The Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership et al.

[Indexed as: Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership]

Ontario Reports Court of Appeal for Ontario Doherty, D.M. Brown and Thorburn JJ.A. April 29, 2020 150 O.R. (3d) 449 | 2020 ONCA 272

Case Summary

Contracts — Interpretation — Agent of Crown soliciting bidders for project associated with Pan/ParaPan American Games — Successful bidder having approached plaintiff to participate in financing of bid — Provincial government having concerns over plaintiff's involvement and excluding plaintiff from process — Motion judge dismissing plaintiff's claim against bidder for breach of funding term sheet — Funding term sheet referring to documents not in record before motion judge — Failure to take into account other documents as well as oral agreement constituting reversible error.

Crown — Immunity — Civil actions — Agent of Crown soliciting bidders for project associated with Pan/ParaPan American Games — Successful bidder having approached plaintiff to participate in financing of bid — Provincial government having concerns over plaintiff's involvement and excluding plaintiff from process — Motion judge striking claims against Crown for misrepresentation — Claims fell within statutory immunity — Proceedings Against the Crown Act, R.S.O. 1990, c. P.27, s. 2(2)(b).

Fiduciaries — Relationship — Agent of Crown soliciting bidders for project associated with Pan/ParaPan American Games — Successful bidder having approached plaintiff to participate in financing of bid — Provincial government having concerns over plaintiff's involvement and excluding plaintiff from process — Motion judge erred in striking claim for breach of fiduciary duty against bidder — Parties were sophisticated but plaintiff pleaded all elements necessary to support a claim for an ad hoc fiduciary relationship.

Limitations — Practice — Pleadings — Agent of Crown soliciting bidders for project associated with Pan/ParaPan American Games — Successful bidder having approached plaintiff to participate in financing of bid — Provincial government having concerns over plaintiff's involvement and excluding plaintiff from process — Plaintiff commencing separate actions which were struck out — Plaintiff issuing amended statement of claim in consolidated action — Motion judge striking claims for unjust enrichment and quantum meruit against two defendants — Claims had not been advanced in against those defendants in original pleading and so were new claims that were statute-barred.

Restitution — Unjust enrichment — Quantum meruit — Agent of Crown soliciting bidders for project associated with Pan/ParaPan American Games — Successful bidder having approached plaintiff to participate in financing of bid — Provincial government having concerns over plaintiff's involvement and excluding plaintiff from process — Motion judge striking claims for unjust enrichment and quantum meruit — Judge erring in respect of one of three defendants — Generous reading of amended pleading [page450] established claims against one defendant — Claims against other two defendants were both statute-barred and had no reasonable chance of success.

Torts — Duty of care — Agent of Crown soliciting bidders for project associated with Pan/ParaPan American Games — Successful bidder having approached plaintiff to participate in financing of bid — Provincial government having concerns over plaintiff's involvement and excluding plaintiff from process — Motion judge striking claim for breach of public law duty — No tort duty of care by owner to proponent in context of tendering process — Conditions not supporting new tort of misconduct by civil authority.

Two Ontario government actors, styled collectively as the defendant IO, solicited bidders for the design, construction, financing, and post-games marketing of the athletes' village for the 2015 Pan/ParaPan American Games in Toronto. The defendant DKD, a group of companies and limited partnerships, was accepted as a qualified bidder. DKD approached the plaintiff, C, and asked it to participate in the financing of its bid. C claimed that it reached an oral agreement with DKD allowing DKD to conduct negotiations regarding the bid, with C providing financing in accordance with a model of its own development. Because C had not been named in the request for qualifications as a member of the team, DKD asked IO to formally consent to C's addition as a proponent team member. IO refused, but C claimed that IO had represented to DKD that C could participate as long as C was kept "behind the curtain". DKD and C then entered into two written agreements that C alleged were intended to supplement, but not replace, the oral agreement. One of those agreements was a funding term sheet. After DKD was selected as the preferred project bidder, C's involvement was disclosed to the "Province", who considered C's participation to raise a "red flag". IO directed DKD to remove C as a participant in the proposed financing model. C commenced an action against DKD and IO, and a second action against the Crown. The claims were struck out in their entirety with C given leave to deliver an amended statement of claim and to consolidate the actions. The amended claim was subject to a motion to strike. The motion judge struck out five claims without leave to amend: against DKD for breach of the funding term sheet; against DKD for breach of fiduciary duty; against all defendants for unjust enrichment and quantum meruit as being statute-barred; against IO and the Crown for breach of an alleged public law duty; and against the Crown for fraudulent and negligent misrepresentations as being precluded by the Proceedings Against the Crown Act. C appealed the dismissal of those claims.

Held, the appeal should be allowed in part.

The motion judge erred in finding that C's claim for breach of the funding term sheet had no reasonable prospect of success. C pleaded that DKD breached its obligations under the funding term sheet to act in good faith in ensuring that C's participation was acceptable to IO and the Crown. The section of the funding term sheet at issue referred to other documents, none of which were in the record before the motion judge, so there was a risk that the contract was not interpreted as a whole. The judge also failed to take into account the oral agreement preceding the execution of the funding term sheet.

The motion judge erred in striking the claim for breach of fiduciary duty. C pleaded that although it and DKD were sophisticated parties who were not otherwise in a fiduciary relationship, C's participation in the bid was conditional on ceding to DKD its rights and ability to negotiate on its own behalf, such that it was vulnerable and dependent on DKD to advance its interests. In doing so, C adequately pleaded all the necessary elements supporting its claim for an ad hoc fiduciary relationship. [page451]

The motion judge erred in striking the unjust enrichment and quantum meruit claims against DKD as statute-barred. The judge held that the original claim against DKD and IO had not pleaded substantially all of the material facts on which such claims were based, such that the amended claim asserted new causes of action well beyond the two-year limitation period. However, a generous reading of the original claim suggested otherwise. With respect to unjust enrichment, C had pleaded an enrichment to DKD in the form of a more competitive financial model, a corresponding deprivation from C's investment of resources, and an absence of juristic reason for the benefit arising from C's wrongful exclusion. With respect to quantum meruit, C had pleaded that services were furnished at DKD's request and that DKD's retention of the benefit of C's participation was unjust in the circumstances.

The motion judge made no error in striking the unjust enrichment and quantum meruit claims against IO and the Crown. The judge struck those claims as statute-barred, but went on to note that he would have struck them in any event because it was plain and obvious that they could not succeed. Both conclusions were correct. C's original claim failed to plead that either IO or the Crown benefited from C's financial model so the amended claim advanced new causes of action that were statute-barred. The amended claim did not plead that C directly provided any service to IO and the Crown, who received only an indirect benefit from the services provided by C to DKD. Such an indirect benefit could not ground an unjust enrichment claim. With C's services not being requested by IO or the Crown, there was no quantum meruit claim.

The motion judge did not err in striking out the public law duty claim. C's amended claim was devoid of any allegation of breach of a statutory duty or discretionary power. There was no tort duty of care by an owner to a proponent in the context of a tendering process. IO was acting as any other owner in seeking to obtain bids to finance and construct the athletes' village, with nothing being unique to governmental actors. The conditions, as argued, did not support the recognition of a new tort of "misconduct by civil authority".

The claim against the Crown for misrepresentation was properly struck out. The amended claim clearly identified the makers of the "behind the curtain" representations as employees of IO, which made the representations to DKD, which in turn communicated them to C. It followed that if the IO employees were found to have made untrue representations, liability would attach to IO, being an agent of the Crown, thereby bringing the claim squarely within the immunity afforded by the Proceedings Against the Crown Act.

3869130 Canada Inc. v. I.C.B. Distribution Inc., 2008 ONCA 396; ArcelorMittal Dofasco Inc. v. U.S. Steel Canada Inc.; Dumbrell v. Regional Group of Companies Inc. (2007), 85 O.R. (3d) 616, 2007 ONCA 59; Martel Building Ltd. v. Canada, 2000 SCC 60; McDowell v. Fortress Real Capital Inc., 2019 ONCA 71, consd

Design Services Ltd. v. Canada, 2008 SCC 22; Peel (Regional Municipality) v. Canada; [page452] Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, apld

Paradis Honey Ltd. v. Canada (Attorney General), 2015 FCA 89 [Leave to appeal to S.C.C. refused [2015] S.C.C.A. No. 227], distd

R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, folld

Other cases referred to

Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24; Anns v. Merton London Borough Council, [1978] A.C. 728; Brozmanova v. Tarshis, 2018 ONCA 523; Ceballos v. DCL International Inc., 2018 ONCA 49; Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2011 ONCA 418; Cooper v. Hobart, 2001 SCC 79; Dumoulin v. Ontario; Grand River Enterprises Six Nations Ltd. v. Canada (Attorney General), 2017 ONCA 526; Hughes v. Ontario (Liquor Control Board), 2019 ONCA 305; Kerr v. Baranow, 2011 SCC 10; Klassen v. Beausoleil, 2019 ONCA 407; Lac Minerals Ltd v International Corona Resources Ltd.; Merrifield v. Canada (Attorney General), 2019 ONCA 205 [Leave to appeal to S.C.C. refused [2019] S.C.C.A. No. 174, 2019 CarswellOnt 14956]; Ontario v. Ron Engineering & Construction (Eastern) Ltd.; Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71; Rausch v. Pickering (City), 2013 ONCA 740; Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60; [page453] Toronto (City) v. Longbranch Child Care, 2011 ONSC 548; Transamerica Life Canada Inc. v. ING Canada Inc.

Statutes referred to

Competition Act, R.S.C. 1985, c. C-34 Crown Liability and Proceedings Act, 2019, S.O. 2019, c. 7, Sch. 17, s. 11 Limitations Act, 2002, S.O. 2002, c. 24, Sch. B [as am.] Ontario Infrastructure and Lands Corporation Act, 2011, S.O. 2011, c. 9, Sch. 32, ss. 2(1), 3(1) Proceedings of the Crown Act, R.S.O. 1990, c. P.27 [rep.], s. 2(2)(b)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 21, 21.01(1)(b), (2)(b), 25.06(1)

Authorities referred to

Hall, Geoff R., Canadian Contractual Interpretation Law, 3rd ed. (Toronto: LexisNexis, 2016)

APPEAL by the plaintiff from the order of Newbould J., 2016 ONSC 7365 (S.C.J.) striking out some of the plaintiff's claims.

David Moore and Kenneth G.G. Jones, for appellant. Mark A. Gelowitz and Kevin O'Brien, for respondents Dundee Kilmer Developments Limited Partnership, Dundee Realty Corporation, KD Infrastructure L.P., Kilmer Van Nostrand Co. Limited, Infrastructure Ontario and Ontario Infrastructure and Lands Corporation (formerly Ontario Infrastructure Projects Corporation). Christopher P. Thompson, for respondent Her Majesty the Queen in Right of Ontario.

The judgment of the court was delivered by

D.M. BROWN J.A. : —

I. Overview

[1] The events underlying this action took place almost a decade ago, in 2011. Since this proceeding's inception in late 2013, it has progressed no further than a series of challenges to the adequacy of the plaintiff's pleading. This appeal is from part of the most recent order, made in 2016, that struck out some of the plaintiff's claims.

[2] The action concerns a dispute about whether the plaintiff, the Catalyst Capital Group Inc. ("Catalyst"), could participate in the financing and development of the Athletes' Village for the 2015 Toronto Pan/ParaPan American Games (the "Project"). Catalyst [page454] pleads that in 2011 it struck a deal to participate in the financing of the Project with a group of the defendants, which it styles as DKD: Dundee Kilmer Developments Limited Partnership, Kilmer Van Nostrand Co. Limited, Dundee Realty Corporation, KD Infrastructure L.P., and John Doe Corporations Partnerships. Catalyst alleges that DKD broke that deal and it seeks significant damages against DKD.

[3] As well, Catalyst seeks significant damages against two Ontario government actors, the Ontario Infrastructure and Lands Corporation/Infrastructure Ontario (collectively"IO"), 1 as well as against the Ontario Crown. IO was responsible for procuring and approving bids for the design, construction, finance and post-games marketing of the Project. Catalyst alleges that IO made material misrepresentations to it and, together with the Crown, acted tortiously by excluding it from participating in the Project.

[4] The damages sought by Catalyst against DKD, IO and the Crown exceed $110 million.

[5] Catalyst commenced two actions (now consolidated) in November 2013 and January 2014: the first against DKD and IO; the second against the Crown. The ensuing six years have seen two separate challenges by the defendants to the adequacy of Catalyst's statements of claim pursuant to rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. At this point, no statements of defence have been filed.

[6] In disposing of the second challenge in 2016, the motion judge found parts of the pleading adequate, struck out some parts with leave to amend, and struck out other parts without leave to amend. The Divisional Court dismissed Catalyst's motion for leave to appeal from the part of the motion judge's order striking out certain claims with leave to amend. This appeal only concerns the part of the motion judge's order that struck out five of the claims without leave to amend.

[7] For the reasons that follow, I would grant Catalyst's appeal in part, setting aside the portion of the motion judge's order dismissing the claims against DKD for breach of s. 29 of the Funding Term Sheet, breach of fiduciary duty, and for unjust enrichment and quantum meruit. [page455]

II. Factual Background

[8] The chronology of events before the court comes from Catalyst's 2016 Consolidated Fresh as Amended Statement of Claim (the "Amended Claim").

October 2010 to May 2011

[9] In October 2010, IO started its solicitation of bidders for the design, construction, financing and post-games marketing of the Project by issuing a Request for Qualifications ("RFQ"). DKD responded to the RFQ. IO accepted DKD as qualified to bid on the Project.

[10] IO then issued a Request for Proposals ("RFP") in January 2011, at which point DKD began to prepare its bid. While doing so, DKD became concerned about the competitiveness of its financial model and the costs of the financing options available to it at the time. As a result, in early May 2011, DKD approached Catalyst and asked it to participate in the financing of its bid. However, in its response to the RFQ, DKD had not named Catalyst as a member of its proponent team. Consequently, the terms of the RFP required DKD to obtain the written consent of IO in order to change the members of its bid team.

May to June 2011: The oral agreement with DKD

[11] From May 13, 2011 to June 6, 2011, senior executives of Catalyst and DKD held a series of meetings to discuss Catalyst's participation in DKD's bid. Catalyst pleads that it reached an oral agreement with DKD that contained the following terms: (i) Catalyst would allow DKD to conduct all material negotiations and discussions regarding DKD's bid with IO and the Crown, including those affecting or involving Catalyst's participation in the bid and the Project; (ii) Catalyst would develop and finalize a financial model to form the basis of the financial component of DKD's bid and would provide financing in accordance with the finalized model; (iii) DKD would act in good faith to protect, promote and advance Catalyst's interests and participation in its bid and the Project, including in all of its communications and dealings with IO and the Crown; and (iv) DKD would keep Catalyst advised in a timely manner of all material developments in connection with its bid, including any developments that impacted Catalyst's involvement, interests and participation in the bid (the "Oral Agreement").

June 2011: The governmental representations by IO

[12] In early June 2011, DKD asked IO to consent formally to Catalyst's addition as a DKD proponent team member. IO refused. [page456]

[13] However, Catalyst pleads that on or shortly after June 15, 2011, IO advised DKD that although it would not consent to add Catalyst as a formal proponent team member, Catalyst could nevertheless participate in DKD's bid in a manner that did not require such consent. IO represented to DKD that (i) it and the Crown did not have issues or concerns regarding the source of DKD's funding or any equity structure DKD would enter with any of its funders, including Catalyst; (ii) it and the Crown decided that Catalyst could participate and provide funding to DKD for the Project without IO's formal consent as long as Catalyst was kept "behind the curtain"; and (iii) if Catalyst provided funding for the Project "behind the curtain", no issue or difficulty would be raised by IO or the Crown about such participation (the "Governmental Representations").

[14] Catalyst pleads that IO made the Governmental Representations to DKD in consultation with the Crown, or as a result of instructions received from representatives of the Crown, knowing and intending that DKD would communicate them to Catalyst and that Catalyst and DKD would rely and act upon them.

June 2011: The term sheets between Catalyst and DKD

[15] On June 22, 2011, DKD and Catalyst entered into two written agreements that Catalyst alleges were intended to supplement, but not replace, the earlier Oral Agreement. One of the written agreements was a Subordinated Notes and Letters of Credit Term Sheet (the "Funding Term Sheet") that contained additional terms and conditions upon which Catalyst would participate in and provide funding for the Project. Section 29 of the Funding Term Sheet plays a key role in Catalyst's allegations against DKD; it will be described in more detail later in these reasons.

September to November 2011

[16] DKD was selected as the preferred Project bidder on September 2, 2011. In September and October 2011, DKD and Catalyst met with DKD's senior lenders (the "Lenders") to obtain the consents necessary for Catalyst's continued participation in DKD's bid.

[17] Catalyst and the Lenders asked DKD to disclose to IO the details of Catalyst's involvement in the financing of the Project. DKD initially resisted but ultimately met with IO on November 2, 2011 to disclose Catalyst's involvement in its bid. Catalyst pleads that this information was relayed to the "Province".

[18] On November 8, 2011, Catalyst was advised that "the Province" had raised a "red flag" regarding Catalyst's participation in the bid. On that date, IO provided a written response to DKD's disclosure of Catalyst's involvement in the Project, in [page457] which, it detailed concerns about Catalyst's involvement and directed DKD to remove Catalyst as a participant in the financing model that was proposed for the Project. Catalyst pleads that IO's decision resulted from directions and instructions given by "Crown officials".

[19] Thereafter, DKD ceased all efforts to obtain the Lenders' consent to Catalyst's participation. DKD informed Catalyst that the Lenders would not consent to Catalyst's participation and refused to allow Catalyst to participate any further in the Project.

III. Procedural History

The Original Statements of Claim

[20] Catalyst initially commenced two actions, the first against DKD and IO on November 7, 2013 (the "Original Claim against DKD and IO"), and the other against the Crown on January 10, 2014 (the "Original Claim against the Crown") (collectively, the "Original Claims").

[21] In December 2014, DKD, IO and the Crown successfully moved to strike out Catalyst's Original Claims as disclosing no reasonable cause of action. Although the motion judge struck out the Original Claims in their entirety, he granted Catalyst leave to deliver an amended statement of claim and to consolidate the actions.

The Amended Claim

[22] Quite some time later, on April 4, 2016, Catalyst delivered its Amended Claim. As against DKD, Catalyst alleges that DKD

(a) breached the terms of the Oral Agreement; (b) breached s. 29 of the Funding Term Sheet; (c) breached its fiduciary duty to act in Catalyst's interests; (d) made negligent or fraudulent misrepresentations relied on by Catalyst to its detriment; and (e) deprived Catalyst of profits, benefits, and opportunities that were promised to it and that it reasonably expected to gain from its participation in DKD's bid and the Project, thereby unjustly enriching DKD or entitling Catalyst to compensation on a quantum meruit basis.

[23] As against IO and the Crown, Catalyst alleges that

(a) IO and the Crown breached a public law duty to act to prevent Catalyst from being expelled from DKD's winning bid; [page458] (b) the actions of IO and the Crown constituted misfeasance in public office; (c) IO and the Crown made negligent or fraudulent misrepresentations relied on by Catalyst to its detriment; and (d) that it was deprived of profits, benefits, and opportunities that were promised to it and that it reasonably expected to gain from its participation in DKD's bid and the Project, thereby unjustly enriching IO and the Crown or entitling Catalyst to compensation on a quantum meruit basis.

[24] In early 2016, DKD, IO and the Crown moved to strike out Catalyst's Amended Claim on the basis that it disclosed no reasonable cause of action and certain claims were statute-barred.

[25] In his November 28, 2016 order, the motion judge granted the motions in part:

(a) he refused to strike out the claims against DKD and IO for fraudulent or negligent misrepresentation; (b) he struck out two claims with leave to amend: the claim against DKD for breach of the terms of the Oral Agreement and the claim against IO and the Crown for misfeasance in public office. In September 2019, the Divisional Court denied Catalyst leave to appeal from that part of the motion judge's order; and (c) he struck out five claims without leave to amend, specifically the claims against (1) DKD for breach of s. 29 of the Funding Term Sheet; (2) DKD for breach of its alleged fiduciary duty to act in Catalyst's interests; (3) DKD, IO and the Crown for unjust enrichment and quantum meruit because they were statute-barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B; (4) IO and the Crown for breach of an alleged public law duty to act to prevent Catalyst from being expelled from DKD's winning bid; and (5) the Crown for fraudulent and negligent misrepresentations on the basis that the claims were precluded by s. 2(2)(b) of Proceedings of the Crown Act, R.S.O. 1990, c. P.27 ("PACA").

[26] The part of the motion judge's order dismissing these five claims without leave to amend is the subject-matter of this appeal. [page459]

IV. First Ground of Appeal: The Claim Against DKD for Breach of S. 29 of the Funding Term Sheet

The issue stated

[27] In its Amended Claim, Catalyst pleads two breach of contract claims against DKD. The first is for breach of the Oral Agreement that Catalyst alleges it entered into with DKD during the first week of June 2011. The motion judge struck out this claim but with leave to amend in order to identify when, where, and the individuals by whom the Oral Agreement was made.

[28] The second is based on one of the two written term sheets that Catalyst entered into with DKD on June 22, 2011: the Funding Term Sheet and the Future Development Blocks Term Sheet. Catalyst pleads that the provisions of the term sheets supplemented, but did not replace, those contained in the Oral Agreement. Since the Amended Claim referred to both term sheets, they were included in the Rule 21 record placed before the motion judge.

[29] Catalyst alleges that DKD breached s. 29 of the Funding Term Sheet, which provides:

Each of the DK Group and the Subordinated Noteholder agrees that from and after the date of execution of this Term Sheet and until such time as the Formal Agreements are entered into, it will not enter into any discussions or negotiations or solicit offers or execute any agreement relating to the subject matter of this Term Sheet or to the provision of financial assistance in connection with the Project (excluding, with respect to the DK Group, the Project Documents) with any party other than, in the case of the DK Group, the Subordinated Noteholder, and in the case of the Subordinated Noteholder, the DK Group. The parties acknowledge that the Senior Financing Term Sheet contains a condition precedent in favour of the Lenders with respect to the approval by the Lenders of the Subordinated Noteholder, the participation of the Subordinated Noteholder in the Project, the manner and terms and conditions of the provision (directly or indirectly) by the Subordinated Noteholder of subordinated debt to the Project including, without limitation, the terms of this Term Sheet and the corporate/ partnership structure of ownership and control of the Project at all direct or indirect levels (collectively, the "CP"). The parties acknowledge and agree that time is of the essence with respect to the satisfaction of the CP. Each of the parties shall negotiate in good faith with each other and the Lenders to satisfy the CP.

(Emphasis added) 2 [page460]

[30] Section 29 of the Funding Term Sheet is one of several provisions in Part H of the agreement, which is titled "Binding Nature of Term Sheet". Part H begins with s. 27, which provides that the provisions of the Funding Term Sheet "other than Section 29 and the confidentiality obligation set out in the preamble, will not come into effect until such time as the Lenders consent to the provision by the Subordinated Noteholder [Catalyst] of the Contingency Equity Letter of Credit and the Cost to Complete Letter of Credit on the terms and conditions of this [Funding] Term Sheet". Section 28 specifies when the Funding Term Sheet will expire.

[31] Section 29 then deals, in part, with the exclusivity of negotiations between DKD and Catalyst in respect of the Project. It concludes with the obligation of DKD and Catalyst to "negotiate in good faith with each other and the Lenders to satisfy the [Condition Precedent]".

[32] In its Amended Claim, Catalyst pleads that s. 29 of the Funding Term Sheet imposed two obligations on DKD:

(i) an obligation to negotiate in good faith with the Lenders and to use its best efforts to satisfy the conditions precedent identified in s. 29 of the Funding Term Sheet"including taking all reasonable steps to persuade IO and the Crown to allow Catalyst's participation in the DKD Bid"; and (ii) a good faith obligation to ensure that the structure resulting from the two term sheets, DKD's Bid"and any subsequent agreements negotiated after September 1, 2011 resulted in Catalyst's participation 'behind the curtain' in a manner that was acceptable to IO and the Crown".

[33] Catalyst alleges that DKD failed to satisfy both obligations, thereby breaching its obligations under s. 29 of the Funding Term Sheet and "its common law duties of honest performance in relation thereto, its duty to negotiate and act in good faith, its duties to use its best efforts, or in the alternative reasonable efforts, to obtain the Lenders' consent to Catalyst's continued participation" in the Project.

[34] The motion judge interpreted s. 29 of the Funding Term Sheet to mean that DKD was obligated "to negotiate in good faith with Catalyst and the Lenders to satisfy the condition precedent in favour of the Lenders with respect to approving Catalyst to be in the deal. It was not an obligation to negotiate with IO": at para. 46. Based on that interpretation, the motion judge struck out Catalyst's pleading that DKD breached s. 29 of the Funding Term Sheet stating, at para. 51, that [page461]

the complaint is not that DKD failed to deal with the Lenders to fulfill the condition precedent of the [Funding Term Sheet] to permit Catalyst's involvement in the project. Rather the complaint is that although Catalyst and DKD obtained the consent of the Lenders, it was afterwards that IO and the Crown had a problem with Catalyst and would not agree to Catalyst being involved. The complaint at its core is that DKD failed to convince IO to change its mind. However, the [Funding Term Sheet] contained no obligation on DKD to negotiate with IO to change its mind. Whether it was DKD's fault that IO and the Crown had this problem is not relevant to the issue of a breach of the term sheet.

(Emphasis added)

He concluded that "[o]nce the IO and the Crown had decided not to permit Catalyst to be involved, that was the end of the matter for Catalyst. Even if the Lenders agreed to Catalyst being involved, it would not affect that": at para. 55.

The positions of the parties

[35] Catalyst submits that the motion judge erred in law by adopting too narrow an interpretation of s. 29 of the Funding Term Sheet "without any analysis or assessment of the impact of the factual matrix upon the proper meaning of this provision". It argues that in order to fulfill the condition precedent contained in s. 29 of the Funding Term Sheet, DKD was required to demonstrate the consent of IO and the Crown to Catalyst's participation in the Project.

[36] DKD submits that the motion judge correctly concluded that the cause of action alleging a breach of s. 29 could not succeed because the Funding Term Sheet contained no obligation on DKD to negotiate with IO to change its mind.

The governing principles

[37] Correctness is the applicable standard of review on an appeal from an order made under rule 21.01(1)(b) dismissing a claim as disclosing no reasonable cause of action: Ceballos v. DCL International Inc., 2018 ONCA 49, at para. 7.

[38] Determining whether Catalyst's plea that DKD breached s. 29 of the Funding Term Sheet discloses no reasonable cause of action engages the process of contractual interpretation, specifically ascertaining the scope of the obligation to negotiate in good faith contained in s. 29.

[39] A rule 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, at paras. 25-26. [page462]

[40] 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: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, 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 Companies Inc. (2007), 85 O.R. (3d) 616, 2007 ONCA 59, at para. 54. At the same time, the factual matrix cannot overwhelm or displace the language of the contract: Sattva, at para. 57.

[41] Given that most contractual interpretation claims involve questions of mixed fact and law, rule 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: rule 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, at para. 83.

[42] Yet, some moving party defendants, like DKD, contend that rule 21.01(1)(b) is an apt procedural device to strike out a claim involving contractual interpretation, pointing to the jurisprudence that holds a claim may be struck where it is plain and obvious that "the claim has no reasonable prospect of success": R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, at para. 17.

[43] As well, DKD relies on the decision of the Superior Court of Justice in ArcelorMittal Dofasco Inc. v. U.S. Steel Canada Inc., for the proposition that a court can rule on a breach of contract claim on a Rule 21 motion where the operative provisions of a contract are clear. However, great care must be taken in applying the ArcelorMittal Dofasco decision. First, that decision pre-dated Sattva. Second, in ArcelorMittal Dofasco the parties agreed that the issue of the exercise of the contractual termination right was a question of law, not a question [page463] of mixed fact and law: at para. 17. Finally, the court held that "arguably" there was no need to consider the factual matrix as there was no ambiguity with respect to the interpretation of the termination right: at para. 33. However, Dumbrell and McDowell teach to the contrary: Dumbrell, at para. 54; McDowell, at para. 83. 3

[44] When the Rules of Civil Procedure are examined through the lens of Sattva's teaching, a Rule 20 summary judgment motion is better suited than a rule 21.01(1)(b) motion to deal with claims involving contractual interpretation because such claims typically involve mixed questions of fact and law and always require a consideration of the factual matrix. Still, it remains the case that the language of rule 21.01(1)(b) does not exclude its use to strike out causes of action that turn on an issue of contractual interpretation. However, rule 21.01(1)(b) contains certain features that reduce the risk of its misuse to dispose of contractual interpretation claims.

[45] First, a motion to strike for failure to disclose a reasonable cause of action proceeds on the basis that the facts pleaded are true, unless they are manifestly incapable of being proven or are patently ridiculous: Imperial Tobacco, at para. 22; Transamerica Life Canada Inc. v. ING Canada Inc. (2003), at p. 375 D.L.R. Accordingly, a defendant who resorts to rule 21.01(1)(b) must take the plaintiff's pleaded claim at its provable highest.

[46] Second, a court must read the plaintiff's pleading generously, making allowances for drafting deficiencies and erring on the side of permitting an arguable claim to proceed to trial: Transamerica, at p. 375 D.L.R.; Rausch v. Pickering (City), 2013 ONCA 740, at para. 34.

[47] Finally, rule 21.01(1)(b) imposes a very high burden of proof on the moving defendant. It is not sufficient for a moving defendant to demonstrate that it is more probable than not that the plaintiff's pleading does not disclose a reasonable cause of action. The defendant must meet the much higher standard of establishing that the claim as pleaded has no reasonable prospect of success.

[48] At the same time, the notional availability of a rule 21.01(1)(b) motion to dispose of a cause of action involving contractual interpretation reminds a plaintiff that it must plead clearly [page464] the facts upon which it relies when making a breach of contract claim. A plaintiff is not entitled to rely on the possibility that new facts may turn up as the case progresses: Imperial Tobacco, at para. 22. As well, since rule 25.06(1) requires a plaintiff to plead "the material facts on which the party relies for the claim", where a plaintiff's cause of action puts into play an issue of contractual interpretation, its statement of claim must plead the material facts of the factual matrix upon which the plaintiff relies.

Analysis

[49] In permitting Catalyst to proceed with its claim for breach of the Oral Agreement, subject to pleading further particulars, the motion judge recognized that on a Rule 21 pleadings motion the issue is not whether a claim could withstand a summary judgment motion or a trial. Instead, as he described it, the test is whether the claim is "patently ridiculous incapable of proof": at para. 39. With respect, the motion judge did not apply the same approach when assessing under rule 21.01(1)(b) Catalyst's claim that DKD breached s. 29 of the Funding Term Sheet. His reasoning contained two errors that attract appellate intervention.

[50] 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, 3rd ed. (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, 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.

[51] In the present case, s. 29 of the Funding Term Sheet refers to a condition precedent contained in the "Senior Financing Term Sheet". 4 Schedule 1 of the Funding Term Sheet defines "Senior Financing Term Sheet" as "the Senior Financing Executive Summary Term Sheet and the Senior Financing Common Terms Term Sheet attached to the Lenders' Commitment and Mandate Letter". [page465] None of those documents were included in the record placed before the motion judge on the rule 21.01(1)(b) motion.

[52] That leaves the court in the unsatisfactory position of attempting to interpret the condition precedent clauses contained in s. 29 of the Funding Term Sheet using only the summary description of the condition precedent found in the section, without the benefit of reviewing the Senior Financing Term Sheet that precisely describes the condition precedent. And without the ability to review the Senior Financing Term Sheet, how can the court determine whether that document is a related contract relevant to the holistic contractual interpretation analysis prescribed by the jurisprudence, including cases such as 3869130 Canada?

[53] In the present case, the restriction on evidence embedded in a rule 21.01(1)(b) motion creates a real risk that a court cannot interpret s. 29 of the Funding Term Sheet within the contract "as a whole", which potentially includes aspects of the Senior Financing Term Sheet. With respect, the motion judge did not give sufficient weight to that risk. Accordingly, he erred in dismissing Catalyst's claim for breach of s. 29 of the Funding Term Sheet on the limited rule 21.01(1)(b) record before him.

[54] Second, in addressing the main point of contractual interpretation argued by Catalyst, the motion judge failed to consider an important part of the factual matrix, the Oral Agreement that preceded the execution of the Funding Term Sheet: Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60, at paras. 29-30.

[55] Catalyst contends that since s. 29 required DKD to "negotiate in good faith with . . . the Lenders to satisfy the [Condition Precedent]", and since the Lenders would not consent unless IO knew of and approved Catalyst's participation, s. 29, properly interpreted, includes an obligation on DKD to negotiate in good faith to secure IO's consent to Catalyst's participation in the Project. Unless it did so, the Lenders would not consent. That is the interpretation advanced by Catalyst.

[56] The motion judge did not allow for the possibility of such an interpretation. Instead, he reasoned that once the IO and Crown had decided against Catalyst's involvement "that was the end of the matter for Catalyst. Even if the Lenders agreed to Catalyst being involved, it would not affect that": at para. 55.

[57] Although the motion judge considered much of the pleaded factual matrix, on this point he failed to take into account the Oral Agreement. The motion judge was required to take as proven, for purposes of the rule 21.01(1)(b) motion, Catalyst's pleading at para. 25(f) of the Amended Claim that, as part of the Oral Agreement"DKD agreed that it would act in good faith to protect, [page466] promote and advance Catalyst's interests and participation in the DKD Bid on the Athlete's Village Project . . .".

[58] When the s. 29 contractual obligation of DKD to negotiate in good faith is read in the context of the Oral Agreement, it is not plain and obvious that the interpretation of s. 29 proffered by Catalyst has no reasonable prospect of success. DKD failed to meet the very high burden required to strike out that claim. With respect, the motion judge erred in concluding otherwise, and I would allow this ground of appeal.

V. Second Ground of Appeal: The Claim Against DKD for Breach of Fiduciary Duty

The issue stated

[59] In its Amended Claim, Catalyst pleads that while it and DKD were sophisticated parties who were not in a fiduciary relationship in respect of many of the issues relating to the Project:

[T]he terms of the Oral Agreement, the Term Sheets and the representations made by DKD to Catalyst, collectively or individually, created a fiduciary relationship between Catalyst and DKD in relation to the negotiations that DKD conducted with the Lenders, and with IO and the Crown, on Catalyst's behalf. Specifically, Catalyst's participation in the DKD Bid and the Athlete's Village Project was conditional on Catalyst ceding to DKD its rights and ability to negotiate on its own behalf. In exchange, DKD agreed to use its expertise and extensive contacts to benefit Catalyst, by negotiating on Catalyst's behalf and by promoting and advancing Catalyst's interests in all negotiations and discussions with the Lenders and with IO and the Crown.

[60] In such circumstances, Catalyst pleads it was vulnerable and dependent on DKD to protect and advance its interests "and, if necessary, to subordinate its own interests in the process". Catalyst alleges that DKD breached its fiduciary obligations, resulting in Catalyst's exclusion from the Project.

[61] The motion judge struck Catalyst's claim against DKD for breach of fiduciary duty without leave to amend. He held that it was plain and obvious that Catalyst could not succeed in its claims that a per se or ad hoc fiduciary relationship existed between Catalyst and DKD.

[62] Catalyst had pleaded that it was in a joint venture relationship with DKD and that joint ventures are a per se category of a fiduciary relationship. The motion judge rejected that submission. Catalyst does not appeal that finding.

[63] The motion judge also held that the facts as pleaded could not establish an ad hoc fiduciary relationship between DKD and Catalyst because (i) Catalyst failed to plead that DKD undertook to give up its own interests to protect Catalyst; and (ii) "it would be absurd in a relationship that existed in this case between two [page467] highly sophisticated organizations in which DKD was seeking the assistance of Catalyst in the DKD bid to think that DKD would have agreed to subordinate its interests to those of Catalyst": at para. 65.

[64] Catalyst submits the motion judge misunderstood the narrow scope of its fiduciary duty claim -- namely, that DKD stood in a fiduciary relationship with an obligation to take all reasonable steps to enable Catalyst to remain part of the Project and DKD could not resile from that obligation even if it was in DKD's financial interest to do so. Not only was the fiduciary relationship limited in scope, it was limited in duration, existing only from the time that DKD was selected as the preferred bidder for the Project until the commercial close of the RFP with the execution of a project agreement, initially scheduled for November 2011. According to Catalyst, during that time, DKD had a fiduciary duty to act in the utmost good faith and take all reasonable steps to enable Catalyst's continued participation in the Project.

Analysis

[65] To establish the existence of an ad hoc fiduciary relationship a claimant must demonstrate three elements:

(i) an undertaking, express or implied, by the alleged fiduciary to act in the best interests of a beneficiary. The claimant must be able to point to a forsaking by the alleged fiduciary of the interests of all others in favour of those of the beneficiary in relation to the specific legal interest at stake; (ii) the identification of a defined person or class of persons who are vulnerable to the alleged fiduciary in the sense that the alleged fiduciary has a discretionary power over them; and (iii) the alleged fiduciary's power may affect the legal or substantial practical interests of the beneficiary.

Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, at paras. 30-34; Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71, at paras. 124, 128 and 138.

[66] The motion judge held that Catalyst failed to plead the required element of an undertaking. I disagree. A review of Catalyst's Amended Claim reveals that it substantively pleaded all three elements.

[67] While Catalyst did not use the word "undertaking" to describe DKD's relationship with it, the Amended Claim essentially pleads that DKD undertook to act in the best interests of Catalyst [page468] and forsake the interests of all others in favour of those of Catalyst. The Amended Claim pleads that the terms of the Oral Agreement, a potential form of undertaking, included the following:

-- para. 25(f): DKD agreed that it would act in good faith to protect, promote and advance Catalyst's interests and participation in the DKD Bid on the Project, including in all of its communications and dealings with the IO and the Crown; and -- para. 25(g): DKD agreed that it would apply the experience and expertise that it had represented it possessed in its dealings with IO and the Crown, to enable Catalyst to participate in the Project, including in the preparation and submission of the DKD Bid and, if DKD was selected as the preferred bidder, in any and all subsequent dealings and agreements relating to the Project.

[68] The section of the Amended Claim dealing with the alleged breach of fiduciary duty by DKD builds on those pleaded terms to allege, in para. 113, that "DKD agreed to use its expertise and extensive contacts to benefit Catalyst, by negotiating on Catalyst's behalf and by promoting and advancing Catalyst's interests in all negotiations and discussions with the Lenders and with IO and the Crown" (emphasis added). In para. 114, Catalyst pleaded that it was "in a unique position of vulnerability and dependency" as it was dependent on "DKD to communicate with IO and the Crown regarding the terms under which Catalyst would be permitted to participate in the [Project]". Catalyst went on to plead, in para. 116, that "DKD was required to take all necessary steps to protect and advance Catalyst's interests, and, if necessary, to subordinate its own interests in the process" (emphasis added). Combined, these portions of the Amended Claim adequately plead the undertaking element of the breach of fiduciary duty cause of action.

[69] As well, Catalyst adequately pleads the elements of DKD's discretionary power (Amended Claim, paras. 25 and 113-114) and that its power might affect the legal or substantial practical interests of Catalyst, specifically its participation in the Project (Amended Claim, paras. 113 and 118).

[70] The motion judge also held that it would be "absurd" to think that a fiduciary relationship could arise between two sophisticated commercial parties like DKD and Catalyst. In making that comment, the motion judge strayed beyond the boundaries of examining the sufficiency of the pleading on a rule 21.01(1)(b) motion into the realm of assessing the claim on the merits in the absence of an evidentiary record. [page469]

[71] The existence of an ad hoc fiduciary relationship is determined on a case-by-case basis, including in cases of commercial transactions: PIPSC, at para. 113; Lac Minerals Ltd v International Corona Resources Ltd. (1989), at pp. 667-68 S.C.R. In the present case, Catalyst pleads that the fiduciary duty owed by DKD only covered one aspect of their relationship: "the negotiations that DKD conducted with the Lenders, and with IO and the Crown, on Catalyst's behalf": Amended Claim, para. 113. Catalyst claims that DKD needed its assistance to finance the Project but insisted on conducting all material negotiations with IO in the absence of Catalyst. In return, DKD agreed to act in good faith to protect, promote and advance Catalyst's interest and participation in its bid. Certainly not a typical commercial relationship between two sophisticated parties. But a determination as to whether the evidence bears out Catalyst's claim properly awaits the hearing on the merits, not an evidence-free rule 21.01(1)(b) pleadings motion.

[72] For these reasons, I would allow this ground of appeal.

VI. Third Ground of Appeal: The Claims Against DKD for Unjust Enrichment and Quantum Meruit

The issue stated

[73] In its Amended Claim, Catalyst pleads against DKD claims for unjust enrichment and quantum meruit. The motion judge struck out the claims, without leave to amend, on the basis that they were statute-barred under the Limitations Act, 2002. He held that the Original Claim against DKD and IO had not pleaded substantially all of the material facts on which the claims of unjust enrichment and quantum meruit were based: at para. 35. That led him to conclude that the Amended Claim asserted new causes of action well beyond the two-year limitation period.

[74] Catalyst submits that the motion judge erred, arguing that the Original Claim against DKD and IO pleaded the material facts needed to support those claims.

Analysis

[75] I accept this submission. The governing principles were stated by this court in Klassen v. Beausoleil, 2019 ONCA 407, at paras. 27-30:

An amendment [to a statement of claim] will be statute-barred if it seeks to assert a "new cause of action" after the expiry of the applicable limitation period: North Elgin, at paras. 19-23, 33; Quality Meat Packers, at para. 65. In this regard, the case law discloses a "factually oriented" approach to the concept of [page470] a "cause of action" -- namely"a factual situation the existence of which entitles one person to obtain from the court a remedy against another person": North Elgin, at para. 19; Quality Meat Packers, at para. 65.

An amendment does not assert a new cause of action -- and therefore is not impermissibly statute-barred -- if the "original pleading . . . contains all the facts necessary to support the amendments . . . [such that] the amendments simply claim additional forms of relief, or clarify the relief sought, based on the same facts as originally pleaded": Dee Ferraro, at paras. 4, 13-14; North Elgin Centre Inc., at paras. 20-21; East Side Mario's Barrie, at paras. 31-32; Quality Meat Packers, at para. 65. Put somewhat differently, an amendment will be refused when it seeks to advance, after the expiry of a limitation period, a "fundamentally different claim" based on facts not originally pleaded: North Elgin, at para. 23.

The relevant principle is summarized in Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3rd ed. (Toronto: LexisNexis, 2017), at p. 186:

A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon [which] the original right of action is based.

In the course of this exercise, it is important to bear in mind the general principle that, on this type of pleadings motion, it is necessary to read the original Statement of Claim generously and with some allowance for drafting deficiencies: Farmers Oil and Gas Inc. v. Ontario (Ministry of Natural Resources), 2016 ONSC 6359, at para. 23.

[76] A claim of unjust enrichment contains three constituent elements: (i) an enrichment or benefit to the defendant; (ii) a corresponding deprivation of the plaintiff; and (iii) the absence of a juristic reason for the enrichment: Kerr v. Baranow, 2011 SCC 10, at para. 32. The question then is: Did the Original Claim against DKD and IO, read generously, plead all the material facts needed to support these three elements of the cause of action of unjust enrichment?

[77] In my view, it did.

[78] In its Original Claim against DKD and IO, Catalyst pleaded the material facts to support all three elements of unjust enrichment:

(i) Enrichment/benefit of the defendant: As a result of Catalyst's involvement, DKD was able to develop a more competitive financial model for its bid and submit a lower cost bid, which IO ultimately selected as the winning bid: Original Claim against DKD and IO, paras. 16, 22 and 23; (ii) Corresponding deprivation: Catalyst invested extensive time and resources in assisting DKD and was deprived of the [page471] profits, benefits and opportunities promised to it and that it reasonably expect to gain from its participation in DKD's bid and Project: Original Claim against DKD and IO, paras. 16 and 36; and (iii) Absence of a juristic reason for the benefit: The retention of the benefit conferred by Catalyst lacked juristic reason as Catalyst was "wrongfully excluded from the DKD Bid and the Athletes' Village Project": Original Claim against DKD and IO, paras. 24-31 and 35.

[79] Similarly, in its Original Claim against DKD and IO, Catalyst pleaded the material facts needed to support the two elements of a quantum meruit claim: (i) that the services were furnished at the request, or with the encouragement or acquiescence of, the opposing party; and (ii) that in the circumstances it would be unjust for the opposing party to retain the benefit conferred by the provision of the services: Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2011 ONCA 418, at para. 8.

[80] Catalyst pleads that: (i) DKD approached it to participate in its bid and requested its services; and (ii) DKD's retention of the benefits arising from Catalyst's participation in the bid and Catalyst's exclusion from the Project was unjust in the circumstances of the case: Original Claim against DKD and IO, paras. 16, 24-31 and 35.

[81] The required generous reading of the Original Claim against DKD and IO discloses that the claims for unjust enrichment and quantum meruit advanced in the Amended Claim are not new causes of action but, rather, claims for additional forms of relief based on the same facts as originally pleaded. The motion judge erred in striking these claims as statute-barred. I would allow this ground of appeal.

VII. Fourth Ground of Appeal: The Claim Against IO and the Crown for Unjust Enrichment and Quantum Meruit

The issue stated

[82] In its Amended Claim, Catalyst also advances claims of unjust enrichment and quantum meruit against IO and the Crown. The motion judge struck out those claims, without leave to amend, as statute-barred for the same reasons he struck out the similar claims against DKD. However, the motion judge went on to note that he would have struck out the claims in any event because it was plain and obvious that they could not succeed. The motion judge held that as Catalyst had not pleaded that it provided any [page472] services to IO and the Crown, IO and the Crown only received an indirect benefit from the services Catalyst did provide to DKD. Such an indirect benefit could not ground Catalyst's unjust enrichment claim against IO or the Crown. Nor could the quantum meruit claim succeed because Catalyst failed to plead that its services were requested, encouraged, or acquiesced in by IO or the Crown.

[83] Catalyst submits that the motion judge erred in reaching that conclusion. It contends that it pleaded the benefits received by IO and the Crown were tangible and substantial, namely, that Catalyst's financial model significantly reduced the cost of DKD's bid which directly lowered the cost of constructing the Project. This benefitted IO and the Crown directly. Moreover, as pleaded, IO and Crown encouraged and induced Catalyst to provide the benefit through the Governmental Representations.

Analysis

[84] I am not persuaded by Catalyst's submissions. I see no error by the motion judge.

[85] First, Catalyst's Original Claim against DKD and IO and Original Claim against the Crown failed to plead that either IO or the Crown benefitted from the financial model Catalyst provided to DKD or that Catalyst's actions provided any economic benefit to IO or the Crown. Consequently, in its Amended Claim, Catalyst is advancing new causes of action, not additional forms of relief on the same facts originally pleaded. The motion judge correctly held that the claims for unjust enrichment and quantum meruit against IO and the Crown were statute-barred.

[86] As well, I agree with the motion judge that Catalyst's claims for unjust enrichment and quantum meruit against IO and the Crown should be struck on the ground that it is plain and obvious they cannot succeed. In Peel (Regional Municipality) v. Canada, the Supreme Court stated, at p. 797 S.C.R., that any enrichment or benefit to the defendant must be conferred directly and specifically on the defendant and that it is not sufficient that the enrichment or benefit to the defendant is indirect:

While not much discussed by common law authorities to date, it appears that a further feature which the benefit must possess if it is to support a claim for unjust enrichment is that it be more than an incidental blow-by. A secondary collateral benefit will not suffice. To permit recovery for incidental collateral benefits would be to admit of the possibility that a plaintiff could recover twice -- once from the person who is the immediate beneficiary of the payment or benefit (the parents of the juveniles placed in group homes in this case), and again from the person who reaped an incidental benefit. . . . It would also open the doors to claims against an undefined class of persons who, while not the recipients of the payment or work conferred by the plaintiff, indirectly benefit [page473] from it. This the courts have declined to do. The cases in which claims for unjust enrichment have been made out generally deal with benefits conferred directly and specifically on the defendant, such as the services rendered for the defendant or money paid to the defendant. This limit is also recognized in other jurisdictions. For example, German restitutionary law confines recovery to cases of direct benefits[.]

(Internal citations omitted; emphasis added)

[87] Catalyst's Amended Claim does not plead that it directly provided any services to IO or the Crown. On the contrary, Catalyst pleads that it provided services to DKD because DKD wanted to make its bid more competitive. There is no suggestion in the factual matrix pleaded by Catalyst that IO or the Crown had asked it to provide any services. In these circumstances, even if Catalyst's financial model significantly reduced the cost of DKD's bid and lowered the cost of constructing the Project, any economic benefit received by IO and the Crown would constitute an indirect, secondary collateral benefit not recoverable through a claim of unjust enrichment.

[88] In terms of the claim for quantum meruit, the motion judge correctly observed that Catalyst failed to plead that it furnished its services at the request, encouragement, or acquiescence of IO or the Crown.

[89] For these reasons, I would dismiss this ground of appeal.

VIII. Fifth Ground of Appeal: The Public Law Duty Claim Against IO and the Crown

The issue stated

[90] In its Amended Claim, Catalyst pleads what it describes as a "public law claim", drawing upon the obiter comments of Stratas J.A. in Paradis Honey Ltd. v. Canada (Attorney General), 2015 FCA 89, leave to appeal to S.C.C. refused [2015] S.C.C.A. No. 227.

[91] One aspect of Catalyst's public law claim replicates its discrete misrepresentation claims against IO and the Crown. But there are several distinctive elements to the public law "duty to act" claim that Catalyst pleads against IO and the Crown, specifically that IO and the Crown failed: (i) to provide DKD with timely and sufficient information to enable DKD and Catalyst to structure a financial model that met IO and the Crown's "behind the curtain" requirements; (ii) to act fairly towards Catalyst; (iii) to make rational decisions based on factually correct information; (iv) to afford Catalyst a fair and reasonable opportunity to answer and alleviate any questions, issues, or concerns about its participation in DKD's bid and the Project; (v) to act in a non-arbitrary, bona fide manner and in a manner that respected Catalyst's reasonable [page474] expectations resulting from the Governmental Representations; and (vi) to avoid causing, contributing to, or assisting in any breach of contractual and other duties owed by DKD to Catalyst. Catalyst pleads that IO and the Crown breached those obligations, acted in bad faith, and their reasons "for excluding Catalyst were unreasonable and indefensible".

[92] The motion judge struck out Catalyst's public law claim against IO and the Crown, without leave to amend, for being plain and obvious that it could not succeed. While respectfully considering the obiter analysis of Stratas J.A. in Paradis Honey, the motion judge concluded that the Paradis Honey framework did not apply to Catalyst's case. The motion judge explained why, at paras. 98-101 of his reasons:

Without in any way denigrating the obiter analyses of Stratas J.A., I do not think it is at all applicable to this case. What he was dealing with was a case involving government policy unique to governmental action and he opined that in the future there could be a case to be made to permit such a claim to be decided on public law grounds.

In the case against IO and the Crown, however, what is central is a claim that could and is quite regularly made against private actors, namely a claim for damages arising from an unsuccessful bid in a RFP request for bids on a construction project.

In this case, the IO was acting as any other owner in seeking to obtain bids to finance and construct the Athlete's Village. There was nothing in this that was unique to governmental actors. This is no different from Design Services in which Public Works and Government Services Canada launched a "design-build" tendering process for the construction of a building. Justice Rothstein for the SCC dealt with the case involving rights between the Government and subcontractors by an analyses of the common law test of Anns. He began his decision by saying: "The issue in this appeal is whether an owner in a tendering process owes a duty of care in tort to subcontractors." It is also no different from Martel in which a claim arising from a tender process undertaken by the federal Department of Public Works was analysed by the SCC on contractual and tortious principles applicable to any private person.

I see no basis to depart from cases such as Design Services and Martel, which are binding authority, to permit a different analysis of claims against a public authority for liability under a tender process for a construction contract. To do otherwise would be to ignore that binding authority. It is plain and obvious that the public law claim pleaded against IO and the Crown cannot succeed and it is struck without leave to amend.

[93] Catalyst submits that the motion judge erred by improperly analogizing its claims to those in Design Services Ltd. v. Canada, 2008 SCC 22 and Martel Building Ltd. v. Canada, 2000 SCC 60. Its public law claim differs from the typical claim by an unsuccessful bidder under a tender process for a construction contract and lacks the element of indeterminate scope of liability [page475] that concerned the Supreme Court in Design Services and Martel. Catalyst contends it occupied a special position, as a non-prequalified proponent financier, known to IO and the Crown on the facts pleaded, and that its expulsion from DKD's winning bid violated the public law principles identified by Stratas J.A. in Paradis Honey. Although Ontario courts have not affirmed the obiter reflections in Paradis Honey about the availability of monetary relief for an administrative law wrong, Catalyst contends that its claim based on the framework constructed by Stratas J.A. in obiter should have been allowed to proceed as a novel cause of action.

Analysis

[94] I am not persuaded by these submissions. For several reasons, I substantially agree with the motion judge's analysis.

[95] First, the context in which Stratas J.A. made his obiter comments in Paradis Honey differs materially from the circumstances from which Catalyst's claim has emerged. At issue in Paradis Honey was the exercise by a Minister of the Crown of a regulatory discretion to issue permits for the importation of bees into Canada. At the material time, the Minister was only prepared to issue permits for the importation of a queen and a few attendant bees, not for small colonies, or a package, of bees. A class action was brought by a group of commercial beekeepers alleging that the government defendants had acted negligently and in bad faith by imposing such import restrictions.

[96] The Federal Court struck out the statement of claim. A majority of the Federal Court of Appeal (Nadon and Stratas JJ.A.) reversed and allowed the claim to proceed. The ratio of their decision was that the facts as pleaded supported claims in negligence and bad faith: at para. 77.

[97] However, all members of the court expressed the view that had the beekeepers attacked the government's conduct by way of judicial review and proven their allegations, they would have been entitled to an award of administrative law remedies: at paras. 85 and 147. That prompted Stratas J.A., writing for the majority, to ask, in obiter, whether the available administrative remedies could include a monetary award. He expressed the view that it was not plain and obvious that a court would decline to exercise its remedial discretion against giving the beekeepers monetary relief as an administrative law remedy: at paras. 147-148.

[98] By contrast, the facts pleaded in the present case do not concern the exercise by Ontario government actors of discretionary powers within a regulatory regime. Catalyst's Amended Claim is devoid of any allegation of the breach of a statutory duty or discretionary power. [page476]

[99] Instead, the factual context of Catalyst's claim concerns the process to select the Project's developer. That process was set out in the RFP, which IO issued as agent for the Crown: RFP, s. 1.1(1). The RFP operated as a "Contract A" in the tendering process framework adopted by the Supreme Court in a series of cases starting with Ontario v. Ron Engineering & Construction (Eastern) Ltd..

[100] The RFP set out the rights and obligations of the government sponsors and the various proponents and their team members. Section 3.6 of the RFP specifically addressed the process to change members of a proponent's team. Section 3.6(7) reserved to the government sponsors the right, in their sole discretion, to "refuse to accept a change in an Identified Proponent Party that occurs or is requested by the Proponent after the Submission Deadline (Technical)". In essence, all of Catalyst's claims come down to DKD not negotiating hard enough or in good faith to secure IO's consent to add Catalyst as a proponent team member and IO's refusal to so recognize Catalyst pursuant to s. 3.6(7) of the RFP.

[101] Second, to date the Supreme Court has not been prepared to recognize a tort duty of care by an owner to a proponent in the context of a tendering process, in part because the rights and obligations in the Contract A would inform any duty in any event: Martel, at para. 106. In Design Services, the court was not prepared to recognize a duty of care between an owner and the subcontractor of a proponent who had failed in its bid: at paras. 57-58 and 65-67. Recognizing Catalyst's public law claim as a reasonable cause of action would run counter to both those decisions.

[102] Third, Martel and Design Services involved tender processes run by government sponsors. In both cases, the Supreme Court applied the standard Anns/Cooper 5 analysis to the question of whether a duty of care existed. No special public law duty analysis was conducted. Significantly, for our purposes, in Design Services, the Supreme Court stated, at para. 32:

The appellants' economic losses do not fall within the first four categories. This case obviously does not involve a negligent misrepresentation, a negligent performance of services or a negligent supply of shoddy goods or structures. Neither is this a case of independent liability of statutory public authorities, [page477] which deals with the government's "unique public power to convey certain discretionary benefits, such as the power to enforce by-laws, or to inspect homes or roadways" (Feldthusen, at p. 358). Here, the government is not inspecting, granting, issuing or enforcing something mandated by law. Instead, the present situation is akin to commercial dealings between private parties, not the exercise of unique government power.

(Emphasis added)

[103] This extract from Design Services supports the motion judge's conclusion, at para. 100, that: "In this case, the IO was acting as any other owner in seeking to obtain bids to finance and construct the Athletes' Village. There was nothing in this that was unique to governmental actors."

[104] Fourth, this court has not previously recognized a Paradis Honey-type claim. 6 In Hughes v. Ontario (Liquor Control Board) (2019), 2019 ONCA 305, this court considered the lower court's decision to dismiss a class action against the Liquor Control Board of Ontario and several retailers alleging violations of the Competition Act, R.S.C. 1985, c. C-34. As one ground of appeal, the appellants contended that they had established their claim for damages under the "misconduct by a civil authority" claim discussed by Stratas J.A. in Paradis Honey. This court disposed of the ground of appeal on the basis that even if such a claim were adopted in Ontario, relief would not be available to the appellants on the facts of the case: at para. 47.

[105] Finally, in Merrifield v. Canada (Attorney General) (2019), 2019 ONCA 205, leave to appeal to S.C.C. refused, [2019] S.C.C.A. No. 174, 2019 CarswellOnt 14956, this court discussed at length the conditions supporting and the process required for the recognition of a new tort: at paras. 19-26. Merrifield stressed the importance of the incremental development of the common law and the grounding of any new tort in the emerging acceptance in the case law of a new type of claim: at paras. 20-24. Here, the conditions, at least as argued, do not support the recognition of a new tort of "misconduct by a civil authority". Catalyst relies on a single case, Paradis Honey, where comments were made in obiter, in a context where the government actors were not participating in a commercial transaction, as they are here. Moreover, in the present case, the jurisprudence [page478] very strongly points away from the recognition of such a claim in the tendering process where a government actor is the sponsor of the process.

[106] For these reasons, I conclude that the motion judge did not err in striking out Catalyst's public law claim, without leave to amend, on the ground that that it is plain and obvious that Catalyst's public law claim would not succeed.

[107] Given that conclusion, it is not necessary to address the submissions of the respondents that the enactment of s. 11 of the Crown Liability and Proceedings Act, 2019, S.O. 2019, c. 7, Sch. 17 extinguished in Ontario the kind of public law claim described by Stratas J.A. in Paradis Honey.

IX. Sixth Ground of Appeal: The Claim Against the Crown for Misrepresentation

The issue stated

[108] Catalyst pleads that at the time the Governmental Representations were made by IO in about mid-June 2011, IO and the Crown: (i) knew or ought to have known that they were untrue; and (ii) knew and intended that the Governmental Representations would be specifically and uniquely communicated to, accepted by, acted on, and relied on by Catalyst to its detriment.

[109] The motion judge did not strike out Catalyst's misrepresentation claim against IO. However, he struck out the claim against the Crown, without leave to amend, on the basis that it was precluded by s. 2(2)(b) of PACA, which states:

Nothing in this Act, . . . (b) subjects the Crown to a proceeding under this Act in respect of a cause of action that is enforceable against a corporation or other agency of the Crown[.]

[110] In striking out the claim against the Crown, the motion judge stated, at paras. 27-28:

To the extent that the pleading of Governmental Representations is a pleading of the existing state of mind of IO and the Crown, it is actionable if the statements were untrue. Catalyst however pleads in several places that the Governmental Representations were promises of what IO or the Crown would do in the future (paragraphs 127(a), 136, 137, 139 and 142) and damages are sought against IO and the Crown on that basis. There is no pleading of any contract between Catalyst and IO or the Crown, nor could there be as the basis for the claim of Catalyst is that it did not need to be a part of the RFP process as it could operate behind the curtain.

Thus the only claim so far as the Governmental Representations is concerned is the claim that they were untrue when made. That claim as pleaded does not permit a finding that the Crown but not IO could be liable for the untrue representation made by IO. The plea is that the untrue representations were made by IO. Thus section 2(2)(b) of the PACA precludes an action against the Crown [page479] for misrepresentation. The claim against the Crown for misrepresentation is therefore struck without leave to amend.

[111] Catalyst submits that the motion judge erred in striking out the misrepresentation claim against the Crown because it is conceivable that at trial it could be found that liability for the Governmental Representations could attach to the Crown, but not to IO, thereby bringing the case outside the scope of s. 2(2)(b) of PACA.

Analysis

[112] I am not persuaded by Catalyst's submission. It is undercut by its own pleading of material facts.

[113] In Imperial Tobacco, the Supreme Court stated, at paras. 22-23:

It is incumbent on the claimant to clearly plead the facts upon which it relies in making its claim. A claimant is not entitled to rely on the possibility that new facts may turn up as the case progresses. The claimant may not be in a position to prove the facts pleaded at the time of the motion. It may only hope to be able to prove them. But plead them it must. The facts pleaded are the firm basis upon which the possibility of success of the claim must be evaluated. If they are not pleaded, the exercise cannot be properly conducted.

Before us, Imperial and the other tobacco companies argued that the motion to strike should take into account, not only the facts pleaded, but the possibility that as the case progressed, the evidence would reveal more about Canada's conduct and role in promoting the use of low-tar cigarettes. This fundamentally misunderstands what a motion to strike is about. It is not about evidence, but the pleadings. The facts pleaded are taken as true. Whether the evidence substantiates the pleaded facts, now or at some future date, is irrelevant to the motion to strike. The judge on the motion to strike cannot consider what evidence adduced in the future might or might not show. To require the judge to do so would be to gut the motion to strike of its logic and ultimately render it useless.

(Emphasis added)

[114] Applying those principles to the present case, in its Amended Claim Catalyst clearly identifies the makers of the Governmental Representations as employees of IO: Amended Claim, para. 31. The IO employees named in the Amended Claim made the representations to DKD which, in turn, communicated them to Catalyst. It follows that if, at trial, Catalyst establishes that the IO employees made the Governmental Representations, as alleged, and those representations were not true, liability would attach to IO.

[115] Since IO is an agent of the Crown -- Ontario Infrastructure and Lands Corporation Act, 2011, s. 3(1) -- liability in respect of the misrepresentation cause of action would be "enforceable against a corporation or other agency of the Crown", thereby bringing the claim pleaded against the Crown [page480] squarely within the immunity afforded by PACA, s. 2(2)(b): Toronto (City) v. Longbranch Child Care, 2011 ONSC 548, at para. 44. 7

[116] Consequently, I would dismiss this ground of appeal.

X. Disposition

[117] For the reasons set out above, I would allow Catalyst's appeal in part and set aside paras. 1(a), (b) and (c) of the Order in which the motion judge struck out Catalyst's claims against DKD for breach of s. 29 of the Funding Term Sheet, breach of fiduciary duty, and unjust enrichment/quantum meruit. I would dismiss the appeal in all other respects.

[118] This proceeding was started in late 2013. Although it is on the Toronto Region Commercial List, the action has not progressed beyond successive attacks on the statement of claim. Active single-judge case management would be appropriate to move it along to a final adjudication on the merits. Once the Commercial List resumes normal operations following the current COVID emergency, the parties should appear before a judge of the Commercial List to secure the case management of this aging proceeding.

[119] The Crown successfully resisted Catalyst's appeal and is entitled to its costs of the appeal fixed in the amount of $10,000, inclusive of disbursements and applicable taxes.

[120] There was mixed success as between Catalyst and DKD on the appeal. I would fix the costs of the appeal as between them at $15,000, inclusive of disbursements and applicable taxes, but make the costs payable in the cause of the action. I would not interfere with the order of the motion judge that there should be no order as to the costs of the motion below.

Appeal allowed in part.

Notes

1 The Ontario Infrastructure and Lands Corporation is the amalgamated corporation continued under the Ontario Infrastructure and Lands Corporation Act, 2011, S.O. 2011, c. 9, Sch. 32, s. 2(1). It carries on business under the name Infrastructure Ontario.

2 The Funding Term Sheet defines the "Subordinated Noteholder" as Catalyst. Lenders were the consortium of financial institutions that were to provide DKD with financing for its bid and who were party to a Credit Agreement.

3 In ArcelorMittal Dofasco, the motion judge did take into consideration the surrounding circumstances and business context in interpreting the agreement, relying on the undisputed material facts plead in the statement of claim: at para. 34.

4 Section 29 of the Funding Term Sheet states, in part: "The parties acknowledge that the Senior Financing Term Sheet contains a condition precedent in favour of the Lenders . . ."

5 Anns v. Merton London Borough Council, [1977] UKHL 4, [1978] A.C. 728 (H.L.); Cooper v. Hobart, 2001 SCC 79.

6 This court considered Paradis Honey in Grand River Enterprises Six Nations Ltd. v. Canada (Attorney General), 2017 ONCA 526, at paras. 114-115, but not in respect of the discussion of a novel claim for misconduct by a civil authority. This court focused on the analysis in Paradis Honey using the standard Anns/Cooper framework.

7 I do not find persuasive the view expressed by Cullity J. in Dumoulin v. Ontario (2004), at para. 28, that before a court can apply PACA s. 2(2)(b), there must be a finding of liability against the Crown. On that basis, Cullity J. took the view that a rule 21.01(1)(b) motion was not the appropriate place in which to make a determination on the application of PACA s. 2(2)(b). In my view, such a restrictive interpretation of PACA s. 2(2)(b) would unnecessarily foster a multiplicity of litigation and would deprive the Crown of the section's stated purpose of protecting it from a proceeding if the section's conditions are met.

End of Document