Fundraising Initiatives v. Globalfaces Direct, 2015 ONSC 1334
COURT FILE NO.: CV-14-498805
DATE: 20150227
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Fundraising Initiatives Incorporated, Plaintiff
AND:
Globalfaces Direct Incorporated, Samsara Global Limited, Matthew J. Davison, Jordan W. Nott and Nicholas Francis, Defendants
BEFORE: Mr. Justice S. Akhtar
COUNSEL: Laura Van Soelen, for the Plaintiff
Brendan Clancy, for the Defendant, Globalfaces Direct Incorporated
HEARD: February 19, 2015
REASONS FOR DECISION
[1] The defendant, Globalfaces, moves to strike paras. 40 – 42 from the plaintiff’s Statement of Claim. Globalfaces argues that the impugned paragraphs must be excised as they disclose no reasonable cause of action as required by Rule 21.01(1)(b) of the Rules of Civil Procedure. The plaintiff, Fundraising Initiatives, argues that a reasonable cause of action is apparent from the pleadings and that Globalfaces’ motion should accordingly be dismissed. In the alternative, if this court accedes to the Globalfaces’ argument, Fundraising Initiatives requests that they be given leave to amend the pleadings.
The Factual Background
[2] Fundraising Initiatives and Globalfaces are companies involved in the business of providing charity fundraising services. A third company, Samsara, also named in the action, provides “field agents” for the same purpose. Since 2002, Fundraising Initiatives has solicited charitable contributions by sending out field agents on a door-to-door basis. Fundraising Initiatives developed unique software, used by its field agents in their visits to prospective donors, to facilitate this process. In or about 2012, Globalfaces began using the same software as part of its fundraising business.
[3] In May 2009, Fundraising Initiatives and Samsara entered into an agreement whereby Fundraising Initiatives would utilize Samsara’s field agents to recruit potential donors. That agreement was set to expire on December 31, 2011, after which, pending negotiations on its renewal, it would continue on a month-to-month basis. Ultimately, Samsara terminated the agreement on May 17, 2013 when the parties failed to agree terms. Within a month, Globalfaces began conducting business as a rival in the same market in British Columbia in which Fundraising Initiatives had been active.
[4] Fundraising Initiatives alleges that Samsara breached their agreement by working with Globalfaces and providing services that were substantially the same as those provided to Fundraising Initiatives. The focus of this motion is Fundraising Initiatives’ allegation that Samsara disclosed confidential information to Globalfaces, who in turn intentionally exploited that information to interfere with Fundraising Initiatives’ economic interests.
Motions to Strike
[5] Rule 21.01(b) of the Rules of Civil Procedure provides as follows:
(1) A party may move before a judge,
(b) to strike out a pleading on the ground that it discloses no reasonable cause of action or defence,
and the judge may make an order or grant judgment accordingly.
[6] No evidence is admissible on this type of motion and, for the purposes of the hearing, the motions judge is to assume all of the facts contained within the Statement of Claim are true. The test, agreed upon by the parties, is whether it is plain and obvious that the Statement of Claim discloses no reasonable cause of action: see e.g. Hunt v. Carey Canada Inc., 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959, 74 D.L.R. (4th) 321, R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45.
[7] On a motion to strike out a pleading, the court must read the impugned paragraphs in a generous manner to avoid unfairly denying a plaintiff the benefit of a pleading in an action. In Imperial Tobacco, the court made clear that a pleading should only be struck out if it has no reasonable chance of success. At para. 21 of that case, McLachlin C.J. noted that “the motion to strike is a tool that must be used with care. The law is not static and unchanging. Actions that yesterday were deemed hopeless may tomorrow succeed... The approach must be generous and err on the side of permitting a novel but arguable claim to proceed to trial.” Similarly, the Court of Appeal has noted that a motion to strike should not become the battleground for novel and complex issues to be decided prematurely: PDC 3 Limited Partnership v. Bregman + Hamann Architects (2001), 2001 CanLII 38745 (ON CA), 52 O.R. (3d) 533, [2001] O.J. No. 422 (C.A.).
The Controversial Pleadings
[8] The pleadings that are at the centre of this motion are found at paras. 40 to 42 of the plaintiff’s Statement of Claim:
Intentional Interference with Economic Interests
Globalfaces intentionally exploited Fundraising Initiatives’ confidential information so as to divert profits from Fundraising Initiatives to Globalfaces or to weaken Fundraising Initiatives’ market position.
Globalfaces’ use of Fundraising Initiatives confidential information has unlawfully interfered with Fundraising Initiatives’ business.
As a result of the the Defendant’s conduct, Fundraising Initiatives lost BC Cancer as a client suffered a reduction in general goodwill, and faces a decline in relative market share due to the disclosure of its trade secrets.
The Tort of Unlawful Interference with Economic Relations
[9] The tort relied upon by Fundraising Initiatives in the impugned paragraphs is not often seen in civil courts. In a recent decision by the Supreme Court of Canada, A.I. Enterprises v. Bram, 2014 SCC 12, [2014] 1 S.C.R. 177 at para. 2, Cromwell J., speaking for the court, acknowledged that “while this tort is far from new, its scope is unsettled and needs clarification.” As he explains at para. 5, the tort is available in three-party situations wherein the defendant committed an unlawful act against a third party and that act intentionally caused harm to the plaintiff. In the same paragraph, Cromwell J. clarified that, for the purpose of the tort of unlawful interference with economic relations, “conduct is unlawful if it would be actionable by the third party or would have been actionable if the third party had suffered loss as a result of it.”
The Position of the Parties
[10] It is against this legal backdrop that counsel for Globalfaces, Mr. Clancy, ably argues his point. The backbone of his argument is that if Fundraising Initiatives are pleading the tort of unlawful interference with economic relations, the pleadings must, on their face, demonstrate unlawful conduct against a third party as defined in the A.I. Enterprises case. In this instance, the only unlawful action disclosed in the impugned paragraphs is against Fundraising Initiatives itself. In the absence of any unlawful conduct alleged against a third party, the tort cannot succeed.
[11] In equally able submissions, counsel for Fundraising Initiatives, Ms. Van Soelen, asks this court to consider paras. 24 and 25 of the Statement of Claim, which read:
Davison, Nott and Francis, either personally or on behalf of Samsara, provided the application that they copied from Fundraising Initiatives’ confidential information to Globalfaces and provided Globalfaces with information about Fundraising Initiatives’ business processes and clients including BC Cancer. [Emphasis added.]
Globalfaces is using this application and other confidential information belonging to Fundraising Initiatives to conduct business in British Columbia and Ontario (and perhaps in other provinces unbeknownst to Fundraising Initiatives) and to solicit clients.
[12] Reading this alongside the impugned paragraphs and the Statement of Claim as a whole, Ms. Van Soelen asserts that the pleadings clearly disclose the unauthorized taking of information belonging not only to Fundraising Initiatives, but to its clients as well. Since these clients are third parties who would have a cause of action against Globalfaces for the tort of intrusion upon seclusion, the requisite criteria for the tort of unlawful interference with economic relations set out in A.I. Enterprises are satisfied.
[13] In my view, there are two questions that must be answered to dispose of this motion:
(1) Do the pleadings, on their face, disclose conduct against a third party?
(2) If so, does that conduct give rise to a potential cause of action by the third party?
Do the Pleadings Disclose Conduct Against a Third Party?
[14] Mr. Clancy draws the court’s attention to two decisions striking out pleadings alleging the tort of interference with economic relations due to misuse of a third party’s confidential information. In both cases, the impugned pleadings were struck on the basis that they failed to disclose any unlawful act against a third party.
[15] In the first, Szecsodi v. MGM Resorts International, 2014 ONSC 1323, [2014] O.J. No. 946, the pleadings alleged that the defendant had used confidential information imparted by the plaintiff to a third party and the defendant without permission. The plaintiff alleged in his Statement of Claim that, by using this information for their own benefit, the defendant had interfered with the plaintiff’s economic interest.
[16] In the second case, Kaptor Financial Inc. v. Alexander, 2014 ONSC 2185, [2014] O.J. No. 2635, the pleadings alleged that the defendants, applicants in a receivership application, obtained confidential information pertaining to the termination of licence agreements between the plaintiff and two other companies. The plaintiffs argued that receipt of that information imposed a fiduciary duty not to bring the receivership application. As part of their Statement of Claim, the plaintiffs alleged that the defendants used the confidential information to subvert sources of funding from the plaintiff’s creditors and adversely affect the plaintiff’s contractual relationship with other parties.
[17] Both cases are distinguishable from the case at bar. In Szecodi, the court concluded that the confidential information belonged to the plaintiff and not to any third party. Accordingly, there was nothing in the pleadings alleging unlawful conduct against a third party. In Kaptor, the unlawful conduct pleaded was the receipt of confidential information and the breach of fiduciary duty to the plaintiff caused by its allegedly impermissible use. The court found that the plaintiffs had not pleaded any conduct against the third parties.
[18] In the instant case, on a generous reading of the Statement of Claim, and in particular paras. 24 and 25, it is clear that Fundraising Initiatives plead that Globalfaces acquired, without authorization, confidential information belonging to both Fundraising Initiatives and their clients to develop a competing business with the intention of diverting funds away from Fundraising Initiatives. Accordingly, I find that the pleadings do disclose conduct against a third party.
Does the Conduct Give Rise to a Third Party Cause of Action?
[19] As noted, the second requirement of the A.E. Investments test necessitates that the conduct pleaded potentially grants the third party a cause of action against the defendant. Fundraising Initiatives, in their factum, claim that the acquisition and use of their clients’ confidential information, without consent, would give rise to the tort of intrusion upon seclusion. In assessing this argument, I am obliged to assume all of the facts pleaded in the Statement of Claim are true.
[20] In Jones v. Tsige, 2012 ONCA 32, 108 O.R. (3d) 241 at para. 71, the court held that the key features of intrusion upon seclusion were:
…first, that the defendant's conduct must be intentional, within which I would include reckless; second, that the defendant must have invaded, without lawful justification, the plaintiff's private affairs or concerns; and third, that a reasonable person would regard the invasion as highly offensive causing distress, humiliation or anguish.
[21] In my view, the conduct pleaded by Fundraising Initiatives is certainly capable of satisfying this test. In coming to this conclusion, I am reminded of McLachlin C.J.’s comments in Imperial Tobacco at para. 21, that courts must read the impugned pleadings generously, and err on the side of permitting a novel but arguable claim to proceed to trial.
[22] I would also add that, in my view, Globalfaces’ real complaint in this case does not appear to be about a failure to plead the requisite elements of the tort alleged, but rather a failure to specify the particulars of that tort. It of course remains open to Globalfaces to demand further particulars if they are concerned that the current pleadings are insufficient in that regard.
Conclusion
[23] For the foregoing reasons, the motion to strike out paras. 40 to 42 of Fundraising Initiatives’s Statement of Claim is dismissed. I commend counsel for both parties for their very helpful submissions and facta in this matter.
Costs
[24] The parties agreed that costs were to be fixed in the sum of $2000.00 and I order that sum to be paid by Globalfaces to Fundraising Initiatives within 30 days.
Akhtar J.
Date: February 27, 2015