COURT OF APPEAL FOR ONTARIO

CITATION: North Elgin Centre Inc. v.
    McDonalds Restaurants of Canada Limited, 2021 ONCA 173

DATE:  20210317

DOCKET: M51329 & M51679

(C63933)

Brown J.A.
    (Motions Judge)

BETWEEN

North
    Elgin Centre Inc.

Applicant
    (Respondent)

(Responding
    Party/Moving Party on cross-motion)

and

McDonalds
    Restaurants of Canada Limited

Respondent
    (Appellant)

(Moving
    Party/Responding Party on cross-motion)

Andrew Parley,
    Margaret Robbins and Sean Blakeley, for the moving party/appellant, McDonalds
    Restaurants of Canada Limited

Jeffrey E. Streisfield, for the moving
    party on the cross-motion/respondent, North Elgin Centre Inc.

Heard: December 7 and 8, 2020 by video
    conference

REASONS
    FOR DECISION

I.         OVERVIEW

[1]

McDonalds Restaurants of Canada Limited (McDonalds)
    moves for an order declaring North Elgin Centre Inc. (NEC) in contempt of the
    order of a panel of this court dated January 29, 2018 (the Order). That Order
    was made in respect of the renewal of a lease between NEC, as landlord, and
    McDonalds, as tenant, for commercial property located in Richmond Hill,
    Ontario (the Lease).

[2]

The Order declared that the Lease had been
    renewed for a first renewal term running from March 11, 2017 to March 10, 2027.
    Since the renewal term requires consent approval under s. 50(3)(f) of the
Planning
    Act
, R.S.O. 1990, c. P.13,
[1]
para. 3(b) of the Order states:

McDonalds shall, within 30 days of the date
    of the issuance of the reasons by the Court, bring an application for the
    consent required under s. 50(3)(f) of the
Planning Act
and the
    Respondent, [NEC], shall provide all reasonable cooperation to obtain that
    consent.

[3]

McDonalds alleges that NEC has acted in ways
    that breached the Orders requirement that it provide all reasonable
    cooperation to obtain the
Planning Act
consent.

[4]

NEC has brought a cross-motion that seeks
    declaratory relief in the nature of defences to the contempt motion, as well as
    directions regarding its obligations under para. 3(b) of the Order.

[5]

Contempt proceedings proceed in two stages: a
    liability phase, followed by a penalty phase:
Carey v. Laiken
, 2015
    SCC 17, [2015] 2 S.C.R. 79, at para. 18. These are my reasons for the liability
    phase of McDonalds contempt motion.

[6]

As I will explain below, I dismiss McDonalds
    motion. Given the basis for my conclusion that NEC is not in contempt of the
    Order, it is not necessary to decide the issues raised by NECs cross-motion,
    so I dismiss that motion.

II.       JURISDICTION

[7]

McDonalds initially sought to bring its contempt
    motion before the panel that made the Order. The panel invited submissions from
    the parties on the appropriate procedure to hear the contempt motion. NECs
    submissions disclosed that it intended to bring a cross-motion seeking
    directions as to whether the Lease was void because
Planning Act
consent was not obtained before the expiry of 21 years or, alternatively,
    directions about what NEC could do or not do having regard to paragraph 3(b)
    of the Courts Order.

[8]

The panel advised that a settlement conference
    would take place before Pardu J.A., which occurred on June 10, 2020. No
    settlement was reached. By order dated June 19, 2020, Pardu J.A. gave
    directions regarding the hearing of the motions (the Directions Order).

[9]

The Directions Order provided that the motion
    for contempt and a motion for directions and for declaratory relief, if brought
    by North Elgin, be heard together by a single judge of the Court of Appeal.
    However, [t]his is without prejudice to the right of the judge hearing both
    motions to determine whether the court has jurisdiction to give the declaratory
    relief sought.

[10]

Neither party objects to a single judge of this
    court hearing the motions.

[11]

Although the parties were not able to locate any
    jurisprudence of this court on the issue of the jurisdiction of a single judge
    to hear a contempt motion to enforce a panel order,
[2]
I am satisfied that the combined operation of the
Courts of
    Justice Act
, R.S.O. 1990, c. C.43 (
CJA
), and the
Rules of
    Civil Procedure
provides such jurisdiction.

[12]

The
Rules of Civil Procedure
apply to
    all civil proceedings in the Court of Appeal, subject to a few exceptions which
    do not apply to these motions: r. 1.02(1). Rule 60.11(1) requires that a
    contempt order to enforce an order requiring a person to do an act must be
    obtained on motion to a judge in the proceeding in which the order to be
    enforced was made. Where the order to be enforced is one made by the Court of
    Appeal, a contempt motion therefore must be brought in the Court of Appeal.

[13]

Section 7(2) of the
CJA
provides that a
    motion in the Court of Appeal shall be heard and determined by one judge,
    subject to the exceptions enumerated in s. 7(3), none of which include a
    contempt motion. I therefore conclude that a single judge of this court has the
    jurisdiction to hear a contempt motion to enforce an order made by a panel of
    the court.

III.      BACKGROUND FACTS

A.

The lease renewal dispute

[14]

NEC owns a parcel of land at the north-east
    corner of Yonge Street and Bernard Avenue on which it operates a shopping plaza
    (the Property). Under the Lease that commenced March 11, 1997, NEC leases
    part of the Property to McDonalds, which operates a restaurant on the demised
    premises.

[15]

The initial term of the Lease was for 20 years,
    expiring on March 10, 2017, with McDonalds having options to extend the term
    for two additional consecutive terms of ten years each.
[3]

[16]

The Property is located within a planning
    intensification area, known as a Key Development Area (KDA), in the 2010 Richmond
    Hill Official Plan. In 2016, the Town of Richmond Hill (the Town) initiated a
    process to prepare a secondary plan and zoning by-law for the KDA. As part of
    that process, NEC provided Town staff with a concept plan and parking strategy
    for the future development of the Property. The concept plan contemplates a
    high-density, mixed use, transit supportive development on the Property and
    shows that eventually a residential tower may be located on the site presently
    occupied by the McDonalds restaurant. In late 2017, NEC and other area
    landowners appealed the secondary plan and zoning by-law to the Local Planning
    Appeal Tribunal.

[17]

Section 19.10 of the Lease provides that it is
    subject to the
Planning Act
. As noted, s. 50(3)(f) of that Act provides,
    in part, that no person shall enter into any agreement that has the effect of
    granting the use of or right in land directly or by entitlement to renewal for
    a period of twenty-one years or more unless  (f) a consent is given to convey,
    mortgage or charge the land, or grant, assign or exercise a power of
    appointment in respect of the land or enter into an agreement in respect of the
    land. Section 19.10 of the Lease places the obligation on the landlord, NEC,
    to seek any
Planning Act
consent.

[18]

In 2016, a dispute arose over McDonalds
    exercise of its first right to renew the term of the Lease for an additional 10
    years. The dispute went to court, where the application judge found that the
    Lease had come to an end in March 2017 as McDonalds had failed to comply with
    the renewal provision: 2017 ONSC 3306, 87 R.P.R. (5th) 303.

[19]

In January 2018, this court allowed McDonalds
    appeal, declaring the Lease had been renewed for the first 10-year renewal term
    and referring the rent dispute for the renewal term to arbitration: 2018 ONCA
    71, 87 R.P.R. (5th) 315, at para. 13. This court then dealt, at para. 14, with
    the need to obtain consent under the
Planning Act
for the first
    renewal term:

With regard to McDonalds claim for an order
    requiring North Elgin to specifically perform its obligation to obtain a
Planning
    Act
consent, we note that the end of the 21
st
year under the
    Lease is fast approaching. We proposed to the parties in oral argument that the
    most sensible order would be one in which McDonalds was permitted to
    immediately bring an application for the consent, and North Elgin would provide
    all reasonable cooperation to obtain the consent. The parties were agreeable to
    that order, and it shall issue.

[20]

Para. 3(b) of the Order set out the parties
    obligations in respect of the
Planning Act
consent application,
    including requiring NEC to provide all reasonable cooperation to obtain that
    consent.

B.

The Consent Application

Events from February until October 2018

[21]

McDonalds retained Dentons Canada LLP to
    prepare and file the
Planning Act
consent application (the Consent Application).
    Dentons had the Consent Application signed by Mr. Renzo Belluz, a NEC
    representative, and filed it with the Town on February 1, 2018.

[22]

The Consent Application stated it sought [c]onsent
    to a long term lease for a McDonalds restaurant. The covering letter for the
    application stated:

The subject McDonalds Restaurant has been
    operating on the property for some time. The implementing (subject) lease
    permits McDonalds Restaurant to use part (approximately 1,200 sq. m.) of our
    clients property (as depicted on the enclosed Site Plan), along with
    non-exclusive rights for access and parking over the remainder of the property
    (therefore, easement approvals are not required).

The subject lease was for an initial term of
    twenty (20) years with a lease commencement date of March 1997.
The lease has two (2) options to
    extend for ten (10) years each. It is these extensions that require Planning
    Act approval.

As you are aware, the
Planning Act
requires leases of this length of time and nature (i.e. not part of a building
    and not the entire site) to be approved by the Committee of Adjustment when the
    term extends beyond twenty-one (21) years less a day.

It is respectfully submitted that this
    application for consent to a lease supports the orderly development of the
    neighbourhood, is consistent with the Zoning By-law and complies with all of
    those matters that one must have regard to pursuant to Section 51(24) of the
Planning
    Act
, and that a plan of subdivision is not appropriate in this
    circumstance. [Emphasis added.]

[23]

Town staff responded on March 21, 2018 advising
    that:

In order to understand the implications of the
    proposed consent, a Concept Plan (Section 5.2 of the OP) with a Planning
    Justification are required to demonstrate how the application conforms with the
    long term vision of the Towns new Official Plan and recently adopted Yonge and
    Bernard Key Development Area Secondary Plan.

[24]

In March and April 2018 emails sent to Dentons,
    Town staff raised a concern about how a long-term lease might freeze development
    on the Property to single storey buildings, which would not be in keeping with
    the Official Plan.

[25]

In the summer of 2018 McDonalds obtained from
    NEC copies of concept plans NEC had prepared in 2017 for the development of the
    entire Property. McDonalds took the position that the 2017 concept plans did
    not make provision for a site for its restaurant and asked NEC to submit
    revised concept plans to the Town.

[26]

By letter dated August 9, 2018, NECs counsel
    confirmed that NEC is not only consenting to your client's application for
Planning
    Act
approval but has even allowed the application to be made by your
    client in its name. As far as the Town of Richmond Hill (the Municipality) is
    concerned, NEC is 100% behind the application for the
Planning Act
approval. The letter noted that:

3. The reason the Municipality requested a
    Planning Justification Report in support of your clients application is
    because your clients application conflicts with and creates issues arising
    from (i) the Zoning By-Law, (ii) the Official Plan and (iii) an Interim Control
    By-Law

4. Toward the bottom of page 4 of your letter,
    you are asking NEC to provide a planning justification report outlining what
    is needed in order for the restaurant to comply. However, it is strictly your
    clients obligation to prepare and submit the Planning Justification Report
    supporting its application that has been requested by the Municipality

5. You also seem to believe that any NEC
    concept plans have affected your clients application. That is manifestly
    incorrect. What is relevant are the Municipalitys Zoning By-Law, Official Plan
    and Interim Control By-Law. While there is a non-conforming use for the leased
    lands, your client must nevertheless satisfy the Municipality with respect to
    its application for the
Planning Act
approval sought. It is simply up
    to your client to once and for all proceed with and submit a Planning
    Justification Report which will hopefully persuade the Municipality to approve
    the application for
Planning Act
approval.

[27]

By October 2018 McDonalds had retained Mr. Mike
    Crough, of the IBI Group, to assist with the Consent Application. In October
    2018 the IBI Group discussed with the Town the requirements for a Planning
    Justification Report. The IBI Group prepared an initial draft report but,
    according to an affidavit sworn by Mr. Crough, there followed a period of
    inactivity on the file and the IBI Group did not communicate with McDonalds
    for several months.

November 2018 until June 2019: the rent arbitration

[28]

It appears that McDonalds did not revive the
    work of the IBI Group until after the completion of the rental rate arbitration
    in June 2019.

[29]

The rental rate arbitration was held in February
    and May 2019, with an Award issued on June 26, 2019. In that proceeding,
    McDonalds obtained the production of the lease with one other tenant at the
    shopping plaza. NEC initially sought to appeal the Award but abandoned its
    application to do so.

June through August 2019: McDonalds Planning
    Justification Report

[30]

In June 2019, McDonalds asked NEC to provide
    copies of current leases for other tenants in the shopping plaza so they could
    be used in the Consent Application. Extensive correspondence ensued between
    counsel for the parties, in which McDonalds sought certain information from
    NEC that it needed to prepare a Planning Justification Report and in which NEC,
    in turn, sought access to the entire draft report. I need not delve into the
    details of the back-and-forth for present purposes. Suffice it to say that on
    September 10, 2019 McDonalds filed with the Town a Planning Justification
    Report prepared by the IBI Group (the IBI Report).

September through November 2019: Town staffs response to the IBI
    Report

[31]

By email dated September 20, 2019, Town staff
    informed counsel for the parties that:

This is to advise that staff has reviewed the [IBI
    Report] and is prepared to concur with the conclusions and recommendations
    contained therein, provided the owner confirms in writing that he is aware of
    both the proposed lease and the pending development proposal to permit high
    density residential development on the subject lands.

[32]

McDonalds immediately sought from NEC the
    written confirmation asked for by the Town. Confirmation from NEC was not
    forthcoming, for reasons set out in NEC counsels October 2, 2019 email to
    McDonalds:

The IBI report filed by McDonald's in support
    of the consent application (the September 2019 report) contains inaccurate statements
    (opinions) regarding the future development potential and timing of the NEC
    lands  which are acknowledged to be within a KDA and MTSA.

There appear to be at least two issues  (1)
    the temporal impact of a consent and (2) the spatial extent of any consent on the
    NEC lands.

1. The lease was renewed for a 10 year
    term (not up to 18 years and 4 months). This was not disclosed in the IBI
    report, and if disclosed may well support a consent limited to a 10 year term -
    which would expire in 2027.

2. In any event, the lease contains a no build
    zone clause (lease par 22.03 and schedule E4) - which consists of the entire
    NEC site. This clause (and its impact) was not disclosed or discussed in the
    IBI report, nor made known to the city planner or planning department who now
    request an acknowledgement letter from NEC. (Of course, the City knows that there
    is a Secondary Plan and Zoning Bylaw before LPAT for approval).

NEC does not wish to be a party to an
    application that potentially misrepresents information to the decision making tribunal
    (the committee of adjustment).

The question therefore is how we address these
    matters going forward  which is why a meeting has been requested in advance of
    a consideration to returning to the court for directions. I am available on
    Friday but prefer Monday Oct 7 in the AM. Please confirm. [Emphasis added.]

[33]

Further correspondence ensued, including NECs
    advice that it intended to meet with Town staff. The IBI Group wrote to the
    Town and provided a copy of the Lease. That resulted in Town staffs November
    1, 2019 email to the parties that stated, in part:

In the interim, staff has carefully reviewed
    your e-mail below and are therefore satisfied the Owner is aware of both the
    proposed lease and the pending development proposal to permit high density
    residential development on the its land holdings. Given the above, we no longer
    believe a meeting is necessary and are prepared to move forward with the
    application for consent. Please advise if you concur.

[34]

Then, on November 8, 2019, Town staff further
    advised:

Consent application B012/18 has been placed
    into our priority queue for the January 2020 circulation. Our internal meeting
    takes place on December 10, 2019 and applicants will be notified by email by
    the end of the week if they have been scheduled. Please open the
    acknowledgement letter contained in that email to advise you when signs are
    available for pick-up and the date staff reports will be ready.

December 2019: the MPlan Report

[35]

On December 6, 2019, a few days prior to Town
    staffs scheduled internal meeting, NEC filed a report prepared by MPlan Inc.
    as NECs input on the Consent Application.

[36]

The MPlan Report commented on the Consent Application
    and the IBI Group Report. The MPlan Report made the following recommendations
    concerning the consent application:

In order for the proposed Consent Application
    to be supportable, the following CONDITIONS OF APPROVAL are necessary and
    reasonable:

1. The Consent shall be limited to 8
    years, being the remaining portion of the renewal term. The owner or McDonalds
    may apply for a further Consent should McDonalds seek to renew the lease for
    the 2
nd
renewal term.

Reason: The Lease was only renewed for the 1
st
renewal term.

2. The Consent shall apply to the area
    of land shown on Appendix B.

Reason: Appendix B ensures that the subject
    lands can be redeveloped in phases, if necessary, in accordance with the
    Provincial, Regional and Municipal mandated intensification policies including
    provision of more affordable housing options including purpose built rental
    units, while providing for McDonalds continued use of the severed lands for
    the remainder of the renewal term.

3. The consent approval does not apply
    to, and no sanction is given to, Section 22.03 and Schedule E-4 to the Lease
    and to Sections 22.01, 22.02 and 22.04 of the Lease.

Reason: The No Build Zone provision and
    related sections sterilize the NEC property and therefore do not meet the
    Planning Act requirements referred to above.
The
    condition is intended to ensure that consent to the 1
st
renewal term
    does not freeze development on the retained lands and removes any restriction
    that would otherwise prevent development from occurring in a phases, with the
    south west corner of the property potentially be redeveloped last.
[Emphasis
    added.]

[37]

In general terms, ss. 22.01 to 22.04 of the
    Lease allow McDonalds, and its customers, the right to use the parking areas
    and other outdoor common areas of the shopping plaza and prohibit NEC from
    building on any part of the common areas shown with hatch marks on Schedule
    E-4 to the Lease. The hatched area constitutes a significant portion of NECs
    Property.

[38]

In response to the MPlan Report, on December 12,
    2019 Town staff advised that the Consent Application has been deferred until
    such a time that it has been determined what the actual request is and the
    owner is satisfied.

[39]

On December 17, 2019, the IBI Group wrote to the
    Town stating, in part:

I do not agree with the conditions or
    modifications proposed in the North Elgin Report. Specifically, I do not agree
    with the proposal to reduce the time period nor the expanded spatial area
    proposed.

[40]

In January 2020, Town staff advised NECs
    counsel that: (i) the Committee of Adjustment considered the Consent
    Application to be incomplete, hence the deferral; and (ii) the Committee of
    Adjustment would require the Propertys owner to be satisfied with the Consent
    Application and would ensure that the Consent Application and submitted
    drawings were complete.

C.

THE MOTIONS

[41]

McDonalds alleges that by filing the December 2019
    MPlan Report NEC breached para. 3(b) of the Order, which requires NEC to
    provide all reasonable cooperation for the Consent Application. McDonalds
    seeks a declaration that NEC is in contempt of the Order, the imposition of a
    fine on NEC, and an order requiring NEC to withdraw the MPlan Report from the
    Consent Application.

[42]

NECs cross-motion has two aspects. First, NEC
    seeks certain declarations that would operate, in effect, as defences to the
    contempt motion. Specifically, NEC seeks orders that the Lease came to an end in
    March 2018, 21 years after its commencement, with the result that the contempt
    motion is moot. Second, NEC seeks an order explaining what para. 3(b) of the
    Order requires it to do.

IV.     CONTEMPT: THE GOVERNING PRINCIPLES

[43]

Civil contempt consists of the intentional doing
    of an act which is prohibited by a court order:
Carey
, at para. 26. As
    summarized in
Carey
, at paras. 32 to 35, civil contempt has three
    elements that must be established beyond a reasonable doubt:

(i)

the order alleged to have been breached must
    state clearly and unequivocally what should and should not be done. An order
    may be found to be unclear if: it is missing an essential detail about where,
    when or to whom it applies; it incorporates overly broad language; or external
    circumstances have obscured its meaning;

(ii)

the party alleged to have breached the order
    must have had actual knowledge of it. Actual knowledge may be inferred from the
    circumstances or an alleged contemnor may attract liability on the basis of the
    wilful blindness doctrine; and

(iii)

the party allegedly in breach must have
    intentionally done the act that the order prohibits or intentionally failed to
    do the act that the order compels.
All that is required
    to establish civil contempt is proof beyond a reasonable doubt of an
    intentional act or omission that is in fact in breach of a clear order of which
    the alleged contemnor has notice
:
Carey
, at para. 38. Contumacy
    the intent to interfere with the administration of justice  is not an element
    of civil contempt and lack of contumacy is therefore not a defence:
Carey
,
    at para. 29.

[44]

With civil contempt, where there is no element
    of public defiance, the purpose of a contempt order is seen primarily as
    coercive rather than punitive, with the court attempting to obtain compliance
    with its order:
United Nurses of Alberta v. Alberta (Attorney General)
,
    [1992] 1 S.C.R. 901, at p. 943, per Sopinka J., in dissent;
Chiang (Re)
,
    2009 ONCA 3, 93 O.R. (3d) 483, at para. 11. To that end, r. 60.11 of the
Rules
    of Civil Procedure
contemplates that a judge may set aside a finding of
    contempt if the contemnor subsequently complies with the order or otherwise
    purges his or her contempt or, in exceptional circumstances, where new facts or
    evidence have come to light after the contempt finding was made:
Carey
,
    at paras. 62, 64 and 66.

[45]

As the contempt power is discretionary, courts
    have consistently discouraged its routine use to obtain compliance with court
    orders. It should be used cautiously and with great restraint; it is regarded
    as an enforcement power of last, not first, resort. So, where an alleged
    contemnor acted in good faith in taking reasonable steps to comply with the
    order, the judge entertaining a contempt motion generally retains some
    discretion to decline to make a finding of contempt. As well, a judge may
    properly exercise his or her discretion to decline to impose a contempt finding
    where it would work an injustice in the circumstances of the case:
Carey
,
    at paras. 36-37.

[46]

As a procedural matter, the party seeking a
    finding of contempt must clearly specify the act or omission that constitutes
    the contempt. The usual requirement is that the notice of motion set out the
    particulars of the alleged contempt:
Bell ExpressVu Limited Partnership v.
    Corkery
, 2009 ONCA 85, 94 O.R. (3d) 614, at paras. 17, 20 and 42-45;
Rocca
    Dickson Andreis Inc. v. Umberto Andreis
, 2013 ONSC 5508, 111 W.C.B. (2d)
    587 (Div. Ct.), at para. 20; and
Dare Foods (Biscuit Division) Ltd. v. Gill
,
    [1973] 1 O.R. 637 (H.C.), at p. 639.

V.

APPLICATION OF THE GENERAL PRINCIPLES

A.

Framing the key issue in dispute

[47]

There is no dispute that NEC knew about and
    understood the Order. On his examination, Mr. Renzo Belluz, a principal of NEC
    and a practising planning lawyer, acknowledged that he had read the Order and
    understood what it required NEC to do. Further, the evidence clearly shows that
    NEC retained MPlan to prepare and file the report on its behalf. As a result,
    the filing of the MPlan Report with the Town certainly was an intentional act
    by NEC. As acknowledged in MPlans filing letter of December 6, 2019, the MPlan
    Report served as NECs input to the Consent Application, as well as a review
    of the IBI Report.

[48]

The key issue then boils down to whether the
    filing of the MPlan Report was a breach of para. 3(b) of the Order that
    required NEC to provide all reasonable cooperation to obtain [the] consent
    sought by McDonalds from the Town pursuant to the
Planning Act
.

[49]

That is the issue I intend to address in the
    balance of these reasons. Before doing so, I wish to address two issues raised
    by the parties.

[50]

First, in its factum McDonalds points to
    conduct by NEC other than the filing of the MPlan Report that it alleges
    disrupted the Consent Application process, such as delays by NEC in responding
    to communications by McDonalds and NECs refusal to comply with simple
    requests from McDonalds and the Town. Apart from the fact that McDonalds did
    not plead in its notice of motion that such conduct amounted to acts of
    contempt, in my view the conduct did not materially affect the prosecution of
    the Consent Application. Notwithstanding McDonalds own delay of close to 10
    months in prosecuting the Consent Application, the reality was that by early
    November 2019 Town staff had advised McDonalds that they were prepared to move
    forward with the Consent Application, which had been placed in the priority
    queue for circulation.

[51]

Second, on its part NEC asserts, by way of a
    defence to the contempt motion, that no Lease existed after March 2018, following
    the expiry of 21 years from the commencement of the Lease, with the result that
    the contempt motion is moot. However, as of December 6, 2019, when NEC filed
    the MPlan Report, the Consent Application was very much alive and before the
    Towns Committee of Adjustment for consideration. The MPlan Report, which
    purported to provide the Committee of Adjustment with NECs input on the
    Consent Application, did not take the position that the Lease was at an end and
    therefore the Committee of Adjustment should or could not consider the Consent
    Application. Instead, NEC took the position that the Consent Application could
    be supported, subject to conditions set out in the MPlan Report. Given that
    position, I do not consider it necessary to determine what appears to be a defence
    constructed after-the-fact in response to the contempt motion and which is
    inconsistent with the position NEC took in the MPlan Report.

[52]

Accordingly, the balance of these reasons will
    focus on what I regard as the determinative issue, namely: whether NECs filing
    of the MPlan Report was a breach of para. 3(b) of the Order.

[53]

I will proceed with some caution. Although
    consideration of the Consent Application by the Committee of Adjustment has
    been deferred, the application remains alive. Consequently, I will decide the
    contempt motion but in a manner that recognizes the future conduct of the
    Consent Application lies within the jurisdiction of the Committee of Adjustment.

B.

The positions of the parties

[54]

McDonalds takes the position that by filing the
    MPlan Report, NEC directly opposed the Consent Application. While the MPlan
    Report nominally supported the Consent Application, by including conditions for
    granting consent approval the report effectively opposed the relief sought by
    McDonalds.

[55]

McDonalds contends that by retaining MPlan to
    prepare and file the Report, NEC directly and deliberately hindered the Consent
    Application in breach of the Order or, alternatively, acted in a manner
    indifferent, reckless or willfully blind to conduct carried out in violation of
    the Order.

[56]

In response, NEC submits that the Order did not
    prohibit it from filing the MPlan Report. The IBI Report contained errors and
    material omissions that the MPlan Report sought to correct. As well, the MPlan
    Report contains planning reasons and explanations to the Committee of
    Adjustment as to how the Consent Application could be approved.

C.

Analysis

The context in which to assess the
    allegations of contempt

[57]

Section 19.10 of the Lease stipulates that it is
    subject to the
Planning Act
. In considering the Consent Application,
    the Committee of Adjustment will consider the renewal of the Lease in the
    context of the various public planning instruments and policies in effect. Town
    staff pointed this out to McDonalds in its March 21, 2018 communication that
    requested McDonalds to file a concept plan, together with a Planning Justification
    Report.

[58]

Some 17 months after the Town had made its
    request, McDonalds sought to satisfy it by filing the IBI Report. McDonalds
    did not provide NEC with the report for review before submitting it; NEC
    received a copy of the report the day before its filing. The IBI Report went
    into great detail about the implications of the renewal of the Lease for
    planning policies contained in instruments issued by various levels of
    government.

[59]

Three aspects of the IBI Report are of
    particular relevance to the contempt motion:

(i)      The Consent Application signed by NECs representative
    referred simply to a consent for a long term lease for a McDonalds
    Restaurant. The February 1, 2018 covering letter from Dentons indicated that
Planning
    Act
approval was sought for the two ten-year options to extend under the
    Lease. The IBI Report indicated that consent was being sought for the two
    renewal periods. The IBI Report did not disclose that the Order only renewed
    the Lease for the first 10-year renewal term;

(ii)     The IBI Report included a sketch, Figure 4-1, that outlined
    in red the demised premises that are subject to the proposed extension of the
    Lease. The report states that the proposed extension of the existing lease
    area would occupy approximately 7% of the total site area, and does not include
    vehicular or pedestrian access points to external roads. The area covers the
    existing McDonalds restaurant building, immediately adjacent walkway and
    landscape areas, the existing drive through lane, a small portion of the
    westerly internal drive aisle, and two accessible parking spaces. This point
    is repeated in the reports conclusion, which states that [t]he spatial extent
    of the lease is based on existing and approved development on the subject
    lands, which permits the stand-alone McDonalds restaurant; and

(iii)     The IBI Report emphasized in several places that
the Consent Application and the Lease would not prevent
    growth and development from occurring on the NEC Property
. For example, s.
    5.1.1. of the IBI Report stated that [t]he area of the lands not subject to
    the proposed extension of the existing lease provides sufficient space and
    frontage for phased or complete development/re-development in the future, should
    that occur.

[60]

On its face, the filing of the MPlan Report was
    NECs attempt to draw to the Committee of Adjustments attention certain
    aspects of the Consent Application that it thought affected its interest as
    owner of the Property, of which the demised premises formed only a small part.
    The MPlan Report stated that it intended to provide NECs input to the
    Consent Application, comment on the IBI Report, and respond to requests by Town
    staff that it confirm it was aware of and supported the Consent Application.

[61]

The Committee of Adjustment has not denied the
    Consent Application; it has deferred considering the application until the
    parties provide it with requested clarification.

[62]

That is the context in which McDonalds allegation
    that NEC has breached the Orders requirement that NEC provide all reasonable
    cooperation must be assessed.

[63]

I shall now consider McDonalds allegation that by
    filing the MPlan Report NEC breached para. 3(b) of the Order.

First allegation: The MPlan Report opposed
    the Consent Application

[64]

McDonalds alleges that the MPlan Report is
    explicitly contrary to the Consent Application because it does not support the
    application. I am not persuaded by that submission. A plain reading of the
    MPlan Report reveals that it supports a consent application, a point
    acknowledged on cross-examination by Mr. Crough from IBI. However, the MPlan Report
    proposed three conditions of approval. As I will explain in the next few
    paragraphs, I conclude that NEC had a legitimate interest in proposing the
    conditions of approval and by doing so did not breach its obligation to provide
    all reasonable cooperation.

Second allegation: The MPlan Report improperly proposed a temporal
    limit on the consent

[65]

McDonalds next alleges that the MPlan Report is
    explicitly contrary to the Consent Application because it proposed that consent
    approval be limited to the initial 10-year renewal period, not to the two
    10-year lease renewal options contained in the Lease. While it is true that
    NECs proposal to limit consent approval is inconsistent with McDonalds
    application to obtain approval for the two renewal periods, NECs proposal does
    not amount to a breach of para. 3(b) of the Order. Since the Order only
    declared that the Lease had been renewed for the first 10-year renewal term,
    NECs obligation to provide reasonable co-operation under para. 3(b) of the
    Order only extended to an application that sought approval for the first renewal
    period sanctioned by this court.

Third allegation: The MPlan Report improperly proposed a
    geographical limit on the consent

[66]

McDonalds alleges that the MPlan Report is
    explicitly contrary to the Consent Application by proposing that any consent
    provided be geographically limited in a manner that conflicts with McDonalds
    rights under the Lease. This allegation has two parts.

[67]

The first part of the allegation asserts that one
    condition of approval proposed by the MPlan Report would modify the area to
    which any consent would apply to ensure that NEC could redevelop the rest of
    the Property in accordance with applicable planning intensification policies
    and plans. It is true that the MPlan Report proposed such a modification, but the
    modification was more spatially favourable to McDonalds than that contained in
    the IBI Report and was consistent with the extent of the demised premises under
    the Lease.

[68]

Over the years, the Lease had undergone several
    amendments that expanded the size of the demised premises, in large part to
    enable McDonalds to expand the restaurants drive-through. Under the Lease,
    the demised premises were L-shaped. The IBI Report proposed, in Figure 4-1, that
    the lands for which consent be given track the L-shape of the demised premises.

[69]

The MPlan Report proposed that consent approval
    be given to a larger, rectangular area of the Property that would include the
    L-shaped demised premises, together with additional parts of the Property. The
    MPlan Report contended that the larger, more regular shape of the area, to
    which consent approval should apply, would facilitate the orderly development
    of the balance of the NEC Property. To be clear, NEC was not proposing that
    consent approval be given to an area smaller than the demised premises under
    the Lease. Quite the opposite. NEC proposed that consent approval be given to
    an area larger than the demised premises. In those circumstances, I am not
    persuaded that such a proposal amounted to a failure to provide all reasonable
    cooperation required by para. 3(b) of the Order.

[70]

The second part of the allegation asserts that NECs
    proposal that consent approval should not apply to the No Build Zone provisions
    of the Lease was contrary to the Consent Application and a breach of the Order.
    Article XXII of the Lease deals with common areas. Sections 22.01 to 22.04 of
    the Lease allow McDonalds, and its customers, the right to use the parking
    areas and other outdoor common areas of the shopping plaza and prohibit NEC
    from building on any part of the common areas shown with hatch marks on
    Schedule E-4 to the Lease. The hatched area constitutes a significant portion
    of NECs Property.

[71]

The MPlan Report proposed that consent approval
    not apply to the No Build Zone Lease provisions as those provisions sterilize
    the NEC property and therefore do not meet the Planning Act requirements
    referred to above. The condition is intended to ensure that consent to the 1
st
renewal term does not freeze development on the retained lands and removes any
    restriction that would otherwise prevent development from occurring in a phases,
    with the south west corner of the property potentially be redeveloped last [
sic
].

[72]

McDonalds alleges that this proposal in the
    MPlan Report is contrary to the Consent Application. I am not persuaded that it
    is. First, the Consent Application, the Dentons covering letter, and the IBI
    Report did not make any mention of the Leases No Build Zone provisions. It is
    difficult to see how the MPlan Reports proposal could be inconsistent with a
    matter that was not disclosed by McDonalds in its Consent Application. Indeed,
    it is not clear from the record why the IBI Report failed to address the
    implications of the Consent Application for the Leases No Build Zone provisions.

[73]

Further, the MPlan Reports proposal is
    consistent with the numerous representations made by the IBI Report that approval
    of the Consent Application would not prevent growth and development from
    occurring on the rest of the Property.

[74]

Finally, the Leases renewal terms are subject
    to the
Planning Act
. McDonalds is not entitled as of right to consent
    approval under s. 50(3)(f) of the
Planning Act
. McDonalds must
    demonstrate to the Committee of Adjustment that the consent it seeks is
    consistent with the planning principles relevant to the granting of such
    consent. Within two months of the filing of the Consent Application, Town staff
    clearly signalled the need for McDonalds to provide a concept plan and
    planning justification, which in part would address the impact of any consent
    approval on the future development of the remainder of the Property.  NEC had a
    legitimate interest in ensuring that the Committee of Adjustment was aware of
    provisions of the Lease, such as the No Build Zone provisions, that could
    impact such future development.

[75]

Accordingly, I conclude that the three
    conditions of approval proposed in the MPlan Report reflected legitimate
    concerns of NEC, as owner of the remainder of the Property, about relevant
    issues that McDonalds had not identified in its Consent Application. On their
    face the proposed conditions were not designed to defeat the Consent
    Application, but to support the granting of consent approval that took into
    account NECs legitimate concerns. As a result, I do not see the content of the
    MPlan Report, including its proposed conditions of approval, as constituting a
    breach by NEC of its obligation to provide all reasonable cooperation under
    the Order.

Fourth allegation: The mere filing of the
    MPlan Report breached the Order

[76]

McDonalds advances one final argument. It
    contends that the mere filing of the MPlan Report constituted an act of
    contempt because it resulted in the Committee of Adjustment deferring
    consideration of the Consent Application. I am not persuaded by this
    submission. Para. 3(b) of the Order did not sanction a process in which
    McDonalds was permitted to proceed with its Consent Application on a kind of
ex
    parte
basis, with no ability for the landowner, NEC, to raise legitimate planning
    issues or point out inaccuracies in McDonalds application. The evidence
    discloses that at various points NEC sought to provide some input into the
    application but was rebuffed by McDonalds. In those circumstances, it is
    understandable that NEC would want to place before the Committee of Adjustment
    information it thought relevant to a complete consideration of the Consent Application
    and its approval on a basis that was fair to the legitimate interests of both
    tenant and landlord. In the circumstances, I do not regard NECs filing of the
    MPlan Report as a breach of para. 3(b) of the Order.

D.

Conclusion

[77]

By way of summary, I am not satisfied that
    McDonalds has established, beyond a reasonable doubt, that NECs filing of the
    MPlan Report constituted a failure by NEC to provide all reasonable
    cooperation to obtain
Planning Act
consent.

[78]

Consequently, I dismiss McDonalds contempt
    motion.

VI.

NECS CROSS-MOTION

[79]

I have treated the relief sought by NEC in
    paras. (a) through (d)(ii) of its notice of motion as forms of defence to McDonalds
    contempt motion. As I have been able to decide the contempt motion on other
    grounds, it is not necessary to consider those requests for relief by NEC.

[80]

In para. (d)(iii) of its notice of motion NEC
    seeks further explanation of the meaning of para. 3(b) of the Order. As a
    single judge, I cannot vary the order made by a panel which, in effect, is the
    nature of NECs request. In any event, the Order is clear and speaks for
    itself; no further explanation is required.

[81]

Accordingly, I dismiss NECs motion.

VII.

DISPOSITION

[82]

For the reasons set out above, I dismiss the
    motions brought by McDonalds and NEC.

[83]

Should any party decide to seek costs of the
    motions, it may file brief (no more than 7 pages) cost submissions within 10
    days of the release of these reasons. The party against whom costs are sought
    may file brief (no more than 7 pages) responding submissions within 10 days
    thereafter.

David
    Brown J.A.

[1]

Planning
    Act
, s. 50(3): No person shall convey land by way of a deed or transfer, or
    grant, assign or exercise a power of appointment with respect to land, or
    mortgage or charge land, or enter into an agreement of sale and purchase of
    land or enter into any agreement that has the effect of granting the use of or
    right in land directly or by entitlement to renewal for a period of twenty-one
    years or more unless,

(f)
    a consent is given to convey, mortgage or charge the land, or grant, assign or
    exercise a power of appointment in respect of the land or enter into an
    agreement in respect of the land

[2]
The
    case law on this issue is sparse. In
Peel Financial Holdings Ltd. v. Western
    Delta Lands Partnership
, 2003 BCCA 551, [2003] B.C.W.L.D. 890, at paras.
    11-17, a single judge of the British Columbia Court of Appeal relied on the
    provisions of the
Court of Appeal Act
, R.S.B.C. 1996, c. 77, to conclude
    that he had the jurisdiction to hear a contempt motion to enforce an order made
    by a single judge of the Court of Appeal.

[3]
Pursuant to the terms of the Lease and a 2015 Second Amending
    Agreement.


COURT OF APPEAL FOR ONTARIO

CITATION: O'Reilly v. ClearMRI Solutions Ltd., 2021 ONCA 385

DATE: 20210607

DOCKET: C68215

Roberts, Zarnett and Sossin JJ.A.

BETWEEN

William OReilly

Plaintiff (Respondent)

and

ClearMRI Solutions Ltd., ClearMRI Solutions Inc.,
    Jeff Hassman,
Jae Kim
,
Stefan Larson, David Stopak,
Tornado Medical Systems
, Inc., Arsen
    Hajian,
Jeff Courtney and Gordon Cheung

Defendants (
Appellants
)

Ted Brook and Paul Macchione, for the appellants Tornado
    Medical Systems, Inc. and Jae Kim

Jacqueline Horvat and Alexandra Chun, for the respondent

Heard: January 29, 2021 by videoconference

On appeal from the judgment of Honourable Justice Jane
    Ferguson of the Superior Court of Justice, dated February 11, 2020, with
    reasons reported at 2020 ONSC 938.

Zarnett J.A.:

i.

INTRODUCTION

[1]

This appeal concerns the scope and application of two avenues of
    recourse that are potentially available when employment entitlements have not
    been honoured.

[2]

One avenue exists under the doctrine of common employer liability. This
    common law doctrine
[1]
recognizes that an employee may simultaneously have more than one employer. If
    an employer is a member of an interrelated corporate group, one or more other corporations
    in the group may also have liability for the employment obligations. However,
    and importantly, they will only have liability if, on the evidence assessed
    objectively, there was an intention to create an employer/employee relationship
    between the employee and those related corporations.

[3]

A second avenue exists under the provisions of s. 131 of Ontarios
Business
    Corporations Act
, R.S.O. 1990, c. B.16 (
OBCA
). This section
    imposes liability on corporate directors, in favour of a corporate employee, for
    up to six months unpaid wages and up to twelve months vacation pay. That
    liability is subject to specific conditions.

[4]

The appellant, Tornado Medical Systems, Inc. (Tornado) stood at the
    top of a corporate group. It was the majority shareholder of ClearMRI Solutions
    Ltd. (ClearMRI Canada) which itself had a wholly owned subsidiary, ClearMRI
    Solutions, Inc. (ClearMRI US).

[5]

The respondent, William OReilly, served as the Chief Executive Officer
    (CEO) of ClearMRI Canada and ClearMRI US (together, ClearMRI companies).
    His written employment agreement was with ClearMRI US, but he reported to, and his
    performance goals were set by, the board of directors of ClearMRI Canada.

[6]

When his employment ended, Mr. OReilly was owed substantial sums for
    salary and other entitlements. He brought an action seeking recovery of all
    outstanding amounts from the ClearMRI companies and Tornado. While Mr. OReilly
    did not have a formal position or written agreement with Tornado, he alleged
    that it, along with the ClearMRI companies, were his common employers. The
    action also sought recovery from the directors of Tornado and ClearMRI Canada,
    including the appellant, Jae Kim (Dr. Kim), for six months unpaid wages and
    twelve months vacation pay under s. 131 of the
OBCA
.

[7]

Mr. OReilly obtained default judgment against the ClearMRI companies. He
    subsequently moved for summary judgment against the other defendants. His
    motion was successful.

[8]

Tornado appeals the judgment against it, arguing that the finding of the
    motion judge that it was liable to Mr. OReilly as a common employer is flawed.
    Tornado argues that the motion judge misconstrued the common employer doctrine,
    effectively finding it liable only because of its corporate affiliation to Mr.
    OReillys contractual employer.

[9]

Dr. Kim appeals the judgment finding him liable as a director of
    ClearMRI Canada. Dr. Kim contends that the motion judge improperly applied s.
    131 of the
OBCA
to hold him liable without evidence that a condition
    to that liability  execution against ClearMRI Canada having been returned
    unsatisfied  had been met.

[10]

Tornado
    and Dr. Kim both argue that the motion judge further erred in determining the
    quantum of their respective liability.

[11]

I
    would allow the appeal by Tornado. The motion judge erred in her articulation
    and application of the common employer doctrine and thus made an extricable
    error of law in concluding that Tornado was a common employer.

[12]

I
    would dismiss Dr. Kims appeal, subject to one variation necessary to respect
    the
OBCAs
conditions for s. 131 director liability.

[13]

Below,
    I set out my reasons for these conclusions.

ii.

BACKGROUND

A.

Tornado and the ClearMRI Companies

[14]

Tornado
    is an Ontario corporation. In 2010, it acquired licence rights to intellectual
    property that can be used to facilitate the refurbishment and upgrading of Magnetic
    Resonance Imaging (MRI) machines.

[15]

Tornado
    is the majority shareholder of ClearMRI Canada, which is also an Ontario
    corporation. ClearMRI Canada was formed in 2012 to develop a business of
    upgrading and refurbishing MRI machines. For this purpose, Tornado assigned, to
    ClearMRI Canada, its licence rights to the intellectual property.

[16]

In
    addition to the incidents of corporate control over ClearMRI Canada that flowed
    from its majority shareholding, Tornado had certain specified rights under a
    Unanimous Shareholder Agreement that related to ClearMRI Canada: Tornados
    consent was required for certain dividends, large capital expenditures, the
    sale of ClearMRI Canadas business, any amalgamation with another corporation,
    or any winding-up, reorganization, or dissolution. Tornados consent rights did
    not, however, extend to changes in management of ClearMRI Canada or its
    subsidiaries, employment agreements, or dealing with loans from non-arms-length
    persons  the Unanimous Shareholder Agreement required only the approval of the
    board of ClearMRI Canada, or a committee of the board, for these matters.
[2]

[17]

To
    some extent, the boards of directors of Tornado and ClearMRI Canada overlapped;
    ClearMRI Canadas board consisted of five directors, two of whom were also directors
    of Tornado. Dr. Kim was a director of both Tornado and ClearMRI Canada.

[18]

ClearMRI
    US is a Delaware company, wholly owned by ClearMRI Canada. It was formed in May
    2012 to obtain American regulatory approval of the ClearMRI technology and to develop
    the MRI upgrading and refurbishing business in the United States.

B.

Mr. OReillys Roles and Written Employment Agreement

[19]

Mr.
    OReilly served as CEO of ClearMRI Canada from approximately the time of its
    formation. He was also one of its directors. When ClearMRI US was formed, he also
    became its CEO and sole director. Mr. OReilly did not hold any formal position
    with Tornado.

[20]

On
    May 22, 2012, Mr. OReilly and ClearMRI US signed an agreement confirming the
    terms of his employment. The agreement named ClearMRI US as Mr. OReillys
    employer. The agreement specified that Mr. OReilly was to serve as its CEO and
    was to be paid an annual base salary of $153,000 USD in 2012, increasing to
    $210,000 USD in 2013. He was also entitled to benefits including paid vacation
    and to specific payments if he was terminated without notice or cause. He was also
    eligible to earn a performance bonus of $80,000 USD and to receive other
    compensation.

[21]

Although
    ClearMRI US was named in the written agreement as the employer, the motion
    judge found that Mr. OReilly was also employed by ClearMRI Canada and Tornado.
    Her reasons for doing so are discussed below.

C.

Deferral of Salary, Non-Payment of Employment Obligations, and the
    Termination of Mr. OReillys Employment

[22]

Cash
    flow problems inhibited the successful launch of the MRI upgrading and
    refurbishment business. Mr. OReilly took certain steps to overcome that
    problem. To assist with the required funding, he agreed to defer his full
    salary commencing in 2013 until ClearMRI Canada started to earn revenue; the
    deferral continued in 2014. The motion judge found that Mr. OReilly had not agreed
    to defer his salary indefinitely, only temporarily, and that he received assurances
    from ClearMRI Canada and Tornado that ClearMRI Canada was committed to bringing
    its product to market. I return to the arrangements for the deferral and the
    assurance in more detail below.

[23]

In
    December 2013, Mr. OReilly also made a $50,000 USD loan to ClearMRI Canada. To
    avoid the appearance of a conflict of interest, he resigned as a director and
    CEO of both ClearMRI Canada and ClearMRI US. However, the motion judge noted
    that in reality he continued in the CEO role. This loan was not repaid.

[24]

In
    April 2014, Mr. OReilly secured a regulatory clearance from the U.S. Food and
    Drug Administration. The motion judge found that this step entitled him to a performance
    bonus of $80,000 USD. However, the performance bonus was never paid.

[25]

By
    the spring of 2014, it was apparent that ClearMRI Canada was no longer
    committed to bringing their product to market. On August 6, 2014, Mr. OReilly
    took the position that he had been constructively dismissed. His lawyer
    demanded payment from ClearMRI Canada and ClearMRI US of $281,315 USD in unpaid
    salary, and of the $50,000 USD loan.

D.

The Action

[26]

In
    October 2014, Mr. OReilly commenced this action against ClearMRI Canada,
    ClearMRI US, Tornado, and individual directors of ClearMRI Canada and Tornado,
    including Dr. Kim.

[27]

The
    claims against the individuals were for six months wages and twelve months
    vacation pay under s. 131 of the
OBCA
. The corporations were each sued
    (as common employers) for all unpaid wages and employment entitlements.
    ClearMRI Canada and ClearMRI US were sued for the unpaid loan.

[28]

On
    September 2, 2015, Mr. OReilly obtained default judgment against ClearMRI
    Canada and ClearMRI US for deferred salary, vacation pay, the performance bonus,
    and the unpaid loan, totalling $381,103.84 USD, plus costs.

[29]

The
    default judgment was not satisfied, and Mr. OReilly moved for summary judgment
    against the remaining defendants.

E.

The Motion Judges Decision

[30]

The
    motion judge was satisfied that this was an appropriate case for summary
    judgment.

[31]

The
    motion judge described the common law doctrine of common employer liability as
    one that requires the court to look past the immediate bilateral contractual
    relationshipand recognize that an employee may be employed by a number of
    different companies at the same time. A group of companies identified as concurrent
    employers will have joint and several liability with respect to the rights
    and entitlements of the employee. The motion judge identified three factors
    that should be considered: the employment agreement itself; where the effective
    control over the employee resides; and whether there was common control between
    the different legal entities.

[32]

The
    motion judge then addressed whether ClearMRI Canada was a common employer of
    Mr. OReilly. She concluded that it was, noting that the issue was not really
    in dispute and there was already a judgment against it. She found that Mr.
    OReilly reported to the ClearMRI Canada board, which set his performance
    goals, and that, [i]n practice, effective control over [Mr.] OReilly did
    reside with ClearMRI Canada; she further remarked that ClearMRI Canada wholly
    owned ClearMRI US, and had incorporated it for a specific purpose. She was
    satisfied they both had a single relationship with [Mr.] OReilly.

[33]

The
    motion judge next considered the liability of the individuals who were
    directors of ClearMRI Canada, including Dr. Kim. She referred to the source of
    directors liability for wages, s. 131 of the
OBCA
, which provides, in
    relevant part, as follows:

Directors
    Liability to employees for wages

(1)

The directors of a corporation are jointly and
    severally liable to the employees of the corporation for all debts not
    exceeding six months wages that become payable while they are directors for
    services performed for the corporation and for the vacation pay accrued while
    they are directors for not more than twelve months under the
Employment
    Standards Act
, and the regulations thereunder, or under any collective
    agreement made by the corporation.

Limitation
    of liability

(2) A director is liable under subsection (1) only if,

(a) the corporation is sued in
    the action against the director and execution against the corporation is
    returned unsatisfied in whole or in part; or

(b) before or after the action
    is commenced, the corporation goes into liquidation, is ordered to be wound up
    or makes an authorized assignment under the
Bankruptcy and Insolvency
    Act
(Canada), or a receiving order under that Act is made against it,
    and, in any such case, the claim for the debt has been proved.  2002, c.
    24, Sched. B, s. 27 (1).

Idem

(3) Where execution referred to in clause (2) (b) has issued,
    the amount recoverable from a director is the amount remaining unsatisfied
    after execution.  R.S.O. 1990, c. B.16, s. 131 (3).

[34]

She
    found that the ClearMRI Canada directors were jointly and severally liable
    under s. 131 of the
OBCA
to Mr.
    OReilly

for six months ofunpaid wages and twelve months
    ofvacation pay, specifically $153,400 USD. As Mr. OReilly was also a
    director, she found that he shared in that liability.

[35]

Next,
    the motion judge considered whether Tornado was a common employer using the
    three factors she identified. She stated that it was not determinative that
    there was no employment agreement with Tornado. She found that Tornado exercised
    a sufficient amount of control over Mr. OReilly, as both Tornado and ClearMRI
    Canada had accepted his offers to defer his salary and to loan funds to ClearMRI
    Canada, both had assured Mr. OReilly that ClearMRI Canada was committed to
    bringing its product to market, and both shared the business objectives that
    Mr. OReilly was employed to achieve. She found common control between the
    different legal entities because Tornado had incorporated ClearMRI Canada to
    develop a specific business; Tornado had a majority controlling shareholder
    interest; Tornado had consent rights under the Unanimous Shareholder Agreement;
    there was an overlap in directors; and when it came time to replace a director
    of ClearMRI Canada, Dr. Kim wished to discuss the replacement with Tornado.
    Accordingly, she found that Tornado was a common employer, jointly and
    severally liable for the employment related amounts of the default judgment  everything
    except the unpaid loan and interest on it.

[36]

Finally,
    she held that if Tornado did not satisfy the judgment against it, the Tornado
    directors individually named in the action would share in the liability of the
    ClearMRI companies directors for the six months wages and twelve months
    vacation pay.
[3]
She said that the judgment against the Tornado directors is to remain in
    abeyance until and unless Tornado does not satisfy the judgment against it.
    There was no similar statement regarding the judgment against the ClearMRI companies
    directors.

[37]

The
    formal judgment indicated that the parties could return to the Court for
    directions concerning the liability of the two Tornado directors if execution
    against Tornado was returned unsatisfied. No similar provision appeared in the
    judgment concerning the liability of the ClearMRI Canada directors, including
    Dr. Kim.

iii.

ANALYSIS

A.

Was Tornado Properly Found to be a Common Employer?

The Arguments

[38]

Tornado argues that although the motion
    judge mentioned effective control over the employee as part of the common
    employer test, nothing that she referred to showed any effective control by
    Tornado over Mr. OReilly as an employee. Tornado submits that the motion judge
    effectively treated Tornados corporate relationship with the ClearMRI companies
    as rendering it liable, which is insufficient in law for a corporation to be liable
    for anothers obligations.

[39]

Tornado also argues that the motion judge
    gave no real consideration to the presence of a written employment agreement
    which specified Mr. OReillys employer, and to the absence of an employment
    agreement with Tornado. It submits that it was necessary to consider whether
    Mr. OReilly had a reasonable expectation that Tornado was his employer  the
    written employment agreement and Mr. OReillys senior role in the ClearMRI
    companies shows he could not have reasonably held such an expectation.

[40]

Tornado also argues that the common
    employer doctrine only applies to wrongful dismissal claims, and that claims
    for unpaid salary against a corporation related to the employer must be made
    under s. 4 of the
Employment Standards Act
, which was not invoked by Mr. OReilly.
    Further, it challenges how the motion judge arrived at the quantum of its
    liability.

[41]

Mr. OReilly argues that the motion judge
    made no reversible error in reaching the conclusion that Tornado was a common
    employer, in holding it liable for unfulfilled employment obligations, and in
    determining the quantum of that liability.

[42]

I begin by discussing the relationship
    between the concept of corporate separateness, under which corporations are not
    liable for debts and obligations of affiliated or subsidiary corporations, and
    the common employer doctrine, which may impose liability on related
    corporations. I also discuss the role of an employment agreement in that
    analysis. I then address why the common employer doctrine applies to claims beyond
    those for wrongful dismissal. Against that backdrop, I explain why I conclude
    that the motion judge erred in granting summary judgment based on her finding
    that Tornado was a common employer. In light of that conclusion, it is
    unnecessary to examine Tornados arguments about quantum.

Corporate Separateness

[43]

A corporation is a distinct legal entity
    with the powers and privileges of a natural person:
OBCA
, s. 15. These powers and privileges
    include owning assets in its own right, carrying on its own business, and being
    responsible only for obligations it has itself incurred.

[44]

The fact that one
    corporation owns the shares of or is affiliated with another does not mean they
    have common responsibility for their debts, nor common ownership of their businesses
    or assets. A corporations business and assets are not, in law, the business or
    assets of its parent corporation:
Yaiguaje v. Chevron Corporation
, 2018 ONCA 472, 141 O.R. (3d) 1 at paras.
    57-58, leave to appeal refused, [2018] S.C.C.A. No. 255;
BCE Inc. v.
    1976 Debentureholders
, 2008 SCC
    69, [2008] 3 S.C.R. 560 at para. 34. Similarly, a parent (shareholder) corporation
    is not liable, as such, for the debts and obligations of a subsidiary:
OBCA
, s. 9

[45]

The fact that corporations are related and
    coordinate their activities does not, in and of itself, change this paradigm. Ontario
    law rejects a group enterprise theory under which related corporations that
    operate closely would, by that very fact, be considered to jointly own their
    businesses or be liable for each others obligations. Although the group might,
    from the standpoint of economics, appear as a unit or single enterprise, the
    legal reality of distinct corporations governs:
Meditrust Healthcare
    Inc. v. Shoppers Drug Mart

(2002), 61 O.R. (3d) 786 (C.A.) at paras. 29-31;
Yaiguaje
, at paras.
    76-77.

[46]

Corporate separateness has exceptions
     the court may pierce the corporate veil
and hold a parent corporation liable for obligations
    nominally incurred by a subsidiary corporation that is a mere façade:

in order to ignore the corporate separateness principle, the
    court must be satisfied that: (i) there is complete control of the subsidiary,
    such that the subsidiary is the mere puppet of the parent corporation; and
    (ii) the subsidiary was incorporated for a fraudulent or improper purpose or
    used by the parent as a shell for improper activity:
Yaiguaje
, at para.
    66. [Citations omitted].

[47]

As the test for
    piercing the corporate veil makes clear, control by one corporation over
    another, on its own, does not make the controlling corporation liable for the
    obligations of the controlled corporation; a fraudulent or improper purpose
    must also be present.

[48]

It is not suggested in
    this case that there are grounds to pierce the corporate veil of any of the
    relevant corporations. Accordingly, the basis on which the common employer
    doctrine operates to hold related corporations liable, while remaining consistent
    with the concept of corporate separateness, is important.

The Common Employer Doctrine

[49]

The
    common employer doctrine does not involve piercing the corporate veil or
    ignoring the separate legal personality of each corporation. It imposes
    liability on companies within a corporate group only if, and to the extent that,
    each can be said to have entered into a contract of employment with the
    employee:
Sinclair v. Dover Engineering Services Ltd.
, 49 D.L.R. (4th)
    297 (B.C.C.A.)
(Sinclair (BCCA))
, at para. 9.

[50]

Thus,
    consistent with the doctrine of corporate separateness, a corporation is not
    held to be a common employer simply because it owned, controlled, or was
    affiliated with another corporation that had a direct employment relationship
    with the employee. Rather, a corporation related to the nominal employer will
    be found to be a common employer only where it is shown, on the evidence, that
    there was an intention to create an employer/employee relationship between the
    individual and the related corporation:
Gray v. Standard Trustco Ltd.
(1994), 8 C.C.E.L. (2d) 46 (Ont. Gen. Div.), at para. 3;
Downtown Eatery
    (1993) Ltd. v. Her Majesty the Queen in Right of Ontario

(2001), 54
    O.R. (3d) 161 (C.A.), at paras. 31, 40, leave to appeal refused, [2002] 3
    S.C.R. vi (note);
Rowland v. VDC Manufacturing Inc.
, 2017 ONSC 3351,
    at paras. 12-13.

[51]

As
    illustrated by the issue in this case, where Mr. OReilly alleges that Tornado
    is liable for specific employment obligations, the common employer question is one
    of contractual formation  did the employee and the corporation alleged to be a
    common employer intend to contract about employment with each other on the
    terms alleged? When such an intention is found to exist, no violence is done to
    the concept of corporate separateness because the corporation is held liable
    for obligations it has undertaken.

[52]

To
    determine whether the required intention to contract was present, the parties
    subjective thoughts are irrelevant. Nor need the intention necessarily have
    been reflected in a written agreement. The common laws approach to contractual
    formation is objective; intention to contract can be derived
from conduct. As the Supreme Court has
    stated in a similar common law contractual formation context, what is relevant
    is how each partys conduct would appear to a reasonable person in the
    position of the other party:
Owners, Strata Plan LMS 3905 v.
    Crystal Square Parking Corp.
, 2020
    SCC 29, 450 D.L.R. (4th) 105, at para. 33.

[53]

A
    variety of conduct may be relevant to whether there was an intention to
    contract between the employee and the alleged common employer(s).
As they bear upon this case, two types of conduct are
    important.
One is conduct that reveals where effective control over the
    employee resided. The second is the existence of an agreement specifying an
    employer other than the alleged common employer(s).

[54]

The
    conduct most germane to showing an intention that there was an employment
    relationship with two or more members of an interrelated corporate group is
    conduct which reveals that effective control over the employee resided with
    those members
[4]
:
Downtown Eatery
, at paras. 32-33. This is consistent with how the
    law distinguishes employment from other types of relationships. Control over
    such matters as the selection of employees, payment of wages or other
    remuneration, method of work, and ability to dismiss, can be important
    indicators of an employer/employee relationship:
Baldwin v. Erin District
    High School Board
,

1961 O.R. 687, at para 11, affd 36 D.L.R. (2d)
    244 (SCC); see also
Bagby v. Gustavson International Drilling Co. Ltd.
,
    1980 ABCA 227, 24 A.R. 181, at paras. 48-50.

[55]

A
    written agreement that specifies an employer other than the corporation(s)
    alleged to be the common employers may also be relevant. The extent of its
    relevance depends on how the existence and terms of the written agreement, in
    light of the facts, informs the question of whether there was an intention that
    others were also employers.

[56]

These
    points are illustrated in this courts leading decision on common employer
    liability,
Downtown Eatery
, and the case law which has followed.

[57]

In
Downtown Eatery
, the employee was the manager of a nightclub called For
    Your Eyes Only. The nightclub was operated together by a highly integrated or
    seamless group of companies. One corporation owned the premises; a second
    owned the trademark and held the liquor and entertainment licences; a third owned
    the chattels and equipment; and a fourth was the paymaster: at para. 34. The
    employees contract was with the business name For Your Eyes Only, which itself
    was not a legal entity: at paras. 38-40.

[58]

The
    court held that an individual may be found to be an employee of more than one
    corporation in a related group of corporations, as long as the evidence shows
    an intention to create an employer/employee relationship between the individual
    and the respective corporations within the group: at para. 31. To determine
    that issue, the operative question raised by the facts was where effective
    control over the employee resides: at paras. 32-33.

[59]

In
Downtown Eatery
, the answer to that question was that each of the commonly
    controlled corporations that was integrally and directly involved in owning and
    operating the nightclub, was exercising control over, and was therefore a
    common employer of, the manager.

[60]

The
    court stated at para. 40:

In conclusion, Alouche's true employer in 1993 was the
    consortium of Grad and Grosman companies which operated
For Your Eyes Only
.
The contract of employment was between Alouche and
For Your Eyes Only
which was not a legal entity.
Yet the contract specified that Alouche
    would be "entitled to the entire package of medical extended health care
    and insurance benefits as available in our sister organization". The
    sister organization was not identified. In these circumstances,
and
bearing in mind
    the important roles played by several companies in the operation of the
    nightclub
, we conclude that Alouche's employer in June 1993 when he was
    wrongfully dismissed was all of Twin Peaks, The Landing Strip, Downtown Eatery
    and Best Beaver. This group of companies functioned as a single, integrated
    unit in relation to the operation of
For Your Eyes Only
. [Emphasis
    added.]

[61]

The
    two emphasized passages deserve amplification.

[62]

First,
    the written contract of employment in
Downtown Eatery
, by not naming a
    legal entity, did not indicate a choice of one entity over another in terms of identifying
    the employer. Rather, it indicated the employer was the nightclub, a business
    operated by the four corporations. Although there was a written agreement, it
    begged, rather than answered, the question of who the parties intended the employer
    to be.

[63]

Second,
    each of the corporations found to be a common employer was directly involved in
    the operation of the nightclub that employed the manager. The nightclub was
    each of their business. Each was thus in a direct relationship of control with
    the employee who had been hired to manage their business. None were held to be
    employers simply because they had a relationship with another corporation that
    was directly involved with the employee. As Hourigan J.A. noted in
Yaiguaje
,
    the conclusion in
Downtown Eatery

rested more on the plaintiffs relationship to
    the group of companies rather than the relationships among the companies in the
    group: at para. 69.

[64]

In
    other cases, a common employer allegation has failed due to the presence of a
    written employment agreement that specified that only one company within the corporate
    group was the employer:
Dumbrell v. The Regional Group of Companies Inc.
, 2007
    ONCA 59, 85 OR (3d) 616, at para.
83
;
Mazza v. Ornge
    Corporate Services,
2015 ONSC 7785, 52 B.L.R. (5th) 51 (
Mazza
    (ONSC)
), at paras. 93-99, affd
2016 ONCA 753
, 62
    B.L.R. (5th) 211 (
Mazza (ONCA)
). In each of these cases, the facts
    were such that the court could conclude that the employee knew the only entity to
    whom he could look for fulfillment of employment obligations:
Dumbrell
,
    at para. 83;
Mazza (ONSC)
at paras. 90, 93-94. As this court explained
    in
Mazza (ONCA)
, the common employer claim was precluded because [t]he
    Employment Agreement identified only one employer and contained an express
    release of claims against affiliated corporations: at para. 8. In other words,
    the written agreements in those cases, in light of all the facts, did not
    permit the conclusion that there was an intention to create an employer/employee
    relationship with anyone beyond the employer specified in the written
    agreement.

[65]

Nonetheless,
    as
Downtown Eatery
shows, a written agreement will not always preclude
    a finding of common employers. It depends on the terms of the written agreement,
    and the other facts of the case. The circumstances must reasonably permit the
    inference that there was an intention that the alleged common employers were
    also parties to the employment agreement. The inference is not available simply
    because the corporations are related: As Morgan J. explained in
Rowland
,

at paras. 12-13:

In order to establish that two or more legal entities are his
    common employer, the Plaintiff must demonstrate that he had a reasonable
    expectation that the Defendants were each a party to his employment contract

Where the employee is aware that he was employed by a single
    employer, the fact of interlocking shareholders with his formal employer does
    not itself establish a common employer. The onus is on the Plaintiff to
    demonstrate that there was effective control over the employee by all of the
    alleged common employer companies. There must be evidence of an actual
    intention to create an employer/employee relationship between the individual
    and the respective corporations within the group. [Citations omitted.]

To summarize, the doctrine of common employer liability
    exists consistently with the principle of corporate separateness because it
    holds related corporations liable for obligations they actually undertook to
    perform in favour of the employee. It does not hold them liable simply because
    they have a corporate relationship with the nominal employer. Whether the
    related corporations actually undertook to perform those obligations is a
    question of contractual formation  did the parties objectively act in a way
    that shows they intended to be parties to an employment contract with each
    other, on the terms alleged? Of central relevance to that question is where
    effective control over the employee resided. The existence of a written
    agreement specifying an employer other than the alleged common employer(s) will
    also be relevant; the extent of the relevance will depend on the terms and the
    factual context.

To Which Claims Does the Common Employer Doctrine
    Apply?

[66]

Tornado
    argues that the common employer doctrine applies only to wrongful dismissal
    claims. In my view, this argument must be rejected.

[67]

Although
    the common employer doctrine has traditionally been applied to wrongful
    dismissal claims, there is no reason in principle to so limit it. Whether a
    corporation is a common employer is a function of whether it is properly
    considered a party to the employment agreement with the employee. Therefore,
    any claims that could be brought by reason of that agreement can be made
    against the common employer. This includes claims for a breach that consists of
    not paying salary, bonus, or other entitlements as much as it includes claims
    for a breach that consists of dismissing the employee without notice or cause.

[68]

Against
    that backdrop, I turn to a consideration of the approach taken by the motion
    judge.

The Standard of Review

[69]

Whether
    a common employer relationship exists is a question of mixed fact and law, as
    it involves the application of a legal standard to a set of facts. Appellate
    deference is generally warranted, but intervention is justified when the judge
    commits an extricable error of law, such as the formulation and application of
    the wrong test, or makes a palpable and overriding error of fact:
Housen v.
    Nikolaisen
, 2002 SCC 33, [2002] 2. S.C.R. 235, at para. 36.

The Motion Judge Did Not Articulate or Apply the
    Correct Test

[70]

The
    test to determine whether corporations are common employers may be stated in several
    ways that are in substance the same. For example, as articulated by Wallace
    J.A. in
Sinclair (BCCA)
: The issuereduces itself to determining
    which company or companies entered into a contract of employment with [the
    employee] pursuant to which he would provide services in return for his salary
    and benefits: at para 8. Or, as adopted in
Downtown Eatery
,

One
    must find evidence of an intention to create an employer/employee relationship
    between the individual and the respective corporations within the group: at para.
    31.

[71]

Mr.
    OReilly contended that Tornado owed him the same obligations as ClearMRI US
    under the written employment agreement  the same salary, benefits, and other
    employment entitlements. For that contention to succeed, it was necessary to
    find that Tornado and Mr. OReilly intended to contract with each other on
    those terms.

[72]

As
    discussed below, the motion judge did not address that question. Although she
    referred to three factors that are relevant to determining whether a common employer
    relationship exists, she did not articulate the actual test, namely, whether
    there was an intention that Tornado was a party to the employment agreement
    with Mr. OReilly on the terms alleged. Nor did she apply that test to the
    factors she considered. In other words, she did not ask, or answer, the right
    question.

[73]

I
    deal, in turn, with the three factors the motion judge considered through the
    lens of the test.

The Effect of an Employment Agreement

[74]

The
    first factor the motion judge discussed was Tornados absence from Mr.
    OReillys employment agreement. She held that this was not determinative. She
    said: It is true that O 'Reilly's employment contract does not mention
    Tornado, and that Tornado did not pay him, but the factor of a contractual
    relationship is not determinative, or else it would be too simple for employers
    to evade their obligations towards their employees.

[75]

To
    the extent that the motion judge suggested that there did not need to be any
    contractual relationship between Tornado and Mr. OReilly in order to consider
    Tornado a common employer, she erred. The whole point of the common employer
    inquiry was to determine whether Tornado was a party to an employment agreement
    imposing the obligations that Mr. OReilly sought to enforce. That did not
    require a written agreement with Tornado, but it did require a determination
    that a contractual relationship with Tornado on the terms alleged had been
    formed. The motion judge never adverted to that question.

[76]

The
    motion judge cited
Downtown Eatery
for the proposition that a contractual
    relationship is not a decisive factor. However, the passage the motion judge
    cited spoke to the relevance of a written agreement that did not specifically name
    the common employers; the court was not suggesting that a corporation can be a common
    employer without a finding that it and the employee intended to be parties to
    an employment agreement with each other.

[77]

To
    the extent that the motion judge was addressing the effect of the written
    agreement specifying only ClearMRI US as the employer, her consideration was
    incomplete. She did not address the agreements fundamental difference from that
    in
Downtown Eatery
which, unlike the agreement in this case, neither
    selected an entity as the employer, nor implicitly excluded any others from
    consideration. Here, the written agreement specifically named a corporation for
    which the appellant actually worked.

[78]

It
    was accordingly necessary to assess how the written agreement bore on the
    question of whether there was an intention that Tornado was a party to the
    employment agreement with the same obligations as ClearMRI US. This analysis would
    have to be made in light of all of the evidence.

[79]

The
    motion judge did not, however, undertake this required analysis.

Tornados Control Over Mr. OReilly As an
    Employee

[80]

The
    second factor the motion judge considered was whether Tornado exercised a sufficient
    amount of control over Mr. OReilly. She held that it did, but her conclusion
    is tainted by her failure to relate the facts to the proper test.

[81]

The
    motion judge relied on several facts which she said she took from Mr.
    OReillys uncontested evidence: that Tornado and ClearMRI Canada both agreed
    to accept [Mr.] OReillys offer to defer his salary; that Tornado and
    ClearMRI Canada both agreed to accept his offer to loan funds to ClearMRI
    Canada; that Tornado and ClearMRI Canada had assured Mr. OReilly that both
    were committed to bringing the ClearMRI products to market; and that Tornado
    shared business objectives that Mr. OReilly was employed to achieve. There are
    several problems with these findings.

[82]

Beginning
    with the offer to defer salary, the motion judge misapprehended Mr. OReillys
    evidence. Mr. OReilly did not say his offer to defer his salary was accepted
    by Tornado. Rather, he said that [t]he Board of Directors [of ClearMRI Canada]
    discussed and approved of the arrangement to defer my salary until we are
    receiving revenue at its meeting of February 27, 2013 This evidence does not
    indicate that Tornado was exercising control over Mr. OReilly as an employee.

[83]

Second,
    with respect to the loan, the motion judge did not relate her reliance on this
    to her later conclusion that the loan was a private commercial debt and not a
    debt related to employment duties. The motion judge did not explain, nor is it
    apparent, why Tornados involvement in agreeing to the loan, which she found to
    be unrelated to employment duties, was relevant to whether it was exercising
    control over Mr. OReilly as an employee. For similar reasons, Tornados offer that
    Mr. OReilly take shares in ClearMRI Canada in satisfaction of the loan  an
    offer Mr. OReilly did not accept  does not assist in showing that effective
    control over Mr. OReilly, as an employee, resided with Tornado.

[84]

Third,
    Mr. OReillys evidence about an assurance was that at the time he offered to
    defer his salary, he was reassured by ClearMRI, Clear MRIs directors, Tornado
    and Tornados directors, and had no reason to doubt that ClearMRI [Canada] was
    committed to bringing the product to market and subsequently earning
    significant revenue. The motion judge did not explain, and it is not apparent,
    why the provision of this assurance about what his employer, ClearMRI Canada,
    was committed to do, constituted Tornado exercising control over Mr. OReilly
    as an employee.

[85]

The
    fourth fact the motion judge relied on, shared business objectives between Tornado
    and the ClearMRI companies, impermissibly strayed across the boundaries of
    corporate separateness. A shareholders objectives may be aligned with that of
    the corporation, in that the corporations success may accrue to the benefit of
    the shareholder. However, the business remains that of the corporation. An
    employee of a corporation is not controlled by a shareholder of that
    corporation simply because the employee is working for the success of the
    corporation, and the shareholder hopes that such success will occur.

[86]

Stepping
    back from the specific findings, the key question was whether there was
    evidence of an intention to create an employment agreement between Tornado and
    Mr. OReilly containing the obligations Mr. OReilly sought to enforce. The
    motion judge did not relate the evidence about control over Mr. OReilly to this
    critical question. She did not consider whether the evidence about control showed
    an intention that Tornado was one of Mr. OReillys employers at the time Mr.
    OReilly commenced employment in 2012, or that Tornado was somehow added as one
    of his employers at a point after that.

Corporate Relationships

[87]

The
    third factor the motion judge considered was whether there was a sufficient
    relationship between Tornado and the ClearMRI companies to apply the common employer
    doctrine. She found that there was, relying on Tornados majority ownership and
    incidents of corporate control, Tornados consent rights under the Unanimous
    Shareholder Agreement, and a desire of Dr. Kim to consult Tornado about a proposed
    replacement to ClearMRI Canadas board of directors.
[5]

[88]

That
    corporations to which the common employer doctrine is applied are related to
    each other, members of a corporate group, or commonly controlled, is a feature
    of the case law. It might usefully be described as a necessary, but not a
    sufficient, factor for the application of the common employer doctrine. The
    corporate interrelationships in this case were such that the common employer
    doctrine qualified for consideration. But the corporate interrelationships do
    not, on their own, justify applying the doctrine. If they did, the common
    employer doctrine would lose its consistency with the concept of corporate
    separateness.

[89]

In
    some cases, the corporate set-up may shed light on with whom the employee has
    contracted, because it brings into sharper focus where effective control over
    the employee resided. For example, in
Downtown Eatery
, all of the
    commonly controlled corporations were directly operating the business that
    employed the manager. In
Sinclair
, the employee was required to work for
    two companies even though on the payroll of only one. Or the employee may have
    been transferred from company to company within a group in a manner that may indicate
    the employment agreement was with the parent corporation:
Bagby
, at
    para. 46.

[90]

These
    features were not present here. The motion judge did not consider or explain
    why the aspects of the corporate relationship between Tornado and the ClearMRI
    companies indicated an intention that Tornado was a party to the employment
    agreement with Mr. OReilly. In the absence of something that shows such an
    intention, share ownership and its incidents, including the power to elect
    directors and the alignment of financial objectives between parent and subsidiary
    corporations, are insufficient to establish common employer status on the
    parent. The motion judge referred to an overlap in directors, but there was no
    suggestion of confusion about the capacity in which directors were acting when
    they interacted with Mr. OReilly concerning employment. And while the motion
    judge relied on Tornados consent rights under the Unanimous Shareholder
    Agreement, those rights did not extend to employment agreements or changes in
    senior management  matters reserved to the ClearMRI Canada board.

[91]

Thus,
    on the key question of whether there was an intention that Tornado was a party
    to the employment arrangement with Mr. OReilly  even accepting the finding
    that the written agreement was not dispositive  the motion judges conclusions
    about control over Mr. OReilly as an employee did not address the correct test
    and were thus legally insufficient to support summary judgment. The corporate
    interrelationships could not fill that gap.

Conclusion on Common Employer Liability

[92]

Accordingly,
    I would set aside the summary judgment against Tornado, and substitute an order
    dismissing the motion for summary judgment against it.

B.

Dr. Kims Appeal

[93]

In
    her reasons, the motion judge found Dr. Kim liable for six months wages and
    twelve months vacation pay on the basis that he was a director of ClearMRI
    Canada. Although he was also a director of Tornado, the formal judgment only
    addresses his liability as a director of ClearMRI Canada.

[94]

Dr.
    Kims primary argument on appeal is that even though ClearMRI Canada had not
    paid the judgment against it, the conditions to his liability in s. 131(2) of
    the
OBCA
are quite specific, and there was no evidence they were
    fulfilled. There was no evidence that ClearMRI Canada was in liquidation,
    ordered to be wound-up, or was formally bankrupt as contemplated by s.
    131(2)(b). Nor was there evidence that an execution against ClearMRI Canada was
    returned unsatisfied as contemplated by s. 131(2)(a).

[95]

The
    issue is how s. 131 is to be interpreted in this case, given that it
    contemplates the director and the corporation being sued in the same action,
    yet provides that a directors liability is conditional on, for example, an
    execution against the corporation being returned unsatisfied, a step that would
    occur after judgment.

[96]

In
    a case where the issue of liability of both the corporation and the directors
    comes up for consideration at the same time, and judgment is given against the
    corporation, any judgment against the director may have to be conditional on
    the occurrence of a subsequent event. That was how the motion judge, having
    found Tornado to be liable, approached the matter in respect of the Tornado
    directors. She directed the parties to return to address the responsibility of
    two Tornado directors (but not Dr. Kim) if execution against Tornado was
    returned unsatisfied.

[97]

Mr.
    OReilly obtained judgment against ClearMRI Canada sometime before he brought a
    motion for summary judgment against Dr. Kim. Dr. Kim argues that Mr. OReilly could
    have included evidence in the summary judgment motion that execution had been
    returned unsatisfied against ClearMRI Canada if that were the case. Since he did
    not, Dr. Kim argues that no judgment at all should have been given against him.
    In any event, the judgment does not reflect that Dr. Kims liability is
    conditional on s. 131(2) events occurring.

[98]

I
    reject the argument that no judgment at all should have been granted against
    Dr. Kim. Nothing in s. 131 of the
OBCA
puts a time limit on when the
    conditions in s. 131(2) can be fulfilled. But the formal judgment should be
    amended to provide that the liability of Dr. Kim in para. 3 is conditional on
    an execution against ClearMRI Canada being returned unsatisfied, or one of the
    events referred to in s. 131(2)(b) occurring in relation to ClearMRI Canada. The
    parties should have leave to return to the motion judge for directions if any
    issue arises on this point.

C.

Quantum Issues

[99]

The
    appellants made various arguments regarding the quantum of the judgments
    against them. Given the disposition of Tornados appeal, I address two that could
    apply to Dr. Kim.

[100]

First, they argue that
    the motion judge did not consider the fact that Mr. OReilly resigned in December
    2013, and that this should affect the quantum of his entitlement. I would
    reject that argument. The motion judge found that, notwithstanding the formal resignation,
    Mr. OReilly continued to work as CEO in reality. This reality governs his
    compensation entitlement.

[101]

Second, it is argued
    that the agreement to defer specified the circumstance under which payment
    would resume, namely, the business earning revenue, and this never occurred. Mr.
    OReilly gave evidence, however, that revenue was earned. In my view, there was
    evidence on which the motion judge could properly view the deferral as
    non-permanent, such that the entitlement to claim salary and other entitlements
    was not waived and was in place when the revenue was earned.

[102]

Finally, it is argued
    that the motion judge simply accepted the amounts in the default judgment.
    There was evidence before the motion judge on the quantum of Mr. OReillys
    entitlements as they pertained to Dr. Kims liability. As well, his liability
    is derivative of that of ClearMRI Canada, which had been determined by
    judgment. I would not interfere with the quantum of the judgment against Dr.
    Kim.

iv.

CONCLUSION

[103]

Subject to the
    variation noted in para. 98 above, I would dismiss the appeal of Dr. Kim. I
    would allow Tornados appeal and set aside the summary judgment against it.

[104]

The parties made
    submissions on costs but did not specifically address the mixed result I have
    arrived at. If the parties cannot agree on costs, they should make written
    submissions limited to three pages each, within ten days of the release of
    these reasons.

Released: June 7, 2021 L.R.

B. Zarnett J.A.

I agree. L.B.
    Roberts J.A.

I agree. Sossin
    J.A.

[1]

Only the common law doctrine of common employer liability was
    invoked by the respondent in this case. Section 4 of the
Employment Standards Act
,
    2000, S.O. 2000, c. 41 provides for circumstances in which separate persons are
    treated as one employer. It is not necessary to comment on how the section
    might have applied in this case, a point on which the parties did not agree.

[2]
The motion judge described this latter category of decision as falling within
    Tornados consent rights at para. 13 of her reasons, but this appears to
    misread sections 2.12 and 2.13 of the Unanimous Shareholder Agreement.

[3]
The motion judge subsequently varied her judgment to delete one of the
    individuals (Stefan Larson) as he had not been a director of either Tornado or
    ClearMRI Canada at the relevant time.

[4]

This is a different question from the question of corporate
    control, which, at its most basic, refers to the ability of a shareholder to
    elect the majority of a corporations board of directors:
OBCA
, s. 1(5). The fact
    that one corporation controls a second corporation does not equate to control
    by the first corporation over the second corporations employees.

[5]

Neither the director being replaced, or the replacement, was
    Mr. OReilly.