Bridgmount Development v Tarion Warranty Corp, 2017 ONSC 6190

CITATION: Bridgmount Development v Tarion Warranty Corp, 2017 ONSC 6190

COURT FILE NO.: CV-17-577266

DATE: 20171019

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BRIDGMOUNT DEVELOPMENT AND CONSTRUCTION LTD., GLENN BRIDGMOHAN, and NATASHA BRIDGMOHAN, Plaintiffs

– AND –

TARION WARRANTY CORPORATION, NEERAJ GHAI and KARTIKA MALIK, VISAVI CONSULTING & MANAGEMENT LTD., ASHOK MALIK, and YOUR CHOICE REALTY CORPORATION, Defendants

BEFORE: Justice E.M. Morgan

COUNSEL: Christine Kellawan, for the Plaintiffs (Responding parties)

Jayson Thomas, for the Defendants, Neeraj Ghai and Kartika Malik (Moving parties)

HEARD: October 16, 2017

ENDORSEMENT

I. The pleadings motion

[1] In this motion under Rule 21 of the Rules of Civil Procedure, the Defendants, Neeraj Ghai and Kartika Malik (the “Moving Parties”), seek to strike out the claim against them in its entirety. The Moving Parties purchased a home from the Plaintiffs. They alleged that it was defective in a variety of ways and made claims in that respect with the Defendant, Tarion Warranty Corporation (“Tarion”). The Plaintiffs claim that these complaints damaged their business in various ways.

[2] To make a long story short, the Plaintiffs have framed the action under a number of legal headings: defamation, intentional interference with economic relations, denial of access/statutory breach, negligence, negligent misrepresentation, breach of an implied term of contract, breach of the duty of good faith. The Moving Parties object to each and every one of these causes of action as being improperly pleaded; their counsel contends in his factum that, “although the Plaintiffs make various allegations and raise various causes of action against them, the Plaintiffs have failed to support those various causes of actions with the relevant factual allegations required to support those causes of action.” As it was put at the hearing, the Moving Parties have a right to know and understand the case they have to meet, and none of the individual causes of action, as pleaded, allows them to fully understand the Plaintiffs’ claim.

[3] Having read the Amended Statement of Claim, I seem to have no trouble understanding the case the Moving Parties have to meet. Taking the allegations in the pleading as true, as I must on a Rule 21 motion, the Plaintiffs are house builders/sellers and the Moving Parties are exceptionally difficult purchasers. In short, the Moving Parties went out of their way to obstruct repairs to the house and then filed more than 800 complaints with Tarion about alleged defects in the house, many of which they knew were specious, and that this blizzard of complaints overwhelmed Tarion. This caused damage to the Plaintiffs’ business reputation and resulted in the Moving Parties achieving a settlement with Tarion that has been charged back to the Plaintiffs.

[4] In response to this set of claims, the Moving Parties seem to be using the same legal tactic that they used with Tarion. While it would be an overstatement to say that they have raised over 800 complaints about the Plaintiffs’ pleading, they have challenged each and every one of the causes of action in a way that suggests that no form of words will ever truly suit them.

[5] While counsel for the Moving Parties does make some valid points about the way some of the causes of action have been phrased, the overall impression left by this motion is that the Moving Parties require the Plaintiffs’ pleading to conform to some pre-ordained form of wording, and that the Plaintiffs have missed the mark at every turn.

[6] I have considerable respect for the effort gone to by counsel for the Moving Parties, who has researched carefully the legal ingredients of each of the Plaintiffs’ claims. But the motion leaves the impression that nothing the Plaintiffs say will satisfy the Moving Parties.

[7] Overall, the argument is reminiscent of the old English forms of action abolished in the mid-19th century. As Sir Henry Summer Maine once observed, the defect of the early common law was to allow the form of civil actions to overwhelm their substance. “So great is the ascendancy of the Law of Actions in the infancy of Courts of Justice that substantive law has at first the look of being gradually secreted in the interstices of procedure”: Henry Maine, Dissertations on Early Law and Custom, chiefly selected from Lectures delivered at Oxford (London: John Murray, 1883), p. 389.

[8] Counsel for the Plaintiff submits that the test on a motion of this nature is whether it is plain and obvious that the claim discloses no cause of action. She correctly points out that the Court of Appeal has confirmed that the “bar for striking a pleading as disclosing no cause of action is very high”: The Catalyst Capital Group Inc. v. Veritas Investment Research Corporation, 2017 ONCA 85, at para. 21.

[9] Citing the Supreme Court of Canada’s judgment in Hunt v. Carey Canada Inc., 1990 CanLII 90 (SCC), [1990] 2 SCR 959, 980, counsel for the Plaintiffs goes on to argue that the Plaintiffs ought not be “driven from the judgment seat” if there is a chance that their claim might succeed, and that neither the length and complexity of the action, the novelty of the claim, nor the potential strength of the defense should prevent them from proceeding with their case. She further submits that the Amended Statement of Claim must be generously read to allow for drafting deficiencies: Castrillo v. Ontario (Workplace Safety and Insurance Board), 2017 ONCA 121, at para. 14.

II. Defamation

[10] Counsel for the Moving Parties submits that the Amended Statement of Claim falls short of the requirements for pleading defamation in a number of ways. In particular, he submits that the Plaintiffs make “unspecified impugned statements to groups of unnamed individuals at unidentified places and periods of time.” He argues that this fails to provide sufficient detail of the elements of defamation – i.e. that there has been a statement tending to lower the Plaintiffs’ reputation, that the impugned words refer to the Plaintiffs, and that the statement was published or disseminated to one or more persons: Grant v. Torstar Corp., 2009 SCC 61, [2009] 3 SCR 640, at para. 28.

[11] Counsel for the Plaintiffs points out that the Amended Statement of Claim identifies a series of both oral and written statements, including at the initial inspection of the house and in the complaints to Tarion, made by the Moving Parties in which the Plaintiffs were referenced in respect of allegedly substandard work or defects in the house. The oral statements are described at paras. 42, 49, 50 51, 52, and 55, while the written statements are described at paras. 52, 55, and 67(a) of the Amended Statement of Claim. While for some of these communications the Plaintiff is only aware of by way of hearsay or in general terms, it is clear that the specific incidents and the details of the communications are well within the knowledge of the Moving Parties.

[12] Courts have generally been flexible in upholding defamation pleadings where a claimant cannot provide full particulars of each and every allegation, but where the incidents are known to the defendant and the particulars are within the defendant’s knowledge. This is particularly the case where a claimant has otherwise established publication or dissemination of the impugned statements and they amount to a prima facie case of defamation: The Catalyst Capital Group Inc. v. Veritas Investment Research Corporation, 2017 ONCA 85, at para. 21.

[13] The defamation pleading has been put forward by the Plaintiffs in good faith, they appear to have pleaded all the particulars that are within their knowledge, it does not appear to be a fishing expedition in that they know for certain that the complaints were made, and although the exact defamatory words are not known by the Plaintiffs they are within the knowledge of the Moving Parties: The Catalyst Capital Group, at para. 28.

[14] Counsel for the Plaintiffs submits, and I agree, that it would be “impractical, disproportionate and contrary to the Rule against pleading evidence” for the Plaintiffs to set out the potentially hundreds of potentially defamatory complaints to the level of particularity that the Moving Parties demand. The essence of the claim is that the Moving Parties intentionally or with reckless disregard for the Plaintiffs inundated Tarion with defamatory complaints and verbally expressed the defamatory complaints to workers and others on numerous occasions, all known to the Moving Parties.

III. Intentional Interference with Economic Relations

[15] In A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, [2014] 1 SCR 177, at para 5, the Supreme Court set out the elements of the tort of intentional interference with economic relations. These include situations where the defendant commits an act against someone other than the claimant which nevertheless causes damage to the claimant, and the conduct is unlawful in that it would have been actionable by the direct target of the act in question.

[16] Counsel for the Plaintiffs indicates that in paras. 56 and 67(c) of the Amended Statement of Claim it is pleaded that the direct target of the conduct was the Plaintiffs’ tradespersons, and that in paras. 46, 49, 50, 51 and 67(c) it is pleaded that the trades were unable to effect repairs to the house and that they wrongfully denied access to the house in circumstances which would have been actionable by the trades. The Amended Statement of Claim goes on to state in paras. 46, 49, and 51 that the Plaintiffs suffered damages as a result of this conduct by the Moving Parties, and, in para. 56, that this interference was done in order to sour the relationship between the Plaintiffs and the tradespeople.

[17] Furthermore, paragraph 42 of the Amended Statement of Claim alleges that the Moving Parties stated during an inspection of the house that they intended to file every conceivable frivolous complaint in order to obtain a payout from Tarion. It also is alleged in this paragraph that the Moving Parties declared to the Plaintiffs and their tradespeople that they would never have been satisfied with any of the Plaintiffs’ repair of the house and that what they wanted was a cash settlement from Tarion. This set of pleadings fulfills the requirements for pleading the tort of intentional interference with economic relations. No specific form of words is required to plead this tort.

IV. Denial of Access/Statutory breach

[18] In para. 1(e) of the Amended Statement of Claim, the Plaintiffs put forward a claim for damages resulting from the denial of access to the house in order to effect repairs. The Moving Parties submit that this does not amount to a cause of action in that it is unconnected to any actionable breach of contractual, common law, or equitable duty.

[19] In response, the Plaintiffs submit that the denial of access is tied to a breach of statutory duty. At para. 1(d) of the Amended Statement of Claim, they indicate that the Moving Parties refused to comply with the provisions of the Ontario New Home Warranties Plan Act and Regulations. They further state, at para. 67, that this non-compliance of the standard of conduct expected of them under the statute has led to monetary penalties levelled at the Plaintiffs. The pleading goes on to describe the administrative process followed once a complaint is submitted by a home buyer, and claims that this administrative process which allows a builder to mitigate any damages was denied to them by the Moving Parties’ conduct.

[20] Counsel for the Moving Parties cites Regina v Saskatchewan Wheat Pool, 1983 CanLII 21 (SCC), [1983] 1 SCR 205 for the proposition that breach of statutory duty does not constitute an independently actionable wrong. He is, of course, correct in making that point. Denial of access to one’s home is not in itself a wrongful act, and breach of a statutory provision is not in itself an actionable act. In combination, the two of these do not amount to a cause of action. The denial of access may be factually a part of the other tort claims made in the Amended Statement of Claim, and so may be relevant as part of the narrative in the Amended Statement of Claim; but it does not amount to an independent cause of action.

V. Negligence and Negligent Misrepresentation

[21] In Mustapha v. Culligan of Canada Ltd., 2008 SCC 27, [2008] 2 SCR 114, at para. 3, the Supreme Court of Canada confirmed that the ingredients of a negligence claim are: a) the defendant owes the plaintiff a duty of care; b) the defendant’s acts breached the requisite standard of care; c) the plaintiff suffered damages; and d) the defendant’s act was the factual and proximate cause of the plaintiff’s damage.

[22] The Amended Statement of Claim sets out the statutory framework of the Ontario New Home Warranties Plan Act and the duties of various parties thereunder, and on the basis of those statutory duties claims in paras. 1(d) and 53 that there is a duty of care owed by the Moving Parties to the Plaintiffs to maintain the house to an adequate standard and to engage in the warranty claims process in good faith. In paras. 54 and 67(f) it goes on to state that the Moving Parties breached this duty knowingly and intentionally by making unfounded warranty claims.

[23] Further, in para. 66 of the Amended Statement of Claim, the Plaintiffs contend that they suffered loss that was caused both factually and legally by the Moving Parties, particularly by being charged with reimbursing Tarion for the cash settlements it has entered with the Moving Parties. Counsel for the Moving Parties argues that the Plaintiffs have not actually incurred those losses as they should first claim against Tarion before looking to the Moving Parties; whatever the merits of that argument, it is not a pleadings point but rather one that goes to the merits of the Plaintiffs’ claim. It is to be addressed at another junction in this action, and not on a motion to strike.

[24] Overall, the Plaintiffs submit that had the Moving Parties adequately maintained the house and not made unfounded claims, they would not have created the risk of loss to the Plaintiffs and the damage to the Plaintiffs would not have ensued. Counsel for the Plaintiffs argues that while this characterization of the warranty claims made by the Moving Parties may seem unconventional, that is not a reason to dismiss the claim at the pleadings stage. Their case involves the contention that in light of the statutory framework in which the warranty claims operate, there was a close enough relationship between the parties that it ought reasonably to have been contemplated that the Moving Parties’ negligence and unfounded claims would cause damage to the Plaintiffs.

[25] The Moving Parties are of the view that the Plaintiffs’ negligence claim cannot succeed. That may or may not be the case, but there is nothing wrong with their pleading.

[26] The same is true of the negligent misrepresentation claim asserted by the Plaintiffs. They plead in paras. 24, 33, 35, and 36 of the Amended Statement of Claim that the parties had a special and adequately proximate relationship as sellers/builders and buyers of the house. In paras. 43 and 45 they claim that the Moving Parties owed a duty of care not to create the risk of damage to the Plaintiffs by submitting knowingly specious warranty claims, failing to adequately maintain the home, and breaching their duty of good faith in making warranty claims based not on building defects in the house as built but rather on features that they claim were missing from the house altogether.

[27] The Plaintiffs go on to plead in paras. 42, 47, 48, and 52 that the Moving Parties misrepresented to them that they would accept the house on an “as is” basis and would not make warranty claims based on missing features. Then, at para. 46, they plead that they reasonably relied on the representations by the Moving Parties, and at paras. 48 and 66 they plead that this reasonable reliance on the Moving Parties’ misrepresentations caused them loss. In other words, all of the ingredients of a claim in negligent misrepresentation are covered in the Amended Statement of Claim: see Queen v. Cognos Inc. 1993 CanLII 146 (SCC), [1993] 1 S.C.R. 87, 110.

VI. Breach of Contract and Breach of Good Faith

[28] The Plaintiffs plead in paragraph 43 of the Amended Statement of Claim that it was an implied term of the agreement of purchase and sale that the Moving Parties would not make “unfounded claims”. They go on to state that the Moving Parties in fact made “unfounded claims to Tarion in circumstances where the Home was sold in an ‘as is’ condition and therefore not subject to the statutory warranties.”

[29] In so pleading, the Plaintiffs state that the house was listed for sale, that the Moving Parties accepted that offer by entering into the agreement, and that the Plaintiffs suffered loss as a result of the Moving Parties’ breach of an implied term. In other words, they have pleaded all of the elements of a breach of contract claim: see Gravelle v. A1 Security Manufacturing Corp., 2014 ONSC 5472, at para 16.

[30] Based on the same facts, the Plaintiffs plead that the Moving Parties have breached the implied contractual duty of good faith. They state that the contractual duty encompasses the implied term that there can be no warranty claims asserting that there are missing features and upgrades, and that any such contentions by the Moving Parties lie outside of the statutory warranty plan.

[31] In my view, the Moving Parties’ supposed failure to understand precisely what acts of theirs constitute the breach of good faith is more a product of their excessively narrow reading of the Amended Statement of Claim than it is any defect in drafting. Once the pleading is read with the requisite generosity of interpretation, the contours of the claim and the specifics of the case that the Moving Parties must meet are readily apparent.

VII. Conclusion

[32] For the most part, the Moving Parties’ complaints reflect an unduly narrow reading of the Amended Statement of Claim and an unduly strict interpretation of pleading requirements.

[33] In taking this strict and narrow view, the Moving Parties attempt to pigeon-hole a somewhat novel claim in pre-existing doctrinal boxes, without allowing for any flexibility in legal thinking about those boxes and the criteria for liability under the various causes of action pleaded. This is not an acceptable approach to a Rule 21 motion. As the Supreme Court of Canada has pointed out, “The approach must be generous and err on the side of permitting a novel but arguable claim to proceed to trial”: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 SCR 45, at para. 21.

[34] As indicated, the claim for denial of access is not supported in the pleading in a way which is recognized by the law. The facts that are pleaded in support of this particular claim may remain, as they also go to support other claims contained in the pleading. However, paragraph 1(e) of the Amended Statement of Claim is hereby struck out.

[35] The balance of the motion is dismissed.

[36] Having been for the most part successful on this motion, the Plaintiffs deserve some costs. I would ask that counsel for the Plaintiffs email my assistant with written submissions on costs (which are not to exceed 2 pages), together with a Costs Outline, within one week of the date of this judgment. Counsel for the Moving Parties may email my assistant with any responding submissions (also not exceeding 2 pages) within one week thereafter.

Morgan J.

Date: October 19, 2017