The Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited et al, 2016 ONSC 7365

CITATION: The Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited et al, 2016 ONSC 7365

COURT FILE NO.: CV-14-10670-00CL

DATE: 2016-11-28

SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: THE CATALYST CAPITAL GROUP INC., Plaintiff

AND:

DUNDEE KILMER DEVELOPMENTS LIMITED PARTNERSHIP, DUNDEE REALTY CORPORATION, KD INFRASTRUCTURE L.P. KILMER VAN NOSTRAND CO. LIMITED, JOHN DOE CORPORATIONS PARTNERSHIPS, INFRASTRUCTURE ONTARIO AND ONTARIO INFRASTRUCTURE AND LANDS CORPORATION (FORMERLY ONTARIO INFRASTRUCTURE PROJECTS CORPORATION), THE MINISTRY OF INFRASTRUCTURE OF ONTARIO and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, Defendants

BEFORE: Newbould J.

COUNSEL: Mark A. Gelowitz and Kevin O’Brien, for the defendants Dundee Kilmer Developments Limited Partnership, Dundee Realty Corporation, KD Infrastructure L.P., Kilmer Van Nostrand Co. Limited, Infrastructure Ontario and Ontario Infrastructure and Lands Corporation

Ronald E. Carr and Christopher P. Thompson, for the Her Majesty the Queen in right of Ontario

David C. Moore and Diana M. Soos, for the plaintiff

HEARD: October 24, 2016

Revised ENDORSEMENT[^1]

[1] The defendants move to strike the consolidated fresh as amended statement of claim without leave to amend.

[2] This consolidated action first was commenced in two actions, one by the plaintiff (“Catalyst”) against all defendants except the Queen in Right of Ontario on November 7, 2013 and one by Catalyst against Her Majesty the Queen in Right of Ontario (“Crown”) on January 10, 2014. On December 16, 2014 these claims were struck with leave to Catalyst to deliver fresh statements of claim and to consolidate the two actions, which has now occurred. The claim against the Ministry of Infrastructure was withdrawn with prejudice as it is not a legal entity. For some reason the Ministry was improperly contained in the title of proceedings in the consolidated action.

[3] The consolidated fresh as amended statement of claim was delivered on April 4, 2016. It is 50 pages long and takes some reading to understand it. A number of heads of relief are contained in it. Damages of $110 million are claimed.

Brief history

[4] The claim arises from the steps taken by the Crown to construct the Pan/ParaPan American Games Athletes’ Village for the 2015 Games.

[5] Infrastructure Ontario (“IO”) is a Crown Corporation[^2]. IO was responsible for procuring and approving bids for the design, construction and financing of the Athletes' Village. In October 2010, IO issued a Request for Qualifications (“RFQ”) inviting companies to submit their qualifications to IO in relation to their capacity to design, construct and finance the Athletes’ Village. DKD[^3] responded and was advised by IO that their qualifications, and included Proponent Team Members, were acceptable and that they would be permitted to tender a bid. Catalyst was not a Proponent Team Member.

[6] In January 2011, IO issued a Request for Proposal (“RFP”) for the pre-qualified bidders. At the end of the tendering process, IO was required to select its preferred bid, and thereafter negotiate a final contract with the successful bidder. Only parties prequalified through the RFQ process were eligible to participate in the RFP process.

[7] Following the issuance of the RFP, although Catalyst was not prequalified, DKD asked Catalyst to participate in the financing for its bid. The RFP contained an explicit process for changing Proponent Team Members and proposed subcontractors which required the written consent of IO.

[8] In a series of meetings from May 13 to June 6, 2011, Catalyst and DKD came to an oral agreement in which it was agreed, amongst other things, that (i) Catalyst would allow DKD to negotiate the DKD bid with IO, including Catalyst's involvement in the bid, (ii) Catalyst would develop a financial model to form the basis of the DKD bid and to use its best efforts to secure financing for the Athletes' Village project if DKD was selected as the preferred bidder, and (ii) DKD would act in good faith to advance Catalyst’s interests and participation in the DKD bid, including in its dealings with IO and the Crown.

[9] On or about June 8, 2011, DKD asked IO to formally consent to Catalyst being added as a Proponent Team Member for the DKD bid. Shortly thereafter, IO refused.

[10] On or shortly after June 15, 2011 DKD engaged in further discussions with IO about Catalyst's participation. As a result of the discussions, IO advised DKD that although it would not consent to have Catalyst added as a formal DKD team member, Catalyst could nevertheless participate in the DKD Bid in a manner which did not require such consent. Specifically, IO (including Peter Wilson and Vas Georgiou) represented that IO and the Crown did not have any issues or concerns regarding the source of funding for DKD from Catalyst, IO and the Crown had decided that DKD and Catalyst could proceed on the basis that Catalyst could participate and provide funding to DKD without IO's formal consent, and that Catalyst was approved to do so, so long as Catalyst was kept “behind the curtain”, and if Catalyst provided financing for the Athlete’s Village Project in a manner that was “behind the curtain”, no issue or difficulty would be raised by IO or the Crown about such participation (the “Governmental Representations”).

[11] On or about June 22, 2011, Catalyst entered into two written term sheets with DKD, including a Funding Term Sheet, which contained additional terms and conditions upon which Catalyst would participate in and provide funding for the Athlete’s Village Project. The term sheets were intended to supplement the oral agreement between DKD and Catalyst and were not intended to replace or terminate those contractual obligations. The Funding term sheet contained a provision in paragraph 29 which stated that the parties acknowledged that the Lenders had a condition precedent in their Senior Financing Term Sheet that required the consent of the Lenders to Catalyst's involvement in the project and that each of the parties, i.e. each of Catalyst and DKD, “shall negotiate in good faith with each other and the Lenders to satisfy” the condition requiring the Lender’s consent to Catalyst’s involvement.

[12] On September 2, 2011, DKD was selected as the preferred bidder. After that, Catalyst agreed to terms proposed by the Lenders. Catalyst and the Lenders requested DKD to apprise IO of the details of Catalyst's involvement in the financing of the project. DKD resisted doing that and said that it was not necessary.

[13] On or about October 30, 2011, Catalyst and the Lenders again requested DKD to apprise IO of the details of Catalyst’s involvement in the financing of the Athlete’s Village project, including Catalyst’s role in providing the financing. Catalyst was advised that on November 2, 2011 DKD’s counsel had had a brief meeting with representatives of IO to disclose Catalyst’s involvement in the financing of the Athlete’s Village Project.

[14] On November 8, 2011, Catalyst was advised by DKD (Ken Tanenbaum) that “the Province” had raised a “red flag” regarding Catalyst’s participation in the Athlete’s Village project. On that date, IO had provided a written response to DKD's disclosure of Catalyst's involvement in the project, in which it detailed alleged concerns about Catalyst's involvement and directed DKD to remove Catalyst as a participant in the financing model being proposed for the Athletes' Village Project. IO’s decision to have Catalyst removed was made as a result of directions and instructions it received from Crown officials, instructing or authorizing IO to do so. Thereafter, DKD ceased all efforts to obtain the Lenders’ consent to Catalyst’s participation and thereafter refused to allow Catalyst to participate any further in the Athletes' Village project.

Test for a pleading motion

[15] DKD moves under rule 21.01(1)(b). The guiding principles on such a motion were well stated by Justice Conway in 1597203 Ontario Ltd. v. Ontario 2007 21966 (ON SC), [2007] O.J. No. 2349 in which she said:

12 There are well settled principles which apply to Rule 21 motions to strike pleadings. The leading case is Hunt v. Carey Canada Inc. 1990 90 (SCC), [1990] 2 S.C.R. 959. The governing principles to be applied on Rule 21 motions are:

(a) The facts in the pleading are to be taken as proven and true unless they are patently ridiculous or incapable of proof.

(b) It must be "plain and obvious" that the pleading is unfounded or contains no reasonable cause of action in order for the motion to succeed.

(c) The threshold for sustaining a pleading is not high - a "germ" or "scintilla" of a cause of action will be sufficient.

(d) The pleading will only be struck if the allegations do not give rise to a recognized cause of action or if the claim fails to plead the necessary elements of an otherwise recognized cause of action.

(e) No evidence is to be admitted on the motion.

(f) The pleading is to be read generously.

(g) The novelty of the claim does not prevent a plaintiff from proceeding with its case.

(h) The court's role at the motion stage is not to determine the strength of the case or the likelihood of success.

[16] These principles were recently re-iterated in R. v. Imperial Tobacco Canada Ltd. 2011 SCC 42.

Statutory prohibition of actions against the Crown

[17] The Crown relies on the Ontario Infrastructure and Lands Corporation Act, 2011, which provides that no action may be commenced against the Crown for any act, neglect or default of IO.

Immunity of the Crown

27(2) No action or other civil proceeding shall be commenced against the Crown for any act, neglect or default by a person referred to in subsection (1) [a director, officer, employee or agent of the Corporation] or for any act, neglect or default by the Corporation.

[18] This provision does not render the Crown immune from its own actions that may be actionable.

[19] As will be seen, I have struck out the claims against the Crown referred to in the claim as the Public Law Claim and unjust enrichment/quantum meruit without leave to amend. I have struck out the claim against the Crown for misrepresentation without leave to amend. I have struck out the claim for misfeasance in public office but with leave to amend. As there may still be a claim against the Crown for its own actions, I would not strike any remaining claim on this motion on the basis of section 27(2) of the Ontario Infrastructure and Lands Corporation Act, 2011.

[20] The Crown also relies on the Proceedings Against the Crown Act (“PACA”) which provides that the Crown is not liable for the actions of Crown corporations or agencies.

[21] Section 2(2)(b) of the PACA states as follows:

2(2) Nothing in this Act ... (b) subjects the Crown to a proceeding under this Act in respect of a cause of action that is enforceable against a corporation or other agency of the Crown...

[22] Catalyst contends that in order to determine whether the immunities relied upon by the Crown are applicable, it would be necessary to consider the defences advanced by both the Crown and IO and central factual issues would need to be determined including, for example, whether the Crown and IO acted independently from one another, in which case the immunity would have no application.

[23] In this this case, so far as the claim of misrepresentation is concerned, it is a claim that IO made the Governmental Representations that IO and the Crown had decided that Catalyst could be included in the project “behind the curtain” (paragraph 31) and that IO and the Crown knew or ought to have known that these representations were untrue (paragraph 133).

[24] It is claimed that the Governmental Representations were made shortly after June 15, 2011. However, some months later on November 8, 2011 IO decided to remove Catalyst from the project and this was as a result of directions and instructions it received from Crown officials, instructing or authorizing IO to do so (paragraph 62). Catalyst claims that IO and the Crown officials’ positions that Catalyst had to be removed from the Athlete’s Village Project contradicted and were in breach of the Governmental Representations (paragraph 63).

[25] There is a fundamental flaw in the pleading regarding the Governmental Representations claim and it has to do with the difference between a representation of an existing fact which is actionable if untrue and a promise to do something in the future, the latter of which requires a contract to have been made in order to be actionable.

[26] A representation to be actionable must be a statement of present fact, not a future act or what will happen in the future or what the speaker will do in the future. A statement of what will happen in the future is a representation of the speaker’s present belief about future events. A statement of intention is a representation of the speaker’s present plan for his future conduct. If the speaker does not have that belief at the time he or she speaks, the representation can be characterized as a fraudulent misrepresentation of fact and therefore actionable. On the other hand, if the statement made by the speaker is not as to his or her present state of mind, but rather what he or she will do in the future, it is a promise and not a representation and the only remedy is one in contract. See Cartwright, Misrepresentation, Mistake and Non-Disclosure, 3^rd ed (Sweet & Maxwell) at §3-42 and 3-43. See also Spencer Bower, Turner & Handly, Actionable Misrepresentation, 4^th ed. (Butterworths) at §11, 14 and 19.

[27] To the extent that the pleading of Governmental Representations is a pleading of the existing state of mind of IO and the Crown, it is actionable if the statements were untrue. Catalyst however pleads in several places that the Governmental Representations were promises of what IO or the Crown would do in the future (paragraphs 127(a), 136, 137, 139 and 142) and damages are sought against IO and the Crown on that basis. There is no pleading of any contract between Catalyst and IO or the Crown, nor could there be as the basis for the claim of Catalyst is that it did not need to be a part of the RFP process as it could operate behind the curtain.

[28] Thus the only claim so far as the Governmental Representations is concerned is the claim that they were untrue when made. That claim as pleaded does not permit a finding that the Crown but not IO could be liable for the untrue representation made by IO. The plea is that the untrue representations were made by IO. Thus section 2(2)(b) of the PACA precludes an action against the Crown for misrepresentation. The claim against the Crown for misrepresentation is therefore struck without leave to amend.

[29] Whether section 2(2)(b) would preclude an action against the Crown for misfeasance in public office will depend on whether Catalyst amends its claim to properly plead the claim and what that claim will be.

Limitations Act, 2002

[30] The defendants rely on the Limitations Act to strike some of the claims that are said to be pleaded for the first time in the consolidated action. It is contended that the claims in unjust enrichment/quantum meruit, misrepresentation, misfeasance in public office and the “public law” claim are statute-barred.

[31] The prior claims issued on November 7, 2013 against the DKD defendants and IO and on February 7, 2014 against the Crown were struck. In a brief endorsement I stated that those pleadings did not comply with the rule that requires causes of action to be properly and intelligently pleaded. Leave to deliver a fresh claim was given.

[32] As the claims made relate to events in 2011 and the new pleading was delivered on April 4, 2016, the defendants say that the action in several respects is statute-barred.

[33] To assert a cause of action so as to interrupt a limitation period, a pleading must at least allege the facts necessary to identify the constituent elements of the cause of action. Where this has not occurred, amendments which assert an otherwise statute-barred claim will not be permitted. See Dugal v. Manulife Financial Corporation, 2011 ONSC 1764 at para. 53.

[34] The question whether a new statute-barred cause of action has been pleaded is determined by whether substantially all of the material facts giving rise to the cause of action were previously pleaded. A cause of action is simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person. An alternative ground for relief arising out of the same facts does not constitute the raising of a new cause of action See Denton v. Jones (No. 2) (1976), 1976 831 (ON SC), 14 O.R. 2nd 382 per Grange J. See also 1309489 Ontario Inc. v. Bank of Montreal (2011), 2011 ONSC 5505, 107 OR. (3d) 384 in which Lauwers J. (as he then was) stated:

[19] Note the two expressions used in this excerpt: "cause of action" and "technical cause of action". These identify the two senses in which lawyers and judges use the term "cause of action". Sometimes they are speaking of a factual matrix, that is, the factual cause of the plaintiff's complaint. At other times, however, lawyers and judges use the term "cause of action" to identify the legal nature of the claim; recognized causes of action in this legal sense include, for example, breach of contract, negligence, breach of fiduciary duty and so on, each of which has its own constituent elements.

[20] The contrast between a "cause of action" seen as a factual matrix, on the one hand, and a "cause of action" seen as the legal basis for relief, on the other hand, often arises in motions under Rule 26 of the Rules of Civil Procedure to amend a Statement of Claim after the limitation period has expired. …

[21] In my view, the trend of the cases favours the broader, factually oriented approach to the meaning of "cause of action" in interpreting and applying rule 26.01. …

[35] I have read the prior pleadings. With one exception, and giving those pleadings a generous read, the basic constituent facts for the new pleading are pleaded. The one exception is the claim for unjust enrichment/quantum meruit. Nowhere in the prior pleadings were the factual underpinnings of this claim pleaded. In the new pleading Catalyst claims not only that its actions resulted in DKD creating a better financial model than it otherwise would have created had Catalyst not been involved, but also that IO and the Crown benefited in that Catalyst’s involvement resulted in DKD submitting a lower cost bid which was accepted by IO and the Crown. This produced an economic benefit for IO and the Crown.

[36] Thus, the claims for unjust enrichment/quantum meruit against DKD, IO and the Crown are struck as being statute-barred.

Claims pleaded

(a) Breach of oral agreement

[37] Catalyst pleads that DKD breached its oral agreement made with Catalyst in failing to act in good faith to persuade IO or the Crown to allow Catalyst to participate in the Athletes' Village project and in failing to attempt to persuade the Lenders to agree to Catalyst's participation.

[38] DKD contends that it is patently ridiculous to contend that it would have made an oral agreement with Catalyst as DKD (or at least two DKD entities) made two written agreements (the term sheets) only two weeks after the alleged oral agreement in which there was no mention of any oral agreement. Given the amount of money and importance of the rights allegedly at stake, it strains credulity that parties of this commercial sophistication would reduce terms to writing in a way that did not include any of the important provisions of the alleged oral agreement, apparently entered into just two weeks earlier. DKD says that this renders the claim patently ridiculous on its face, and for that reason it should be struck.

[39] I cannot at this stage agree with DKD insofar as this is a rule 21 pleadings motion. Whether the claim could withstand a motion for summary judgment or a trial is a different matter, but not before me. It is claimed in the pleading that term sheets were intended to supplement the oral agreement between DKD and Catalyst and were not intended to replace or terminate those contractual obligations. It is not unheard of for persons to have an oral agreement later followed by a written agreement. The latter does not necessarily preclude the former. In this case, there was no entire agreements clause in the written term sheet agreements. I cannot find on this pleadings motion that the claim of the existence of an oral agreement is patently ridiculous incapable of proof.

[40] DKD attacks the pleading of an oral contract as being insufficiently pleaded. I agree with DKD. The pleading of the oral contract is as follows:

19. Consequently, commencing on or about May 13, 2011 and continuing to approximately the first week of June 2011, a series of meetings and communications took place between senior executives of DKD (primarily Larry Tanenbaum, Ken Tanenbaum, Jason Lester and Wayne Carson) and Catalyst (primarily Newton Glassman and James Riley) regarding Catalyst’s participation in the Athlete’s Village Project and the DKD Bid. These meetings and communications occurred on numerous dates during the above period, including on or about May 13, 20, 28, 30 and June 1, 2, 3 and 6, 2011.

20. As a result of the meetings, communications, assurances and representations between DKD and Catalyst during the period referred to in paragraphs 19-24, by the first week of June 2011, Catalyst and DKD entered into an oral agreement upon the following terms (the “Oral Agreement”):

(a) Catalyst agreed that it would defer to DKD’s expertise in public bids of this type and would allow DKD to conduct all material negotiations, contacts and discussions regarding the DKD Bid, including but not limited to any and all negotiations, contacts and discussions with IO and the Crown affecting or involving Catalyst’s participation in the DKD Bid and in the Athlete’s Village Project;

(b) Catalyst agreed to expand the team which had been engaged in the initial meetings to create a larger group of senior executives who would devote significant time and resources to review and analyse the details of the Athlete’s Village Project, consider the investment risks and opportunities inherent therein and review the financing options to be considered for the upcoming bidding deadline;

(c) Catalyst agreed to develop and finalize an attractive and efficient financial model to form the basis of the financial component of the DKD Bid and to provide financing in accordance with that model;

(d) Catalyst and DKD agreed that they would work together and cooperate to finalize the DKD Bid for submission on June 23 on terms that would fulfil the objectives referred to in paragraph 21;

(e) Catalyst agreed that it would use its best efforts to secure and/or arrange letters of credit on favourable terms and in a very cost effective manner to be used to finance the Athlete’s Village Project if DKD was selected as the Preferred Bidder;

(f) DKD agreed that it would act in good faith to protect, promote and advance Catalyst’s interests and participation in the DKD Bid on the Athlete’s Village Project, including in all of its communications and dealings with IO and the Crown; and

(g) DKD agreed that it would apply the experience and expertise that it had represented it possessed, as pleaded in paragraph 22 (b)-(e), in its dealings with IO and the Crown, to enable Catalyst to participate in the Athlete’s Village Project, including in the preparation and submission of the DKD Bid, and , if DKD was selected as the Preferred Bidder, in any and all subsequent dealings and agreements relating to the Athletes Village Project.

(h) DKD agreed to keep Catalyst advised in a timely manner of all material developments in connection with the DKD Bid, including any developments which impacted upon Catalyst’s involvement, interests, and participation in the DKD Bid.

26. DKD and Catalyst understood, intended and agreed that the above terms formed a legally valid and binding Oral Agreement between DKD and Catalyst, and that these terms would govern the relationship and dealings between DKD and Catalyst throughout the Athlete’s Village Project.

[41] A plea of an oral agreement should provide sufficient particulars to permit the other party to know the case to be met. See Brad Industries Ltd. v. Rio Tinto Mining Co. [1962] O.W.N. 126. In Cohen v. Cambridge Mercantile Corp. (2007), 2007 21596 (ON SC), 33 B.L.R. (4th) 248 Brown J. (as he then was) dealt with a rule 21 motion on a pleading that alleged an oral agreement between the plaintiff and Cambridge Mercantile Corp. He held that the plaintiff had not provided sufficient particulars previously ordered by Campbell J. and stated:

13 However, in my view Mr. Cohen has not provided the particulars of the oral contract required by the order of C. Campbell J. Specifically, Mr. Cohen has not pleaded when the alleged oral contract was entered into, where it was made, nor has he identified the representative of Cambridge with whom he allegedly made the contract. This information is required in order to enable the defendants to plead over in an intelligent fashion.

[42] In this case, paragraph 19 of the claim refers to eight specific dates of meetings and to several representatives of Catalyst and DKD who attended. That paragraph and the paragraphs that follow to paragraph 24 do not however identify any particular person from DKD who made any particular statement. It refers only to DKD. Paragraphs 25 and 26 do not identify any particular person who made the alleged various agreements or the date or place of each agreement. In my view, DKD is not in any position to plead to such a claim.

[43] In the result the claim of an oral agreement between Catalyst and DKD is struck, including paragraphs 19 to 26 and any other reference to an oral agreement in the pleading. This is the second time the claim has been struck, and while I am reluctant to do so, I think Catalyst should have one final chance to properly plead an oral agreement. There must be identified what person or persons agreed to each particular thing identified in each subparagraph of paragraph 25 and paragraph 26, including both persons from Catalyst and from DKD, what day each agreement was made and where. If it is alleged that more than one person from either side agreed to any particular term, the persons must be identified as well as the date and place for each term agreed by each person.

(b) Breach of the term sheet

[44] The term sheet provided an obligation in section 29 which bound the parties to it. The defendants that were a party to the term sheet were not all of the DKD defendants, but only Dundee Kilmer Developments Limited Partnership and it was Dundee Realty Corporation and KD Infrastructure that signed the term sheet on behalf of that partnership. The other defendants stated in the claim to be part of DKD were not a party to the term sheet.

[45] The obligation of the parties to the term sheet is set out in section 29, the relevant part of which is:

The parties acknowledge that the Senior Financing Term Sheet contains a condition precedent in favour of the Lenders with respect to the approval by the Lenders of the Subordinated Noteholder [Catalyst], the participation of the Subordinated Noteholder in the Project, the manner and terms and conditions of the provision (directly or indirectly) by the Subordinated Noteholder of subordinated debt to the Project including, without limitation, the terms of this Term Sheet and the corporate/partnership structure of ownership and control of the Project at all direct or indirect levels (collectively, the “CP”). The parties acknowledge and agree that time is of the essence with respect to the satisfaction of the CP. Each of the parties shall negotiate in good faith with each other and the Lenders to satisfy the CP.” (underlining added)

[46] Thus the obligation of the Partnership was to negotiate in good faith with Catalyst and the Lenders to satisfy the condition precedent in favour of the Lenders with respect to approving Catalyst to be in the deal. It was not an obligation to negotiate with IO.

[47] Catalyst pleads breaches of the term sheet in two paragraphs. The first is in paragraph 109 of the statement of claim as follows:

109. Catalyst further pleads that the good faith obligation in paragraph 29 of the Funding Term Sheet included an obligation on DKD’s part to apply its experience and expertise to ensure that the structure resulting from the Term Sheets, the DKD Bid, and any subsequent agreements negotiated after September 1, 2011 resulted in Catalyst’s participation being “behind the curtain” in a manner that was acceptable to IO and the Crown, and that DKD failed to do so. Catalyst relies upon the facts pleaded in paragraphs 35-54 herein in support of this claim.

[48] This paragraph suffers from two problems. The first is that it misstates the obligation in the term sheet as there was no obligation under the term sheet to negotiate anything that would be acceptable to IO or the Crown. The second is that Catalyst then relies on the facts pleaded in paragraphs 35-54 in support of the claim. It is not a proper pleading to say to look at twenty paragraphs and figure out what is said to be a breach of a term of an agreement. Moreover, those paragraphs have nothing to do with dealing with the Lenders, which is what the obligation was under paragraph 29 of the term sheet. Those paragraphs have to do with dealings by DKD with IO and the Crown. Paragraph 109 of the pleading is struck without leave to amend.

[49] The second plea of a breach of the term sheet is in paragraph 110 of the statement of claim as follows:

110. By reason of the facts set out in paragraphs 55-89 herein, DKD breached its obligations under Section 29 of the Funding Term Sheet and its common law duties of honest performance in relation thereto, its duty to negotiate and act in good faith, its duties to use its best efforts, or in the alternative reasonable efforts, to obtain the Lenders’ consent to Catalyst’s continued participation in the Athlete’s Village Project, and its duty to undertake the above efforts in a timely manner.

[50] Again, it is not a proper plea to tell a party to read in this case some thirty-five paragraphs and figure out what is said to be a breach of an agreement. Those paragraphs nearly in their entirety deal solely with dealings between DKD, IO and the Crown and complain that IO and the Crown wrongfully refused to permit Catalyst to participate with DKD in its bid. There are only two paragraphs in the paragraphs 55 to 89 that refer to DKD’s dealings with the Lenders:

64. After being told by IO to remove Catalyst as a financier, DKD ceased any and all efforts to obtain the Lenders’ consent to Catalyst’s participation (including failing to even discuss with the Lenders the possibility of waiving the Lenders’ request for IO’s consent) despite its clear obligation to do so. Instead of fulfilling its various obligations to Catalyst, in November, 2011, DKD instead advised Catalyst that the Lenders would not consent to Catalyst's participation, and thereafter refused to allow Catalyst to participate any further in the Athletes' Village Project.

65. As a consequence of the position taken by IO and the Province, DKD told Catalyst that it was impossible to obtain the Lenders’ consent under the Funding Term Sheet. DKD therefore took the position that Catalyst could not continue as a participant in the Athlete’s Village Project because this condition precedent could not be satisfied, despite the fact (according to DKD) that DKD had acted in good faith and had done everything possible to fulfill this condition.

[51] There is a fundamental issue with the pleading. It is clear from the pleading, including paragraphs other than relied on in paragraph 110, that the complaint is not that DKD failed to deal with the Lenders to fulfill the condition precedent of the Lenders’ agreement to permit Catalyst's involvement in the project. Rather the complaint is that although Catalyst and DKD obtained the consent of the Lenders, it was afterwards that IO and the Crown had a problem with Catalyst and would not agree to Catalyst being involved. The complaint at its core is that DKD failed to convince IO to change its mind. However, the term sheet contained no obligation on DKD to negotiate with IO to change its mind. Whether it was DKD’s fault that IO and the Crown had this problem is not relevant to the issue of a breach of the term sheet.

[52] That the complaint as pleaded at its core is not that it was a failure of DKD to deal with the Lenders but rather the failure of DKD to get IO and the Crown to agree to Catalyst’s involvement is apparent from the following in the statement of claim:

51. Throughout September-October 2011, DKD and Catalyst had numerous meetings, discussions and communications with the Lenders to obtain the consents necessary for Catalyst’s continued participation in the Athlete’s Village Project and to satisfy the conditions contained in the Funding Term Sheet.

52. During and as a result of these meetings and negotiations, Catalyst (and DKD) agreed to certain amendments that the Lenders proposed in relation to the Funding Term Sheet, and by October 30, 2011, all of the material terms required to obtain the Lenders’ consent to Catalyst’s participation in the Athlete’s Village Project had been resolved. As a result, DKD, Catalyst and the Lenders began, through their respective legal counsel, to prepare formal documentation to implement and record the outcome of their negotiations and the resulting agreements.

[53] There follows in the pleading a number of discussions between DKD and the IO and the Crown and the reporting of those discussions to Catalyst that things are going well for Catalyst's involvement. Then the problem regarding Catalyst is pleaded as follows:

59. However, on November 8, 2011, Catalyst (by communications to Riley, Horrox and Glassman) was advised by DKD (Ken Tanenbaum) that “the Province” had raised a “red flag” regarding Catalyst’s participation in the Athlete’s Village Project. According to Ken Tanenbaum, DKD did not understand what was behind this concern and intended to follow-up with IO (through Carson) and “the Province”, through DKD’s counsel, Goodmans LLP.

60. Unknown to Catalyst at the time, on or about November 8, 2011, IO had provided a written response to DKD's disclosure of Catalyst's involvement in the project, in which it detailed alleged concerns about Catalyst's involvement and directed DKD to remove Catalyst as a participant in the financing model being proposed for the Athletes' Village Project. IO’s decision to have Catalyst removed was made as a result of directions and instructions it received from Crown officials, instructing or authorizing IO to do so.

[54] The allegation in paragraph 64 of the pleading when understood in this light could not possibly succeed. That paragraph for each of reference again is;

64. After being told by IO to remove Catalyst as a financier, DKD ceased any and all efforts to obtain the Lenders’ consent to Catalyst’s participation (including failing to even discuss with the Lenders the possibility of waiving the Lenders’ request for IO’s consent) despite its clear obligation to do so. Instead of fulfilling its various obligations to Catalyst, in November, 2011, DKD instead advised Catalyst that the Lenders would not consent to Catalyst's participation, and thereafter refused to allow Catalyst to participate any further in the Athletes' Village Project.

[55] Once the IO and the Crown had decided not to permit Catalyst to be involved, that was the end of the matter for Catalyst. Even if the Lenders agreed to Catalyst being involved, it would not affect that. Failing at that stage to ask the Lenders to agree to Catalyst, (which according the plea in paragraph 52 they already had) or failing to ask the Lenders’ to waive their request for IO’s consent (and there is no plea that the Lenders had requested IO’s consent) could make no difference. The IO had not delegated its authority to the Lenders and it had to be satisfied with the involvement of Catalyst under the terms of the RFP. Even in the terms of the alleged Governmental Representations pleaded in the claim, there is no allegation that the IO would defer to the Lenders. If IO breached its representations made to Catalyst indirectly through DKD, that would not affect the obligations of DKD under the term sheet.

[56] In the circumstances, on the basis of what is pleaded and the documents referred to in the pleading, it is plain and obvious that the claim against DKD for breach of the term sheet cannot succeed and it is struck without leave to amend.

(c) Breach of fiduciary duty against DKD

[57] Catalyst claims that DKD owed to it a fiduciary duty to act in Catalyst's interests. It does so by pleading a special relationship arising from the alleged oral agreement, the term sheet and representations made by DKD to Catalyst. Catalyst pleads:

112. Catalyst and DKD were and are sophisticated parties, and in respect of many of the issues relating to the Athlete’s Village Project, Catalyst and DKD were not in a fiduciary relationship.

113. However, Catalyst pleads that the terms of the Oral Agreement, the Term Sheets and the representations made by DKD to Catalyst, collectively or individually, created a fiduciary relationship or, in the alternative, a position of trust, between Catalyst and DKD in relation to the negotiations that DKD conducted with the Lenders, and with IO and the Crown, on Catalyst’s behalf….

114. As a result, in respect of certain aspects of the Athlete’s Village Project, Catalyst was in a unique position of vulnerability and dependency. In particular, at all material times: …

115. The above facts and circumstances resulted in a special relationship and created a dependency as a result of which Catalyst was reliant upon DKD to protect and maintain Catalyst’s interests in accordance with the contractual commitments which DKD had made to Catalyst. Accordingly, in respect of the matters referred to above, Catalyst pleads that DKD stood in a fiduciary relationship, or in the alternative, in a position of trust with Catalyst.

116. In these circumstances, Catalyst pleads that DKD was required to take all steps necessary to protect and advance Catalyst’s interests, and, if necessary, to subordinate its own interests in the process.

117. Alternatively, the relationship between DKD and Catalyst was that of a joint venture, and therefore, gave rise to fiduciary duties owed to Catalyst.

[58] Canadian law distinguishes between per se fiduciary relationships and an ad hoc fiduciary relationship. Per se, historically recognized, fiduciary relationships exist as a matter of course within the traditional categories of trustee-cestui qui trust, executor-beneficiary, solicitor-client, agent-principal, director-corporation and guardian-ward or parent-child. By contrast, ad hoc fiduciary relationships must be established on a case-by-case basis. See Alberta v Elder Advocates of Alberta Society, 2011 SCC 24 at para. 33.

[59] Catalyst argues that the pleadings give rise to an ad hoc fiduciary duty based on an Anns analysis and to a per se fiduciary duty arising from the alleged joint venture.

[60] So far as a joint venture is concerned, which as it is a pleadings motion must be taken to exist between Catalyst and DKD, Catalyst argues that joint ventures are one category of per se fiduciary relationships recognized by Canadian courts. No authority for that statement is given and I do not agree with it. Joint ventures are not per se fiduciary relationships. See Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 34 (SCC), [1989] 2 S.C.R. 574 at para. 90 and Mark Vincent Ellis, Fiduciary Duties in Canada, Vol. II (Thomson Reuters: 2016) at p. 13-3 and 13-4. Thus the Anns test for recognition of a non per se fiduciary relationship must be considered.

[61] The claim of Catalyst as pleaded is essentially that Catalyst was in a position of vulnerability because DKD required Catalyst to stay out of any discussions or negotiations with IO, which Catalyst agreed to in return for DKD’s assumption of the duty to protect and promote Catalyst’s interests in good faith in dealing with IO and the Crown. In the result, Catalyst was forced to rely completely on DKD to advance its interests in the negotiations, at DKD's discretion. Although Catalyst argues in its factum that this obligation of Catalyst to let DKD negotiate included negotiations with the Lenders, this is clearly not correct as paragraph 29 of the term sheet provided that “each of the parties” (i.e. Catalyst and the DKD partnership) shall negotiate in good faith with each other and the Lenders to satisfy the CP. Catalyst was not precluded by the term sheet from dealing with the Lenders directly.

[62] In my view a fiduciary duty to Catalyst cannot be imposed on DKD. Contrary to the assertion by Catalyst, a trial is not necessary to determine this, just as in Elder a claim for breach of fiduciary duty was struck by the Supreme Court prior to any trial.

[63] The starting point is Frame v Smith, 1987 74 (SCC), [1987] 2 S.C.R. 99 in which Wilson J. stated at para. 63:

Because of the requirement of vulnerability of the beneficiary at the hands of the fiduciary, fiduciary obligations are seldom present in the dealings of experienced businessmen of similar bargaining strength acting at arm's length: see, for example, Jirna Ltd. v. Mister Donut of Canada Ltd. (1971), 1971 42 (ON CA), 22 D.L.R. (3d) 639 (Ont. C.A.), aff'd 1973 31 (SCC), [1975] 1 S.C.R. 2. The law takes the position that such individuals are perfectly capable of agreeing as to the scope of the discretion or power to be exercised, i.e., any "vulnerability" could have been prevented through the more prudent exercise of their bargaining power and the remedies for the wrongful exercise or abuse of that discretion or power, namely damages, are adequate in such a case.

[64] Frame v. Smith at that time enunciated the test for determining if there was a fiduciary duty, and it was less stringent than now exists in Canadian law. At that time, vulnerability was a key ingredient. Since then, however, a further test has been imposed of requiring that the person against whom a fiduciary duty is being sought having forsaken the interests of all others in favour of the beneficiary. In Elder, McLachlin C.J.C. said:

29 As useful as the three "hallmarks" referred to in Frame are in explaining the source fiduciary duties, they are not a complete code for identifying fiduciary duties. It is now clear from the foundational principles outlined in Guerin v. The Queen, 1984 25 (SCC), [1984] 2 S.C.R. 335, Hodgkinson v. Simms, 1994 70 (SCC), [1994] 3 S.C.R. 377, and Galambos that the elements outlined in the paragraphs that follow are those which identify the existence of a fiduciary duty in cases not covered by an existing category in which fiduciary duties have been recognized.

30 First, the evidence must show that the alleged fiduciary gave an undertaking of responsibility to act in the best interests of a beneficiary: Galambos, at paras. 66, 71 and 77-78; and Hodgkinson, per La Forest J., at pp. 409-10. As Cromwell J. wrote in Galambos, at para. 75: "what is required in all cases is an undertaking by the fiduciary, express or implied, to act in accordance with the duty of loyalty reposed on him or her."

31 The existence and character of the undertaking is informed by the norms relating to the particular relationship: Galambos, at para. 77. The party asserting the duty must be able to point to a forsaking by the alleged fiduciary of the interests of all others in favour of those of the beneficiary, in relation to the specific legal interest at stake.

[65] It is clear from the recent case of Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71 at paras. 124 to 127 that the forsaking of the interests of all others includes the forsaking by the alleged fiduciary of its own interests. That is, there must have been an undertaking in this case by DKD to forsake or give up its own interests to Catalyst. There has been no pleading that DKD undertook to give up its own interests to protect Catalyst, which would be the essence of a fiduciary or trust relationship. Moreover, it would be absurd in a relationship that existed in this case between two highly sophisticated organizations in which DKD was seeking the assistance of Catalyst in the DKD bid to think that DKD would have agreed to subordinate its interests to those of Catalyst.

[66] Catalyst recognizes that DKD would not agree to do that. In paragraph 116 of the claim it is pleaded:

116. In these circumstances, Catalyst pleads that DKD was required to take all steps necessary to protect and advance Catalyst’s interests, and, if necessary, to subordinate its own interests in the process.

[67] That is, Catalyst pleads a legal conclusion, not an undertaking by DKD, that DKD was required if necessary to subordinate its own interests in the process.

[68] It is plain and obvious that the claim for breach of a fiduciary duty against DKD cannot succeed and it is dismissed without leave to amend.

(d) Fraudulent misrepresentation against DKD

[69] Catalyst pleads that DKD made misrepresentations to Catalyst that were relied on by Catalyst to its detriment:

119. In addition or in the alternative to the above causes of action, Catalyst pleads that the following misrepresentations made by DKD to Catalyst:

(a) that DKD had the expertise, experience and ability to understand the Governmental Representations and to structure Catalyst’s participation in the Athlete’s Village Project in a manner that complied with the requirements of IO and the Crown, as set out herein;

(b) the nature and structure of Catalyst’s interest in the DKD Bid did not need to be disclosed to IO or the Crown;

(c) that the nature and structure of and role of Catalyst in the Athlete’s Village Project in fact complied with the “behind the curtain” requirement; and

(d) that DKD was using its best efforts to advance and protect Catalyst’s interest in its communications with IO and the Crown, including, in particular, the representations made by DKD to Catalyst regarding DKD’s communications with IO and the Crown in November 2011, as set out above.

were false, or misleading, or, in the alternative, were negligent.

120. DKD knew or ought to have known that these representations were untrue or misleading. Catalyst reasonably relied on these representations throughout its interactions with DKD, and as part of its ongoing relationship with DKD, to its detriment.

[70] DKD has not raised any argument about the plea of a claim for fraudulent misrepresentation, a claim that will stand.

[71] I see no basis for this claim to be struck.

(e) Negligent misrepresentation against DKD

[72] As seen, Catalyst has pleaded a claim of negligent misrepresentation against DKD. The defendants say that as this is a case of pure economic damage, the case law has established that for policy reasons, no duty of care arises in the conduct of contractual negotiations. See Martel Building Ltd. v. Canada 2000 SCC 60, [2000] 2 S.C.R. 860 at para. 72:

72 For these reasons we are of the opinion that, in the circumstances of this case, any prima facie duty is significantly outweighed by the deleterious effects that would be occasioned through an extension of a duty of care into the conduct of negotiations. We conclude then that, as a general proposition, no duty of care arises in conducting negotiations. While there may well be a set of circumstances in which a duty of care may be found, it has not yet arisen.

[73] Further, it is argued by the defendants that no duty of care arises between an owner and a subcontractor. See Design Services Ltd. v. R., 2008 SCC 22, [2008] 1 S.C.R. 737 at para. 56:

56 The fact that the appellants had the opportunity to form a joint venture, and thereby be parties to the "Contract A" made between PW and Olympic, is an overriding policy reason that tort liability should not be recognized in these circumstances. Allowing the appellants to sidestep the circumstances they participated in creating and make a claim in tort would be to ignore and circumvent the contractual rights and obligations that were, and were not, intended by PW, Olympic and the appellants. In essence, the appellants are attempting, after the fact, to substitute a claim in tort law for their inability to claim under "Contract A". After all, the obligations the appellants seek to enforce through tort exist only because of "Contract A" to which the appellants are not parties. In my view, the observation of Professor Lewis N. Klar (Tort Law (3rd ed. 2003), at p. 201) -- that the ordering of commercial relationships is usually in the bailiwick of the law of contract -- is particularly apt in this type of case. To conclude that an action in tort is appropriate when commercial parties have deliberately arranged their affairs in contract would be to allow for an unjustifiable encroachment of tort law into the realm of contract.

[74] These two cases did not deal with claims for negligent misrepresentation. They dealt with claims of negligent conduct in a negotiating process. In Martel, Iacobucci and Major J.J.A. identified five types of cases in which economic damages could be claimed, one of which was negligent misrepresentation. They distinguished the claim for negligence in a negotiating process from those claims. They said:

38 In an effort to identify and separate the types of cases that give rise to potentially compensable economic loss, La Forest J., in Norsk, supra, endorsed the following categories (at p. 1049):

1. The Independent Liability of Statutory Public Authorities;

2. Negligent Misrepresentation;

3. Negligent Performance of a Service;

4. Negligent Supply of Shoddy Goods or Structures;

5. Relational Economic Loss.

See B. Feldthusen, "Economic Loss in the Supreme Court of Canada: Yesterday and Tomorrow" (1990-91), 17 Can. Bus. L.J. 356, at pp. 357-58; Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., 1995 146 (SCC), [1995] 1 S.C.R. 85, at para. 12; and D'Amato, supra, at para. 30.

39 The allegation of negligence in the conduct of negotiations does not fall within any of these classifications. Thus, Martel's claim is novel when weighed against the prior jurisprudence of this Court. That by itself should not preclude the claim. The question is whether the numbered categories ought to be enlarged or some other method identified to include a new head of economic loss. To answer this question it is useful to set out a framework for the recognition of new categories such as that advanced by Martel. (underlining added)

[75] It was in that context that the Court concluded at para. 72 that, as a general proposition, no duty of care arises in conducting negotiations. The statement was not meant to apply to a claim for negligent misrepresentation. That is understandable. A misrepresentation case is a different case than a claim that a duty of care arises in a relationship giving rise to negligence principles. Someone who makes a representation has a duty by virtue of making the representation to not misstate what is represented. If the defendants were right in their position, it would mean, for example, that a person who entered into an agreement on the basis of a negligent misrepresentation made during the negotiations would be unable to obtain any relief. That is not our law.

[76] Design Services contained the same analysis as was done in Martel. Rothstein J. referred to the same five categories of cases identified in Norsk and then, as none of them applied, undertook an Anns analysis. In saying that the case before the Court did not fall within the five categories, Justice Rothstein stated in para. 32 that the case obviously did not involve a negligent misrepresentation.

[77] I see no basis for the claim of negligent misrepresentation against DKD to be struck.

(f) Fraudulent and negligent misrepresentation against IO and the Crown

[78] Catalyst pleads that after IO told DKD that it would not formally consent to Catalyst being a member of the DKD team, representations were made by IO and the Crown through DKD that Catalyst could participate in the Athletes' Village project on a “behind a curtain” basis. It pleads:

31. …DKD stressed to IO that Catalyst would provide valuable assistance and financing for the Athlete’s Village Project and that this would benefit not only DKD, but also IO and the Crown by resulting in a more competitive and attractive financial bid, and by adding financial strength to the DKD team. As a result of these discussions, IO advised DKD that although it would not consent to have Catalyst added as a formal DKD team member, Catalyst could nevertheless participate in the DKD Bid in a manner which did not require such consent. Specifically, IO (including Peter Wilson and Vas Georgiou) represented that:

(a) IO and the Crown did not have any issues or concerns regarding the source of funding for DKD or any equity structure that might be entered into between DKD and any of its funders, including Catalyst;

(b) IO and the Crown had decided that DKD and Catalyst could proceed on the basis that Catalyst could participate and provide funding to DKD for the Athlete’s Village Project, without IO's formal consent, and that Catalyst was approved to do so, so long as Catalyst was kept “behind the curtain”; and

(c) if Catalyst provided financing for the Athlete’s Village Project in a manner that was “behind the curtain”, no issue or difficulty would be raised by IO or the Crown about such participation.

Collectively, these representations and assurances are referred to hereinafter as the "Governmental Representations".

[79] Catalyst pleads in paras. 133 and 135 of its claim that at the time that the Governmental Representations were made, IO and the Crown knew or ought to have known that they were untrue and that they knew they would be communicated by DKD to Catalyst as follows:

133. In addition to or in the alternative to the above causes of action, at the time that the Governmental Representations were made, IO and the Crown knew or ought to have known that they were untrue. Furthermore, because they knew and intended that these representations would be specifically and uniquely communicated to and acted on by Catalyst, the Governmental Representations created a special relationship between Catalyst, IO and the Crown.

134. In the unique circumstances in which the Governmental Representations were made, and the specific nature of the Governmental Representations, IO and the Crown knew (or ought to have known) and intended that DKD would and did convey the Governmental Representations to Catalyst, that Catalyst would and did accept that the Government Representations were true, and that Catalyst would and did rely on the Governmental Representations.

[80] IO and the Crown make the same attack against the pleading of negligent misrepresentation as does DKD on the basis of Martel and Design Services. I have not accepted that argument.

[81] Catalyst pleads reliance on the Governmental Regulations. IO and the Crown contend that it is plain and obvious that there could be no reasonable reliance by Catalyst. They raise several points of argument. However, I do not see the argument succeeding on a pleadings motion to strike. It is argument on the facts.

[82] I have struck out the misrepresentation claim against the Crown under section 2(2)(b) of the PACA. I see no basis for the plea of misrepresentation against IO to be struck.

(g) Unjust enrichment and quantum meruit against DKD

[83] Catalyst has pleaded a claim in unjust enrichment and quantum meruit against DKD. I have struck this plea as being statute-barred under the Limitations Act, 2002. Had I not done so, I would not have struck the claims on the grounds that it was plain and obvious that the claims could not succeed. I will deal with the claims briefly.

[84] Catalyst claims that DKD wanted and relied on Catalyst's financial advice in structuring the financing for the Athletes' Village project to maximize its competitive position to be the winning bidder and that Catalyst provided that advice on the basis that it would benefit if DKD’s bid was selected by IO, as it ultimately was. Catalyst’s actions resulted in DKD creating a better financial model than it otherwise would have created had Catalyst not been involved. Catalyst was deprived of the profits, benefits, and opportunities that were promised to it, and it reasonably expected to gain from its participation in the DKD bid. Catalyst claims to be entitled to compensation on a quantum meruit basis, equivalent to the benefits it would have derived from the project (and which DKD has wrongfully retained for its sole benefit) had it not been wrongfully excluded, or in an amount commensurate with the time and expense incurred by Catalyst in connection with the DKD bid.

[85] To establish a claim of unjust enrichment, Catalyst must prove: (i) DKD has been enriched; (ii) there has been a corresponding deprivation to Catalyst; and (iii) the absence of a juristic reason for the enrichment. See Kerr v. Baranow, 2011 SCC 10 at para. 32.

[86] DKD raises a number of arguments as to why it is plain and obvious that a claim for unjust enrichment cannot succeed. I think that is an overstatement, taking into account this is a pleadings motion and the threshold test to sustain a pleading is not high. For example, it is said that a deprivation must be more than a mere hope or expectancy of profits and that there was juridical reason for what happened in that IO had a contractual right not to agree to Catalyst participating in the project. However, if there was a breach of an oral agreement by DKD (assuming an oral agreement is properly pleaded) in that DKD did not in good faith persuade IO to permit Catalyst to be part of the DKD team, that may affect the analysis. The test for juristic reason is flexible. See Kerr v. Baranow at para. 44.

[87] To establish a claim of quantum meruit, Catalyst must establish that the services in question were furnished at the request, or with the encouragement or acquiescence, of DKD and that in circumstances it would be unjust for DKD to retain the benefit conferred by the provision of the services. See Consulate Ventures Inc v Amico Contracting & Engineering, (1992) Inc., 2011 ONCA 418 at para. 8. Quantum meruit is simply one of the established categories of unjust enrichment. See Kerr v. Baranow at para. 74. The claim is properly pleaded and there is no basis to strike that plea.

(h) Unjust enrichment and quantum meruit against IO and the Crown

[88] I have struck this plea as being statute-barred under the Limitations Act, 2002. Had I not done so, I would have struck the claims on the grounds that it was plain and obvious that the claims could not succeed. I will deal with the claims briefly.

[89] Catalyst pleads that in addition to the benefits that accrued to DKD as a result of Catalyst’s assistance in relation to the DKD bid, IO and the Crown also benefited. Catalyst’s involvement resulted in DKD submitting a lower cost bid which was accepted by IO and the Crown. This produced an economic benefit for IO and the Crown. As a result, Catalyst was deprived of the profits, benefits, and opportunities that were promised to it, and that it reasonably expected from its participation in the DKD bid and the Athlete’s Village project.

[90] In my view, it is plain and obvious that the claim in unjust enrichment against IO and the Crown cannot succeed. A provision of goods, services or money must be given to and retained by a defendant and it is not sufficient if a defendant indirectly benefits from goods, services or money provided by a plaintiff to someone else. In Peel (Regional Municipality) v Canada, 1992 21 (SCC), [1992] 3 S.C.R. 762 McLachlin J. (as she then was) said the following:

41 At the heart of the doctrine of unjust enrichment, whether expressed in terms of the traditional categories of recovery or general principle, lies the notion of restoration of a benefit which justice does not permit one to retain…Thus for recovery to lie, something must have been given, whether goods, services or money. The thing which is given must have been received and retained by the defendant. And the retention must be without juristic justification, to quote Dickson J. in Pettkus v. Becker.

45 …The word "restitution" implies that something has been given to someone which must be returned or the value of which must be restored by the recipient. The word "enrichment" similarly connotes a tangible benefit. It follows that without a benefit which has "enriched" the defendant and which can be restored to the donor in specie or by money, no recovery lies for unjust enrichment.

58 While not much discussed by common law authorities to date, it appears that a further feature which the benefit must possess if it is to support a claim for unjust enrichment, is that it be more than an incidental blow-by. A secondary collateral benefit will not suffice. To permit recovery for incidental collateral benefits would be to admit of the possibility that a plaintiff could recover twice -- once from the person who is the immediate beneficiary of the payment or benefit (the parents of the juveniles placed in group homes in this case), and again from the person who reaped an incidental benefit. See, for example, Fridman and McLeod, supra, at p. 361; Maddaugh and McCamus, supra, at p. 717; and, Gautreau, supra, at pp. 265 et seq. It would also open the doors to claims against an undefined class of persons who, while not the recipients of the payment or work conferred by the plaintiff, indirectly benefit from it. This the courts have declined to do. The cases in which claims for unjust enrichment have been made out generally deal with benefits conferred directly and specifically on the defendant, such as the services rendered for the defendant or money paid to the defendant.

[91] In this case, it is not pleaded that any services were provided by Catalyst to IO or to the Crown. Rather, it is pleaded that the services were provided by Catalyst to DKD. While it is pleaded that the services provided by Catalyst to DKD resulted in a lower cost bid by DKD that produced an economic benefit to IO and the Crown, that would be an indirect benefit not recognized as a direct benefit required to make out a case of unjust enrichment.

[92] It is also plain and obvious that a claim in quantum meruit cannot succeed against IO or the Crown. For such a claim to succeed, Catalyst must establish that the services it provided to DKD were furnished at the request, or with the encouragement or acquiescence, of IO or the Crown. See Consulate Ventures at para. 8. There is no plea that these services were requested, encouraged or acquiesced in by IO or the Crown. The pleading is to the opposite effect, i.e. IO and the Crown were against Catalyst being involved in the bid by DKD.

(i) Public Law Claim against IO and the Crown

[93] Catalyst has pleaded a “Public Law Claim” against IO and the Crown as follows:

127. Catalyst pleads that in dealing with and making decisions which affected Catalyst’s participation in the Athlete’s Village Project, IO and the Crown had a duty to act, but wrongly failed to act, as follows:

(a) keep the promises they had made through the Governmental Representations;

(b) provide DKD with timely and sufficient information to enable DKD and Catalyst to structure a financial model that met IO and the Crown’s “behind the curtain” requirement;

(c) act fairly towards Catalyst, who it knew to be a potential participant in the DKD Bid and the Athlete’s Village Project, as a direct result of the Governmental Representations;

(d) make rational decisions based on factually correct information;

(e) in the event any issues, questions or concerns arose regarding Catalyst's participation or potential participation in the DKD Bid or the Athlete’s Village Project, afford Catalyst a fair and reasonable opportunity to answer and alleviate any such questions, issues or concerns;

(f) in the assessment of such matters, act in a non-arbitrary, bona fide manner, and in a manner which respected Catalyst’s reasonable expectations resulting from the Governmental Representations; and

(g) avoid causing or contributing to any breach of contractual and other duties owed by DKD to Catalyst (which were known to IO and the Crown, as a result of the communications in November 2011 from DKD), and to refrain from assisting DKD in the breach of any of Catalyst's contractual relations with DKD or other legal and equitable rights in connection with the DKD Bid or the Athlete’s Village Project.

128. The actions and decisions of IO and the Crown in respect of Catalyst’s participation in the Athlete’s Village Project were based on factually inaccurate information, on irrelevant considerations, and had no basis in law, including:

(a) the factually incorrect assertion or assumption that Catalyst had not yet secured Letters of Credit at Financial Close, and would not be able to obtain letters of credit from Schedule I Banks, when in fact, Catalyst had secured Letters of Credit from Schedule I Banks prior to the date on which the Athlete’s Village Project Agreement was supposed to be finalized;

(b) the factually incorrect assertion or assumption that through its subordinated notes, Catalyst would obtain a risk capital interest of 10% of the Athlete’s Village Project Co;

(c) the factually and legally incorrect assertion or assumption that Catalyst’s participation would lead to non-compliance with the requirements of section 3.6 of the RFP;

(d) irrelevant considerations regarding whether Catalyst would have to enter into inter-creditor agreements with the Crown; and

(e) the factually and legally incorrect assertion that Catalyst’s participation would constitute an impermissible and fundamental change to the DKD Bid.

129. In dealing with Catalyst’s participation in the Athlete’s Village Project in the manner pleaded herein, Catalyst states and the fact is that IO and the Crown breached each of the above obligations and acted in bad faith. Their reasons for excluding Catalyst were unreasonable and indefensible. IO and the Crown knew (or ought to have known) and intended that such breaches would specifically injure Catalyst. As a result of such breaches, Catalyst was wrongfully excluded from the DKD Bid and the Athlete’s Village Project and suffered damages.

[94] IO and the Crown contend that a “public law claim” is not a recognized cause of action.

[95] Catalyst relies on statements of Stratas J.A. in Paradis Honey Ltd. v. Canada (Attorney General), [2015] F.C.A. 89 (leave to appeal denied, [2015] S.C.C.A. No. 227) to support its argument that its pleading of a public law claim should be permitted to stand. In that case, the plaintiffs in a class action were a group of commercial beekeepers who challenged a governmental ban on importation of honey bees from the United States. Under the applicable regulation 160, permits might be granted on a case-by-case basis where the importation would not bring a "vector, disease or toxic substance" to Canada. It was claimed that the bureaucrats had created and enforced a guideline that unconditionally prevented the beekeepers from accessing regulation 160 under any circumstances. The claim was based in negligence and bad faith on the part of the government. In a split decision, it was held by Stratas J.A. that the claim as pleaded should be permitted to proceed to trial.

[96] Justice Stratas went on, however, at considerable length in obiter to discuss a possible public law claim. He said in part:

112 Given my views on the viability of the beekeepers' claim in negligence and bad faith, I need not go further. But all of us seem to agree that the allegations in the claim, taken as true, could trigger an award of administrative law remedies, or more generally public law remedies. Might a monetary award based on public law principles be one of those remedies? For the benefit of future cases, this warrants examination.

119 One afternoon in a small, quiet café in Paisley, Scotland, Francis Minghella served May Donoghue a bottle of ginger beer with a decomposed snail in it. So said a claim for damages, at the time so novel it was met by a motion to strike: Donoghue v. Stevenson, 1932 536 (FOREP), [1932] UKHL 100, [1932] A.C. 562. Upon the dismissal of that motion, a body of law was born. For the last eighty-three years, that body of law, with some modifications, has governed the liability of all private parties -- and all public authorities too, even giant, complex ones that today serve millions.

120 The difference between private parties and public authorities matters not. For reasons never explained, Canadian courts have followed the same analytical framework for each: we examine the duty of care, standard of care, remoteness, proximity, foreseeability, causation and damages.

127 At the root of the existing approach is something that makes no sense. In cases involving public authorities, we have been using an analytical framework built for private parties, not public authorities. We have been using private law tools to solve public law problems. So to speak, we have been using a screwdriver to turn a bolt.

128 Public authorities are different from private parties in so many ways. Among other things, they carry out mandatory obligations imposed by statutes, invariably advantaging some while disadvantaging others. As for the duty of care, does it make sense to speak of public authorities having to consider their "neighbours"-- the animating principle of Donoghue v. Stevenson -- when they regularly affect thousands, tens of thousands or even millions at a time? …

130 This anomaly should now end. The law of liability for public authorities should be governed by principles on the public law side of the divide, not the private law side. …

132 What are the principles of the underlying public law? Today, they are found primarily in administrative law, in particular the law of judicial review. Broadly speaking, we grant relief when a public authority acts unacceptably or indefensibly in the administrative law sense and when, as a matter of discretion, a remedy should be granted. These two components -- unacceptability or indefensibility in the administrative law sense and the exercise of remedial discretion -- supply a useful framework for analyzing when monetary relief may be had in an action in public law against a public authority. This framework explains the outcome in cases like Roncarelli and McGillivray, both above, as well as negligence cases like Hill, Syl Apps, Fullowka, all above, and others mentioned below.

145 The decided cases seem to reflect this. It is striking how often courts have awarded monetary relief against public authorities where they have not fulfilled a clear and specific duty to act -- i.e., where, using the language of public law, the failure to act was unacceptable or indefensible in the administrative law sense and there are circumstances of specific undertakings, specific reliance or known vulnerability of specific persons that trigger or underscore an affirmative duty to act: see Norman Siebrasse, "Liability of Public Authorities and Duties of Affirmative Action" (2007), 57 U.N.B.L.J. 84 and cases citied therein. As for addressing maladministration or vindicating public law values, it is striking how often it is said that monetary recovery in some categories of cases requires abuses of power, exercises of bad faith, pursuits of improper purposes, or conduct that is "clearly wrong," "reckless," "irrational," "inexplicable and incomprehensible," or a "fundamental breakdown of the orderly exercise of authority": see, e.g., Mackin v. New Brunswick (Minister of Finance); Rice v. New Brunswick, 2002 SCC 13, [2002] 1 S.C.R. 405 at paragraph 78; Finney v. Barreau du Québec, 2004 SCC 36, [2004] 2 S.C.R. 17 at paragraph 39; Vancouver (City) v. Ward, 2010 SCC 27, [2010] 2 S.C.R. 28 at paragraph 43; Enterprises Sibeca Inc., above at paragraph 23; Imperial Tobacco, above at paragraphs 74 and 90; see also the authorities cited in paragraph 87 of my reasons, above; and see also the illuminating discussion in David Mullan, "Roncarelli v. Duplessis and Damages for Abuse of Power", (2010) 55 McGill L.J. 587 at pages 604-610. Maladministration and conduct offensive to public law values can take many forms; these are just particular illustrations.

146 The considerations governing the discretion to award remedies in a judicial review, set out in paragraph 138 of my reasons, above, apply equally to the granting of monetary relief in public law. Among other things, one must assess the circumstances surrounding the public authority's conduct, its effects, and whether the granting of monetary relief would be consistent with public law values: see Wilson and Daly, both above; see also much of the discussion in the Charter damages case of Ward, above. Concerns about public authorities being saddled with indeterminate liability and being left free, not chilled, from exercising their legislative mandates are well-supported by some of these public law values. In appropriate cases, those concerns must form part of the exercise of remedial discretion.

[97] Pelletier J.A. dissented, holding that a duty of care could not be established and that bad faith had not been pleaded. He went on to briefly refer to the analysis of Stratas J.A. on the public law claim and said: “To the extent that this case concerns the boundary between public law and private remedies, I would say, despite my colleague's thoughtful analysis, that the distinction is now firmly entrenched in our law.”

[98] Without in any way denigrating the obiter analyses of Stratas J.A., I do not think it is at all applicable to this case. What he was dealing with was a case involving government policy unique to governmental action and he opined that in the future there could be a case to be made to permit such a claim to be decided on public law grounds.

[99] In the case against IO and the Crown, however, what is central is a claim that could and is quite regularly made against private actors, namely a claim for damages arising from an unsuccessful bid in a RFP request for bids on a construction project.

[100] In this case, the IO was acting as any other owner in seeking to obtain bids to finance and construct the Athlete’s Village. There was nothing in this that was unique to governmental actors. This is no different from Design Services in which Public Works and Government Services Canada launched a "design-build" tendering process for the construction of a building. Justice Rothstein for the SCC dealt with the case involving rights between the Government and subcontractors by an analyses of the common law test of Anns. He began his decision by saying: “The issue in this appeal is whether an owner in a tendering process owes a duty of care in tort to subcontractors.” It is also no different from Martel in which a claim arising from a tender process undertaken by the federal Department of Public Works was analysed by the SCC on contractual and tortious principles applicable to any private person.

[101] I see no basis to depart from cases such as Design Services and Martel, which are binding authority, to permit a different analysis of claims against a public authority for liability under a tender process for a construction contract. To do otherwise would be to ignore that binding authority. It is plain and obvious that the public law claim pleaded against IO and the Crown cannot succeed and it is struck without leave to amend.

(j) Misfeasance in public office claim against IO and the Crown

[102] Catalyst pleads a claim for misfeasance in public office against IO and the Crown as follows:

130. The Governmental Representations were specific to Catalyst. Not only did IO and the Crown know (or ought to have known) that the Governmental Representations would be communicated to and relied upon by Catalyst. IO and the Crown also knew and understood (or ought to have known) that the Governmental Representations would result in Catalyst investing extensive time and resources to assist in preparing the DKD Bid and the financing model for the Athlete’s Village Project.

131. IO and the Crown’s conduct in relation to Catalyst’s participation in the Athlete’s Village Project was unreasonable, arbitrary, deliberate, unlawful and specifically targeted Catalyst. Catalyst pleads and the fact is that IO and the Crown, by reason of the communications they had with DKD in November 2011 knew that Catalyst was being wrongfully excluded from the Athlete’s Village Project, and cooperated with DKD’s plan to achieve that result. In the alternative, IO and the Crown deliberately relied on factual information and assumptions that they knew or ought to have known were inaccurate, or were willfully blind as to the correctness of said information or assumptions as pleaded herein, as the basis for excluding Catalyst from the Athlete’s Village Project. This conduct was arbitrary and in bad faith in light of the fact that IO and the Crown were aware of Catalyst’s proposed participation and had made the specific Governmental Representations that Catalyst’s participation was acceptable if it occurred “behind the curtain”.

132. By reason of the above facts, the actions of IO and the Crown in relation to Catalyst’s participation in the Athlete’s Village Project were unreasonable, in bad faith, arbitrary, irrational, based on irrelevant considerations and/or based on factually inaccurate information or assumptions, and made without valid or lawful justification.

[103] The tort of misfeasance in a public office is an intentional tort whose distinguishing elements are twofold: (i) deliberate unlawful conduct in the exercise of public functions; and (ii) awareness that the conduct is unlawful and likely to injure the plaintiff. See Odhavji Estate v. Woodhouse, 2003 SCC 69, at para. 32. In cases involving allegations of malice or intent, as in this case, rule 25.06(8) requires that "full particulars" be pleaded and the pleading must meet a stringent standard of particularity. See Gratton-Masuy Environmental Technologies Inc. v Ontario, 2010 ONCA 501at paras. 88-89.

[104] It is also necessary in a claim of misfeasance in public office to name the specific public officers who knowingly abused a statutory duty for an unlawful purpose. See L(A) v. Ontario (Minister of Community and Social Services), (2006) 2006 39297 (ON CA), 83 O.R. (3d) 512 (C.A.) in which Sharpe J.A. said:

[37] In my view, the amended statement of claim fails to plead facts sufficient to satisfy the requirements of the tort of misfeasance in public office. The pleading makes bald allegations that recite the basic elements of the tort in very general terms but fails to provide material facts sufficient to demonstrate an intentional wrongdoing by a specific public officer aimed at the respondents. The pleading does not allege that a specific public officer knowingly abused his or her statutory duties for the unlawful purpose of harming these respondents.

[105] See also Skypower CL 1 LP v Ontario Power Authority 2014 ONSC 6950 at para. 48 and Trillium Power Wind Corp at para. 59 which accepted a pleading that made “specific allegations about specific public officials and their specific unlawful purpose in acting as they did”. In Skypower, Justice Chiappetta struck a claim for misfeasance in public office and in doing so stated that the claim as pleaded was “general and failed to link specific events to specific people”.

[106] In paragraphs 89 to 98 of the statement of claim, Catalyst names a number of persons who were officers of IO or Crown representatives in the Pam Am Games Secretariat or various Ministry officials who were involved in one way or another in the Athletes' Village project. Naming persons who were involved in the project does not alone support a pleading of misfeasance in public office. It does not plead who in particular engaged in any intentional wrongdoing of the kind required to properly plead the tort of misfeasance in public office.

[107] There is no pleading of any particular person who is alleged to have knowingly and intentionally acted unlawfully, nor any plea what the unlawfulness was with respect to any particular person. The pleading does not link any individuals with any specific conduct or any individual with the specific intent to injure Catalyst and no particulars of any specific actions of specific Crown staff are pled. The pleading in paragraph 132 refers to “IO and the Crown” being involved in actions that “by reason of the above facts” were unreasonable, etc. Apart from not knowing what the “above facts” are, the allegation is simply a bald allegation of wrongdoing. It is no pleading that any defendant could understand and plead to.

[108] Catalyst has referred to Capital Solar Power Corp. v. Ontario Power Authority, [2015] O.J. No. 1643 (S.C.J.) in which a claim for misfeasance in public office was permitted to stand notwithstanding that the identity of the individuals who acted on behalf of the governmental authority was not pleaded. In my view that case was wrongly decided and I decline to follow it. No reference was made to L(A) v. Ontario or Trillium Power Wind Corp which were binding authority to the opposite conclusion. The same comment applies to the case of Georgian Glen Development Ltd. v. Barrie (City), [2005] O.J. No. 3765. As well, with respect to that case, the fact that the City was the named defendant and individual officers of the City were not named as defendants should not have made any difference to the pleading that required the individual officers and their specific actions to be pleaded as per L(A) v. Ontario and Trillium Power Wind Corp.

[109] In the circumstances, the claim for misfeasance in public office against IO and the Crown contained in paragraph 130 to 132 of the statement of claim is struck. I am reluctant to do so, but will give Catalyst one last chance to properly plead such a claim, if it is able to do so.

(k) Paragraphs 72 to 88 of the statement of claim

[110] Catalyst has pleaded a number of paragraphs against DKD that DKD contends are irrelevant and should be struck. If relevant, it is said they are of marginal relevance and should be struck.

[111] Under rule 25.11 a pleading may be struck if it may prejudice or delay the fair trial of an action or it is scandalous, frivolous or vexatious. A court may strike out portions of a pleading, even where the allegations are relevant, if the applicant can establish that they are of marginal probative value and their probative value is outweighed by their prejudicial effect. Before doing so, a judge must balance the rights of the parties on the particular facts of the case and must consider carefully the extent to which the particulars attacked are necessary to enable a party to prove its case and their probative value in establishing that case. This power should be exercised with considerable caution. See Quizno's Canada Restaurant Corp. v. Kileel Developments Ltd., 2008 ONCA 644 at para. 15 and Canadian National Railway Company v Brant (2009), 2009 32911 (ON SC), 96 O.R. (3d) 734.

[112] In this case, the paragraphs in question deal with things in part completely divorced from the issues in this action, including allegations regarding a contract by DKD for replacement of 22 service centres on the 400 Highways in Ontario (paragraphs 73 and 74) and a transaction in which a subsidiary of DKD increased its interest in Maple Leaf Sports and Entertainment (paragraphs 75 and 77). These paragraphs are at most marginally relevant and would greatly increase the production and discovery stage of the action and the trial of the action. Paragraphs 73 to 77 are struck.

[113] The remaining paragraphs (paragraphs 78 to 88) are more closely related to the allegations of bad faith made against DKD in relation to the Athletes' Village project and while they will add to the work involved, I do not think they should be struck.

Costs

[114] Success being divided, there shall be no order as to costs.

Newbould J.

Date: November 28, 2016

[^1]: The endorsement on this motion was released on October 31, 2016. Unfortunately, parts of the endorsement were mistakenly omitted from the version released. This revised endorsement corrects the error.

[^2]: The statement of facts in this decision is based on the facts stated in the consolidated fresh as amended statement of claim or in the RFP incorporated in the claim. For the purposes of the motion those facts are assumed to be true.

[^3]: In its pleading, Catalyst has collectively defined the defendants Dundee Kilmer Developments Limited Partnership, Kilmer Van Nostrand Co. Limited, Dundee Realty Corporation and KD Infrastructure L.P and certain unnamed “John Doe” corporations and/or partnerships as “DKD”.