Executive Summary: Key Legal and Evidentiary Issues

• The Defendants sought to dismiss or stay the action as an abuse of process, arguing the Plaintiff should have moved to amend an existing but stayed counterclaim instead of starting a new proceeding.
   
• Justice Kurz applied a flexible, holistic approach to abuse of process rather than treating overlapping proceedings as automatically improper.
   
• A significant evidentiary question was whether the automatically stayed Counterclaim against the bankrupt corporation created a real risk of multiplicity of proceedings or inconsistent verdicts.
   
• Section 38 of the Bankruptcy and Insolvency Act was central to determining whether the Plaintiff needed court authorization before suing on behalf of the bankrupt corporation's creditors.
   
• Whether the claim to pierce the corporate veil belonged personally to the Plaintiff or instead to the bankruptcy trustee shaped much of the statutory analysis.
   
• Ultimately, the court weighed whether the procedural route proposed by the Defendants would conflict with the efficiency principles set out in the Rules of Civil Procedure.
   

Facts of the case

In 2019, Joseph Berlingieri and his wife hired an entity operating as "Concept Kitchen and Bath" to renovate their kitchen, dealing directly with Dustin Hanco and Timothy Hanco. Work began in June 2020 and ended on December 18, 2020, with the Plaintiff dissatisfied with the work and the additional funds demanded of him. On March 17, 2021, Concepts Plumbing and Bath Inc. ("CPBI") filed a construction lien against the Plaintiff's home and commenced a Lien Action against the Plaintiff, his wife, and CIBC. The Plaintiff and his wife responded on May 7, 2021, with a Counterclaim seeking amounts they said they incurred to rectify CPBI's allegedly negligent work. CPBI's counsel was removed from the record on February 2, 2023, and no new counsel was appointed. On April 12, 2023, Conlan J. vacated CPBI's lien and dismissed the Lien Action, leaving the Counterclaim intact and awarding the Plaintiff and his wife costs of $7,500. CPBI then filed an assignment in bankruptcy on May 25, 2023, and the Plaintiff and his wife were served with a Notice of Bankruptcy on June 21, 2023, automatically staying the Counterclaim. On February 13, 2024, the Plaintiff commenced this separate action, claiming at least $240,000 in damages, broken down as $5,000 in consulting fees, $50,000 in project management fees, approximately $69,000 to remediate and complete construction work, approximately $16,000 for delay-related costs, and approximately $100,000 in legal costs and disbursements from the Lien Action. The Statement of Claim alleges breach of contract, negligence, and misrepresentation, and seeks to pierce the corporate veil of CPBI and the corporate Defendant, 11776240 Canada Inc. ("117"), on the basis that the Hancos exercised complete domination and control over both entities and that 117 was incorporated for an improper or fraudulent purpose. Although the Defendants took the position that a section 38 order was required, they nonetheless filed a statement of defence, and brought their motion to dismiss or stay the action as an abuse of process on September 30, 2025.

Policy and legislative provisions at issue

Several provisions of the Rules of Civil Procedure and the Bankruptcy and Insolvency Act ("BIA") framed the analysis. Rule 21.01(3)(d) permits a defendant to move to stay or dismiss an action as frivolous, vexatious, or an abuse of process, while Rule 21.03(3)(c) allows similar relief where another proceeding is pending between the same parties on the same subject matter, and Rule 2.1.01(1) allows the court to act on its own initiative in comparable circumstances. The Defendants also invoked Rule 5.04(2), governing the addition or substitution of parties, and Rule 26.02(c), which permits amendment of pleadings with leave of the court, arguing the Plaintiff should have used these mechanisms rather than commencing a new action. Central to the bankruptcy issue was section 38(1) of the BIA, which allows a creditor to obtain court authorization to pursue a proceeding on behalf of a bankrupt's estate where a trustee refuses or neglects to do so, and section 69.3(1), which imposes an automatic stay of proceedings against a bankrupt. The court also considered Rules 1.04(1) and (1.1), which direct that the Rules be construed liberally to secure the most expeditious and least expensive determination of proceedings on their merits and proportionate to the issues involved.

Reasoning and analysis

Justice Kurz reviewed the doctrine of abuse of process as described in Behn v. Moulton Contracting Ltd., Toronto (City) v. C.U.P.E., Local 79, and 1086289 Ontario Inc. (Urban Electrical Contractors) v. Welland (City), emphasizing that the doctrine is flexible, unencumbered by fixed requirements, and calls for a holistic evaluation of intent, prejudice, and impact on the administration of justice. Applying this approach, the court found no multiplicity of proceedings, since the Counterclaim had been automatically stayed for over three years with little prospect of revival, and no evidence of an intent to misuse the court's process. The court distinguished the Defendants' authorities, including Maynes v. Allen-Vanguard Technologies Inc. and Gale v. Rothbart Centre for Pain Care, noting that the Counterclaim here remained stayed rather than active, and preferred the more nuanced approach adopted in SIF Solar Energy Income & Growth Fund v. Aird & Berlis LLP and Abarca v. Vargas, which reject any general rule that commencing a second action is automatically abusive merely because an existing action could have been amended. The court further reasoned that following the Defendants' proposed sequence — lifting the bankruptcy stay, seeking section 38 leave, and then amending the Counterclaim — would be disproportionately costly and time-consuming, contrary to Rules 1.04(1) and (1.1). On the section 38 issue, the court accepted the Plaintiff's position, grounded in Indcondo Building Corp. v. Sloan and Canada (Attorney General) v. Standard Trust Co., that a claim to pierce the corporate veil against the Hancos and 117 personally is not a claim belonging to CPBI or its trustee, since the trustee has no greater rights than the bankrupt itself and cannot pursue a personal remedy belonging to a creditor. The court also noted that CPBI's trustee had indicated it was not pursuing any action and took no position on claims against other parties. Although it found section 38 leave unnecessary, the court held that, had it been required, the Plaintiff satisfied the three-part test from Shaw Estate (Trustee of) v. Nicol Island Development Inc. for obtaining such leave.

Ruling and overall outcome

Justice Kurz dismissed the Defendants' motion to dismiss or stay the action as an abuse of process, finding in favour of the Plaintiff, Joseph Berlingieri, and further finding that he was not required to obtain authorization under section 38 of the BIA to continue the action. The Plaintiff's cross-motion for such leave was therefore not needed, though the court indicated it would have granted leave in any event had it been necessary. On costs of the motion, the endorsement does not fix a specific amount; the parties were directed to attempt to resolve costs themselves, failing which the Plaintiff may submit costs materials within 14 days of release, with the Defendants responding within a further 14 days — meaning the monetary outcome of this particular motion remains Not Specified. The decision does not adjudicate the merits of the Plaintiff's underlying $240,000 damages claim, which remains to be determined at a later stage.