In an Aug. 5 decision in Rail v. 2014284 Ontario Limited, 2025 ONSC 4540, Ontario Superior Court Justice Spencer Nicholson ruled that two companies controlled by business executive Patrick J. Cronin must pay the estate of Karen Rail $134,586.83 and $156,481.07 respectively on promissory notes dating back to 2012 and 2017. However, the court declined to “pierce the corporate veil” to make Cronin personally responsible for the corporate debts.
According to facts detailed in the decision, Karen Rail, a London, Ont., home daycare provider, and her husband, Brian Rail, a cabinet installer, had conducted various investment transactions with Cronin over several years. The couple relied on him for investment advice and believed their loans were secured by mortgages on real estate properties.
Rail died of cancer in May 2021, and her husband brought the lawsuit as estate trustee in June 2022, seeking to recover the outstanding amounts.
The case involved two promissory notes: a $100,000 loan from January 2012 bearing eight per cent annual interest, and another $100,000 loan from December 2017 bearing 12 per cent annual interest.
The matter turned largely on a series of text messages between Cronin and Rail, particularly one sent on July 21, 2020, in which Cronin promised: “I’m just finishing with a sale transaction that is to close one week today. From that I can pay the 100k and interest for sure and put a serious dint in the other amount.”
Justice Nicholson found this text message constituted a legal “acknowledgment” that reset the limitation period for both debts, defeating the defendants’ argument that the claims were statute-barred.
“As between Mr. Cronin and Mrs. Rail there could be no ambiguity regarding what he was talking about repaying,” the judge wrote, noting that Cronin had testified under oath that the text referred specifically to the two promissory notes in question.
The defendants had argued the case required a full trial due to credibility issues, but Justice Nicholson rejected this position after finding inconsistencies in Cronin’s evidence.
During his 2023 examination for discovery, Cronin confirmed the text messages referred to the promissory notes. However, in a later affidavit, he claimed they referenced other mortgages that had been paid in full.
“A defendant providing two inconsistent answers under oath cannot create an inconsistency requiring a trial,” Justice Nicholson ruled. “Rather, it demonstrates that his evidence is unreliable and can be rejected.”
While successful on the debt claims, the estate failed in its attempt to hold Cronin personally liable by piercing the corporate veil of his companies, 2014284 Ontario Ltd. and Interra Management Group Ltd.
Justice Nicholson found insufficient evidence that the corporations were being used for fraudulent or improper purposes, noting they were “incorporated years apart and years prior to entering into these commercial transactions with Mrs. Rail.”
“The mere fact that a company may be judgment proof does not justify piercing the corporate veil,” the judge wrote. “To impose personal liability upon Mr. Cronin for these loans would be akin to making him a guarantor of the loans when no personal guarantee was sought or granted.”
Kaitlin Cook, an associate with London, Ont.-based LeClair & Associates who served as counsel for the defendants, 2014284 Ontario Ltd., Interra Management Group Ltd. and Patrick J. Cronin, said the decision underscores the high legal threshold applied to piercing the corporate veil.
“This decision reaffirmed that a corporation’s legal status should generally be recognized in commercial transactions,” she said in an email to Law360 Canada, “and personal liability cannot be imposed in the absence of clear evidence of misconduct such as fraud, deceit or misuse of the corporate form.”
The decision also illustrates how COVID-19 emergency measures affected limitation periods. Justice Nicholson noted that Ontario’s limitation periods were suspended from March 16, 2020, to Sept. 14, 2020, which impacted the timing calculations in the case.
“I recognize that neither party raised the COVID issue but as a matter of law, the limitation periods had not expired,” he noted.
“The case is a good reminder that the tolling of the limitation period caused by COVID is applicable in unique ways, such as applying to an acknowledgment of the debt,” said Cole Vegso, a London, Ont.-based partner with Siskinds who served as counsel for the plaintiff, the estate of Karen Rail by its estate trustee Brian Rail.
In an email to Law360 Canada, Vegso added that the decision is also “a good example of where the court can use a summary judgment motion to resolve a matter where there are alleged credibility issues.”
The ruling also offers guidance on when text messages can constitute valid acknowledgments under Ontario’s Limitations Act, 2002.
The court encouraged the parties to resolve costs issues themselves, noting there was “divided success” in the litigation.
If you have any information, story ideas or news tips for Law360 Canada, please contact John Schofield at john.schofield1@lexisnexis.ca or call 905-415-5815.