Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20220520 DOCKET: C69858

Benotto, Zarnett and Copeland JJ.A.

BETWEEN

The Calbot Group Ltd. and 2649106 Ontario Inc. cob Synergy Capital Plaintiffs (Appellant)

and

NSR Toronto Holdings Ltd., NSR Canada Development Ltd., New Silk Road Culturaltainment Ltd., Dapeng Wang, Sha Huang aka Sam Huang, Sunny Communities (Markham Gold) Inc., Patrick O’Hanlon, Christopher O’Hanlon, Sunny Development Holdings Inc., 11105639 Canada Inc., Bill K. Chen, and Wuzheng Zhang aka Jian Zhang Defendants (Respondents)

Counsel: Antonio Conte, for the appellant Michael Schafler and A.J. Freedman, for the respondents

Heard: May 12, 2022

On appeal from the order of Justice Jane Ferguson of the Superior Court of Justice, dated August 30, 2021, with reasons reported at 2021 ONSC 5812.

Reasons for Decision

[1] The appellant appeals an order that dismissed its claims against the respondents, who were two of twelve parties it had named as defendants to an action it commenced. The motion judge determined, pursuant to r. 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, that it was plain and obvious that the claims against the respondents could not succeed. She denied the appellant permission to further amend its statement of claim.

[2] The motion judge found that an allegation of a written contract stood “[a]t the core of this proceeding”. The statement of claim alleged that on May 31, 2019, the appellant [1] entered into a Memorandum of Understanding, which it defined as the “Mandate”. The other parties to the Mandate were Sam Huang and “NSR”, a term defined in the statement of claim to include a number of corporations. The statement of claim alleged that under the Mandate, the appellant was to assist in obtaining equity financing for NSR and was to receive a $5 million Consulting Fee if a firm and irrevocable offer from a “joint venture, investor buyer or equity partner” was presented. The statement of claim also alleged that NSR and Sam Huang breached the Mandate, including by not paying the Consulting Fee.

[3] As the statement of claim defined the term “NSR”, it included the respondent NSR Toronto Holdings Ltd. (“NSR Toronto”), a British Columbia corporation. However, the Mandate, which was specifically referred to and therefore deemed incorporated into the pleading, did not include NSR Toronto or the respondent Dapeng Wang (“Mr. Wang”) as parties, was not signed by either, and made no reference to either.

[4] The motion judge found that in the absence of contractual privity, there could be no successful breach of contract claim against either respondent. She also found that other claims asserted in the statement of claim (such as breach of the duty of honesty in contractual performance) against NSR Toronto and Mr. Wang were dependant on the existence of a contract to which they were parties and were thus equally doomed to fail against them. She found there to be no proper pleading of an unjust enrichment or conspiracy claim against either respondent, that an oppression remedy claim against NSR Toronto could not succeed because the Ontario court had no jurisdiction to grant it against a British Columbia corporation, and because it was premised on breaches of contractual duties. She found that allegations against Mr. Wang were not actionable as they did not assert that he acted outside his capacity as an officer of a corporation.

[5] The appellant’s central argument on appeal is that the motion judge went beyond the proper role of a judge hearing a r. 21.01(1)(b) motion by interpreting the Mandate and concluding that it did not create contractual privity with the respondents. According to the appellant, this was tantamount to considering evidence and, in any event, was something that could be done only in a process in which evidence was admissible. Further, the appellant argues that the motion judge should have granted leave to amend the statement of claim to cure any deficiencies.

[6] We disagree.

[7] We see no error in the motion judge’s conclusion that on the facts alleged in the statement of claim, neither of the respondents was a party to the Mandate and therefore the claim for breach of the Mandate, and claims that included, as a constituent element, a breach by the respondents of the Mandate, had no reasonable possibility of success.

[8] The statement of claim expressly pled the Mandate as a specific written document. It was therefore incorporated into the pleading. That means it was part of the pleading itself, as though its exact contents had been fully set out. Reviewing it does not offend the rule that no evidence is permitted on a r. 21.01(1)(b) motion: Darmar Farms Inc. v. Syngenta Canada Inc., 2019 ONCA 789, 58 C.C.L.T. (4th) 1, at para. 44, leave to appeal refused, [2019] S.C.C.A. No. 409.

[9] Nor, in our view, did the motion judge engage in an interpretation of the Mandate that would only be appropriate in a procedural context that permitted evidence. The motion judge simply took as true what the appellant had alleged by referring to the Mandate − that the Mandate did not name either respondent as a party, did not refer to them, and was not signed by them. The statement of claim did not assert any other facts that could support a theory that the respondents became parties to the Mandate without being mentioned in it or signing it. The motion judge applied the facts alleged, taken as true, to the bedrock legal principle that contractual obligations exist only among parties to the contract.

[10] We also see no error in the motion judge’s conclusion that on the facts alleged, none of the other causes of action referred to had a reasonable possibility of success against the respondents.

[11] The statement of claim had already been amended prior to the hearing before the motion judge. The motion judge refused leave to further amend as there had been opportunities to do so, and there was no showing that amendments could make the claims against the respondents legally viable. This was a discretionary decision of the motion judge that is entitled to appellate deference: The Catalyst Capital Group Inc. v. VimpelCom Ltd., 2019 ONCA 354, 145 O.R. (3d) 759, at para. 75, leave to appeal refused, [2019] S.C.C.A. No. 284. We see no error in the motion judge’s exercise of discretion that would justify interference with it.

[12] In addition to resisting the appeal, the respondents moved to quash the appeal on the basis of developments that have taken place in the action (which has continued among the remaining parties to it) after the motion judge’s decision. The appellant resisted the motion to quash based on its timing and based on the appellant’s disagreement with the respondents’ characterisation of the effect of these developments. In light of our disposition of the appeal, it is unnecessary to address these issues, as the motion to quash is moot.

[13] The appeal is dismissed. The respondents are entitled to costs of the appeal fixed in the amount of $9,000, inclusive of disbursements and applicable taxes. The motion to quash is dismissed as moot.

“M.L. Benotto J.A.”

“B. Zarnett J.A.”

“J. Copeland J.A.”

[1] The allegations in the claim were on behalf of the appellant and its co-plaintiff, but for ease of reference, we refer only to the appellant herein.