COURT FILE NO.: 16-58391 (Hamilton) DATE: 20180912

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Wilfred Davey and Bill Monture, Plaintiffs (Moving parties) Jeffrey A. Kaufman, for the Plaintiffs (Moving parties)

- and -

Hazel Hill, Brian Doolittle, Aaron Detler, Haudenosaunee Development Institute, 2438543 Ontario Inc., Ogwawihsta Dedwahsnye Inc., Elvera Garlow, Defendants (Responding parties) David Shiller, for the Defendants (Responding parties)

HEARD: May 25, 2018 with written reply submissions dated May 31, 2018

R. A. Lococo J.

REASONS FOR DECISION

I. Introduction

[1] Wilfred Davey and Bill Monture are the plaintiffs in a putative class action. They allege the misuse of funds intended for development projects on Aboriginal land.

[2] The plaintiffs have brought a motion for leave to amend the Statement of Claim, as set out in the draft Fresh as Amended Statement of Claim included in the Plaintiffs Motion Record. For the following reasons, I am granting the motion to the extent indicated below.

A. Background Facts

[3] As set out in the Statement of Claim dated August 15, 2016 (referred to as the “original claim”), the plaintiffs are Aboriginal persons who are members of the Haudenosaunee. The proposed class members (referred to as the “Haudenosaunee People”) consist of approximately 25,000 Aboriginal persons identified as Mohawks, Oneidas, Onondagas, Cayugas, Senecas and Tuscaroras, commonly referred to as the Six Nations of the Grand River, making up the Haudenosaunee Confederacy. The plaintiffs recognize the authority of the Haudenosaunee Confederacy Chiefs Council (the “Chiefs Council”) to represent the legal interests of the Haudenosaunee People.

[4] The dispute between the parties relates to proposed development projects on Haudenosaunee land. In the original claim, the plaintiffs seek damages of $50 million and other relief for breach of contract, breach of fiduciary duty, civil conspiracy, conversion, unjust enrichment, breach of trust, knowing assistance of breach of trust, knowing receipt of trust funds, and fraudulent and negligent misrepresentation. The factual basis for the plaintiffs’ claim, as set out in the original claim, is summarized below.

[5] The Chiefs Council retained the defendant Aaron Detler to act as their lawyer with respect to proposed development on Haudenosaunee land for the benefit of the Haudenosaunee People. Mr. Detler formed the defendant Haudenosaunee Development Institute (“HDI”), an unincorporated association, the board members of which were the defendants Hazel Hill and Brian Doolittle. The Chiefs Council tasked HDI with the responsibility of receiving applications for development projects on Haudenosaunee land. It was an express or implied term of their agreement that members of HDI, including Mr. Detler, Ms. Hill and Mr. Doolittle, would (among other things) protect the rights and interests of the Chiefs Council and the Haudenosaunee People, and would not act in conflict with their interests. HDI entered into transactions and agreements that were contrary to the interests of the Chiefs Council and the Haudenosaunee People. Mr. Detler, Ms. Hill and Mr. Doolittle created the defendant 2438543 Ontario Inc. (“243”) to purchase Haudenosaunee land and divert funds properly belonging to the Chiefs Council and the Haudenosaunee People. The defendant Elvera Garlow, an associate of Mr. Doolittle, created the defendant Ogwawihsta Dedwahsnye Inc. (“Ogwawihsta”) to divert funds properly belonging to the Chiefs Council and the Haudenosaunee People. The Chiefs Council and the Haudenosaunee people suffered damages as a result of the defendants’ actions.

[6] The original claim was prepared by the plaintiffs’ previous counsel and served on the defendants. The plaintiffs subsequently brought motions seeking class certification and other relief. Those motions had not yet been heard when the plaintiffs decided to change counsel. In August 2017, the plaintiffs retained their current counsel.

B. Relief sought

[7] The plaintiffs now seek leave to amend the original claim before the certification motion is heard. The proposed amendments would vary the original claim in the following respects: (i) correct the names of certain parties in the style of cause and the body of the original claim, rectifying what are essentially typographical errors; and (ii) amend substantive allegations in the body of the pleading, as set out in the draft Fresh as Amended Statement of Claim included in the plaintiffs’ motion record (referred to as the “proposed amended claim”). Among other things, the proposed amended claim includes the following changes to the pleaded causes of action: (i) breach of contract is deleted; (ii) oppression is added; and (iii) the basis for certain other causes of action is recast or expanded.

[8] The court’s authority to grant the requested relief is found in rr. 26.01 and 5.04(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 26.01 provides that the court shall grant leave to amend a pleading on such terms as are just, unless prejudice will result that could not be compensated for by costs or an adjournment. The court also has the discretion under r. 5.04(2) to correct the name of an incorrectly-named party, once again on just terms and with the same exclusion. The court itself may make corrections under r. 5.04(2), rather than granting a party leave to do so.

[9] In this case, there is no dispute that the following parties have been incorrectly named in the style of cause and the original claim: the plaintiff Bill Monture (incorrectly referred to as Bill Mounture), the defendant 2438543 Ontario Inc. (incorrectly referred to as 2438543 Inc.) and the defendant Ogwawihsta Dedwahsnye Inc. (incorrectly referred to as Ogwawihsta Inc.) (emphasis added). The defence has not alleged that any prejudice would result from correcting those errors, nor is there any evidence to suggest that prejudice would arise. Therefore, an order will issue (i) amending the style of cause to correct the names of those three parties, and (ii) granting the plaintiffs leave to amend the original claim to correct those names throughout the pleading. I have already made those changes to the style of cause in these Reasons.

II. Proposed substantive amendments

A. Positions of the parties

[10] The plaintiffs argue that the proposed substantive amendments to the original claim would not result in any non-compensable prejudice to the defendants. As a result, leave to amend is mandated by r. 26.01. According to the plaintiffs, the proposed amendments do no more than (a) provide alternative claims for relief from the facts previously pleaded, (b) amount to different legal conclusions drawn from the same facts, and (c) provide particulars of allegations already pleaded or additional facts upon which the original right of action is based. The plaintiffs also say that the validity of the causes of action pleaded in the proposed amended claim are not subject to challenge for failing to disclose a reasonable cause of action. The plaintiffs also argue that the defence is precluded from challenging the viability of causes of action already pleaded in the original claim, in the absence of a motion to strike those causes of action pursuant to r. 21.

[11] As noted further below, during oral submissions, defence counsel did not challenge the viability of certain causes of action pleaded in the original claim, after obtaining the court’s direction that the defendants would not be precluded for that reason from doing so on the certification motion or a subsequent r. 21 motion. However, defence counsel challenged the viability of what he characterized as new causes of action pleaded in the proposed amended claim, including causes of action referred to in the original claim that he argued are being advanced on a fundamentally different basis in the proposed amended claim. The defence also says that the allegations supporting those causes of action fail to meet the minimum pleading requirements in r. 25.06.

B. Legal principles

[12] The court’s authority to grant the substantive relief the plaintiffs seek is found in r. 26.01. That rule is expressed in mandatory terms. The court is required to grant leave to amend a pleading on just terms in the absence of non-compensable prejudice. In Marks v. Ottawa (City), 2011 ONCA 248, 280 O.A.C. 251, at para. 19, the Court of Appeal interpreted the court’s authority under that rule as follows: “Although the general rule is that amendments are presumptively approved, there is no absolute right to amend pleadings. The court has a residual right to deny amendments where appropriate”. The Court of Appeal then cites previous case law that set out proper factors to be considered on a motion for leave to amend pleadings, including that “[n]o amendment should be allowed which, if originally pleaded, would have been struck.” The court goes on to indicate that a pleading may be stuck on motion under r. 21.01(1)(b) “on the ground that it discloses no reasonable cause of action or defence.”

[13] Citing Marks, the Court of Appeal in 1317424 Ontario Inc. v. Chrysler Canada Inc., 2015 ONCA 104, 330 O.A.C. 195, at para. 7, expanded on the application of that factor when considering a motion to amend a pleading, as follows:

[O]n a motion to amend a pleading under rule 26.01 … [o]ne factor [to consider] is that an amendment will not be allowed if it would have been struck out had it been originally pleaded. Applying the analysis from Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, a claim will be struck out under rule 21.01(1)(b) if it has no reasonable chance of success. See also R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at paras. 20-25.

[14] Citing Hunt at p. 980, the Supreme Court in Imperial Tobacco, at para.17, also provided the following formulation of the test applicable on a motion to strike: “A claim will only be struck if it is plain and obvious, assuming the facts pleaded to be true, that the pleading discloses no reasonable cause of action”.

[15] As well, in Dylex Ltd. (Trustee of) v. Anderson (2003), 36 C.P.C. (5th) 176 at para. 9, Winkler J. (as he then was) stated as follows:

Although the Rules of Civil Procedure R.R.O. 1990 Reg. 194 provide for a liberal approach to amendments to pleadings, it is now settled law that a court should examine proposed amendments to determine if they are tenable at law, rather than merely granting the amendment and thereby inviting a motion to strike to follow in short order. If the amendment is untenable, leave should not be granted.

[16] In Brookfield Financial Real Estate Group Ltd. v. Azorim Canada (Adelaide Street) Inc., 2012 ONSC 3818, 111 O.R. (3d) 580, at para. 24, Brown J. (as he then was) used similar language, concluding that “on a motion to amend a statement of claim, a court will consider the ‘tenability’ of a proposed claim by applying the principles developed under the rule 21.01(1)(b) analysis.”

[17] On a motion to strike a statement of claim under r. 21.01(1)(b), no evidence is admissible: r. 21.01(2)(b). Consistent with Imperial Tobacco, at para. 17, the tenability of the claim is determined based on the facts pleaded in the statement of claim, assuming they are true. However, the court is also entitled to consider documents specifically referred to and relied on in the statement of claim, since they are in effect incorporated into the pleading: see Web Offset Publications Ltd. v. Vickery (1999), 43 O.R. (2d) 802 (C.A.), at para. 3.

[18] As previously noted, in support of the defence position that the proposed amended claim would be struck if leave to amend is granted, defence counsel also argued that the revised allegations fail to meet the minimum pleading requirements in the Rules of Civil Procedure. In particular, every pleading is required to contain a concise statement of the material facts on which the party relies, but not the evidence to prove those material facts: r. 25.06(1). Conclusions of law may be pleaded, but only if the material facts supporting them are pleaded: r. 25.06(2). Where fraud, misrepresentation or breach of trust is alleged, the pleading is required to contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred: r. 25.06(8).

C. Analysis of proposed amendments

[19] In the defendants’ factum, defence counsel took the position that the plaintiffs’ motion should be dismissed in its entirety on the basis that the proposed amended claim fails to disclose any reasonable cause of action and fails to meet the minimum pleading requirements. The defence factum therefore addressed and dismissed as untenable each of the causes of action pleaded in the proposed amended claim, including causes of action and supporting allegations included in the original claim. However, as previously noted, oral submissions proceeded on the basis that the defence was not challenging at this stage the tenability of causes of action advanced in substance in the original claim.

[20] Plaintiffs’ counsel argued that the oppression claim was the only cause of action advanced in the proposed amended claim that was not pleaded in the original claim, but arose from the same pleaded facts. The defence challenged that position, arguing that in substance oppression was not the only new cause of action pleaded. According to defence counsel, the allegations underlying certain other causes of action pleaded in the proposed amended claim were fundamentally different than in the original claim, referring in particular to breach of fiduciary duty, breach of trust, and negligent or fraudulent misrepresentation.

[21] More generally, defence counsel argued that since the plaintiffs recognize the Chiefs Council’s authority to represent the interests of the Haudenosaunee people, the proper party to assert those claims would be the Chiefs Council, rather than the plaintiffs. The defendants say that (i) any duty that they owe would be to the Chiefs Council, not the plaintiffs, and (ii) there is no evidence that the Chiefs Council has taken issue with the defendants’ actions.

[22] In the balance of these reasons, I will address the causes of action pleaded in the proposed amended claim under the headings set out below. In each case, I will address the tenability of the indicated cause of action to determine whether leave should be granted to include the cause of action and supporting allegations in the proposed amend claim.

a. Breach of fiduciary duty b. Breach of trust c. Negligent or fraudulent misrepresentation d. Oppression.

[23] To be clear, I will not be addressing the other causes of action pleaded in the original claim, that is, civil conspiracy, conversion, unjust enrichment, knowing receipt of trust funds, knowing assistance of breach of trust, and directors’ personal liability for acts of the corporation. The viability of those claims will be addressed to the extent appropriate if raised on a subsequent motion.

[24] As well, I do not intend to address defence counsel’s submission that the Chiefs Council rather than the plaintiffs would be the proper party to assert the plaintiff’s claim against the defendants. My concern is that a finding in the defendants’ favour on that issue would be determinative of the viability of all the causes of action pleaded in the proposed amended claim, including those pleaded in the original claim. Proceeding in this way would not be in keeping with the basis upon which the motion hearing was conducted, where the viability of the latter causes of action was left for another time.

a. Breach of fiduciary duty

[25] In paragraphs 37-40 of the proposed amended claim, the plaintiffs allege breach of fiduciary duty against Mr. Detler, Ms. Hill, Mr. Doolittle and Ms. Garlow (referred to collectively as the “individual defendants”). Among other things, the plaintiffs allege that the individual defendants diverted funds belonging to the class members, and used the funds for their personal benefit.

[26] The plaintiffs plead that as directors of 243, Mr. Detler, Ms. Hill and Mr. Doolittle breached their fiduciary duty to act honestly, loyally, in good faith and in the best interests of 243 and its beneficiaries, which precludes the directors from acting in their self-interest (para. 37). In the proposed amended claim, the plaintiffs also make the following statements about 243:

1. The purpose of 243 is only to carry out activities which provide a benefit to the Haudenosaunee People (para. 16);
2. 243 is deemed a charitable corporation under the Charities Accounting Act, R.S.O. 1990, c. C.10, and as such imposes a higher standard of care and fiduciary duty for directors (para. 18);
3. 243 through its directors issued 50 equitable non-transferable shares in trust for the Haudenosaunee People through the Chiefs Council, as set out in a Declaration of Trust in favour of 50 named chiefs, approximately half of whom are deceased or no longer serving as chiefs (paras. 19-20); and
4. The Haudenosaunee People received none of the funds that 243 received purportedly for their benefit (para. 21).

[27] The plaintiffs make similar allegations against Ms. Garlow in her capacity as a director of Ogwawihsta. Ogwawihsta is described as a federal non-for-profit corporation, having the purported purpose of providing financial management and services for Six Nations people (para. 22). The plaintiffs plead (in para. 39) that Ms. Garlow breached her fiduciary duty to act honestly, loyally, in good faith and in the best interests of Ogwawihsta. They also plead that she breached her primary obligation to exercise due diligence in overseeing and managing the corporation and its charitable property, and failed to provide the financial management and services represented to the class members.

[28] In order to place in context the plaintiffs’ claim for breach of fiduciary duty in the proposed amended claim (and the defendants’ objection to it), it is appropriate to indicate the bases for the claim for breach of fiduciary duty in the original claim.

[29] In paragraphs 29-33 of the original claim, the plaintiffs allege breach of contract and breach of fiduciary duty against Mr. Detler, arising out of Mr. Detler’s retainer by the Chiefs Council to act as their lawyer with respect to proposed development on Haudenosaunee land. The plaintiffs state that based on the pleaded facts, (i) upon Mr. Detler’s retainer, there was a fiduciary relationship between Mr. Detler and the Chiefs Council and the Haudenosaunee People, including a duty that Mr. Detler act in good faith for their benefit and not act in a way that would conflict with their interests, (ii) Mr. Detler’s skill, knowledge and advice were relied on, (iii) Mr. Detler breached his duty to the Chiefs Council and the Haudenosaunee People, and (iv) they suffered damages as a result of Mr. Detler’s breach.

[30] In the original claim (paras. 34-39), the plaintiffs also allege breach of fiduciary duty and breach of contract against HDI, arising out of the express or implied terms of its “agency agreement” with the Chiefs Council, under which HDI was charged with the responsibility of receiving and administering applications for development projects on Haudenosaunee land (see also paras. 18-22 of the original claim). The plaintiffs state that based on the pleaded facts, (i) there was a fiduciary relationship between HDI and the Chiefs Council, creating a relationship of trust and confidence with the Chiefs Council and the Haudenosaunee People (ii) the Chiefs Council relied on the skill, knowledge and advice of HDI, (iii) HDI breached its duty to the Chiefs Council and the Haudenosaunee People, and (iv) they suffered damages as a result of HDI’s breach.

[31] The defence argues that the plaintiffs’ claim for breach of fiduciary duty as set out in paras. 37-40 of the proposed amended claim does not disclose a reasonable cause of action. The language used to describe the individual defendants’ duties as directors of 243 and Ogwawihsta generally tracks the wording of s. 134(1) of the Business Corporations Act, R.S.O. 1990, c. B.16 (243’s incorporating statute, referred to as the “OBCA”) and s. 148(1)(a) of the Canada Not-for-profit Corporations Act, S.C. 2009, c. 23, (Ogwawihsta’s incorporating statute), but also includes the duty to act “honestly, loyally, in good faith and in the best interests of the corporation and its beneficiaries” (emphasis added). According to defence counsel, the law is clear that the directors owe a fiduciary duty exclusively to the corporation, not the shareholders or other stakeholders. Defence counsel also argued that the plaintiffs do not plead the factual basis for the directors’ owing a duty to “beneficiaries” or how they are beneficiaries.

[32] Defence counsel also says that the breach of fiduciary duty alleged in the proposed amended claim is fundamentally different than the breach of fiduciary duty alleged in the original claim. In the original claim, the plaintiffs’ claim for breach of fiduciary duty (as well as for breach of contract) is pleaded as arising out of the legal retainer agreement between the Chiefs Council and Mr. Detler and the “agency” agreement between the Chief Council and HDI, the members of which are stated to be Mr. Detler, Ms. Hill and Mr. Doolittle. The defendants say that in the proposed amended claim, the plaintiffs are no longer asserting a breach of contract claim or the related breach of fiduciary duty claim based on the pleaded contractual terms. Rather, the breach of fiduciary claim in the proposed amended claim is explicitly stated as being based on the individual defendants’ duties as directors of 243 and Ogwawihsta. According to defence counsel, the plaintiffs are in effect withdrawing their previous claim for breach of fiduciary duty contained in the original claim.

[33] Focusing narrowly on the plaintiffs’ claim for breach of fiduciary duty as set out in paras. 37-40 of the proposed amended claim, it is apparent that the basis for the claim in those paragraphs is specifically defined as arising from the individual defendants’ duties as corporate directors. However, as explained further below, looking at the proposed amended claim as a whole, it is less than clear that defence counsel is correct in asserting that the plaintiffs have withdrawn their claim against the individual defendants for breach of fiduciary duty arising from the terms upon which they were tasked with administering land development projects.

[34] In para. 1(b) of the proposed amended claim, the plaintiffs claim damages for breach of fiduciary duty and other causes of action from all defendants. The plaintiffs also plead that HDI was tasked with the responsibility of receiving applications of land development projects for the benefit of the Haudenosaunee People (para. 14), and that it was an implied term that members of HDI (specifically Mr. Detler, Ms. Hill and Mr. Doolittle) would carry on activities for the benefit of the Haudenosaunee People and subordinate their own interests (para. 15). Elsewhere in the proposed amended claim, the plaintiffs plead that the defendants acted in breach of their duties, and that the Haudenosaunee People suffered damages as a result.

[35] In any case, for the reasons that follow, I am not persuaded that it is plain and obvious that the plaintiffs’ claim based on breach of fiduciary duty as set out in the proposed amended claim does not disclose a reasonable cause of action.

[36] Defence counsel is correct that the relevant corporate statutes direct directors of a corporation to exercise their powers and discharge their duties with a view to the best interests of the corporation. However, it does not follow that it is plain and obvious that the directors do not owe a duty to affected stakeholders arising from the discharge of their duties as directors. The case law indicates that in determining whether the directors acted in the best interests of the corporation, it is appropriate to consider “all relevant considerations, including, but not confined to, the need to treat affected stakeholders in a fair manner, commensurate with the corporation’s duties as a responsible corporate citizen” (see BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 82).

[37] In para. 37-40 of the proposed amended claim, the plaintiffs in effect plead that the individual defendants owe a fiduciary duty to the Haudenosaunee People as directors of 243 and Ogwawihsta, consistent with the corporations’ purpose to act in the interests of the Haudenosaunee People and for their benefit. They also plead that the individual defendants breached their duty, to the detriment of the Haudenosaunee People. As well, the plaintiffs plead (in paras. 14-15) that Mr. Detler, Ms. Hill and Mr. Doolittle were required to act for the benefit of the Haudenosaunee People and protect their interests as an express or implied term of being tasked by the Chiefs Council with responsibility for receiving and administering land development applications. In these circumstances, reading the proposed amended claim as a whole, I do not agree with defence counsel that the proposed amended claim does not disclose the factual basis for the directors’ owing a duty to “beneficiaries” or how they are beneficiaries, nor do I agree that it is plain and obvious that the plaintiffs’ claim on that ground has no reasonable chance of success.

[38] In her dissenting reasons in Frame v. Smith, [1987] 2 S.C.R. 99 at p. 136, Wilson J. considered the extension of fiduciary obligations to new categories of relationship, in the following terms (subsequently adopted by La Forest J. in Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574 at pp. 645-646):

[T]here are common features discernible in the contexts in which fiduciary duties have been found to exist and these common features … provide a rough and ready guide to whether or not the imposition of a fiduciary obligation on a new relationship would be appropriate and consistent.

Relationships in which a fiduciary obligation have been imposed seem to possess three general characteristics:

(1) The fiduciary has scope for the exercise of some discretion or power. (2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical interests. (3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.

[39] Plaintiffs’ counsel argued that the individual defendants owed a duty to the Haudenosaunee People that was consistent with the foregoing hallmarks of a fiduciary obligation, as indicated in Frame. The plaintiffs say that the facts as pleaded in the proposed amended claim support their position that (i) the individual defendants have such a duty, and (ii) they breached it, to the detriment of the Haudenosaunee People. As indicated in the pleaded facts, the individual defendants had scope to exercise discretionary power in relation to funds intended for development projects on Haudenosaunee land. Their exercise that of power affected the rights of the Haudenosaunee People to benefit from those funds. The vulnerability of the Haudenosaunee People was specifically pleaded and obvious on the face of the proposed amended claim.

[40] In order to determine whether a statement of claim discloses a reasonable cause of action, I am required to read the pleading generously, and not dispose of matters of law at the pleadings stage that are not fully settled in the jurisprudence (see Dylex Ltd. (Trustee of) v. Anderson (2003), 63 O.R. (3d) 659 (S.C.), at para. 8). Applying those principles, I do not consider it plain and obvious, assuming the facts pleaded to be true, that the plaintiffs’ claim based on breach of fiduciary duty has no reasonable chance of success. I am therefore granting the plaintiffs leave to make the amendments set out in the proposed amended claim relating to breach of fiduciary duty.

b. Breach of trust

[41] The plaintiffs’ claim for breach of trust is set out in paras. 49-51 of the proposed amended claim. The plaintiffs plead that (i) the defendants committed breach of trust by unlawfully misappropriating funds properly belonging to class members, (ii) they dealt with the funds for their own benefit and not for the benefit of class members, and (iii) the class members suffered damages as a result. In addition to damages, the plaintiffs also seek an order appointing a new trustee pursuant to ss. 5 and 16 of the Trustee Act, R.S.O. 1990, c. T.23.

[42] As the basis for the trust relationship, the plaintiffs plead that 243 and Ogwawihsta are “charitable companies”, the directors of which are trustees of “restricted charitable property” (para. 49). Also relevant to that issue are paras. 16-24 of the proposed amended claim, relating to the creation of 243 and Ogwawihsta and the role of the individual defendants as directors.

[43] With respect to 243, the plaintiffs plead that: (i) 243 is deemed a charitable corporation under the Charities Accounting Act (para. 18), (ii) 243 through its directors (Mr. Detler, Ms. Hill and Mr. Doolittle) issued 50 equitable non-transferable shares in trust for the Haudenosaunee People, as set out in a Declaration of Trust (paras. 19-20); and (iii) the Haudenosaunee People did not receive any of those funds (para. 21). Similarly, with respect to Ogwawihsta, a non-for-profit corporation, the plaintiffs plead that its director Ms. Garlow, among other things, breached her primary obligation to exercise due diligence in overseeing and managing the corporation and its charitable property, and failed to provide the financial management and services represented to the class members in accordance with purported Ogwawihsta’s purpose (paras. 39).

[44] Defence counsel argued that the breach of trust claim in the proposed amended claim is a new cause of action that was not pleaded in the original claim. While the plaintiffs plead breach of trust in para. 1(b) of the original claim, the basis for the breach of trust claim (as set out in para. 49 of the original claim) is that the defendants hold funds “fraudulently misappropriated from [the Chiefs Council] and the Haudenosaunee People on a resulting and/or constructive trust for their benefit.” There is no express reference to the Charities Accounting Act or the status of 243 and Ogwawihsta as “charitable companies.”

[45] As argued by plaintiffs’ counsel, I recognize that the factual basis for the plaintiffs’ action as pleaded in the original claim, viewed as a whole, is essentially the same as that set out in the revised amended claim, with some refinements. However, I am sympathetic to the defence position that the basis for the breach of trust claim in the proposed amended claim is expressed in markedly different terms than the breach of trust claim in the original claim.

[46] That being said, as was the case with the cause of action of breach of fiduciary duty, no substantive consequence would flow from a determination at this stage that the breach of duty claim as set out in the proposed amended claim raises a new cause of action. For example, nobody has raised a limitation issue as being a relevant consideration in these circumstances. As with the allegation of breach of fiduciary duty, the real issue is whether the proposed amendments asserting the breach of trust claim would be liable to be struck as not being tenable at law.

[47] The defence argues that the proposed breach of trust pleading does not disclose a reasonable cause of action, with the result that leave should not be granted to permit the proposed amendment. The defence says that it is unclear whether the plaintiffs are alleging a charitable purpose trust or an express trust. If they are alleging a purpose trust, no cause of action is disclosed because none of the class members has any equitable entitlement to the trust funds (see Schmidt v. Air Products of Canada Ltd., [1994] 2 S.C.R. 611 at paras. 53-54). If they are alleging an express trust, no cause of action is disclosed because no particulars are pleaded to allow a determination if there is the requisite certainty of intention, certainty of subject matter, and certainty of objects, namely the beneficiaries (see Angus v. Port Hope (Municipality), 2017 ONCA 566, 28 ETR (4th) 169, at para. 95).

[48] In response to the defence position, plaintiffs’ counsel says that the plaintiffs are not claiming a purpose trust, but instead a trust created by the Charitable Accounting Act or in the alternative, an express trust. I agree with plaintiffs’ counsel that it is reasonable to read the plaintiffs’ breach of trust claim in the proposed amended claim in that way.

[49] Subsection 1(2) of the Charitable Accounting Act provides as follows:

Any corporation incorporated for a religious, educational, charitable or public purpose shall be deemed to be a trustee within the meaning of this Act, its instrument of incorporation shall be deemed to be an instrument in writing within the meaning of this Act, and any real or personal property acquired by it shall be deemed to be property within the meaning of this Act.

[50] Previous case law has cited that provision to support the conclusion that a corporation incorporated for a charitable purpose (as 243 is pleaded to be) had elements of the character of a trustee and was responsible to account as a trustee or fiduciary for funds it received in furtherance of that purpose (see Ontario (Public Guardian and Trustee) v. AIDS Society for Children (Ontario) (2001), 39 E.T.R (2d) 96 (S.C.), at paras. 20-22 and 28, citing Re Public Trustee and Toronto Humane Society et al. (1987), 60 O.R. (2d) 236 (H.C.), at p. 243).

[51] As well, I agree with plaintiffs’ counsel that the Declaration of Trust referred to in the proposed amended claim (para. 19) provide some support for the three certainties of a trust, that is: certainty of intention (see also para. 16, which states as 243’s purpose “to carry out activities which provide a benefit to the Haudenosaunee People); certainty of subject matter (see also paras. 35-26, with respect to Land Lease Agreements and Other Projects on Haudenosaunee land giving rise to fund that plaintiffs allege the defendants used for their personal benefit); and certainty of objects (ascertainable from the Declaration of Trust, which identifies the beneficiaries as the Haudenosaunee People – see paras. 19-20).

[52] I also note that in large measure, the defendants created the documents upon which the plaintiffs rely in support of the trust relationship, including the Declaration of Trust and the incorporating and other documents relating 243 and Ogwawihsta. I agree with plaintiffs’ counsel that it would be appropriate to consider the efficacy of those documents at the evidentiary stage of the proceedings, not at the pleading stage.

[53] Accordingly, as was the case with the claim based on breach of fiduciary duty, on a generous reading of the proposed amended claim and assuming the facts pleaded to be true, I have concluded that it is not plain and obvious that the plaintiffs’ claim based on breach of trust has no reasonable chance of success. I am therefore granting the plaintiffs leave to make the amendments set out in the proposed amended claim relating to breach of trust.

c. Negligent or fraudulent misrepresentation

[54] In paragraph 1(b) of the proposed amended claim, the plaintiffs allege “negligent and/or fraudulent misrepresentation” to support their damages claim against the defendants. The plaintiffs also allege “fraudulent misrepresentation” and “negligent misrepresentation” in paragraph 1(c) of the original claim.

[55] To establish the tort of negligent misrepresentation, the plaintiffs must establish the following elements, as articulated by the Supreme Court of Canada in Queen v. Cognos Inc., [1993] 1 S.C.R. 87 at p. 110:

(1) [T]here must be a duty of care based on a "special relationship" between the representor and the representee; (2) the representation in question must be untrue, inaccurate or misleading; (3) the representor must have acted negligently in making the misrepresentation; (4) the representee must have relied, in a reasonable manner, on the negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted.

[56] In order to establish the alternative cause of action of fraudulent misrepresentation, the plaintiffs bears a heavy onus. Rather than establishing that the representor acted negligently in making the misrepresentation, the plaintiffs must establish that the representor made the false representation either: (i) knowing it to be false, (ii) without belief in its truth, or (iii) recklessly, careless as to whether it is true or false (see Derry v. Peek (1889), 14 A.C. 337 (H.L.), at p. 374, cited with approval in Bruno Appliance and Furniture Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 26, at paras. 18-19). In Bruno at para. 21, the Supreme Court of Canada summarized the jurisprudence on civil fraud in the following terms:

From this jurisprudential history, I summarize the following four elements of the tort of civil fraud: (1) a false representation made by the defendant; (2) some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness); (3) the false representation caused the plaintiff to act; and (4) the plaintiff’s actions resulted in a loss.

[57] The basis for the plaintiffs’ claim from negligent or fraudulent misrepresentation is addressed in paragraphs 41-48 of the proposed amended claim, which may be summarized as follows:

1. The directors of 243 and Ogwawihsta have a duty to the corporation and its beneficiaries, the class members. The directors breached the required standard of care in carrying out their duties (paras. 43-44). As directors of charitable corporations, 243’s directors are subject to a higher duty of care obligations with regard to charitable property (para. 43).
2. The defendants made a number of representations that were untrue, inaccurate and/or misleading, in particular, that (i) HDI and its directors would ensure that the rights of the Haudenosaunee People were protected, (ii) HDI would fully account to the Haudenosaunee People for the funds received and used, (iii) HDI would report to the Chiefs Council and the Haudenosaunee People with respect to the Land Use Agreements, preservation of treaty rights and the status of each project, (iv) 243 was incorporated to carry on activities which benefit the Haudenosaunee People, and (v) Ogwawihsta was incorporated to fund community projects and provide financial management and service for the Haudenosaunee People (para. 45).
3. The defendants acted negligently and/or fraudulently in making those representations (para. 46).
4. The plaintiffs relied in a reasonable manner on the misrepresentations (para. 47). Based on the special relationship between the plaintiffs and the defendants, it was reasonably foreseeable that the plaintiffs would rely on the representations, and reliance was reasonable in the circumstances (para. 42).
5. The plaintiffs relied on the defendants’ misrepresentations to their detriment and damages resulted (para. 48).

[58] The defence again argues that the misrepresentation claim in the proposed amended claim is a “new” cause of action not pleaded in the original claim. As noted by plaintiffs’ counsel, the plaintiffs in fact pleaded fraudulent and negligent misrepresentation in the original claim. However, there is no parallel to paragraphs 41-48 of the proposed amended claim, in which the plaintiffs address the basis for the misrepresentation claim. In these circumstances, as a threshold issue, I am prepared to consider defence submissions as to the tenability of the misrepresentation claim.

[59] The defence argues that the proposed amended claim fails to plead material facts on which the plaintiffs rely to establish the elements of a misrepresentation claim. In particular, the proposed amended claim does not: (i) specify which defendant made the representations, when they were made, to whom they were made, or whether the plaintiffs altered their position as a result of them; or (ii) contain material facts that establish a special relationship between the plaintiffs and the defendants alleged to have made the representations (see Deep v. M.D. Management (2006), 13 B.L.R. (4th) 193 (Ont. Div. Ct.), at paras. 4-5). The defence also says that the pleaded misrepresentations constituted an alleged promise to do something in the future, which does not give rise to a cause of action unless it is a binding contract (see Culligan Real Estate Ltd. v. 1336459 Ontario Ltd., [2005] O.J. No. 5068 (S.C.), at para. 7). As well, the defence argued that the consequence of failing to plead the required level of material facts should be to refuse to allow the proposed amendment rather than addressing any deficiently in a subsequent demand or motion for particulars (see Deep v. M.D. Management (2007), 35 B.L.R. (4th) 86 (C.A.), at para. 9 (iv)).

[60] I agree with the defence that requiring additional particulars is not an appropriate remedy to cure a fatally deficient pleading. However, having considered the defence submissions, I am not persuaded that it is plain and obvious that the plaintiffs’ claim based on negligent or fraudulent misrepresentation as set out in the proposed amended claim does not disclose a reasonable cause of action.

[61] In my previous consideration of the claims based on breach of fiduciary duty and breach of trust, I have already addressed the nature of the duty owed to the class members as pleaded in the proposed amended claim. Consistent with my previous conclusions, I find the pleaded material facts (assuming they are true) to be sufficient to establish to a “special relationship” to the extent required for a misrepresentation claim.

[62] With respect to the other elements of a misrepresentation claim, I consider the pleadings to be sufficient to comply with r. 25.06, including the requirement “material facts” requirement in r. 25.06(1) and the “full particulars” requirement in r. 25.06(8). In the proposed amended claim, the plaintiffs have addressed the various essential elements of a misrepresentation claim. The proposed amended claim sets out the particular representations alleged to be untrue. It also pleads the defendants’ alleged fraudulent or negligent conduct and the plaintiffs’ reasonable reliance and resulting loss. It is not necessary at this stage to plead the supporting evidence. While certain alleged misrepresentations relate to the future, case law indicates that such representations may form the basis for a misrepresentation claim “if they import by implication misstatements of existing facts” (Deep, Court of Appeal decision, at para. 14; see also Singh v. Trump, 2015 ONSC 4461, 47 B.L.R. (5th) 268, at para. 214, rev’d on other grounds 2016 ONCA 747, 408 D.L.R. (4th) 235).

[63] Accordingly, on a generous reading of the proposed amended claim and assuming the facts pleaded to be true, I have concluded that it is not plain and obvious that the plaintiffs’ claim based on negligent or fraudulent misrepresentation have no reasonable chance of success. I am therefore granting the plaintiffs leave to make the amendments set out in the proposed amended claim relating to negligent or fraudulent misrepresentation.

d. Oppression

[64] In para. 1(b) of the proposed amended claim, the plaintiffs allege “oppression” to support their damages claim against the defendants. The plaintiffs did not plead oppression as a remedy in the original claim.

[65] As outlined further below, the basis for the oppression claim is set out in more detail in paras. 59-64 of the proposed amended claim. During oral submissions, plaintiffs’ counsel clarified the intended scope of the oppression claim. Paragraph 59 pleads that the plaintiffs are “proper complainants” within the meaning of s. 245 of the OBCA and s. 218 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (the “CBCA). 243 is an Ontario corporation incorporated under the OBCA. Ogwawihsta is a federal corporation, but was incorporated under the Canada Not-for-profit Corporations Act, not the CBCA. None of the other defendants are corporate entities. Accordingly, Plaintiffs’ counsel confirmed during oral submissions that the proposed oppression claim was under the OBCA only.

[66] The oppression remedy is set out in s. 248 of the OBCA. Under s. 248, where a “complainant” (as defined in s. 245) establishes that the affairs of a corporation are, have been or are threatened to be carried out in a manner that is “oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of.”

[67] Section 245 provides that a “complainant” who may bring an oppression application includes the following:

(a) a current or former registered holder or beneficial owner of a security of a corporation or any of its affiliates, (b) a current or former director or officer of a corporation or any of its affiliates, and (c) any other person who, in the discretion of the court, is a proper person to make an application.

[68] If the court is satisfied that oppressive conduct has occurred, the court has the broad power under s. 248(3) to make “any interim or final order it thinks fit”, including “an order compensating an aggrieved person” (para. 248(3)(j)).

[69] The leading case on the oppression remedy is the 2008 Supreme Court of Canada decision in BCE. In that case, the court indicated that on an oppression application, the court must first determine the reasonable expectations of the claimant in the particular circumstances. In that regard, the claimant must identify the expectations claimed to have been violated and establish that the expectations were reasonably held. Secondly, the court must determine whether the reasonable expectations were violated by conduct which was oppressive, unfairly prejudicial or unfairly disregarding a relevant interest (see in particular BCE at para. 68).

[70] In the proposed amended claim, the plaintiffs plead the following: (i) they are proper complainants (para. 59), who had a reasonable expectation about the manner in which the funds of the Haudenosaunee People would be used and how HDI would distribute the funds (para. 60); (ii) they reasonably relied on and expected the defendants to protect the rights of the class members, but instead, the defendants misappropriated the funds (para. 61); (iii) the defendants’ wrongful conduct was oppressive, unfairly prejudicial and unfairly disregarded the interests of the class member (para. 63), and (iv) the plaintiffs suffered damages caused by the oppressive acts.

[71] The defence argues that it is plain and obvious that the plaintiffs’ oppression claim does not disclose a reasonable cause of action. In particular, the defence says that the plaintiffs did not plead any material facts to support their statement that they had a reasonable expectation about the manner in which the funds would be used and how HDI would distribute them. Based on the facts pleaded in the proposed amended claim, the plaintiffs’ short answer to that argument (which I accept) is that they reasonably expected that the funds would be used for the benefit of the Haudenosaunee People, rather than misappropriated for the benefit of the defendants.

[72] More fundamentally, the defence argues that the plaintiffs plead nothing that puts them in any of the categories of “security holder, creditor, director or officer”, the potential aggrieved persons for whom the oppression remedy is intended to provide a remedy, as set out in s. 248(2) of the OBCA. On a similar basis, the defence also says that the plaintiffs failed to plead any basis to support their status as complainants (as defined in s. 245) who would be entitled to bring an oppression claim (as opposed to benefiting from it). As well, the defence argues that in circumstances where the claimants allege harm to a collectivity of stakeholders rather than the claimants’ individual interests, the claim ought to proceed by way of derivative action on behalf of the corporation, not by way of an oppression remedy.

[73] Having considered the defence submissions, I am not persuaded that it is plain and obvious that the plaintiffs’ claim based on oppression as set out in the proposed amended claim does not disclose a reasonable cause of action.

[74] In support of his submission that the plaintiffs failed to plead any basis to support their status as potential aggrieved persons (that is, as “security holder, creditor, director or officer“), defence counsel relied on Joncas v. Spruce Falls Power & Paper Co. (2000), O.R. (3d) 179 (S.C.), at para. 36. In that case (at para. 36), the court indicated as follows:

[R]easonable expectations must derive from corporate conduct affecting a protected category of person: namely, a creditor, director, officer or security holder. To be considered a security holder, a putative complainant must either be a registered owner or at the least a beneficial owner. I agree that "beneficial owner" should be interpreted broadly. Nevertheless, a putative complainant must have a legal right to become a shareholder before it can be asserted that the person is a "beneficial owner". Reasonable expectations must be tied to legal or equitable rights as a security holder, whether as a registered owner or as a beneficial owner. It is not enough to simply have reasonable expectations to become a shareholder based upon a general sense of fairness.

[75] Relying on Joncas, defence counsel argues that there is nothing in the proposed amended claim to indicate that the plaintiffs are either registered or beneficial security holders of 243. To be considered a “beneficial owner”, there must be a legal right to become a security holder. Defence counsel says that there is nothing in the proposed amended claim to indicate that plaintiffs have that legal right.

[76] I disagree with that analysis.

[77] In Joncas, the proposed claim arose from a proposed corporate reorganization, in which a new class of shares were gifted to employees who met certain eligibility criteria. The oppression claim was brought on behalf of employees who were excluded from the eligibility criteria. In that context, the court held since the complainants did not have the legal right to be either a registered or beneficial owner, they did not qualify as beneficial owners to bring an oppression claim. They could not qualify based on reasonable expectations alone.

[78] In my view, the result in Joncas is clearly distinguishable. As set out in paras. 19-21 of the proposed amended claim, the directors of 243 issued 50 equitable non-transferable shares in trust for the Haudenosaunee People through the Chiefs Counsel. Assuming that to be true (as I am required to do), it is not plain and obvious to me that the proposed class members are not beneficial owners of those 243 shares who qualify under s. 248 of the OBCA as “a protected category of person: namely, a … security holder” (Joncas at para. 36). As beneficiaries of that trust, the proposed class members would already be beneficial owners of 243 shares. They would not be relying on “reasonable expectations” to give them that status.

[79] The same analysis also provides an answer to the defendants’ submission that the plaintiffs failed to plead any basis to support their status as proper complainants as defined in s. 245 of the OBCA who would be entitled to bring an oppression claim. As beneficiaries of the trust, the plaintiffs would qualify as proper complainants as beneficial owners of 243 shares. In any case, the court would have the discretion under s. 245(c) to accept the plaintiffs as proper complainants for this purpose, based on the facts pleaded in the proposed amended claim.

[80] Turning now to the defence objection that the plaintiffs’ oppression claim ought to proceed by way of derivative action rather than an oppression claim, to support that position, the defence cited the Ontario Court of Appeal decision in Rea v. Wildeboer, 2015 ONCA 373, 126 O.R. (3d) 178, at paras. 33-36. However, my reading of that decision is that it supports the opposite position, that is, the plaintiffs’ remedy (to the extent there is one) would be an oppression claim rather than a derivative action.

[81] In Rea at paras. 18-19, the court draws a distinction between a derivate action (properly brought “for wrongs done to the company itself”) and the oppression remedy (properly brought “to recover for wrongs done to the individual complainant” resulting from oppressive conduct that adversely affects the complainant’s interests). The court indicates (at para. 18) that after obtaining the leave of the court, a derivative action is brought “in the name of or on behalf of a corporation … for the purpose of prosecuting, defending or discontinuing the action on behalf of the body corporate”, quoting s. 246 of the OBCA. By contrast, an oppression claim is a “personal claim”, brought by the individual complainants, without the need for prior leave.

[82] In Rea, the proposed oppression claim related to alleged wrongful acts of the corporation’s directors that the claimants said resulted in the misappropriation of corporate funds. In para. 33, the court indicated for an oppression claim, “the impugned conduct must harm the complainant personally, not just the body corporate, i.e., the collectivity of shareholders as a whole” (emphasis added). In context, the distinction the court was drawing related to a corporation’s status as “a legal entity distinct from its shareholders” (see Rea at para. 15, emphasis added). In my view, the court was saying that it is not appropriate for a complainant qua shareholder to bring an oppression claim for an alleged wrong that affects all shareholders the same way. That type of claim is more properly advanced by way of derivative action by or on behalf of the corporation itself, consistent with the corporation’s legal existence separate from its shareholders.

[83] Applying the rationale in Rea to the present case, I have concluded the oppression claim that the plaintiffs advance is a “personal claim” on behalf of the proposed class members, rather one that would be properly advanced on behalf of the corporation by way of a derivative action. The proposed oppression claim relates to alleged oppressive conduct affecting the proposed class members personally as beneficiaries of a trust in their favour. In my view, these circumstances indicate an oppression claim rather than derivative action. Since the claim is being advanced in the context of a proposed class action, it may be considered to be a “collective” claim in that sense. However, I see no basis for concluding that the proposed class members could properly be considered to be the collective “alter ego” of the corporation such that a derivative action would be the appropriate way to proceed.

[84] Accordingly, on a generous reading of the proposed amended claim and assuming the facts pleaded to be true, I have concluded that it is not plain and obvious that the plaintiffs’ oppression claim would have no reasonable chance of success. I am therefore granting the plaintiffs leave to make the amendments set out in the proposed amended claim relating to oppression, except that the reference to s. 238 of the CBCA in paragraph 59 of the proposed amended claim shall not be included.

V. Conclusion

[85] For the foregoing, an order will issue in the following terms:

1. The style of cause is amended to make the following corrections: a. Change the name of the plaintiff Bill Mounture to Bill Monture; b. Change the name of the defendant 2438543 Inc. to 2438543 Ontario Inc.; and c. Change the name of the defendant Ogwawihsta Inc. to Ogwawihsta Dedwahsnye Inc.
2. The plaintiffs are granted leave to amend the Statement of Claim dated August 15, 2016 (i) to correct the names of the parties as set out in paragraph 1 of this order, and (ii) as otherwise set out in the draft Fresh as Amended Statement of Claim attached to the Plaintiffs Motion Record, except that the reference to s. 238 of the CBCA in paragraph 59 thereof shall not be included.
3. Costs of this motion shall be determined based on written submissions.

[86] If the parties cannot agree on costs, each party may serve and file brief written submissions (not to exceed three pages) together with a costs outline within 21 days. Each party may reply by brief written submissions within seven days. All such submissions are to be forwarded to the Trial Coordinator in Hamilton and to me at 59 Church Street, 4th Floor, St. Catharines ON L2R 7N8. If no submissions are received within the specified timeframe, the parties will be deemed to have settled costs.

The Honourable Mr. Justice R.A. Lococo Released: September 12, 2018