Court File and Parties

COURT FILE NO.: CV-22-964 DATE: 2023/10/03 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

9695672 Canada Inc. o/a VECTOR GIFT CARDS AND MARKETING AGENCY Plaintiff – and – FUNDSTREAM INC. and ROYAL BANK OF CANADA Defendants

The Honourable Justice C.D. Braid

Counsel: Richard Campbell, Counsel for the Plaintiff/Responding Party Alexander Bissonnette, Counsel for the Defendant/Moving Party, Fundstream (RBC Not Participating In Motion)

HEARD: June 22, 2023

Reasons on Motion to Strike Portions of Statement of Claim

I. OVERVIEW

[1] 9695672 Canada Inc., operating as Vector Gift Cards and Marketing Agency (“Vector”), is a corporation that sources discount gift cards from merchants. Vector then sells those gift cards to clients for use in promotional programs by end users who may redeem the cards at their face value.

[2] Fundstream is a corporation that also engages, in part, in the business of gift card sourcing and distribution.

[3] Royal Bank of Canada (“RBC”) entered into a gift card procurement agreement with Vector on November 6, 2017. Vector agreed to source and supply third party gift cards to RBC, and RBC agreed to purchase them from Vector. This agreement was terminated by RBC on September 25, 2020.

[4] Vector sued Fundstream and RBC, claiming conspiracy by unlawful means, predominant purpose conspiracy, false representation, breach of contract, and breach of duty of good faith. Vector submits that Fundstream used Vector’s confidential information to divert business away from Vector and increase business given to Fundstream by RBC.

[5] Fundstream served a demand for particulars regarding the claims of false representation and conspiracy. Vector answered the demand for particulars, but Fundstream was unsatisfied with the response. A statement of defence has not yet been filed.

[6] Fundstream has brought a motion seeking to strike certain paragraphs of the Statement of Claim. The following issues arise on the motion:

A. What is the test on a motion to strike? B. Should the paragraphs be struck?

[7] For the reasons set out below, the motion is dismissed.

II. IMPUGNED PARAGRAPHS IN STATEMENT OF CLAIM

[8] Fundstream submits that the Statement of Claim does not meet the minimum level of material fact disclosure for the allegations of conspiracy and misrepresentation, and that those allegations should be struck out as a result.

[9] Fundstream seeks an order striking out the following paragraphs of the Statement of Claim, without leave to amend:

i. Paras. 1(a)(ii) and (iii) claim damages for conspiracy

[10] Paras. 1(a)(ii) and (iii) claim damages for “ii. conspiracy by unlawful means to injure the financial interest of the plaintiff; [and] iii. further and/or in the alternative, conspiracy the predominant purpose of which was to injure the financial interests of the plaintiff.”

ii. Paras. 18b and c allege that Fundstream made false representations to RBC

[11] The Statement of Claim alleges that Fundstream’s representatives implied that its aim was to divert RBC's business away from Vector to Fundstream, for the sole purposes of causing Vector to suffer financial loss and to increase Fundstream's revenue and profit at Vector's expense. Paragraphs 18b and c of the Statement of Claim state that Fundstream was able to accomplish this goal: “b. through falsely representing to RBC that Vector lacked the technical ability to satisfy RBC's program requirements; and c. through falsely representing to RBC that it had signed, or was about to sign, a contract with Vector to obtain gift cards from Vector's clients.”

iii. Paras. 25-27 allege conspiracy by unlawful means

[12] Paras. 25-27 allege conspiracy by unlawful means, and state:

• that the defendants conspired, and acted in concert, by agreement and with a common design of causing harm to Vector.
• that the defendants' conduct was unlawful in that it was in breach of their contractual obligations to Vector, and in breach of their common-law obligations of good faith and fair dealing to Vector.
• that the defendants' conduct was directed at Vector, and that the defendants knew, or ought to have known, that their conduct would cause injury to Vector. The defendants' conduct did in fact cause injury to Vector.

iv. Paragraphs 28 and 29 allege predominant purpose conspiracy

[13] Paragraphs 28 and 29 repeat and rely on the allegations in paragraphs 25-27. They allege that the predominant purpose of the defendants' conspiracy was economic injury to Vector, and that Vector suffered economic injury as a direct result of the defendants' conspiracy.

III. ANALYSIS

A. What is the Test on a Motion to Strike?

[14] Fundstream has brought a motion to strike out portions of the Statement of Claim, without leave to amend, based on the following grounds:

a. that they disclose no reasonable cause of action, pursuant to Rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. b. that they are frivolous, vexatious or otherwise an abuse of process, pursuant to Rule 21.01(3)(d) of the Rules of Civil Procedure. c. that the pleadings are scandalous, frivolous or vexatious, or that they are otherwise an abuse of process, pursuant to Rule 25.11 of the Rules of Civil Procedure.

[15] Pleadings must clearly define the question in controversy between the parties, give notice of the precise case that is required to be met and the precise remedy sought: Ontario Consumers Home Services Inc. v. EnerCare Inc., 2014 ONSC 4154, at para. 13.

[16] All allegations of fact, unless plainly ridiculous or incapable of proof, must be accepted as proven. The claim is to be read generously with allowance for drafting deficiencies: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 22; The Catalyst Capital Group Inc. v. Veritas Investment Research Corporation, 2017 ONCA 85, 136 O.R. (3d) 23, at para. 21; Aviva Canada Inc. v. Lyons Auto Body Limited, 2019 ONSC 6778, at para. 30.

[17] The threshold for sustaining a pleading on a Rule 21 motion is not high: MacKinnon v. Ontario Municipal Employees Retirement Board, 2007 ONCA 874, 88 O.R. (3d) 269, at para. 21.

[18] When a reasonable prospect of success exists, the matter should be allowed to proceed to trial. The court must consider whether the pleadings, as they stand or may reasonably be amended, disclose a question that is not doomed to fail: Atlantic Lottery Corp. Inc. v Babstock, 2020 SCC 19, [2020] 2 S.C.R. 420, at para. 90.

[19] The pleadings should only be struck if it is plain and obvious that the claim discloses no reasonable cause of action or has no reasonable prospect of success. The court ought to give the pleadings a generous reading, assume the facts as pled and construe them in the way that is most favourable. The statement of claim must be read generously with allowances for drafting deficiencies. An order to strike should not be granted unless it is one of the clearest of cases: Ontario Consumers Home Services Inc. at para.10; Andrin Hillsborough Limited v. Eliaszadeh, 2021 ONSC 3229, at para. 15.

[20] The liberal construction of the Rules of Civil Procedure and the requisite generous approach to pleadings in general will secure the just, most expeditious and least expensive determination of every civil proceeding on its merits, as required by Rule 1.04(1): PMC York Properties Inc. v. Siudak, 2022 ONCA 635, 473 D.L.R. (4th) 136, at para. 33.

[21] Courts have dismissed motions to strike pleadings when there are details in the context of a conspiracy that the plaintiff would not know until the discovery process has been completed. It may be premature to strike a claim for conspiracy at the pleading stage: PMC York Properties Inc. at para. 85; Beaver Lumber Inc. et. al. v. Hamer et. al., at para. 32.

B. Should the Paragraphs be Struck?

i. Pleading Fraudulent Misrepresentation and Conspiracy

[22] In their submissions, the parties have used three different terms: false representation, misrepresentation, and fraudulent misrepresentation. I shall define these concepts before addressing the topic of pleadings and the particularity required of them:

a) False Representation

[23] A false representation is an act of express dishonesty or a deliberate failure to disclose material facts. One type of false representation is a false representation of fact, which occurs when a representation within a statement relating to a past or present fact is untrue or a half-truth. To qualify as a false representation, the plaintiff must be able to show the representation within the statement was false: Kelly v. Lundgard, 2001 ABCA 185, 202 D.L.R. (4th) 385, at para. 105; Konicek v Vantown Infrastructure Invesco Inc., 2022 BCSC 1590, 36 B.L.R. (6th) 277, at para. 234.

[24] False representation is an element of other causes of action, such as the tort of fraudulent misrepresentation. False representation is not a stand-alone cause of action.

b) Misrepresentation

[25] Misrepresentation is defined as the making of a false or misleading statement about something, usually accompanied by an intention to deceive the listener. A misrepresentation can be expressed by words or by conduct: Thibeault v. Saskatchewan Apprenticeship and Trade Certification Commission, 2020 SKQB 192, at paras. 29-30.

[26] Misrepresentation is an umbrella term. It is uncommon to see claims of simple misrepresentation What is more common to see are claims for fraudulent misrepresentation, innocent misrepresentation, or negligent misrepresentation.

c) Fraudulent Misrepresentation

[27] Fraudulent misrepresentation consists of a representation of fact made without any belief in its truth, with intent that the person to whom it is made shall act upon it and causing that person to act upon it: G.H.L. Fridman, The Law of Contract in Canada, 5th ed (Toronto: Carswell, 2006) at 287.

[28] The four elements of the tort of fraudulent misrepresentation, also referred to as “civil fraud” or “deceit”, have been described as follows:

i. a false representation made by the defendant; ii. some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness); iii. the false representation caused the plaintiff to act; and iv. the plaintiff's actions resulted in a loss.

Bruno Appliance and Furniture Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 126, para. 21.

[29] Pleadings must contain full particulars where fraud or misrepresentation is alleged in the statement of claim: Rules of Civil Procedure, Rule 25.06(8).

[30] When claiming civil conspiracy, the plaintiff must plead all the following material facts:

a) The parties to the conspiracy; b) The agreement between those parties; c) The actions taken by the parties pursuant to the agreement: for predominant purpose conspiracy, the actions may be lawful or unlawful; d) The intent: for predominant purpose conspiracy, the harm to the plaintiff was the intentional and predominant purpose; e) The actual damages suffered by the plaintiff.

Pan v. Kelly, 2023 BCSC 208, at para. 21.

[31] In this case, there are two competing decisions that the parties primarily rely on in making their submissions:

1. Fundstream relies on Ontario Consumers Home Services Inc. v. EnerCare Inc. In that decision from 2014, the Ontario Superior Court of Justice held that civil conspiracy is an intentional tort and a serious allegation that should be pled with heightened particularity. The court took a strict approach to pleadings in finding that the plaintiff’s claim of conspiracy was not sufficiently pled and should therefore be struck: Ontario Consumers Home Services Inc. at paras. 25, 28, 32.
2. In response, Vector relies on PMC York Properties Inc. v. Siudak, 2022 ONCA 635. In that more recent decision from 2022, the Ontario Court of Appeal endorsed the modern, flexible approach to defamation pleadings. The Court took a more generous approach to the pleadings when they held that exact particulars were not required. The court also recognized that further particulars would become available during the discovery process. The bar for striking a pleading is high, and this should occur only in the clearest of cases: PMC York Properties Inc. at paras. 30-34, 85, 87.
3. In reply, Fundstream argues that the PMC decision is specific to defamation proceedings, which is not relevant in this case. However, it is worth noting that civil conspiracy was pled in the PMC case, but the determination of whether sufficient particulars for conspiracy were pled was not dealt with by the court because the conspiracy claim was held to be “duplicative” of the defamation claim. Even though the Ontario Court of Appeal focused on the defamation claim in its reasons, it did not take issue with the adequacy of particulars pled in support of the “duplicative” civil conspiracy claim when it refused to strike the claim. I therefore find that the reasons in PMC are not limited to defamation proceedings.

[32] The reasons in PMC follow the modern approach to striking pleadings, which was discussed by the Supreme Court of Canada in Atlantic Lottery Corp. Inc. and is repeated throughout later cases. The modern approach gives a liberal and generous construction to pleadings. The bar to strike a pleading is high; a pleading will only be struck when there is “no reasonable prospect of success” or “it is plain and obvious that the action cannot succeed”: Atlantic Lottery Corp. Inc. at paras. 87-90; Carducci v Canada (AG), 2022 ONSC 6232, at paras. 15-19; 10948420 Canada Inc. v. CY Best Group Inc., 2020 ONSC 6504, at para. 13.

[33] The Rules require a plaintiff to plead full particulars when claiming fraud or misrepresentation. Similarly, the particularity required when pleading conspiracy is high. However, when the court assesses the pleadings of the plaintiff, they often do so with a generous eye. So long as the pleadings demonstrates some prospect of success, the court should take a liberal and forgiving approach to the pleadings to allow the plaintiff to pursue the action: Atlantic Lottery Corp. Inc. at paras. 87, 90; Carducci at paras. 15-17.

[34] While there are high expectations of particularity for claims of fraudulent misrepresentation and civil conspiracy, the modern approach to striking pleadings sets an equally high bar to strike these pleadings for apparent deficiencies. The court should only strike a claim where the question as pled is doomed to fail: Atlantic Lottery Corp. Inc. at para. 90; Carducci at paras. 15-17.

[35] In this case, the pleadings provide particulars with respect to the following claims:

i. With respect to the conspiracy claims, the Statement of Claim states that Vector had a contract with RBC. Fundstream was a competitor of Vector, who entered into a confidentiality agreement with Vector. Fundstream and RBC conspired and acted in concert, by diverting RBC’s business to Fundstream in various ways (which are listed in the claim). RBC and Fundstream both attempted to compel Vector to introduce its clients to them, to create direct relationships between RBC and/or Fundstream and Vector’s clients. RBC and Fundstream told Vector that, if it did not facilitate the formation of these new relationships, Vector’s contracts would be terminated. RBC shared confidential information with Fundstream regarding Vector’s pricing, contracts and business methods, which it was contractually required to keep in confidence. This conspiracy was done with the intention of harming Vector and with the knowledge that their conduct would harm Vector. A general timeframe of the conspiracy was also pled. ii. The claim also states that the predominant purpose of the conspiracy was the economic injury of Vector, and that Vector suffered economic injury as a direct result of the conspiracy. iii. With respect to the false representation claims, the Statement of Claim states that Fundstream falsely represented to RBC that Vector lacked the technical ability to satisfy RBC’s program requirements and also that it had signed or was about to sign a contract with Vector to obtain gift cards from Vector’s clients. iv. The claim sets out the amount of losses that Vector has suffered and the categories of losses, including lost sales, lost profits and reputational harm.

[36] I am mindful that I should assess the pleadings with a generous eye. Although the pleadings may not perfectly reflect every particular fact as contemplated by Rule 25.06(8) and the related caselaw, the defendants know the case to meet. It is unrealistic to expect that Vector would know the precise details of the alleged agreement between Fundstream and RBC, when Vector was never a party to that agreement. There are details of the alleged conspiracy that Vector will not know until the discovery process has been completed.

[37] The impugned portions of the pleadings are sufficiently particularized to describe the fraudulent misrepresentation and conspiracy. The pleadings define the question in controversy between the parties, give notice of the precise case that is required to be met and the precise remedy sought.

[38] I find that the impugned portions of the pleadings demonstrate some prospect of success, and I take a liberal approach to the pleadings to allow the plaintiff to pursue the action. I am not satisfied that this is one of the clearest of cases that requires the striking of the impugned portions of the pleadings.

IV. CONCLUSION

[39] For all of these reasons, the motion is dismissed.

V. COSTS

[40] The parties are encouraged to settle the issue of costs. If they are unable to do so, they shall provide written costs submissions, which shall be no longer than two typed pages, double-spaced, in addition to any relevant Bill of Costs. Vector shall provide costs submissions by October 20, 2023; and Fundstream shall provide costs submissions by November 10, 2023. If submissions are not received by November 10, 2023, costs shall be deemed settled.

Braid, J.

Released: October 3, 2023