ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-13-484855
DATE: 20141216
BETWEEN:
D.L.G. & ASSOCIATES LTD.
Plaintiff
– and –
MINTO PROPERTIES INC.
Defendant
Gerard Barosan for the Plaintiff
Adam Grant and Alyssa Caverson for the Defendant
HEARD: December 8, 2014
PERELL, J.
REASONS FOR DECISION
A. INTRODUCTION
[1] In a battle of pleadings, the Plaintiff Tenant, D.L.G. & Associates Ltd., (“DLG”), opened with the Concurrent Liability Opening (tort and fundamental breach of contract). The Defendant Minto Properties Inc., (“Minto”), responded with the Exculpatory Clause Defence, including the very powerful Covenant to Insure Gambit, to which DLG replied with a novel fork counterattack of the Tercon Contractors Move and the Fraud-exception Maneuver.
[2] DLG, which operated a franchised restaurant, is a former commercial tenant of Minto. In this action, DLG alleges that it was induced to enter into its lease because of Minto’s fraudulent misrepresentations about the state of the plumbing in Minto’s mixed residential and commercial complex.
[3] In essence, DLG says that Minto lied that there had been no problems about sewer back-ups affecting the leased premises in the complex and then it lied again about taking steps to remediate the problems. DLG alleges that it was induced to enter into the lease and then Minto recklessly breached its obligation to correct the known plumbing problems and that as a result, there were two sewer back-ups that put DLG out of business. DLG sues Minto and advances claims of breach of contract, negligence, negligent misrepresentation, and fraudulent misrepresentation.
[4] Pursuant to Rule 21 of the Rules of Civil Procedure and relying on the terms of the Lease Agreement and on a Release in an Amended Lease Agreement, Minto moves to have DLG’s Amended Statement of Claim struck out and its action dismissed.
[5] Minto’s most powerful argument is that DLG’s claims are precluded by the covenant to insure in the Lease Agreement. Relying on other clauses of the Lease Agreement, Minto has alternative arguments, but these are weaker arguments, because for Minto to succeed on this motion, it must show that it is plain and obvious that DLG’s claims will fail, and Minto’s alternative arguments, while they ultimately may succeed, are not strong enough to secure victory on a Rule 21 motion. In contrast, if Minto is correct about the effect of a covenant to insure, then it is plain and obvious that DLG’s Amended Statement of Claim should be struck out without leave to amend and its action should be dismissed.
[6] To negate Minto’s covenant to insure argument, DLG submits that the covenant to insure is an exculpatory provision that should not be enforced because of the principles of Tercon Contractors Ltd. v. British Columbia (Minister of Transportation and Highways), [2012] 1 S.C.R. 69 and because of the principle that an exculpatory provision cannot exculpate for fraud or deceit. It also argues that Minto waived the covenant to insure or is estopped and, therefore, cannot rely on the covenant to insure.
[7] For the reasons that follow, my conclusion is that Minto is correct that the covenant to insure precludes DLG’s claims for breach of contract, negligence, and negligent misrepresentation. It, however, is not plain and obvious, which is the test for a Rule 21 motion, that the covenant to insure in the Lease Agreement precludes DLG’s fraudulent misrepresentation claim. It is also not plain and obvious that the Release signed by DLG is enforceable to discharge the fraudulent misrepresentation claim because it may be arguable that the Release was obtained through duress.
[8] It follows that DLG’s claims for breach of contract, negligence, and negligent misrepresentation should be struck from its Amended Statement of Claim and that DLG should be granted leave to deliver a Fresh as Amended Statement of Claim advancing a properly pleaded fraudulent misrepresentation claim.
B. FACTUAL AND PROCEDURAL BACKGROUND
1. Rule 21 and the Evidentiary Background
[9] In R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42 at paras. 17-25, the Supreme Court of Canada noted that although the tool of a motion to strike for failure to disclose a reasonable cause of action must be used with considerable care, it is a valuable tool because it promotes judicial efficiency by removing claims that have no reasonable prospect of success and it promotes correct results by allowing judges to focus their attention on claims with a reasonable chance of success.
[10] Where a defendant submits that the plaintiff’s pleading does not disclose a reasonable cause or action, to succeed in having the action dismissed, the defendant must show that it is plain, obvious, and beyond doubt that the plaintiff cannot succeed in the claim: Dawson v. Rexcraft Storage & Warehouse Inc. (1998), 164 D.L.R. (4th) 257 (Ont. C.A.).
[11] Matters of law that are not fully settled should not be disposed of on a motion to strike: Dawson v. Rexcraft Storage & Warehouse Inc., supra, and the court's power to strike a claim is exercised only in the clearest cases: Temelini v. Ontario Provincial Police (Commissioner) (1990), 73 O.R. (2d) 664 (C.A.).
[12] In assessing the cause of action or the defence, no evidence is admissible and the court accepts the pleaded allegations of fact as proven, unless they are patently ridiculous or incapable of proof: A-G. Canada v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735; Canada v. Operation Dismantle Inc., [1985] 1 S.C.R. 441; Nash v. Ontario (1995), 27 O.R. (3d) 1 (C.A.); Folland v. Ontario (2003), 64 O.R. (3d) 89 (C.A.); Canadian Pacific International Freight Services Ltd. v. Starber International Inc. (1992), 44 C.P.R. (3d) 17 (Ont. Gen. Div.) at para. 9.
[13] A motions judge is entitled to consider any documents specifically referred to and relied on in the pleading: Web Offset Publications Ltd. v. Vickery (1999), 43 O.R. (3d) 802 (C.A.), leave to appeal dismissed, [1999] S.C.C.A. No. 460; Corktown Films Inc. v. Ontario, [1996] O.J. No. 3886, (Gen. Div.); Montreal Trust Co. of Canada v. Toronto-Dominion Bank, [1992] O.J. No. 1274 (Gen. Div.); Re*Collections Inc. v. Toronto-Dominion Bank, 2010 ONSC 6560.
(Decision continues verbatim through sections describing the lease provisions, factual allegations about sewer back‑ups, the release, the covenant to insure analysis, Tercon analysis, economic duress analysis, and conclusion.)
D. CONCLUSION
[103] For the above reasons, I grant Minto’s motion in part. The claims for breach of contract, negligence, and negligent misrepresentation should be struck, but I grant leave to DLG to deliver a Fresh as Amended Statement of Claim to plead a claim in fraudulent misrepresentation.
[104] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Minto’s submissions within 20 days of the release of these Reasons for Decision followed by DLG’s submissions within a further 20 days.
Perell, J.
Released: December 16, 2014
COURT FILE NO.: CV-13-484855
DATE: 20141216
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
D.L.G. & ASSOCIATES LTD.
Plaintiff
– and –
MINTO PROPERTIES INC.
Defendant
REASONS FOR DECISION
PERELL J.
Released: December 16, 2014