COURT FILE NO.: CV-10-4306-00

DATE: 2012 05 16

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

FOURNIER LEASING COMPANY LTD., CANADIAN AUTO ASSOCIATES LTD. and WESTPORT MOTOR CARS LTD.

Plaintiffs

B. Osler and G. Hotz for the Plaintiffs

• and -

MERCEDES-BENZ CANADA INC., MERCEDES-BENZ USA LLC, and BMW CANADA INC., and THE ATTORNEY GENERAL OF CANADA

Defendants

D. Kent and M. Seers for the Defendants Mercedes-Benz Canada Inc. and Mercedes-Benz USA LLC

A. McKinnon for the Defendant BMW Canada Inc.

B. Brucker and V. Paolone for the Defendant The Attorney General of Canada

Reasons for Decision on Rule 21 Motion

K.M. van RENSBURG J.

A. Introduction

[1] This proposed class proceeding concerns claims by the plaintiffs who are car dealers who imported vehicles into Canada. The plaintiffs seek to represent a class of persons in Canada who imported Mercedes Benz, BMW and Mini vehicles into Canada from the United States. While the class period is not specifically identified, it appears from the Fresh Statement of Claim that the impugned conduct occurred between August 2006 and July 4, 2008 for the Mercedes defendants and November 27, 2007 and July 4, 2008 for BMW.

[2] By way of overview, the plaintiffs allege that, at the request of Mercedes, in August 2006 Transport Canada’s admissibility list for vehicles imported from the U.S. to Canada was revised to state that the manufacturer had not provided admissibility information to Transport Canada, that modifications to Mercedes vehicles to meet Canadian standards had to be performed by an authorized Mercedes dealer, and that a letter of admissibility from Mercedes was required to import Mercedes vehicles. It is alleged that similar changes to Transport Canada’s admissibility list were made at the request of BMW in November 2007 for BMW and Mini vehicles.

[3] As a result of the changes to the admissibility list, Mercedes and BMW were able to withhold admissibility and recall information until importers paid fees for the information and effected unnecessary vehicle modifications which were made by Mercedes and BMW dealers. This allowed Mercedes and BMW to maintain artificially high prices for the modification and certification of imported vehicles and to allocate the market for modifications of Mercedes vehicles to Mercedes and of BMW vehicles to BMW. This continued until the admissibility list in respect of such vehicles was revised on July 4, 2008 to remove the objectionable statements, and to return to the pre-August 2006 statements in relation to such vehicles.

[4] The Amended Amended Statement of Claim that was before the court at the commencement of the motion alleged that the defendants conspired with the Attorney General of Canada (the “AG”), representing Transport Canada and Canada Border Services Agency (“CBSA”), and their respective dealers, to force Canadians to pay for unnecessary modifications and certifications on vehicles imported from the United States. There were also allegations of misrepresentation against the AG, as well as allegations of violations of consumer protection and competition laws.

[5] This decision is in respect of a motion by the defendants Mercedes-Benz Canada Inc. (“Mercedes Canada”), Mercedes-Benz USA LLC (“Mercedes US”) (together the “Mercedes defendants”) and BMW Canada Inc. (“BMW”) to strike the claims against them in this action pursuant to rules 21 and 25.11.

[6] There was also a motion to strike brought at the same time by the AG, however during the course of argument plaintiffs’ counsel advised that they would be seeking a dismissal on consent of the claims against the AG and certain amendments to the Amended Amended Statement of Claim respecting the AG’s involvement in the matters in dispute.

[7] An order was made dismissing the claims by the plaintiffs against the AG without costs. The order was made on the basis that the dismissal did not bind other parties from any proceeding involving the same or related subject matter. The Amended Amended Statement of Claim was amended on consent, and the pleading at issue is now the Fresh Statement of Claim (the “Claim”), which continues to contain references to, but no allegations of wrongdoing against, the AG. Also on consent references in the pleadings to “Volvo” vehicles were removed from the pleading.

[8] In the current version of the pleading there is no longer an allegation of conspiracy involving the government. There are no longer any pleadings of misrepresentation, at least as a separate cause of action, as the AG was the only party originally against whom such allegations were made. What remains of the pleading is at times awkward and disjointed, because of the deletion of certain paragraphs, sentences and words. The Claim purports to plead the following causes of action against the remaining defendants:

(a) a civil conspiracy between BMW Canada and its dealers (who are not named as defendants in the action);

(b) a civil conspiracy between the Mercedes defendants and their dealers (who are not named as defendants in the action); (Note that there is no allegation of a conspiracy between BMW and the Mercedes defendants);

(c) breach of s. 17 of the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A.;

(d) conduct contrary to Part VI of the Competition Act R.S.C.1985 c. C-34;

(e) interference with economic interests;

(f) unjust enrichment; and

(g) waiver of tort.

B. Facts

[9] In a motion to strike for failure to disclose a cause of action, the facts as pleaded are assumed to be true, unless they are manifestly incapable of being proven: Operation Dismantle Inc. v. The Queen, 1985 CanLII 74 (SCC), [1985] 1 S.C.R. 441 at 455. What follows are the material facts as pleaded in the Claim.

1. Importing Vehicles from the U.S. into Canada

[10] The action relates to the importation of motor vehicles from the United States into Canada. With the Canadian dollar close to par against the American dollar, vehicle prices are generally lower in the United States.

[11] Transport Canada operates a program to allow Canadians to import vehicles from the United States. Between January 1, 2006 and June 30, 2010 more than 750,000 vehicles were imported through Transport Canada’s import program. The plaintiffs were importers of BMW and/or Mercedes vehicles through this program.

[12] Mercedes Canada sells, markets and services Mercedes vehicles in Canada, while Mercedes US sells, markets and services Mercedes vehicles in the U.S. BMW sells, markets and services BMW vehicles in Canada.

[13] Since 2005, the same or similar vehicles sold and distributed by the Mercedes defendants and BMW were priced 10 to 35 per cent higher than the same or similar make and model vehicles sold in the United States. There was consumer demand for the purchase and importation of such vehicles from the United States because of lower prices in the U.S.

2. The Regulated Process

[14] The importation of vehicles from the U.S. is a regulated process. Canada has enacted laws and regulations which, if followed, entitle a person to import a vehicle from the U.S. into Canada through Transport Canada’s import program, known as the RIV program, which was established in 1995. The laws and regulations are administered by Transport Canada and CBSA.

[15] When a vehicle is imported from the U.S. into Canada it must be inspected and certified to ensure that the vehicle is compliant with Canadian motor vehicle safety standards. Such standards are similar to American motor vehicle safety standards, although there are some minor differences. Most American vehicles can be easily modified to meet Canadian standards and many vehicles do not need any modifications at all. The inspection and certification are carried out by Transport Canada through a contractor under the Motor Vehicle Safety Act (the “Act”).

[16] A person is entitled to import a motor vehicle into Canada from the U.S. as long as the importation complies with the Act and the regulations prescribed thereunder (the “regulations”).

[17] Under s. 7(2) of the Act, a person may import a vehicle from the U.S. as long as the importer makes a declaration to Transport Canada in the prescribed form that the vehicle will be brought into conformity with Canadian safety standards in place at the time the vehicle was originally manufactured, and the vehicle will be certified as conforming to Canadian safety standards in the prescribed form and manner by a person designated by the regulations. The person designated by the regulations to certify that imported vehicles comply with Canadian safety standards is known as the Registrar of Imported Vehicles (“RIV”). RIV is currently operated by a private corporation, Livingston International Inc.

3. The RIV Program

[18] The prescribed importation process is set out in detail in the Act and regulations. An importer must follow certain procedures which include:

(a) Confirming that the vehicle is on a list maintained by Transport Canada of vehicles that are admissible into Canada from the United States on the basis that the vehicles can be modified to meet Canadian safety standards;

(b) Confirming that there are no outstanding recalls on the vehicle issued by the United States national Highway Traffic Safety Administration that have not yet been repaired;

(c) Determining the modifications required to bring the vehicle into conformity with Canadian safety standards;

(d) Submitting to CBSA proof of ownership of the vehicle;

(e) Filling out a Transport Canada document, known as Form 1, that is submitted by the importer to CBSA, which requires the importer to provide certain information about the vehicle and the importer, such as the vehicle identification number, type of vehicle, make, model, importer name, address and telephone number;

(f) Obtaining verification from CBSA that the vehicle is not inadmissible for importation into Canada – i.e. the vehicle is not listed as inadmissible on Transport Canada’s list of admissible vehicles;

(g) Paying to CBSA the mandated fee for RIV which is $195 plus tax. Part of the fee is held in trust by RIV for Transport Canada;

(h) Submitting to CBSA proof that there are no outstanding recalls on the vehicle that have not yet been repaired. Proof that there are no outstanding recalls and Form 1 are delivered by CBSA to RIV;

(i) Obtaining an inspection form from RIV (Form 2), which sets out the modifications required to bring the vehicle into compliance with Canadian safety standards;

(j) Completing any modifications to the vehicle required to bring the vehicle into compliance with Canadian safety standards, which modifications may be completed by any vehicle repair service provider;

(k) Taking the vehicle to an RIV inspection centre to enable RIV or its agent to determine if the vehicle conforms to Canadian safety standards. Necessary modifications can be performed by the inspection centres;

(l) Obtaining a certified Form 1 from the inspection centre to confirm that the vehicle has been inspected and has been certified as complying with Canadian safety standards;

(m) Obtaining a certification label from RIV to affix to the vehicle; and

(n) Presenting the certified Form 1 to a provincial vehicle licensing office to enable the importer to license the vehicle for use in Canada.

4. The Admissibility List

[19] Importers were directed by Transport Canada on its website and elsewhere to consult the Transport Canada admissibility list prior to import to determine if the vehicle could be imported into Canada and to follow the directives on the admissibility list. The website stated that there are questions that need to be dealt with before a vehicle is imported and that the steps that importers must take are listed on the RIV website, which stated that “before you import, make sure you check your vehicle against Transport Canada’s list of vehicles admissible from the United States”.

[20] The Claim alleges that Transport Canada required importers to rely on and follow the directives on the admissibility list, and that importers relied on the accuracy and truthfulness of the statements made by Transport Canada on the admissibility list.

[21] The admissibility list contained statements relating to the admissibility of Mercedes, BMW and Mini vehicles. The admissibility list was populated from information provided by vehicle manufacturers. The admissibility list shows which vehicle models can be imported from the U.S. on the basis that they can be certified by RIV as meeting Canadian safety standards, and which vehicle models are inadmissible because they cannot be certified as meeting such standards.

5. Allegations re: Changes to the Admissibility List

[22] It is alleged that in 2006, in an effort to deter Canadians from importing vehicles from the U.S. where prices were lower, Mercedes demanded that Transport Canada remove all of its vehicles from the admissibility list. Transport Canada initially had reservations about this demand. On June 28, 2006, Pierre Tremblay, Chief, Importation and Audit Inspection, Transport Canada, sent Manfred Mokry, Manager, Product Compliance & VPC Coordination, Mercedes, an email stating:

As I explained to you last week, we cannot have a list of vehicles that are admissible from the United States and then have the same vehicles denied entry by the manufacturer of the vehicle.

[23] Notwithstanding Mr. Tremblay’s concerns and that Mercedes had provided complete information about the admissibility of its vehicles, Transport Canada removed all of the Mercedes vehicles from the admissibility list. Transport Canada ultimately changed its admissibility list to state, “The manufacturer has not provided information to Transport Canada on the admissibility of Mercedes-Benz vehicles”.

[24] It is alleged that Mercedes was adamant about preventing Canadians from buying their vehicles in the United States and importing them into Canada. Mercedes went back to Transport Canada and demanded that vehicles not be allowed into Canada unless Mercedes granted permission for an import in the form of a “letter of admissibility”. The term “letter of admissibility” was branded by Mercedes, and there has never been any requirement in the Act for a letter of admissibility from any manufacturer. In August 2006 Transport Canada changed the admissibility list to state, “A formal letter of admissibility for Mercedes Benz must be presented to CBSA offices at the time of importation”.

[25] By November 27, 2007 BMW had asked Transport Canada to make the same statements on the admissibility list for BMW and Mini vehicles. Transport Canada agreed to remove all BMW and Mini vehicles from the admissibility list and stated, “The manufacturer has not provided information to Transport Canada on the admissibility of BMW and Mini vehicles”.

[26] The admissibility list also stated that modifications of Mercedes, BMW and Mini vehicles had to be done by an authorized Mercedes or BMW dealer respectively. The admissibility list did not contain any such representation for any other make of vehicle.

[27] On July 4, 2008, after the issuance of this action, Transport Canada removed the statement that it had no information about Mercedes, BMW and Mini vehicles from its admissibility list and the statement about modifications having to be done by an authorized dealer and the statement about admissibility letters. All of the Mercedes, BMW and Mini vehicles that Transport Canada knew were admissible into Canada were returned to the list.

[28] BMW currently acknowledges on its website that letters of admissibility are not required, while Mercedes acknowledges that such letters are not required, but continues to misrepresent that letters of admissibility are “recommended”.

[29] The misrepresentations on the admissibility list gave Mercedes and BMW the ability to deny entry into Canada of vehicles that could properly be imported through the RIV program unless importers paid fees and charges to these companies for unnecessary certifications and vehicle modifications, including modifications to instrument clusters, heater control modules and daytime running lamps. BMW and Mercedes withheld letters of admissibility unless the unnecessary modifications were completed and fees were paid to them by importers. It is alleged that the modifications were not required to bring the vehicles into compliance with Canadian standards.

[30] From November 27, 2007 onward, Transport Canada and CBSA required that letters of admissibility be presented at the border by importers of Mercedes, BMW and Mini vehicles.

[31] BMW and Mercedes charged a standard fee to issue a letter of admissibility. Some vehicles required no modification at all, but BMW still charged a fee to issue a letter of admissibility.

[32] It is alleged that vehicles were physically prevented from entering Canada unless importers had paid Mercedes and BMW the fees for unnecessary modifications and certifications. The plaintiffs and other importers acted reasonably in following the directives and instructions on the admissibility list.

6. Allegations of Wrongdoing by the Defendants

[33] I turn now to consider the specific causes of action alleged against the remaining defendants. As stated earlier, the action as originally framed alleged misrepresentation by Transport Canada in connection with the statements about Mercedes, BMW and Mini vehicles on the admissibility list. There were also allegations of negligence against Transport Canada and CBSA in connection with the refusal of entry of vehicles that were in fact admissible. There were also allegations of conspiracies between Transport Canada, CBSA and each of Mercedes and BMW and their dealers. There are now no allegations of misrepresentation as a cause of action against any of the remaining defendants and the conspiracy allegations do not include the AG as a defendant or as a participant in the alleged conspiracies.

[34] In support of the claims of civil conspiracy, breach of Part VI of the Competition Act and intentional interference with economic interests, certain facts are alleged as follows:

Since 2005 senior executives and employees of the defendants and unnamed co-conspirators, acting in their capacities as agents for the defendants and unnamed co-conspirators, engaged in communications, conversations and attended meetings with each other at times and places, some of which are unknown to the plaintiffs, and as a result of the communications and meetings of the defendants and unnamed co-conspirators, they unlawfully agreed and/or arranged to:

(a) withhold recall information from importers until they agreed to pay fees for the recall information and until they paid fees for unnecessary modifications;

(b) force vehicle importers to pay, to the Mercedes defendants and BMW and their dealers, fees for making unnecessary modifications and certifications to vehicles that already complied with Canadian safety standards;

(c) fix, increase and/or maintain at artificially high levels the prices at which modifications and certifications for importation of Mercedes, BMW and Mini vehicles were sold in Canada;

(d) allocate the entire market for modifications for importation of BMW and Mini vehicles to BMW; and

(e) compel vehicle importers to pay fees and charges, including artificially high fees and charges, to the Mercedes defendants and BMW for information about recalls on their vehicles notwithstanding that the Mercedes defendants and BMW are obliged to remedy recalls and provide information about recalls on American and Canadian vehicles at no charge to vehicle owners.

[35] The italicized words, which were included in the Amended Amended Statement of Claim, appear to have been unintentionally deleted from the Fresh Statement of Claim. For the purpose of deciding this rule 21 motion, I assume that these paragraphs form part of the current pleading, as this is the only place where the substance of the unlawful agreement or arrangement appears to be pleaded. (Counsel have since confirmed that the italicized words were unintentionally deleted and should form part of the pleading.)

[36] The Claim alleges the following acts in furtherance of the conspiracy, combination, agreement and/or arrangement (again, the italicized words were unintentionally deleted and should form part of the pleading):

In furtherance of the conspiracy, combination, agreement and/or arrangement, during this period, the following acts were done by the defendants, their servants and agents and unnamed co-conspirators:

As between the Mercedes defendants and their dealers:

i. They knowingly made misrepresentations to vehicle importers related to requirements for importing Mercedes vehicles into Canada;

ii. They imposed unnecessary modifications, procedures, fees and costs that were not required by law on importations of Mercedes vehicles;

iii. They unlawfully transferred the inspection and certification authority for imported vehicles prescribed by law to Mercedes;

iv. They knowingly compelled importers of Mercedes vehicles to pay fees to the Mercedes defendants for providing recall information on their vehicles notwithstanding that the Mercedes defendants had an obligation to remedy recalls and provide information about recalls on these vehicles at no charge to importers;

v. They agreed that the dealers would no longer provide recall information to importers (which they previously provided at no charge) to force importers to buy recall information from the Mercedes defendants and to force importers to pay for unnecessary modifications in order to obtain recall information;

vi. They agreed to charge and collect unlawful estimate fees from consumers;

vii. They instructed members of the conspiracy not to divulge the existence of the conspiracy; and

viii. They disciplined any corporation or person who failed to comply with the conspiracy.

[37] Essentially the same allegations are made against BMW, with the exception of the allegation about the collection of unlawful estimate fees from consumers.

[38] It is alleged that the purpose of these conspiracies, combinations, agreements and/or arrangements was to illegally increase profits earned by the Mercedes defendants and BMW on modifying, certifying and providing recall information for vehicles imported into Canada from the United States.

[39] It is alleged that the defendants had sufficient market power to behave independently of the market and intentionally engaged in particularly injurious behaviour likely to injure competition, which did indeed lessen competition substantially. The defendants were aware, or ought to have been aware, that their conspiracies, combinations, agreements and/or arrangements, if implemented, would result in an undue restraint of competition.

[40] It is alleged that the acts were in breach of Part VI of the Competition Act, in particular s. 45(1) and render the defendants liable to pay damages pursuant to s. 36 of the Competition Act. In the latest amendment to the Claim the plaintiffs also rely on s. 52(1) of the Competition Act, which is also in Part VI.

[41] It is alleged that the participation of Mercedes and BMW dealers was essential because importers needed certain recall information to pass the RIV inspection. Importers were forced to obtain the recall information from the Mercedes defendants and BMW and they would only supply the recall information after importers paid for unnecessary modifications and certifications.

[42] There are also allegations of breaches of sections 17(1) and 57(3) of the Consumer Protection Act, unjust enrichment, waiver of tort and constructive trust (which causes of action and facts pleaded in support are described later in these reasons).

7. Claim for Damages

[43] The Claim alleges that the plaintiffs and other importers have suffered damages as a result of the acts of the defendants, which had the effect of unreasonably raising, maintaining and stabilizing prices of modifications, certifications and recall information on imported Mercedes, BMW and Mini vehicles at artificial and non-competitive levels. The plaintiffs and other importers paid for work that was unnecessary and/or paid more for modifications, certifications and recall information on such vehicles, suffering injury to their business and property, and damages.

[44] The plaintiffs claim damages on an aggregate or individual basis. They also claim punitive damages.

C. Test on a Rule 21 Motion

[45] In a rule 21 motion, the court must be satisfied that it is plain and obvious that the allegations pleaded are incapable of supporting a cause of action and that the claim cannot succeed: Hunt v. Carey, 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959. The statement of claim must be read generously, with a view to accommodating any inadequacies in the form of the allegations due to drafting deficiencies: Apotex Inc. v. Hoffmann La-Roche Ltd., 2000 CanLII 16984 (ON CA), [2000] O.J. No. 4732 (C.A.) at para. 5.

[46] The usual practice is to grant the plaintiff leave to amend unless it is clear that the plaintiff cannot improve its case by any further and proper amendment: AGF Canadian Equity Fund v. Transamerica Commercial Finance Corp. Canada (1993), 1993 CanLII 8682 (ON SC), 14 O.R. (3d) 161 (Gen. Div.) at 173.

D. Competition Act Claims

[47] Section 36 of the Competition Act provides for a statutory cause of action for a private party who has suffered damage as a result of conduct contrary to the criminal provisions of the Act (Part VI). Even where there are no criminal charges, a plaintiff may seek recovery by proving breach of such provisions and resulting damages.

[48] The conspiracy provisions of the Competition Act were amended in March 2010 such that they apply only to conspiracies between competitors. At the relevant time however section 45(1) provided as follows:

Everyone who conspires, combines, agrees or arranges with another person

(a) To limit unduly the facilities for transporting, producing, manufacturing, supplying, storing or dealing in any product,

(b) To prevent, limit or lessen, unduly, the manufacture or production of a product or to enhance unreasonably the price thereof,

(c) To prevent or lessen, unduly, competition in the production, manufacture purchase, barter, sale, storage, rental, transportation or supply of a product, or in the price of insurance on persons or property, or

(d) To otherwise restrain or injure competition unduly,

is guilty of an indictable offence and liable to imprisonment for a term not exceeding five years or to a fine not exceeding ten million dollars or to both.

[49] Para. 74 of the Claim alleges two conspiracies contrary to the Competition Act – one between the Mercedes defendants and their dealers, and the other between BMW and its dealers. The facts relied upon in support of the Competition Act claims are set out in paras. 74 to 81 of the Claim as well as the additional subparagraphs and wording that were unintentionally deleted, to which I have referred earlier in these reasons.

[50] Originally conduct by Transport Canada and CBSA was alleged to have been an integral part of the conspiracies. A key objection to the pleading at the hearing of the motion, was that the Crown cannot offend the Competition Act. These references have been deleted from the Claim.

[51] The remaining objections to the Competition Act conspiracy pleadings are that (a) the claim cannot succeed because the acts alleged were “regulated conduct” and therefore not unlawful; (b) the claim does not allege the necessary element of allocation of markets or impact on competition in Canada; and (c) the claim cannot succeed where the conspirators of BMW are affiliates.

1. The “Regulated Conduct” Defence

[52] The defendants assert that the “regulated conduct” doctrine or defence would apply to exclude any action taken pursuant to a valid regulatory scheme, such that the conduct of the defendants, authorized by the government under a comprehensive regulatory scheme, cannot fall afoul of the Competition Act.

[53] Ordinarily, a court will not strike a pleading of a cause of action simply because a defendant may be able to establish a particular defence: See, for example, Mansoor Electronics Ltd. v. BCE Mobile Communications Inc., [1995] F.C.J. No. 1208 (F.C.), where Richard J. refused to strike a claim under the Competition Act on the basis that the regulated conduct defence should be pleaded in the Statement of Defence and the court should consider its application on such facts as might be proven at trial (at para. 23). In this case, however, the defendants assert that it is plain and obvious that the defence will succeed; that is, that they are exempt from Part VI of the Competition Act by virtue of the fact that the importation of vehicles from the U.S. into Canada is subject to a comprehensive legislative and regulatory scheme.

[54] In R. v. Independent Order of Foresters (1989), 1989 CanLII 10345 (ON CA), 26 C.P.R. (3d) 229 (Ont. C.A.) at 233, the “regulated industries” doctrine was defined as follows:

The doctrine simply means that a person obeying a valid provincial statute may in certain circumstances, be exempted from the provisions of a valid federal statute. But there can be no exemption unless there is a direction or at least an authorization to perform the prohibited act.

[55] In that case, the accused had been charged under the Combines Investigation Act with having made misleading advertisements relating to the recruitment of insurance sales personnel. While upholding the convictions, the Court of Appeal concluded that the trial judge had erred in applying the regulated industry doctrine where the defendant was subject to provincial control and regulations under Ontario’s Insurance Act. The court stated, at p. 234:

There is no suggestion in the case at bar that the Insurance Act authorizes, much less directs [the defendant] to give false or misleading representations or to make any representations that might be deemed false or misleading, to the public.

[56] In Industrial Milk Producers Association v. British Columbia (Milk Board), 1988 CanLII 9411 (FC), [1989] 1 F.C. 463 (F.C.), at para. 36, Reed J. referred to the regulated conduct defence as follows:

…I accept counsel for the plaintiffs’ argument that it is a regulated industry defence, not an exemption which is pertinent. Indeed as I read the cases it is a regulated conduct defence. It is not accurate merely to identify an industry as one which is regulated by federal or provincial legislation and then conclude that all activities carried on by individuals in that industry are exempt from the Competition Act. It is not the various industries as a whole, which are exempt…but merely activities which are required or authorized by the federal or provincial legislation as the case may be. If individuals involved in the regulation of a market situation use their statutory authority as a spring board (or disguise) to engage in anti-competitive practices beyond what is authorized by the relevant regulatory statute then such individuals will be in breach of the Competition Act. (emphasis in original)

[57] In Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629, the Supreme Court considered the application of the regulated conduct defence in the context of a consumer class action for restitution of late payment penalties alleged to have violated s. 347 of the Criminal Code (respecting criminal rates of interest), but collected pursuant to orders of the Ontario Energy Board. The court held that the defence only applies where the legislation expressly or by necessary implication contemplates that the impugned conduct will be permitted (at paras. 77 to 79).

[58] The authorities are clear. In order for the regulated conduct exception or defence to apply, the actions in question must have been directed or authorized by the statute or regulation. The fact that the importation program is administered by Transport Canada and the CBSA under a legislative scheme is not sufficient. The defendants were unable to point to any express provision or necessary implication in the regulatory regime that would authorize or direct them to engage in the conduct they are alleged by the plaintiffs to have undertaken, that is to pressure the government agency to insert false statements in the admissibility list, to deny Canadian importers access to recall information, and to prevent importers from using whomever they wish to perform vehicle modifications.

[59] It is not plain and obvious that the regulated conduct defence will apply to preclude the claims under the Competition Act, and this ground of attack on the pleading must fail.

2. The Claim Cannot Succeed because it Deals with Lessening Competition in the U.S. Market

[60] The defendant BMW asserts that, while the Claim alleges that its anti-competitive conduct had an impact on markets in Canada, a plain reading of the Claim indicates that the plaintiffs are describing the market for modifications in the United States. The allegation is that, as a result of the changes to the admissibility list and the CBSA’s actions, BMW was able to prevent vehicles from being imported into Canada until necessary modifications were made. BMW argues that the necessary implication is that the modifications would have been performed in the U.S. and therefore would not have impacted the Canadian market for repair and modifications. If this is the case, an essential element of the offence would be missing, that the conduct affected competition in Canada.

[61] The plaintiffs contend that the pleading describes the market for modifications in Canada. I agree. The plaintiffs allege that modifications to bring a vehicle into compliance with Canadian safety standards can be done by any vehicle repair service provider. They specifically allege that modifications can be performed by the RIV inspection centres, all of which are located in Canada. As such, the Claim should not be read as a complaint about the defendants’ conduct affecting the U.S. market. The defendants’ conduct is alleged to have affected the Canadian market, including the market for repairs and modifications. This challenge to the pleading cannot succeed.

3. The Claim Cannot Succeed where Co-conspirators are Affiliates

[62] Former s. 45(8) of the Competition Act provides:

Subsection (1) does not apply in respect of a conspiracy, combination, agreement or arrangement that is entered into only by companies each of which is, in respect of every one of the others, an affiliate.

It is asserted by BMW that, on a plain reading of the Claim, what is alleged is a conspiracy between BMW and its dealers who are affiliates, and that this cause of action must of necessity fail.

[63] At this stage the identity of the dealers who are alleged to have conspired is unknown. The Claim alleges conspiracies between the Mercedes defendants and their dealers and BMW and its dealers. In furtherance of the conspiracies, among other things, the dealers are alleged to have agreed to no longer provide recall information to importers without charge.

[64] BMW asserts that elsewhere in the Claim the plaintiffs plead that BMW has been unjustly enriched by the unnecessary modifications performed by its dealers, and this enrichment would only be possible if BMW and its dealers are affiliates. While this may be the case, it is something that can be raised by way of defence. BMW does not assert that all of its dealers are in fact affiliates, and this is not a necessary inference from the pleading. If BMW conspired only with its affiliated dealers, then the Competition Act claim would be sure to fail. At this stage however it is not plain and obvious that the dealers referred to are all affiliates, and that a s. 45(8) defence will be made out.

[65] The claims under the Competition Act will not be struck out.

E. Civil Conspiracy Claims

[66] The cause of action in civil conspiracy is pleaded at paras. 82 and 83 of the Claim. The plaintiffs plead as follows:

82. The plaintiffs repeat and rely upon the facts set out in paragraphs 74 to 81 and state that the acts particularized therein were unlawful acts directed towards the plaintiffs and other importers of Mercedes, BMW and Mini vehicles, which unlawful acts the defendants knew in the circumstances would likely cause and did cause injury, damages and losses to the plaintiffs and the other importers of Mercedes, BMW and Mini vehicles and the defendants are liable for the tort of civil conspiracy.

83. Alternatively, the primary purpose of the conduct and acts of the Mercedes defendants and BMW was to cause injury and financial losses to the plaintiffs and other importers.

[67] The facts relied upon are those set out in paragraphs 74 to 81 (again, including the subparagraphs and additional wording inadvertently omitted from the latest amendment to the Claim referred to earlier in these reasons).

[68] The defendants raise two objections to the pleading of civil conspiracy in this case. They assert that the Claim does not properly plead either or both types of civil conspiracy, and that the tort has not been pleaded with sufficient particularity.

1. Is the Tort of Civil Conspiracy Properly Pleaded?

[69] According to the leading case of Canada Cement LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd., 1983 CanLII 23 (SCC), [1983] 1 S.C.R. 452, the tort of civil conspiracy can be committed in two ways:

(a) Where the defendants’ conduct is itself unlawful, directed at the plaintiff, and will foreseeably result in harm to the plaintiff; or

(b) Where the predominant purpose of the defendants’ conduct is to injure the plaintiff, regardless of whether the means used are lawful or unlawful.

[70] In Dale v. Toronto Real Estate Board, 2012 ONSC 512 (S.C.J.), K. Campell J., citing the relevant authorities, described the elements of the two types of conspiracy as follows (at para. 49):

…[T]he elements of "predominant purpose conspiracy" require the plaintiff to establish that: (1) the defendants acted in combination, that is, in concert, by agreement or common design; (2) the predominant purpose of the defendants was to intentionally harm the plaintiff; and (3) the defendants' conduct caused harm to the plaintiff. The elements of "unlawful means conspiracy" require the plaintiff to establish that: (1) the defendants acted in combination, again that is, in concert, by agreement or common design; (2) the defendants committed some unlawful act such as a crime, a tort, or breached some statute; (3) the defendants conduct was directed towards the plaintiffs; (4) the defendants knew or ought to have known that injury to the plaintiffs was likely to occur from their unlawful act; and (5) the defendants' unlawful conduct in furtherance of their conspiracy caused harm to the plaintiff. See: Canada Cement LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd., 1983 CanLII 23 (SCC), [1983] 1 S.C.R. 452, at pp. 471-472; Hunt v. Carey Canada Inc., 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959, at para. 35-43; Lombardo v. Caiazzo, [2006] O.J. No. 2286 (C.A.) at para. 16-17; Robinson v. Medtronic, Inc., 2009 CanLII 56746 (ON SC), [2009] O.J. No. 4366 (S.C.J.) at para. 85-120; Harris v. GlaxoSmithKline Inc. et al. (2010), 2010 ONCA 872, 106 O.R. (3d) 661 (C.A.) at para. 39-51; Agribrands Purina Canada Inc. v. Kasamekas (2011), 2011 ONCA 460, 106 O.R. (3d) 427 (C.A.) at para. 24-43.

[71] In this case the plaintiffs rely on both types of civil conspiracy. The question is whether it is plain and obvious from the pleading that the tort will not be made out.

a. Unlawful Conduct Conspiracy

[72] For defendants to be liable for the tort of unlawful conduct conspiracy, a plaintiff must prove that (a) the conspirators acted in combination; that is, in concert, by agreement or with a common design; (b) their conduct is unlawful; (c) their conduct is directed towards the plaintiffs; (d) the conspirators should know that, in the circumstances, injury to the plaintiffs is likely to result; and (e) their conduct causes injury to the plaintiffs: Agribrands Purina Canada Inc. v. Kasamekas (2011), 2011 ONCA 460, 106 O.R. (3d) 427 (C.A.), at para. 26.

[73] The defendants assert that the requirement that the defendants engaged in unlawful conduct cannot be met in this case.

[74] “Unlawful conduct” for the purpose of the tort of conspiracy need not be independently actionable, but must be conduct that is a tort, breach of statute or breach of contract. It is not sufficient that the conduct is something that the defendants are “not at liberty to do”: Agribrands, at paras. 36 to 38.

[75] Paragraphs 74 to 81 of the Claim (including the passages that were unintentionally deleted in the last revision of the pleading), allege conduct by the defendants and their dealers in violation of the Competition Act and the Consumer Protection Act. Paragraph 82 of the Claim pleads that the acts were “unlawful acts directed towards the plaintiffs and other importers…which unlawful acts the defendants knew in the circumstances would likely cause and did cause injury, damages and losses”. I am satisfied that the pleading discloses allegations of unlawful conduct by the defendants and their dealers, who are the alleged parties to the conspiracies pleaded, as well as all of the other elements of the tort necessary to plead a cause of action of unlawful conduct conspiracy.

b. Unlawful Injury Conspiracy

[76] The defendants assert that the Claim does not disclose a claim for conspiracy to injure. This type of conspiracy requires that the defendants’ predominant purpose was to harm the plaintiffs. Where the predominant purpose is to promote legitimate self-interest, the unlawful purpose conspiracy will not succeed, even if it predictably causes damage to another person: Harris v. GlaxoSmithKline Inc., 2010 ONCA 872, [2010] O.J. No. 5546 (C.A.), at paras. 39 and 44, leave to appeal to S.C.C. denied [2011] S.C.C.A. No. 85. To be predominant, a purpose must be the defendant’s chief or principal purpose. Actions taken for the purpose of protecting a party’s trade or business interests are not actionable as conspiracy to injure.

[77] In this case the plaintiffs plead in para. 75 of the Claim:

The purpose of these conspiracies, combinations, agreements and/or arrangements [was] to illegally increase profits earned by the Mercedes defendants and BMW on modifying, certifying and providing recall information for vehicles imported into Canada from the United States.

[78] This pleading of the purpose of the conspiracies is inconsistent with the general allegation in para. 83 that the “primary purpose” of the conduct was to cause injury and financial losses to the plaintiffs and other importers. Read as a whole, the Claim alleges that the conduct of the defendants and their co-conspirators was for economic gain, to preserve for themselves the Canadian market for BMW, Mini and Mercedes vehicles, and to dissuade Canadians from purchasing such vehicles in the U.S. and importing them into Canada by imposing additional and unnecessary costs on the imported vehicles.

[79] The Claim alleges that the defendants imposed unnecessary fees for modifications, estimates and certifications, compelled and forced importers to pay for recall information and modifications, and increased the defendants’ profits. There is no suggestion from the facts pleaded that the object of the conspiracy was to cause harm to the plaintiffs and other importers as an end in itself. The fact that an alternative purpose is pleaded in general terms in one paragraph of the Claim does not assist, where the Claim, read as a whole, makes it clear that the plaintiffs are alleging a predominant purpose of self-interest, and not to harm the plaintiffs, or as the plaintiffs allege in their factum, to “punish” them.

[80] The pleading of unlawful injury conspiracy contained in para. 83 of the Claim is struck without leave to amend.

2. Is the Tort of Conspiracy Pleaded with Sufficient Particularity?

[81] A pleading of the tort of conspiracy must include the following elements: the parties and their relationship; an agreement to conspire; the precise purpose or objects of the conspiracy; the overt acts alleged to have been done by each conspirator; and the injury and particulars of the special damages suffered by reason of the conspiracy: Normart Management Ltd. v. West Hill Redevelopment Co., 1998 CanLII 2447 (ON CA), [1998] O.J. No. 391 (C.A.), at para 21. In Agribrands at para. 26, the Court of Appeal expressed the “agreement” element more broadly, requiring that the defendants “acted in combination, that is, in concert, by agreement or with a common design”.

[82] The defendants assert that the pleading fails to properly identify the parties to each conspiracy, and that the predicate “agreement” is not properly pleaded.

[83] Paragraph 74 of the Claim refers to conspiracies between senior executives and employees of the defendants and “unnamed co-conspirators” acting in their capacities as agents for the defendants and unnamed co-conspirators. The pleading of “unnamed co-conspirators” would not meet the requirement of identifying the parties to the conspiracy and their relationship. Later however, the pleading refers to conspiracies as between each of BMW and its dealers and the Mercedes defendants and their dealers. No specific dealers are identified.

[84] As presently pleaded only one member of each conspiracy is a named defendant. This is not fatal to the pleading of conspiracy. An action in conspiracy can be maintained although it is brought against only one of the alleged conspirators, and it is not a fundamental defect where all of the co-conspirators are not named: Dean v. Mister Transmission (International) Ltd., [2008] O.J. No. 4372 (S.C.J.) at para. 52, citing Rose Park Wellesley Investments Ltd. v. Sewell, 1972 CanLII 354 (ON SC), [1973] 1 O.R. 102 (Master). In the Mister Transmission case Gray J. permitted the conspiracy claim to proceed against the defendants where the conspiracy was between the named defendants and their franchisees who were not specifically named. He observed that, while the “plain and obvious” test was not met, it would make it more difficult for the plaintiff to prove his case if only one of the alleged conspirators is before the court (at para. 52).

[85] With respect to the pleading of an agreement, it is sufficient that the Claim pleads that the defendants and their dealers acted in combination. The Claim clearly pleads that the defendants and their dealers unlawfully agreed and/or arranged to take certain actions that are described in the Claim, and that such actions were taken for the shared purpose identified at para. 75, to illegally increase the defendants’ profits on modifying, certifying and providing recall information for imported vehicles. Accordingly, the defendants’ challenge on this ground must fail.

F. Doctrine of Merger

[86] The defendants assert that the claim of civil conspiracy merges with the underlying causes of action under the Competition Act and the Consumer Protection Act and should accordingly be struck.

[87] The doctrine of merger provides that where a tort is alleged together with a prior agreement to commit the tort, the prior agreement “merges” in the tort. An allegation of a prior conspiracy to commit the tort “adds nothing” to a claim and is defective: Normart Management Ltd., at para. 28.

[88] In Bank of Montreal v. Tortora, 2010 BCCA 139, the B.C. Court of Appeal held that it was appropriate to strike a civil conspiracy claim at the pleadings stage on the basis that the conspiracy claim merged with the other claims. In that case the unlawful acts alleged to support the conspiracy claim were breach of contract and breach of fiduciary duty, which were independently actionable and had been pleaded by the plaintiff against the defendants.

[89] In the present case, the unlawful conduct alleged by the plaintiffs consists of breaches of the Competition Act and the Consumer Protection Act, which may or may not be found to be independently successful as causes of action, and there is no allegation that the plaintiffs or other class members have suffered damages as a result of the conspiracy that are distinguishable from damages suffered as a result of a breach of the statutory provisions.

[90] In Hunt v. Carey Canada Inc., 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959 at para. 55, Wilson J. held that it was premature at the pleadings stage to reach a conclusion about the validity of the defendants’ claims about merger. The same approach was taken by Strathy J. in Cannon v. Funds for Canada Foundation, 2012 ONSC 399, [2012] O.J. No. 168 (S.C.J.), where, after reviewing the authorities on this issue at paras. 202 to 218, he refused to strike the conspiracy claims based on merger.

[91] Similarly, in the present case, it is not plain and obvious that the conspiracy claims will stand or fall with the claims based on the breaches of statute alleged. As Strathy J. observed in the Cannon case, at para. 216: “It is possible…that the unlawful conduct of the defendants might be sufficient to support the underlying cause of action…but that the cause of action itself might fail for any number of reasons, leaving the cause of action for conspiracy still standing”.

[92] Accordingly, the pleading of conspiracy will not be struck on the basis of merger, which, if pleaded, may well be an issue at trial.

G. Intentional Interference with Economic Interests

[93] The claim of intentional interference with economic interests is set out in paragraphs 84 and 85 of the Claim. The plaintiffs plead that the facts set out in paragraphs 74 to 81 were unlawful acts intended to cause the plaintiffs and other importers economic loss, were intended to interfere with their business, and that, as a result of the acts of the defendants, the plaintiffs suffered economic losses.

[94] The tort of intentional interference with economic interests has the following elements: an intention by the defendant to injure the plaintiff; interference with the plaintiff’s method of gaining its living or business by illegal or unlawful means; and economic loss suffered as a result. The actions of the defendant must have been targeted against the plaintiff: Lineal Group Inc. v. Atlantis Canadian Distributors Inc. (1998), 1998 CanLII 4248 (ON CA), 42 O.R. (3d) 157 (C.A.), at paras. 6 and 7.

[95] The defendants assert that the cause of action cannot be made out in this case because the pleading makes it clear that the defendants’ actions were for the purpose of advancing their own economic interests, and not for the purpose of causing harm to the plaintiffs. The defendants also assert that the plaintiffs have failed to plead illegal conduct by the defendants.

[96] With respect to the first objection, it is not essential for this tort that the predominant purpose of the defendants was to injure. The plaintiff need only prove that the unlawful acts were directed against the plaintiff “in some measure”. The defendant’s predominant purpose might well have been to advance his own interest thereby rather than to injure the plaintiff: Reach M.D. Inc. v. Pharmaceutical Manufacturers Association of Canada (2003), 2003 CanLII 27828 (ON CA), 65 O.R. (3d) 30 (C.A.) at para. 46, per Laskin J.A., citing Fleming, the Law of Torts, 9th ed. at p. 769. “Intentional interference with economic relations requires that the defendant intend to cause loss to the plaintiff, either as an end in itself or as a means of, for example, enriching himself”: Alleslev-Krofchak v. Valcom Limited, 2010 ONCA 557, at para. 50.

[97] It is not fatal to the pleading that the plaintiffs specifically plead at para. 75 that the defendants’ purpose was to illegally increase their profits. The Claim pleads the intention necessary for the tort of intentional interference with economic relations. It is clear from the claim that the plaintiffs plead that the conduct by the defendants was targeted toward importers of Mercedes and BMW vehicles, that the conduct was intended to cause importers to incur additional charges and expense for unnecessary repairs, estimates and letters, and that the defendants were aware of the effects of their conduct on third parties such as the plaintiffs.

[98] With respect to the second objection, the defendants assert that no “unlawful conduct” has been pleaded.

[99] The defendants’ argument centered on the “regulated conduct” defence, acknowledging that the plaintiffs had pleaded various breaches of statutes, and asserting that the conduct was nevertheless lawful because it was pursuant to a valid provincial regulatory scheme. That argument has already been addressed and dismissed earlier in these reasons. Whether the defendants engaged in unlawful conduct in relation to the plaintiffs however is not the issue. The focus is on the conduct of the defendants in relation to a third party, through whom the plaintiff was injured.

[100] In the Alleslev-Krofchak case, Goudge J.A. referred to the discussion of the tort of intentional interference in the House of Lords decision in OBG v. Allan, [2008] 1 A.C. 1 and emphasized that the essence of the tort is to “provide otherwise unavailable recovery for harm intentionally inflicted by unlawful means through the instrumentality of a third party” (at para. 57). Goudge J.A. stated at paras. 60 and 64:

...it is now clear that to qualify as “unlawful means”, the defendant’s actions (i) cannot be actionable directly by the plaintiff and (ii) must be directed at a third party, which then becomes the vehicle through which harm is caused to the plaintiff…

…any suggestion that the tort might apply where the conduct is directly actionable by the plaintiff has been displaced by subsequent jurisprudence.

[101] The court concluded that the trial judge had erred in finding that the claim of intentional interference with economic relations was made out, since the unlawful conduct relied upon amounted to defamation, which was directly actionable by the plaintiff. Similarly, in Correia v. Canac Kitchens (2008), 2008 ONCA 506, 91 O.R. (3d) 353 (C.A.), the claim was dismissed in part because the unlawful means were directly actionable by the plaintiff.

[102] The definition of “unlawful conduct” for the purpose of the tort of intentional interference with economic relations has been a matter of some debate. In Reach M.D. Inc., the Court of Appeal suggested that the conduct could include an act the defendant “is not at liberty to commit”; that is, an act without legal justification (at para. 50, citing Lord Denning in Torquay Hotel Co. v. Cousins [1968] 1 All E.R. 522 (Eng. C.A.)). Goudge J.A. in Agribrands, at para. 32, observed that Ontario cases may be moving toward the requirement that the conduct alleged may need to be actionable by the third party in order to be “unlawful conduct” for the purpose of this tort, although the delineation of actionability remains to be defined.

[103] I have carefully considered the pleadings in the current version of the Claim. To the extent that the plaintiffs rely on the unlawful acts that are pleaded in paras. 74 to 81 of the Claim, these are the same facts pleaded in support of the claims under the Competition Act and for the tort of civil conspiracy, that are directly actionable by the plaintiff. The question is whether there is a pleading of unlawful conduct directed at a third party that causes damage to the plaintiffs, for that is the essence of the tort of intentional interference.

[104] I am required to give the pleading a broad and liberal reading. It is apparent that, elsewhere in the Claim (but not at paras. 74 to 81), the plaintiffs allege that, as a result of certain actions taken by the defendants, Transport Canada removed Mercedes, BMW and Mini vehicles from the admissibility list, and stated that a formal letter of admissibility was required from the manufacturer, and the defendants enlisted CBSA to physically prevent such vehicles from passing through the border without a letter of admissibility. Accordingly, there is a claim that the defendants acted through the instrumentality of a third party to cause harm to the plaintiffs, that would amount to a pleading of the tort of intentional interference with economic relations.

[105] It is not appropriate to strike the claim for intentional interference with economic relations, however as presently framed the pleading is deficient. Accordingly, the plaintiffs must amend the Claim to make clear what conduct against what third party is relied upon in support of this tort, and how such conduct is “unlawful”.

H. Consumer Protection Act Claims

[106] The plaintiffs claim that the Mercedes defendants and BMW breached s. 17 of the Consumer Protection Act (the “CPA”) by making false or misleading statements to them regarding modifications required to bring vehicles into compliance with Canadian standards. The plaintiffs further claim that Mercedes Canada breached s. 57(3) of the CPA by charging improper estimate fees as defined in the CPA.

[107] The CPA applies in respect of all consumer transactions if the consumer or the person engaging in the transaction with the consumer is located in Ontario. Since the defendants are located in Ontario the CPA would apply to vehicle importers located in all provinces.

[108] It is not alleged by the defendants that the pleading fails to assert facts relevant to each cause of action under the CPA. Rather, they assert that the CPA claims must fail as the representative plaintiffs have no standing under that legislation to make a claim.

[109] Under section 1 of the CPA, “consumer” is defined as “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes”. It is acknowledged that the representative plaintiffs are all corporations in the business of importing cars into Canada. They were not importing cars for personal, family or household purposes. They were acting for business purposes; accordingly, they do not fall under the definition of “consumer” according to the CPA. Paragraph 103 of the Fresh Statement of Claim pleads that “some importers” in the proposed class were consumers as defined by section 1 of the CPA.

[110] The plaintiffs submit that, although the representative plaintiffs would not have a cause of action against the defendants under the CPA, the claims under that statute are nevertheless properly asserted on behalf of class members who are consumers and would therefore have such a claim.

[111] Ordinarily, the court will consider whether an individual plaintiff in an action has a cause of action against each defendant. In a proposed class proceeding, the question is more complicated. Can a claim be asserted on behalf of proposed class members where the representative plaintiff would not be able to assert such a claim? The answer to this question appears to be “yes”, provided that the representative plaintiff has a cause of action against the defendants, and the two causes of action share a common issue of law or fact.

[112] In Ragoonanan v. Imperial Tobacco Canada Ltd., 2000 CanLII 22719 (ON SC), [2000] O.J. No. 4597, 51 O.R. (3d) 603 (S.C.J.), Cumming J. dealt with a pleading that alleged a cause of action by the representative plaintiff against only one defendant, and asserted a similar claim by putative class members against the other defendants. Cumming J. held that for each defendant who is named in a class action there must be a representative plaintiff who has a valid cause of action against that defendant. There must be a reasonable cause of action against each defendant on the face of the pleading (at para. 50).

[113] In Boulanger v. Johnson & Johnson Corp., [2002] O.J. No. 1075 (S.C.J.), the representative plaintiff, a resident of Ontario, sought to advance claims for the subrogated interests of health insurers in provinces other than Ontario. Nordheimer J. held that claims can be asserted by a representative plaintiff who does not have a particular claim against the defendant, as long as there is a valid cause of action against the named defendants. Macdonald J. for the Divisional Court agreed at (2003), 640 O.R. (3d) 208, stating at para. 33:

…the scheme of the [Class Proceedings Act] demonstrates the legislature’s intention to permit a representative plaintiff, prior to the certification motion, to plead causes of action which are not the representative plaintiff’s personal causes of action but which are the causes of action of members of the class, asserted by the plaintiff in a representative capacity.

[114] In Hughes v. Sunbeam Corp. (Canada), 2002 CanLII 45051 (ON CA), [2002] O.J. No. 3457 (C.A.), the court considered a motion to strike in an action where claims were asserted against a number of manufacturers of smoke detectors, as well as other defendants. Laskin J.A. referred with approval to Nordheimer J.’s statement in Boulanger v. Johnson & Johnson, that "for each defendant who is named in a class action there must be a representative plaintiff who has a valid cause of action against that defendant."

[115] The court concluded that the representative plaintiff could not claim to have a reasonable cause of action against manufacturers who did not manufacture the smoke alarm he purchased, and he could not therefore resist a rule 21.01(1)(b) motion by alleging that some as yet unknown members of a proposed class may have a cause of action against these other manufacturers if the class action is certified (referring also to the Ragoonanan case). The court referred to three decisions of the British Columbia Court of Appeal which suggested that courts in that jurisdiction may be more willing to let a proposed class action proceed against defendants against whom no representative plaintiff has a claim. After stating that, to the extent that the British Columbia decisions conflict with the Ontario cases of Boulanger and Ragoonanan, he preferred the reasoning in the Ontario cases, Laskin J.A. noted:

In Ontario a statement of claim must disclose a cause of action against each defendant. Thus in a proposed class action, there must be a representative plaintiff with a claim against each defendant. Hughes, therefore, may not maintain his action against Sunbeam, BRK Brands and Pittway.

[116] The defendants submit that the Hughes case is authority for the principle that “in an Ontario class action, each claim must be capable of being asserted by at least one representative plaintiff”. I disagree. Hughes dealt with the same concern that faced the court in Ragoonanan; that is, whether the pleading contained a claim against each defendant by at least one named plaintiff. It was not enough that a putative class member might have such a claim. The court was not addressing the question of whether, if there is a claim against each defendant by each representative plaintiff, claims could be asserted against the defendants on behalf of class members, notwithstanding that the representative plaintiffs would not be able to pursue such claims.

[117] This specific issue has been considered in subsequent case law. In Healey v. Lakeridge Health Corp., [2006] O.J. No. 4277 (S.C.J.) it was alleged that the defendants were negligent in exposing class members to tuberculosis. There was a composite class comprised of several discrete groups. A claim in negligence was pleaded in respect of each of the groups. The action was certified. Cullity J. found that the representative plaintiff did not have a cause of action in negligence, but that other class members did, and permitted the claim to proceed.

[118] In Matoni v. C.B.S. Interactive Multimedia Inc. (c.o.b. Canadian Business College), 2008 CanLII 1539 (ON SC), [2008] O.J. No. 197 (S.C.J.), Hoy J. summarized the authorities at paras. 71 to 77, and concluded that the representative plaintiffs, who had valid causes of action against the defendants under the Business Practices Act, could assert claims under the successor legislation, the Consumer Protection Act, on behalf of other class members.

[119] In Dobbie v. Arctic Glacier Income Fund, 2011 ONSC 25, [2011] O.J. No. 932 (S.C.J.), Tausendfreund J. permitted claims to proceed under s. 130(1) of the Securities Act, notwithstanding that neither plaintiff was a prospectus purchaser in the primary market. In Topacio v. Batac, 2011 ONSC 1008, [2011] O.J. No. 711 (S.C.J.), Perrell J. noted, at para. 131:

Provided that the representative plaintiff has his or her own cause of action, the representative plaintiff can assert a cause of action against a defendant on behalf of other class members that he or she does not assert personally, provided that the causes of action all share a common issue of law or of fact: Boulanger v. Johnson & Johnson Corp., [2002] O.J. No. 1075 (S.C.J.) at para. 22, leave to appeal granted, [2002] O.J. No. 2135 (S.C.J.), varied (2003), 2003 CanLII 45096 (ON SCDC), 64 O.R. (3d) 208 (Div. Ct.) at paras. 41, 48, varied 2003 CanLII 52154 (ON CA), [2003] O.J. No. 2218 (C.A.); Matoni v. C.B.S. Interactive Multimedia Inc., 2008 CanLII 1539 (ON SC), [2008] O.J. No. 197 (S.C.J.), at paras. 71-77; Voutour v. Pfizer Canada Inc., [2008] O.J. No. 3070 (S.C.J.); LeFrancois v. Guidant Corp., [2008] O.J. No. 1397 (S.C.J.) at para. 55.

[120] In the present case, it is not fatal that the representative plaintiffs cannot assert claims under the Consumer Protection Act. The substance of the s. 17 CPA claims is that the defendants engaged in unfair practices by charging for unnecessary modifications to vehicles imported into Canada, and the substance of the s. 57(3) CPA claim against Mercedes is that importers were charged a fee represented as an “estimate” prior to advising importers what modifications were required for importation and the cost of the modifications. The Claim alleges that the defendants imposed unnecessary modifications, fees and costs on the importations, in support of the allegations of contravention of the Competition Act and the various tort claims. While the elements of each cause of action are distinct, the claims share common issues of fact respecting the conduct of the defendants in relation to the importation of their vehicles from the U.S. into Canada.

[121] The question at this stage is not whether the plaintiffs can adequately represent the interests of consumer members of the class. That issue will need to be addressed when a motion for certification is considered. The claim can be asserted at this stage, notwithstanding that none of the representative plaintiffs are consumers, and the CPA claims accordingly will not be struck from the Claim.

I. Unjust Enrichment, Waiver of Tort and Constructive Trust

[122] Paras. 112 to 118 of the Claim plead that the plaintiffs waive the torts and that they and other importers are entitled to recover under restitutionary principles. It is alleged that the defendants have been unjustly enriched by the receipt of artificially induced overcharges, fees paid for unnecessary modifications and certifications on the importation of vehicles into Canada, and in the case of the Mercedes defendants, on estimate fees, and that the plaintiffs and other importers have suffered a deprivation in the amount of such charges. It is alleged that the charges resulted from the defendants’ wrongful or unlawful acts and there is no juridical reason justifying the retention of such charges. The plaintiffs claim that any contracts upon which the defendants purport to rely to receive the illegal charges are void and illegal. The Claim pleads that the defendants are constructive trustees in favour of the plaintiffs and other importers for the charges and fees, for the reasons asserted in para. 117.

[123] To succeed in unjust enrichment a plaintiff must demonstrate: (a) an enrichment of the defendant; (b) a corresponding deprivation suffered by the plaintiff; and (c) a lack of juristic reason for the enrichment. Juristic reasons would include “valid common law, equitable or statutory obligations”: Garland, at para. 44.

[124] The defendants assert that it is plain and obvious that the plaintiffs will not succeed with an unjust enrichment claim because there are two clear reasons for the benefit allegedly accruing to them: (a) the alleged benefit was obtained pursuant to a validly enacted regulatory scheme, the validity of which is not challenged by the plaintiffs; and (b) the alleged benefit was obtained pursuant to contracts (with respect to the modifications), the validity of which is not challenged.

[125] The first argument is again an assertion of the regulated conduct defence. I have already determined that it is not plain and obvious that the conduct alleged by the plaintiffs was authorized or directed by the regulatory scheme; to the contrary. The essence of the claim with respect to unjust enrichment is that the defendants were gaining an economic benefit by charging for unnecessary modifications before the plaintiffs and other importers could import their vehicles into Canada. There is nothing in the scheme that the defendants could point to that would authorize such conduct.

[126] With respect to the contention that the plaintiffs do not challenge the validity of the contracts, in fact paragraphs 115 and 116 of the Claim assert that the contracts upon which the defendants purport to rely are void and illegal.

[127] The defendants also argue that, to the extent that modifications were made by their dealers, any enrichment was in favour of the dealers and not the defendants, and that it is therefore plain and obvious that the plaintiffs will not be able to establish that the defendants were unjustly enriched. The Claim asserts that the defendants charged unlawful fees, and that the dealers participated in such conduct. If, in fact, it was the dealers and not the defendants that benefited, then the defendants will be able to successfully defend against a claim of unjust enrichment on this basis. Again, this is something that can be asserted by way of defence. It is not plain and obvious from the pleading that the defendants would not have been enriched, directly or indirectly, as a result of the conduct alleged.

[128] In waiver of tort, the plaintiff gives up the right to sue in tort but seeks to recover on the basis of restitution, claiming the benefits the wrongdoer has derived from the wrongful conduct regardless of whether the plaintiff has suffered damages or not: Aronowicz v. EMTWO Properties Inc., 2010 ONCA 96. Whether waiver of tort is an independent cause of action or a remedy, the plaintiffs have pleaded the elements of waiver of tort and facts to support their claim for it, as part of their claim for restitution in paras. 112 to 118 of the Claim. The pleading of waiver of tort will not be struck from the Claim.

J. Conclusion

[129] The defendants’ motion to strike is allowed in part. Paragraph 83 of the Claim which pleads unlawful purpose conspiracy is struck out without leave to amend. The plaintiffs are at leave to amend the Claim with respect to the pleading of intentional interference with economic interests as noted in para. 105 of these reasons, and to amend the Claim to include the wording italicized at paras. 34 and 36 of these reasons. The motion is otherwise dismissed.

[130] If the parties are unable to agree on costs, I will receive brief written submissions (including a costs outline from any party seeking costs) as follows: the plaintiffs’ submissions within 20 days, responding submissions within 15 days of receipt of the plaintiffs’ submissions and reply submissions, if any, within ten days of receipt of the responding submissions.

K.M. van Rensburg J.

DATE: May 16, 2012