NEWMARKET

COURT FILE NO.: CV-12-109375-00 SR

DATE: 20130823

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Allstate Insurance Company of Canada and Pembridge Insurance Company

Plaintiffs

– and –

Fairview Assessment Centre Inc., Pacific Assessment Centre Inc., Alexandre Lobatch, Vitali Tourkov and Danny Grossi

Defendants

Richard Horst and Julie Singh, for the Plaintiffs/Responding Parties

Melvyn L. Solomon and James P. McReynolds, for the Defendants/Moving Parties, Fairview Assessment Centre Inc., Pacific Assessment Centre Inc., Alexandre Lobatch and Vitali Tourkov

HEARD: August 16, 2013

REASONS FOR DECISION

mCcARTHY J.:

[1] The Defendants move to strike some or all of the statement of claim, dated May 9, 2012, on the grounds that it discloses no reasonable cause of action. The motion is brought under rule 21.01(1)(b) of the Rules of Civil Procedure.

The Plain and Obvious Test

[2] The test for the court to consider in a motion to strike is whether it is “plain and obvious” that the pleading or part of it discloses no reasonable cause of action: see Hunt v Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959 at para. 34. On a motion to strike, the court is to assume that the facts as pleaded are true. Pleadings must contain the basic elements of a recognized cause of action at law. The absence of a necessary element of a cause of action may constitute a radical defect such that it is plain and obvious to the court that the plaintiff cannot succeed at trial: see Deep v Ontario, 131 A.C.W.S. (3d) 964; 2004 CarswellOnt 2625 (S.C.J.) at para 34.

The Defendants’ Position

[3] The defendants assert that the pleading cannot stand because it fails to set out the requisite elements for their allegations of conspiracy, fraudulent and negligent misrepresentation, and unjust enrichment. As well, the defendants argue that the damages claimed for the tort of fraudulent misrepresentation are one and the same with the damages for the tort of conspiracy. In these circumstances, the merger principle should apply to render the allegation of conspiracy redundant. The merger principle simply states that when a tort has been committed by two or more persons, an allegation of conspiracy to commit the tort adds nothing and should be struck: see Sun Life Assurance of Canada v 401700 Ontario Ltd. (1991), 1991 CarswellOnt 895; 1991 7050 (ON SC), 3 O.R. (3d) 684 (Ont. Gen. Div.).

[4] The case of Apotex Inc. v Plantey USA Inc. (2005), 2005 15481 (ON SC), 139 A.C.W.S. (3d) 52; 2005 CarswellOnt 1844 (S.C.J.) at para. 55, states that, in order to support a cause of action in conspiracy, a claim must set out the parties to the agreement, the particulars of the agreement, the purpose or object of the conspiracy, the overt acts done in pursuance of the agreement, and the damages suffered by the plaintiff from those acts.

[5] The defendants rely on the case of Corfax Benefit Systems Ltd. v Fiducie Desjardins Inc. (1997), 1997 12195 (ON SC), 37 O.R. (3d) 50; 1997 CarswellOnt 5180 (Ont. Gen. Div.), which sets out what must be pleaded to maintain a cause of action for fraudulent misrepresentation. The necessary elements are: that the representations complained of were made by the defendants; that they were false when made; that they were known to be false or recklessly made; that the representations induced the party to enter into a contract to his prejudice; and that within a reasonable time after the discovery of the falsity of the representation, the aggrieved party elected to void the contract. Moreover, rule 25.06(8) of the Rules of Civil Procedure requires that where fraud is pleaded, the pleading shall contain full particulars.

[6] The defendants further submit that the pleading fails to set out the necessary elements of a claim for negligent misrepresentation on the part of personal defendants, Lobatch and Tourkov. They argue that a successful action under this tort requires the plaintiff to plead and demonstrate: that the defendant owed the plaintiff a duty of care; that the defendant’s behaviour breached the standard of care; and that the plaintiff sustained damage and that such damage was caused by the defendant’s breach. The defendants rely upon the Supreme Court of Canada’s decision in Mustapha v Culligan of Canada Ltd., 2008 SCC 27 at para. 3.

[7] The defendants also attack the claim for negligence as failing to assert the requisite elements of duty of care, breach of the standard of care, and damages caused by the alleged breach.

[8] Further, the defendants challenge the personal claims against the individual defendants on the basis that same causes of action and damages are being sought against the corporate defendants. Relying on the Ontario Court of Appeal’s decision in Normart Management Ltd. v West Hill Redevelopment Co. (1998), 1998 2447 (ON CA), 155 D.L.R. (4th) 627, 37 O.R. (3d) 97 at paras. 19-22, the defendants contend that, in the absence of pleaded facts which point to separate tortious acts on the part of the individuals, there can be no sustainable cause of action against those individuals.

[9] Finally, the defendants point to the absence of the essential elements of a claim for unjust enrichment (ie. an enrichment of the defendant, a corresponding deprivation of the plaintiff and the absence of any juristic reason for the enrichment) summarized by the Court of Appeal in Hodgins v Grover, 2011 ONCA 72 at para 52. Absent those elements from a pleading, a claim cannot succeed and must be struck.

The Plaintiffs’ Position

[10] The plaintiffs reply that a liberal and generous reading of the claim does reveal each of the essential elements of conspiracy, fraudulent and negligent misrepresentation, and unjust enrichment. The plaintiffs contend that the defendants are merely seeking particulars at this juncture and that a demand in that regard would be more appropriate than a motion to strike. Lastly, the plaintiffs argue that, in the event that all or part of the claim is struck, that leave should be granted to amend the statement of claim.

Analysis

[11] In my view, the doctrine of merger should apply in this case such that the claim for conspiracy cannot stand together with the claim in tort for fraudulent misrepresentation. Applying the unassailable logic of Lord Denning in the English case of Ward v Lewis, [1955] 1 All E.R. 55 (C.A.), at 56, an allegation of a prior conspiracy to commit a tort adds nothing to the pleading. This is not a case where conspiracy is pleaded in the alternative because it is uncertain to the plaintiff whether the benefit claims were submitted or the charges incurred. If it were, then a claim for unjust enrichment could hardly be supported. There is nothing that needs to be left to the trial judge here; the claim in conspiracy adds nothing to the pleading as constituted. It is redundant. Applying the doctrine of merger, therefore, the claim in conspiracy cannot be maintained and must be struck.

[12] I am unable to agree with the defendants that the pleading does not disclose a cause of action in unjust enrichment. The alleged enrichment is plain to see, if not plainly worded: the defendants received a benefit to which they were not entitled, namely fees for approved services. The corresponding deprivation to the plaintiffs was the payment of those fees. The absence of a juristic reason is not specifically pleaded, but a generous reading of the claim makes it clear that the entire scheme alleged to have been operated by the defendants was unlawful. I find that paragraphs 17, 18 and 19 of the claim, read in context, are sufficient to constitute the third element of a cause of action in unjust enrichment.

[13] I agree with the defendants that the allegations as against the personal defendants must be struck. There are simply insufficient facts pleaded of alleged wrongdoings by the personal defendants against the plaintiffs directly to support any cause of action against them personally. I acknowledge that directors and officers of corporations may be held personally liable for certain tortious acts; however, standing alone, the allegations in paragraphs 17 and 19 do not support a cause of action against these defendants individually. Greater care must be taken to set out with some specificity the acts which would expose the personal defendants to liability to the plaintiffs. The conduct identified in paragraph 17 may indeed be the kind which the law may frown upon and which may attract scrutiny by licensing authorities, but setting up a corporation for an improper purpose is not a cause of action known at law. The claims against the personal defendants are therefore struck.

[14] I find that the statement of claim does set out sufficient facts to found a cause of action in fraudulent and negligent misrepresentation. It is not plain and obvious that the claims would fail. The law recognizes both torts being advanced. A generous and liberal reading of the pleading allows one to identify the essential elements of both torts. In respect of fraudulent misrepresentation, the representations are the information contained on the submitted OCF-22 forms; they are alleged to be false or to contain false information (paragraph 10); paragraph 10 speaks to the defendants intentions and their knowledge; paragraphs 13 and 14 set out what the submitted forms induced the plaintiffs to do, with the attached schedule to the claim providing specific references to claim numbers. In respect of the fifth element from the Corfax case, it was not, practically speaking, open to the plaintiff to void any contract with the defendants. As an insurer with responsibilities to its insured under the regulations of the Insurance Act, R.S.O. 1990, c.I.8, the course open to it on any particular submitted claim was merely to deny the benefit or service.

[15] I also find that the allegations of fraud are sufficiently pleaded. The description of the acts taken by the defendants provides sufficient detail of the nature of the alleged fraud: that of submitting insurance claim forms containing incorrect information, falsifications or bogus claims.

[16] I find that the pleading discloses a reasonable cause of action in negligent misrepresentation and negligence. The essential elements of those torts pleaded are found at paragraphs 20 and 21. The duty of care owed by the defendants to the plaintiffs, although not specifically set out, may be gleaned from a reading of the claim in its entirety. The defendants, as assessment centres for individuals with injuries arising out of motor vehicle accidents, would be submitting authorized forms to the plaintiffs as insurer for those individuals. The duty to provide honest and reliable information to the insurer can be viewed as inherent to that relationship. A degree of reliance on the assessment centre to submit legitimate claims on behalf of injured persons was to be expected; indeed, the nature and extent of the reliance by insurer is set out clearly at paragraphs 8 and 9 of the claim.

Disposition

[17] For the reasons set out above, the claims and allegations as against the personal defendants are struck. That portion of the pleading alleging conspiracy is struck. The balance of the motion is dismissed. The court grants leave to the plaintiffs to amend their statement of claim. The defendants were utterly unable to show any prejudice to them which may arise if leave to amend were permitted. The balance of the motion is dismissed.

[18] There has been divided success on the motion. If the parties are unable to agree on the issue of costs, they are to serve and file written submissions on costs, limited to three pages, by

September 27, 2013. Each party shall be entitled to serve and file a reply to the other party’s submissions, limited to one page, by October 11, 2013.

Justice J.R. McCarthy

Released: August 23, 2013