Advance Beauty Supply Ltd. v. 233930 Ontario Inc., 2015 ONSC 422
COURT FILE NO.: CV-14-20641
DATE: 20150127
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Advance Beauty Supply Limited
Plaintiff
– and –
233930 Ontario Inc., operating as Saryna Key and Gilam Cosmetics Canada Inc.
Defendants
David M. Sundin, for the Plaintiff
Elliot Birnboim, for the Defendant, Saryna Key
HEARD: October 6, 2014
Carey J.:
Overview
[1] The plaintiff, Advance Beauty Supply Limited (“Advance”) commenced an action in April 2014 against the defendants alleging breach of contract, tortious interference with their economic interests and unjust enrichment. They seek both punitive and aggravated damages.
[2] The defendant, 233930 Ontario Inc., operating as Saryna Key (“Saryna”), seeks, pursuant to Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, an order striking Advance’s statement of claim on the basis that it has no tenable cause of action against Saryna as it was not a party to the contract.
[3] Advance has cross-motioned for an order to amend its statement of claim and to produce and rely on evidence in response to the defendant Saryna’s motion.
Facts
[4] Advance pleads that around June 25, 2012, they entered into an exclusive distribution agreement with the co-defendant, Gilam Cosmetics Canada Inc. (“Gilam”) in specified communities in southwestern Ontario (the “Region”).
[5] It is further pleaded that Saryna Key took over the business of Gilam in May 2013 and now manufactures the products.
[6] Advance says that after spending considerable amounts of money to promote the defendants’ products they learned that the defendants were allowing other distributors to market and sell the products in the Region, contrary to the provisions of their exclusive agreement.
[7] Advance says that after the defendants refused to amend the exclusive contract, the defendants advised the plaintiff that they were granting distribution rights of the products to the plaintiff’s competitor.
[8] Saryna relies on the doctrines of privity of contract to assert that the contract with Gilam cannot be used to impose obligations on them as a third party.
Issues
a) Should the plaintiff’s statement of claim or parts thereof be struck as disclosing no cause of action against Saryna?
b) Should Advance be permitted to produce and rely on evidence in response to the motion?
c) Should Advance’s cross-motion allow for amendment of the statement of claim?
Analysis
[9] Rule 21.01(1) (a) and (b) of the Rules of Civil Procedure reads as follows:
21.01 (1) A party may move before a judge,
(a) for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs; or
(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.
(2) No evidence is admissible on a motion,
(a) under clause (1) (a), except with leave of a judge or on consent of the parties;
(b) under clause (1) (b).
[10] Pursuant to r. 21.01(2) the plaintiff seeks the court’s leave to rely on the evidence of Danielle Rice, found at tab 2 of the plaintiff’s motion record. The jurisprudence has made it quite clear that a Rule 21 motion relates to pleadings not evidence. As stated by McLachlin C.J.C. in Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42, 2011 S.C.C. 42, [2011] 3 S.C.R. 45, at para. 24: “Whether the evidence substantiates the pleaded facts, now or at some future date, is irrelevant to the motion to strike.” Further r. 21.01(2)(b) prohibits evidence on a motion to strike a pleading. Accordingly, the plaintiff will not be permitted to rely on any evidence on this motion.
[11] The Court of Appeal provided guidelines for striking out pleadings pursuant to r. 21.01 in Trillium Power Wind Corp. v. Ontario, 2013 ONCA 683, 312 O.A.C. 367, at paras. 30 and 31:
The analytical framework for assessing whether to strike out a pleading on the ground that it discloses no reasonable cause of action under Rule 21.01(1) (b) of the Rules of Civil Procedure, is set out by Paul M. Perell and John W. Morden in The Law of Civil Procedure in Ontario, 1st ed. (Markham: LexisNexis Canada Inc., 2010), at p. 445:
The following principles apply to a Rule 21 motion to strike a pleading for failing to disclose a reasonable cause of action or defence: (a) the material facts pleaded must be deemed to be proven or true, except to the extent that the alleged facts are patently ridiculous or incapable of proof; (b) the claim incorporates by reference any document pleaded and the court is entitled to read and rely on the terms of such documents as if they were fully quoted in the pleadings; (c) novelty of the cause of action is of no concern at this stage of the proceeding; (d) the statement of claim must be read generously to allow for drafting deficiencies; and (e) if the claim has some chance of success, it must be permitted to proceed.
The test is not in dispute: the claim will only be dismissed where it is “plain and obvious” that it has no reasonable prospect of success: Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959; Imperial Tobacco, at paras. 17-19; Taylor v. Canada (Attorney General), 2012 ONCA 479, 111 O.R. (3d) 161 at para 22. While the court must accept as true the material facts as pleaded, this obligation does not extend to bald conclusory statements of fact, unsupported by material facts.
[12] I must assume the material facts as pleaded are true, and in the proposed amended pleadings the plaintiff states Gilam and Saryna are controlled by the same directing mind and that the companies have either merged or Saryna has acquired Gilam. Taking these specific circumstances as true, basic principles of equity and fairness might suggest that obligations arising from previously entered contracts should flow from the merger or assumption of assets. This could reasonably result in a court, after a careful analysis, finding a principled exception to the privity of contract doctrine.
[13] The defendants argue that Saryna is not a proper party. The plaintiff relies by analogy on the principles as set out in the employment law case of Downtown Eatery (1993) Ltd. v. Ontario (2001), 2001 8538 (ON CA), 54 O.R. (3d) 161, 147 O.A.C. 275 (ONCA). In that case, the Court of Appeal determined that a judgment for a wrongful dismissal should be enforced against the company that emerged after a corporate reorganization: see Downtown Eatery, at paras. 19-45. While Downtown Eatery is an employment law decision, it does not seem a stretch of law or logic that principles dealing with a common employer be applied to a distribution contract with a common manufacturer.
[14] The fact that this may be a novel claim or that a point of law has yet to be established is not determinative at this stage of the proceedings:
The law is not static and unchanging. Actions that yesterday were deemed hopeless may tomorrow succeed.
Therefore, on a motion to strike, it is not determinative that the law has not yet recognized the particular claim. The court must rather ask whether, assuming the facts pleaded are true, there is a reasonable prospect that the claim will succeed. The approach must be generous and err on the side of permitting a novel but arguable claim to proceed to trial. (See Knight, at para. 21.)
[15] Regarding the claim for tortious economic interference, the plaintiff has failed to make out the necessary third party allegation in its statement of claim and thus that pleading fails the tortious interference test: see Midland Seafoods Inc. v. Guth, 2012 ONSC 4368, 2012 CarswellOnt 10387, at para. 33.
[16] The defendants have not satisfied me that it is plain and obvious that the balance of Advance’s claim has no reasonable prospect of success. The allegations and facts pleaded in Advance’s statement of claim and/or its proposed amended statement of claim are deemed at this stage to be true. Essentially the plaintiff is saying that all that really changed after the contract was signed was the name on the company door. I cannot conclude here that if the facts pleaded are true there is no reasonable prospect of success.
Disposition
[17] In the result, plaintiff’s cross-motion to amend as per proposed amended statement of claim is allowed and the defendants’ motion to strike is allowed in respect to the tortious interference claim. The balance of the defendants’ motion is dismissed.
[18] I heard submissions regarding costs. Given the mixed results there will be no order as to costs.
Original signed “Carey J.”
Thomas J. Carey
Justice
Released: January 27, 2015
CITATION: Advance Beauty Supply Ltd. v. 233930 Ontario Inc., 2015 ONSC 422
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Advance Beauty Supply Limited
Plaintiff
– and –
233930 Ontario Inc., operating as Saryna Key and Gilam Cosmetics Canada Inc.
Defendants
REASONS FOR JUDGMENT
Carey J.
Released: January 27, 2015