The Aldo Group Inc. v. Moneris Solutions Corporation and MasterCard International Inc.

CITATION: Aldo Group v. Moneris Solutions, 2015 ONSC 2084

COURT FILE NO.: CV-11-9323-OOCL

DATE: 2010401

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: The Aldo Group Inc., Plaintiff/Respondent

AND:

Moneris Solutions Corporation and MasterCard International Inc., Defendant/Moving Party

BEFORE: L. A. Pattillo J.

COUNSEL: George J. Pollack and Michael H. Lubetsky, for the Plaintiff/Respondent

Robert A. Centa, for the Defendant/Moving Party

HEARD: October 24, 2014

ENDORSEMENT

Introduction

[1] The Plaintiff, The Aldo Group Inc. (“Aldo”), is a retailer of footwear and carries on business in Ontario, across Canada and internationally.

[2] On April 19, 2011, the Defendant MasterCard International Inc. (“MasterCard”) imposed $4,929,479.30 USD in assessments for “operational reimbursement” and “fraud recovery” (the “Assessments”) arising out of an alleged intrusion into Aldo’s credit card processing system in September 2008. MasterCard collected the Assessments from Aldo’s banks, the Bank of Montreal (“BMO”) and its affiliate Harris National Association (“Harris”) (collectively the “Banks”). The Defendant, Moneris Solutions Corporation (“Moneris”), a processor of MasterCard transactions, subsequently debited Aldo’s account for the amount of the Assessments.

[3] Aldo has commenced an action against both MasterCard and Moneris in respect of what it submits is an unlawful imposition of the Assessments and wrongful appropriation of $4,929,479.30 USD. Aldo has claimed against Moneris in contract and tort and against MasterCard in tort and unjust enrichment. Aldo has also claimed declaratory remedies and punitive damages of $1,000,000.

[4] MasterCard brings this motion pursuant to rule 21.01(1)(b) to strike out Aldo’s Fresh as Amended Statement of Claim (the “Claim”) in its entirety on the ground that it discloses no reasonable cause of action. MasterCard further submits, given that the Claim has been amended three times already, leave to amend should not be granted.

[5] For the reasons that follow, I dismiss MasterCard’s motion in respect of Aldo’s claims for intentional interference with contractual rights, unlawful interference with economic relations, negligence, unjust enrichment, conversion, and the declarations and for punitive damages. In my view, it cannot be said at this stage that it is plain and obvious those claims, as pleaded by Aldo, have no reasonable prospect of success. The motion is allowed only in respect of Aldo’s claims for conspiracy and breach of duty of good faith. Those claims are struck with leave to amend the conspiracy claim only as provided.

Background

[6] In a motion under rule 21.01(1)(b) to strike a pleading on the ground that it discloses no reasonable cause of action or defence, no evidence is admissible. The facts as pleaded are assumed to be true, unless they are manifestly incapable of being proven. The following facts are taken from the Claim.

[7] MasterCard operates a global payment solutions network that regulates the interchange of credit and debit card (“Payment Cards”) transactions between banks that accept Payment Card transactions (“acquiring banks”) and banks that issue those cards to customers (“issuing banks”).

[8] All banks in the MasterCard network enter into a license agreement with MasterCard and become a MasterCard Member (“Member”). The license agreement authorizes the Member to use MasterCard trademarks and service marks on condition that it comply with, among other things, the rules, policies and operating regulations adopted by MasterCard from time to time (the “Standards”).

[9] The Standards include MasterCard’s Security Rules which, among other things, oblige the Members to cause their merchants to comply with certain requirements for the security of MasterCard account data known as the Payment Card Industry Security Standards (“PCI DSS”). The Standards require the implementation of security controls and maintenance of processes which can identify and contain security breaches and security breach attempts. The MasterCard Security Rules set down procedures for dealing with an Account Data Compromise Event (“ADC Event”) which is an occurrence that results, directly or indirectly, in the unauthorized access to or disclosure of MasterCard account data. MasterCard may hold its Member acquiring bank(s) responsible for an ADC Event.

[10] Prior to January 2010, MasterCard Security Rules provided that an acquiring bank would only be liable for costs arising from an ADC Event if MasterCard determined that the acquiring bank bore responsibility for the ADC Event, a violation of the MasterCard Security Rules had occurred and an issuing bank had submitted a claim for losses actually incurred. In January 2010, the MasterCard Security Rules were altered by MasterCard to provide that MasterCard determined whether the occurrence constituted an ADC Event and the financial liability associated with it.

[11] BMO and Harris are MasterCard Members and are both issuing banks as well as the acquiring banks for Aldo.

[12] As noted, Moneris is a processor of Payment Card transactions. It has entered into a written service provider agreement with MasterCard which enables it to perform certain functions to assist MasterCard Members in processing Payment Card transactions (“Service Provider Agreement”) including processing credit card and other data related to credit card purchases and to manage the distribution of funds related to such payments.

[13] Aldo, BMO and Moneris have entered into an agreement pursuant to which BMO acquires Payment Card transactions made at Aldo stores and Moneris acts as the processor for those transactions (the “Processing Agreement”).

[14] There is no contractual relationship between Aldo and MasterCard.

The Alleged Intrusion into Aldo’s Computer System

[15] In April 2010, MasterCard and Visa identified Aldo as having experienced a potential ADC Event because Aldo was the common point of purchase for legitimate transactions made with Payment Cards that were subsequently used to effect fraudulent transactions.

[16] Pursuant to the MasterCard Security Rules, MasterCard commenced an investigation, which included the engagement by Aldo of a forensic examiner, Verizon Business (“Verizon”) to determine whether Aldo’s payment processing system had been breached and the cause, scope and effects of such breach.

[17] Verizon issued its first report on June 2, 2010. It concluded that on September 28, 2008, Aldo had been subjected to a sophisticated cybercrime attack through which an intruder has attempted to steal account data through a “packet sniffer” which captured data travelling over the port used by Aldo to transmit account data to Moneris (the “Intrusion”). Verizon found no evidence that the Intrusion resulted in the theft of account data from Aldo’s computer network.

[18] MasterCard and Visa interfered with and manipulated Verizon into issuing further versions of its report that found that Aldo was not in compliance with PCI DSS requirements that Verizon had not found in its first report.

[19] On August 11, 2010, MasterCard advised the Banks that it considered the Intrusion to be a potential ADC Event and the Banks estimated financial liability associated with the Intrusion was US $4,869,405.

[20] Aldo sought clarification from MasterCard, through Moneris, as to the basis on which it concluded the Intrusion was an ADC Event entitled to recovery and how the estimated amount was calculated. MasterCard never responded.

[21] Aldo further provided a detailed analysis of each of Verizon’s conclusions in its report. In addition, Aldo provided MasterCard with detailed written submissions as to why the Intrusion should not be considered an ADC Event and that no financial liability should be imposed.

[22] On March 11, 2011, MasterCard confirmed its earlier preliminary finding that the Intrusion constituted an ADC Event and that it intended to debit the Banks’ accounts for the Assessments on April 17, 2011. MasterCard gave no reasons for its decision.

[23] On April 4, 2011, Moneris wrote to Aldo and advised that it would debit Aldo’s account to reimburse the Banks for the Assessments. Moneris debited Aldo’s account on April 19, 2011.

Aldo’s Pleaded Claims Against MasterCard

[24] Aldo’s claims against MasterCard asserting intentional interference with contractual rights; unlawful interference with economic relations; conspiracy; unjust enrichment; negligence; conversion; and breach of duty of good faith. In the alternative, Aldo asserts a claim of equitable subrogation.

[25] In addition to the tort and unjust enrichment claims, Aldo also seeks five declarations against MasterCard: (i) MasterCard was not entitled under its rules, policies and operating procedures to impose the Assessments; (ii) Certain provisions of the MasterCard Security Rules were illegal and constituted an unenforceable penalty clause or were deliberately drawn for an illicit purpose; (iii) the Assessments constituted an illegal and unenforceable imposition of a penalty against the Banks; (iv) MasterCard was not entitled to apply retroactively the 2010 Security Rules in respect of the Intrusion; and (v) the Intrusion did not constitute an ADC Event under the Standards.

[26] Finally, Aldo claims punitive and exemplary damages.

Procedural History

[27] The Claim was issued on May 24, 2011. Moneris delivered a statement of defence dated August 11, 2011.

[28] In August 2011, MasterCard brought a motion seeking a stay of the Claim pursuant to section 106 of the Courts of Justice Act, RSO 1990, c C.43 (the “Section 106 Motion”). MasterCard submitted that Ontario courts should decline jurisdiction on the merits in favour of the Claim being heard in the State of New York in accordance with a choice of forum clause in a contract between it and the Banks to which Aldo was not a party.

[29] The Section 106 Motion was heard in this court on November 21, 2011 and February 3, 2012. For lengthy reasons released May 1, 2012, D.M. Brown J. (as he then was) dismissed the motion (2012 ONSC 2581). MasterCard’s subsequent appeal of Brown J.’s order to the Court of Appeal was dismissed on November 29, 2013 (2013 ONCA 725). MasterCard’s application for leave to appeal was dismissed by the Supreme Court of Canada on May 1, 2014 (35700).

[30] On September 1, 2011, Aldo made a minor amendment to the Claim on consent. Aldo’s Claim was further amended on January 5, 2012. Finally, a Fresh As Amended Statement of Claim was filed on May 28, 2012.

The Test on a Rule 21.01(1)(b) Motion

[31] The test for striking out a claim pursuant to rule 21.01(1)(b) for failure to disclose a reasonable cause of action is well settled. A claim will only be struck if it is plain and obvious that the pleading discloses no reasonable cause of action or, put another way, has no reasonable prospect of success. As noted, no evidence is admissible on the motion. The facts pleaded are assumed to be true unless manifestly incapable of being proven. The pleading will be read generously to accommodate any drafting deficiencies but it is incumbent on the claimant to clearly plead the facts upon which it relies in making its claim. Finally, the motion to strike is a tool that must be used with care. The fact that the law has not yet recognized a claim is not determinative. The question is whether there is a reasonable prospect that the claim will succeed. See: R. v. Imperial Tobacco, 2011 SCC 42 (SCC) at paras. 17 - 25; Raghavan v. Bell Canada, 2011 ONSC 7486 (SCJ), aff’d 2012 ONCA 370 (CA).

Issue Estoppel/Abuse of Process

[32] Aldo submits by way of preliminary objection that in light of MasterCard’s Section 106 Motion, the doctrine of res judicata (and, more specifically, the “issue estoppel” branch of res judicata) applies and MasterCard’s motion must fail. In the alternative, it submits that there is sufficient duplication between the Section 106 Motion and the current motion to constitute the latter an abuse of process.

[33] As noted, in the Section 106 Motion MasterCard sought a stay of the causes of action asserted against it by Aldo in the Claim based on a choice of forum clause in its contract with the Banks which provided that any action against it should be heard in the State of New York. As there was no contractual relationship between Aldo and MasterCard, the Section 106 Motion was predicated on reading out all of Aldo’s claims in tort, unjust enrichment and for declaratory remedies so as to leave only a claim based on equitable subrogation.

[34] There are three conditions to invoking issue estoppel: the issue must be the same as the one decided in the prior decision; the prior judicial decision must have been final; and the parties, or their privies, must be the same for both proceedings: Toronto (City) v. CUPE, Local 79, 2003 SCC 63, [2003] 3 SCR 77 (SCC) at para. 23.

[35] While the second and third conditions are met in this case, the first is not. Simply put, the issue now before the court was not decided in the Section 106 Motion. In his reasons for decision, D.M. Brown J. expressly declined to consider or decide on the merits of Aldo’s pleaded claims. At paragraph 59, he stated: “Given that MasterCard’s standing at the present time is limited to requesting this Court to decline jurisdiction because of a forum selection clause, it is not open to MasterCard to ask this Court to pass judgment on the merits of the Plaintiff’s pleaded claims. To do so would transform a jurisdiction-based analysis into a merits based analysis.”

[36] Further, at paragraph 60 of his decision, D.M. Brown J. stated: “In my view a defendant who requests that this court decline jurisdiction to hear a case on the merits because of a forum selection clause cannot conflate its jurisdictional arguments with ones which call into question the merits of the plaintiff’s case. If an Ontario court assumes jurisdiction over a case and a defendant elects to defend in this forum, it may then take steps to challenge the merits of the plaintiff’s action; not before.”

[37] Nor, in my view, is MasterCard’s current motion an abuse of process. The issue of whether Aldo has pleaded reasonable causes of action in law has not been previously decided. Having lost its jurisdictional challenge, MasterCard now takes steps to challenge the merits of Aldo’s claim as it is entitled to do.

[38] I turn next to a determination of Aldo’s pleaded claims, each one of which is challenged by MasterCard.

Intentional Interference With Contractual Rights or Inducing Breach of Contract

[39] There are four essential elements to a claim for intentional interference with contractual rights or inducing breach of contract:

1. A valid contract between the plaintiff and a third party;

2. Knowledge of the contract by the defendant;

3. The defendant’s conduct intended to and did cause the third party to breach the contract with the plaintiff; and

4. The plaintiff suffered damage as a result of the breach.

See: Correia v. Canac Kitchens, 2008 ONCA 506 (CA) ; A.I Enterprises Ltd. v. Bram Enterprises, 2014 SCC 12, [2014] 1 SCR 177.

[40] Aldo alleges that MasterCard is liable for inducing breach of the Processing Agreement between Aldo, Moneris and BMO for two reasons. First, Aldo asserts that MasterCard “acquiesced in and encouraged” Visa’s inappropriate intervention with Verizon’s report, including when Visa demanded that Verizon find that Aldo was not in compliance with the safety standards. Aldo pleads that this “interference in Verizon’s investigation was in violation of the 2010 Security Rules and constituted a wrongful interference with the Processing Agreement.” (para. 58 of the Claim)

[41] Second, Aldo asserts that the Assessments imposed by MasterCard on the Banks “constituted a wrongful interference in Aldo’s contractual rights in virtue of the Processing Agreement” because MasterCard purportedly “knew or ought to have known that when it wrongfully debited the Banks, Moneris would in turn debit Aldo.” (para. 81 of the Claim)

[42] MasterCard submits that the pleading in respect of Visa’s alleged interference with Verizon’s investigation Aldo’s allegations are bare, conclusory and devoid of factual detail and therefore insufficient to support a cause of action against it. I do not consider the allegations to be conclusory and devoid of factual detail. MasterCard’s submission confuses evidence with material facts. The former are not permitted, the latter are required. Aldo has pleaded that it retained Verizon to investigate the incident as required by MasterCard. Further, MasterCard’s conduct (acquiescing in and encouraging Visa’s interference in the Verizon investigation) violated its safety rules and resulted in a breach of the Processing Agreement which in turn caused Aldo damage in having to pay the Assessments. While the pleading is perhaps not the clearest, in my view it sets out sufficient facts to encompass the essential elements of a claim of inducing breach of contract.

[43] In respect of Aldo’s second claim for inducing breach of contract concerning MasterCard’s implementation of the Assessments, MasterCard submits that Aldo has failed to plead the requisite intent and that Moneris breached the Processing Agreement. In my view, however, Aldo has again pleaded all of the essential elements relating to this claim: Aldo had an agreement with Moneris (the Processing Agreement); MasterCard, through its requirements and communications with Aldo and Moneris, was aware of the Processing Agreement; MasterCard was not entitled to impose the Assessments on the Banks; MasterCard wrongfully imposed the Assessments on the Banks, knowing that the Banks and/or Moneris would pass them on to Aldo; in improperly passing the Assessment on to Aldo, Moneris breached the Processing Agreement; and Aldo suffered damage by having to pay the Assessments.

[44] Contrary to MasterCard’s submission, in my view, Aldo has pleaded the requisite intent. Aldo pleads in paragraphs 75.1 and 81.1 of the Claim that when it debited the Banks for the Assessment, MasterCard “knew” that the Banks and/or Moneris would obtain reimbursement from Aldo. That pleading is a sufficient pleading of intent. Acting with knowledge is acting with intent. Aldo’s pleading of foreseeability (“ought to have known”) is an alternative pleading. Further, I am satisfied that Aldo has clearly pleaded Moneris breached the Processing Agreement in paragraphs 82 i and ii of the Claim.

[45] MasterCard submits that section 3.6 of the Processing Agreement establishes strict indemnity on Aldo and accordingly Moneris was entitled to pass along any assessment from MasterCard. I agree with Aldo that at this stage it is far from “plain and obvious” that the terms of the Processing Agreement can be construed in such a fashion.

[46] Accordingly, I would not strike Aldo’s claim for inducing breach of contract against MasterCard.

Unlawful Interference With Economic Relations

[47] The tort of unlawful interference with economic relations has recently been considered and clarified by the Supreme Court of Canada in A.I Enterprises Ltd. It has three essential elements: the defendant committed an unlawful act against a third party (an act that would have been actionable by the third party); in committing the unlawful act, the defendant intended to cause economic harm to the plaintiff; and the plaintiff suffered economic loss. See: A.I. Enterprises at paras. 5, 23 and 26.

[48] MasterCard submits that Aldo has failed to plead material facts to support a claim against MasterCard for unlawful interference with economic relations. Specifically, MasterCard submits that Aldo has not properly pleaded the intent component.

[49] Paragraph 81.6 of the Claim states:

81.6 Further or alternatively, MasterCard’s actions constituted unlawful interference with Aldo’s economic relations. In this regard, MasterCard unlawfully breached its contracts with the Banks and Moneris, wrongfully converted the Banks’ funds to its own use and/or failed to take reasonable care and imposed unwarranted and grossly exaggerated Assessments upon the Banks, all with the intention of causing loss to Aldo. As a result of MasterCard’s unlawful interference with Aldo’s economic relations, Aldo suffered damages.

[50] In my view, the pleading in paragraph 81.6 of the Claim together with the specific allegation that MasterCard imposed the Assessments knowing that they would be ultimately paid by Aldo (Paragraph 75.1) and that the Assessments were, in fact, ultimately paid by Aldo (Paragraphs 75 to 77) set out the essential elements of the claim of unlawful interference with economic relations.

[51] Accordingly, I would not strike the claim of unlawful interference with economic relations.

Negligence

[52] The essential elements of a claim for negligence are the existence of a duty of care; breach of the duty; and damages.

[53] Aldo alleges in paragraph 81.5 of the Claim that MasterCard has a legal duty to Aldo to take reasonable care in determining whether the Intrusion constituted an ADC Event and in the calculation of the Assessments to ensure that they accurately reflected actual issuer costs and incremental fraud related to the Intrusion. It further pleads MasterCard breached its duty by issuing the Assessments without taking reasonable care in determining that the Intrusion constituted an ADC Event and in the absence of any actual issuer costs or incremental fraud caused by the Intrusion. Finally, Aldo has pleaded, in a number of paragraphs that as a result of MasterCard’s actions in imposing the Assessments, it has suffered damages in that amount (paragraphs 81.5, 81.6, 81.7).

[54] MasterCard submits that Aldo cannot meet the test to establish a duty of care as set out in Anns v. Merton London Borough Council (1977), [1978] A.C. 728 (H.L.) as reformulated in Kamloops (City) v. Neilson, 1984 21 (SCC), [1984] 2 SCR 2 (SCC). The test has two parts:

1. Is the relationship between the plaintiff and the defendant of sufficient proximity that a prima facie duty of care is reasonably foreseeable? and

2. Are there any policy considerations that should negate, reduce or limit the scope of that duty?

[55] I accept that the analysis of whether a duty of care exists can be conducted on a pleadings motion without the benefit of a full trial record. See: Cooper v. Hobart, 2001 SCC 79, [2001] 3 SCR 537 at para. 52. That said, given the facts as pleaded, I do not consider that it is “plain and obvious” that the duty as pleaded by Aldo does not establish a prima facie duty of care owed by MasterCard to Aldo. I refer to the chain that exists between MasterCard and the Banks and Moneris on the one hand and the Banks, Moneris and Aldo on the other, coupled with the allegation that MasterCard promulgated the MC Standards in the expectation and with the intention that they would be imposed upon merchants like Aldo by its Members and that MasterCard knew or could reasonably foresee that Aldo would be expected to pay the Assessment.

[56] MasterCard submits that the terms of its agreements with the Banks preclude any duty to Aldo. That may be a defence, but it does not negate Aldo’s pleading.

[57] MasterCard submits that even if Aldo has pleaded a prima facie duty of care, there are policy reasons under the second stage of the Anns test that negate that duty. In talking about the policy considerations, the Supreme Court of Canada in Cooper v. Hobart stated:

These [residual policy considerations] are not concerned with the relationship between the parties, but the effect of recognizing a duty of care on other legal obligations, the legal system and society more generally. Does the law already provide a remedy? Would recognition of the duty of care create the spectre of unlimited liability to an unlimited class? Are there other reasons of broad policy that suggest that the duty of care should not be recognized?

[58] Again, I do not consider that it is plain and obvious at this stage that the duty as pleaded by Aldo would be negated for policy concerns. The liability arising from its breach would be neither unlimited nor indeterminate. While the number of merchants who accept MasterCard is potentially large, it is not infinite. Further, the merchants are supervised by MasterCard, its Members and third-party processors. And as it is MasterCard who determines the Assessments, there is no question of indeterminate liability.

[59] MasterCard further submits that as the Assessments are money transfers under contracts, they represent a claim for pure economic loss. Given that the courts are reluctant to expand the categories of torts for pure economic loss coupled with the fact that Aldo has a claim against Moneris, MasterCard submits there is no need to extend the categories of negligence for pure economic loss in these circumstances.

[60] I am not satisfied that a claim for the loss of a discrete sum of money in a bank account is a claim for “pure economic loss” in the context of a negligence claim. See: Vitalaire (A General Partnership) v. Bank of Nova Scotia, [2002] OJ No. 4902 (SCJ). Even if it is, it is not plain and obvious, in my view, in the context of Aldo’s claim that the category would not be extended. Nor do I consider that just because Aldo may have a claim against Moneris that necessarily relieves MasterCard from liability: Correia at paras. 57 and 58. MasterCard has failed to establish that it is plain and obvious that the duty as pleaded by Aldo should not be recognized.

[61] I am therefore satisfied that Aldo’s claim in negligence against MasterCard should not be struck.

Unjust Enrichment

[62] Aldo’s claim for unjust enrichment is set out in paragraphs 1(a), 4, 75, 76, 79 and 80 of the Claim. Aldo pleads that MasterCard was not entitled under the Standards to impose on and collect from the Banks the Assessments, and “in doing so, acted arbitrarily, deceitfully and in fraud of Aldo’s rights.” Further, Aldo pleads that MasterCard’s actions “resulted in Aldo being wrongfully deprived” of the sum of the Assessments and in MasterCard’s “corresponding unjust enrichment.”

[63] MasterCard submits that because Aldo has not pleaded an enrichment flowing directly from Aldo to MasterCard, Aldo’s claim for unjust enrichment is “fatally defective.” The enrichment must be direct as opposed to indirect which was what is pleaded. MasterCard relies on Boulanger v. Johnson & Johnson Corp. (2003), 2003 52154 (ON CA), 174 O.A.C. 44.

[64] In Boulanger, the Court of Appeal held that where the plaintiff purchased a drug from a pharmacy and not directly from the defendant manufacturer, the plaintiff could not make out a claim for unjust enrichment because any benefits to the defendant were indirect and only incidentally conferred on the defendant.

[65] More recently, in Pro-Sys Consultants Ltd. v. Microsoft, 2013 SCC 57, [2013] 3 SCR 477, the Supreme Court of Canada held that an action in unjust enrichment can lie, at least at the pleading stage, even when the transfer from plaintiff to defendant is indirect. See too: Sun-Rype Products Ltd. v. Archer Daniels Midland, 2013 SCC 58, [2013] 3 SCR 545.

[66] Pro-Sys concerned a class action by ultimate consumers against Microsoft for overcharges. The proposed class of plaintiffs were “indirect” purchasers who acquired Microsoft’s product from re-sellers. In discussing the restitutionary principles involved, Rothstein J., on behalf of the court, stated in part at paragraph 50:

50. ... In my view, allowing indirect purchaser actions is consistent with the remediation objective of restitution law because it allows for compensating the parties who have actually suffered the harm rather than merely reserving these actions for direct purchasers who may have in fact passed on the overcharge.

[67] In light of the above, it cannot be concluded at this stage that Aldo’s claim for unjust enrichment has no reasonable chance of success simply because the enrichment was indirect. Accordingly, I am not prepared to strike Aldo’s claim for unjust enrichment.

Conversion

[68] The tort of conversion is one of strict liability. To succeed, the plaintiff must establish that property is specific personal property; the plaintiff has a possessory interest in the property; and the defendant committed a wrongful act in respect of the chattel: Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, 1996 149 (SCC), [1996] 3 SCR 727 (SCC) at para. 31.

[69] Aldo’s claim for conversion is set out in paragraphs 1(a), 5.5, and 81.7 of the Claim. Aldo pleads that by wrongfully imposing and collecting the Assessments, which were ultimately debited to Aldo’s account, MasterCard interfered with Aldo’s property in a manner inconsistent with Aldo’s rights and thereby caused Aldo to suffer damages.

[70] MasterCard submits that Aldo’s claim in conversion fails for three reasons. First, it submits that the tort of conversion cannot apply to money debited from Aldo’s account. Second, it submits that Aldo has failed to plead material facts to support the allegation that MasterCard controlled or interfered with Aldo’s property. Finally, MasterCard submits that Aldo failed to plead MasterCard had the intention to interfere with Aldo’s property.

[71] In Albion Transportation Research Corp v. Canada (TD), 1997 6351 (FC), [1998] 1 FC 78 (FCTD), the court held that an action in conversion can lie with regards to funds in a bank account. At the very least, it is not plain and obvious that a conversion action won’t lie in respect of funds in a bank account. Further, I consider that Aldo’s pleading concerning MasterCard’s actions towards Aldo sufficient to support the pleading that MasterCard interfered with Aldo’s property. Finally, and given that conversion is a strict liability tort, a pleading of intent is not required.

[72] I would therefore not strike Aldo’s claim for conversion.

Conspiracy

[73] Aldo pleads in paragraph 83 of the Claim that “in imposing and collecting the Assessments, the Defendants conspired to violate Aldo’s rights and intentionally inflict economic harm on Aldo by deprive it of the sum of US $4,929,479.30 and are liable to compensate Aldo for the prejudice resulting from their actions.”

[74] The elements of an unlawful means conspiracy were set out by the Court of Appeal in Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460 at para. 26 as follows: the defendants act in combination, that is, in concert, by agreement or with common design; their conduct is unlawful; their conduct is directed towards the plaintiff; the defendants know that, in the circumstances, injury to the plaintiff is likely to result; and their conduct causes injury to the plaintiff.

[75] I agree with MasterCard that the Claim makes only passing reference to conspiracy without providing any particulars upon which the cause of action relies. Aldo has not alleged that MasterCard and Moneris acted pursuant to an agreement or a common design; that there conduct was unlawful and that they knew or ought to have known that Aldo would suffer injury.

[76] Nor do I consider that Aldo’s attempt to rely on other allegations in the Claim sufficient to satisfy the requirement that it must plead sufficient facts to support the Claim.

[77] Accordingly, I am of the view that Aldo has failed to properly plead its claim for conspiracy. I strike the claim with leave to amend within 30 days. I do not consider that the prior amendments should disentitle Aldo from having the opportunity to plead a proper claim in conspiracy.

Breach of Duty of Good Faith

[78] In its prayer for relief against MasterCard, Aldo seeks damages for breach of MasterCard’s alleged duty of good faith. There is nothing further in the balance of the Claim that refers to this relief.

[79] Canadian courts have not recognized a stand-alone duty of good faith that is independent from the terms of a contract or the objectives that emerge from those provisions. See: Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 2003 9923 (ON CA), 68 O.R. (3d) 457 (C.A.) at para. 53. MasterCard submits that in the absence of a contract between them, it cannot owe a duty of good faith to Aldo.

[80] Aldo submits that given the kind of relationship MasterCard has with its merchants (like Aldo) which MasterCard established, coupled with its authority to investigate data breaches and impose large assessments with no procedural protections, that it is open to Aldo to argue that MasterCard has a stand-alone common-law duty to exercise those powers in good faith.

[81] While Canadian courts have recognized that there are classes of relationships that call for a duty of good faith to be implied by law, those relationships arise from contract. See: Honda Canada v. Keays, 2008 SCC 39, [2008] 2 S.C.R. 362 (employment); Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] 2 S.C.R. 3 (insurance); Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860 (tendering); WP (33 Sheppard) Gourmet Express Restaurant Corp v. WP Canada Bistro & Express Co., 2010 ONSC 2644 (franchise). In my view, in the absence of a contract, the relationship which Aldo submits gives rise to the duty of good faith cannot give rise to a stand-alone duty of good faith in law. Accordingly, I am of the view it is plain and obvious that MasterCard’s claim for breach of duty of good faith has no reasonable prospect of success.

[82] I would therefore strike Aldo’s claim for breach of duty of good faith. Because I do not consider that such a cause of action is available to Aldo, I am not prepared to grant leave to amend.

The Declarations

[83] As noted, Aldo seeks five declarations against MasterCard all of which arise out of the facts as pleaded by Aldo.

[84] MasterCard submits that the declarations relate to the enforceability of MasterCard’s contracts with the Banks and, because Aldo is not party to them, it does not have standing to seek such relief. It further submits that because the Banks are not party to the action, the court cannot make the declarations sought by Aldo.

[85] As Aldo points out, the jurisprudence has long featured situations where non-parties to contracts with a clear financial interest in their validity can, in appropriate circumstances, seek judicial declarations of invalidity. See: Lagoski v. Shano (2007), 37 ETR (3d) 141 (Ont. Div. Ct); MacIlreith v. Hart (1907), 1908 64 (SCC), 39 SCR 657 (SCC); Bot Construction Limited v. Ontario (Transportation) (2009), 2009 92110 (ON SCDC), 99 O.R. (3d) 104 (Div Ct), rev’d on other grounds, 2009 ONCA 879.

[86] On the Section 106 Motion, Justice Brown addressed the argument of standing in relation to Aldo’s declaratory relief. At paragraph 72 of his reasons, he stated in part:

…… While it is not for me to determine on this stay motion the availability of declaratory relief to the plaintiff, the terms and conditions of the Processing Agreement on their face arguably provide some contractual basis for Aldo to contend that it enjoys standing to seek certain declaratory relief. Section 3.6 of the Moneris Terms and Conditions required Aldo to comply with the Data Security Standards and to pay any assessment levied by a Card Association, such as MasterCard. Having agreed to be bound by the Data Security Standards and assessments, arguably it would be open to Aldo to challenge directly the manner in which those standards were applied or assessments determined and to seek declaratory relief in that respect. Section 6.1 of the Processing Agreement stated that Moneris and BMO were not responsible “for charged back Transactions but you may pursue a claim against the Cardholder directly”. Assessments are not “charged back Transactions” under the Processing Agreement, but the presence of section 6.1 indicates that the parties contemplated some prospects of direct claims by merchants against Card Associations. What effect, if any, that section might have on the overall interpretation of the Processing Agreement as a source for seeking declaratory relief will be a matter for the trial judge. I simply point to those provisions of the Processing Agreement to indicate that arguable issues exist as to whether that agreement provides Aldo with standing to seek some of its declaratory relief.

[87] I agree with Justice Brown’s comments. It is not plain and obvious that Aldo’s claims for declarations have no reasonable chance of success. I am not prepared to strike the claims for declarations.

Punitive and Exemplary Damages

[88] MasterCard submits that Aldo’s claim for punitive and exemplary damages contains no particular facts and is pleaded in a conclusory manner.

[89] As Aldo points out in its factum, the essence of its claim against MasterCard, as disclosed by the factual allegations in the Claim, is that MasterCard imposed a $5 million USD charge without ever explaining how the amounts were calculated and in spite of Aldo’s protests that the amounts were completely unjustifiable in the absence of any evidence that credit card data had been improperly extracted from its computer systems. In addition, MasterCard interfered with an impartial investigation so that it could come up with some basis for the Assessment that was otherwise unjustified. It then issued the Assessments knowing that it would ultimately be borne by Aldo. In my view, Aldo has pleaded sufficient facts to support a claim for punitive and exemplary damages.

Conclusion

[90] In summary, MasterCard’s motion is dismissed in respect of Aldo’s claims for intentional interference with contractual rights; unlawful interference with economic relations; unjust enrichment; negligence; conversion; the declarations and punitive and exemplary damages.

[91] MasterCard’s motion is allowed in respect of Aldo’s claims for conspiracy and breach of a duty of good faith. The conspiracy claim is struck with leave to amend within 30 days. The breach of duty of good faith is struck without leave to amend.

[92] Aldo was primarily successful on the motion and is therefore entitled to its costs on a partial indemnity basis. Both parties provided a Cost Outline at the conclusion of the motion. MasterCard claimed total partial indemnity costs of $53,424.06, comprised of fees of $44,559.00 plus taxes and disbursements. Aldo claimed partial indemnity costs totaling $49,989.24, with fees of $43,659.50.

[93] The costs claimed are virtually identical. Given the issues raised on the motion, I consider them to be reasonable. Aldo’s costs are therefore fixed at $49,989.24. Payable forthwith.

L. A. Pattillo J.

Released: April 1, 2015