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Employment - OBCA Director's Liability for Unpaid Wages

. O'Reilly v. ClearMRI Solutions Ltd.

In O'Reilly v. ClearMRI Solutions Ltd. (Ont CA, 2021) the Court of Appeal considered the procedures applicable to a corporate director's liability for unpaid wages under s.131 of the OBCA:
[33] The motion judge next considered the liability of the individuals who were directors of ClearMRI Canada, including Dr. Kim. She referred to the source of directors’ liability for wages, s. 131 of the OBCA, which provides, in relevant part, as follows:
Director’s Liability to employees for wages

(1) The directors of a corporation are jointly and severally liable to the employees of the corporation for all debts not exceeding six months’ wages that become payable while they are directors for services performed for the corporation and for the vacation pay accrued while they are directors for not more than twelve months under the Employment Standards Act, and the regulations thereunder, or under any collective agreement made by the corporation.

Limitation of liability

(2) A director is liable under subsection (1) only if,

(a) the corporation is sued in the action against the director and execution against the corporation is returned unsatisfied in whole or in part; or

(b) before or after the action is commenced, the corporation goes into liquidation, is ordered to be wound up or makes an authorized assignment under the Bankruptcy and Insolvency Act (Canada), or a receiving order under that Act is made against it, and, in any such case, the claim for the debt has been proved. 2002, c. 24, Sched. B, s. 27 (1).


(3) Where execution referred to in clause (2) (b) has issued, the amount recoverable from a director is the amount remaining unsatisfied after execution. R.S.O. 1990, c. B.16, s. 131 (3).

[93] In her reasons, the motion judge found Dr. Kim liable for six months’ wages and twelve months’ vacation pay on the basis that he was a director of ClearMRI Canada. Although he was also a director of Tornado, the formal judgment only addresses his liability as a director of ClearMRI Canada.

[94] Dr. Kim’s primary argument on appeal is that even though ClearMRI Canada had not paid the judgment against it, the conditions to his liability in s. 131(2) of the OBCA are quite specific, and there was no evidence they were fulfilled. There was no evidence that ClearMRI Canada was in liquidation, ordered to be wound-up, or was formally bankrupt as contemplated by s. 131(2)(b). Nor was there evidence that an execution against ClearMRI Canada was returned unsatisfied as contemplated by s. 131(2)(a).

[95] The issue is how s. 131 is to be interpreted in this case, given that it contemplates the director and the corporation being sued in the same action, yet provides that a director’s liability is conditional on, for example, an execution against the corporation being returned unsatisfied, a step that would occur after judgment.

[96] In a case where the issue of liability of both the corporation and the directors comes up for consideration at the same time, and judgment is given against the corporation, any judgment against the director may have to be conditional on the occurrence of a subsequent event. That was how the motion judge, having found Tornado to be liable, approached the matter in respect of the Tornado directors. She directed the parties to return to address the responsibility of two Tornado directors (but not Dr. Kim) if execution against Tornado was returned unsatisfied.

[97] Mr. O’Reilly obtained judgment against ClearMRI Canada sometime before he brought a motion for summary judgment against Dr. Kim. Dr. Kim argues that Mr. O’Reilly could have included evidence in the summary judgment motion that execution had been returned unsatisfied against ClearMRI Canada if that were the case. Since he did not, Dr. Kim argues that no judgment at all should have been given against him. In any event, the judgment does not reflect that Dr. Kim’s liability is conditional on s. 131(2) events occurring.

[98] I reject the argument that no judgment at all should have been granted against Dr. Kim. Nothing in s. 131 of the OBCA puts a time limit on when the conditions in s. 131(2) can be fulfilled. But the formal judgment should be amended to provide that the liability of Dr. Kim in para. 3 is conditional on an execution against ClearMRI Canada being returned unsatisfied, or one of the events referred to in s. 131(2)(b) occurring in relation to ClearMRI Canada. The parties should have leave to return to the motion judge for directions if any issue arises on this point.


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Last modified: 07-06-21
By: admin