Court File and Parties

COURT FILE NO.: CV-19-119 DATE: 2022 Jan 7 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: TyCorra Investments Inc. dba Wabash Canada Inc., TyCorra Group Inc., TyCorra Leasing Inc. and TyCorra Fleet Solutions Inc., Plaintiffs AND: PNC Equipment Finance, a Division of PNC Bank Canada Branch and PNC Financial Services Group Inc., Defendants

BEFORE: Justice D.A. Broad

COUNSEL: Paul Fruitman, Niklas Holmberg and Joseph Stonehouse, for the Plaintiffs/ Responding Parties Fahad Siddiqui, for the Defendants/Moving Parties

HEARD: November 19, 2021

Endorsement

[1] The defendants have brought a motion for an order:

(a) dismissing the action under rule 21.01(1)(a) of the Rules of Civil Procedure;

(b) in the alternative, striking out the Fresh as Amended Statement of Claim (the “Fresh Claim”) in its entirety without leave to amend pursuant to rule 21.01(1)(b);

(c) in the further alternative, dismissing all claims advanced by TyCorra Group Inc., TyCorra Leasing Inc. and TyCorra Fleet Solutions Inc. (collectively, the “Additional TyCorra Plaintiffs”) under rule 21.01(1)(a) or an order under rule 21.01(1)(b) striking out all references to the Additional TyCorra Plaintiffs in the Fresh Claim.

[2] The defendants say that reading the Fresh Claim generously and assuming that all of the facts pleaded therein are true, it is plain and obvious that (i) the plaintiffs are not entitled to any of the relief they seek and (ii) the Fresh Claim discloses no reasonable cause of action.

Parties

[3] TyCorra Investments Inc. (“TyCorra Investments) sells, maintains, rents and leases commercial trailers. TyCorra Leasing Inc. (“TyCorra Leasing”) and TyCorra Fleet Solutions Inc. (“TyCorra Fleet Solutions”) are leasing and sales companies which are wholly owned by TyCorra Group Inc. (“TyCorra Group”), which is in turn wholly owned by TyCorra Investments.

[4] The commercial trailers in issue include “dry vans” used to transport dry goods, and refrigerated trailers, known as “reefers” used to transport produce and frozen goods.

[5] The Fresh Claim utilizes the word “TyCorra” throughout, without distinguishing in all instances between the distinct named plaintiffs TyCorra Investments, TyCorra Leasing, TyCorra Fleet Solutions and TyCorra Group.

[6] PNC Equipment Finance, a division of PNC Bank Canada Branch (“PNCEF”) provides financing to large corporations and governmental agencies on equipment assets, including operating leases, loans and capital leases. PNCEF is a wholly owned subsidiary of PNC Financial Services Group Inc. PNCEF and PNC Financial Services Group Inc. are sometimes referred to together in the Fresh Claim as “PNC”.

Background and Facts Alleged in the Fresh Claim

[7] The claims advanced by the plaintiffs in the Fresh Claim arise out of a series of Right of First Refusal Agreements (“ROFR Agreements”) entered into by PNCEF and TyCorra Investments.

[8] The facts pleaded and claims advanced in the Fresh Claim may be summarized as follows:

(a) in June 2009 TyCorra brought to PNC the opportunity to lease commercial trailers to Metro Ontario Inc. and Metro Inc. (referred to in the Fresh Claim together as “Metro”).

(b) TyCorra presented Metro and PNC with a lower cost solution for Metro’s trailer leasing, rental and maintenance needs than Metro’s then current leasing arrangement with Trailcon Leasing Inc. (“Trailcon”);

(c) TyCorra’s proposed solution was to arrange for PNCEF to take Trailcon’s place in the existing Trailcon leases. In exchange, TyCorra would have an option to buy the trailers at lease end for PNCEF’s book value. TyCorra would then earn income by renting the trailers to Metro;

(d) To give effect to the foregoing, TyCorra proposed three-way transactions between it, PNCEF and Metro which would proceed as follows:

(i) Metro would buyout a given rental schedule (a schedule to a Master Lease Agreement applying to specified trailers) on its anniversary date under its leases with Trailcon;

(ii) PNCEF would buy the trailers from Metro at the buyout price;

(iii) PNCEF would lease the trailers back to Metro for the remaining term at a lower lease rate than Metro had with Trailcon;

(iv) at the end of the lease term TyCorra would have the first right to purchase the trailers from PNCEF at PNCEF’s book value, being a negligible amount covering PNCEF’s administrative costs; and

(v) TyCorra would then rent the trailers to Metro on a monthly basis, at below market rates

(e) PNC knew that TyCorra’s purpose in acquiring the trailers would be to generate revenue by renting them to Metro after PNCEF’s leases with Metro expired;

(f) Based on their shared understanding of the plan for the trailers on lease maturity, PNCEF and TyCorra entered into a series of ROFR Agreements effective December 2010 that corresponded to the schedules of trailers PNCEF contemporaneously leased to Metro;

(g) The ROFR Agreements effective December 2010 covered in excess of 250 trailers that Metro bought out from Trailcon as well as new trailers that TyCorra later sold to PNCEF for the purpose of leasing them to Metro (the “New Metro Trailers”);

(h) In respect of the trailers bought from Trailcon, the ROFR Agreements included TyCorra’s first right to purchase them on lease expiry for PNCEF’s book value and for the New Metro Trailers TyCorra’s first right to purchase was at PNCEF’s residual value plus a markup. PNCEF’s residual value was typically 30% to 40% of the prevailing market value;

(i) In respect of the New Metro Trailers, PNC insisted on Metro having an option at lease expiry to extend the lease or purchase the equipment at “fair market value” defined in the applicable rental schedule as:

“the value which would be obtained in an arms-length transaction between an informed and willing buyer and an informed and willing seller under no compulsion to sell.”

(j) The rental agreements provided for the appointment of appraisers to determine fair market value in the event of a dispute as to fair market value for a particular rental schedule;

(k) The terms of the various ROFR Agreements for the New Metro Trailers were identical save for the identification of the particular rental schedule to which it applied, the description of the leased equipment and the purchase price, and provided as follows:

WHEREAS [PNC] has entered into a Rental Schedule No. […] To the Master Lease Agreement dated December 9, 2010 (the “Lease”) with Metro Ontario Inc. (“Lessee”) for the lease of certain equipment, as described in the attached Schedule “A” (the “Equipment”)…

[PNC] hereby grants [TyCorra] the right of first refusal to purchase all but not less than all of the Equipment at the end of the Lease term for an amount equal to […] (the “Purchase Price”), if Lessee does not exercise its purchase option or Lessee does not renew the lease. TyCorra shall have ten (10) days from the date of [PNC’s] written notice to purchase the Equipment. If the Vendor fails to purchase the Equipment within ten days of [PNC’s] written notice, the right of first refusal shall terminate and [PNC] may sell the Equipment to any other purchaser.

(l) PNC knew that TyCorra’s purpose in brokering leases for the New Metro Trailers was to generate revenue by renting them for up to 10 years after PNCEF’s leases expired, and then selling them. TyCorra’s contractual benefit would be 10 years of rental income and the market value of the trailers at the end of that 10-year period;

(m) The relationship that TyCorra brokered between Metro and PNC later extended to other lessees. TyCorra subsequently brokered lease arrangements between PNC and various for-hire trucking companies and private fleets for other food and beverage producers and distributors;

(n) TyCorra’s first refusal purchase right would be triggered at lease maturity when the lessee declined the option to purchase the trailers for fair market value. However, the Fresh Claim alleged [incorrectly as described below] that several leases, including one with TFI Transport 2 LP (“TFI”) did not include any purchase right to the lessee. The lessee was obliged to return the equipment at the conclusion of the lease, which would automatically trigger TyCorra’s first refusal purchase right;

(o) TyCorra completed all the “leg work” for all lease arrangements as particularized in the Fresh Claim, and bore all of the costs of identifying and securing the business;

(p) TyCorra could have introduced the lease opportunities to lenders other than PNC. TyCorra continuously brought the least opportunities to PNC because it trusted PNC to honour its contractual obligations to TyCorra and to act in good faith;

(q) In the course of negotiating and implementing changes to the ROFR Agreements requested by TyCorra in or around January, 2014, PNC made false and fraudulent representations with respect to a draft revised agreement. PNC submitted a “compared document” to TyCorra which failed to reflect the removal by PNC of one of the ROFR Agreement’s most essential terms from the “new” version of the ROFR Agreement. The essential term which was removed was TyCorra’s right to purchase the trailers for the Purchase Price (as defined) if the lessee does not exercise its purchase option or does not renew the lease. By doing this PNC sought to deny TyCorra what it knew was TyCorra’s first right to purchase the trailers if the lessee opted not to pay fair market value for them. TyCorra relied on PNC’s representations with respect to changes to the ROFR Agreements and that the only changes were reflected in the “compared document.” TyCorra has suffered damages as result of the misrepresentations;

(r) in the alternative, PNC made the representations with respect to the draft revised Purchase Agreement negligently, and TyCorra reasonably relied on those representations to its detriment;

(s) in the further alternative, TyCorra claims that the draft revised Purchase Agreement should be rectified to reflect the true intentions of the parties to include the Purchase Option Term;

(t) in March or April, 2018 PNC sold 30 Schedule 2000 trailers to TFI even though the TFI lease did not include any purchase option for TFI, thereby denying to TyCorra its right to purchase the Schedule 2000 Trailers pursuant to the applicable ROFR Agreement. This constituted a breach of the ROFR Agreement causing TyCorra to lose revenue that TyCorra would have earned from renting and then selling the trailers;

(u) by agreement dated June 27, 2018 PNC agreed to sell to Metro 169 Schedule 5000 trailers at a price which was significantly below PNC’s own assessment of fair market value and below TyCorra’s ROFR amount, thereby denying TyCorra its contractual first refusal purchase right;

(v) in or about May 2019 PNC sold 54 Schedule 7000 trailers to Metro for a price below fair market value;

(w) in or about January 2021 PNC entered into negotiations with Metro respecting a proposed sale of 105 Schedule 1000 trailers. PNC offered to sell the Schedule 1000 trailers to Metro at a price below fair market value, which would deny TyCorra the exercise of its rights in respect of the trailers under the applicable ROFR Agreement. Metro asked TyCorra to beat PNC’s offer and, in an effort to mitigate its damages, TyCorra agreed to sell the Schedule 1000 trailers to Metro for $2 million after it acquired the trailers under its ROFR. Because of PNC’s unlawful conduct, TyCorra suffered a loss representing the difference between the profit it stood to earn through the exercise of its ROFR right and the lesser profit it in fact received;

(x) PNCEF breached its contractual obligations to TyCorra by:

(i) agreeing to sell the Schedule 5000 and 7000 trailers to Metro for less than fair market value;

(ii) offering to sell the Schedule 1000 trailers to Metro for less than fair market value; and

(iii) selling the Schedule 2000 trailers to TFI without first providing TyCorra its right of first refusal to purchase them.

(y) PNC Inc. induced PNCEF to breach its valid ROFR Agreements with TyCorra;

(z) TyCorra suffered damages arising from PNC’s inducement in the form of lost rental and resale revenue related to the schedule 2000 Trailers and the Schedule 5000 and 7000 trailers, and has suffered additional losses in the form of its damaged relationship with Metro;

(aa) PNC breached its duty of good faith to TyCorra by:

(i) intentionally acting in a manner designed to deny TyCorra the benefit of the ROFR Agreements corresponding to Schedule 2000 and Schedules 5000, 1000 and 7000;

(ii) representing to TyCorra that PNC intended to comply with their contracts, when PNC planned instead to take TyCorra’s contractual rights of first refusal for itself;

(bb) By denying TyCorra’s purchase right, and in particular, by selling trailers for a price below fair market value but above TyCorra’s contractual purchase price, PNC derived an additional, unlawful benefit;

(cc) TyCorra was correspondingly deprived of its contractual purchase right and the fruits of its labours;

(dd) There is no juristic reason for TyCorra’s deprivation. Indeed, any deprivation is contrary to express and implied terms of the ROFR Agreements;

(ee) TyCorra claims rental and sale revenue damages in respect of the Schedule 2000 trailers sold by PNC to TFI and the Schedule 5000 and 7000 trailers sold by PNC to Metro;

(ff) TyCorra suffered a loss in respect of the Schedule 1000 trailers by being forced to agree to sell those trailers to Metro for $2 million;

(gg) PNC’s actions have caused, and will continue to cause, irreparable harm to TyCorra’s business including its valuable business relationship with customers, its market share, its reputation and goodwill;

(hh) PNC’s conduct towards TyCorra has been oppressive, malicious, high-handed and represents a marked departure from ordinary standards of decent behaviour between contracting parties.

Guiding Principles governing Motions brought pursuant to Sub-rule 21.01(1)

[9] Rule 21.01(1)(a) provides that a party may move for the determination, before trial, of a question of law raised by a pleading, where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs.

[10] Rule 21.01(b) provides that a party may move to strike out a pleading on the ground that it discloses no reasonable cause of action or defence.

[11] Pursuant to rule 21.01(2) no evidence is admissible on a motion under rule 21.01(1)(b). Evidence is only admissible on a motion under rule 21.01(1)(a) with leave of the judge hearing the motion or the consent of the parties.

[12] Although no evidence is admissible on a motion under rule 21.01(1)(b), the judge hearing the motion is entitled to consider the documents specifically referred to and relied on in the pleading sought to be struck. These documents are not "evidence" precluded by rule 21.01(1)(b) but are, in effect, incorporated into the pleading (see Web Offset Publications Ltd. v. Vickery, [1999] O.J. No. 2760 (C.A.) at para. 3 and Rowland v. Stephan, 2017 ONSC 7276 at para. 19).

[13] The Court of Appeal summarized the applicable principles on a rule 21.01(1)(b) motion in the case of McCreight v. Canada (Attorney-General) 2013 ONCA 483 at paras. 39-40, as follows:

a) the claim will only be struck if it is plain and obvious, assuming the facts pleaded to be true, that the pleading discloses no reasonable cause of action;

b) there is a need, in the interest of efficiency and correct results, to weed out hopeless claims - a housekeeping dimension which underlies rule 21;

c) if the cause of action pleaded has been recognized, all of its essential elements must be pleaded;

d) if the cause of action has not been recognized, this is not necessarily fatal but there must be a reasonable prospect that the claim will succeed;

e) a claim should not be struck merely because it is novel;

f) the facts pleaded are accepted as being true for the purposes of the motion, unless they are manifestly incapable of being proven;

g) the pleading forms the basis of the motion, and accordingly, possible future facts that have not been pleaded may not supplement the pleading;

h) the pleading must be read generously in favour of the plaintiff, with allowances for drafting deficiencies; and

i) a motion to strike should not be confused with a summary judgment motion which has a different test, a different purpose, and different rules relating to evidence.

[14] The jurisprudence has stressed that the threshold for sustaining a pleading is not high. A “germ or scintilla" of a cause of action will be sufficient (see O’Farrell v. Attorney General of Canada, 2016 ONSC 6342 at para. 33, citing 1597203 Ontario Ltd. v. Ontario, [2007] O.J. No. 2349 (S.C.J.)).

[15] In the case of Dalex v. Schwartz Levitsky & Feldman, (1994), 19 O.R. (3d) 463, (Ont. Ct. Gen Div.) Epstein, J. (as she then was) offered the following important observation respecting the narrow scope of a successful motion to strike a pleading under rule 21.01(1)(b):

…although the court has inherent jurisdiction to strike out a pleading as disclosing no legally tenable position, such power should be exercised sparingly and only when there is no doubt that no cause of action or defence exists. In order to foreclose the consideration of an issue past the pleadings stage, the moving party must show that there is an existing bar in the form of a decided case directly on point from the same jurisdiction demonstrating that the very issue has been squarely dealt with and rejected by our courts. Only by restricting successful attacks of this nature to the narrowest of cases can the common law have a full opportunity to be refined or extended (see: Krouse v. Chrysler Canada Ltd., [1970] 3 O.R. 135 (H.C.)).

Preliminary Issue respecting fresh step and delay in bringing the motion

[16] The plaintiffs submit that the motion to strike should be dismissed without considering its merits on two bases:

(a) sub-rule 2.02(b) which provides that a motion to attack an irregularity shall not be made, except with leave of the court, if the moving party has taken any further step in the proceeding after obtaining knowledge of the regularity. The defendants defended the plaintiffs’ initial Statement of Claim in March 2019 and served amended Statements of Defence responding to two amended Statements of Claim served by the plaintiffs. The plaintiffs say that the defendants repeatedly joined issue with the allegations in the claim by its repeated pleadings, and thereby waived any right to bring a motion to strike under rule 21.01;

(b) delay in bringing the motion. The plaintiffs to say that, although rule 21.02 provides that a motion to strike a pleading under rule 21.01 shall be made promptly and a failure to do so may be taken into account by the Court in awarding costs, delay is also a sufficient basis to dismiss the motion altogether.

[17] The following represents the history of the pleadings which have been served in the proceeding:

(a) Statement of Claim - January 28 2019;

(b) Statement of Defence - March 29 2019;

(c) Amended Statement of Defence February 27, 2020;

(d) Amended Statement of Claim March 4 2020;

(e) Amended Amended Statement of Claim June 2, 2020;

(f) Amended Amended Statement of Defence July 31, 2020;

(g) Fresh as Amended Statement of Claim July 30 2020

[18] In Bell v. Booth Centennial Healthcare Linen Services, [2006] O.J. No. 4646 (S.C.J.) Brown J. (as he then was) noted at para. 6 that the time for bringing a motion under Rule 21.01(1)(b) is before the defendant pleads over, as the filing of a statement of defence signifies that the claim contains recognizable causes of action to which the defendant can respond (see also Canadian National Railway v. Holmes, 2014 ONSC 6390, leave refused, 2014 ONSC 6390 (Div. Ct.), at para. 28).

[19] However, recent caselaw has modified the seemingly rigid approach suggested in Bell, by adopting a more contextual approach to the issues of whether delivery of the statement of defence may bar a motion to strike a claim as disclosing no reasonable cause of action and whether delay will bar such a motion.

[20] In the case of Potis Holdings Ltd. v. The Law Society of Upper Canada, 2019 ONCA 618 the plaintiff/appellant, relying on Bell, argued that the practice of bringing a motion to strike after delivering a defence should be discouraged and that the motions judge erred in hearing the defendant’s motion to strike as it has not applied for leave to bring the motion after having filed its defence.

[21] Jamal, J.A., writing for the panel, disagreed with these submissions, observing as follows at para. 14:

While generally a defendant should move to strike a claim as disclosing no reasonable cause of action before filing a statement of defence, in some instances a defendant may bring such a motion without leave even after delivering a defence. One such instance is where it is obvious from the defendant's pleading that the defendant takes issue with the sufficiency of the plaintiff's claim: Arsenijevich v. Ontario (Provincial Police), 2019 ONCA 150 (Ont. C.A.), at para. 7.

[22] In the recent case of Dosen v. Meloche Monnex Financial Services Inc. (Security National Insurance Company) 2021 ONCA 141 the Court of Appeal applied a contextual analysis to the question of whether the moving parties’ delay barred the bringing of the motion to strike. Coroza, J.A., writing for the panel, stated at paras. 71-72:

Case law is clear that delay in bringing a motion under r. 21.01, including r. 21.01(3)(d), can be a sufficient ground to dismiss the motion. In Fleet Street Financial Corp. v. Levinson, [2003] O.T.C. 94 (S.C.), Rouleau J. (as he then was), stated, at para. 16:

The obligation to act promptly is clear and the failure to bring a rule 21.01 motion promptly can, in the appropriate circumstances, be the basis for the judge exercising his discretion pursuant to rule 21.01 not to grant the relief sought.

What constitutes "appropriate circumstances" to dismiss a r. 21.01 motion for delay partly depends on what effect the motion will have on trial efficiency.

[23] I am satisfied that it is obvious from the defendants’ pleading that they did take issue with the sufficiency of the plaintiffs’ claim. The motion to strike relies upon the doctrine of privity in asserting that the plaintiffs’ claims are based upon alleged breaches by PNC of the Master Lease Agreements and rental schedules between it and Metro and TFI, none of which the defendants were party to. The Statement of Defence and Amended Statements of Defence plead that the defendants were not parties to the agreements relied upon by the plaintiffs. This pleading coincides with the basis for the motion to strike. Reference is made in this respect to paragraphs 17, 28, 37, 42, 43, 45 and 50 of the defendants’ initial Statement of Defence. The subsequent Amended Statements of Defence were to the same effect.

[24] I also accept that the motion to strike will not interfere with trial efficiency. The action is still at the pleading stage. Documentary discovery has not been completed and there have been no examinations for discovery scheduled or conducted. Case Management has not been ordered and the action is far from being ready to be set down for trial.

[25] I therefore find that it is appropriate for the Court to hear the defendants’ motion to strike the Fresh Claim pursuant to rule 21.01 on its merits.

Grounds for the defendants’ motion to strike the Fresh Claim

[26] The grounds of the defendants’ submission that the Fresh Claim should be struck out as disclosing no reasonable cause of action fall into three categories:

(a) the claim does not allege any tenable cause of action in respect of the Additional TyCorra Plaintiffs and the claims made by them should therefore be struck;

(b) the claim based upon PNC’s dealings with TFI in respect of the TFI lease (Schedule 2000), particularly that TFI had no option to purchase the trailers at lease end pursuant to the applicable rental schedule, is incapable of being correct, which the plaintiffs have acknowledged in their Factum. The issue is whether this aspect of the claim should be allowed to proceed with or without amendment;

(c) the contractual claim which is at the heart of the action, based upon an allegation that PNC sold trailers to Metro at less than fair market value, as defined in the rental agreements, and sold trailers to TFI, thereby breaching the ROFR Agreements between PNC and TyCorra, is contrary to black letter rules of contract at common law, justifying the Fresh Claim being struck in its entirety.

A - Claims by the Additional TyCorra Plaintiffs

[27] The Fresh Claim commences with an “Overview” setting forth, in summary form, the basis of the plaintiffs’ claims against the defendants. The “Overview” concludes with the statement at paragraph 5 that “as a result of the defendants’ misconduct, TyCorra has been denied its contractual rights and has suffered losses for which the defendants are liable.”

[28] At para. 62 of the Fresh Claim it is alleged that “PNC developed a clandestine scheme to circumvent the agreed process and deprive TyCorra of its first refusal rights.”

[29] The Fresh Claim alleges four “breaches” by PNC under the following headings:

(a) The First Breach – Sale to TFI: paragraphs 64-70;

(b) The Second Breach: Schedule 5000: paragraphs 71-79;

(c) The Third Breach: Schedule 7000: paragraphs 81-85;

(d) The Fourth Breach: Schedule 1000: paragraphs 86-95.

[30] In respect of the first alleged breach, para. 68 the Fresh Claim alleged that “PNC’s breach of the ROFR Agreement corresponding to the TFI Lease caused TyCorra to lose more than $1.75 million in revenue that TyCorra would have earned from renting and then selling the trailers.”

[31] In respect of the second alleged breach, paragraph 78 of the Fresh Claim alleged that “PNC saw and took an opportunity to make a fast $300,000 profit and/or gain additional benefits from Metro by denying TyCorra its contractual first refusal purchase right.”

[32] In respect of the third alleged breach paragraph 83 of the Fresh Claim alleged that “PNC offered to sell… New Metro Trailers at the same below Fair Market Value price that PNC charged for the Schedule 5000 Trailers, contrary to the terms of Metro’s lease, and in breach of PNCEF’s contractual obligations to TyCorra.”

[33] Paragraph 85 of the Fresh Claim alleged that “pursuant to its scheme to deprive TyCorra of the benefit of its first refusal right, PNC proceeded to sell the Schedule 7000 to Metro for a price below Fair Market Value.”

[34] In respect of the fourth alleged breach, paragraph 92 of the Fresh Claim alleged that “TyCorra was not given the opportunity to exercise [its right to purchase the Trailers at the ROFR price]” and paragraph 95 alleged that because of PNC’s unlawful conduct, TyCorra suffered a loss … [representing] the difference between the profit it stood to earn through its ROFR right and the lesser profit in fact received.”

[35] The defendants submit that all of the alleged breaches relied upon by the plaintiffs represent breaches of the ROFR Agreements between PNC Equipment Finance and TyCorra Investments Inc. The ROFR Agreements are all identical save for the description of the rental schedule to which each applies, the description of the equipment and the stipulated purchase price upon exercise of the first right to purchase the equipment. It is noted that the parties agree that no written ROFR Agreement has been located in reference to TFI.

[36] The defendants say that it is clear from the foregoing that the claims alleging breach of TyCorra’s “contractual rights” relate only to TyCorra’s rights pursuant to the ROFR Agreements entered into between TyCorra Investments Inc. and PNC. None of the Additional TyCorra Plaintiffs were parties to any ROFR Agreements. The Fresh Claim does not allege that any exception to the requirement for privity of contract should be applied.

[37] In response the plaintiffs state in their Factum that the claim seeks damages for sales and leasing revenue lost because PNC breached contractual and common-law duties. It asserts that TyCorra Leasing and TyCorra Fleet Solutions are necessary parties “to ensure that all pleaded losses are addressed.” The Factum adds that if the court feels the clarification is necessary, it can be made by means of the draft further amended pleading set forth at Schedule “C” to the Factum.

[38] The “clarification” set forth at paragraph 6 of the proposed Amended Fresh as Amended Statement of Claim provides as follows:

“TyCorra Investments Inc. is party to the various agreements with PNCEF (defined below) at issue in the claim. While they are not parties to the relevant agreements, the other TyCorra Entities [defined as including all four named plaintiffs] named as plaintiffs to the claim suffered loss as a result of breaches by the defendants and are necessary and proper parties to the action.”

[39] In submissions Counsel for the plaintiffs acknowledged that the Additional TyCorra Plaintiffs were not parties to any of the ROFR Agreements but argued that striking the claims of those parties should be “with prejudice” against the defendants in order to foreclose them from arguing at trial that these three plaintiffs should have been named as plaintiffs, while preserving the defendants’ right to claim that damages suffered by the Additional TyCorra Plaintiffs should not be recoverable, based on the law of privity.

[40] In my view, assuming the facts pleaded in the Fresh Claim to be true, it is plain and obvious that it discloses no reasonable cause of action of the Additional TyCorra Plaintiffs for damages arising from alleged breaches of the ROFR Agreements to which they were not parties. The plaintiffs have not alleged that the principled exception, or any other exception, to the privity rule applies so as to permit non-contracting plaintiffs to advance a contractual claim for damages.

[41] In the case of Forest Trust S.A. v. The Devine Entertainment Film Library Limited Partnership, 2013 ONSC 3347 Master Glustein (as he then was) stated as follows at para. 26 respecting the doctrine of privity of contract:

In the recent decision of the Court of Appeal in Brown v. Belleville (City), 2013 ONCA 148, [2013] O.J. No. 1071 (Ont. C.A.), the Court reviewed at length the doctrine of privity of contract. Cronk J.A. spoke for the Court and stated the general principle that the doctrine of privity of contract prevents a non-party to a contract from enforcing or relying upon the contract, subject to certain principled exceptions established in the case law. Cronk J.A. set out the general principle as follows (Brown, at para. 75):

The common law doctrine of privity of contract, an established principle of contract law, stands for the proposition that "no one but the parties to a contract can be bound by it or entitled under it": Greenwood Shopping Plaza Ltd. v. Neil J. Buchanan Ltd., [1980] 2 S.C.R. 228, at para. 9. See also London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299, at p. 416; Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co., [1915] A.C. 847 (H.L.), at p. 853. In this case, it is common ground that the Browns have no privity of contract with the City in respect of the Agreement. They are not signatories to the Agreement and no explicit assignment or transfer of the Agreement was made in their favour.

[42] The amendment to the Fresh Claim proposed by plaintiffs does nothing to extend to the Additional TyCorra Plaintiffs a cause of action based on alleged breaches by the defendants of ROFR Agreements. It simply concludes that they suffered losses resulting from the breaches and that they are therefore necessary and proper parties. Simply asserting that they are proper parties does not make them so.

[43] In my view, the claims of Additional TyCorra Plaintiffs (TyCorra Leasing, TyCorra Fleet Solutions and TyCorra Group) and all references to them in the Fresh Claim should be struck out pursuant to paragraph 21.01(1)(b) of the Rules of Civil Procedure. I am not persuaded that it is appropriate to stipulate that the striking out of their claims should be “with prejudice” against the defendants in the manner proposed by the plaintiffs. No authority for the court making such a stipulation was cited by the defendants.

B - Claim based on rental schedule between PNCEF and TFI

[44] The defendants point out that the Fresh Claim alleges at paragraph the lease between TyCorra and TFI did not include any purchase right for the lessee TFI and that TFI was obliged to return the equipment at the conclusion of the lease, which would automatically trigger TyCorra’s first refusal purchase right. At para. 65 the Fresh Claim alleges that PNCEF breached its contractual obligations to TyCorra by selling the Schedule 2000 trailers to TFI without first providing TyCorra its right of first refusal to purchase them and that the Schedule 2000 trailers did not include any lessee purchase option.

[45] However it is acknowledged by the plaintiffs that, on the face of Rental Schedule 2000 between PNCEF and TFI, TFI was granted an express right to purchase the trailers.

[46] Para. 4 of the Schedule 2000 Rental Schedule provides, in part, as follows:

“4. Options. Notwithstanding anything contained in the Master Lease to the contrary, so long as no default shall have occurred and be continuing, Lessee may, at lessee’s option, (i) purchase the Equipment leased pursuant to this Rental Schedule… At the end of the Initial Term at a price equal to the Fair Market Value, plus applicable taxes…”

[47] The defendants say that the entire allegation in the Fresh Claim with respect to TFI is that the TFI Lease does not contain a term which it clearly does and it is therefore plain and obvious that the pleadings with respect to TFI are bound to fail and disclose no reasonable cause of action. The Defendants cite the case of 6646107 Canada v. The TDL, 2019 ONSC 2240 at paras. 4-13 in support of this submission.

[48] The plaintiffs acknowledge that the Fresh Claim contained a drafting error by incorrectly stating that the Schedule 2000 Rental Schedule between PNC and TFI has no purchase option at all. A plain reading of the Schedule shows that it provides for an option to purchase to TFI at Fair Market Value, as defined.

[49] Although it submits that it is arguable whether an amendment is needed, TyCorra seeks leave, if necessary, to amend paragraphs 35, 64, 65 and 96 of the Fresh Claim as set out in the draft Amended Fresh As Amended Statement of Claim at schedule “C” to its Factum. TyCorra submits that Schedule 2000 entered into between PNC and TFI has the same fair market value purchase option in favour of the lessee as was provided in the Metro schedules and the basis of its claims for breach of the ROFR Agreements in respect of the rental schedules in respect of TFI and Metro respectively are therefore the same.

[50] In my view, given that the claim as asserted against the defendants in respect of Schedule 2000 between PNC and TFI is incapable of being advanced based on the wording of the Schedule 2000 document, it is clear that the claim in the Fresh Claim referencing TFI should be struck as disclosing no reasonable cause of action.

[51] Given TyCorra’s submission that the proper basis for its claim of liability in respect of the TFI lease is the same as its claims respect of the Metro leases, the question of whether to grant leave to amend to correct the drafting error should await determination of the third basis for the motion to strike, set forth below.

C - Are the claims contrary to black letter common law rules?

Position of the Defendants

[52] The defendants submit that, properly understood, the Fresh Claim seeks damages on the basis that PNCEF and Metro (in the case of Schedules 5000, 7000 and 1000) and PNCEF and TFI (in the case of Schedule 2000 subject to the drafting error being corrected by amendment) breached the “fair market value” requirement in the purchase clause of the applicable rental schedules. However, they say that the plaintiffs have failed to plead privity with the Metro and TFI leases or to plead any exception to the doctrine of privity which would allow them to enforce the purchase agreement clauses in the respective rental schedules.

[53] The defendants say that the plaintiffs may only recover for purported breaches of the purchase clauses in the leases if the ROFR Agreements grant them such a right, and submit that there is no legally tenable interpretation of the ROFR Agreements that supports the existence of such a right.

[54] The ROFR Agreements state that TyCorra has “the right of first refusal to purchase all but not less than all of the Equipment at the end of the lease term [for the stipulated price], if Lessee does not exercise its purchase option or Lessee does not renew the lease.”

[55] The defendants assert that it is clear from this that TyCorra’s right to purchase trailers is only triggered if the lessee (Metro or TFI as the case may be) first completes the corresponding lease and returns the trailers to PNCEF. They point out that there is no mention in the ROFR Agreements of “fair market value,” the price at which the lessee is to purchase trailers from PNCEF, nor any specific reference to the purchase clause of the corresponding Schedule.

[56] The defendants also submit that the contractual bargain pleaded in the Fresh Claim that the plaintiffs’ rights are triggered upon Metro not paying “fair market value” contradicts several terms of the Master Lease Agreement including the clause permitting the parties to modify any provision in writing (para. 22) and the assignment clause (para. 16) permitting PNC to assign or mortgage/pledge its rights under the Lease and for such assignee or mortgagee to re-assign them.

[57] The defendants submit that the plaintiffs’ pleading that the ROFR Agreements were intended to provide them with the contractual benefit of the return of the trailers by Metro does not accord with sound commercial principles or good business sense, and that it would be an absurdity to interpret the ROFR Agreements in a manner requiring the parties to the lease to go through a binding appraisal process and to grant the plaintiffs a damages remedy should they fail to do so.

[58] The purchase clause in the Metro lease provides that Metro may purchase the trailers from PNCEF at the end of the lease term if they agree on the fair market value price of the trailers. The defendants submit that the appraisal process is to be invoked only if the parties are unable to agree on the fair market value. The Fresh Claim does not allege that PNCEF and Metro failed to comply with this process. The defendants say that the plaintiffs’ theory of liability requires the court to invert the text of the purchase clause which specifically requires PNCEF and Metro to agree upon a price with resort to an appraisal to follow only if they cannot come to an agreement.

[59] The defendants submit that none of the surrounding circumstances pleaded in the Fresh Claim may be used to “overwhelm,” “change” or “overrule” the terms of the ROFR Agreements, citing Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53 paras. 57 and 60.

Position of the Plaintiffs

[60] It is clear that the viability of the plaintiffs’ claim depends upon an interpretation of the words “if Lessee does not exercise its purchase option” in the ROFR Agreements. The plaintiffs allege that the phrase “purchase option” means the lessee’s [Metro or TFI as the case may be] option conferred on it by each rental schedule to “purchase the Equipment leased… at the end of the initial Term at a price equal to Fair Market Value.”

[61] The plaintiffs say that the ROFR Agreements represent a product of three-way arrangements between PNC, TyCorra and Metro and PNC, TyCorra and TFI [subject to correction of the drafting error in the Fresh Claim respecting TFI]. These “arrangements” comprise the Master Lease Agreements between PNC and Metro and PNC and TFI respectively, the Rental Schedules to the Master Lease Agreements, and the ROFR Agreements between PNC and TyCorra. The plaintiffs say that the ROFR Agreements need to be read in the context of the complementary contracts forming part of the “arrangements.”

Discussion

[62] In the case of Weyerhauser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007, rev'd on other grounds, Brown, J.A. summarized the general principles which should guide adjudicators in interpreting a commercial contract at paras. 65-67 as follows:

The general principles guiding adjudicators about "how" to interpret a commercial contract were summarized in Sattva, at para. 47, and by this court in two 2007 decisions - Ventas Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254 (Ont. C.A.), at para. 24, and Dumbrell v. Regional Group of Cos., 2007 ONCA 59, 85 O.R. (3d) 616 (Ont. C.A.), at paras. 52-56. When interpreting a contract, an adjudicator should:

(i) determine the intention of the parties in accordance with the language they have used in the written document, based upon the "cardinal presumption" that they have intended what they have said;

(ii) read the text of the written agreement as a whole, giving the words used their ordinary and grammatical meaning, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;

(iii) read the contract in the context of the surrounding circumstances known to the parties at the time of the formation of the contract. The surrounding circumstances, or factual matrix, include facts that were known or reasonably capable of being known by the parties when they entered into the written agreement, such as facts concerning the genesis of the agreement, its purpose, and the commercial context in which the agreement was made. However, the factual matrix cannot include evidence about the subjective intention of the parties; and

(iv) read the text in a fashion that accords with sound commercial principles and good business sense, avoiding a commercially absurd result, objectively assessed.

[63] In the recent case of Ottawa (City) v. ClubLink Corporation ULC, 2021 ONCA 847 L.B. Roberts, J.A. succinctly adopted the foregoing statement of the principles governing interpretation of commercial contracts at para 52.

…the basic rules of contract interpretation require the determination of the intention of the parties in accordance with the ordinary and grammatical words they have used, in the context of the entire agreement and the factual matrix known to the parties at the time of the formation of the contract, and in a fashion that corresponds with sound commercial principles and good business sense: Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007, 77 B.L.R. (5th) 175, at para. 65, rev'd on other grounds, Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60, 444 D.L.R. (4th) 77.

[64] Roberts J.A. also made reference to the “related contracts principle” which may be engaged in the interpretive process where the contract under consideration forms part of an overall transaction involving more than one contract. In essence, this is what the plaintiffs submit in the case at bar. Roberts J.A. described the “related contracts principle” as follows at para. 54:

Under the related contracts principle, where more than one contract is entered into as part of an overall transaction, the contracts must be read in light of each other to achieve interpretive accuracy and give effect to the parties' intentions: 3869130 Canada Inc. v. I.C.B. Distribution Inc., 2008 ONCA 396, 239 O.A.C. 137, at paras. 33–34; Salah v. Timothy's Coffees of the World Inc., 2010 ONCA 673, 268 O.A.C. 279, at para. 16; Fuller v. Aphria Inc., 2020 ONCA 403, 4 B.L.R. (6th) 161, at para. 41, 51; Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership, 2020 ONCA 272, 150 O.R. (3d) 449, at para. 50.

[65] Brown, J.A. stated the principle in Catalyst Capital Group Inc. (a case referred to in the defendants’ Factum on another point) at para. 50 as follows:

First, it is a fundamental principle of contractual interpretation that a contract must be interpreted as a whole. That, in turn, requires a consideration of related contracts entered into as part of a larger composite whole: Geoff R. Hall, Canadian Contractual Interpretation Law, Third Edition (Toronto: LexisNexis, 2016), at §2.2.6. As explained by this court in 3869130 Canada Inc. v. I.C.B. Distribution Inc., 2008 ONCA 396, 239 O.A.C. 137 (Ont. C.A.), at para. 33:

Where each agreement is entered into on the faith of the others being executed and where it is intended that each agreement form part of a larger composite whole, assistance in the interpretation of any particular agreement may be drawn from the related agreements.

[66] It is arguable whether the contracts forming part of a “larger composite whole” for the related contracts principle to apply need necessarily be between the same parties in every case. In 3869130 Canada Inc. Blair J.A., writing for the panel, cited at para. 34, as an example of the application of the principle, the case of Mechanical Pin Resetter Co. v Canadian Acme Screw & Gear Ltd., [1971] S.C.R. 628 in which the Supreme Court read four interrelated contracts together in order to ascertain the geographical scope of a license to manufacture set out in one of them. There were three parties involved, but not all three parties were parties to each contract (see para 2).

[67] It is not appropriate for me to make a definitive determination in the context of a motion under rule 21.01(1)(b) of whether the related contracts principle has application where the alleged related contracts are not all between identical contracting parties. It is not plain and obvious that the parties to the contracts forming part of a larger composite whole need to coincide for the principle to apply.

[68] In my view, the plaintiff TyCorra in the case at bar does not seek to enforce the rental schedules to which it is not a party contrary to the privity rule, but rather seeks to enforce the ROFR Agreements and to have them interpreted in the context of the rental schedules which it says formed part of the overall transactions between itself, PNC and Metro and itself, PNC and TFI respectively.

[69] In Catalyst Capital Group Inc. Brown, J.A. stated as follows at paras. 39-41 in reference to the limitations on the use of Rule 21.01(1)(b) in the context of cases which depend upon interpretations of a contract:

A r. 21.01(1)(b) motion focuses on the legal sufficiency of a plaintiff's pleading, in the sense of determining whether the plaintiff has pleaded the material facts necessary to support a cause of action recognized by the law: Brozmanova v. Tarshis, 2018 ONCA 523, 81 C.C.L.I. (5th) 1 (Ont. C.A.), at paras. 25-26.

By contrast, contractual interpretation contains a strong factual component. It is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix. Contractual interpretation usually involves a question of mixed fact and law, except where a question of law can be extracted: Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 (S.C.C.), at para. 50. A court's consideration of the language of a contract always must have regard to the factual matrix that gave birth to the contract, even where the contractual provision is not ambiguous: Dumbrell v. Regional Group of Cos., 2007 ONCA 59, 85 O.R. (3d) 616 (Ont. C.A.), at para. 54. At the same time, the factual matrix cannot overwhelm or displace the language of the contract: Sattva, at para. 57.

Given that most contractual interpretation claims involve questions of mixed fact and law, r. 21.01(1)(b) usually is ill-suited to dispose of such claims prior to trial. That is due to the restrictions built into the rule that limit its utility for assessing the factual adequacy of a claim. Of greatest significance is the restriction that no evidence is admissible on such a motion: r. 21.01(2)(b). This restriction rubs the wrong way against the jurisprudence's recognition that a party is entitled to lead relevant evidence regarding the circumstances surrounding a contract's formation or its context to aid in its interpretation: McDowell v. Fortress Real Capital Inc., 2019 ONCA 71, 91 B.L.R. (5th) 181 (Ont. C.A.), at para. 83.

[70] In my view, these observations have application to the case at bar. I am not tasked with determining whether the plaintiffs’ claims will withstand a motion for summary judgment seeking dismissal or will prevail at trial, but rather with determining whether there is a “germ or scintilla" of a cause of action disclosed in the Fresh Claim. For the reasons set forth above I find that there is.

[71] To summarize, I accept the submissions of the defendants that the claims in the Fresh Claim advanced on behalf of the Additional TyCorra Plaintiffs should be struck and that the claim based upon the rental schedule between PNCEF and TFI, as presently pleaded, should be struck. However, I find that the balance of the claims in the Fresh Claim should not be struck on the ground advanced by the defendants, namely that they are inconsistent with black letter common law rules.

Leave to Amend

[72] It is necessary that consideration be given to whether leave to amend should be granted in respect of the claims of the Additional TyCorra Plaintiffs and the claim based upon the rental schedule between PNCEF and TFI each of which I have determined should be struck.

[73] The principles and considerations applicable to the question of whether leave to amend a pleading found to be defective were very usefully reviewed by Epstein, J. (as she then was) in the case of Aristocrat Restaurants Ltd. (c.o.b. Tony’s East) v. Ontario [2003] O.J. No. 5331 (S.C.J.) at paras. 80-86. The following principles may be drawn from this case:

(a) The approach that amendments should be presumptively approved unless they would occasion prejudice that cannot be compensated by costs or an adjournment, they are shown to be scandalous, frivolous, vexatious, or an abuse of the Courts process, or they disclose no reasonable cause of action, is relevant to the issue of whether, on a motion to strike a pleading, a court should exercise its discretion to grant leave to amend;

(b) leave to amend should properly be given where a pleading can be put right or improved by amendment and no injustice is done thereby;

(c) leave to amend should only be refused in the clearest of cases;

(d) depending on the circumstances of the case, striking out a pleading without granting leave to amend often does little to advance the ends of justice;

(e) in disposing of a motion to strike when a recognized cause of action has been improperly pleaded, but can be put right without non-compensable prejudice to the defendants, the preferred route is to afford the plaintiff the opportunity, upon appropriate terms, to plead the cause properly within the action before the court; and

(f) the foregoing approach makes practical sense and is in keeping with the objectives set out in rule 1.04, namely that the rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

[74] As set forth above, the claims of the Additional TyCorra Plaintiffs as set forth in the Fresh Claim disclose no reasonable cause of action. The pleading respecting these claims cannot be put right by the proposed amendment, for the reasons referred to above. The conclusory statements that the Additional TyCorra Plaintiffs suffered damages as a result of breaches of the ROFR Agreements (to which they were not parties) and that they are therefore necessary and proper parties to the action, do not clothe them with reasonable causes of action against the defendants. In my view, leave to amend should not be granted in respect of the claims of the Additional TyCorra Plaintiffs.

[75] In contrast, it is evident that the defect in the pleading respecting TyCorra Investments’ claim against the defendant relating to TFI resulted from a drafting error, namely the inclusion of an allegation that the Rental Schedule between PNCEF and TFI did not confer on TFI an option at lease end to purchase the trailers at fair market value. In my view this defect can be put right by the amendments proposed by the TyCorra Investments to paragraphs 35, 64, 65 and 96(c) of the draft Amended Fresh as Amended Statement of Claim appended as Schedule C to the plaintiffs’ Factum.

Disposition

[76] For the reasons set forth above it is Ordered as follows:

(a) The claims of TyCorra Group Inc., TyCorra Leasing Inc. and TyCorra Fleet Solutions Inc. shall be struck out and dismissed as disclosing no reasonable cause of action, without leave to amend;

(b) TyCorra Group Inc., TyCorra Leasing Inc. and TyCorra Fleet Solutions Inc. shall be removed as plaintiffs in the title of proceedings and all references to them shall be struck from the Fresh as Amended Statement of Claim (the “Fresh Claim”);

(c) The claim of the plaintiff TyCorra Investments Inc. dba Wabash Canada Inc. based upon the sale of trailers by the defendants (or one of them) to TFI Transport 2 LP (“TFI”) is struck out as disclosing no reasonable cause of action, with leave to amend in accordance with paragraphs 35, 64, 65 and 96(c) of the draft Amended Fresh as Amended Statement of Claim appended as Schedule C to the plaintiffs’ Factum; and

(d) The balance of the defendants’ motion is dismissed.

Costs

[77] The parties are strongly encouraged to agree on the costs of the motion.

[78] If the parties cannot agree on costs, the plaintiff TyCorra Investments Inc. may make written submissions as to costs within 21 days of the release of this Endorsement. The defendants have 14 days after receipt of the submissions to respond. The said plaintiff has a further 7 days to make reply submissions. All such written submissions are to be forwarded to me care of the Trial Coordinator at Brantford at the same email address used for the release of this Endorsement.

[79] The initial submissions of each side shall not exceed four (4) double-spaced pages, exclusive of Offers to Settle, Bills of Costs or Costs Outlines, and the reply submissions, if any, shall not exceed two such pages. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.

D.A. Broad, J. Date: January 7, 2022