CITATION: IQ Management Consulting et al v. Life Clinic Metabolic Corporation et al, 2016 ONSC 4683
COURT FILE NO.: CV-15-123832-SR
DATE: 20160719
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
IQ MANAGEMENT CONSULTING and CHRISTOPHER GAFOOR
Plaintiffs/Responding Parties
– and –
LIFE CLINIC METABOLIC CORPORATION, LIFE CLINIC LASERBODY INC., M.B. HEALTH RH INC., MB HEALTH PICKERING INC., MB HEALTH BRAMPTON INCORPORATED and JOHN KOZMAN
Defendants/Moving Parties
J. Kevin Fox , for the Plaintiff
David Whitten, for the Defendants
HEARD: June 23, 2016
REASONS FOR DECISION
CHARNEY J.:
Introduction
[1] This motion is brought by the defendants under Rule 25.11 of the Rules of Civil Procedure to:
a. Strike the claims against all of the defendants except for Life Clinic Metabolic Corporation (Life Metabolic Corp.);
b. To strike paragraph 6 of the statement of claim.
[2] The plaintiff has consented to striking the claim against the personal defendant, John Kozman, and has consented to striking paragraph 6 of the statement of claim.
[3] Accordingly, the only remaining issue before me is whether the claims against Life Clinic Laserbody Inc., M.B. Health RH Inc., MB Health Pickering Inc., and MB Health Brampton Incorporated (the four remaining corporate defendants) can be struck out in a motion under Rule 25.11.
Background
[4] On August 28, 2015, the plaintiffs issued a Statement of Claim seeking, inter alia, damages in the amount of $91,000.00 for “pay in lieu of notice” in relation to breach of contract arising out of an “Independent Contractor Agreement” dated January 21, 2015 (the agreement). This agreement was between the plaintiff Chris Gafoor and the first defendant Life Metabolic Corp. The four remaining corporate defendants were not parties to the agreement.
[5] Article 10.5 of this agreement is an “Entire Agreement” clause, which provides that:
This Agreement …constitutes the entire agreement between the Parties and supersedes all prior agreements or understandings between the Parties whether written or oral, and may not be altered, varied, revised or amended except by a writing signed by both Parties.
[6] The defendants argue that it is “plain and obvious” that the action against the four remaining corporate defendants cannot succeed because:
a. The four remaining corporate defendants were not parties to the agreement;
b. The agreement contains an Entire Agreement Clause.
Analysis
[7] The notice of motion indicates that the defendants bring this motion under Rule 25.11, which provides as follows:
25.11 The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,
(a) may prejudice or delay the fair trial of the action;
(b) is scandalous, frivolous or vexatious; or
(c) is an abuse of the process of the court.
[8] The defendants did not bring this motion under Rule 21.01 (motion to strike out a pleading on the ground that it discloses no reasonable cause of action) or under Rule 20 (motion for summary judgment).
[9] Rule 25 was examined by Epstein J. (as she then was) in George v. Harris (2000), 97 A.C.W.S. (3d) 225, [2000] O.J. No.1762 (S.C.J.), particularly at paras. 19-23 and by Molloy J. in Brodie v. Thomson Kernaghan & Co., [2002] O.J. No. 1850, (2002), 27 B.L.R. (3d) 246 (S.C.J.), particularly at paras. 26-28. The principles set out in these cases were summarized by Strathy J. (as he then was) in Carney Timber Company, Inc. v. Pabedinskas, 2008 CanLII 63163 (ON SC), at para.16:
• a fact that is relevant to a cause of action cannot be scandalous, frivolous or vexatious;
• a pleading that has no material facts is frivolous and vexatious;
• a pleading that is superfluous or can have no effect on the outcome of the action is scandalous, frivolous and vexatious;
• portions of a pleading that are irrelevant, argumentative, inserted only for colour or are bare allegations without material facts in support, will be struck as scandalous;
• a pleading that is purely argumentative will be struck out;
• a pleading that contains unfounded and inflammatory attacks on the integrity of a party, and speculative and unsupported allegations of defamation will be struck as scandalous and vexatious;
• a pleading may be struck on the ground that it may prejudice or delay the fair trial of the action where the probative value of the evidence would be outweighed by the time and effort involved and would seriously interfere with the fair and focused trial of the issues;
• striking a pleading on the ground that it may prejudice or delay the fair trial of an action is an exercise in discretion – the court must balance the added complexity of the pleading against the potential probative value of the facts alleged;
• pleadings that are replete with conclusions, expressions of opinion and contain irrelevant matters will be struck in their entirety; and
• pleadings that are clearly designed to use the judicial process for an improper purpose are an abuse of process – these include harassment and oppression of other parties by multifarious proceedings, the re-litigation of issues previously decided and the litigation of matters that have been concluded.
[10] The defendants’ argument for striking the claim against the four remaining corporate defendants should really have proceeded under Rule 21.01 as a motion to strike a claim as disclosing no reasonable cause of action. The defendants’ argument that naming the four remaining corporations as defendants is “frivolous or vexatious” or “an abuse of the process” is premised on the argument that there is no reasonable cause of action against those four defendants. If, however, the statement of claim does disclose a reasonable cause of action against the four remaining corporations, it cannot be “frivolous or vexatious” or “an abuse of the process” to name them as defendants: Prete v. Ontario (1993), 1993 CanLII 3386 (ON CA), 16 O.R. (3d) 161 (C.A.), leave to appeal refused, (1994), 17 O.R. (3d) xvii.
[11] In the motion before me both parties filed affidavits to support their position. Whether the motion was brought under Rule 25.11 or 21.01 this was improper. On a motion under either Rule 21.01 or Rule 25.11, the facts set out in the pleading are to be taken as true for the purpose of determining whether the claim discloses a reasonable cause of action. The court should not look beyond the pleadings, as to do so would effectively treat the motion as one for summary judgment under Rule 20: Carney Timber Company, at para. 18; Prete v. Ontario.
[12] The test to be applied under Rule 21.01(1)(b), on a motion to strike a pleading on the ground that it discloses no reasonable cause of action or defence is well-settled:
• the court must accept the facts alleged in the pleading as proven, unless they are patently ridiculous, or incapable of proof;
• it must be “plain and obvious” that the claim cannot succeed – the pleading must have a “radical defect” before the party will be driven from the judgment seat;
• the pleading should be read generously, with allowance for inadequacies due to drafting deficiencies;
• It is important to note Rule 21.01(2)(b), which states that no evidence is admissible on a motion to strike under Rule 21.01(1)(b);
• While evidence is not admissible, documents referred to and relied on in the pleading are not evidence precluded by Rule 21.01 but are, in effect, incorporated into the pleading.
[13] Accordingly, I will treat this motion as a motion to strike the claim against the four remaining corporate defendants under Rule 21.01(1)(b). I will not consider any of the affidavit evidence submitted by either party. Since the statement of claim references and relies on the “Independent Contractor Agreement” I am permitted to examine and consider that document.
[14] I will not treat this motion as a motion for summary judgment under Rule 20 because that would be unfair to the plaintiff. The stakes on a summary judgment motion are very high, and the court’s expectation is that the parties will “put their best foot forward” in terms of evidence and not just rely on the allegations in their pleadings. The motion judge is entitled to assume that the record contains all of the evidence that would be introduced at trial (Landrie v. Congregation of the Most Holy Redeemer, 2014 ONSC 4008, at para. 47). This assumption is valid only if the responding party is given proper notice when a motion for summary judgment is brought.
Does the Statement of Claim disclose a reasonable cause of action against the 4 remaining corporations?
[15] The plaintiff relies primarily on para. 13 and 33 of the statement of claim, which state:
(13)The Plaintiff performed services for all of the Corporate Defendants, under the instruction of KOZMAN, which operated as one economic unit or as one economic enterprise, and was issued pay cheques from all of the Corporate Defendants.
(33)The Plaintiff pleads and relies upon the common law, specifically the common employer doctrine, that the Corporate Defendants to be treated as one employer for the purposes of determining liability for obligations owed to the Plaintiff who, in effect, served all the Defendants without regard for any precise notion of to whom he was bound in contract.
[16] The plaintiff relies on several cases that hold that an employee (or an independent contractor) can have more than one employer, and that the courts now regard the employment relationship as more than a matter of form and technical corporate structure. Consequently an individual may be employed by a number of different companies at once. This is often referred to as the “common employer doctrine”. (Downtown Eatery (1993) Ltd. v. Ontario (2001), 2001 CanLII 8538 (ON CA), 54 O.R.(3d) 161, at paras. 1 -2, 30-36, and cases cited therein).
[17] In Downtown Eatery the Ontario Court of Appeal concluded (at para. 36):
[A]lthough an employer is entitled to establish complex corporate structures and relationships, the law should be vigilant to ensure that permissible complexity in corporate arrangements does not work an injustice in the realm of employment law… The definition of "employer" in this simple and common scenario should be one that recognizes the complexity of modern corporate structures, but does not permit that complexity to defeat the legitimate entitlements of wrongfully dismissed employees.
[18] See also: Jacobs v. Harbour Canoe Club Inc., 1999 CanLII 3642 (BC SC), at para. 11:
In addition, where a person has been employed by one entity but in fact provides services to an additional entity, and both entities exercise some measure of control over that person's affairs, that person has been held to be an employee of both entities…
[19] The plaintiff pleads that he performed services for all of the corporate defendants under the instruction of John Kozman, whom he claims is a director, officer, and controlling shareholder/owner of all five corporate defendants (paras. 7-12 of the statement of claim). The plaintiff also pleads that he was issued pay cheques by all of the corporate defendants. He alleges that the five corporate defendants operated as one economic unit. For the purposes of this motion the court must accept the facts alleged in the pleading as proven.
[20] These are all factors that the court will examine to determine whether different corporations are all in fact common employers. If proven, these allegations support the plaintiff’s express reliance on the common employer doctrine.
[21] Reading the pleadings generously, with allowance for inadequacies due to drafting deficiencies, it is my opinion that para. 7 to 13 and 33 of the statement of claim plead sufficient facts to support a reasonable cause of action against the four remaining corporate defendants.
[22] The defendants argue that reference to the “Entire Agreement Clause” in Article 10.5 of the agreement makes it “plain and obvious” that the claim against the 4 remaining corporate defendants cannot succeed.
[23] The defendants rely on the case of Mazza v. Ornge Corporate Services Inc., 2015 ONSC 7785, where the court dismissed an employee’s claim against the affiliates of an employer on the grounds of both an “Entire Agreement” clause and a “Release” clause that provided that “upon termination of the Executive’s employment by the Employer, he shall have no cause of action, claim or demand against the Employer or its directors, including any of its subsidiaries and affiliates, or any other person as a consequence of such termination…” Referencing both of these provisions together, Dunphy J. (at paras. 96 – 97) concluded that the employment agreement was “entirely inconsistent with the existence of the alleged common employer relationship…To the contrary it specifically releases such claims”.
[24] Two points in relation to the Mazza case. First, the decision in Mazza is based on the combination of the “Entire Agreement” clause together with the “Release” clause, which expressly precluded claims against “subsidiaries and affiliates”. There is no equivalent to the “Release” clause in the case before me, and therefore the result is not as “plain and obvious” as it might have been in Mazza.
[25] The second point is that the Mazza case was a motion for summary judgment under Rule 20, and Dunphy J. was very much influenced by the evidence (and lack of evidence) that was presented on that motion. At para. 99 he states:
Dr. Mazza knew full well who his employer was. He knew full well what the business of Global was – he was its 51% beneficial owner (via the limited partnership) and its CEO. He has provided no evidentiary basis to excuse him from the ordinary consequences of the agreements he entered into with his eyes wide open and with every tool of independent legal advice, sophistication and bargaining power fully at his disposal.
[26] That conclusion – based on the evidence presented on a motion for summary judgment – is not available on a motion to strike under Rule 21.01 (or 25.11) in which no evidence is admissible and the court must accept the allegations in the impugned pleadings as proven.
Conclusion
[27] Based on the foregoing :
The motion to strike the claims against the defendants Life Clinic Laserbody Inc., M.B. Health RH Inc., MB Health Pickering Inc., and MB Health Brampton Incorporated is dismissed.
The motion to strike the claim as against the defendant John Kozman is granted on consent.
The motion to strike paragraph 6 of the statement of claim is granted on consent.
Costs
[28] If the parties are unable to agree on costs, the plaintiff may file costs submissions not to exceed three pages plus a cost outline and any offer to settle within 20 days of the date of the release of this decision, and the defendants may file reply costs submissions on the same terms within 10 days thereafter.
Justice R.E. Charney
Released: July 19, 2016
CITATION: IQ Management Consulting et al v. Life Clinic Metabolic Corporation et al, 2016 ONSC 4683
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
IQ MANAGEMENT CONSULTING ET AL
Plaintiffs
– and –
LIFE CLINIC METABOLIC CORPORATION ET AL
Defendants
REASONS FOR DECISION
Justice R.E. Charney
Released: July 19, 2016