DiFlorio et al. v. Con Structural Steel Ltd. et al., [2000] O.T.C. 73 (SupCt)

• Judge: Wilson, J.
• Court: Superior Court of Justice of Ontario (Canada)
• Case Date: February 09, 2000
• Jurisdiction: Ontario
• Citations: [2000] O.T.C. 73 (SupCt)

DiFlorio v. Con Structural Steel Ltd., [2000] O.T.C. 73 (SupCt)

MLB headnote and full text

Temp. Cite: [2000] O.T.C. TBEd. FE.109

Ida DiFlorio and Rocca Steel Limited (plaintiffs) v. Con Structural Steel Ltd., Roland DiFlorio, Guiseppe Bertolo, Orlando DiFlorio, Lucia Grazia DiFlorio, Patricia DiFlorio, Carla DiFlorio and Emiliana Scarpone (defendants)

(Court File No. 92-CQ-21962)

Indexed As: DiFlorio et al. v. Con Structural Steel Ltd. et al.

Court of Ontario

Superior Court of Justice

Wilson, J.

February 9, 2000.

Summary:

In 1960, two brothers, Roland and Joseph DiFlorio, established a structural steel business, Rocca Steel Ltd. In 1975 several of the brothers' children began joining the business. Conflict ensued and by mid 1989, the brothers decided that one side would buy out the other. Pursuant to an Asset Purchase Agreement dated November 30, 1989, Roland's side of the family sold its share of the businesses and real estate to Joseph's side. Prior to the closing of the sale, Roland made plans and incorporated a new structural steel company, Con Structural Steel Limited (Con Steel). Once operational, Con Steel directly competed with Rocca. A key employee of Rocca, the defendant Bertolo, was encouraged by Roland to become a shareholder, officer and director of Con Steel. Former Rocca customers became clients of Con Steel. The parties executed the Price Adjustment Agreement in 1990 which provided, inter alia, that the purchase price paid exceeded by $162,364.00 the amount which should have been payable. Joseph died in 1992. Joseph's widow, Ida, and Rocca Steel Ltd. (the plaintiffs) sued Con Steel, Roland, Bertolo et al. (the defendants). The claims were, inter alia, as follows: (1) Ida sought repayment of the $162,364.00 calculated as an over payment pursuant to the Adjustment Agreement; (2) Ida claimed damages for breach of a material non-disclosure clause in the Asset Adjustment Agreement (i.e., Roland's failure to disclose that after selling his interest in Rocca, he was intending to establish a new, competing structural steel business and that Bertolo would be leaving Rocca to join that business). With regard to this claim the widow sought damages of $400,000.00 for the full amount attributed to goodwill in the purchase price; (3) Rocca claimed damages in tort for a breach of fiduciary obligation by Roland and Bertolo; and (4) the plaintiffs jointly claimed punitive damages. The defendants argued that the plaintiffs' claims should be dismissed, and counterclaimed for the $400,000.00 payment less the overpayment agreed to in the Adjustment Agreement.

The Ontario Superior Court held: (1) that the $400,000 payment constituted a payment for goodwill; (2) that Roland did not advise Joseph that he intended to set up a competing business before the Asset Purchase Agreement was executed; (3) that Roland breached a clause in the Asset Purchase Agreement by failing to disclose material facts; (4) that Roland, Bertolo and Grace (Roland's daughter) stood in a fiduciary relationship to Rocca and breached their common law fiduciary duties to Rocca by covertly planning to set up a competing structural steel business prior sale of assets; (5) that by executing the adjustment agreement, Ida affirmed the obligation to pay the $400,000 for goodwill, less the $162,374 overpayment (i.e., the widow was required to honour the terms of the adjustment agreement, however, this did not affect the rights of the plaintiffs to seek damages); and (6) that the plaintiffs' delay did not bar the plaintiff' claim. The court dismissed the plaintiffs' claim for punitive damages. The court set out the appropriate method for calculating damages in this type of case and calculated damages accordingly (i.e., $250,000 for loss of profits). The court refused to award punitive damages. The court allowed the defendants' counterclaim for the $400,000 payment, subject to the defendants' obligation to repay the calculated overpayment of $164,372.

Company Law - Topic 4266

Directors - Duties - General principles - Breach of fiduciary duty - What constitutes - See paragraphs 115 to 126.

Contracts - Topic 3536

Performance or breach - Breach - By nondisclosure of material facts - See paragraphs 69 to 117.

Contracts - Topic 3739

Performance or breach - Fundamental breach - Waiver of breach or affirmation of contract - See paragraphs 127 to 136.

Contracts - Topic 4007

Remedies for breach - General - Bars (incl. delay) - See paragraphs 141 to 146.

Contracts - Topic 7417

Interpretation - General principles - Dependent v. independent clauses (conditional obligations) - See paragraphs 137 to 140.

Damages - Topic 510

Limits of compensatory damages - General - Prohibition against double recovery - See paragraphs 149 to 169.

Damages - Topic 1305

Exemplary or punitive damages - Breach of contract - See paragraphs 225 to 228.

Damages - Topic 1309.1

Exemplary or punitive damages - Breach of confidence or fiduciary duty - See paragraphs 225 to 228.

Equity - Topic 3646

Fiduciary or confidential relationships - Breach of fiduciary relationship - By director or officer of company - See paragraphs 115 to 126.

Equity - Topic 3648

Fiduciary or confidential relationships - Breach of fiduciary relationship - By employee - Solicitation of business - See paragraphs 115 to 126, 189 to 224.

Equity - Topic 3655

Fiduciary or confidential relationships - Breach of fiduciary relationship - Damages - See paragraphs 115 to 126, 174 to 246.

Equity - Topic 3726

Fiduciary or confidential relationships - The employer-employee relationship - Duty of employee after termination - See paragraphs 115 to 126.

Cases Noticed:

Mabey v. Mansonville Plastics Ltd., Potten Chemicals Ltd., Russell and Korman (1978), 24 N.B.R.(2d) 689; 48 A.P.R. 689 (Q.B.), refd to. [para. 44].

Jacobs (John) and Sons Ltd. v. Dobbin (N.D.) Ltd. (1988), 70 Nfld. & P.E.I.R. 99; 215 A.P.R. 99 (Nfld. T.D.), refd to. [para. 44].

Alampi v. Swartz, [1964] 1 O.R. 488; 43 D.L.R.(2d) 11 (C.A.), refd to. [para. 44].

Canada Deposit Insurance Corp. v. Canadian Commercial Bank, [1990] 4 W.W.R. 445; 105 A.R. 368 (Q.B.), revd. [1991] 4 W.W.R. 418; 113 A.R. 371 (C.A.), affd. [1992] 2 S.C.R. 3; 137 N.R. 234; 125 A.R. 390; 14 W.A.C. 390, refd to. [para. 44].

Ontario Metal Products Co. v. Mutual Life Insurance Co. of New York, [1925] 1 W.W.R. 362 (P.C.), refd to. [para. 105].

McCammon v. Alliance Assurance Co., [1931] 2 W.W.R. 621 (Sask. C.A.), refd to. [para. 106].

Brickenden v. London Loan & Savings Co. et al., [1934] 3 D.L.R. 465 (P.C.), refd to. [para. 106].

Commerce Capital Trust Co. v. Berk et al. (1989), 33 O.A.C. 373; 68 O.R.(2d) 257 (C.A.), refd to. [para. 107].

Raso v. Dionigi (1993), 62 O.A.C. 328; 12 O.R.(3d) 580 (C.A.), refd to. [para. 108].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1; [1994] 9 W.W.R. 609; 22 C.C.L.T.(2d) 1; 117 D.L.R.(4th) 161, refd to. [para. 108].

478649 Ontario Ltd. v. Corcoran et al. (1996), 5 O.T.C. 100; 2 R.P.R.(3d) 187 (Gen. Div.), dist. [para. 110].

James et al. v. Chiaravalle (V.), [1979] 1 O.R. 233 (H.C.), refd to. [para. 111].

Geiger v. Popowich, [1949] O.W.N. 287 (H.C.), refd to. [para. 111].

Alberts (Edgar T.) Ltd. v. Mountjoy (1977), 16 O.R.(2d) 682 (H.C.), refd to. [para. 117].

Sure-Grip Fasteners Ltd. v. Allgrade Bolt & Chain Inc. (1993), 45 C.C.E.L. 276; 46 C.P.R.(3d) 443 (Ont. Gen. Div.), refd to. [para. 117].

Canadian Industrial Distributors Inc. v. Dargue (1994), 7 C.C.E.L.(2d) 60 (Ont. Gen. Div.), refd to. [para. 117].

CRC-Evans Canada Ltd. v. Pettifer et al. (1997), 197 A.R. 24; 26 C.C.E.L.(2d) 294 (Q.B.), affd. (1998), 216 A.R. 192; 175 W.A.C. 192 (C.A.), refd to. [para. 117].

White Oaks Welding Supplies v. Tapp (1983), 42 O.R.(2d) 445; 149 D.L.R.(3d) 159 (H.C.), refd to. [para. 118].

Quantum Management Services Ltd. v. Hann et al. (1989), 69 O.R.(2d) 26; 43 B.L.R. 93 (H.C.), affd. (1992), 11 O.R.(3d) 639 (C.A.), refd to. [para. 118].

Engineered Sound Systems Ltd. v. Datel Communications Ltd. (1987), 22 C.P.C.(2d) 240 (Ont. Dist. Ct.), varied (1987), 19 C.P.R.(3d) 105 (Ont. H.C.), refd to. [para. 188].

Anderson, Smyth & Kelly Customs Brokers Ltd. v. World Wide Customs Brokers Ltd. et al., [1996] 7 W.W.R. 736; 184 A.R. 81; 122 W.A.C. 81; 20 C.C.E.L.(2d) 1 (C.A.), refd to. [para. 119].

Barron v. Kelly, [1918] 2 W.W.R. 131; 56 S.C.R. 455, refd to. [para. 128].

Goulet et al. v. Clarkson et al., [1949] 1 D.L.R. 847 (B.C.S.C.), refd to. [para. 128].

Panzer v. Zeifman et al. (1978), 20 O.R.(2d) 502; 88 D.L.R.(3d) 131 (C.A.), refd to. [para. 129].

Samson v. Lockwood (1998), 110 O.A.C. 301; 40 O.R.(3d) 161 (C.A.), refd to. [para. 129].

Kupchak v. Dayson Holdings Ltd. (1965), 53 D.L.R.(2d) 482 (B.C.C.A.), refd to. [para. 129].

Stewart v. Complex 329 Ltd. et al. (1990), 109 N.B.R.(2d) 115; 273 A.P.R. 115 (T.D.), refd to. [para. 129].

Dodds v. Millman, Warwicker, Lister and Lister (Merline M.) Ltd. (1964), 47 W.W.R.(N.S.) 690; 45 D.L.R.(2d) 472 (B.C.S.C.), refd to. [para. 129].

Timmins and Timmins v. Kuzyk and Kuzyk (1962), 32 D.L.R.(2d) 207 (B.C.S.C.), refd to. [para. 129].

Shortt v. MacLennan (1956), 6 D.L.R.(2d) 431 (Ont. C.A.), affd., [1959] S.C.R. 3, refd to. [para. 129].

Cline v. Watt (Don) & Associates Communications Inc. (1986), 15 C.C.E.L. 181 (Ont. Dist. Ct.), refd to. [para. 138].

Huntoon Co. v. Kolynos (Inc.), [1930] 47 R.P.C. 403; [1930] 1 Ch. 528 (C.A.), refd to. [para. 138].

Kingu v. Walmar Ventures Ltd. (1986), 38 C.C.L.T. 51; 10 B.C.L.R.(2d) 15 (C.A.), refd to. [para. 143].

Ruscheinsky v. Spencer (A.) Co. and Gim Foon Wong, [1948] 2 W.W.R. 392 (B.C.S.C.), refd to. [para. 143].

Hudson Bay Investment Co. v. Thompson, [1924] 1 W.W.R. 933 (Man. K.B.), refd to. [para. 143].

Alex and Alex v. Tiede and Tiede, [1986] 5 W.W.R. 599; 43 Man.R.(2d) 1 (Q.B.), refd to. [para. 143].

Shaw v. Applegate, [1978] 1 All E.R. 123 (C.A.), refd to. [para. 145].

Cullinane v. British Rema Manufacturing Co., [1954] 1 Q.B. 292 (C.A.), refd to. [para. 155].

McLean (R.G.) Ltd. v. Canadian Vickers Ltd. et al., [1971] 1 O.R. 207; 15 D.L.R.(3d) 15 (C.A.), refd to. [para. 155].

Sunnyside Greenhouses Ltd. v. Golden West Seeds Ltd. (1972), 27 D.L.R.(3d) 434 (Alta. C.A.), affd. (1973), 33 D.L.R.(3d) 384 (S.C.C.), refd to. [para. 155].

Canlin Ltd. v. Thiokol Fibres Canada Ltd. (1983), 40 O.R.(2d) 687; 142 D.L.R.(3d) 450 (C.A.), refd to. [para. 155].

Thomson (A.R.) Ltd. v. Stock, [1990] B.C.J. No. 2164 (S.C.), refd to. [para. 159].

Unisource Canada Inc. v. Enterprise Paper Co., [1999] B.C.J. No. 753 (S.C.), refd to. [para. 160].

57134 Manitoba v. Palmer et al. (1985), 7 C.P.R.(3d) 477 (B.C.S.C.), affd. (1989), 26 C.P.R.(3d) 8 (B.C.C.A.), refd to. [para. 174].

Unisource Canada Inc. v. Enterprise Paper Co. et al. (1999), 9 B.C.T.C. 161 (S.C.), refd to. [para. 175].

Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701; 219 N.R. 161; 123 Man.R.(2d) 1; 159 W.A.C. 1; 152 D.L.R.(4th) 1, refd to. [para. 182].

Barton Insurance Brokers Ltd. v. Irwin et al. (1999), 119 B.C.A.C. 109; 194 W.A.C. 109; 170 D.L.R.(4th) 69 (C.A.), refd to. [para. 201].

Tomenson Saunders Whitehead Ltd. v. Baird et al. (1980), 7 C.C.E.L. 176 (Ont. H.C.), refd to. [para. 202].

Canadian Aero Service Ltd. v. O'Malley (1974), 40 D.L.R.(3d) 371 (S.C.C.), refd to. [para. 203].

Christie (W.J.) & Co. v. Greer and Sussex Realty & Insurance Agency Ltd. (1981), 9 Man.R.(2d) 269; 121 D.L.R.(3d) 472; 14 B.L.R. 146 (C.A.), refd to. [para. 204].

Metropolitan Commercial Carpet Centre Ltd. v. Donovan and Donovan (B.) Interiors Ltd. (1989), 91 N.S.R.(2d) 99; 233 A.P.R. 99; 42 B.L.R. 306 (T.D.), refd to. [para. 205].

Trego et al. v. Hunt, [1896] A.C. 7 (H.L.), refd to. [para. 207].

Commercial Transport (Northern) Ltd. v. Watkins (1983), 22 B.L.R. 249; 73 C.P.R.(2d) 207 (Ont. H.C.), refd to. [para. 207].

Mohawk Maintenance Co. v. Kessler (1981), 419 N.E.2d 324 (N.Y.C.A.), refd to. [para. 209].

Kraft Agency Inc. v. Del Monico (1985), 494 N.Y.S.2d 77 (N.Y. Sup. Ct. App. Div.), refd to. [para. 209].

Phytoderm Inc. v. Urwin (1999), 90 O.T.C. 262 (Gen. Div.), refd to. [para. 210].

Tree Savers International Ltd. et al. v. Savoy et al. (1992), 120 A.R. 368; 8 W.A.C. 368; 87 D.L.R.(4th) 202; 40 C.P.R.(3d) 173 (C.A.), refd to. [para. 221].

Clayburn Industries Ltd. v. Piper (1998), 44 C.C.E.L.(2d) 129 (B.C.S.C.), refd to. [para. 221].

Thompson v. Zurich Insurance Co. (1983), 45 O.R.(2d) 744 (H.C.), refd to. [para. 225].

Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085; 94 N.R. 321; 58 D.L.R.(4th) 193; [1989] 4 W.W.R. 218; 36 B.C.L.R.(2d) 273; 90 C.L.L.C. 14,035; 25 C.C.E.L. 81, refd to. [para. 225].

Vlchek v. Koshel (1988), 44 C.C.L.T. 314; 52 D.L.R.(4th) 371 (B.C.S.C.), leave to appeal refused (1988), 52 D.L.R.(4th) 371 (B.C.C.A.), refd to. [para. 226].

Statutes Noticed:

Ontario Business Corporations Act. R.S.O. 1990, c. B-16, sect. 134.1 [para. 115].

Authors and Works Noticed:

Chitty on Contracts (27th Ed. 1994), p. 24-030 [para. 137].

Fridman, Gerald Henry Louis, The Law of Contract in Canada (4th Ed. 1999), pp. 769 [para. 155]; 863 [para. 128].

Waddams, Stephen, The Law of Damages (1998) (Looseleaf Ed.), p. 265 [para. 165].

Counsel:

Alan J. Davis and S.B. Tator, for the plaintiffs;

Ronald G. Chapman, for the defendants.

This action was heard in Toronto, Ontario, on September 21, 22, 27 to 30 and October 1, 3 to 7, 11 to 15, 18, and 19, 1999, before Wilson, J., of the Ontario Superior Court, who released the following judgment on February 9, 2000.

Please note: The following judgment has not been edited.