2008 BCCA 434 Hildebrand v. Fox

COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:	*Hildebrand v. Fox,*
	2008 BCCA 434

Date: 20081105

Docket: CA036115

Between:

Margaret Hildebrand

Appellant

(Plaintiff)

And

Brian Fox and
Board of Education of School District No. 62 (Sooke)

Respondents

(Defendants)

Before:	The Honourable Madam Justice Prowse
	The Honourable Mr. Justice Tysoe
	The Honourable Madam Justice Smith

K. I. Denhoff and A. Alani	Counsel for the Appellant
N. T. Mitha and A. Kundi	Counsel for the Respondents
Place and Date of Hearing:	Vancouver, British Columbia
September 26, 2008
Place and Date of Judgment:	Vancouver, British Columbia
November 5, 2008

Written Reasons by:

The Honourable Mr. Justice Tysoe

Concurred in by:

The Honourable Madam Justice Prowse

The Honourable Madam Justice Smith

Reasons for Judgment of the Honourable Mr. Justice Tysoe:

Introduction

[1] The plaintiff, Margaret Hildebrand, appeals from an order dismissing her action against the defendant, Brian Fox, made on an application by Mr. Fox under Rule 19(24) of the Rules of Court.

[2] Mr. Fox based his application on three grounds. The chambers judge decided the application on one of those grounds, and did not deal with the other two grounds. His reasons for judgment are indexed as 2008 BCSC 842. The parties are agreed that, if we rule that the chambers judge erred on the ground he decided, we should deal with the other two grounds rather than remitting them to the trial court.

[3] It is my view that, for the following reasons, the chambers judge did err in dismissing the action against Mr. Fox on the ground with which he dealt. It is also my view that the action should not be dismissed against Mr. Fox under Rule 19(24) on either of the other grounds upon which he relies.

Background

[4] The jurisprudence with respect to Rule 19(24) stipulates that the application must be determined on the basis of the facts asserted in the statement of claim, as it stands at the time of the application (or as it can be amended). I will therefore summarize some of the facts contained in the statement of claim, and I will quote portions of it.

[5] Ms. Hildebrand is employed by the defendant school board (the “Board”) and, at the time of the subject complaint, was the principal of an elementary school in the Sooke School District. Mr. Fox is the superintendent of the Board.

[6] A complaint was lodged against Ms. Hildebrand by a teacher’s assistant working in the school. It was alleged that Ms. Hildebrand grabbed the teacher’s assistant by the arm while she was in a classroom, pulled her into the corridor towards a parent, and continued to hold her arm tightly while speaking with the parent in the corridor, thereby bruising the assistant’s arm.

[7] Immediately following the allegations, Mr. Fox ordered Ms. Hildebrand to remain off work. She was permitted to return after an absence of five days, and she was docked sick days in respect of the absence.

[8] The Board retained a third party to conduct an investigation of the complaint. The investigator interviewed the complainant, the plaintiff and the parent with whom they had the discussion in the corridor outside the classroom. The investigator did not interview the teacher or any of the students who had been in the classroom.

[9] The investigator prepared a summary of allegations concerning the complaint. A copy of the summary was provided to the plaintiff. The plaintiff’s legal counsel expressed concern to the Board about the lack of thoroughness of the investigation.

[10] The investigator prepared a final report. Without giving Ms. Hildebrand an opportunity to respond to the report, Mr. Fox gave her a letter of discipline. Ms. Hildebrand’s legal counsel requested Mr. Fox to withdraw the letter of discipline and to refrain from sending a copy of the letter to the British Columbia College of Teachers until the plaintiff responded to the report. Mr. Fox did not accede to either request, and forwarded a copy of the letter to the College. Mr. Fox also provided copies of the letter to the complainant and the union to which she belonged.

[11] The statement of claim alleges that Mr. Fox was grossly negligent in failing to meet the standard of care he owed to Ms. Hildebrand. The particulars given in the statement of claim of the alleged gross negligence are as follows:

(a) failing to properly instruct [the investigator] about the procedure and process to be followed to ensure that the investigation was conducted fairly;

(b) improperly relying on the Report, including by issuing the Disciplinary Letter based solely on the conclusions set out in the Report and by failing to consider the adequacy of the Report or the investigation process;

(d) failing to withdraw the Disciplinary Letter or delay sending the Disciplinary Letter to the College pending a response by Hildebrand to the Report and/or the Disciplinary Letter;

(e) publishing the Disciplinary Letter to the College; and

(f) publishing the Report to third parties, including to [the complainant] and her Union.

[12] The statement of claim asserts that the Board is vicariously liable for the gross negligence alleged against Mr. Fox.

[13] In addition to general and special damages, the statement of claim includes claims for punitive and aggravated damages. The claim for punitive damages is based on the assertion that “Fox acted in an arrogant, malicious and high-handed fashion”. The claim for aggravated damages is in respect of distress alleged to have been suffered by Ms. Hildebrand “from the perfunctory and unfair manner in which this matter was dealt with by Fox, with complete disregard for her position and rights.”

Issues

[14] The issues before both the chambers judge and this Court arise from the question of whether the pleadings do not disclose a reasonable cause of action against Mr. Fox on each of the following grounds:

(a) the allegations against Mr. Fox do not disclose a cause of action in gross negligence;

(b) no duty of care was owed by Mr. Fox to Ms. Hildebrand; and

The chambers judge found that the allegations do not amount to gross negligence and struck the claim against Mr. Fox. As previously mentioned, the judge did not deal with the other two grounds.

Discussion

(a) Gross Negligence

[15] The reason Ms. Hildebrand made a claim of gross negligence, as opposed to negligence simpliciter, is because section 94 of the School Act, R.S.B.C. 1996, c. 412, contains a partial bar prohibiting claims being made against, among others, employees of a school board. Section 94(1) provides that no action may be instituted against an employee for anything done or omitted to be done by the employee, or for any neglect or default, in the performance of his or her duties or exercise of his or her powers. Section 94(2) states that subsection (1) does not provide a defence if the employee was guilty of “dishonesty, gross negligence or malicious or willful misconduct”. Thus, Mr. Fox is immune from claims for negligence simpliciter, but not for claims for gross negligence.

[16] Rule 19(24)(a) authorizes the court to strike out the whole or any part of a pleading on the ground that “it discloses no reasonable claim”. It is accepted by Ms. Hildebrand that the chambers judge articulated the correct test under Rule 19(24) when he stated in his reasons for judgment that the “Statement of Claim should be struck only if it is plain and obvious that it discloses no reasonable cause of action” (paragraph13). In making this statement, the chambers judge was referring to the oft-cited passage from Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959 at 980, 49 B.C.L.R. (2d) 273:

Thus, the test in Canada governing the application of provisions like Rule 19(24)(a) of the British Columbia Rules of Court is the same as the one that governs an application under R.S.C. O. 18, r. 19: assuming that the facts as stated in the statement of claim can be proved, is it “plain and obvious” that the plaintiff’s statement of claim discloses no reasonable cause of action? As in England, if there is a chance that the plaintiff might succeed, then the plaintiff should not be “driven from the judgment seat”. Neither the length and complexity of the issues, the novelty of the cause of action, nor the potential for the defendant to present a strong defence should prevent the plaintiff from proceeding with his or her case. Only if the action is certain to fail because it contains a radical defect ranking with the others listed in Rule 19(24) of the British Columbia Rules of Court should the relevant portions of a plaintiff’s statement of claim be struck under Rule 19(24)(a).

[17] In Hunt at 978, the court quoted with approval the following passage from Minnes v. Minnes (1962), 39 W.W.R. 112 at 122 (B.C.C.A.):

In my respectful view it is only in plain and obvious cases that recourse should be had to the summary process under O. 25, R. 4, and the power given by the Rule should be exercised only where the case is absolutely beyond doubt. So long as the statement of claim, as it stands or as it may be amended, discloses some question fit to be tried by a judge or jury, the mere fact that the case is weak or not likely to succeed is no ground for striking it out. If the action involves investigation of serious questions of law or questions of general importance, or if facts are to be known before rights are definitely decided, the Rule ought not to be applied.

[18] It is also accepted by Ms. Hildebrand that the chambers judge correctly referred to the meaning of the term “gross negligence” when he quoted the following portions of Doern v. Phillips Estate (1994), 2 B.C.L.R. (3d) 349, 25 M.P.L.R. (2d) 279 (S.C.), aff’d (1997), 43 B.C.L.R. (3d) 53, 42 M.P.L.R. (2d) 252 (C.A.):

81 In the absence of any clear legislative intent to define the concept of gross negligence, it should be given its plain meaning as it has developed under the common law. The classic test for gross negligence was reiterated by the Supreme Court of Canada in Walker v. Coates, [1968] S.C.R. 599 [64 W.W.R. 449]. Ritchie J. referred, at p. 601, to the Court's earlier decision in McCulloch v. Murray, [1942] S.C.R. 141, where Duff C.J.C., at p. 145, had defined gross negligence as:

“All these phrases, gross negligence, wilful misconduct, imply conduct in which, if there is not conscious wrongdoing, there is a very marked departure from the standards by which responsible and competent people in charge of motor cars habitually govern themselves.” [emphasis by Ritchie J.]

82 The definition of “gross negligence” was also discussed in the context of “gratuitous passenger” cases in Ogilvie v. Donkin, [1949] 1 W.W.R. 439 (B.C.C.A). O'Halloran J.A. held, at p. 441:

…a rational test for deciding whether negligence is “gross” (within the meaning of the gratuitous passenger section) is the magnitude of the foreseeable risks in the particular circumstances....

The failure to take care develops into gross negligence within the meaning of the statute, when it must be plain the magnitude of the risks involved are such that, if more than ordinary care is not taken, a mishap is likely to occur in which loss of life, serious injury or grave damage is almost inevitable.

[19] Ms. Hildebrand does, however, take issue with the manner in which the chambers judge considered her claim of gross negligence. She says that while he stated the correct test, he failed to apply it.

[20] At paragraphs 19 and 20 of his reasons, the chambers judge analyzed Ms. Hildebrand’s claim against Mr. Fox by making a one or two sentence comment on each of the particulars of gross negligence, (a) through (f) quoted above (the chambers judge having combined (e) and (f) in one).

[21] The chambers judge’s comment on particular (a) was that “it is not plain and obvious that there is any duty whatsoever on Fox to give such instructions to the investigator.” With respect, the chambers judge reversed the test. He should have considered whether it was plain and obvious that there was no such duty.

[22] The judge’s comment on particular (b) was that he had “difficulty finding such reliance to be negligent, never mind grossly negligent.” As to particular (c), he said, “I am not satisfied there was any such duty on Mr. Fox.” His comment on particular (d) was that “Mr. Fox had a statutory duty with which he complied.” In commenting on particular (e) (combined with (f)), the judge considered his view on particular (d) to be relevant with respect to the College, and he stated that providing the complainant and her union with copies of the disciplinary letter “seems consistent with natural justice and procedural fairness rather than gross negligence.” In paragraph 21 of his reasons for judgment, the judge concluded that he was satisfied that “the cumulative effect of the plaintiff’s allegations do not amount to gross negligence.”

[23] Rather than determining whether it was plain and obvious that the pleadings did not disclose the existence of a reasonable cause of action against Mr. Fox, it appears that the chambers judge weighed the allegations contained in the statement of claim and concluded that Mr. Fox was not grossly negligent. In my opinion, that is not the correct approach to be taken on a Rule 19(24)(a) application.

[24] The purpose of Rule 19(24)(a) is to strike out pleadings when it is plain and obvious that the facts alleged in the pleadings do not disclose a reasonable claim. Its purpose is not to determine whether the plaintiff will be able to prove his or her claim at trial.

[25] At this point of the proceeding, there is no evidence with respect to Mr. Fox’s state of mind, nor is there any evidence as to the standard of care exercised by other superintendents in similar circumstances. Other evidence may come to light in the discovery process or otherwise that may assist Ms. Hildebrand in proving her claim against Mr. Fox at trial.

[26] To pose the question in the words used by the Supreme Court of Canada in Hunt quoted above, is there a chance that Ms. Hildebrand might succeed in her gross negligence claim? In my view, the question must be answered in the affirmative. Although it is often difficult to prove claims of gross negligence, there is a chance that Ms. Hildebrand might succeed in her claim against Mr. Fox. As stated in Minnes, the fact that Ms. Hildebrand’s claim might be weak or unlikely to succeed is not a ground for striking it out.

[27] It is my conclusion that it is not plain and obvious that the particulars of gross negligence contained in the statement of claim disclose no reasonable cause of action against Mr. Fox. In my view, the chambers judge erred in striking out the claim against Mr. Fox on this basis. I will now consider the other two grounds upon which Mr. Fox relies.

(b) Duty of Care

[28] Mr. Fox says that it is plain and obvious that he did not owe a duty of care to Ms. Hildebrand. He argues that the law is clear that an employer does not owe an employee a general duty of care that incorporates principles of fairness or natural justice into the employment relationship and that an employer has no duty with regard to the conduct of investigations of its employees.

[29] In this regard, Mr. Fox relies first on the decision in Ridge v. Baldwin, [1964] A.C. 40, [1963] 2 All E.R. 66 (H.L.), a wrongful dismissal case, where it was held that the important issue in the context of master and servant law was whether there was a breach of contract and that the principles of natural justice are not relevant to a termination of the employment relationship.

[30] Mr. Fox then points to the recent case of Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, where the Supreme Court of Canada overruled its previous decision in Knight v. Indian Head School Division No. 19, [1990] 1 S.C.R. 653, 69 D.L.R. (4th) 489, in its holding that a limited obligation of procedural fairness applies to the termination of public sector employees.

[31] Next, Mr. Fox relies on Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701, 152 D.L.R. (4th) 1, where it was held that there is no tort permitting a dismissed employee to sue for breach of a good faith and fair dealing obligation.

[32] Finally, Mr. Fox cites Correia v. Canac Kitchens, 2008 ONCA 506, 294 D.L.R. (4th) 525, where an employee had been wrongfully terminated because an investigation had mistakenly identified the employee as a participant in theft and drug dealing at the employer’s plant. The employee sued the employer and the investigator for negligent investigation. While allowing the action to proceed against the investigator, the Ontario Court of Appeal dismissed the claim against the employer. Mr. Fox relies on the following reasoning of the court:

[72] The fundamental premise of the employer-employee relationship in Canada is the right, subject to contractual terms to the contrary, of either party to terminate the relationship. Thus, in Wallace, the Supreme Court of Canada rejected the submission that an employer must have good faith reasons for dismissal or that there could be an independent action or head of damages for breach of such alleged duty of good faith, either in contract or in tort. In our view, it would be inconsistent to nevertheless recognize a duty on an employer not to conduct a negligent investigation regarding an employee. To do so would be to do indirectly what the Supreme Court expressly rejected in Wallace.

[73] The Supreme Court, for policy reasons explained in Wallace, has refused to recognize an action in tort for breach of a good faith and fair dealing obligation. In this case, Canac fired the plaintiff for cause. It concedes that it was wrong in doing so and it may have been negligent. But, in our view, to recognize a tort of negligent investigation for an employer would be inconsistent with the holding in Wallace. It would, in effect, carve out an exception from the broad holding in Wallace where the reason for the dismissal was an allegation of criminality. We can see no principled reason for so doing.

[33] Ms. Hildebrand replies that the problem with the authorities relied upon by Mr. Fox is that they all deal with claims by terminated employees against their employers. In this case, Ms. Hildebrand was not terminated and her claim is against Mr. Fox (although she also claims that her employer, the Board, is vicariously liable).

[34] I agree with the position of Ms. Hildebrand that the above authorities do not make it plain and obvious that Mr. Fox did not owe her a duty of care in connection with the investigation into the incident in question. Ms. Hildebrand is not claiming a breach of a duty of fairness or other principle of procedural fairness. She is asserting that Mr. Fox, who is not her employer, owed her a duty of care, upon which she can found a claim of gross negligence.

[35] Correia does stand for the proposition that an employer does not owe a duty of care to an employee in connection with a criminal investigation leading to the termination of the employee. In considering a claim of negligent investigation, the Ontario Court of Appeal first conducted an analysis pursuant to the two-part test for determining whether a person owes a duty of care to another, as formulated in Anns v. Merton London Borough Council, [1977] 2 All E.R. 492, [1978] A.C. 728 (H.L.), and first adopted by the Supreme Court of Canada in Kamloops (City) v. Nielsen, [1984] 2 S.C.R. 2, 66 B.C.L.R. 273. On the first part of the test, the court held that there was a triable issue as to whether sufficient foreseeability and proximity existed to establish a prima facie duty of care on the part of the private investigation firm and the employer. On the second part of the test, the court concluded that, if a prima facie duty were found to exist, it would be negated by policy considerations in the case of the employer, but not the investigation firm. Hence, the employer was found not to owe a duty of care to the employee in connection with the investigation leading to his dismissal.

[36] The court relied on two policy considerations to negate a prima facie duty on the part of the employer. The first was the existence of a contract between the employer and the employee (see paragraphs 72 and 73 quoted above). The second policy consideration was that the imposition of a duty of care on the employer would have a chilling effect on the willingness of honest citizens to report criminal activity to the police.

[37] The head of the employer’s human resources department was also named as a defendant in the action. The plaintiff had sued this senior employee for the tort of intentional infliction of mental distress, and the court allowed this claim to proceed to trial. It appears from the court’s description of the plaintiff’s claims that the senior employee was also being sued for negligent investigation, but the court’s discussion of the Anns/Kamloops test does not refer to this employee.

[38] The court held in Correia that there was a triable issue as to whether the relationship between the employer and the terminated employee disclosed sufficient foreseeability and proximity to establish a prima facie duty of care (i.e., the first part of the Anns/Kamloops test). Similarly, in this case, it is not plain and obvious that the relationship between Mr. Fox and Ms. Hildebrand fails to disclose sufficient foreseeability and proximity to establish a prima facie duty of care.

[39] It is also my view that, unlike the situation in Correia, it is not plain and obvious that policy considerations should negate the prima facie duty of care (i.e., the second part of the Anns/Kamloops test). Neither of the policy considerations relied upon in Correia is present in this case. Mr. Fox did not raise on this appeal any other policy considerations that would negate a prima facie duty if one were found to exist (but he is at liberty to do so at trial if he wishes).

[40] In my opinion, it is not plain and obvious that Mr. Fox did not owe a duty of care to Ms. Hildebrand. Her claim against him should not be struck on this ground.

(c) Independent Cause of Action

[41] Mr. Fox makes two points on this ground. First, he says that an independent cause of action against him is required by the School Act. Secondly, he says that the common law requires that there be an independent cause of action against him.

[42] Mr. Fox relies on the decision in Reglin v. Creston (Town), 2003 BCSC 1699, 43 M.P.L.R. (3d) 299, for the first point. In that case, an employee of the Town of Creston was dismissed from his employment. In addition to suing the Town for wrongful dismissal, the employee sued the mayor and chief administrative officer for their part in his dismissal. The Local Government Act, R.S.B.C. 1996, c. 323, contains a provision (section 287) similar to section 94 of the School Act. In dismissing the claim against the mayor and chief administrative officer because the employee had not asserted an independent cause of action against them, Mr. Justice Melnick, at paragraph 7 of his reasons, said the following:

All of s. 287 is premised on there being a pre-existing valid cause of action; maliciousness or gross negligence will only serve to deny a municipal officer the protection provided by subsection (2). Therefore, the first issue for the court to determine when a plaintiff invokes s. 297(3) is whether or not there is a cause of action against the defendant. If not, the analysis ends there. If so, then the claim against the municipal employee will be barred unless there is evidence of malicious or grossly negligent conduct such that subsection (3) allows the personal claim to proceed.

[43] I agree with Melnick J. that section 287 of the Local Government Act does not, itself, create a cause of action. It provides a defence to an otherwise valid cause of action. Similarly, section 94 of the School Act provides a defence to a claim and does not create a cause of action. For example, one cannot sue a municipal employee or school board employee for maliciousness because no such cause of action exists. Section 94 only becomes engaged if the plaintiff has a cause of action against the employee (e.g., defamation), in which case the employee will have immunity unless he or she has been guilty of maliciousness or any of the other conduct specified in the section.

[44] In my view, Reglin does not stand for the proposition that because section 287 of the Local Government Act (or section 94 of the School Act) mentions gross negligence, a plaintiff must have a cause of action against the employee for something other than gross negligence. In Reglin, the plaintiff was not asserting that the mayor and chief administrative officer were negligent or grossly negligent.

[45] In this case, Ms. Hildebrand is making a claim against Mr. Fox on the basis of the tort of gross negligence. The tort of gross negligence is an independent tort and does not rely on section 94 of the School Act for its existence. It is not plain and obvious, in my opinion, that Ms. Hildebrand is required to have a cause of action other than gross negligence in order to maintain an action against Mr. Fox.

[46] The second point made by Mr. Fox is that the common law has held that employees will not be liable for acts done in the course of their employment unless the employee commits a tortious act which demonstrates an identity or interest separate and apart from their employer. He relies in this regard on the decisions in ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 129 D.L.R. (4th) 711, 26 O.R. (3d) 481 (C.A.); Digital.Doc Services (Canada) Inc. v. Future Shop Ltd., [1997] B.C.J. No. 1689 (S.C. Chambers); Rafiki Properties Ltd. v. Integrated Housing Development Ltd. (1999), 45 B.L.R. (2d) 316 (B.C.S.C. Chambers); ADGA Systems International Ltd. v. Valcom Ltd. (1999), 168 D.L.R. (4th) 351, 43 O.R. (3d) 101 (C.A.); Blacklaws v. Morrow, 2000 ABCA 175, 187 D.L.R. (4th) 614; Kay Aviation b.v. v. Rofe, 2001 PESCAD 7, 202 D.L.R. (4th) 683; Dorus v. Teck Corporation, 2001 BCSC 1201 (Chambers); Strata Plan LMS 1965 v. 450526 B.C. Ltd., 2002 BCSC 155, [2002] B.C.T.C. 155 (Chambers); and Steele v. Riverside Forest Products Ltd., 2005 BCSC 1598 (Chambers).

[47] Ms. Hildebrand responds to this point by saying that the decision in London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299, 97 D.L.R. (4th) 261, demonstrates that an employee can be liable in negligence alongside his or her employer.

[48] Although not separately cited by Mr. Fox, a seminal decision referred to in some of the above authorities is Said v. Butt, [1920] 3 K.B. 497, [1920] All E.R. Rep. 232. In that case, the plaintiff had purchased a ticket for an opera performance. When the plaintiff went to attend the performance, an employee of the company staging the performance refused him entrance. In addition to suing the company for breaching the contract which the plaintiff asserted was formed when he purchased the ticket, he joined the employee in the action and claimed against him for wrongfully procuring the company to breach the contract.

[49] The court found that no contract existed between the plaintiff and the opera company, but went on to hold that, if there had been a contract, the employee would not have been personally liable. Following is the reasoning of McCardie J. at 505-506:

But the servant who causes a breach of his master's contract with a third person seems to stand in a wholly different position. He is not a stranger. He is the alter ego of his master. His acts are in law the acts of his employer. In such a case it is the master himself, by his agent, breaking the contract he has made, and, in my view an action against the agent under the Lumley v Gye [2 E. & B. 216] principle must therefore fail, just as it would fail if brought against the master himself for wrongfully procuring a breach of his own contract. …

I hold that if a servant acting bona fide within the scope of his authority procures or causes the breach of a contract between his employer and a third person, he does not thereby become liable to an action of tort at the suit of the person whose contract has thereby been broken. … Nothing that I have said today is, I hope, inconsistent with the rule that a director or a servant who actually takes part in or actually authorizes such torts as assault, trespass to property, nuisance, or the like may be liable in damages as a joint participant in one of such recognized heads of tortious wrong.

[50] The case of ScotiaMcLeod involved a third party claim against the directors of a corporation, two of whom were the most senior officers of the corporation. The plaintiffs were purchasers of debentures issued by the corporation, and they were suing the underwriter because certain liabilities of the corporation had not been disclosed to them in the prospectus for the offering of the debentures. The underwriter third partied all of the directors of the corporation, and they applied to have the third party claim dismissed. The motions judge granted the application. The Ontario Court of Appeal upheld the decision as it related to the directors who were not also officers of the corporation, but it allowed the appeal with respect to the two senior officers, who had been active in the marketing of the debentures. The appeal was dismissed with respect to the directors because there was no activity on their part that took them out of the role of directing minds of the corporation. The appeal was allowed with respect to the two senior officers because, although officers have the same “identity of interest” as directors, the threshold of sustainability of pleadings was very low and the claim against the officers, while novel, should be allowed to proceed to trial.

[51] The principle enunciated in Said v. Butt was applied in Digital.Doc Services, although it was not specifically mentioned. The plaintiff had sued a corporation for breach of the contract between them, and joined several employees of the corporation in the action. Mr. Justice Warren held that the claims against the employees disclosed no reasonable cause of action because they had acted within the ordinary course and scope of their employment responsibilities and there was no allegation that they had acted for personal gain or out of malice.

[52] In Rafiki Properties, the plaintiff had sued a corporation with which it had a management services contract for breach of the contract and negligence. The plaintiff applied to join two principals of the corporation on the basis that they were negligent in failing to provide information and carry out duties for which the corporation was contractually responsible. Mr. Justice Clancy dismissed the application on the grounds that there was no allegation that (i) the principals of the corporation had a separate identity or interest apart from that of the corporation, (ii) the principals had acted outside the scope of their authority, (iii) the principals had been motivated by personal interest, or (iv) the principals had acted fraudulently or with malice.

[53] Mr. Fox particularly relies on the reasoning in ADGA Systems. In that case, the plaintiff sued its competitor for raiding its employees, thus causing it economic damage. The plaintiff joined two employees and one director of the competitor in the action, and the application before the court was for the summary dismissal of the claim against them.

[54] Mr. Justice Carthy reviewed Said v. Butt at some length and then said the following:

[18] The consistent line of authority in Canada holds simply that, in all events, officers, directors and employees of corporations are responsible for their tortious conduct even though that conduct was directed in a bona fide manner to the best interests of the company, always subject to the Said v. Butt exception.

Mr. Fox argues that, as a result of the Said v. Butt exception, a plaintiff must plead a tort committed by the individual employee independent of that of their employer, and that the exception applies in this case.

[55] Although not quoted by Mr. Fox in his submissions, there is another paragraph from ADGA Systems that is instructional on the scope of the Said v. Butt exception. After quoting from Said v. Butt, Carthy J.A. said:

[15] For present purposes, I extract the following from McCardie J.'s reasons. First, this is not an application of Salomon and Salomon. That case is not mentioned anywhere in the reasons. Second, it provides an exception to the general rule that persons are responsible for their own conduct. That exception has since gained acceptance because it assures that persons who deal with a limited company and accept the imposition of limited liability will not have available to them both a claim for breach of contract against a company and a claim for tortious conduct against the director with damages assessed on a different basis. The exception also assures that officers and directors, in the process of carrying on business, are capable of directing that a contract of employment be terminated or that a business contract not be performed on the assumed basis that the company's best interest is to pay the damages for failure to perform. By carving out the exception for these policy reasons, the court has emphasized and left intact the general liability of any individual for personal conduct.

A potential interpretation of the above explanation of the Said v. Butt exception is that it only applies where the action relates to a breach of contract and that the rationale for the exception is that the other party to the contract (i.e., the plaintiff) accepted the imposition of limited liability when it entered into the contract with a limited company.

[56] The outcome in ADGA Systems was that the Said v. Butt exception was found to be inapplicable. The motion for summary judgment was dismissed, with the result that the action against the director and two employees of the corporate defendant was permitted to proceed.

[57] In Blacklaws v. Morrow, the Alberta Court of Appeal reversed the finding of the trial judge that the principal of a company was liable in negligence. The company became the owner of a timeshare resort as a result of foreclosure proceedings when the developer failed to repay mortgage monies. Problems arose with the sewage facilities, and the project was expelled from an international association for timeshare owners. On behalf of the timeshare owners, representative plaintiffs sued the company and the principal of its parent company. The trial judge dismissed a claim of fraud against the principal of the company, but allowed the negligence claim against him.

[58] In allowing the appeal from the judgment on the negligence claim, Chief Justice Fraser, on behalf of the majority of the court, said the following that is relied upon by Mr. Fox:

[41] We begin our analysis by acknowledging that there will be circumstances in which the actions of a shareholder, officer, director or employee of a corporation may give rise to personal liability in tort despite the fact that the impugned acts were ones performed in the course of their duties to the corporation. Where those actions are themselves tortious or exhibit a separate identity or interest from that of the corporation so as to make the act or conduct complained of their own, they may well attract personal liability: ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1996), 26 O.R. (3d) 481, 129 D.L.R. (4th) 711 (C.A.), leave denied [1996] S.C.C.A. No. 40 (QL), 205 N.R. 314n, 137 D.L.R. (4th) vi; Jackson and Parkview Holdings Ltd. v. Trimac Industries Ltd. (1994), 155 A.R. 42 (C.A.). However, on the facts of this case, we have concluded that Morrow's actions cannot attract personal liability in negligence.

Chief Justice Fraser noted that personal liability in negligence may have attached if the principal’s actions had led to physical harm that had been foreseeable, but she viewed the claim as a disguised attempt to make a non-party liable on a contract.

[59] The Said v. Butt exception was applied in Kay Aviation. In that case, the plaintiff entered into a partnership or joint venture with another company. The relationship deteriorated and the plaintiff sued the other company, obtaining a default judgment against it. The plaintiff then sued the principal of the other company for inducing breach of contract, breaching a fiduciary duty, acting with an improper purpose and converting funds. A motions judge had dismissed an application to strike out the statement of claim.

[60] The Appeal Division of the Prince Edward Island Supreme Court allowed the appeal and held that the statement of claim did not disclose a reasonable cause of action. Mr. Fox relies on the following passage of the court’s reasoning:

[19] Therefore, persons who deal with a corporate entity, knowing the extent to which liability is limited, do not have a cause of action against both the company for breach of contract and an action against the officer or director for inducing breach of contract, which is tortious in nature and provides for a scope of damages much broader tha[n] those flowing from the breach of the contract. See: ADGA Systems International Ltd. v. Valcom Ltd. (1999), 43 O.R. (3d) 101, 168 D.L.R. (4th) 351 (C.A.). On the other hand where directors, officers or employees of a company partake in independent tortious conduct, the individual could be liable presuming of course the proof of a standard of care and a breach of duty. The pleadings alleging such a cause of action must set forth with particularity the material facts thereby providing the factual underpinning for the cause of action. The reason for this is not only the Rules of Court, but the well-established policy that in order to insure the proper functioning of commerce, the directing minds of a corporation should not have to be continually looking over their shoulders in the fear of being sued when they direct a corporation to take certain action in relation to a contract. The directing minds of the corporate entity cannot be held liable for the actions of the corporation unless there is independent tortious conduct such as fraud, deceit, dishonesty or want of authority.

Mr. Fox also relies on the following paragraph:

[25] The minimum level of material facts in a statement of claim founded on causes of action against an officer, director or employee of a corporation with whom the plaintiff has contracted is very high. The imposition of personal liability on an employee, officer or director of a company is the exception rather than the rule. To justify a departure from this rule a plaintiff must plead all the relevant material facts to establish there is a reasonable cause of action. In the absence of specifically pleaded material facts the action against the director, officer or employee of the corporation will be struck. See: Serel v. 371487 Ontario Ltd., [1996] O.J. No. 3988 (QL) (Gen. Div.) [summarized 67 A.C.W.S. (3d) 60]. This is particularly so where the plaintiff is not a stranger to the defendant. In the case at bar, for example, the respondent has contracted with the corporation in which the appellant is sole director and officer and with full knowledge of the inherent limits to liability.

[61] In Dorus, the plaintiff sued a company for conspiracy, and also named some of the directors and officers of the company. Madam Justice Gill struck the claim against the individual defendants on the basis that, in order to establish a cause of action against an employee of a company, a plaintiff must show that the individual committed a tortious act which demonstrated an identity or interest separate from that of the company.

[62] In Strata Plan LMS 1965, Madam Justice Allan dismissed an application to join employees of corporate defendants to the action, which involved a claim for damages for construction deficiencies to buildings owned by the plaintiff. She reviewed several of the above authorities and concluded that no evidence existed to support a separate cause of action against the employees personally.

[63] The final decision relied upon by Mr. Fox, Riverside Forest Products Ltd., involved actions for wrongful dismissal in which the plaintiffs joined the chief executive officer of the takeover corporate employer. Master Patterson applied the Said v. Butt exception and dismissed the claims against the chief executive officer.

[64] While Mr. Fox does not cite it on this point, the decision in Correia is also relevant. As I mentioned above, the Ontario Court of Appeal allowed the claim for the tort of intentional infliction of mental distress to proceed against the head of the employer’s human resources department. The court held the Said v. Butt exception to be inapplicable:

[88] Marilyn Smith [the head of human resources] was the person who terminated Mr. Correia and facilitated turning him over to the police to be charged with criminal offences following the negligent investigation, in which she herself made the error that caused blame to be falsely cast on him. In law she may be held personally liable for her conduct. The rule in Said v. Butt does not apply here, because we are talking about responsibility for a separate actionable tort, not for the wrongful termination of the contract of employment itself.

[65] Ms. Hildebrand says that the authorities relied upon by Mr. Fox on this point are distinguishable because those decisions, dismissing the claims against employees of corporations, each relate to a termination or a breach of a contract. Ms. Hildebrand also points to the Supreme Court of Canada’s decision in London Drugs.

[66] In that case, the plaintiff engaged a warehouse company to store a transformer. They entered into a standard form contract, which included a limitation of liability clause. Two employees of the warehouse company attempted to move the transformer in an unsafe manner, and the transformer was damaged. The plaintiff sued the warehouse company and the employees for breach of contract and negligence.

[67] The majority of the Supreme Court of Canada held that the employees were liable in negligence but that they were entitled to the protection of the limitation of liability clause in the contract between the plaintiff and their employer. Mr. Justice Iacobucci made the following comments at 407-409 on behalf of the majority:

… There is no general rule in Canada to the effect that an employee acting in the course of his or her employment and performing the "very essence" of his or her employer's contractual obligations with a customer does not owe a duty of care, whether one labels it "independent" or otherwise, to the employer's customer. Our law of negligence has long since moved away from a category approach when dealing with duties of care. It is now well established that the question of whether a duty of care arises will depend on the circumstances of each particular case, not on pre-determined categories and blanket rules as to who is, and who is not, under a duty to exercise reasonable care. There may well be cases where, having regard to the particular circumstances involved, an employee will not owe a duty of care to his or her employer's customer. Indeed, the respondents have provided this Court with a series of decisions where this conclusion appears to have been reached: ...

... the question of whether a duty of care arises between an employee and his or her employer's customer depends on the circumstances of each particular case. The mere fact that the employee is performing the "very essence" of a contract between the plaintiff and his or her employer does not, in itself, necessarily preclude a conclusion that a duty of care was present.

... In concluding discussion of this issue, I would add that the acceptance of the general rule advocated by the respondents would be at odds with the common law notion of vicarious liability. This principle, which has been well developed through years of jurisprudence, has as part of its very core the recognition that in many cases employees do owe duties of care to third parties, such as their employer's customers. [emphasis in original]

[68] Ms. Hildebrand submits that London Drugs must be regarded as binding authority on this point. She says that the first sentence of the above passage demonstrates that the court did address the principle maintained by Mr. Fox that the pleadings must show the employee to have a separate identity from his or her corporate employer or to have committed an independent tort.

[69] London Drugs was mentioned in several of the authorities relied upon by Mr. Fox. Notably, Carthy J.A. observed in ADGA Systems that “[e]ven though there was a contractual relationship between the company and the customer, the majority held in favour of the claim against the employee” (paragraph 23). In his concluding comments in paragraph 43, Carthy J.A. mused that for policy reasons it may be appropriate to adjust the law as to the allocation of responsibility for tortious conduct to provide protection to employees where, for example, the plaintiff had voluntarily chosen to accept the risk of a limited liability company and the employees were acting in the best interests of their corporate employer. He suggested that any such evolution of the law should probably be articulated as a definitive extension of the principle in Said v. Butt.

[70] I have reviewed these authorities at some length to demonstrate that there does not appear to be a clear consensus as to what the law is or should be in connection with personal liability of employees. The law is relatively clear that, based on Said v. Butt, an employee of a company which has breached a contract is not personally liable for the tort of inducing breach of contract or for another claim that is a disguised attempt to make a non-party liable on a contract. That is not the situation in this case. Based on London Drugs and ADGA Systems, it is at least arguable that the principle in Said v. Butt does not extend to the tort of negligence even where the negligent act or omission occurred in the performance by the employee of a contract between the employee’s corporate employer and the plaintiff.

[71] On the basis of my review of these authorities, it is my view that it is not plain and obvious that the statement of claim does not disclose a cause of action against Mr. Fox on the ground that it fails to demonstrate that he had an identity or interest separate and apart from the Board.

Conclusion

[72] I would allow the appeal, and I would dismiss Mr. Fox’s application to strike Ms. Hildebrand’s claim against him. Ms. Hildebrand is entitled to her costs of this appeal and the application in the Supreme Court.

“The Honourable Mr. Justice Tysoe”

I agree:

“The Honourable Madam Justice Prowse”

I agree:

“The Honourable Madam Justice Smith”