SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-11-9506-00CL
MOTION HEARD: MARCH 6, 2013

RE: BMO Nesbitt Burns Inc. v. Donna Shortt, Robert Bramwell, Lu-Anne Breedon and TD Waterhouse Canada Inc.

BEFORE: MASTER R.A. MUIR

COUNSEL: Hendrik Nieuwland for the plaintiff
Gavin J. Tighe for defendants

REASONS FOR DECISION

[1] This is a motion brought by the plaintiff for an order striking out certain paragraphs of the defendants’ statement of defence. The motion is brought pursuant to Rule 25.11 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”). The plaintiff argues that the impugned paragraphs do not comply with the rules of pleading as set out in Rule 25.06(1) and are otherwise scandalous, frivolous or vexatious and an abuse of the process of this court. The defendants oppose the relief sought by the plaintiff.

BACKGROUND

[2] The individual defendants in this action are all former employees of the plaintiff. This claim is brought by the plaintiff for damages arising from what the plaintiff alleges were the unlawful resignations of the individual defendants on November 8, 2011.

[3] The defendant Donna Shortt (“Shortt”) was employed by the plaintiff, or its related corporations, for approximately 31 years. At the time of her alleged resignation, she worked as an investment advisor at the plaintiff’s Collingwood, Ontario branch.

[4] The defendant Robert Bramwell (“Bramwell”) was employed by the plaintiff for approximately 12 years. At the time of his alleged resignation, he also worked as an investment advisor at the plaintiff’s Collingwood, Ontario branch.

[5] The defendant Lu-Anne Breedon (“Breedon”) was employed by the plaintiff for approximately eight years. At the time of her alleged resignation, she worked as an investment representative. She too was employed at the plaintiff’s Collingwood, Ontario branch. It appears that part of Breedon’s role was to provide administrative assistance to Shortt and Bramwell.

[6] The plaintiff claims that prior to November 8, 2011, the individual defendants provided retail investment services to many of the plaintiff’s customers. The plaintiff alleges that at approximately 3:30 p.m. on November 8, 2011, the individual defendants all resigned without any prior notice and immediately commenced employment with the defendant TD Waterhouse Canada Inc. (“TD”). The plaintiff alleges that within six days of the departure of the individual defendants, 35% of the customer assets they managed on behalf of the plaintiff’s customers were transferred to TD.

[7] The plaintiff issued a notice of action on December 9, 2011. Its statement of claim was filed on March 7, 2012 with the consent of the defendants. It seeks $500,000.00 in damages, along with interlocutory and permanent injunctive relief. The plaintiff claims damages from the individual defendants for breach of contract, breach of their duty of good faith and breach of confidence. The plaintiff seeks damages from TD for inducing breach of contract. Finally, the plaintiff seeks damages from all defendants for unlawful interference with economic relations and conversion.

[8] The plaintiff filed an amended statement of claim on April 23, 2012. The defendants’ statement of defence was filed on April 24, 2012. In their statement of defence, the individual defendants take the position that they were forced to submit letters of resignation by the plaintiff’s Collingwood branch manager, Peter Hodgson (“Hodgson”). The defendants allege that Hodgson’s actions in this regard amounted to the dismissal of the defendants from their positions with the plaintiff. They deny that they voluntarily resigned.

[9] On September 28, 2012, the plaintiff’s lawyer wrote to Mr. Tighe and advised of the plaintiff’s intention to bring a motion to strike several paragraphs from the defendants’ statement of defence. The plaintiff then scheduled a Commercial List appearance before Justice Pattillo on October 25, 2012 at which time he ordered that this motion be heard by a master. On the same day, the plaintiff’s lawyer filed a requisition with the motions scheduling office and this motion was then scheduled to be heard by me on March 6, 2013 for a period of two hours.

PRELIMINARY OBJECTION

[10] At the commencement of his argument, Mr. Nieuwland sought to make reference to certain documents and other evidence filed by the parties in connection with an earlier motion brought by the plaintiff for interlocutory injunctive relief. Mr. Tighe objected to the plaintiff’s use of this material as evidence on this motion.

[11] The notice of motion served and filed by the plaintiff did not make reference to this other material. It simply stated that the documentary evidence to be relied upon on this motion would be the amended statement of claim and the statement of defence. The motion confirmation form filed by the plaintiff did not make reference to this other material either. Mr. Tighe was apparently unaware of the plaintiff’s intention to rely on this material until the morning of March 6, 2013.

[12] In my view, it would have been unfair to the defendants to allow the plaintiff to make reference to this material without the defendants having a full opportunity to respond. As a result, I presented the plaintiff with two options. It could request an adjournment of the motion and serve a supplementary notice of motion, to which the defendant would be permitted to respond. Alternatively, it could proceed to argue the motion without making reference to the additional material. The plaintiff chose to proceed by relying only on the evidence referenced in its notice of motion for this motion, along with the defendants’ responding evidence. It was on this basis, that this motion was argued on March 6, 2013.

DELAY

[13] The defendants take the initial position that before the merits of the plaintiff’s argument on this motion are even considered, this motion should be dismissed on the basis of delay. The defendants’ statement of defence was served on April 24, 2012. It was not until September 28, 2012 that the plaintiff advised the defendants that it objected to certain portions of the statement of defence. The defendants argue that this period of delay is excessive and that the plaintiff’s motion should be dismissed as a result.

[14] I do not agree. In my view, the delay is not particularly lengthy, especially given the time of year involved. In addition, the plaintiff moved promptly to have this matter scheduled after advising the defendants of its position. Finally, the defendants have not been prejudiced by this delay. They took no steps in reliance on their pleading as drafted. No affidavits of documents have been prepared. No discoveries have taken place.

[15] I am therefore not prepared to give effect to this argument.

ANALYSIS

[16] Rule 25.11 provides as follows:

The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,

(a) may prejudice or delay the fair trial of the action;

(b) is scandalous, frivolous or vexatious; or

(c) is an abuse of the process of the court.

[17] Rule 25.06(1) provides that every pleading shall contain a concise statement of the material facts upon which a party intends to rely in support of its claim or defence.

[18] The principles applicable to motions of this nature can be summarized as follows:

● a pleading cannot be scandalous if it is relevant to a matter in issue;[^1]

● a court may strike out portions of a pleading, even where the allegations are relevant, if the moving party can establish that the portion in question is of marginal probative value which is outweighed by the pleading’s prejudicial effect;[^2]

● the power of the court to strike out a portion of a relevant pleading should be exercised with considerable caution;[^3]

● a motion under Rule 25.11 is not the appropriate stage in an action to determine the admissibility of evidence at trial or whether a proposed defence is reasonable – a fair trial requires that a defendant be able to put forward a full defence;[^4]

● portions of a pleading that are irrelevant, argumentative or inserted for colour should be struck as scandalous;[^5]

● striking a portion of a pleading on this basis is an exercise in discretion;[^6]

● portions of a pleading that amount to bare allegations should be struck out as scandalous;[^7]

● portions of a pleading that contain only argument or include unfounded and inflammatory attacks on the integrity of a party should be struck out as scandalous and vexatious;[^8]

● allegations in a pleading that would have no effect on the outcome of the litigation should be struck;[^9]

● pleadings should be confined to the relationship between the parties and should not extend to a party’s relationship with non-parties;[^10]

● a pleading with respect to the motive of a plaintiff is bringing an action is generally improper;[^11]

● a pleading with respect to motive may be relevant to a defence of abuse of process.[^12]

[19] These are the principles I have applied in determining the issues on this motion. My analysis leads me to the conclusion that most of the impugned paragraphs are proper and should not be struck out.

THE IMPUGNED PARAGRAPHS

[20] The plaintiff seeks an order striking paragraphs 10 to 16 and 43 and 44 of the statement of defence. In general terms, paragraphs 10 to 16 set out facts relating to the prevailing workplace environment at the plaintiff’s Collingwood branch between 2006 and 2011 and focus on the conduct of Hodgson. For the sake of simplicity, I will refer to those paragraphs as the Hodgson Paragraphs.

[21] Paragraphs 43 and 44 contain allegations relating to the plaintiff’s motive in bringing this action. I will refer to those paragraphs as the Abuse of Process Paragraphs.

THE HODGSON PARAGRAPHS

[22] With respect to the Hodgson Paragraphs, the plaintiff only seeks to strike paragraphs 10 to 16 of the statement of defence. However, in my view it is necessary that those paragraphs be read in context. Paragraphs 9 and 17 to 19 of the statement of defence are important for this purpose. Those paragraphs read as follows:

9. Prior to joining TD Waterhouse, Shortt, Bramwell, and Breedon (collectively, the “Individual Defendants”) were employed by BMO until they were forced by Peter Hodgson (“Hodgson”), Branch Manager of the BMO Collingwood Branch, to submit letters of resignation on or about November 8, 2011.

10. In 2006, Hodgson became the Branch Manager of the Collingwood BMO branch where the Individual Defendants had worked for several years. Upon Hodgson’s hiring, the atmosphere at the branch immediately became poisonous, resulting in circumstances that were extremely disruptive to employees at the branch, including the Individual Defendants, and interfered with client relationships. Hodgson mistreated employees at the branch, including the Individual Defendants, and mistreated clients of the Individual Defendants.

11. The plaintiff BMO is currently involved in other disputes with other former employees regarding Hodgson’s behaviour towards employees. BMO was, or ought to have been, at all material times fully aware of the toxic employment environment created by Hodgson. Hodgson also hired his wife to work in the branch, despite her utter lack of financial experience or training. When employees confronted Hodgson about his wife’s lack of financial training and their concerns with respect to confidentiality issues pertaining to his wife’s employment, Hodgson ignored the employees’ concerns about this nepotism.

12. Prior to Hodgson becoming branch manager, the atmosphere at the Collingwood branch was very collegial in that employees were treated with respect, information was shared between the investment advisors, knowledge based meetings were held, and so forth. Subsequent to Hodgson’s hiring, information and knowledge sharing seemed to be deliberately prevented by Hodgson. Arranging routine internal matters often became heated arguments.

13. Hodgson materially changed the working relationship between the Individual Defendants. Hodgson forced Breedon, who had been the full time assistant to Shortt and Bramwell, to take on office-wide receptionist and assistant duties. Breedon had been a Sales Assistant to Shortt and Bramwell for five years on a full time basis and was previously dedicated exclusively to their clients. Prior to Hodgson’s “new” arrangement, Shortt and Bramwell had a financial agreement with BMO whereby Shortt and Bramwell covered 100% of Breedon’s employment costs. Discretionary bonusing from Shortt and Bramwell accounted for almost 40% of Breedon’s compensation. Hodgson unilaterally terminated this arrangement. After being forced to take on office wide duties, Breedon was very close to quitting BMO due to stress. This situation was intolerable for the Individual Defendants and naturally affected the level of client service they could provide to their clientele.

14. Shortt and Bramwell attempted many times to speak with Hodgson about their concerns with respect to the atmosphere at the branch. However, nothing was done. Eventually, they escalated their concerns to BMO’s National Sales Manager, who then referred them to the Divisional Manager for BMO, South Western Ontario. The Individual Defendants’ concerns went unanswered by anyone senior to Hodgson and the poisonous work environment continued at the BMO branch in Collingwood. In fact, the lack of any meaningful oversight by BMO simply emboldened Hodgson.

15. The atmosphere in the BMO Nesbitt branch created by Hodgson was well known in the small community of Collingwood. In the fall/winter of 2009, Mark Lyon (“Lyon”), branch manager for the Collingwood Branch of TD Waterhouse, learned that the Individual Defendants were very unhappy at BMO due to the conduct of Hodgson.

16. Lyon met with the Individual Defendant [sic] in or about February, 2010. Lyon learned that the Individual Defendants were happy with BMO as an organization based on their lengthy history with the firm, but that Hodgson lacked the compassion, advocacy, integrity, and objectivity to lead. Lyon also learned that Hodgson had done numerous things to make it very difficult for the Individual Defendants to work and grow their business. Lyon then provided the Individual Defendants with an offer to join TD Waterhouse. The Individual Defendants did not accept TD Waterhouse’s offer, and decided to continue to attempt to work out the issues at BMO.

17. In or around September, 2011, Bramwell and Shortt received an unsolicited offer from RBC Dominion Securities. TD Waterhouse subsequently matched RBC’s offer. Shortt and Bramwell advised Lyon that this offer would be agreeable if they ultimately decided to leave BMO for TD Waterhouse.

18. On or about November 8, 2011, Hodgson confronted each of the Individual Defendants about their dealings with TD Waterhouse. The Individual Defendants accurately advised Hodgson that they had not executed contracts with TD Waterhouse. Later that day, however, Hodgson demanded resignation letters from the Individual Defendants which were subsequently provided.

19. Contrary to the allegations in paragraph 22 of the Statement of Claim, the Individual Defendants did not fail to provide BMO with reasonable notice of their resignations. Rather, Hodgson demanded letters of resignation from the Individual Defendants and, in fact, dismissed the Individual Defendants from BMO on or about November 8, 2011. The circumstances relating to the conduct of Hodgson justified and in fact forced the manner of the Individual Defendants’ departure on November 8, 2011.

[23] The plaintiff seeks damages from the individual defendants for what the plaintiff refers to in its factum as “unlawful resignation”. In its statement of claim, the plaintiff alleges that the individual defendants all resigned without prior notice on November 8, 2011, in breach of the terms of their contracts of employment with the plaintiff. As can be seen from the excerpts from the statement of defence set out above, the individual defendants tell a very different story. They all allege that they did not resign at all. Rather, the individual defendants allege that Hodgson forced them to submit letters of resignation against their will after he learned of their involvement with TD. The individual defendants take the position that Hodgson’s actions in forcing them to submit letters or resignation amounted to a dismissal of individual defendants as employees of the plaintiff.

[24] In my view, the historical relationship between Hodgson and the individual defendants, along with the events leading up to November 8, 2011, are relevant to the issue of whether the individual defendants quit or whether they were fired. The trial judge will have to decide between two very different versions of events. It makes no sense to make that decision without reference to the historical nature of the parties’ interactions. It seems to me that if the allegations the individual defendants are making about being forced to resign are to be considered it is only fair that they should be permitted lead evidence to demonstrate that Hodgson’s alleged conduct on November 8, 2011 was in keeping with the earlier working relationship among the parties. They should also be permitted to lead evidence that in the months prior to November 8, 2011 they had decided to remain with the plaintiff and attempt to work out their issues with Hodgson. In my view, this context is a necessary and important element of the defence put forward by the individual defendants that they were forced to resign. These allegations are relevant to matters in issue in this proceeding. Their probative value is more than simply marginal. The plaintiff is making very serious claims against the defendants. In my view, it is necessary that these allegations remain in order to allow the defendants the opportunity to mount a full defence to the plaintiff’s claims.

[25] It is true that the defendants’ allegations regarding Hodgson’s conduct are not particularly flattering. However, I do not view them as inflammatory or inserted for colour only. In my view, they are relevant and necessary in order for the individual defendants to establish their defence that they were forced to resign by Hodgson on November 8, 2011.

[26] I have therefore concluded that to the extent that the impugned allegations relate to Hodgson’s historical conduct and interaction with the employees of the Collingwood branch, and to the individual defendants’ state of mind leading up to November 8, 2011, they should not be struck out.

[27] However, it is my view that the first sentence of paragraph 15 of the statement of defence does not fall within those categories. I can see no relevance to the allegation that the “atmosphere in the BMO Nesbitt branch created by Hodgson was well known in . . . Collingwood”. Whether this allegation is true or not can have no bearing on the outcome of this action. It simply does not matter whether the general population of Collingwood knew of the alleged poor working atmosphere in the plaintiff’s Collingwood branch. In my view, this allegation has been included for the purpose of colour only and should be struck out as scandalous.

THE ABUSE OF PROCESS PARAGRAPHS

[28] The plaintiff requests an order striking out paragraphs 43 and 44 of the statement of defence. The plaintiff argues that those paragraphs are directed to the plaintiff’s motive in bringing this action and are therefore improper.

[29] Paragraphs 43 and 44 read as follows:

43. BMO’s claim herein was commenced for the predominant, collateral and improper purpose of preventing competition in the Canadian marketplace. In particular, BMO has brought the within claim for the purpose of:

(a) intimidating independent investment firms such as TD Waterhouse from lawfully offering or agreeing to engage investment advisors who are associated with BMO and who wish to move to TD Waterhouse; and,

(b) intimidating other investment advisors employed by BMO from lawfully moving to another brokerage firm.

44. BMO has launched a series of such lawsuits against numerous investment advisors from various firms, including a series of failed injunction applications, who have left their employ in a concerted effort to intimidate its workforce into remaining in its employment. TD Waterhouse pleads that this constitutes an abuse of the process of this Honourable Court and an unfair restraint of trade designed to enhance BMO’s position in the marketplace at the expense of fair competition and the lawful mobility of its professional workforce.

[30] The statement of defence goes on to allege in paragraph 45 that this action constitutes an abuse of the process of this court and was designed for improper and collateral purposes.

[31] In my view, these paragraphs should not be struck out. The defendants have raised the defence of abuse of process. It is clearly set out in paragraph 45 of the statement of defence. The defence of abuse of process may be available to a defendant in certain circumstances. See Marineland at paragraph 29. Marineland involved a similar allegation in a statement of defence. In that case, the plaintiff (“Marineland”) had commenced a defamation action against an animal rights organization that had written a letter critical of the conditions at Marineland and of the manner in which Marineland cared for its animals. The defendants included a defence of abuse of process in their statement of defence. Paragraph 59 of the defence read, in part, as follows:

Marineland has brought this action for the purpose of intimidating the defendants and silencing legitimate public discussion and debate upon matters of public interest. This action should be dismissed or stayed as an abuse of process.

[32] The motion judge in Marineland held that such a defence may be available in Ontario and declined to strike out the offending paragraph. I was not provided with any authority to the contrary.

[33] In my view, paragraphs 43 and 44 should not be struck out. The defendants have clearly included a defence of abuse of process in paragraph 45 of their statement of defence. It appears, based on Marineland, that this is a defence that may be available to defendants in Ontario in the appropriate circumstances. The plaintiff’s notice of motion does not seek to strike paragraph 45 of the statement of defence.[^13] In my view, paragraphs 43 and 44 simply provide necessary particulars of the factual basis for the defendants’ abuse of process defence as pleaded in paragraph 45. They are very similar to the allegations that were the subject matter of the decision in Marineland. I have concluded that they should be allowed to stand.

ORDER

[34] I therefore order as follows:

(a) the first sentence of paragraph 15 of the statement of defence is hereby struck out, without leave to amend;

(b) the balance of the relief sought on this motion is dismissed; and,

(c) if the parties are unable to agree on the issue of the costs of this motion, they may make brief submissions in writing by no later than April 16, 2013.

Master R.A. Muir

DATE: April 2, 2013

[^1]: Quizno’s Canada Restaurant Corporation v. Kileel Developments Ltd., 2008 ONCA 644 at paragraph 14.
[^2]: Quizno’s at paragraph 15.
[^3]: Quizno’s at paragraph 15.
[^4]: Quizno’s at paragraphs 16 and 23.
[^5]: George v. Harris, [2000] O.J. No. 1762 (S.C.J.) at paragraph 20.
[^6]: Al-Dandachi v. SNC-Lavalin Inc., 2012 ONSC 6534 at paragraph 15.
[^7]: George at paragraph 20.
[^8]: George at paragraph 20.
[^9]: Canadian National Railway Company v. Brant, 2009 32911 (ON SC), 2009 CarswellOnt 3720 (S.C.J.) at paragraph 39.
[^10]: Craik v. Aetna Life Insurance Co. of Canada, 1995 CarswellOnt 3177 (G.D.) at paragraph 30.
[^11]: Rundle v. Kruspe, [1998] O.J. No. 2078 (S.C.J. – Master) at paragraphs 4‑9.
[^12]: Marineland of Canada Inc. v. Niagara Action for Animals, 2004 30880 (ON SC) at paragraph 29.
[^13]: Counsel for the plaintiff suggested during his submissions that this may have been an oversight on his part and that perhaps an order should be made striking paragraph 45 as well. However, this request was not made until the plaintiff’s reply submissions and only in response to a question from me. In any event, it is my view that I do not have the jurisdiction to make such an order as it would require a finding on my part that the defence of abuse of process was not available to the defendants. An order of that nature cannot be made under Rule 25.11. Such relief must be sought pursuant to Rule 21.01(1)(b) (which order must be made by a judge) or perhaps pursuant to Rule 20. Neither of those Rules is relied upon by the plaintiff as a basis for this motion.