COURT FILE NO.: 11-CV-420011

DATE: January 19, 2012

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

EnerWorks Inc.

Plaintiff

• and -

Glenbarra Energy Solutions Inc., Glenbarra Energy Solutions Inc., carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc. and the Glenbarra Group of Companies, Glenbarra Renewable Energy Solutions Inc., Glenbarra Renewable Energy Solutions Inc., carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc. and the Glenbarra Group of Companies, Glenbarra Energy Management Corp., Glenbarra Energy Management Corp., carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc. and the Glenbarra Group of Companies, Glenbarra Inc., Glenbarra Inc., carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc. and the Glenbarra Group of Companies, Glenbarra Management Services Inc. Glenbarra Management Services Inc., carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc. and the Glenbarra Group of Companies, Glenbarra Green Energy Capital Inc., Glenbarra Green Energy Capital Inc., carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc. and the Glenbarra Group of Companies, Glenbarra Green Energy Finance Inc., Glenbarra Green Energy Finance Inc., carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc. and the Glenbarra Group of Companies, Green Edge Products Inc., Green Edge Products Inc. carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc. and the Glenbarra Group of Companies, Darren Cooper, Darren Cooper, carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc. and the Glenbarra Group of Companies, Jean Aoun, Jean Aoun, carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc. and the Glenbarra Group of Companies, Greg Judd, and Greg Judd, carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc. and the Glenbarra Group of Companies.

Defendants

COUNSEL:

• William A. Chalmers for the Plaintiff

• Ashley Lattal for the Defendants, Glenbarra Renewable Energy Solutions Inc., Glenbarra Energy Management Corp., Glenbarra Green Energy Capital Inc., Glenbarra Green Energy Finance Inc., Green Edge Products Inc., Jean Aoun and Greg Judd

• Christopher A.L. Caruana for the Defendant Glenbarra Energy Solutions Inc.

• William Ribeiro for the Defendants, Glenbarra Inc., Glenbarra Management Services Inc. and Darren Cooper

HEARING DATE: January 11, 2012

PERELL, J.

REASONS FOR DECISION

A. INTRODUCTION

[1] The Plaintiff, EnerWorks Inc., alleges that it was led to believe that it was selling goods and services to a corporation, Glenbarra Energy Solutions Inc. (“GESI”) that had the financial means to pay for the goods and services. After it successfully sued GESI for payment, EnerWorks allegedly discovered that GESI’s assets were non-existent or had been systematically moved by GESI’s management to subsidiaries or associated corporations or stripped from the corporation. EnerWorks now sues GESI again along with the managers and the subsidiaries or associated corporations for a cornucopia of causes of action.

[2] EnerWorks now sues: (1) GESI, (2) Glenbarra Renewable Energy Solutions Inc., (3) Glenbarra Energy Management Corp., (4) Glenbarra Inc., (5) Glenbarra Management Services Inc., (6) Glenbarra Green Energy Capital Inc., (7) Glenbarra Green Energy Finance Inc., (8) Green Edge Products Inc., (“GEPI”) (9) Darren Cooper, (10) Jean Aoun, and (11) Greg Judd. EnerWorks also sues each of these Defendants as carrying on business as Glenbarra, Glenbarra Energy, Glenbarra Energy Inc., and the Glenbarra Group of Companies.

[3] In three notices of motion, various combinations of the Defendants bring motions to strike EnerWorks’ Statement of Claim.

[4] For the reasons that follow, I grant the motion in part and subject to terms as follows:

(a) the claims for fraudulent conveyance, fraudulent misrepresentation, conspiracy, and unlawful interference with economic relations should be struck out with leave to amend;

(b) the claims for contempt orders, a writ of sequestration, and for orders under rules 60.18(5), 60.11(5) and (6), and rule 60.09 shall be struck out without leave to amend; and

(c) the Defendants should receive costs in the cause.

B. BACKGROUND TO THE MOTIONS

[5] EnerWorks manufactures renewable energy appliances for residential, commercial and industrial markets.

[6] The various corporate Defendants are all Ontario corporations carrying on business in the same premises in Mississauga, Ontario, and, as will be seen below, there was a contractual relationship between EnerWorks and two of the Defendants, i.e., GESI and GEPI.

[7] EnerWorks alleges that the personal Defendants, Messrs. Cooper, Aoun, and Judd were officers and directors of the corporate Defendants at all relevant times.

[8] EnerWorks alleges that in August 2008, Mr. Cooper, who is the president of GESI, represented that GESI required goods and services from EnerWorks, and based on Mr. Cooper’s representation, EnerWorks entered into a contract with what it believed was GESI to supply goods and services in return for payment from GESI.

[9] EnerWorks alleges, however, that in 2008, it was not aware that since 2006, Mr. Cooper had devised the “Glenbarra Scheme,” to which Mr. Aoun was a participant and to which Mr. Judd became a participant in 2009.

[10] The alleged Glenbarra Scheme was that Mr. Cooper and the Glenbarra corporations would carry on business using some or all of the names “Glenbarra”, “Glenbarra Energy” and/or “The Glenbarra Group of Companies” with the intention of not drawing any distinction between any of them for the purpose of permitting Mr. Copper to transfer assets and liabilities among the various Glenbarra corporations. It is alleged that business was carried on without regard to the identity of the corporate entity actually carrying on the business. And, it is further alleged that in contravention of s. 2 of the Business Names Act, R.S.O. 1990, c. B. 17, Mr. Cooper and the various Glenbarra corporations carried on business without registering their business names under the Act.

[11] It is further alleged that from August of 2008 to date, at the direction and with the assistance of Messrs. Cooper, Aoun, and Judd, an insolvent GESI transferred its assets to all or some of the other Defendants, which transfers were contrary to common law, to the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29, and the Assignment and Preferences Act, R.S.O. 1990, c. A.33.

[12] EnerWorks alleges that all the Defendants acted in concert to cause the Fraudulent Transfers, when GESI was, to their knowledge, insolvent or unable to pay its debts in full or when GESI was, to their knowledge, on the eve of insolvency. It is alleged that the transfers were made to defeat, hinder, delay or prejudice EnerWorks.

[13] Further, EnerWorks alleges that all the Defendants made false and fraudulent representations of fact including the misrepresentations that:

(a) “Glenbarra”, “Glenbarra Energy Inc.” and “The Glenbarra Group of Companies” are registered business names of GESI;

(b) the entity with whom EnerWorks entered into the Contract was GESI;

(c) GESI received the benefit of the goods and services;

(d) GESI would pay EnerWorks for the goods and services;

(e) the goods and services would be provided by GESI to customers of GESI and, in turn, GESI would collect and receive payment from its customers;

(f) none of the Fraudulent Transfers is a transfer made by GESI when insolvent or unable to pay its debts in full or when GESI knew that it was on the eve of insolvency, with intent to defeat, hinder, delay or prejudice EnerWorks;

(g) none of the Fraudulent Transfers is a transfer made by GESI in insolvent circumstances or when GESI was unable to pay its debts in full or when GESI knew that it was on the eve of insolvency, with the intent to give any of the Glenbarra Corporations an unjust preference over EnerWorks; and

(h) none of the Fraudulent Transfers is a transfer made with intent to defeat, hinder, delay or defraud EnerWorks of its just and lawful actions, suits, debts and damages.

[14] EnerWorks alleges that the Defendants were conspirators. It alleges that the Defendants agreed to implement the Glenbarra Scheme and the Fraudulent Transfers to injure EnerWorks. It alleges that the predominant purpose of the Defendants’ conduct in the Glenbarra Scheme and the Fraudulent Transfers was to cause injury to EnerWorks by lawful or, alternatively, unlawful means or, in the alternative, the Glenbarra Scheme and the Fraudulent Transfers were unlawful and were directed towards EnerWorks when the Defendants knew or ought to have known that injury to EnerWorks was likely to and did result.

[15] As particulars of the conspiracy, EnerWorks alleges that:

(a) the parties to the conspiracy are the Defendants;

(b) the relationship among the Defendants is that they are all controlled, to some extent, by the Personal Defendants;

(c) the Conspiracy Agreement is among the Defendants to conspire to formulate and implement the Glenbarra Scheme and the Fraudulent Transfers to injure EnerWorks;

(d) the Conspiracy Agreement was entered into among the Defendants at some time known to them after August of 2008;

(e) the precise purpose or objects of the conspiracy is to use the Glenbarra Scheme and the Fraudulent Transfers to reduce the assets of GESI that are available to satisfy the GESI Debt;

(f) the overt acts which the Defendants have done in furtherance of the conspiracy are the formulation and implementation of the processes by which the Glenbarra Scheme and Fraudulent Transfers were created and implemented; and

(g) as a result of the conspiracy by the Defendants, EnerWorks suffered injury and damages.

[16] EnerWorks also alleges that the Defendants perpetrated the tort of unlawful interference with economic relations. As particulars of that tort, EnerWorks alleges that:

(a) there was a valid business relationship or business expectancy between EnerWorks and GESI;

(b) at all material times, the Defendants were aware of that business relationship or business expectancy;

(c) the Defendants intentionally and deliberately caused and/or affected the degradation of that business relationship or expectancy;

(d) the actions of the Defendants were wrongful and/or unlawful and were the proximate cause of the degradation; and.

(e) as a result of those actions, EnerWorks suffered damages.

[17] EnerWorks alleges that Messrs. Cooper, Aoun, and Judd are the guiding minds of the Glenbarra Corporations, which are mere alter-egos completely dominated and controlled by Messrs. Cooper, Aoun, and Judd and used by them as a shield for their fraudulent and improper conduct in connection with the Glenbarra Scheme and the Fraudulent Transfers.

[18] EnerWorks alleges that the actions of Messrs. Cooper, Aoun, and Judd in connection with the Glenbarra Scheme and the Fraudulent Transfers, furthered their personal interest, conferred a personal benefit and were tortious and exhibited a separate identity or interest from that of the Glenbarra Corporations.

[19] EnerWorks alleges, in its statement of claim, that it did not become aware of the facts for these various causes of action until January 20, 2011, in circumstances that I will describe below.

[20] In any event, in August of 2008 and thereafter, EnerWorks entered into contracts to supply goods and services to GESI and also agreements to supply goods and services to GEPI.

[21] When it was not paid for its goods and services, in 2010, EnerWorks sued GESI and GEPI for unpaid accounts for goods and services delivered.

[22] GEPI agreed to settle, and it paid EnerWorks $250,000 and received a Release, which Release bars EnerWorks from commencing an action against GEPI or any of its related and affiliated corporations, present and former directors, officers and employees, in relation to the following:

…any and all actions [etc.]… that they had in the past, that they have at the present time and that they may have in the future, whether commenced or not, whether presently known or unknown, of every nature and kind whatsoever, whether or not in existence as at the date hereof, connected with or related to in any way whatsoever, directly or indirectly, to anything, any document, any issue and/or any matter claimed in the Action …

[23] EnerWorks moved for a summary judgment against GESI, and as it happens, I heard the motion.

[24] On November 29, 2010, I granted the motion for summary judgment and GESI was ordered to pay EnerWorks: (a) $448,938.11; (b) interest on $268,545.17 at the rate of 18% per annum from November 29, 2010; (c) interest on $104,964.98 at the rate of 3.3% per annum from November 29, 2010; and (d) costs of $18,907.42 bearing interest at 2% per year from November 29, 2010. The judgment was not appealed.

[25] On January 20, 2011 and February 9 and 10, 2011, Mr. Cooper was examined at a judgment debtor examination of GESI. EnerWorks alleges that Mr. Cooper’s answers on the judgment debtor examination revealed that GESI had concealed or disposed of property to defeat or defraud EnerWorks.

[26] On February 10, 2011, EnerWorks commenced the case at bar and sued for: (a) fraudulent misrepresentation; (b) fraudulent conveyance; (c) conspiracy; (d) intentional interference with economic interests; (e) individual liability of Messrs. Cooper, Aoun, and Judd; (f) piercing the corporate veil; and (g) a declaration that the Glenbarra corporations have contravened s. 2 of the Business Names Act.

[27] As part of its action, EnerWorks also makes several claims connected with alleged misconduct at the judgment debtor examination. EnerWorks alleges that Messrs. Aoun and Judd conspired with Mr. Cooper and counselled him: (a) to misrepresent the assets and liabilities of the Glenbarra Corporations and the relationship among them; and (b) to suppress or conceal material documents, facts, matters or information regarding the assets and liabilities of the Glenbarra Corporations and the relationship among them.

[28] Accordingly, EnerWorks seeks: (a) a contempt order as against GESI in accordance with rule 60.18 (5) of the Rules of Civil Procedure; (b) an order under rules 60.11 (1), (5) and (6) against Mr. Cooper in his capacity as an officer or director of GESI; and (c) a writ of sequestration against Mr. Cooper under rule 60.09.

[29] The Defendant GESI brings a motion to strike out the Statement of Claim for not showing a reasonable cause of action and as an abuse of process.

[30] The Defendants that describe themselves as the “Glenbarra Defendants;” namely, Mr. Cooper, Glenbarra Inc., and Glenbarra Management Services Inc. also bring a motion to strike out the Statement of Claim for not showing a reasonable cause of action and as an abuse of process.

[31] The Defendants that describe themselves as the “Green Edge Defendants;” namely, Messrs. Aoun and Judd, GEPI, Glenbarra Renewable Energy Solutions Inc., Glenbarra Energy Management Corp., Glenbarra Green Energy Capital Inc., and Glenbarra Green Energy Finance Inc. bring a motion to strike out the Statement of Claim for not showing a reasonable cause of action and as an abuse of process.

[32] EnerWorks states that it would not have signed the Release if it had been aware of the matters disclosed by Mr. Cooper and that it did not intend for the Release to apply to fraudulent or unlawful acts.

C. DISCUSSION

1. Introduction

[33] With the exception of the plea of intentional interference with economic relations, the Defendants did not argue that EnerWorks’ Statement of Claim did not disclose a reasonable cause of action. Rather, the nature of their arguments was that EnerWorks has imperfectly pleaded its various causes of action because it has not pleaded all the material facts necessary for the constituent elements of the various causes of action.

[34] EnerWorks riposte to this argument is that a motion to strike under Rule 21 is different than a demand for particulars and the test for striking out a pleading under Rule 21 is not whether particulars should be ordered but whether it is plain and obvious that the claim discloses no cause of action. That being the case, EnerWorks submits that the Defendants’ motions should be dismissed in their entirety because EnerWorks has pleaded the constituent elements of the various torts and it is not necessary for it to detail or particularize the material elements of the constituent elements. EnerWorks submits that after the motion is dismissed, the Defendants can make a demand for particulars, which EnerWorks will answer as it might be advised.

[35] During oral argument, I tested EnerWorks’ argument by asking whether a motion to strike under Rule 21 should be dismissed if a plaintiff pleaded the constituent elements of the tort of negligent misrepresentation by simply pleading - devoid of any details whatsoever - that: (a) the defendant had a duty of care based on a special relationship with the plaintiff; (b) the defendant made a false statement; (c) the plaintiff relied on the statement; (d) the plaintiff’s reliance was reasonable; and (e) the plaintiff suffered damages as a consequence. EnerWorks’ answer to this hypothetical of a pleading devoid of any material facts was yes, the Rule 21 motion should be dismissed and the defendant could move for particulars supported by an affidavit showing that he or she needed the details to plead.

[36] EnerWorks’ argument is wrong. It is a fundamental principal of procedural justice that a litigant should have notice of the case against him or her. The Rules of Civil Procedure employ a system of fact pleading to give notice. The primary function of a system of fact pleading is to compel the parties to disclose the facts that they are relying on to support their claim or defence. The heart of the system of fact pleadings is that the parties plead the material facts that constitute their claim or defence.

[37] The most important rule about pleadings is rule 25.06 (1) that “[e]very pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence, but not the evidence by which those facts are to be proved.” This rule directs the disclosure of the material facts, which include facts that establish the constituent elements of the claim or defence: Philco Products, Ltd. v. Thermionics, Ltd., [1940] S.C.R. 501 at p. 505.

[38] The causes of action must be clearly identifiable from the facts pleaded and must be supported by facts that are material: Cerqueira v. Ontario 2010 ONSC 3954 at para. 11. See J.W. Morden and P.M. Perell, The Law of Civil Procedure in Ontario (1st ed.) (Markham: NexisLexis Canada Inc., 2010) at pp. 339-45.

[39] Rule 25.06 (8) requires that full particulars be provided where fraud or misrepresentation is alleged. Rule 25.06 (8) states:

Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred.

[40] The full particulars required by rule 25.06 (8) must set out precisely each allegation of wrongful conduct and the who, where, when, what, and how of that alleged misconduct: Balanyk v. University of Toronto, [1999] O.J. No. 2162 (S.C.J.) at para. 28. In the Balanyk case, Justice Cameron stated at para. 29:

The plaintiff must plead all the material facts on which it relies and all of the facts which it must prove to establish a cause of action which is legally complete. If any fact material to the establishment of a cause of action is omitted, the statement of claim is bad and the remedy is a motion to strike the pleadings, not a motion for particulars. If the plaintiff does not, at the time of pleading, have knowledge of the facts necessary to support the cause of action, then it is inappropriate to make the allegations in the statement of claim. It is improper to allow conclusions to be pleaded baldly and without any supporting facts: see Region Plaza Inc. v Hamilton - Wentworth (Regional Municipality) (1990), 12 O.R. (3d) 750 (Ont. H.C.).

[41] It is true that under the case law about rule 21.01 (1), a pleading will not be struck out unless it is plain and obvious that that the claim discloses no cause of action. However, it will be plain and obvious that a claim discloses no cause of action when the allegations in the statement of claim do not plead all the elements necessary for a recognized cause of action: Dawson v. Rexcraft Storage & Warehouse Inc., [1998] O.J. No. 3240 (C.A.) at at para. 10; Aristocrat Restaurants Ltd. v. Ontario, [2004] O.J. No. 5164 (S.C.J.) at paras. 18-20.

[42] It follows that for the case at bar, with exceptions for the claim for intentional interference with economic relations, the abuse of process argument, and the alleged violation of the rules associated with judgment debtor examinations, it is not enough to articulate the constituent elements devoid or deficient of material facts, and the analysis of the adequacy of the Statement of Claim should focus on the merits of the Defendants’ argument that EnerWorks has imperfectly pleaded its various causes of action because it has not pleaded the material facts relied on for the constituent elements of the various causes of action.

[43] I will proceed through that analysis by beginning with the more straight forward issues and progressively moving to the more difficult questions about the adequacy of EnerWorks’ Statement of Claim.

2. The Abuse of Process Arguments

[44] The Defendants’ abuse of process arguments rely on the Release between EnerWorks and GEPI as barring the action by EnerWorks, thus making the current action an abuse of process.

[45] A similar argument was made and rejected by Justice D.M. Brown in Simkeslak Investments Ltd. v. Kolter Yonge L.P. Ltd,, [2009] O.J. No. 982 (S.C.J.), where the defendants moved under Rule 21 and argued that they had obtained a release from the plaintiffs that constituted a complete defence to the action. Justice Brown stated at para. 5:

Kolter submits that the release it obtained from the plaintiffs on the purchase of their Class A units constitutes a complete defence to their action and therefore the Claim discloses no reasonable cause of action. I do not accept that argument. Rule 21 is designed to vet a pleading to ascertain whether, at law, it discloses a reasonable cause of action or defence; it is not designed to deal with matters of fact - that is the role of Rule 20. It is open to Kolter to plead the release in its statement of defence and, if no genuine issue of fact exists as to its validity, scope or effect, summary judgment may be available to Kolter. However, the effect of the release requires a determination of fact, and that simply is not the role of Rule 21.01(1)(b). …

[46] In my opinion, if the Defendants wish to rely on the Release, then they should do so by pleading it as a defence in their Statement of Defence. As EnerWorks indicated during argument, it will be met with an amended Statement of Claim pleading rescission of the Release on the grounds of fraud.

[47] The validity and scope of the release are issues to be tried. I, therefore, reject the argument that the action should be dismissed as an abuse of process.

3. Contravention of s. 2 of the Business Names Act.

[48] In its Statement of Claim, EnerWorks seeks a declaration that there has been a contravention of s. 2 of the Business Names Act, but EnerWorks seeks no relief incidental to the declaration. It seems that EnerWorks seeks the declaration just to prove a material fact for its other claims and for no other purpose. The Defendants seek to have the plea struck out.

[49] The parties’ factums contained arguments about the nature of declaratory relief and about whether EnerWorks’ claim for a declaration was proper. I, however, do not need to address these arguments because during the oral argument, it emerged that the Defendants’ attack on this claim for declaratory relief was just a provisional attack reserved for the circumstance that all the other claims or causes of action had been struck out, with the plea for a declaration being the last plea standing.

[50] Since, I will not be striking out all of the other claims or causes of action without leave to amend, there is no reason to strike out the plea for a declaration.

4. Fraudulent Conveyance

[51] The elements of a fraudulent conveyance claim are: (1) the plaintiff is a creditor; i.e., a person to whom a debt is due; (2) the debtor is an insolvent person or unable to pay his or her debts in full; and (3) the debtor conveys his or her property to another person with intent to defeat, hinder, delay or prejudice creditors, or any one or more of them. See: Fraudulent Conveyances Act; Assignments and Preferences Act; Stone v. Stone (2001), 55 O.R. (3d) 491 (C.A.), aff’g. (1999), 46 O.R. (3d) 31 (S.C.J.); Optical Recording Laboratories v. Digital Recording Corp. Inc. (1990), 1 O.R. (3d) 131 (C.A.); J.G. Young & Sons Ltd. v. TEC Park Ltd., [1999] O.J. No. 4066 (S.C.J.) at para. 21; Hostmann-Steinberg Ltd. v. 2048669 Ontario Inc., 2010 ONSC 2411 at paras. 10-11, 14.

[52] The typical fraudulent conveyance action involves a particular property that the debtor conveys to a defendant, often a spouse or family member, to save that property from creditors. EnerWorks’ pleading of fraudulent conveyance is untypical or an aberration in two respects. First, the pleading is inconsistent with EnerWorks’ piercing the corporate veil pleading that all the corporations were the alter-egos of Messrs. Cooper, Aoun, and Judd, which pleading, if successful, would make it impossible to have put the assets out of reach of creditors. Second, the pleading of fraudulent conveyance is an omnibus allegation and it does not specify what and when and to whom particular GESI properties were conveyed. It does not identify particular properties.

[53] With respect to the first inconsistency, in my opinion, that the fraudulent conveyance pleading is inconsistent with the piercing of the corporate veil pleading does not provide grounds to strike either pleading.

[54] However, the second aberration of not identifying the subject matter and the details of the fraudulent conveyances is more problematic because, for instance, the timing of a conveyance makes a great deal of difference in determining whether it is a fraudulent conveyance. For instance, a defendant might admit the conveyance of the property but deny that the judgment debtor was insolvent at the time or attempting to defraud any creditors.

[55] A main purpose of a judgment debtor examination is precisely to determine what property the judgment debtor has and what property the judgment debtor had at relevant times. EnerWorks learned on the examination of Mr. Cooper that GESI had concealed or disposed of property to defeat or defraud EnerWorks. If that is true, then in its fraudulent conveyance claim, EnerWorks should have pleaded what it discovered or it should have continued the judgment debtor examination and compiled a list of the missing properties and allegedly fraudulent conveyances.

[56] It strikes me as both necessary and fair that the identification of the property allegedly fraudulently conveyed not wait for the examinations for discovery in this action when that can be determined by completing the judgment debtor examinations.

[57] Therefore, in my opinion, the fraudulent conveyance claim should be struck out with leave to amend to plead the particular properties that were fraudulently conveyed.

5. Fraudulent Misrepresentation

[58] The elements of a claim of fraudulent misrepresentation are: (1) a false statement by the defendant; (2) the defendant knowing that the statement is false or being indifferent to its truth or falsity; (3) the defendant having an intent to deceive the plaintiff; (4) the false statement being material and the plaintiff having been induced to act on it; and, (5) the plaintiff suffering damages. See: Parna v. G. & S. Properties Ltd. (1970), 15 D.L.R. (3d) 336 (S.C.C.) at p. 344; Derry v. Peek (1889), 14 App. Cas. 925 (H.L.).

[59] For present purposes of analyzing EnerWorks’ pleading of fraudulent misrepresentation, it is helpful to focus on the significance of the fourth element that the plaintiff is induced to act on the misrepresentation. It seems trite to have to say it, but this fourth element means that the plaintiff must have perceived the misrepresentation. Conspiracies may take place behind closed doors or secret places but misrepresentations, which may include acts or omissions or silence, are communicative acts that require an audience.

[60] This observation reveals the first major problem with EnerWorks pleading of fraudulent misrepresentation. EnerWorks’ Statement of Claim sets out the allegedly false and fraudulent statements, but it does not detail which defendant made the particular statement and when and to whom the statement was made.

[61] EnerWorks says that this does not matter because all the Defendants can and likely will deny that they made any false statements to anyone, at any time, or at any place. Again, this is wrong. Each individual or corporate defendant is entitled to know the material facts of his, her, or its wrongdoing even if it is anticipated that they will disavow any wrongdoing.

[62] Thus, for instance, Mr. Judd is entitled to know when and to whom and if by conduct or by silence how it is that he represented that “GESI would pay EnerWorks for the Goods and Services.” It remains to be seen whether Mr. Judd will respond with a general denial, but it is a matter of fundamental fairness that he be given notice of what is his alleged misconduct and when and how it occurred.

[63] I appreciate that requiring a plaintiff to plead the material facts of the representations may make an allegation or cause of action disappear. For instance, because I find it difficult to imagine a human or corporate actor by words or deeds representing that “none of the Fraudulent Transfers is a transfer made by GESI in insolvent circumstances or when GESI was unable to pay its debts in full or when GESI knew that it was on the eve of insolvency, with the intent to give any of the Glenbarra Corporations an unjust preference over EnerWorks,” I would not be surprised if this allegation disappears because EnerWorks is unable to detail the circumstances of who, when, where, how, and to whom that statement was uttered. But there is nothing unfair in the disappearance of an allegation that wants for any material facts that can be proven or rebutted.

[64] The second major problem with EnerWorks’ fraudulent misrepresentation pleading is that it lumps together all the Defendants and makes allegations against them collectively.

[65] Although stated in the context of a conspiracy claim, I agree with Justice Nordheimer’s observation in J.G. Young & Sons Ltd. v. TEC Park Ltd., [1999] O.J. No. 4066 (S.C.J.) at paras. 9-10 that the specific acts of each defendant should be identified else the defendant cannot know what he or she is alleged to have done wrong. If there cannot be culpability by association in a conspiracy claim, a fortiori the defendants to a negligent misrepresentation claim cannot be simply lumped together. Each individual defendant is entitled to know the alleged material facts of its misconduct.

6. Conspiracy

[66] The elements of a claim of conspiracy are: (1) two or more defendants make an agreement to injure the plaintiff; (2) the defendants (a) use some means (lawful or unlawful) for the predominate purpose of injuring the plaintiff, or (b) use unlawful means with knowledge that their acts were aimed at the plaintiff and knowing or constructively knowing that their acts would result in injury to the plaintiff; (3) the defendants act in furtherance of their agreement to injure; and, (4) the plaintiff suffers damages as a result of the defendants' conduct. See: Hunt v. T & N plc, [1990] 2 S.C.R. 959; Canada Cement Lafarge Ltd. v. British Columbia Lightweight Aggregate Ltd., [1983] 1 S.C.R. 452; Normart Management Ltd. v. West Hill Redevelopment Co (1998), 37 O.R. (3d) 97 (C.A.).

[67] Canada Lafarge Ltd. is authority that there are two types of conspiracy: (1) conspiracy to injure; and (2) conspiracy to perform an unlawful act.

[68] The elements of conspiracy to injure are: (1) the defendants acted in combination; (2) the defendants intended to harm the plaintiff; and (3) the defendants’ conduct caused harm to the plaintiff.

[69] The elements of conspiracy to perform an unlawful act are (1) the defendants acted in combination; (2) the defendants committed an unlawful act, i.e. a crime, tort, or breach of statute; (3) the defendants knew or should have known that injury to the plaintiffs was likely to occur from their misconduct; and (4) the defendants’ misconduct in furtherance of the conspiracy caused harm to the plaintiff.

[70] It should be noted that unlawful conduct for the tort of conspiracy is different from the unlawful conduct that is a constituent element of the tort of intentional interference with economic relations: Agribrand Purina Canada Inc. v. Kasamekas, 2011 ONCA 460.

[71] The Ontario Court of Appeal considered whether the tort of conspiracy had been properly pleaded against the directors of two corporations in Normart Management Ltd. v. West Hill Redevelopment Co. (1998), 37 O.R. (3d) 97 (C.A.). In this case, the plaintiff Normart had a 25% interest in a joint venture to develop lands along with two other corporations. A mortgage on the lands went into default, and when the mortgagee exercised its power of sale, the defendants purchased the lands to the exclusion of Normart. In response, Normart sued the two corporations for breach of fiduciary duty and the directors of the two corporations for conspiracy. The Court of Appeal struck out the pleading of conspiracy against the corporate directors with leave to amend.

[72] The claim for conspiracy was struck out on the grounds that the wrongful acts alleged against the directors were no more than the acts of their corporations. Justice Finlayson, who wrote the judgment of the court stated at p. 105: “This bare allegation of a conspiracy involving the directing minds of the respondent corporations is an impermissible legal proposition,” and, thus, the Normart case is an important case about the liability of corporate directors acting in the course of their role with the corporation, which is an issue discussed further below.

[73] In Normart, as already noted, the Court of Appeal granted leave to Normart to deliver an amended statement of claim, and Justice Finlayson provided guidance about a proper pleading of conspiracy. Justice Finlayson stated at p. 104 of the judgment:

In H.A. Imports of Canada Ltd. v. General Mills Inc. (1983), 42 O.R. (2d) 645, 150 D.L.R. (3d) 574 (H.C.J.), O'Brien J., dealing with the civil action of conspiracy as pleaded, quoted from Bullen, Leake and Jacob's Precedents of Pleadings, 12th ed. (London: Sweet & Maxwell, 1975), as follows at pp. 646-47:

The statement of claim should describe who the several parties are and their relationship with each other. It should allege the agreement between the defendants to conspire, and state precisely what the purpose or what were the objects of the alleged conspiracy, and it must then proceed to set forth, with clarity and precision, the overt acts which are alleged to have been done by each of the alleged conspirators in pursuance and in furtherance of the conspiracy; and lastly, it must allege the injury and damage occasioned to the plaintiff thereby.

[74] EnerWorks’ Statement of Claim pleads both kinds of conspiracy, and the major problems with its pleading is that it does not set forth with clarity and precision the overt acts done by each of the alleged conspirators in furtherance of the conspiracy and it does not adequately plead the unlawful acts of each individual Defendant.

[75] The latter problem is compounded because insofar as the unlawful acts are the fraudulent conveyances and fraudulent misrepresentations, for the reasons described above, those pleadings are deficient.

[76] I return to the point made above that each individual defendant is entitled to know the case they must meet. This is true for the conspiracy pleading because, although conspiracy is a tort committed by a group, the liability of each defendant arises because they individually participated as a member of the group.

[77] A conspirator is not liable simply vicariously for what somebody else did; he or she is liable for having participated and contributed to the conspiracy. In a conspiracy pleading, it is necessary to set out the particular acts of each co-conspirator: D.G. Jewelry Inc. v. Cyberdiam Canada Ltd., [2002] O.J. No. 1465 (S.C.J.) at para. 34; J.G. Young & Sons Ltd. v. TEC Park Ltd., supra, at paras. 9-10

[78] I appreciate that a plaintiff should be given some slack in how much detail he or she must provide in setting out the material facts of a conspiracy. It is interesting to note that rule 25.06 (8) specifies that where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading must include full particulars but rule 25.06 (8) does not include conspiracy, save insofar as a conspiracy involves an intent to injure or knowledge that injury is likely to occur. This omission may reflect the practical reality that conspiracies by their nature are planned behind closed doors and may involve clandestine conduct. That said, it is not good enough to allege a conspiracy and then use an action and its examinations for discovery to confirm one’s suspicions or to find a cause of action.

[79] In my opinion, in the case at bar, EnerWorks has not gone far enough in pleading the material facts of a conspiracy, and, therefore, its Statement of Claim should be struck out with leave to amend.

7. Intentional Interference with Economic Relations

[80] The elements of a claim of intentional interference with economic relations are: (1) intent to injure and cause loss to the plaintiff; (2) interference with the plaintiff’s business or livelihood by illegal or unlawful means; (3) the unlawful means are directed at a third party who has an actionable claim or an actionable claim but for the absence of having suffered a loss; and, (4) the plaintiff suffering economic loss as a result of the unlawful means. See: Alleslev-Krofchak v. Valcom Ltd. 2010 ONCA 557; Agribrand Purina Canada Inc. v. Kasamekas, 2011 ONCA 460; Correia v. Canac Kitchens (2008), 91 O.R. (3d) 353 (C.A.); Drouillard v. Cogeco Cable Inc. (2007), 86 O.R. (3d) 431 (C.A.) at para. 14.

[81] The essence of EnerWorks’ claim for intentional interference with economic relations comes down to two allegations of material fact; namely: (1) “the Defendants intentionally and deliberately caused and/or affected the degradation of that business relationship or expectancy”; and (2) “the actions of the Defendants were wrongful and/or unlawful and were the proximate cause of the degradation”.

[82] In my opinion, both of these allegations are devoid of any operative legal meaning. All they say is that the Defendants did something wrong and EnerWorks’ relationship with GESI was harmed. Frankly, I do not know what “degradation of a business expectancy means,” and simply alleging that the Defendants’ actions were wrongful is nothing more than saying that the Defendants did something bad. It is not clear what is the legally wrongful misconduct that is a constituent element of the tort.

[83] The question then becomes whether this pleading can be saved by granting leave to amend so that meaningful material facts can be asserted for its constituent elements.

[84] I do not know the answer to this question, because I do not know whether or how EnerWorks will be able to allege that unlawful means were directed at a third party who has an actionable claim, which is a constituent element of the tort. In Alleslev-Krofchak v. Valcom Ltd., supra, Justice Goudge stated at para. 60 that to qualify as unlawful means, the defendant’s actions (1) cannot be actionable directly by the plaintiff and (2) must be directed at a third party, which then becomes the vehicle through which harm is caused to the plaintiff.

[85] Wrongful conduct was apparently directed at EnerWorks, but it is not clear to me who the third party might be, unless GESI is meant to be the third party injured by its co-defendants, which is an odd allegation and one that does not fit with the allegations that all the defendants are the alter-egos of Messrs. Cooper, Aoun, and Judd and that all the defendants conspired together to injure EnerWorks and it seems one another.

[86] In these circumstances, in my opinion, the appropriate order to make is to strike the claim for intentional interference with economic relations with leave to amend and with the understanding that the Defendants may challenge the amended pleading as not showing a reasonable cause of action.

8. Personal Liability and Piercing the Corporate Veil

[87] At common law, the owners and management of a corporation are not liable for what they do within their authority and on behalf of their corporation, but subject to the rule in Said v. Butt, [1920] 2 K.B. 497, which is not relevant to the circumstances of the case at bar, they are liable if there is some conduct on their part that is either tortious in itself or is independent misconduct from that of the corporation: Normart Management Ltd. v. West Hill Redevelopment Co., supra; ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 26 O.R. (3d) 481 (Ont. C.A.).

[88] Managers and directors are not insulated from liability simply because their misconduct was in pursuance of the interests of the corporation: ADGA Systems International Ltd. v. Valcom Ltd. (1999), 43 O.R. (3d) 101 (C.A.); Meditrust Healthcare Inc. v. Shoppers Drug Mart, [1999] O.J. No. 3243 (C.A.), leave to appeal refused (2000) 134 O.A.C. 399n (S.C.C.); NBD Bank, Canada v. Dofasco Inc., (1999), 46 O.R. (3d) 514 (C.A), leave to appeal refused (2000), 254 N.R. 400n (S.C.C.).

[89] In the case at bar, EnerWorks is pleading conspiracy, fraudulent misrepresentation, fraudulent conveyances, intentional interference with economic relations against all of the Defendants. These pleadings would appear to be a pleading of misconduct that may be independent from the misconduct of GESI. The problem, however, is that the pleadings of independent misconduct are imperfect and unclear, for the reasons already discussed.

[90] Once again, it is not enough to say that there is independent misconduct, EnerWorks must actually plead material facts that show independent misconduct. The pleading must address specifically the cause of action asserted against the personal defendant and why he or she is being sued separately from the corporation: Immocreek Corp. v. Pretiosa Enterprises Ltd., [2000] O.J. No. 1405 (C.A.) at para. 35; Ontario Ltd. v. 1002953 Ontario Inc., [1999] O.J. No. 4071 (C.A.) at para. 8.

[91] It may be that by taking up the leave to amend the Statement of Claim for the other claims, EnerWorks will solve any problems with its pleading against Messrs. Cooper, Aoun, and Judd. However, in my opinion, without some amendment, the current pleading against Messrs. Cooper, Aoun, and Judd alleging that they are individually liable is deficient. Once again, I strike out the relevant paragraphs, with leave to amend.

[92] The pleading to pierce the corporate veil to make Messrs. Cooper, Aoun, and Judd personally liable is a polar opposite to the plea that their acts were independent of the corporation.

[93] In effect, a piercing of the corporate veil means that the corporation had no independent existence from its owners. The Defendants did not make much of an attack, if any, on the pleading of piercing the corporate veil, and in my opinion, this claim is satisfactory and the individual Defendants have been told sufficient material facts to know the case they confront.

9. Violation of the Rules Associated with Judgment Debtor Examinations

[94] EnerWorks includes in its Statement of Claim several claims associated with judgment debtor examinations. As will appear, the Defendants object to these claims largely on jurisdictional grounds about procedure.

[95] The relevant rules are rules 60.09, 60.11 (5) and (6), and 60.18 (2), (3), and (5) which state:

WRIT OF SEQUESTRATION

Leave Required

60.09 (1) A writ of sequestration (Form 60B), directing a sheriff to take possession of and hold the property of a person against whom an order has been made and to collect and hold any income from the property until the person complies with the order, may be issued only with leave of the court, obtained on motion.

(2) The court may grant leave to issue a writ of sequestration only where it is satisfied that other enforcement measures are or are likely to be ineffective.

(3) In granting leave to issue a writ of sequestration, the court may order that the writ be enforced against all or part of the person’s real and personal property.

CONTEMPT ORDER

Motion for Contempt Order

60.11 (1) A contempt order to enforce an order requiring a person to do an act, other than the payment of money, or to abstain from doing an act, may be obtained only on motion to a judge in the proceeding in which the order to be enforced was made.

Content of Order

(5) In disposing of a motion under subrule (1), the judge may make such order as is just, and where a finding of contempt is made, the judge may order that the person in contempt,

(a) be imprisoned for such period and on such terms as are just;

(b) be imprisoned if the person fails to comply with a term of the order;

(c) pay a fine;

(d) do or refrain from doing an act;

(e) pay such costs as are just; and

(f) comply with any other order that the judge considers necessary,

and may grant leave to issue a writ of sequestration under rule 60.09 against the person’s property.

Where Corporation is in Contempt

(6) Where a corporation is in contempt, the judge may also make an order under subrule (5) against any officer or director of the corporation and may grant leave to issue a writ of sequestration under rule 60.09 against his or her property.

EXAMINATION IN AID OF EXECUTION

Examination of Debtor

60.18 (2) A creditor may examine the debtor in relation to,

(a) the reason for non payment or non performance of the order;

(b) the debtor’s income and property;

(c) the debts owed to and by the debtor;

(d) the disposal the debtor has made of any property either before or after the making of the order;

(e) the debtor’s present, past and future means to satisfy the order;

(f) whether the debtor intends to obey the order or has any reason for not doing so; and

(g) any other matter pertinent to the enforcement of the order.

(3) An officer or director of a corporate debtor, or, in the case of a debtor that is a partnership or sole proprietorship, a partner or sole proprietor against whom the order may be enforced, may be examined on behalf of the debtor in relation to the matters set out in subrule (2).

(5) Where it appears from an examination under subrules (2) to (4) that a debtor has concealed or made away with property to defeat or defraud creditors, a judge may make a contempt order against the debtor.

[96] The Defendants’ jurisdictional arguments focus on: (a) the requirement in rule 60.09 (1) that a writ of sequestration “may be issued only with leave of the court, obtained on motion;” (b) the requirement in rule 60.11 (1) that a contempt order “may be obtained only on motion to a judge in the proceeding in which the order to be enforced was made,” which requirement would apply to a contempt order under rule 60.18 (5) (c); and (c) the prerequisite to a writ of sequestration under rule 60.11 (6) being that a contempt order has been made against a corporation, which has not yet occurred.

[97] The thrust of all of these jurisdictional arguments is that if EnerWorks wishes a contempt order or sequestration order against GESI and any of Messrs. Cooper, Aoun, or Judd, then EnerWorks should do so in accordance with the motion procedure provided by the Rules of Civil Procedure and not by engrafting those motions as claims in a new action separate from the action whose judgment is being enforced.

[98] EnerWorks’ counterargument is two-fold. First it argues that it is entitled to join the contempt and sequestration claims to its action because in accordance with s. 130 of the Courts of Justice Act, R.S.O. 1990, c. C.43, a multiplicity of proceedings would be avoided and the court has an inherent jurisdiction to control its own proceedings.

[99] Second, it argues pragmatically that if would be a waste of time to start a motion procedure because inevitably the Defendants will object and submit that a trial of an issue is required and then inevitably the court will order that the contempt trial be consolidated or tried together with the fraud, conspiracy, intentional interference with economic relations action that is now before the court.

[100] The Superior Court’s inherent jurisdiction is a profound and difficult topic, which I discuss in an academic article that I wrote several years ago. See P.M. Perell “The Authority of the Superior Court of Justice, the Legislature, and the Civil Rules Committee to Make Rules of Civil Procedure” (2006), 31 Adv. Q. 185. However, for present purposes, I need only note a few conclusions from my research.

[101] In this regard, the case law establishes that the Superior Court’s inherent power cannot be exercised in a way that conflicts with a statute or rule of civil procedure enacted by Parliament, the Legislature, or the Civil Rules Committee: Glover v. Glover (No. 1) (1980), 29 O.R. (2d) 392 (C.A.), affd. [1981] 2 S.C.R. 561; Glover v. Glover (No. 2), (1980), 29 O.R. (2d) 401 (C.A.); Montreal Trust Co. v. Churchill Forest (Manitoba) Ltd. (1971), 21 D.L.R. (3d) 75 (Man. C.A.); Re Richtree Inc., [2005] O.J. No. 251 (S.C.J.); R. (C.) v. Children’s Aid Society of Hamilton (2004), 70 O.R. (3d) 618 (S.C.J.); Clarke v. Clarke (2002), 32 R.F.L. (5th) 282 (Ont. S.C.J.); Unity Insurance Brokers (Winsdsor) Ltd. v. Unity Realty & Insurance Co., [2005] O.J. No. 1069 (Div. Ct.); Equiprop Management Ltd. v. Harris (2000), 51 O.R. (3d) 496 (S.C.J.).

[102] The court’s inherent jurisdiction does not empower a judge to negate an unambiguous expression of the Legislature: Baxter Student Housing Ltd. v. College Housing Co-operative Ltd., [1976] 2 S.C.R. 475 at p. 480.

[103] If a rule of procedure enacted by the Legislature or the Civil Rules Committee is comprehensive, then the inherent jurisdiction of the Superior Court is ousted: Toronto-Dominion Bank v. Szilagyi Farms Ltd. (1988), 65 O.R. (2d) 433 (C.A.); Forrest v. Lacroix Estate (2000), 48 O.R. (3d) 619 (C.A.); Peel (Regional Municipality) v. Great Atlantic & Pacific Co. of Canada Ltd. (1990), 74 O.R. (2d) 161 (C.A.); Société Sepic S.A. v. Aga Stone Ltd. (1995), 21 O.R. (3d) 542 (C.A.).

[104] Inherent jurisdiction does not operate when the Legislature or the Civil Rules Committee has acted and not left any functional gap in its enactment: Re Stelco, [2005] O.J. No. 1171 (C.A.); Re Royal Oak Mines Inc. (1999), 7 C.B.R. (4th) 293 (Ont. Gen Div.); Baker v. Chrysler Canada Ltd., [1998] O.J. No. 1709 (Gen. Div.); Unity Insurance Brokers (Windsor) Ltd. v. Unity Realty & Insurance (2005), 251 D.L.R. (4th) 368 (Ont. Div. Ct.).

[105] From these authorities, I conclude that I do not have the jurisdiction to accept or adopt a procedure that is contrary to what the Rules Committee prescribed. Pragmatic considerations do not confer jurisdiction, and, therefore, it follows that EnerWorks’ claims about violations of the rules associated with violations of the rules associated with the judgment debtor examinations should be struck as free-standing claims and there should be no leave to amend.

[106] To be clear, I am not striking out allegations about Mr. Cooper’s examination in aid of execution that may be factually material to the other claims. I am only striking out the claim for a contempt order or for a sequestration order as a part of the action now before the court.

[107] I should also add that it would be prudent for the parties to resolve whether or not any contempt trials should be consolidated with this action or whether the claim for contempt should proceed by motion. This would be prudent because there may be costs sanctions if it turns out that EnerWorks’ prophesy about the eventual trial of the contempt claims along with this action turns out to be true and this aspect of the motions now before the court has been a waste of time.

D. CONCLUSION

[108] For the above Reasons, I grant the Defendants’ motions to strike as set out above.

[109] Turning to the matter of costs, in my opinion, the appropriate order to make in the circumstances of this case is to order costs to the Defendants in the cause.

[110] If the Defendants are successful at trial in resisting the serious allegations made against them, then they should receive their costs for these motions. However, if EnerWorks is the successful party at trial and shows that its originally imperfectly pleaded claims are sound, then it seems to me that the fairest award would be that each party should receive no costs for these motions.

[111] Orders accordingly.

Perell, J.

Released: January 19, 2012