In Shoppers Drug Mart Inc. v. 6470360 Canada Inc., the Ontario Court of Appeal considered appeals of two cross motions for summary judgment brought by 6470360 Canada Inc. (“647”) and Shoppers Drug Mart Inc. (“Shoppers”). Shoppers and an unincorporated entity (“Energyshop”) had entered into an agreement in 2005 whereby Shoppers would direct utility companies to send their bills for Shoppers to Energyshop, and the defendant 647 would collect and organize the bills and periodically send a remittance summary to Shoppers (the “Agreement”). On receipt of the remittance summary, Shoppers would transfer funds to a Toronto-Dominion Bank account (the “Account”) in the joint names of 647 and its sole officer and director, Michael Wayne Beamish (“Beamish”).
647 either used the funds received from Shoppers to pay Shoppers utility bills or transferred them to a separate account that was used to pay 647’s operating expenses (the “647 Account”). In August, 2008, Shoppers received an anonymous telephone call and fax indicating that funds it paid into the Account were being used for activities other than the payment of utility bills. Shoppers delivered notice terminating the Agreement.
The parties then entered into a transition agreement, and as part of that agreement, Shoppers transferred $1,366,558.20 to the Account to pay outstanding utility bills. Beamish caused 647 to transfer $970,000 of this amount to the 647 Account, and Shoppers later began to receive notices of default from utility providers in respect of outstanding invoices that 647 had failed to pay. Shoppers commenced an action to recover its funds, and 647 and Beamish consented to an order that the remaining funds in the Account and the 647 Account be paid to Shoppers. Shoppers then brought a motion for summary judgment seeking payment of the remaining funds it alleged had been misappropriated. Beamish responded with two motions to dismiss the action against him personally.
Motion For Summary Judgment
The motions judge concluded the Beamish was not personally liable for unjust enrichment. The Court denied Shoppers’ request to pierce the corporate veil and held that “the corporate veil should be pierced not where a corporation has misappropriated funds, but where the very use of the corporation is to hide that misappropriation”. It held the “absent evidence that the incorporation of 647 was itself done for purposes that are illegal and/or fraudulent, a court should be reticent to ignore the corporate structure under which it did business”. He concluded there was no evidence of wrongdoing that would lead to the piercing of the corporate veil.
Court of Appeal
Shoppers appealed from the motions judge’s dismissal of Shoppers’ claim for summary judgment against Beamish in his personal capacity. The Court of Appeal found that the motions judge had erred in failing to pierce the corporate veil by failing to apply the Court of Appeal’s decision in 642947 Ontario Ltd. v. Fleischer (2001), 56 O.R. (3d) 417 (C.A.) which holds that the corporate veil is typically pierced where the company is incorporated for an illegal, fraudulent or improper purpose but that it can also be pierced if when incorporated “those in control expressly direct a wrongful thing to be done”.
The Court of Appeal held that Beamish, 647’s sole officer and director, was the directing mind and he caused the misappropriation and misrepresentation by 647 and the ensuing unjust enrichment. The Court set aside the order of the motions judge and granted judgment against Beamish personally for unjust enrichment.