Hill v. Bridgemohan, (2008) 267 N.S.R.(2d) 120 (SC)

• Judge: Beveridge, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: July 08, 2008
• Jurisdiction: Nova Scotia
• Citations: (2008), 267 N.S.R.(2d) 120 (SC);2008 NSSC 219

Hill v. Bridgemohan (2008), 267 N.S.R.(2d) 120 (SC);

    853 A.P.R. 120

MLB headnote and full text

Temp. Cite: [2008] N.S.R.(2d) TBEd. JL.021

Stephen Hill (plaintiff) v. Bryan Bridgemohan (defendant)

(SH 137726; 2008 NSSC 219)

Indexed As: Hill v. Bridgemohan

Nova Scotia Supreme Court

Beveridge, J.

July 8, 2008.

Summary:

Hill was the sole shareholder and director of Independent Financial Corporation Ltd. (IFC). IFC ran a restaurant called the Apple Barrel from April 1993 to January 1997, when the landlord distrained for rental arrears. IFC's bankruptcy followed. At the time of closure, the Apple Barrel's general manager was Bridgemohan. Within days, the restaurant reopened with a new owner, a numbered company of which Bridgemohan was the sole shareholder and director. Hill sued Bridgemohan, alleging that (i) Bridgemohan was a key IFC employee who breached his fiduciary duties owed to IFC and to Hill as IFC's sole shareholder and (ii) Bridgemohan and the landlord conspired to trigger IFC's bankruptcy.

The Nova Scotia Supreme Court dismissed the action.

Editor's note: for an earlier decision involving these parties, see (1998), 168 N.S.R.(2d) 369; 505 A.P.R. 369.

Company Law - Topic 311

Nature of corporations - Lifting the corporate veil - One person company - Hill was the sole shareholder and director of Independent Financial Corporation Ltd. (IFC) - IFC ran a restaurant from 1993 to 1997, when the landlord distrained for rental arrears - IFC's bankruptcy followed - At the time of closure, the restaurant's general manager was Bridgemohan - Within days, the restaurant reopened with a new owner, a numbered company owned by Bridgemohan - Hill sued Bridgemohan, alleging, inter alia, that Bridgemohan was a key employee who breached his fiduciary duties - The Nova Scotia Supreme Court dismissed the action - Bridgemohan's duties were administrative - There was not the degree of trust, confidence and autonomy required to impose a fiduciary obligation - Even if there were, the obligation was owed to IFC - Hill's action was caught by the rule in Foss v. Harbottle that only the company could sue for wrongs done to the company - Hill had not sued on IFC's behalf - Hill could not avoid the rule by asserting that his claim was not simply for diminution in share value, but for loss of his weekly stipend, loss of his investment and exposure to liability for unremitted statutory obligations - All of those claims depended on damage suffered by IFC - Finally, the court rejected Hill's request that it pierce the corporate veil - The court had no inherent power to pretend that a corporation did not exist - Hill had chosen to conduct business through a corporate entity and had to bear the consequences - See paragraphs 66 to 91 and 97 to 102.

Company Law - Topic 322

Nature of corporations - Lifting the corporate veil - Juridical basis - [See Company Law - Topic 311 ].

Company Law - Topic 2164

Shareholders - Shareholders' rights - Derivative actions - [See Company Law - Topic 311 ].

Equity - Topic 3607

Fiduciary or confidential relationships - General principles - Relationships which are not fiduciary - [See Company Law - Topic 311 ].

Equity - Topic 3721

Fiduciary or confidential relationships - The employer-employee relationship - General - [See Company Law - Topic 311 ].

Master and Servant - Topic 343

Fiduciary duty - When owed - [See Company Law - Topic 311 ].

Torts - Topic 5706

Conspiracy - General - Conspiracy - What constitutes - Hill was the sole shareholder and director of Independent Financial Corporation Ltd. (IFC) - IFC ran a restaurant from April 1993 to January 1997, when the landlord distrained for rental arrears - IFC's bankruptcy followed - At the time of closure, the restaurant's general manager was Bridgemohan - Within days, the restaurant reopened with a new owner, a numbered company owned by Bridgemohan - Hill sued Bridgemohan, alleging, inter alia, that Bridgemohan and the landlord conspired to trigger IFC's bankruptcy - The Nova Scotia Supreme Court dismissed the action - In addition to being caught by the rule in Foss v. Harbottle that only the company could sue for wrongs done to the company, Hill's claim was factually without merit - The court rejected Hill's suggestion that a common design could be inferred because the landlord did not require IFC to pay back rent until Bridgemohan came to the landlord and began working out a way to force IFC into bankruptcy - There was no direct evidence of any such agreement - The bankruptcy, failing some miracle, was inevitable - See paragraphs 92 to 96.

Cases Noticed:

Malcolm v. Transtec Holdings Ltd. et al. (2001), 150 B.C.A.C. 20; 245 W.A.C. 20 (C.A.), refd to. [para. 66].

Percival v. Wright, [1901] 2 Ch. 421, refd to. [para. 67].

Goldex Mines Ltd. v. Revill (1974), 7 O.R.(2d) 216 (C.A.), refd to. [para. 68].

Brant Investments Ltd. et al. v. KeepRite Inc. et al. (1991), 45 O.A.C. 320; 3 O.R.(3d) 289 (C.A.), refd to. [para. 69].

Vladi Private Islands Ltd. v. Haase et al. (1990), 96 N.S.R.(2d) 323; 253 A.P.R. 323 (C.A.), refd to. [para. 70, footnote 1].

Hardman Group Ltd. et al. v. Alexander et al. (2003), 212 N.S.R.(2d) 304; 665 A.P.R. 304 (S.C.), refd to. [para. 70, footnote 1].

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; 117 D.L.R.(4th) 161, refd to. [para. 73].

Atlantic Business Interiors Ltd. v. Hipson et al. (2005), 230 N.S.R.(2d) 76; 729 A.P.R. 76 (C.A.), refd to. [para. 73, footnote 2].

Foss v. Harbottle (1843), 67 E.R. 189; 2 Hare 461 (V.C. Ct.), refd to. [para. 77].

Hercules Management Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241, refd to. [para. 78].

Lerch v. Cableshare Inc. (1996), 21 O.T.C. 47; 32 O.R.(3d) 233 (Gen. Div.), refd to. [para. 76, footnote 3].

Rogers v. Bank of Montreal (1985), 64 B.C.L.R. 63 (S.C.), affd. (1986), 9 B.C.L.R.(2d) 190 (C.A.), refd to. [para. 83].

Meditrust Healthcare Inc. v. Shoppers Drug Mart et al. (2002), 165 O.A.C. 147 (C.A.), refd to. [para. 84].

Gibson and Ridge v. Manitoba Development Corp. (1982), 18 Man.R.(2d) 362 (C.A.), refd to. [para. 85].

Binder v. Royal Bank of Canada et al. (2003), 216 N.S.R.(2d) 363; 680 A.P.R. 363 (S.C.), affd. (2005), 234 N.S.R.(2d) 109; 745 A.P.R. 109 (C.A.), refd to. [para. 86].

Edwards v. Fisher et al. (2008), 436 A.R.159; 84 Alta. L.R.(4th) 128 (Q.B.M.), refd to. [para. 87].

Canada Cement LaFarge Ltd. et al. v. British Columbia Lightweight Aggregate Ltd. et al., [1983] 1 S.C.R. 452; 47 N.R. 191, refd to. [para. 93].

Authors and Works Noticed:

Ellis, Mark Vincent, Fiduciary Duties in Canada (Looseleaf Ed.), generally [para. 68]; pp. 16-2 to 16-2.1 [para. 72].

Gower, Laurence Cecil Bartlett, Principles of Modern Company Law (6th Ed. 1997), p. 599 [para. 66].

McGuinness, Kevin Patrick, The Law and Practice of Canadian Business Corporations (1999), §§ 9.172 [para. 81]; 1.145 to 1.147 [para. 100].

Welling, Bruce L., Corporate Law in Canada: The Governing Principles (3rd Ed. 2006), pp. 116 to 121 [para. 100]; 377 [para. 76].

Counsel:

Roderick Rogers, for Mr. Hill;

Bryan Bridgemohan, self-represented.

This action was heard at Halifax, Nova Scotia, on June 4-6, 10 and 11, 2008, by Beveridge, J., of the Nova Scotia Supreme Court, who delivered the following judgment on July 8, 2008.