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.