Court File and Parties
Court File No.: CV-18-597036 (Toronto) Motion Heard: 2018 09 21
Superior Court of Justice - Ontario
Re: Jacob Shavit v. Top Aces Holdings Inc., Top Aces Inc. and Top Aces Corp.
Before: Master R.A. Muir
Counsel: Arlen K. Sternberg and Irfan Kara for the defendants/moving parties Michael D. Wright and Alex St. John for the plaintiff/responding party
Reasons for Decision
[1] This is a motion brought by the defendants for an order striking out several paragraphs of the plaintiff’s statement of claim. The motion is brought pursuant to Rule 25.11 of the Rules of Civil Procedure, RRO 1990, Reg. 194 (the “Rules”). The defendants argue that the impugned paragraphs do not comply with the rules of pleading as set out in Rule 25.06(1) because they are irrelevant and therefore scandalous. The plaintiff opposes the relief sought by the defendants.
Background
[2] This action involves a claim by the plaintiff against several corporate entities that he now alleges were his former employers. His claim is based on the common employer doctrine. The plaintiff’s written contract of employment was entered into with a now insolvent corporation known as Discovery Air Inc. (“Discovery Air”). However, the plaintiff alleges that the defendants in this action are corporations related to or otherwise closely connected with Discovery Air and were therefore also his employers based on the common employer doctrine.
[3] The plaintiff was terminated from his employment without cause in August 2017. The plaintiff thereafter received severance payments and benefits until the insolvency of Discovery Air in March 2018. However, 17 months of severance payments and benefits remain owing to the plaintiff pursuant to his severance agreement.
The Common Employer Doctrine
[4] The common employer doctrine recognizes that in certain circumstances it is possible for an employee to have more than one employer. In order to establish such a claim, an employee must demonstrate that he or she had a reasonable expectation that the named defendants were each a party to his or her employment contract. This determination is a question of fact. The court must determine who was in control of the plaintiff’s employment relationship and whether there was an intention to create an employee/employer relationship. [1]
[5] Among the factors the court will consider are who was in control of the employee, whether any particular person or entity acknowledged the plaintiff as an employee, the existence of an employment contract, who the employee performed services for and the level of integration of the various alleged employers. [2]
The Test Under Rule 25.11
[6] Rule 25.11 provides as follows:
The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,
(a) may prejudice or delay the fair trial of the action;
(b) is scandalous, frivolous or vexatious; or
(c) is an abuse of the process of the court.
[7] Rule 25.06(1) provides that every pleading shall contain a concise statement of the material facts upon which a party intends to rely in support of his claim or defence.
[8] The principles applicable to this motion can be summarized as follows:
- unnecessary paragraphs should be struck so as to refine and focus the pleading; [3]
- a pleading cannot be scandalous if it is relevant to a matter in issue; [4]
- a court may strike out portions of a pleading, even where the allegations are relevant, if the moving party can establish that the portion in question is of marginal probative value which is outweighed by the pleading’s prejudicial effect; [5]
- the power of the court to strike out a portion of a relevant pleading should be exercised with considerable caution. [6]
[9] These are the principles I have applied in determining the issues on this motion. I have carefully reviewed each of the paragraphs to which the defendants object and have considered the arguments of the parties. In my view, most of the impugned paragraphs are proper and should not be struck from the statement of claim.
The Impugned Paragraphs
[10] The paragraphs the defendants seek to strike from the statement of claim have been separated into three categories:
(a) the plaintiff’s employment qualifications and performance as an employee;
(b) the relative value of Discovery Air and the defendant corporations along with details of various contracts and ventures entered into by these corporations;
(c) various events and corporate transactions entered into by these corporations after the plaintiff’s employment had ended, including the events leading up to Discovery Air’s insolvency.
[11] I agree with the defendants that the portions of the pleading that make allegations solely with respect to the plaintiff’s qualifications and job performance are not relevant and should be struck. The plaintiff was not dismissed for cause. His suitability and performance on the job are not a matter in issue in this proceeding. They are not relevant to the common employer determination. Those matters will have no impact on the outcome of this action.
[12] The plaintiff has agreed to make certain amendments to paragraphs 5 and 7 of the statement of claim that attempt to address this issue. The defendants concede that the proposed amended version of paragraph 5 of the statement of claim is now a proper pleading. However, the defendants maintain their objection to paragraph 7.
[13] I agree with the defendants with respect to paragraph 7. For the most part, that paragraph of the statement of claim simply sets out the fact that the plaintiff was a hard worker and was very successful in his role as a Discovery Air executive. These facts are simply not relevant to the issues in this action. A finding that the plaintiff did his job well and worked long hours will not assist the court in deciding whether or not the defendants were the plaintiff’s employers. Paragraph 7 of the statement of claim shall be struck out. To the extent that paragraph 7 describes the work done by the plaintiff, and for which corporate entities, the plaintiff shall have leave to amend the statement of claim to plead those facts.
[14] In my view, the remaining impugned paragraphs are proper and need not be struck out. It is clear from the authorities that the corporate structure and operations of the alleged employers is a relevant consideration in a common employer claim. The case law requires a court, as part of the common employer analysis, to look at the integration of the various corporate entities, whether there are common shareholders and directors and the employee’s involvement with and relationship to the alleged employers. In my view, these are precisely the issues that the impugned portions of paragraphs 8, 13 and 14 are intended to address.
[15] Paragraph 8 deals with what the plaintiff did while employed by Discovery Air and which corporate entities were involved and may have benefited from his work. These facts are directly relevant to the issue of the work performed by the plaintiff and for whom that work was carried out. The drafting of the paragraph may not be perfect but it does not need to be. Some latitude must be given to a party at the pleadings stage in order for him or her to present a coherent narrative. Some facts of marginal probative value will almost invariably be included. In my view, there is nothing improper about that. A court hearing a pleadings motion should not engage in an exercise that amounts to determining the admissibility of evidence at trial. [7]
[16] The defendants object to the use of the phrase “which was the most valuable subsidiary” in paragraph 13 of the statement of claim. This allegation refers to the defendant Top Aces Inc. In my view, this fact may be relevant to the question of whether Discovery Air and the defendants arranged their affairs in a manner that frustrated the plaintiff’s ability to collect his severance payments. The common employer doctrine was developed, in part, to protect employees from unfairness that may result from inter-corporate and other business arrangements and transactions that may leave a dismissed employee without a remedy. [8]
[17] In my view, the impugned portions of paragraphs 14, 15, 19, 20 and 21 are relevant for the same reasons. The parts of those paragraphs under attack all deal with the organization and operation of the defendants’ business activities both before and after the plaintiff was terminated. The defendants acknowledge that these facts are relevant insofar as they relate to events during the time of the plaintiff’s employment but object to allegations relating to events after the plaintiff was terminated. In my view, the post-termination events are relevant and may have some probative value in respect of the court’s determination of who was the plaintiff’s employer or employers. The plaintiff was receiving severance payments in the months following his termination and up to the insolvency of Discovery Air. The organization of the defendants’ business activities after the plaintiff’s employment, and the subsequent insolvency of Discovery Air, may have affected his ability to collect his severance. This appears to be an example of the type of unfairness addressed by the common employer doctrine, based on the Court of Appeal’s decision in Downtown Eatery (1993) Ltd. v. Ontario, [2001] OJ No. 1879 (CA). In fact, the Court of Appeal considered post-employment evidence of a similar nature to that pleaded by the plaintiff is this action in reaching its decision in Downtown Eatery. [9] I also note that the plaintiff has made allegations with respect to other post-employment events in paragraphs 22 and 23 of the statement of claim that the defendants do not seek to strike.
[18] Finally, I see no significant prejudice to the defendants if these allegations remain in the statement of claim. The discovery process will be expanded to a certain degree but post-employment events will be part of the discovery process in any event. I also note that the plaintiff is claiming significant damages. The principle of proportionality supports a finding that allows the plaintiff some latitude on discovery to explore facts that may be relevant to determining who his employer was. Of course, the fact that these allegations are permitted to stand as part of the statement of claim does not mean that they will be relevant or admissible at trial.
Conclusion
[19] The power to strike out relevant portions of a pleading must be exercised with caution. A pleadings motion is not the place for the court to prune and limit a party’s allegations, except in the clearest of cases. For the reasons set out above, it is my view that the majority of the impugned portions of the plaintiff’s pleading are relevant and may be of some probative value at trial. These allegations should not be summarily shut down at this stage of this proceeding. They must be allowed to stand.
Order
[20] I therefore order as follows:
(a) paragraph 7 of the statement of claim is struck out with leave to the plaintiff to amend the statement of claim to plead facts describing the work done by the plaintiff and for which corporate entities the work was done;
(b) the plaintiff is hereby granted leave to amend his statement of claim in accordance with the proposed amended paragraph 5 of the statement of claim at Appendix “A” of his factum;
(c) the balance of the relief sought on this motion is dismissed; and,
(d) if the parties are unable to agree on the issue of the costs of this motion, they shall provide the court with brief submissions in writing by November 5, 2018.
Master R.A. Muir
DATE: 2018 10 03