COURT FILE NO.: CV-09-374829
DATE: 20120120
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Lawrence Mark Dale, Stephen Moranis and Realtysellers (Ontario) Limited, as Assignor (Plaintiffs)
-and-
The Toronto Real Estate Board, Ann Bosley, Jane Doyle, Marilyn Baubie, Cynthia Lai, David Pearce, Ron Abraham, Donald Bentley, Anne Briscoe, Michael Dosman, John Dimichele, Sharon Fuda, Daniel Gargarella, William Johnston, Jose Rhodes, Michael Manley, Dorothy Mason, Paul Etherington, Dina Maglietta, Ken McClenaghan, John Meehan, Maureen O’Neill, Jeo De Leo, Pamela Prescott, Bhupinder Randhawa, Don Richardson, Treb-Ren Venture Inc., The Canadian Real Estate Association, Richard Wood, Samir Bachir, David Gagnon, Gerry Thiessen, Tim Walsh, John Froese, John Fraser, Brad Gilbert, Jean-Guy Savoie, Noreen Barwise, Dorothy Woodd, Harry Deleeuw, Calvin Lindenberg, Daniel Bennett, Alan Tennant, Peter Brady, Philip Nesrallah, Brad Scott, Pierre Beauchamp, Ron Merkley and Tom Bosley (Defendants)
BEFORE: Mr. Justice Kenneth L. Campbell
COUNSEL: William V. Sasso and Jeffrey B. Rosekat for the Defendants, the Toronto Real Estate Board, Jane Doyle, Marilyn Baubie, Cynthia Lai, David Pearce, Ron Abraham, Donald Bentley, Ann Briscoe, Michael Dosman, John DiMichele, Sharon Fuda, Daniel Gargarella, William Johnston, Jose Rhodes, Michael Manley, Dorothy Mason, Paul Etherington, Dina Maglietta, John Meehan, Maureen O’Neill, Jeo De Leo, Pamela Prescott, Bhupinder Randhawa, Don Richardson and Treb-Ren Venture Inc. (the TREB Defendants)
Katherine L. Kay and Mark E. Walli for the Defendants, the Canadian Real Estate Association, Ann Bosley, Richard Wood, Samir Bachir, David Gagnon, Gerry Thiessen, Tim Walsh, John Froese, John Fraser, Brad Gilbert, Jean-Guy Savoie, Noreen Barwise, Dorothy Woodd, Harry Deleeuw, Calvin Lindberg, Daniel Bennett, Alan Tennant, Peter Brady, Philip Nesrallah, Brad Scott, Pierre Beauchamp, Ron Merkley and Tom Bosley (the CREA Defendants)
Thomas G. Heintzman and C. Daniel Wolski for the Plaintiffs, Lawrence Mark Dale, Stephen Moranis and Realtysellers (Ontario) Limited, as Assignor
HEARD: November 29, 2011
REASONS FOR DECISION
Introduction
[1] This is a motion to strike out a Statement of Claim. The plaintiffs have commenced an action for damages in the amount of $540 million against the 49 defendants. Essentially, the plaintiffs claim that the Toronto Real Estate Board (TREB) and its officers and directors (collectively the TREB defendants), together with the Canadian Real Estate Association (CREA) and its officers and directors (collectively the CREA defendants), breached the terms of an earlier settlement agreement, violated the provisions of the Competition Act, R.S.C. 1985, c. C-34, unlawfully conspired together to injure the plaintiffs, and wrongfully interfered with the plaintiffs’ economic and contractual relations. This was all done, according to the plaintiffs, in an effort to drive Realtysellers out of the real estate business and punish the plaintiffs for making complaints about them to the federal Competition Bureau. The plaintiffs also seek punitive, aggravated and/or exemplary damages in the amount of $10 million against the defendants.
[2] All of the defendants, with the sole exception of TREB itself, have moved under rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to strike out the plaintiffs’ Statement of Claim, without leave to further amend, on the ground that the claim discloses no reasonable cause of action against them.
The Governing Legal Framework
[3] There are a number of well-settled legal principles that provide the framework of analysis for the determination of this motion. First, according to rule 21.01(2)(b), “no evidence is admissible” on a motion to strike out a claim for disclosing no reasonable cause of action. Rather, the motion must be determined on the adequacy of the contents of the impugned claim and any documents that may have been incorporated into the claim by reference. Second, the law is clear that motions to strike can only succeed if the defendants establish that it is “plain and obvious” that the claim discloses no cause of action. In other words, the claim should only be struck if it is “beyond doubt” that the claim will not succeed at trial. If the claim has some chance of success, it should be permitted to proceed. Third, for the purpose of determining such motions, the court must accept the facts as alleged by the plaintiff in the claim as proven unless they are patently ridiculous or incapable of proof. Fourth, the court must read the statement of claim generously, recognizing that there must be allowances made for drafting deficiencies. Fifth, the potential length and complexity of the issues, the legal novelty of the alleged cause of action, and/or the potential for the defendants to mount a strong and persuasive defence are not factors that should prevent the plaintiff from proceeding. The combined application of these principles creates a “stringent” legal test for defendants moving to strike out a statement of claim, while creating a threshold for plaintiffs which is “not high.” See generally: Hunt v. Carey Canada Inc., [I990] 2 S.C.R. 959, at pp. 971-980; Nash v. Ontario (1995), 1995 CanLII 2934 (ON CA), 27 O.R. (3d) 1 (C.A.) at p. 7; MacKinnon v. Ontario Municipal Employees Retirement Board (2007), 2007 ONCA 874, 88 O.R. (3d) 269 (C.A.) at para. 19-21; Piedra v. Copper Mesa Mining Corp. 2011 ONCA 191, [2011] O.J. No. 1041 (C.A.) at para. 36; P. Perell and J.W. Morden, The Law of Civil Procedure in Ontario (2010, 1st ed.) at pp. 444-445.
The Fresh as Amended Statement of Claim
A. Introduction
[4] The Fresh as Amended Statement of Claim that is now under attack by the defendants is some 53 pages long and has been amended four times by the plaintiffs. The following summary of the plaintiffs’ allegations, taken from this pleading, provides the necessary factual background of the case and serves to illuminate the issues between the parties.
B. The Defendants
[5] CREA is the national association representing approximately 90,000 real estate brokers, agents and salespeople who are members of approximately 112 local real estate boards across Canada. CREA is, in effect, the national body overseeing all real estate trade associations throughout the country. CREA’s rules, particularly those in relation to the Multiple Listing System (MLS) services, are carried forward into the rules of its member boards and associations. The MLS services are the databases used by real estate agents and brokers to share information about properties for sale. CREA is governed by a Board of Directors, which is elected by the member local real estate boards. Typically, CREA directors have previously served as directors of their local real estate board. The management of CREA is delegated to senior officers, who are led by a Chief Executive Officer (CEO). The defendant Pierre Beauchamp was the CEO of CREA at all relevant times.
[6] TREB is the CREA-affiliated real estate board, operating as a trade association, in the Greater Toronto Area (GTA). TREB has approximately 28,000 members. TREB’s rules reflect those of CREA, of which TREB is a member. TREB provides services for real estate professionals in the GTA, the most important of which is operating the local MLS property information data system. TREB is governed by a Board of Directors, which is elected by TREB members. Management is delegated to senior officers, led by a CEO. At all relevant times the defendant Don Richardson was the CEO of TREB. The operation of the MLS for TREB is overseen by a Chief Information Officer (CIO). At all relevant times the defendant John DiMichele was the CIO of TREB.
[7] All of the individual defendants own, or are involved in, traditional real estate brokerage businesses. While many of them work in and around the GTA, the individual defendants in this action are located literally across Canada, from British Columbia to New Brunswick. In some 35 brief paragraphs over some five pages, the Fresh as Amended Statement of Claim makes assertions such as the following (for example) with respect to each of the individual defendants:
• The defendant Anne Briscoe is a broker and owner of Century 21 Briscoe Estates Ltd., a traditional residential real estate brokerage firm carrying on business in the GTA.
• The defendant Brad Gilbert is a real estate broker with Coldwell Banker City Side Realty Ltd., a traditional real estate brokerage firm carrying on business in Saskatchewan.
• The defendant Noreen Barwise is a real estate broker and an owner of Noreen Barwise Realty Ltd., a traditional residential real estate brokerage firm carrying on business in New Brunswick.
• [The defendant] Brad Scott is the Chief Operating Officer for the Real Estate Board of Greater Vancouver.
C. The Plaintiffs – Starting Realtysellers
[8] One of the plaintiffs, Lawrence Dale, is a businessman from Toronto, who has been involved in the residential real estate business for over 25 years. In 2000, Mr. Dale developed a business concept with the other personal plaintiff, Stephen Moranis, to provide consumers with lower cost residential real estate brokerage services. In starting this new business, Mr. Dale became a licensed real estate agent and a member of TREB and CREA.
[9] Mr. Moranis has been involved in the residential real estate brokerage business for over 30 years. He is a past president of TREB and a former director of CREA. At all relevant times, he too was a member of both TREB and CREA.
[10] Mr. Dale and Mr. Moranis were the major financial investors in their new business. They jointly caused Realtysellers (Ontario) Limited to be incorporated in November of 2000. Realtysellers was the first business vehicle through which the two men operated their new business, and they licensed Realtysellers as a real estate broker in Ontario.
[11] Any residential real estate brokerage business, if it is to have any realistic chance of business success, must have access to the local MLS services. As mentioned above, in the GTA the MLS is operated by TREB. In late 2000, Realtysellers became a member of TREB so it could operate in the GTA. As a member of TREB, Realtysellers also became a member of CREA. Mr. Moranis became registered as a broker with Realtysellers, and Mr. Dale became registered as a salesperson with Realtysellers. The plaintiffs’ memberships in TREB and CREA entitled the plaintiffs to access the MLS service and use the MLS trademark.
[12] Realtysellers began operating in the resale residential real estate market in the GTA in January of 2001. Subsequently, Realtysellers expanded its operations throughout Ontario, becoming members of several other local real estate boards, including the boards operating the MLS systems in Barrie, Hamilton-Burlington, Ottawa, Windsor, Kitchener-Waterloo, Sudbury, Renfrew, Oakville-Milton, London and Niagara Region.
D. The Essence of the Plaintiffs’ New Business Model
[13] When Realtysellers started business, virtually all real estate agents and brokerages in the major markets throughout Canada were providing their residential resale real estate brokerage services to consumers in virtually the same manner. It was the way such businesses had been operated for decades. The cost structure to consumers had remained the same for many years. For example, the seller of a home in the GTA would typically pay 2.5% of the selling price as a listing fee regardless of the price of the home or the services actually provided. Consumers increasingly began to perceive that the cost of such brokerage services was too high in relation to the services provided. However, consumers had no option to purchase only the services they wanted.
[14] The plaintiff’s new business model was designed to provide the option of permitting sellers to list their residential properties on MLS for a flat fee, without having to contract for any other services. Traditionally, real estate brokers always included in their services the presentation or negotiation of offers to purchase. By offering their “flat free” program, through Realtysellers, without requiring the purchase of traditional “offer negotiation” services, the plaintiffs sought to provide sellers with key access to MLS services, but at a significantly reduced cost. In short, the plaintiffs’ main business strategy was to offer consumers lower cost brokerage services and the ability to purchase only those real estate services the sellers wanted. Through the flat fee program of Realtysellers, home sellers could have their properties listed for sale on MLS for only a few hundred dollars, instead of being required to spend thousands of dollars for the offer negotiation services of a traditional real estate broker.
[15] At the time Realtysellers started business, the rules of TREB and CREA permitted the operation of this new business model. More particularly, these rules permitted communications, offers and negotiations to occur directly between the seller and the buyer’s agent (with the consent of the listing agent), and permitted Realtysellers to list a residential property through its flat fee program without being involved in receiving and presenting offers or negotiating counter-offers.
E. TREB Changed the Rules in 2002
[16] The plaintiffs soon encountered serious resistance to their new business model from TREB, CREA and many of the individual defendants. This resistance culminated in April of 2002 when TREB, in consultation with CREA and some of the other defendants, enacted new rules which required listing brokers to be involved in the offer negotiation process. These rules effectively prevented the flat fee program and eliminated Realtysellers’ access to the MLS services. The plaintiffs, being members of TREB, were required to follow the rules of the organization.
F. The First Action – Subsequently Settled
[17] As a result of this change in the rules the individual plaintiffs commenced an action against TREB and its related publishing company Treb-Ren Venture Inc. (Treb-Ren), when TREB removed a Realtysellers’ flat fee listing from MLS, and TREB caused its related newspaper, Real Estate News, to refuse to publish Realtysellers advertising in connection with the flat fee program.
[18] Subsequently, the federal Competition Bureau began a formal investigation into the matter and the new offer negotiation rules adopted by TREB. By the late summer of 2003 the Competition Bureau had indicated that, unless TREB changed their rules, it would take action against CREA, TREB and some of the other defendants.
[19] In late 2003, Mr. Dale and Mr. Moranis met with Richard Wood, then the President of CREA and acting on behalf of the defendants, to see if the action might be settled. At this meeting the plaintiffs stressed that any settlement had to have three main components, namely:
• An assurance that the flat fee program would be permitted on MLS and the new offer negotiation rules requiring the listing broker to be involved in the offer negotiation process be changed;
• A public acknowledgement from CREA and TREB that the plaintiffs were participants in good standing and that the new flat fee program complied with the TREB and CREA MLS rules; and
• Financial compensation for the individual plaintiffs from the defendants.
[20] The plaintiffs wanted to be assured that, once and for all, they would be allowed to operate their new business without threat of being denied access to MLS. Mr. Wood assured the plaintiffs that any settlement would guarantee their undisturbed access to MLS for the flat fee program. Mr. Wood advised that the defendants would agree with the proposed settlement, but wanted the plaintiffs to advise the Competition Bureau that all complaints by them were withdrawn. The defendants were concerned that action might be taken against them by the Competition Bureau.
[21] The parties settled the action upon this proposed framework. The settlement agreement was executed in early January of 2004 and was effective as of December 9, 2003. The settlement agreement provided that, in return for the plaintiffs giving up all claims against the defendants, the plaintiffs would receive $700,000 in compensation, and that TREB’s rules would be changed to remove the requirement that the listing agent be involved in offer negotiation and to permit the flat fee program access to MLS. This rule change was also agreed to by CREA. The settlement agreement also required CREA and TREB to issue public statements and post notices on their respective websites indicating that Realtysellers was offering services as a participant in good standing and in compliance with MLS. When the plaintiffs withdrew their complaints to the Competition Bureau, the Bureau closed their investigation into the matter.
[22] With this settlement agreement in hand, the plaintiffs set out to build their new business without the distractions encountered in the first three years. In the result, Realtysellers expanded its business in Ontario and to Nova Scotia.
G. The Alleged Conspiracy and Breach of the Settlement Agreement
[23] According to the plaintiffs, sometime after the execution of the settlement agreement, some of the defendants began conspiring to force the plaintiffs to close their non-traditional real estate brokerage business. As early as late 2005 or early 2006, the defendant Tom Bosley was allegedly heard to say: “We have just started dealing with Realtysellers and when we get finished they will be out of business.” The alleged initial conspirators included Mr. Beauchamp, CREA’s CEO, Ann Bosley, the President of TREB at the time of the first action who later became a director of CREA and eventually President of CREA, Tom Bosley, a director of the Real Estate Council of Ontario, Maureen O’Neill, a director of TREB who became TREB's President in 2008, and Alan Tennant, who became CREA’s President.
[24] According to the plaintiffs’ claim, in 2006 the conspiring defendants used CREA as the vehicle to drive the plaintiffs out of the resale brokerage business by causing CREA to implement new “offer negotiation” rules, which all CREA member boards across Canada were obliged to follow. Under these new rules, a listing broker was, once again, required to be involved in offer negotiations and, accordingly, prohibited the flat fee program on MLS.
[25] When CREA first publicly announced this initiative, which was being led by Mrs. Bosley, Mr. Tennant and Mr. Beauchamp, the plaintiffs approached TREB and CREA (specifically their respective CEO’s Don Richardson and Pierre Beauchamp) and advised them that, if the proposed rules were passed, this would constitute a breach of the earlier settlement agreement. Subsequently, there were numerous discussions between TREB, CREA, the plaintiffs and their respective counsel. During these discussions, the defendants were made aware of the unique effect that the proposed new rules would have on Realtysellers, given that there were no other brokerage businesses offering a flat fee program like Realtysellers. In short, they knew that such rules would effectively put the plaintiffs out of business.
[26] Nevertheless, on March 24, 2007, CREA, with the approval of TREB, implemented the new offer negotiation rules. These new rules, called “Interpretations,” once again required that listing agents be involved in offer negotiation services and, therefore, no longer permitted flat fee listings on MLS.
[27] As to the specific nature of the plaintiffs’ allegations, the Fresh as Amended Statement of Claim alleges that, between 2005 and 2007, the 22 individual CREA defendants, in their personal capacity as real estate brokers, and for the purpose of harming the plaintiffs and removing them and their new business as a competitive threat, “acted and agreed unlawfully, maliciously, without justification and outside the scope of his or her authority within CREA” to influence CREA, TREB, the other defendants and other real estate boards “to drive the plaintiffs out of the resale brokerage business” by causing CREA to implement “new offer negotiation rules” that all CREA member boards across Canada would have to follow.
[28] According to the plaintiffs’ claim, while TREB and other real estate boards initially opposed this initiative, the 22 individual CREA defendants “unlawfully, maliciously” and “without justification and outside the scope of his or her authority” within CREA, improperly and knowingly influenced TREB and the other dissenting boards to change their votes in favour of implementing the new offer negotiation rules. Indeed, the CREA defendants “threatened” these boards that if they did not support the new offer negotiation rules proposed by CREA, these boards would “face disciplinary action” from CREA, including being expelled from CREA and prohibited from using the MLS trademarks.
[29] The plaintiffs’ claim alleges that, by late 2006, notwithstanding the intervening efforts of the plaintiffs, the individual defendants had all “reached an agreement whereby they would induce TREB and CREA to breach the settlement agreement,” and/or would agree with TREB and CREA to implement the new offer negotiation rules. The purpose of this agreement by the defendants, according to the plaintiffs, was to put the plaintiffs “out of business.”
[30] Further, the plaintiffs’ claim alleges that the unlawful activities of the various defendants included: (1) breaching the earlier settlement agreement by implementing the new offer negotiation rules; (2) refusing to deal with and otherwise discriminating against the plaintiffs’ new business; (3) fixing, maintaining, inducing increases and preventing or slowing the reduction of fees and commission rates traditionally enjoyed by real estate agents and brokers at the expense of the public and to the prejudice of the plaintiffs; (4) interfering with the plaintiffs’ efforts to offer consumers their innovative and unique products and services; and (5) preventing the plaintiffs’ new business from competing in the resale residential real estate brokerage marketplace in the GTA and elsewhere in Canada.
H. The Consequences for the Plaintiffs – Realtysellers Shut Down Business Operations
[31] As a result of the new offer negotiation rules and the ensuing uncertainty over the ongoing ability to operate their new business, Mr. Dale and Mr. Moranis could not secure any additional long-term financing to keep their new business operating, and the new business suspended operations. Realtysellers had operated for almost seven years until it was forced to close. Mr. Dale and Mr. Moranis were the major investors, and secured creditors, in Realtysellers.
[32] Following the closure of Realtysellers, the company assigned to Mr. Dale and Mr. Moranis all of its rights, title and interest in and all claims and causes of action that Realtysellers had in connection with the matters arising from the first action, any breach of the settlement agreement and any claims and causes of action that Realtysellers had or might have in connection the implementation of the new offer negotiation rules or the alleged conspiracy. As such, Realtysellers is a party to this action only as the assignor of its rights to the individual plaintiffs.
The Positions of the Parties on the Motion
A. The CREA Defendants
[33] The CREA defendants contend that they have no place in this dispute. The plaintiffs’ complaints are directed at the conduct of CREA as an organization in the exercise of its authority to make rules governing its members. Most of the CREA defendants are not even alleged to have been officers or directors of CREA in March of 2007 when the new “Interpretations” were approved. The CREA defendants contend that, while the Fresh as Amended Statement of Claim makes vague assertions and bald, unsupported legal conclusions that each of the individual defendants “conspired” and “acted knowingly and improperly outside the scope of his or her authority within CREA” in causing the CREA rule changes to be amended, this is insufficient to properly state a cause of action against these individuals. Moreover, according to the CREA defendants, the plaintiffs’ claim raises concerns about the inclusion of personal claims against officers and directors of corporations as a litigation tactic.
[34] Further, the CREA defendants argue that the plaintiffs’ claims against CREA itself are fatally defective in that the plaintiffs’ claim describes only the unilateral conduct of CREA in passing its own rules, not the essential element of concerted activity with others. Nor have the plaintiffs, according to the CREA defendants, pleaded factual allegations which could establish that CREA’s conduct violated any provisions of the Competition Act, or which could constitute a cause of action for intentional interference with the plaintiffs’ economic relations.
B. The TREB Defendants
[35] The TREB defendants contend that the claim discloses no cause of action against them personally as they were sued personally in the first action and the settlement of that action provided them with full and final releases, and the plaintiffs disavow any knowledge as to whether the TREB defendants engaged in any subsequent conduct giving rise to a cause of action against them.
[36] The TREB defendants also argue that, even if it could be said that each of the TREB defendants authorized or approved the alleged breaches of contract by TREB, or authorized or approved CREA’s implementation of the new offer negotiation rules, the TREB defendants have limited liability protection from personal claims for such alleged corporate misconduct. The plaintiffs’ claim simply does not identify any of the TREB defendants as directly engaging in any activity in relation to the new CREA rules. The impugned acts which are the heart of this case, namely, CREA’s adoption and implementation of the new offer negotiation rules, and TREB’s alleged approval of that course of action, are all simply authorized corporate acts.
C. The Plaintiffs
[37] The plaintiffs contend, on the other hand, that this action arises from a conspiracy amongst the defendants, between 2004 and 2007, to drive the plaintiffs out of business and eliminate the competition of the economical flat fee services offered by Realtysellers. This was the defendants’ motivation in causing CREA to enact its new rules to require the traditional offer negotiation services. The adoption of those rules by CREA ultimately forced the plaintiffs out of business. The plaintiffs claim, more particularly, that all of the defendants: (1) breached the express and implied terms of the settlement agreement; (2) breached their duty of good faith and the collateral warranty in relation to the settlement agreement; (3) violated certain provisions of the federal Competition Act; and (4) committed the torts of conspiracy, inducing breach of contract and interference with economic and contractual relations.
[38] In advancing this position, the plaintiffs observe, as they did in the Fresh as Amended Statement of Claim, that the defendants were sued in 2010 by the federal Competition Bureau in relation to these same facts. In response, in the spring of 2010, the defendants withdrew the CREA rule requiring real estate brokers to provide offer negotiation services and, in the fall of 2010, the defendants entered into a Consent Agreement with the Bureau effectively acknowledging that their conduct had been unlawful and agreeing not to require their members to provide offer negotiation services or prohibit flat fee listings.
[39] The plaintiffs also contend that almost all of the individual defendants carry on their own real estate brokerage businesses. It is in that capacity that they are directors and officers of the non-profit trade associations, CREA and TREB, and have used those associations to accomplish their conspiracy.
Analysis
A. Introduction
[40] In my view, for the reasons outlined below, the Fresh as Amended Statement of Claim cannot properly be struck out under rule 21.01(1)(b) as it is not plain and obvious that the claim discloses no reasonable causes of action against the defendants.
B. The Alleged Breach of Contract
[41] In my view the plaintiffs’ claim discloses a cause of action in breach of contract against the defendants. The plaintiffs have clearly alleged that: (1) all of the defendants, except Tom Bosley, were parties to the initial settlement agreement; (2) this settlement agreement required the defendants to change and/or maintain their rules so as to permit the plaintiffs to provide their new flat fee business program to consumers, together with the authorized use of MLS services, without providing traditional offer negotiation services; and (3) the defendants “blatantly” breached the express and/or implied terms of that settlement agreement by unlawfully causing CREA to subsequently enact new offer negotiation rules which prohibited the plaintiffs’ innovative flat fee business model.
[42] Given the nature of this pleadings motion, it is not for the court to seek to conclusively interpret the legal effect of the terms (express and/or implied) of the settlement agreement between the parties against the factual matrix of their relationships or to investigate the plaintiffs’ current ability to establish these assertions with admissible evidence. Rather, to successfully resist this motion to strike, it is legally sufficient for the plaintiffs to have alleged, as they have, that the defendants individually and collectively breached the express and/or implied terms of their earlier settlement agreement with the plaintiffs, and that the plaintiffs suffered damages in the result.
[43] In my opinion it is neither plain nor obvious that there is no basis for the plaintiffs’ claim of breach of contract on the part of the defendants. Indeed, it seems clear to me that the plaintiffs have properly alleged a breach of contract on the part of the defendants. See: Dunn v. Chubb Insurance Company of Canada (2009), 2009 ONCA 538, 97 O.R. (3d) 701 (C.A.) at para. 32-37; Brookfield Homes (Ontario) Ltd. v. Nova Plumbing & Heating Ltd., [2008] O.J. No. 3488 (S.C.J.) at para. 11-16; TransCanada Pipelines Ltd. v. Potter Station Power Limited Partnership, 2002 CanLII 49642 (ON SC), [2002] O.J. No. 429 (S.C.J.) at para. 14-15; Nareerux Imports Co. v. Canadian Imperial Bank of Commerce (2009), 2009 ONCA 764, 97 O.R. (3d) 481 (C.A.) at para. 69; Custom Cycle (1996) Ltd. v. Honda Canada Inc., 2009 SKQB 427, [2009] S.J. No. 631 (Q.B.) at para. 34-38; Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 2003 CanLII 9923 (ON CA), 68 O.R. (3d) 457 (C.A.) at para. 35-40, 45-54; M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., 1999 CanLII 677 (SCC), [1999] 1 S.C.R. 619, at pp. 634-635; Menon v. Prestige Toys Ltd., [2007] O.J. No. 2662 (S.C.J.) at para. 17; Affirmed: [2008] O.J. No. 2082 (C.A.).
[44] The individual defendants argue that they cannot be held liable for inducing a breach of contract by CREA given the general rule that officers and directors of an organization (including non-profit trade associations like TREB and CREA) are not liable for inducing any alleged breach of contract by that organization. As the Court of Appeal for Ontario confirmed in Piedra v. Copper Mesa Mining Corp., at para. 72-76, in the absence of allegations of fraud, deceit, dishonesty, or want of authority on the part of the officers, directors, or employees of the organization, such individuals are protected from personal liability “unless it can be shown that their actions are themselves tortious” or “exhibit a separate identity or interest from that of the company” so as to render the impugned conduct “their own.” Indeed, courts must be scrupulous in “weeding out” claims not properly advanced personally against officers and directors as, without this increased degree of scrutiny, there would be a risk that officers and directors would be driven away from corporate business by potential exposure to ill-founded litigation.
[45] In the present case, however, the plaintiffs have clearly alleged that the individual defendants acted unlawfully and maliciously against them, without justification, entirely outside the scope of their lawful authority as officers and/or directors of TREB and/or CREA and for the advancement of their own personal and business interests. Accordingly, to the extent that the impugned conduct of the individual defendants in this action took place when they were officers or directors of CREA or TREB, these specific allegations render inapplicable the general rule protecting them from personal liability. The plaintiffs have alleged that the actions of the defendants are themselves tortious, or at least exhibited a want of authority or separate interest from that of the organization. See: Said v. Butt, [1920] 3 K.B. 497; Normart Management Ltd. v. Westhill Redevelopment Co. (1998), 1998 CanLII 2447 (ON CA), 37 O.R. (3d) 97 (C.A.) at p. 102-103; 117577 Ontario Ltd. v. Magna International Inc., 2001 CanLII 8529 (ON CA), [2001] O.J. No. 1621 (C.A.) at para. 14-24; ADGA Systems International Ltd. v. Valcom Ltd. (1999), 1999 CanLII 1527 (ON CA), 43 O.R. (3d) 101 (C.A.) at para. 8-15, 40-43; Leave denied: [1999] S.C.C.A. No. 124; Jama (Litigation Guardian of) v. McDonald’s Restaurants of Canada Ltd., [2001] O.J. No. 1068 (S.C.J.) at para. 9-11.
[46] The plaintiffs have also alleged that the defendants violated their implied contractual obligation to carry out the settlement agreement in good faith. The plaintiffs contend that the settlement agreement is a continuing contract with an implied term that they not engage again in the same conduct that led to the settlement agreement in the first place. The plaintiffs’ argue that it would be “remarkable” for the defendants to be able to settle the first action and therein agree to revoke the offer negotiation rules, and then turn around and subsequently re-enact those same offer negotiation rules to put Realtysellers out of business. The jurisprudence establishes that there is an implied duty in contractual relationships to carry out a contract in a way that does not defeat or otherwise eviscerate the very purpose and objective of the agreement. See: Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 2003 CanLII 9923 (ON CA), 68 O.R. (3d) 457 (C.A) at para. 53; Nareerux Imports Co. Ltd. v. Canadian Imperial Bank of Commerce (2009) 2009 ONCA 764, 97 O.R. (3d) 481 (C.A.) at para. 69; Fulawka v. Bank of Nova Scotia, [2011] O.J. No. 2561 (Div.Ct.) at para. 44. In my view the factual allegations in the plaintiffs’ claim are sufficient, if ultimately proven, to establish a breach of this contractual obligation. Accordingly, this related aspect of the plaintiffs’ claim should not be struck out.
[47] While the individual defendant Tom Bosley was clearly not a party to the settlement agreement, the plaintiffs have alleged that he had “intimate knowledge” of the details of the settlement agreement and, like the other defendants, induced the breach of this agreement.
C. The Alleged Conspiracy Amongst the Defendants
[48] There are two types of civil conspiracy. First, there is a conspiracy where the predominant purpose of the defendants is to cause injury to the plaintiffs, regardless of whether the means employed are lawful or unlawful. Second, there is a conspiracy where the conduct of the defendants is unlawful, is directed toward the plaintiff alone, and the defendants should have known that, in the circumstances, injury to the plantiff was likely to result.
[49] More particularly, the 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.
[50] The plaintiffs’ claim properly pleads a cause of action against the defendants in relation to both types of civil conspiracy. First, the plaintiffs allege a “predominant purpose conspiracy” amongst the defendants by contending that, between 2004 and 2007, the defendants conspired together for the predominant purpose of injuring the plaintiffs by putting them out of business and thereby eliminating a new competitive business model. The defendants accomplished this goal through the adoption and implementation of the new offer negotiation rules by CREA. Second, the plaintiffs allege an “unlawful means conspiracy” by pleading that the actions of the defendants, in agreeing together to implement the new offer negotiation rules, breached ss. 61 and 45 of the Competition Act. The courts have recognized that breaches of these statutory provisions, where the defendants agree to fix or maintain prices and act in furtherance of that agreement amount to the “unlawful means” necessary to establishing the tort of civil conspiracy. See: 2038724 Ontario Ltd. v. Quizno’s Canada Restaurant Corp. (2010), 2010 ONCA 466, 100 O.R. (3d) 721 (C.A.) at para. 46-49; Canadian Community Reading Plan Inc. v. Quality Service Programs Inc., [2001] O.J. No. 205 (C.A.); Westfair Foods Ltd. v. Lippens Inc. (1989), 1989 CanLII 5257 (MB CA), 64 D.L.R. (4th) 335 (Man.C.A.); Leave denied: [1990] S.C.C.A No. 17.
[51] Accordingly, it is not plain and obvious that the plaintiffs’ claim fails to disclose a reasonable cause of action regarding the tort of conspiracy. Indeed, in my view the plaintiffs have alleged that the defendants engaged in a classic type of conspiracy, namely, combining together to drive a business competitor and their novel business model out of the market place. There is simply no basis to strike out the plaintiffs’ claim that the defendants engaged in the tort of conspiracy.
[52] The TREB defendants argue that the plaintiffs’ impugned pleading only asserts a conspiracy amongst the identified CREA defendants and, accordingly, discloses no cause of action against the TREB defendants. Further, the TREB defendants argue that the plaintiffs’ complaints against them only relate to their conduct prior to the settlement agreement and, therefore, amount to an abuse of process. These submissions inaccurately characterize the Fresh as Amended Statement of Claim. While the plaintiffs acknowledge that TREB was “initially opposed” to the CREA initiative of implementing new offer negotiation rules, the plaintiffs clearly assert that, subsequently, by late 2006, all of “the individual defendants reached an agreement whereby they would induce TREB and CREA to breach the Settlement Agreement” and/or agree with the implementation of the new offer negotiation rules. The purpose of this agreement between the individual defendants was to put the plaintiffs “out of business.” The plaintiffs do not limit this allegation to only the CREA defendants, but include all of the “individual defendants.” Accordingly, the TREB defendants are included amongst the alleged conspirators. Further, this allegation is made in relation to conduct by the individual defendants long after the settlement agreement was executed. Therefore, it cannot accurately be characterized as an abuse of process.
[53] The defendants all contend that insufficient particulars of their conduct have been pleaded by the plaintiffs. I disagree. While the plaintiffs candidly admit a lack of detailed knowledge as to all of the factual nuances of the conspiracy, this is hardly surprising given the nature of the allegation. As Cumming J. aptly stated, when faced with similar circumstances in North York Branson Hospital v. Praxair Canada Inc., 1998 CanLII 14799 (ON SC), [1998] O.J. No. 5993 (S.C.J.), at para. 22:
In truth, the very nature of a claim of conspiracy is that the tort resists detailed particularization at early stages. The relevant evidence will likely be in the hands and minds of the alleged conspirators. Part of the character of a conspiracy is its secrecy and the withholding of information from alleged victims. The existence of an underlying agreement bringing the conspirators together, proof of which is a requirement borne by a plaintiff, often must be proven by indirect or circumstantial evidence. A conspiracy is more likely to be proven by evidence of overt acts and statements by the conspirators from which the prior agreement can be logically inferred. Such details would not usually be available to a plaintiff until discoveries. These considerations and the general theme of Hunt, instructing courts not to shy away from difficult litigation, also militate against holding pleadings in civil conspiracy cases to an extraordinary standard.
[54] See also: Apotex Inc. v. Laboratoires Fournier S.A., 2006 CanLII 38354 (ON SC), [2006] O.J. No. 4555 (S.C.J.) at para. 45-54; Yordanes v. Bank of Nova Scotia (2006), 2006 CanLII 1777 (ON SC), 78 O.R. (3d) 590 (S.C.J.) at para. 114; 2038724 Ontario Ltd. v. Quizno’s Canada Restaurant Corp., [2007] O.J. No. 2404 (Div.Ct.) at para. 15; Philippine v. Portugal, 2010 ONSC 956, [2010] O.J. No. 750 (Div.Ct.) at para. 14-25.
[55] In any event, in my view the plaintiffs’ pleading adequately outlines the conspiracy alleged against the defendants. The pleading describes the parties and their relationships with each other. The pleading also alleges the unlawful agreement between the parties, outlines the purposes and goals of the conspiracy, and asserts the resulting special damages (ie. substantial economic damages) that were occasioned to the plaintiffs. While the impugned pleading provides few specific details with respect to the overt acts alleged to have been done by the individual defendants in furtherance of the alleged conspiracy, but rather speaks more collectively about their involvement and participation in the conspiracy, the pleading is legally sufficient, and permits the defendants to respond to the allegation. See: Normart Management Ltd. v. Westhill Redevelopment Co., at p. 104; 728654 Ontario Inc. (c.o.b. Locomotive Tavern) v. Ontario, 2005 CanLII 36159 (ON CA), [2005] O.J. 4227 (C.A.) at para. 3-5.
[56] The defendants also argue that the individual defendants could not, as a matter of law, have conspired with CREA or TREB since they were officers or directors of those organizations and were engaged in no more than the lawful activities of the organizations (ie. making rules to govern the conduct of members). Again, I disagree. As the plaintiffs’ claim makes clear, this is not a case where the plaintiffs simply assert that the individual defendants were acting solely as officers or directors of TREB and/or CREA within the scope of their authority. Rather, the plaintiffs clearly allege that the individual defendants were acting unlawfully, maliciously, without justification, outside the scope of their authority, and for their own self-interest in participating in this unlawful conspiracy to order eliminate the plaintiffs’ new business. In this regard it is important to recall that CREA and TREB are not typical corporations engaged in business. They are non-profit trade associations. Accordingly, as alleged by the plaintiffs, the personal economic interests of the individual defendant real estate brokers were not tied to these trade associations, but rather were tied to their own real estate businesses. The plaintiffs allege that it was to benefit those personal businesses that the defendants conspired together to wrongfully drive a new competitor out of their business. See: ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 1995 CanLII 1301 (ON CA), 26 O.R. (3d) 481 (C.A.) at para. 25; Craik v. Aetna Life Insurance Co., [1995] O.J. No. 3286 (Gen.Div.) at para. 19; Affirmed: [1996] O.J. No. 2377 (C.A.); Silver v. Imax Corp., 2009 CanLII 72334 (ON SC), [2009] O.J. No. 5585 (S.C.J.) at para. 93-96; Leave denied: (2011), 2011 ONSC 1035, 105 O.R. (3d) 212 (Div.Ct.); McKenna v. Gammon Gold Inc., 2010 ONSC 1591, [2010] O.J. No. 1057 (S.C.J.) at para. 53-68; Varied on other grounds: [2011] O.J. No. 3240 (Div.Ct.); McCann v. CP Ships Ltd., [2008] O.J. No. 5957 (S.C.J.) at para. 57-61; R. v. Electrical Contractors Association (1961), 1961 CanLII 212 (ON CA), 131 C.C.C. 145 (Ont.C.A.).
D. Interference With Economic Relations
[57] The tort of interference with economic relations requires proof of: (1) an intent on the part of the defendant to injure the plaintiff; (2) interference with the plaintiffs’ living or business by the defendant by some unlawful means; and (3) damages suffered by the plaintiff as a result of the actions of the defendant. See: Reach M.D. Inc. v. Pharmaceutical Manufacturers Assn. of Canada et al, [1999] O.J. No. 2853 (S.C.J.) at para. 44-45; Reversed on other grounds: (2003), 2003 CanLII 27828 (ON CA), 65 O.R. (3d) 30 (C.A.) at para. 44-54; Lineal Group Inc. v. Atlantis Canadian Distributors Inc. (1998), 1998 CanLII 4248 (ON CA), 42 O.R. (3d) 157 (C.A.); Drouillard v. Cogeco Cable Inc. (2007), 2007 ONCA 322, 86 O.R. (3d) 431 (C.A.); Correia v. Canac Kitchens (2008), 2008 ONCA 506, 91 O.R. (3d) 353 (C.A.); Agribrands Purina Canada Inc. v. Kasamekas, at para. 32-33.
[58] The plaintiffs’ claim properly pleads all of the necessary elements of this cause of action. More particularly, this pleading asserts that the defendants intended to injure the plaintiffs and interfere with their new business, conducted through Realtysellers. The impugned pleading explains that the defendants adopted this course of action as the plaintiffs were able offer their flat fee program at a significantly lower cost to the consumer as they were not providing the traditional offer negotiation services. The pleading also alleges that the defendants intended to drive Realtysellers out of business because it competed directly with the traditional real estate brokerage businesses operated by the various individual defendants. The pleading also alleges that TREB and CREA sought to punish the plaintiffs for their first suit, and for causing the investigation started by the federal Competition Bureau into the defendant's business affairs. In this pleading the plaintiffs also assert that, as a result of the defendants’ unlawful conduct (ie. breach of contract, civil conspiracy and breaches of the Competition Act), the plaintiffs suffered substantial economic damages. As all of the necessary elements of the tort of interference with economic relations have been fully and properly pleaded, and clearly disclose a cause of action against the defendants, there is no basis to strike this aspect of the pleading. See also: Barber v. Vrozos, 2010 ONCA 570, [2010] O.J. No. 3697 (C.A.) at paras. 47-63; Alleslev-Krofchak v. Valcom Ltd., 2010 ONCA 557, [2010] O.J. No. 3548 (C.A.) at para. 39, 46-83; Leave denied: [2010] S.C.C.A. No. 403.
Conclusion
[59] Assuming that the facts as alleged in the Fresh as Amended Statement of Claim can be established, it is not plain and obvious that the pleading discloses no reasonable cause of action. In conclusion, the motion by the defendants to strike out the plaintiffs’ Fresh as Amended Statement of Claim is dismissed. An order shall issue accordingly.
Costs
[60] If the parties cannot agree as to the costs of this motion, they may serve and file their costs outlines and written submissions in accordance with the following timetable.
[61] Counsel for the plaintiffs have until February 10, 2012 to file their costs outline and submissions, and counsel for the defendants have until February 24, 2012 to file their costs outline and submissions. These submissions shall be no longer than five pages each, excluding the costs outlines and excluding copies of any authorities that the parties may wish to provide.
[62] To the extent that any reply submissions may be necessary, the plaintiffs have until March 2, 2012 to file such reply submissions, which shall be no longer than two pages.
Kenneth L. Campbell J.
DATE: January 20, 2012