An Ontario Superior Court judge has dismissed a multi-million dollar property damage lawsuit against a company director while awarding $108,175 in damages to a long-term bookkeeper who was constructively dismissed after refusing to provide her employer with $50,000 for legal fees.
The intertwined cases involved family members who operated medical assessment and import-export businesses in the Greater Toronto Area. The property damage claim centered on allegations that R.R., a company director, should be held personally liable for damage to a 4.74-acre commercial property in Scarborough caused by excessive soil dumping.
Property damage claim fails
The court found no basis to “pierce the corporate veil” and impose personal liability on R.R., despite allegations he acted as a “bad actor” who used his company as an “instrument to intentionally and illegally convert the Property into a dump site.”
The property was owned by a family trust and leased to R.R.’s import-export company for a soil reprocessing venture. The operation involved bringing dirt onto the property, refining it, and selling it as topsoil. However, up to 121,968 cubic metres of fill accumulated on the site, causing environmental damage and triggering investigations by the City of Toronto and the Ministry of the Environment.
The court noted that while the company “may well have been negligent” and “may well have breached its obligation under the lease,” R.R.’s conduct did not meet the legal threshold for personal liability. The judge found that whatever R.R. “did or did not do in permitting or responding to the fill build-up” did not involve “any dishonesty, deceit, or fraud” and was done within his authority as director.
Constructive dismissal established
The successful counterclaim involved R.R.’s wife, R.J., who worked as a bookkeeper for two related medical assessment companies for over 15 years. The court found she was constructively dismissed in November 2016 when her working conditions were dramatically altered.
According to R.J.’s testimony, her employer G.R. asked her for $50,000 to help fund a legal claim related to the property damage. When R.J. initially agreed but later changed her mind at the bank, G.R. called her into a boardroom and presented her with an agreement that cut her hours from full-time to 16 hours per week.
R.J. testified that G.R. told her she was “collateral damage” and threatened to walk her to the door and “embarrass” her if she didn’t sign the agreement immediately. The new arrangement reduced her compensation from $100,000 annually plus benefits to $30 per hour for part-time work with no benefits.
Employee versus contractor determination
The employers argued R.J. was an independent contractor, not an employee, based on contractual language. However, the court applied the Supreme Court’s test from Sagaz Industries and found she was clearly an employee.
The judge noted that the companies “had complete control over Rita’s activities,” provided all her equipment including office space and computer, and that she “did not take any financial risk” since she was “paid every two weeks, just as the other staff were.”
The court found G.R.’s characterization of R.J. as an independent contractor carried no weight, emphasizing that “what matters is how the Sagaz Industries criteria describe the relationship.”
Credibility issues impact case
The judge made significant credibility findings that affected both claims. Regarding G.R.’s testimony, the court found “concerns about Gloria’s credibility as a witness,” particularly regarding when she became aware of problems at the property.
The judge noted that G.R.’s evidence was “evasive and inconsistent” when confronted with Ministry notes that contradicted her testimony about visiting the property. The court found these credibility issues “also inform my assessment of her credibility in respect of the main action.”
In contrast, the court found R.J.’s evidence “compelling and credible,” noting she “did not overstate matters” and “was candid and forthright.”
Notice period and damages calculation
The court awarded R.J. an 18-month notice period, considering her age (57-58), length of service (over 15 years), and the specialized nature of her role. The judge noted that her “experience and training is at least partly specific to those companies and less broadly applicable.”
The damages calculation included her base salary of $100,000, car allowance of $6,000 annually, and benefits estimated at 10% of salary. After deducting mitigation earnings from new employment, the final award was $108,175 plus pre-judgment interest.
Termination clause deemed void
The employers argued R.J. was only entitled to a six-month notice period based on their agreement. However, the court found the termination provisions “void and unenforceable” because the contract failed to provide even minimum statutory entitlements under the Employment Standards Act.
The judge noted this “illegality renders the termination provisions in the agreement void and unenforceable and requires me to look to the common law in determining Rita’s reasonable notice period.”
Failed defences
The employers attempted to argue R.J. was terminated for cause due to breach of trust, claiming she must have known about her husband’s property dealings. The court rejected this defence as improper since it wasn’t pleaded, and found it “without merit” as G.R. “had no evidence that Rita had anything to do with Roger’s dealings with the Property.”
The court also dismissed claims that the hour reduction was due to financial difficulties, noting there was “no documentary evidence in support of this claim” despite requests for financial statements.
For more information, see 2252230 v. Rajkumar, 2025 ONSC 2649 (CanLII).
