CITATION: The Usand Group v. Kempton, 2016 ONSC 3175
COURT FILE NO.: CV-14-518462
DATE: 20160518
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE USAND GROUP and SEAN MCCOSHEN
Plaintiffs
– and –
KATE KEMPTON and RENEE PELLETIER
Defendants
Paul-Erik Veel for the Plaintiffs
Paul Le Vay and Benjamin Kates for the Defendants
HEARD: May 11, 2016
REASONS FOR DECISION
DIAMOND J.:
Overview
[1] In mid-December 2014, the plaintiffs commenced this action seeking damages for, inter alia, defamation and intentional interference with economic relations. Before the close of pleadings, the plaintiffs amended their statement of claim pursuant to Rule 26.02 of the Rules of Civil Procedure.
[2] The defendants bring this motion pursuant to Rules 21.01 and 25.11 seeking an order striking out portions of the Amended Statement of Claim. While there are 14 separate paragraphs sought to be struck, the parties agreed to organize those paragraphs into four separate categories for the purpose of this motion.
[3] Those categories are as follows:
a) a pleading that the defendants carried out a “campaign of defamation” against the plaintiffs;
b) a pleading that the defendants acted out of malice;
c) a pleading that the defendants carried out an injurious falsehood (which tort requires a component of malice); and
d) a pleading of intentional interference with economic relations.
[4] At the conclusion of the hearing, I advised counsel for the parties that I was taking my decision under reserve with reasons to follow. These are my reasons.
Motion to Strike
[5] The test to be employed on a motion to strike is well known and arguably trite. As held by the Supreme Court of Canada in Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959, assuming that the facts as stated in the Statement of Claim can be proven, I must decide whether it is “plain and obvious” that the claim discloses no reasonable cause of action. As the pleaded facts are presumed to be true, I can only strike out a claim which has no reasonable prospect of success.
[6] As held by Justice Myers in Salehi v. Professional Engineers Ontario 2014 ONSC 3816, a claim is to be read generously with allowance for mere drafting deficiencies. The test on a motion to strike is no doubt a stringent one as I must be satisfied that the claim, or a radical defect therein, is certain to fail.
Amended Statement of Claim - Background
[7] The plaintiff, The Usand Group (“Usand”) is an investment banking firm. The plaintiff Sean McCoshen (“McCoshen”) is the Chief Executive Officer of Usand.
[8] The Amended Statement of Claim alleges that in or around 2012, Usand was retained by the Band Council for Cross Lake First Nations (the “Band”) to assist the Band with its outstanding financing and debt issues. After being retained, Usand alleges that it pursued financing opportunities on behalf of the Band and ultimately obtained a commitment from the Bank of Montreal (“BMO”) to provide funding.
[9] Around that time, the Band’s leadership changed. The plaintiffs allege that shortly thereafter, the Band began receiving advice from the defendants Kate Kempton (“Kempton”) and Renee Pelletier (“Pelletier”), both lawyers with the firm Olthuis, Kleer, Townshend LLP, (“OKT”). The plaintiffs further allege that as a result of the defendants’ actions, (a) the Band received incorrect advice that it was ineligible to receive the BMO Funding, (b) the Band discharged its outside counsel, and (c) a solicitor/client relationship between the Band and OKT was formed.
The Defamatory Statements
[10] While I will have more to say about the defendants’ alleged “campaign of defamation” later in these Reasons, the Amended Statement of Claim alleges that the campaign was “spear headed” by two specific incidents. I note that the paragraphs setting out these two alleged incidents are not under attack on this motion.
[11] Firstly, the plaintiffs allege that, at a time unknown to them, Kempton uttered certain defamatory words to Pelletier, and communicated the following statements which were both intentionally made and untrue:
● A member of an Ontario First Nation communicated to an OKT member (identified as Matt) that “they think they have a case of fraud against McCoshen”.
● McCoshen stated to an Ontario First Nation that he is a lawyer (when he is not), and in that regard McCoshen was not being truthful.
● Due to McCoshen negotiating with banks for a good deal and securing high commissions, the Ontario First Nation member had lost money.
● McCoshen is not honest; and
● OKT intended to proceed to Court and take the position that McCoshen was not honest.
[12] These alleged defamatory words were exchanged between the defendants.
[13] The second incident arose out of an alleged telephone conversation between Pelletier and Vicki Wallace-Godbout (“Vicki”) who is a member of the Madawaska Maliseet First Nation. The plaintiffs allege that during that phone call, Pelletier spoke defamatory words to Vicki and her husband.
[14] The subject matter of those alleged defamatory statements were identical to those exchanged between Pelletier and Kempton as listed above.
Decision
[15] Much like counsel for the parties did during the hearing of the motion, I will address each of the four categories of paragraphs under attack. As conceded by both parties, I note that in the event I strike out the paragraphs alleging malice on the part of the defendants, the plaintiffs’ claims for injurious falsehood would also be struck out (as malice is a necessary component of injurious falsehood).
The Campaign of Defamation
[16] With respect to pleading the necessary elements of a cause of action for defamation, the parties are essentially in agreement. As held in Leschyna v. CIBC World Markets, 2005 ONSC 49205, a claim must show:
● the contents of the statement(s) in question;
● whether the statement(s) was made orally or in writing;
● the recipient of the statement(s);
● the statement(s) identifying the plaintiff; and
● the time and the place that the statement(s) was made.
[17] As previously stated, the defamatory statements set out in paragraphs 11-14 herein are not under attack on this motion. The focus of the defendants’ complaint is what the plaintiffs describe as a “campaign of defamation” against them.
[18] The contents of the Amended Statement of Claim relating to this campaign of defamation are as follows:
Paragraph Allegation
25 Sometime after OKT was retained by the Band, the defendants “and others at OKT” began to make intentionally false and damaging statements concerning the plaintiffs to “First Nations, their representatives, and others including financial institutions”. The full particulars of those intentionally false and damaging statements are unknown to the plaintiffs but within the knowledge of the defendants and others at OKT.
37 On occasions unknown to the plaintiffs but known to the defendants, in or around late 2013 and/or 2014 the defendants stated to members of “First Nations and those dealing with them including financial institutions” that the plaintiffs:
a) were taking advantage of First Nations;
b) were conducting business dishonestly;
c) were charging exorbitant fees; and
d) in the case of McCoshen, he falsely claimed to be a lawyer in order to gain the trust of First Nations and subsequently took improper advantage of that trust.
43 The defendants have conducted a campaign of defamation making statements about the plaintiffs to persons unknown in the banking and financial community as well as to members of First Nations and Band Councils across Canada.
[19] From my review of these paragraphs, the plaintiffs have not identified (a) the words complained of, or (b) the occasion, place or medium used by the defendants. I agree with the defendants that the contents of paragraph 37 are unclear as to whether those facts as pleaded were the specific words alleged to have been published, or the alleged defamatory meaning of those words.
[20] It is noteworthy that at paragraph 40 of the Amended Statement of Claim, the plaintiffs admit that they have pleaded all of the current particulars in their possession of all defamatory statements allegedly made by the defendants regarding the plaintiffs, and further particulars of the instances of defamation and exact words used are within the sole knowledge of the defendants.
[21] Both parties agree that where a plaintiff is unable to plead the precise defamatory words published by a defendant, or does not know the occasion, place or medium used, the Court may relax the rules of pleadings in limited circumstances. In Magnotta Winery Ltd. et al. v. Ziraldo et al. (1995) 25 O.R. (3d) (Gen. Div.), Justice Lane held that in order for a plaintiff to proceed with a defamation action in spite of an inability to state with certainty the precise words published by the defendant at the pleading stage, the plaintiff must show:
a) that he/she has pleaded all of the particulars available to him/her with the exercise of reasonable diligence;
b) that he/she is proceeding in good faith with a prima facie case, and is not on a “fishing expedition”; normally this will require the pleading of a coherent body of facts surrounding the incident such as time, place, speaker and audience;
c) that the coherent body of fact of which he/she does have knowledge shows not only that there was a utterance or a writing emanating from the defendant, but also that the emanation contained defamatory material of a defined character of and concerning the plaintiff; and
d) that the exact words are not in his/her knowledge but are known to the defendant and will become available to be pleaded by discovery of the defendant, production of a document or by other defined means, pending which the plaintiff had pleaded words consistent with the information then at his/her disposal.
[22] The defendants’ argument turns upon whether I am satisfied that the Amended Statement of Claim pleads a coherent body of fact surrounding the incidents in question, and whether that coherent body of fact shows that the utterances which emanated from the defendants contained defamatory material of a defined character of and concerning the plaintiffs.
[23] The subject paragraphs fail to identify the parties to whom the alleged defamatory statements were made, other than listing “members of First Nations and those dealing with them”. I share the defendants’ concerns that the plaintiffs’ attempt to plead a coherent body of fact will undoubtedly lead to a fishing expedition at discovery. I echo the comments of my colleague Justice Akhtar in The Catalyst Capital Group Inc. v. Veritas Investment Research Corporation, 2016 ONSC 23 (S.C.J.):
“The concern arising out of the vagueness of the defamation pleadings in the case at bar is not simply that West Face does not know the case that it has to meet. There is the additional potential that a procedural quagmire might follow at the discovery stage where the plaintiff will question witnesses on an unacceptably broad basis, riding on the horse that it requires information to support those vague pleadings”
[24] The time frame during which this campaign of defamation allegedly took place is stated to be “late 2003 and/or 2004”. As Justice Akhtar stated, when a plaintiff cannot provide the “who, what and when” details of an alleged defamation, it cannot satisfy the necessity of pleading a coherent body of fact. Simply put, “if a party does not possess the knowledge to clearly articulate an allegation of defamation, then it should not make it”.
[25] Further, the Amended Statement of Claim does not set out in any detail how the plaintiffs came to learn of this campaign of defamation and the publications allegedly made by the defendants. While the plaintiffs have satisfied the first elements of the Magnotta Winery test by admitting that they have pleaded all of the particulars in their knowledge, in my view the inquiry does not stop there. Justice Lane made it clear that a plaintiff must plead all of the particulars available to him/her “with the exercise of reasonable diligence”. The plaintiffs must have come to learn about the alleged campaign of defamation through some manner or source, but are conspicuously silent in their pleading as to how that came to be (despite the pleading having been unilaterally amended once already).
[26] I find that the plaintiffs have failed to satisfy the elements of the Magnotta Winery test, and the Amended Statement of Claim does not contain the necessary coherent body of fact to permit the plaintiffs to avoid pleading the exact defamatory words. As such, paragraphs 25 (first sentence), 37 and 43 are struck out.
[27] I further decline to grant the plaintiffs leave to amend these paragraphs as they have already admitted that they are not in possession of any further particulars surrounding this alleged campaign of defamation and there is therefore nothing to be achieved from granting such relief.
The Pleading of Malice
[28] In several paragraphs in the Amended Statement of Claim, the plaintiffs plead that the defendants’ statements were made maliciously, intentionally, dishonestly and in knowing or reckless regard for the truth. On its face, I find that the Amended Statement of Claim satisfies the requirements of Rule 25.06(8) of the Rules of Civil Procedure mandating the plaintiffs to plead full particulars of any allegation of intentional misconduct (which includes malice).
[29] It is the defendants’ position that the plaintiffs’ pleading of malice is nevertheless impermissible as it is based upon a solicitor/client relationship between OKT and the Band, and thus protected by solicitor/client privilege. As such, the defendants submit that they can only defend against the plaintiffs’ assertion of malice by relying on facts that are subject to that solicitor/client privilege, a task that is not permissible in law as the privilege rests with the Bank as OKT’s client.
[30] The particulars in support of the plaintiffs’ pleading of malice state that the defamatory statements were made for the improper purpose of discouraging the Band from proceeding with BMO financing and pursuing alternative financing arrangements to the advantage of OKT and the defendants. The plaintiffs further allege that the defamatory statements were made to divert attention away from (a) the merits of the abandoned BMO financing, (b) the appropriateness of the Band having made an initial payment of $500,000.00 to OKT and (c) the “wisdom” of the Band having paid OKT’s significant ongoing fees totaling over $2,000,000.00 throughout 2013/2014.
[31] The defendants’ argument is essentially premised upon the contents of paragraph 21 in the Amended Statement of Claim which states as follows:
“Subsequently in 2013, leadership of the Band Council of CLFN changed. Chief Garrison Settee was replaced by Chief Cathy Merrick. Following the change of leadership in the Band Council, and at a time unknown to the plaintiffs, Kempton and others at OKT advised the new Band Council that CLFN was ineligible to receive the BMO funding. The plaintiffs plead that there is no reason to believe that CLFN was ineligible for the BMO funding”.
[32] The defendants assert that based upon the contents of paragraph 21, the alleged defamatory statements were made in furtherance of legal advice imparted by the defendants/OKT to the Band. I do not agree. In reading the pleading liberally and generously as I am mandated to do, I cannot conclude that the plaintiffs’ pleading of malice necessarily encroaches upon privileged communications.
[33] As held by the Supreme Court of Canada in Pritchard v. Ontario (Human Rights Commission), 2004 SCC 31, [2004] 1 S.C.R. 809, the scope of solicitor/client privilege does not extend to communications (a) where legal advice is not sought or offered, (b) where it does not intend to be confidential, or (c) that have the purpose of furthering unlawful conduct. I am unable to conclude that the “advice” allegedly imparted by the defendants to the Band regarding the Band’s ineligibility to receive the BMO funding was necessarily communicated in confidence or in response to the seeking of legal advice. While the evidence in this proceeding may ultimately show that such communications were protected by solicitor/client privilege, at this stage I am not prepared to find that the facts pleaded in support of malice necessarily arise from the solicitor/client relationship between OKT and the Band.
[34] Accordingly, I dismiss the defendants’ motion to strike out paragraphs 21, 22, 24, 25, 26, 39, 45 and 46 of the Amended Statement of Claim.
Injurious Falsehood
[35] As I have dismissed the defendants’ motion to strike out the plaintiffs’ pleading of malice, the plaintiffs’ claim for injurious falsehood thus survives. The defendants’ motion to strike out paragraph 51 of the Amended Statement of Claim is dismissed.
Intentional Interference with Economic Relations
[36] The tort of intentional interference with economic relations allows a plaintiff to sue a defendant for losses resulting from a defendant’s unlawful act against a third party. In A.I. Enterprises v. Bram Enterprises, 2014 SCC 12, [2014] 1 S.C.R. 177, the Supreme Court of Canada identified three essential elements of the tort of intentional interference with economic relations:
a) the defendant must have intended to injure the plaintiff’s economic interest;
b) the interference must have been made by illegal and unlawful means; and
c) the plaintiff must have suffered economic harm as a result.
[37] As stated, the unlawful means must be directed at a third party who has an actual claim against the defendants (or an actual claim but for the absence of having suffered a loss).
[38] The plaintiffs’ pleading of intentional interference with economic relations must show that the defendants committed a wrong against a third party, and set out the material facts upon which a Court could find misconduct on the part of the defendants directed towards a third party.
[39] The plaintiffs submit that the defendants interfered with the plaintiffs’ business relations by engaging in a “course of deceptive conduct by misleading members of First Nations and individuals in the financial industry as to the plaintiffs’ ethics, abilities and fees”. As I understood the plaintiffs’ submissions, the third parties were deliberately misled by the defendants’ campaign of defamation and, as a result, were allegedly induced by the defendants to cease pursuing financial and business opportunities with the Band.
[40] The plaintiffs further submit that as these third parties suffered losses as a result of their reliance upon the defendants’ defamatory statements, those third parties could have a claim in negligent misrepresentation against the defendants.
[41] In my view, there cannot be a claim for negligent misrepresentation in the absence of a duty of care owed by the defendants to the third parties. As I have already struck out the paragraphs dealing with the campaign of defamation, I cannot see how the plaintiffs’ claim for intentional interference for economic relations can survive. Even if the third parties formed an audience that “received” the allegedly defamatory statements, in the absence of a duty of care owed to those third parties (which is not pleaded and does not exist in law), I find that there is no sustainable cause of action which can be actionable by any third party.
[42] Accordingly, paragraphs 47, 48, 49 and 50 of the Amended Statement of Claim are struck out as disclosing no reasonable cause of action. I grant the plaintiffs leave to amend and they shall have 30 days from the date of the release of these Reasons to serve and file a further Amended Statement of Claim in whatever manner they see fit to support a tenable cause of action in intentional interference with economic relations, a task which may prove extremely difficult given the admissions in the pleading and the findings in these Reasons.
Costs
[43] At the conclusion of the hearing, both parties exchanged and filed Costs Outlines and supporting Bills of Costs. Given the mixed success achieved on this motion, I am prepared to entertain further brief costs submissions in the circumstances.
[44] The defendants may serve and file written costs submissions totaling no more than two pages within 10 business days after the release of these Reasons. The plaintiffs shall thereafter serve and file their responding written costs submissions also totaling no more than two pages within 10 business days of the receipt of the defendants’ costs submissions.
Diamond J.
Released: May 18, 2016
CITATION: The Usand Group v. Kempton, 2016 ONSC 3175
COURT FILE NO.: CV-14-518462
DATE: 20160518
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE USAND GROUP and SEAN MCCOSHEN
Plaintiffs
and
KATE KEMPTON and RENEE PELLETIER
Defendants
REASONS FOR DECISION
Diamond J.
Released: May 18, 2016