T-1810-88
Shibamoto & Company Ltd., Ocean Fisheries
Ltd., Seattle First National Bank (Plaintiffs)
v.
Louis de Arias, Trustee of the Western Fish Pro
ducers, Inc. Bankruptcy Estate, C.N. Holding,
Inc., Jorn Nordmann, S.M. Properties Ltd. and
The Ship "Nicolle N" (Defendants)
INDEXED AS: SHIBAMOTO & CO. v. WESTERN FISH PRO
DUCERS, INC. ESTATE (T.D.)
Trial Division, Rouleau J.—Vancouver, October
30, 31, November 1, 2, 3, 6, 7, 8, 9, 12, 13, 14, 15,
16, 17, 19, 20, 21, 22, 23, 1990, January 3, 4, 5, 7,
8, 9, 1991; Ottawa, March 22, 1991.
Contracts — Breach of contract — Conversion — Agree
ment whereby money advanced by plaintiffs to defendants for
joint cash fish buying operation off Alaska coast — Defend
ants breaching agreement by: using money for purposes other
than buying fish; disregarding ceiling price set by plaintiffs in
accordance with contract; selling plaintiffs' fish to third par
ties; continuing buying and selling fish using plaintiffs' money
— Negotiated accord without satisfaction not settlement and
no defence to original claim.
Torts — Conversion — Plaintiffs advancing funds to finance
joint fish buying operation — Individual and corporate
defendants guilty of converting plaintiffs' money to own use,
selling plaintiffs' fish to third parties — If plaintiffs breached
contract, not defence to conversion — Individual defendant,
managing mind and will of defendant companies, guilty of
conversion as primary actor, not merely secondary participant
acting on behalf of companies.
Corporations — Lifting corporate veil — Companies sued
for conversion in course of joint cash fish buying operation —
Three companies created, controlled and managed by
individual defendant — Corporate veil lifted as failure to do
so would result in injustice — Companies, individual defend
ant, guilty of conversion.
Maritime law — Liens and mortgages — Conflict of laws —
Maritime lien acquired under maritime laws of Alaska and
U.S.A. recognized as enforceable in Canada — Action in rem
will lie to enforce maritime lien herein.
For the facts of the case, see the Editor's note below.
The issues were: whether there had been a breach of the
agreement; whether the defendants were guilty of conversion;
whether the plaintiffs are entitled to a maritime lien against the
vessel Nicolle N pursuant to the laws of the State of Alaska
and the United States of America and to its enforcement in
Canada; whether the individual defendant Jorn Nordmann was
personally liable for damages for conversion and whether the
Court should lift the corporate veil of the defendant corpora
tions to find them guilty of conversion.
Held, the plaintiffs should have judgment for damages for
breach of contract and the defendant Jorn Nordmann as well as
all three defendant corporations were guilty of the tort of
conversion. Plaintiffs were entitled to a maritime lien against
the ship Nicolle N.
A. Breach of the Agreement
Nordmann agreed to be bound by the ceiling price set by the
plaintiffs. The agreement specifically stated that, though West
ern was purchasing fish in its own name, it was to provide
documentary evidence that the title was to be in the name of
Ocean which, in turn, held it in trust for Shibamoto. Title to
the fish and the money was never intended to be, nor was it in
fact, the property of Western or Mr. Nordmann.
The defendants had breached the agreement in many
respects. They paid more than the ceiling price and continued
the purchase of fish in their own name without authorization
using Shibamoto funds. Furthermore, they used the fish buying
funds to meet their payroll, petty cash, air fares and tender
fees. They also concluded an agreement with third parties to
sell fish which belonged to the plaintiffs.
Even if defendants' submission, that the plaintiffs were guilty
of breaching the contract, was well founded, a party to a
contract cannot unilaterally declare the other contracting party
to be in breach, without any declaration from a court of
competent jurisdiction, and proceed to carry out the contract
according to its own interpretation. In the instant case, the
defendants' only lawful course of action would have been to
have treated the contract as repudiated and sue for damages.
They had no legal right to continue purchasing fish for their
own account or to pay their current expenses with the plaintiffs'
money.
B. Conversion
Two separate and distinct actions taken by the defendants
were inconsistent with the owner's rights: the taking of the
money for their own use and transacting with fish that was
clearly the property of the plaintiffs according to the terms of
the agreement. There was no doubt that these acts were
intentional: the defendants well knew that the money was not
theirs to spend for purposes other than purchasing fish. There
was also no doubt that the defendants kept the goods adversely,
in defiance of the true owners' rights. Even if the plaintiffs were
guilty of a breach of contract, that would not constitute a
defence to the conversion of another's property. As a defence to
the claim in conversion, the defendants had attempted to rely
on an agreement reached by the parties at one point. The
agreement, however, was not a settlement agreement since it
was never intended to be in complete satisfaction of the existing
duties of either party. The arrangement was an accord only and
not "accord and satisfaction". Even if a final settlement had
been reached, and then breached by the plaintiffs, that would
not afford a defence to the original claim, though it might
establish a claim for damages flowing from the breach of the
accord.
C. The U.S. Maritime Lien
Because the defendants were guilty of the tort of conversion,
the plaintiffs are entitled to a maritime lien against the vessel
Nicolle N pursuant to the maritime law of the State of Alaska
and the United States of America and it is recognized by
Canadian law that such a lien is enforceable in Canada.
D. Personal Liability of Jorn Nordmann
An individual who directs a tort to be committed is personal
ly liable regardless of the fact that he is an officer of the
company for whose benefit the tort is executed. Nordmann was
guilty of conversion: he was the primary actor, not merely a
secondary participant acting on behalf of the defendant
companies.
E. Liability of S.M. Properties Ltd. and C.N. Holding, Inc.
It is a long established and fundamental principle of corpo
rate law that each company in a group of companies is to be
regarded as a separate legal entity having separate legal rights
and liabilities. There have, however, been cases where courts
have treated a subsidiary company as an agent of the holding
company and as such conducting the latter's business. While
there is no consistent rule of law as to when the general
principle of insulation will be set aside and the corporate veil
pierced, this was an appropriate case in which to do so and to
treat the defendant companies as one. For his own purposes,
Nordmann lumped the companies together and instructed his
accountants to prepare a "S.M. Properties Ltd. Combined
Financial Statements". Part of the proceeds of the sales of the
fish purchased with Shibamoto's money was directed to the
bank account of S.M. Properties Ltd. Money was transferred
back and forth between the companies as if they were one.
There was no proper accounting kept between the companies.
Jorn Nordmann was, at all material times, the managing mind
of all three companies, in absolute control and responsible for
business decisions. The corporate triangle was in all respects a
creature of Nordmann's making. He, in his sole discretion,
directed for his own purposes use of the plaintiffs' money for
the payment of debts and expenses. If the corporate veil were
not lifted, an injustice would result and the plaintiffs would
bear the burden. It was significant that, while Western Fish
Producers Inc. is now insolvent, neither of the other two
companies are; that S.M. Properties Ltd. operated as the
"financier", receiving in previous years $900,000 a year from
Western; it owned the equipment aboard the vessel; C.N.
Holding, Inc. was the proprietor of the Nicolle N; the assets of
both these companies provided the equitable collateral neces
sary to finance the operations of all companies.
CASES JUDICIALLY CONSIDERED
APPLIED:
Dickey v. McCaul (1887), 14 O.A.R. 166 (C.A.); Cyr v.
Laine (1953), 32 M.P.R. 106 (N.B.C.A.); Todd Ship
yards Corp. v. Alterna Compania Maritima S.A., [1974]
S.C.R. 1248; (1972), 32 D.L.R. (3d) 571; The Strandhill
v. Walter W. Hodder Co., [1926] S.C.R. 680; [1926] 4
D.L.R. 801; Marlex Petroleum, Inc. v. The Ship Har
Rai, [1984] 2 F.C. 345; (1984), 4 D.L.R. (4th) 739; 53
N.R. 1 (C.A.), approved in [1987] 1 S.C.R. 57; (1987),
72 N.R. 75; Metaxas v. Galaxias (The), [1989] 1 F.C.
386; (1988), 19 F.T.R. 108 (T.D.); International Factors
Ltd y Rodriguez, [1979] 1 All ER 17 (C.A.); Caban v.
Calgary Industrial Real Estate Ltd. et al. (1968), 1
D.L.R. (3d) 69 (Alta. S.C.); Kosmopoulos v. Constitu
tion Insurance Co., [1987] 1 S.C.R. 2; (1987), 34 D.L.R.
(4th) 208; 22 C.C.L.I. 297; [1987] I.L.R. 1-2147; 74
N.R. 360; 21 O.A.C. 4; Smith, Stone & Knight, Ltd. v.
Birmingham Corporation, [1939] 4 All E.R. 116
(K.B.D.); Wallersteiner v. Moir, [1974] 1 W.L.R. 991
(C.A.).
AUTHORS CITED
Anson's Law of Contract, 26th ed. by A.G. Guest,
Oxford: Clarendon Press, 1984.
Clerk & Lindsell on Torts, 16th ed., London: Sweet &
Maxwell, 1989.
COUNSEL:
David F. McEwen and Elyn M. Underhill for
plaintiffs.
H. W. Wiebach and W. G. Wharton for
defendants.
SOLICITORS:
McEwen, Schmitt & Co., Vancouver, for
plaintiffs.
Campney & Murphy, Vancouver, for defend
ants.
EDITOR'S NOTE
This case is of interest for its review of a
number of areas of the law including: the tort of
conversion; the enforcement in Canada of an
American maritime lien; the personal liability of the
alter ego of the defendant companies and the
piercing of the corporate veil where a group of
three corporations had been created to insulate
those owning the assets from the obligations
undertaken by the third, an operating company.
The Executive Editor has decided that this 64-
page judgment should be reported as abridged,
omitting the initial 30 pages which deal with the
evidence and pages 55 to 64 (counter claim and
credibility of the witnesses for the defence).
Notes summarizing the omitted portions have
been prepared.
There were three plaintiffs herein: (1) Shibamo-
to, a huge Japanese trading company; (2) Ocean
Fisheries, a long-established fish processor and
exporter incorporated under the laws of British
Columbia and (3) Seattle First National Bank, the
holder of a mortgage on the ship Nicolle N. The
defendants included three corporations: the prin
cipal defendant, Western Fish Producers, a State
of Washington corporation; S.M. Properties, an
Alberta company which owned processing equip
ment on board the Nicolle N and C.N. Holding,
Inc., another Washington company and owner of
the fish processing vessel Nicolle N. The ship as
well as one Nordmann — ship's master and an
executive of the three defendant corporations —
were also named as defendants.
The defendant, Nordmann, was a "cash buyer"
— unlike the "majors" (which have agreements
with large numbers of fishermen for the purchase
of their entire catches) — and accordingly had to
have sufficient currency on board to pay for the
fish. Nordmann, on behalf of Western, entered
into an agreement with Shibamoto to conduct a
joint cash fish buying operation off the coast of
Alaska during the 1988 sockeye salmon season.
Shibamoto was to have a representative on Nord-
mann's vessel, the Nicolle N, with power to set a
ceiling on the price to be paid. No fish could be
purchased above that price without authorization
by Shibamoto's representative.
Plaintiffs' allegations were that a ceiling price of
$1.50 per pound was set and that this was
exceeded by defendant. It was further alleged
that defendants had converted money and fish to
the value of $1,550,793 U.S. Plaintiffs also
claimed the balance due under a ship mortgage
and a maritime lien against the Nicolle N.
Defendants' case was that plaintiffs had under
taken a deliberate and fraudulent plan to destroy
Western's cash buying operation. Salmon prices
had risen rapidly during the season in question
and the decision to hold the ceiling price at $1.50
was dictated by plaintiff, Ocean Fisheries Ltd.,
with a view to fixing the price at an artificially low
level so as to cause Western irreparable harm.
The facts were that the quantity of fish harvest
ed in the 1988 season was much less than that
predicted by the Alaska Department of Fish and
Game and prices soared due to an unprecedent
ed scramble to purchase fish. Nordmann repeat
edly sought permission to have the ceiling price
raised but this was denied. Nordmann disregard
ed the instructions and bought fish at above
ceiling prices. This was not immediately disclosed
to Shibamoto's on-board representative. Later on,
Nordmann advised that since he had been unable
to buy fish for $1.50, Western had been buying
fish not for Shibamoto but for its own account.
Western was prepared to sell to Shibamoto for
$1.50 plus the 35 0 bonus paid on the grounds.
Plaintiffs replied that for Western to use Shibamo-
to money to buy fish for the former's account
constituted theft. Shibamoto demanded that all its
fish be delivered to a tramper and advised that all
funds on the Nicolle N were frozen. Shibamoto's
representative was instructed to leave the vessel
and to take with her the remaining cash buying
funds but was prevented from doing so by Nord-
mann. Western petitioned itself into bankruptcy,
allowing Nordmann to continue buying and selling
fish, under American court supervision, free of
interference on the part of plaintiffs or other credi
tors. An Amended Statement of Affairs filed by the
bankruptcy trustee revealed that Western had
been insolvent long before entering into the fish
processing agreement with Shibamoto. In fact,
none of the Nordmann group of companies had
any liquid assets. No uncommitted funds had
been available to finance Nordmann group partici-
pation in the 1988 Alaska fishery. The inter-com
pany accounting was inaccurate and misleading.
The following are the reasons for judgment
rendered in English by
ROULEAU J.:
THE ISSUES
A. Breach of the Agreement
As I said previously, there were 26 days of
evidence, over 1,400 pages of documents and
numerous issues were the subject of very lengthy
testimony. There was evidence concerning the
equipment involved in the processing of the fish,
much was said about the quality of the processed
fish, a great deal of evidence was led as to whether
or not Mr. Nordmann had consented to the pre
vailing price as set by the majors and much time
was devoted to the probable profitability to be
derived from resale of fish on the Japanese market
regardless of the price per pound paid on the
grounds. All these elements, though relevant, are
not crucial to the determination of the key issue
which is the proper interpretation of this contract
in light of the facts and the actions of the parties.
I am convinced by the overwhelming evidence
submitted at trial that the defendants are the
parties guilty of breaching the agreement of
May 16, 1988.
In spite of his own financial difficulties and
those of the defendant companies as outlined
above, Mr. Nordmann nevertheless undertook to
become a cash buyer during the Bristol Bay Sock-
eye Salmon season, a risky venture at the best of
times. One would be inclined to say that he did so
with reckless abandon and a total disregard to his
own financial health and that of his companies.
Mr. Nordmann was well aware of the risk involved
in being a cash buyer. The evidence of one of the
defendants' witnesses, Mr. Seidel, a cash buyer
and President of New West testified that the 1988
Bristol Bay Salmon season was unprecedented and
obscene and that the Japanese market was
extremely volatile. He testified that during a con
versation with Mr. Nordmann he cautioned
against entering into an agreement that imposed a
ceiling because as a cash buyer he would probably
meet with disaster. It was his view and his policy
that cash buyers should never operate under
restraint. The evidence clearly shows that in the
spring of 1988 Mr. Nordmann had ongoing finan
cial problems; he had just concluded the herring
run and was still indebted to both fishermen and
tender operators; he had no pre-arranged contract
for the salmon season and was in desperate finan
cial straits and in search of marshalling some type
of agreement to survive financially.
I find as a fact that when Mr. Nordmann met
with the principals of Ocean and with Mr. Zoda,
he was prepared to enter into any type of transac
tion that would keep his processor and crew busy
during the sockeye season. Though much evidence
was submitted as to whether or not Mr. Nordmann
agreed to be bound by the price prevailing among
the majors even though he was a cash buyer, I am
convinced that he paid very little heed to this
aspect of the negotiations. He was relying on the
predicted run which was based on the success of
the preceding two years. The ceiling price of $1.50
plus a 5-cent cash buyers bonus consented to by
Mr. Zoda was more than likely in Mr. Nord-
mann's eyes to be adequate to meet the prevailing
prices in light of the history on the fishing grounds.
Referring to the evidence in support of this
finding, I refer briefly to the cross-examination of
Mr. Nordmann in which it was suggested that at
the first meeting between the parties Mr. Nord-
mann would have indicated that he expected the
buying to open at $1.25 a pound. Counsel referred
to Mr. Nordmann's diary notes of April 18 in
Exhibit A-063 where he had indicated $1.25 per
pound; to this there was no clear answer but then
referring to the same page of the diary, Mr. Nord-
mann was shown his note and questioned:
Q Fish buying $1.40/$1.50, what does that note refer to?
A At this time the anticipation was probably to start up
with $1.25 and everybody was at this time in the meeting,
you know, on Ocean's side and Mr. Zoda was thinking,
oh, it will creep up like another 20, 25 cents like normally
this does.
Q And normally over the season there wouldn't be more
than a 20 or 25 cents increase from start to finish?
A This one past, you know, was always quite moderate
comparable to '88.
Q '88 was a unique season.
A Very unique.
(Transcript, November 21, 1990, pages 92, 93 and 94.)
During the trial I was referred to questions and
answers provided by Mr. Nordmann during cross-
examination in which prevailing prices were
referred to and his tacit consent to accepting a
ceiling price of $1.50. There was also much discus
sion concerning whether or not the topic of majors
had ever been debated. I find as a fact that it was.
During the numerous exchange of messages be
tween the parties there were many references to
majors' prices and at no time did Mr. Nordmann
object; in some cases he acquiesced. Further, when
being cross-examined and referred to his examina
tion for discovery, particularly at page 260,
Mr. Nordmann admits investigating the prevailing
prices of majors before the June 14 meeting after
which the memorandum of June 16 was issued
confirming a ceiling price of $1.50 (agreed state
ment of facts, Tab. 4). Mr. Nordmann concurred
that he made enquiries prior to that date and
determined that Trident and Icicle were paying
$1.25 as a starting point.
It is a fact that there were no funds or product
on board until Connie Shevchenko arrived on the
Nicolle N on June 22 with the Shibamoto money.
The agreement specifically stated that though
Western was purchasing fish in its own name it
was to provide documentary evidence that the title
was to be in the name of Ocean who, in turn, held
it in trust for Shibamoto. Title to the fish and the
money was never intended to be nor was it in fact
ever the property of Western or Mr. Nordmann.
From the outset, Mr. Nordmann was purchasing
fish at a price exceeding the agreed ceiling and
paying a "pre-season bonus"; a bonus that did not
appear to be familiar to any of those who testified
during the trial. Mr. Zoda acceded to this request
but was firm in all of his communiques that
Mr. Nordmann was in future not to exceed the
ceiling without prior authorization. On July 1,
after receiving specific instructions to maintain the
ceiling, Mr. Zoda nevertheless consented to pay a
post-season bonus equal to those prices that would
subsequently be established among the majors.
Being unable to convince his fishermen to accept
this arrangement, and in concert with his wife and
Mr. Dubé, his fish buyer, he in the words of this
employee "[went] for it". In completely disregard
ing clause 1.04 of the agreement the defendants
failed to live by the agreed ceiling, paying more
than Mr. Zoda had authorized and deliberately
continuing the purchase of fish without authoriza
tion using Shibamoto funds.
The defendants' conduct was even more repre
hensible over the next 4 to 5 days. They failed to
cooperate with Miss Shevchenko, the plaintiffs'
representative on board. A new practice was ini
tiated. They began issuing fish tickets on the ten
ders showing the purchase price of $1.50 per
pound simultaneously issuing a separate invoice to
the fishermen for a 35-cent bonus. This second fish
ticket was kept from Miss Shevchenko and they
continued this practice without disclosing the fact
for at least 5 days. There was evidence that at one
period Miss Shevchenko, on board the tender
Black Fish, was paying $1.50 per pound; the fish
ermen would then leave the tender and proceed to
either Mr. Nordmann, Mrs. Nordmann or Mr.
Dubé to get the additional 35 cents. In order to
further disguise this activity between July 1 and 5,
the cash fish buying book, though made available
to Miss Shevchenko, only disclosed $1.50 per
pound. The 35-cent bonus was not entered accord
ing to the evidence until September. None of this
activity was disclosed to Mr. Zoda until July 5
when the defendants had the temerity to advise
him that they had been purchasing fish on their
own account since July 1 and offered it to
Shibamoto at the price of $1.85. They had con
verted to themselves title and ownership in the
product as well as the funds clearly in breach of
the agreement.
It was clearly understood by all the parties
involved that the monies delivered on board by
Shibamoto under the care of Miss Shevchenko
were for the sole and exclusive purpose of acquir
ing the product. The defendants were cognizant of
this fact. Nevertheless they proceeded on July 1 to
disburse from the fish buying funds $145,800 to
meet their payroll, petty cash, air fares, and tender
fees. For obvious reasons, this was undisclosed and
was not discovered by the plaintiffs until Septem-
ber 1988.
I find as a fact that Mr. Nordmann had begun
negotiating the sale of Shibamoto product to
S.N.G. on June 29. There is no doubt that in late
June Mr. Nordmann realized that the prices were
escalating and the fish run forecast was unreliable.
Appreciating that he was bound by a ceiling and
that he would have to abort the season and face
financial difficulties, he instead chose another
route to assure himself the sale of the product.
There is evidence that on June 29 he had a 17-
minute telephone conversation with Mr. Mitsuha-
shi of S.N.G. It is the evidence of Mr. Mitsuhashi
that his records indicated that on July 1 or 2, give
a day or two either way, he was offered the entire
season's catch. Though the agreement was not yet
reduced to writing the essential terms had been
agreed to. There is evidence before me from both
Connie Shevchenko and Mr. Yamazaki that some
Japanese gentleman came on board sometime be
tween July 2 and 4. The evidence of
Mrs. Nordmann was that he was only a visitor
from another vessel who was curious to observe
their processing operation. However, I accept the
evidence of Mr. Mitsuhashi who testified that this
visitor was in fact the S.N.G. representative who
was there to inspect the quality of the processed
fish and was to report to Mr. Mitsuhashi whether
or not they should conclude the transaction.
Despite Nordmann's suggestion that he was still
offering the fish to the plaintiff Shibamoto for
$1.85 a pound on July 5, 6 and 7, fish which were
already the property of the plaintiffs, he had in
fact already concluded a verbal agreement with
S.N.G. and executed the contract with them on
July 7 at 2:00 p.m.
Much evidence was also led during the course of
this trial that, because of the market prices in
Japan as well as the Alaska spot market, increases
could have been paid on the grounds and still
generate a profit. That is probable in light of the
evidence that I heard. But, I was also told and
there is no doubt in my mind that, Mr. Nordmann
was well aware that Mr. Zoda had discussed with
him a Japanese market during 1988 of approxi
mately 1,100 yen per kilo. This allowed for prices
up to $1.50 providing a margin of profit. On the
strength of the evidence from all knowledgeable
people who testified both for the plaintiffs and
defendants, I have concluded that the Japanese
market was extremely volatile and almost impos
sible to predict. Mr. Zoda had no pre-arranged
sale, was a cautious buyer and under the terms of
the agreement, particularly paragraph 1.04, his
perception of market conditions was the one that
should prevail. It was after all "his sole discre
tion". We also have the very compelling evidence
that between July 1 and 5 Mr. Nordmann had led
Mr. Zoda and his associates at Ocean to believe
that he was still purchasing fish at $1.50. Being
satisfied initially that at that price he did not
anticipate encountering any difficulty on re-sale,
why should Mr. Zoda be actively pursuing infor
mation as to the prevailing Japanese prices or any
other markets for that matter?
I conclude that the defendants breached the
agreement of May 16, 1988 in many respects.
They spent the funds advanced to them by
Shibamoto and which was expressly for the pur
pose of buying fish for the payment of their corpo
rate obligations in the amount of $145,000; they
completely disregarded the ceiling price lawfully
imposed by the plaintiffs from July 1 on. From
July 1 they were purchasing fish in their own name
with the plaintiffs' money. They had negotiated an
agreement with third parties for the sale of the
plaintiffs' fish. And finally, they continued their
fish buying operation and selling with the plain
tiff's money, at all times knowingly and contrary
to the terms of the agreement.
Contrary to my finding, it is the defendants'
submission that plaintiffs breached the contract.
They maintain that the agreement of May 16,
1988 authorized Western Fish Producers, Inc. to
purchase fish with money advanced to it by the
plaintiff Shibamoto and that it also authorized
Western to decide on the price to be paid for those
fish. According to the defendants, the contract
required Shibamoto to continue to advance money
so that Western had a sufficient supply on hand to
purchase fish. The only restriction on Western was
its right to decide on the price at which fish were
to be purchased as set out in clause 1.04 of the
agreement which gave Shibamoto the sole discre
tion to impose a ceiling price once satisfied as to
profitability.
Accordingly, the plaintiffs were guilty of
breaching the contract in three respects. First, the
ceiling price was unlawfully invoked by the plain
tiffs and as such constituted a breach of the con
tract by them. It is submitted that the ceiling price
invoked on and after June 28, 1988 was not in
compliance with paragraph 1.04 of the contract.
This is because the ceiling price was not imposed
by the plaintiff Shibamoto but rather by Mr. Zoda
who was neither an officer nor an employee of that
company. According to the defendants, Mr. Zoda
was the president of a separate corporate body,
Viking Seafood Inc., and he was at least one and
possibly two steps removed from the plaintiff com
pany Shibamoto.
I am not persuaded by these arguments.
Shibamoto, the contractual party, is the plaintiff
in this action. The decision concerning the price
ceiling was delegated to Mr. Zoda with the knowl
edge and consent of the defendant Mr. Nordmann.
The evidence clearly shows and it was understood
at all times, that the contracting party would be
Shibamoto & Company Ltd. Mr. Tashiro, an offi
cial from Shibamoto came to Vancouver with Mr.
Zoda in order to execute the contract. The funds
provided to the defendants were the property of
Shibamoto and the fish purchased by Western
pursuant to the agreement were to be placed in the
name of Ocean where they were to be held in trust
for Shibamoto, until sold; it would at all times
remain the property of Shibamoto. There is no
doubt that all of this was understood by Mr.
Nordmann when he entered into the contract.
The defendants' second argument is that the
plaintiffs breached the contract by refusing to take
delivery of the fish. Again, the evidence does not
substantiate this allegation. As my findings of fact
show, the plaintiffs demanded delivery of the fish
on several occasions and the defendants refused.
Finally, the defendants maintain that the plain
tiffs were in breach of the contract when they
refused to advance funds to the defendants after
July 3. It is true that there was no further advance
of funds after they became aware of the fact that
those monies were not being used to purchase fish
for them. However, at that point in time, the
plaintiffs were, pursuant to the law of contract,
legally entitled to treat the contract as having been
repudiated by the defendants and to sue for
damages.
Even had my conclusion been that the plaintiffs
were guilty of breaching the contract of May 16,
1988, a proposition which the evidence simply does
not support, it could not justify the defendants'
actions. Implicit in the defendants' argument is the
proposition that a party to a contract can unilater
ally declare the other contracting party to be in
breach, without any declaration from a court of
competent jurisdiction and proceed to carry out
the contract according to its own interpretation.
This is not an accurate representation of the law.
When there has been a breach of contract, there
are two courses of action open to the innocent
party which it may choose to follow. First, that it
may accept the breach as absolving it from further
performance of the contract. Or, that it may con
tinue to carry out its obligations under the agree
ment and sue the breaching party for damages.
However, if the cooperation of the breaching party
is necessary to carry out the contract according to
its terms, then the innocent party has no option
but to accept the repudiation and sue for damages.
These principles are set out in Anson's Law of
Contract, 26th edition, 1984, at pages 467-468:
... [the innocent party] has the option either to treat the
contract as still continuing or to regard himself as discharged
by reason of the repudiation of the contract by the other party.
... the party not in breach will not always thus be entitled to
complete the contract and sue for the contract price. In the first
place, if he cannot carry out the contract without the co-opera
tion of the party who has refused to perform, and such co-oper
ation is withheld, his only remedy is to sue for damages and not
for the price.
In the case at bar, the defendants maintain that
the plaintiffs were the breaching party in that they
unlawfully set the ceiling price, refused to take
delivery of the fish and refused to advance addi
tional funds. Contrary to my finding, if that were
the case then the defendants' only lawful course of
action was to treat the contract as repudiated and
sue for damages. There existed no legal right to
continue purchasing fish for their own account or
paying their current expenses with the plaintiffs'
money as the evidence clearly shows they did.
B. Conversion
This leads me to the issue of conversion. It is the
plaintiffs' contention that since the defendants
were not purchasing fish for Shibamoto on and
after July 1, 1988 but were in fact purchasing fish
for their own account with the plaintiffs' money,
they were guilty of conversion.
In cases where a tort has been committed in
another jurisdiction there are two theories appli
cable to the appropriate method of analyzing a
defendant's liability. The first involves determining
the character of the act under the law of the place
where the tort occurred (lex loci delicti); secondly
determining whether or not that same act would
constitute a tort under the law of the forum.
Recently however, courts have been moving to an
approach described as the proper law of the tort;
under this theory the court determines the system
of the law with which the action has most direct
connection and applies that law to determine the
liability of the defendant.
It is not necessary to determine which approach
is applicable in the present case. Both under the
law of the State of Alaska as proven by the expert
testimony of John Treptow, which was not chal
lenged or shaken on cross-examination, and which
I accept in its entirety, as well as under the laws of
Canada, there is no question that the actions of the
defendants constitute conversion.
The tort of conversion involves the wrongful
taking, using or destroying of goods or the exercise
of control over them in a manner that is inconsist
ent with the title of the owner. It arises when there
exists an intentional exercise of control over a
chattel which seriously impedes the right of the
true owner to control it. What must be shown is a
voluntary act in respect of another's goods which
amounts to an expropriation of the owner's pro
prietary or possessory rights in them. These princi
ples of law are well established by the jurispru
dence. In Dickey v. McCaul (1887), 14 O.A.R.
166 (C.A.) the Court stated at page 171 that "in
order to constitute a conversion there must be a
wrongful taking or using or destroying of the
goods, or an exercise of dominion over them incon
sistent with the title of the owner." In Cyr v. Laine
(1953), 32 M.P.R. 106 (N.B.C.A.) at page 107,
the Court provided a concise definition of conver
sion as "a positive wrongful act or dealing with the
goods in a manner, and with an intention, incon
sistent with the owner's rights".
Based on the evidence two separate and distinct
actions taken by the defendants were definitely
inconsistent with the owner's rights: the taking of
the money for its own use and transacting with fish
that was clearly the property of the plaintiff
according to the terms of the agreement.
It is not disputed that Shibamoto, through
Ocean, provided a total of $1,800,000 to the
defendant Western Fish Producers, Inc. for the
purpose of buying fish and of that amount
$613,247 was used in accordance with the terms of
the contract. It is also not disputed, and in fact
admitted by the defendants that the remaining
$1,186,753 was not used to purchase fish but was
used by the defendants for a variety of other
purposes including:
1. $145,800.00 for other business expenses of the defendant
Western Fish Producers, Inc.;
2. the remaining $1,040,953.00, for the purchase of fish by
Western and which was sold to third parties, Shin Nihon
Global Inc. and Kamei International Inc. None of that fish was
delivered to Ocean and Shibamoto; and from the proceeds of
the sale only $250,000.00 was delivered to the plaintiffs. Part of
the proceeds of those sales was paid to the defendant S.M.
Properties Ltd.
It must be remembered that conversion can
result only from an intentional act, not from negli
gent loss or destruction. There must be a deliber
ate intent to interfere or deal with the goods by
exercising control over them as one's own. In the
case at bar, both Mr. and Mrs. Nordmann admit
ted that they knew that the funds in question were
to be used solely for purchasing fish; but being
under very serious pressure from their creditors
and having no other readily available source of
capital they took the money, the property of the
plaintiffs, and used it as if it were their own. There
is no doubt that as of July 1, 1990 the defendants
had numerous payments to meet including income
tax arrears in the amount of $50,000 per month;
payments to Red Dog Estates Ltd. in the amount
of $220,000; payments outstanding to all of the
tender operators; payments outstanding for payroll
as well as payments outstanding for airfares, etc.
There is one further element essential to the
finding of conversion. Merely being in possession
of another party's goods without his authority is
not sufficient. When the goods have been lawfully
acquired, their detention alone does not constitute
conversion in the absence of some evidence of
intent to keep them adversely or in defiance of the
true owners' rights. In order to establish that the
detention is adverse, the plaintiffs must prove that
they demanded the return of the goods and that
the defendants refused to comply.
The evidence in this case is unequivocal that the
plaintiffs demanded, on more than one occasion,
that the defendants return their money as well as
the fish purchased with their money. The plaintiffs
demanded return of the cash buying funds through
the numerous memoranda and telexes but were
flatly refused. When Connie Shevchenko sought
the remaining cash buying funds from Mr. Nord-
mann on July 6, he once again refused. Other than
the $250,000 returned to Connie Shevchenko on
July 9, 1988 the remainder of the funds derived
from the sale of fish to S.N.G. and Kamei Interna
tional Inc. were retained by the defendants West
ern and S.M. Properties Ltd.
The defendants were unable to raise any con
vincing defence to the allegation of conversion.
They argued that the plaintiffs refused to take
delivery of the fish. However, the facts simply do
not support that argument. The evidence reveals
that the plaintiffs demanded delivery of the fish on
several occasions at the ceiling price but the
defendants refused to comply unless Shibamoto
agreed to advance further funds. Following the
conversion of $1,186,353, both Mr. Zoda and Mr.
Safarik took the position that under no circum
stances would they be advancing further funds.
The defendants also refer to an express or implied
authorization to sell the fish to S.N.G.
Mr. Oesting's testimony was clear that the
arrangement of July 8, 1988 contained no such
licence.
The defendants also submit that although they
did expend $145,800 of the plaintiffs' money for
purposes other than buying fish, these expendi
tures were made necessary because of the plain
tiffs' breach of contract. I am unable to give
serious consideration to this argument; a breach of
contract is never an excuse nor is it a defence to
the conversion of another's property.
Finally, the defendants attempt to rely on the
agreement of July 8, 1988 as a defence to the
claim of conversion. It is clear that this was not a
"settlement agreement" as suggested; all the rights
and remedies of both parties were reserved. The
so-called arrangement, in my view, was never
intended to be in complete satisfaction of the
existing duties of either party. The evidence shows
that during the negotiations of July 7 and 8, 1988,
Mr. Oesting made it clear that the arrangement
was an accord only and not "accord and satisfac
tion". He also emphasized that the arrangement
did not affect the rights and remedies of either of
the parties. Ms. Travestino admitted that what
was discussed was without prejudice to the rights
and remedies of both parties. The most important
evidence given by Ms. Travestino in this regard is
her note "accord only". She testified that
Mr. Oesting made it completely clear that what
was being discussed was accord only and not
"accord and satisfaction". Accord without satis
faction has no legal meaning or effect on the
underlying claim. I have therefore concluded that
since there was no accord and satisfaction it is
consistent that there was also no release of the
underlying obligations resulting from the contract
of May 16, 1988.
In any event, even if a final settlement had been
reached and the agreement or accord had been
breached by the plaintiffs, that does not afford a
defence on the original claim, though it may estab
lish a claim for damages flowing from the breach
of the accord. This is explained in Clerk & Lind-
sell on Torts (16th ed., 1989) at page 374 in the
following way:
Any man who has a cause of action against another may agree
with him to accept in substitution for his legal remedy any
valuable consideration. The agreement is called an accord and
the consideration is called satisfaction.
When the satisfaction agreed upon has been performed and
accepted, the original right of action is discharged and the
accord and satisfaction constitute a complete defence to any
further proceedings upon that right of action. In general, the
right of action is not discharged until the satisfaction is per
formed and part performance is not sufficient. If before
performance the plaintiff, in breach of the executory accord,
proceeds upon the original cause of action, the accord affords
no defence thereto, but the defendant may counterclaim dam
ages for its breach. [Emphasis added.]
In my opinion, the defendants' actions constitute
conversion and their argument raises no defence to
the claim whatsoever.
C. The U.S. Maritime Lien
The evidence of Mr. Treptow, which was not
shaken on cross-examination, and as mentioned,
which I accept in its entirety, was to the effect that
the defendants are guilty of the tort of conversion
and the plaintiffs are therefore entitled to a mari
time lien against the vessel Nicolle N pursuant to
the maritime law of the State of Alaska and the
United States of America.
As to the enforcement of that lien in Canada, it
is well established that where questions of conflict
of laws arise, this country recognizes the law of the
place where the lien arose deeming the question of
whether the lien accrues or not to be one of a
substantive nature.
This principle was enunciated by the Supreme
Court of Canada in Todd Shipyards Corp. v.
Alterna Compania Maritima S.A., [1974] S.C.R.
1248. In that case the appellant effected necessary
repairs in the United States to the defendant ship,
which was registered in Greece. The ship was
owned by a Panamanian company and was subject
to a mortgage registered in Greece in favour of the
respondent, also a Panamanian company. As a
result of financial difficulties the defendant ship
found it impossible to meet its obligations under
the mortgage. The ship was arrested, ordered to be
sold and purchased by the respondent, who then
filed a statement of claim alleging that the amount
of the mortgage, together with interest, was due
and owing to it and should be paid out of the
proceeds of the sale. The appellant submitted a
statement of defence alleging that it had become
the holder of a maritime lien in the United States,
which it was entitled to enforce in Canada in
priority to the claim by the respondent. The
Supreme Court held that a maritime lien acquired
under the law of a foreign state will be recognized
and may be enforced in Canada if the tribunal to
which the party asserting the right to the lien has
resorted, has the requisite jurisdiction.
The Court reviewed its decision in The Strand-
hill v. Walter W. Hodder Co., [1926] S.C.R. 680
wherein it was stated at page 689:
And, seeing that equivalent local jurisdiction exists, the Ex
chequer Court of Canada is empowered, when, in those cases,
the claim for necessaries is secured by a maritime lien, to
enforce that lien, notwithstanding that the right may have been
acquired under the law of a foreign country.
The Court concluded that its decision in the
Strandhill case afforded ample authority for the
proposition that effect is to be given to the appel
lant's claim as if it were a valid maritime lien.
The above decision was subsequently applied
and followed by the Federal Court of Appeal in
Marlex Petroleum, Inc. v. The Ship Har Rai,
[1984] 2 F.C. 345 (approved by Supreme Court of
Canada [1987] 1 S.C.R. 57) wherein it was held
that a maritime lien arising under the proper law
of contract, even though in a foreign jurisdiction,
was to be recognized as enforceable in Canada.
This principle has been held to apply to foreign
maritime liens, even in situations where the claim
underlying the maritime lien would not be recog
nized as a maritime lien in Canada. In Metaxas v.
Galaxias (The), [1989] 1 F.C. 386 (T.D.) it was
argued that since the above cases all dealt with
claims asserted by American necessariesmen, there
was room for the Court to distinguish these cases
and to restrict the principle enunciated by the
Supreme Court. At pages 403-404 I dealt with this
argument as follows:
The Colorado laid the foundation for the logic pursued in
The Strandhill, and subsequently, The Har Rai, and The
loannis Daskalelis. In each of these cases it was held the
contracts for necessaries entered into in the United States will
be treated before Canadian courts according to the laws of the
United States with respect to the substance of the claims
asserted, but ranked according to the Canadian law with
respect to the priority of this type of claim in a distribution.
It is at this point that counsel for Baseline is attempting to
import a limitation into what would appear to be a general rule
with respect to the recognition of foreign maritime liens in
Canada. Counsel has argued that as the claims of necessaries-
men in Canada are recognized as being claims in rem, the fact
that an American statute enhances the status of these claims
into a full blown maritime lien is merely a case of polishing up
an apple into a bigger and brighter apple.
Despite its initial appeal, I cannot agree with the contention
that this restriction can be imported into Canadian law. The
Supreme Court has clearly stated on several occasions that the
substantive rights of the parties are to be determined by
reference to the lex loci. The treatment which Canada as the
forum would accord such a claim in its domestic law does not
enter into consideration. As Mr. Justice Ritchie stated in
quoting from the, decision at first instance in The Strandhill, at
page 1252 of The loannis Daskalelis:
In rendering the judgment at first instance in the Nova
Scotia Admiralty District, Mellish L.J.A., said:
If a maritime lien exists, it cannot be shaken off by
changing the location of the res. A foreign judgment in
rem creates a maritime lien and even although such a
judgment could not have been obtained in the courts of
this country, it will be enforced here by an action in rem.
But a maritime lien may be created by foreign law other
wise than by a judgment in rem; and if it be so created I
think that it can be equally enforced here in the same way.
If the plaintiffs have lawfully acquired the right to the res
even under foreign law, it would be strange if they had not
the liberty to enforce it here in the only court providing
relief in rem.
For these reasons, I am of the opinion that an
action in rem will lie to enforce the maritime lien
in the present case.
D. Personal Liability of Jorn Nordmann
The plaintiffs submit that since there was con
version of the money belonging to the plaintiff
Shibamoto, and that the conversion was specifical
ly intended and authorized by Jorn Nordmann, the
alter ego or managing mind of all of the defendant
companies, he should personally as well as all
defendant companies be liable for the damages
incurred by the plaintiffs. The defendants main
tain that the courts will seldom resort to such a
finding and will do so only when it has been very
clearly established: that not to do so, would be
flagrantly opposed to justice; that it is due to
improper conduct or fraud; and finally it should be
shown that a company has been incorporated for
the express purpose of committing a wrongful act.
They submit that since none of these conditions
are present in the case at bar, it would be inappro
priate to lift the corporate veil and hold Mr.
Nordmann personally liable.
With due respect to the defendants, the issue of
whether or not this is a proper case for the lifting
of the corporate veil is completely irrelevant to the
argument concerning the personal liability of Mr.
Nordmann. In my opinion, the determination of
Mr. Nordmann's liability must be based upon the
legal principle that an individual who directs a tort
to be committed is personally liable regardless of
the fact that he is an officer of the company for
whose benefit the tort is executed.
In International Factors Ltd y Rodriguez,
[1979] 1 All ER 17 (C.A.), the plaintiffs entered
into an agreement with a company whereby they
agreed to purchase all the company's book debts
and in return it agreed to assign them to the
plaintiffs for a percentage of the full amount of the
debts. The agreement provided that all monies
received by the company in respect of the assigned
debts were to be transferred to the plaintiffs. Fol
lowing the execution of the contract four cheques
were sent to the company by debtors in discharge
of their obligations. The company was in financial
difficulty and one of its directors arranged for the
cheques to be paid into the company's bank
account contrary to the agreement.
The plaintiffs sued the defendant director in
conversion. The Trial Judge held that the payment
of the cheques into the company's bank account
amounted to conversion and that the defendant
was personally liable for that conversion. On
appeal it was contended, inter alla, that he could
not be liable in conversion unless the company
itself was guilty of conversion and unless he, as an
officer of the company, was vicariously liable for
conversion. In addressing the defendant's argu
ment, the Court of Appeal stated at page 19:
The learned judge however found that a cause of action in tort,
in conversion, was established against the defendant, and he
based his judgment on three propositions: first, that a director
is liable for torts committed by him in connection with the
affairs of a company. ... It is not now in dispute that the
learned judge was right up to that point.
Counsel for the defendant, in this court, has interpreted the
learned judge's judgment as meaning that the tort was primari
ly a tort of the company and that the defendant became liable
as the person who was instrumental in committing the tort on
behalf of the company. I do not so read the judgment; I read it
as meaning that the defendant himself was here the primary
tortfeasor, and the fact that he was acting on behalf of the
company is no defence to him. [Emphasis added.]
The same principle was applied in Caban v.
Calgary Industrial Real Estate Ltd. et al. (1968),
1 D.L.R. (3d) 69 (Alta. S.C.). There the plaintiff
delivered his truck to the defendant, a real estate
agency, as a deposit on his offer to purchase lands
listed with the defendant. Although aware that the
plaintiff's offer had not been accepted, the defend
ant, through an employee, obtained the plaintiff's
signature on a blank bill of sale and sold the truck.
The Court held that this constituted a clear con
version of the truck by the defendant company
which had been delivered in trust for a specific
purpose. The officer of the company who actually
ordered the sale was guilty of constructive, if not
actual fraud, since he knew or should have known
that in the circumstances the company was a
constructive trustee for the plaintiff.
These cases demonstrate that when an individu
al chooses to convert property belonging to a third
party and that property is in the possession of a
company which he controls, the individual as well
as the company is liable in tort. The defendant
companies in the case at bar were guilty of conver
sion in that they used the funds of the plaintiff
Shibamoto for their own purposes. That conversion
was expressly designed and commissioned by
Mr. Nordmann. The plaintiffs point out that he
was the managing mind of the defendant compa
nies and held all the shares in the companies along
with his wife. It was Mr. Nordmann who had
physical possession of the plaintiffs' funds and fish
to which the plaintiffs' held legal title. It was he
who dealt with those goods in a manner contrary
to the rights of the plaintiffs. In my view, Mr.
Nordmann is guilty of the conversion which was
committed in this case: he was the primary actor,
not merely a secondary participant who was acting
on behalf of the defendant companies.
E. Liability of S.M. Properties Ltd. and C.N.
Holding, Inc.
Finally, the plaintiffs are asking that this Court
pierce the corporate veil and grant judgment
against Western Fish Producers, Inc., S.M. Prop
erties Ltd. and C.N. Holding, Inc. on the grounds
that all three corporate bodies operated as one unit
and that therefore all three should be held
accountable for the damages sustained by the
plaintiffs. It is submitted that the purpose for
incorporating this group of companies was to insu
late those that owned the assets, S.M. Properties
Ltd. and C.N. Holding, Inc., from the obligations
created by the operating company Western Fish
Producers Inc. The defendants maintain that while
this is true, it is also lawful and was fully disclosed
to the plaintiffs.
It is a long established and fundamental princi
ple of corporate law that each company in a group
of companies is to be regarded as a separate legal
entity having separate legal rights and liabilities.
Nevertheless, there are cases where the courts
have been willing to treat a subsidiary company as
an agent of the holding company and as such
conducting the latter's business. It is the circum
stances surrounding a particular case which are
determinative of whether the court will entertain
such a finding since there is no consistent rule of
law as to when the general principle of insulation
will be set aside and the corporate veil pierced. In
Kosmopoulos v. Constitution Insurance Co.,
[1987] 1 S.C.R. 2, the Supreme Court of Canada
confronted this predicament and came to the fol
lowing conclusion at page 10:
As a general rule a corporation is a legal entity distinct from
its shareholders: Salomon v. Salomon & Co., [1897] A.C. 22
(H.L.). The law on when a court may disregard this principle
by "lifting the corporate veil" and regarding the company as a
mere "agent" or "puppet" of its controlling shareholder or
parent corporation follows no consistent principle. The best that
can be said is that the "separate entities" principle is not
enforced when it would yield a result "too flagrantly opposed to
justice, convenience or the interest of the Revenue": L. C. B.
Gower, Modern Company Law (4th ed. 1979), at p. 112.
It is possible however, to derive some principles
or guidelines which may assist the Court in its
resolution of whether or not the basic principle
should be rigidly adhered to. In Smith, Stone &
Knight, Ltd. v. Birmingham Corporation, [1939] 4
All E.R. 116 (K.B.D.) Atkinson J. reviewed the
case law and concluded that while it was a ques
tion of fact in each case whether a subsidiary was
carrying on the parent company's business or its
own, six factors were considered in deciding the
question:
1. Were the profits treated as those of the parent company?
2. Were the persons conducting the business appointed by the
parent company?
3. Was the parent company the head and brain of the trading
venture?
4. Did the parent company govern the adventure and decide
what should be done and what capital should be embarked
on it?
5. Were the profits made by its skill and direction?
6. Was the parent company in effectual and constant control?
In the present case, there is no doubt that the
incorporation of the defendant's various companies
was done to insulate the ones that owned the
assets. No one is alleging that such an arrange
ment is necessarily unlawful. In fact, from the
evidence, this approach had worked successfully
for Mr. Nordmann in the past when the first
operating company of his group, Can Inter Foods
Ltd., which was incorporated in 1983, was able to
protect assets from creditors.
Nevertheless, there are facts disclosed by the
evidence which lead me directly to the conclusion
that this is an appropriate case in which to lift the
corporate veil. For his own purposes, Mr. Nord-
mann lumps the companies together and instructs
his accountants to prepare what has been
described as "S.M. Properties Ltd. Combined
Financial Statements". From the evidence of
Mr. Nordmann and Paul Kissack, it is apparent
that part of the proceeds of the sales of the fish
purchased with Shibamoto's money was directed
to the bank account of S.M. Properties Ltd.
Mr. Kissack also gave evidence that money was
transferred back and forth between companies as
if they were one. The effect of inter-corporate
transfers between June 20, 1988 and July 31, 1988
was to transfer $193,034 to the affiliated compa
nies. There was no proper accounting kept between
the companies. Examples were given by Mr. Kis-
sack in his report where he notes that in the ledger
for Western Fish Producers, Inc. a balance, owing
to S.M. Properties Ltd. of $1,762,418 was written
off on July 31, 1988 without explanation. There
was also a change made in the ledger of S.M.
Properties Ltd. in 1990 eliminating a debt owed
from S.M. Properties to Western of $2,700,000;
the change was affected by the insertion of entries
relating to 1986, 1987 and 1988.
There is no question that Jorn Nordmann, at all
material times, was the managing mind of all three
companies, was in absolute control and was
responsible for business decisions. Indeed, this was
confirmed by his own evidence and that of Mrs.
Nordmann. The corporate triangle of the three
defendant companies was in all respects a creature
of Mr. Nordmann's making. He, in his sole discre
tion, directed for his own purposes use of the
plaintiffs' money for the payment of debts and
expenses. In my view, the circumstances of this
case and Mr. Nordmann's relationship to Western
Fish Producers, Inc., C.N. Holding, Inc. and S.M.
Properties Ltd. fit precisely the following descrip
tion given by Lord Denning, M.R. in Wallersteiner
v. Moir, [1974] 1 W.L.R. 991 (C.A.), at page
1013:
He controlled their every movement. Each danced to his bid
ding. He pulled the strings. No one else got within reach of
them. Transformed into legal language, they were his agents to
do as he commanded. He was the principal behind them. I am
of the opinion that the court should pull aside the corporate veil
and treat these concerns as being his creatures — for whose
doings he should be, and is, responsible.
Further, I am mindful of the statement of the
Supreme Court in the Kosmopoulos case that the
corporate veil should only be lifted "in the inter
ests of third parties who would otherwise suffer".
There is no doubt in my mind that should I fail to
lift the corporate veil in the case at bar and the
plaintiffs are unable to recover judgment from the
defendant group of companies, an injustice will
result and the plaintiffs will bear the burden. It is
significant to underline that while Western Fish
Producers, Inc. is now insolvent, neither of the
other two companies are; that S.M. Properties Ltd.
operated as the "financier" receiving in previous
years $900,000 a year from Western; it owned the
equipment aboard the vessel; C.N. Holding, Inc.
was the proprietor of the Nicolle N, the assets of
both these companies provide the equitable collat
eral necessary to finance the operations of all
companies.
For all of these reasons I am persuaded that this
is an appropriate case in which to lift the corporate
veil and to treat the defendant companies as one.
Accordingly, judgment is granted against all three
companies.
EDITOR'S NOTE
Rouleau J. proceeded to dispose of the coun
terclaim. There was no evidence that would sup
port the allegation that the $1.50 ceiling price was
imposed as an attempt at price fixing by Ocean or
its subsidiaries. Equally unfounded was the sub
mission that Ocean, a corporation doing $175
million worth of business in one year and
Shibamoto, a major Japanese industrial concern,
would have an interest in fraudulently destroying a
fish buying operation that had but 1% of the local
salmon harvest.
In conclusion, His Lordship stated that this
"long and costly trial was caused by Mr. Nord-
mann, a man of reckless business ethic, whose
sole defence was to attack the integrity and
attempt to ruin the reputation of people who were
acting in good faith throughout". Plaintiffs were
awarded damages — to be assessed — for
breach of contract and were entitled to a maritime
lien against the Nicolle N.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.