Court File and Parties

COURT FILE NO.: CV-18-596632587147 DATE: 20181005 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: GREAT OAK VFA INC., Plaintiff/Responding Party AND: S&T ACCOUNTING PROFESSIONAL CORPORATION, DMITRY TYULENYEV, and IVAN SEMENOV., Defendants/Moving Parties

BEFORE: Justice S. Nakatsuru

COUNSEL: Thomas Kurys, for the Defendants/Moving Party Matthew Diskin and Meredith Bacal, for the Plaintiff/Responding Party

HEARD: October 3, 2018

Endorsement

[1] The defendants bring a motion under rule 21.01(1) to strike portions of the statement of claim of the plaintiff. They move to strike:

• The claim against the defendant Tyulenyev;
• The claim for passing off; and
• The claim for unlawful interference with the plaintiff’s economic relations.

[2] The test on such a motion is that the defendant must demonstrate that it is plain and obvious that the statement of claim fails to disclose a cause of action and there is no reasonable prospect of success: Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42 at para. 17. When considering such a motion, I am to assume the facts pleaded are true unless the facts are manifestly incapable of being proven. Leave to amend will not be permitted when it is plain and obvious that no tenable cause of action is possible on the facts alleged: Conway v. L.S.U.C., 2016 ONCA 72, [2016] O.J. No. 451 (C.A.).

A. The claim against the defendant Tyulenyev

[3] I am not satisfied that the claim against Tyulenyev should be struck. In looking at the pleadings generously, I find that sufficient material facts are made out to support the claim against Tyulenyev. It is submitted that it is plain and obvious that the claims of copyright infringement and interference with economic relations against Tyulenyev must fail. The essence of the argument made by the moving parties is that S & T is a corporation, Semenov is its sole officer and director, and that Tyulenyev as such did not and could not authorize or have any control of the alleged wrongful actions against the plaintiff. In my view, a number of material facts supporting the claim have been pleaded that supports a reasonable prospect of success despite this. This includes the fact that Tyulenyev is a founder of S & T, the “T” in the name refers to him, and that he is responsible for S & T’s marketing and business development. It is in this context that the totality of the claim must be assessed. In particular, it is pleaded that Tyulenyev along with Semenov and the corporate defendant approached clients of the plaintiff for the preparation of reports that substantially reproduce and appear to be authorized by the plaintiff in order to divert clients to them rather than the plaintiff. It is further pleaded that Tyulenyev’s representation were false and misleading in that they represented S & T’s services as affiliated with the plaintiff, Great Oak. In this context, it is pleaded that he authorized, directed and participated in this copyright infringement. This statement of claim could be compared to a case where an employee of a corporation is alleged to be responsible for a copyright infringement by the mere fact of employment with a corporation. Such is not the case here. In short, it is pleaded that Tyulenyev was significantly and personally responsible for and directly participated in the acts that are complained of by the plaintiff.

[4] I find that these material facts support the claim that Tyulenyev authorized the copyright infringement. I appreciate that he is not a directing mind of the corporation, but personal liability will suffice. It is not only the officers and directors of corporate defendants who can be found liable; liability very much depends upon the findings made at trial regarding authorization, control, knowledge, and participation: Louis Vuitton Malletier SA v. 486353 B.C. Ltd, 2008 BCSC 799; Microsoft Corp. v PC Village Co., 2009 FC 401; Lainco Inc. v. Commission scolaire des Bois-francs, 2017 FC 825.

[5] A similar argument is made on behalf of Tyulenyev in terms of a motion to strike the tort of interfering with economic relations. For similar reasons, that motion is dismissed.

B. The claim for passing off

[6] The defendants submit that two of the requirements for the claim of passing off have not been met: a) the existence of goodwill in the goods or services which the plaintiff supplies; and b) actual or potential damage to the plaintiff.

[7] Let me deal with the last point. The plaintiff has set out the damages it is seeking. It has further provided material facts about the nature of that damage. That damage being the loss of potential business as clients were diverted to S & T because S & T was passing itself off as the plaintiff. Both actual damages and “potential” damages fall within the tort. I find that it is not plain and obvious this claim will fail on the basis that the claim does not set out any material facts supporting the suffering of damages. I find it has. The fact it cannot at this early stage of the action particularize the quantum of the damages does not show the claim has no reasonable prospect of succeeding.

[8] The first point is more problematic. The plaintiff’s position is that it has “goodwill in its style and content” of the reports that it prepares. I disagree that insufficient facts have been pleaded in this regard. The plaintiff has pleaded how much time and effort it spent in the preparation and branding of the reports and how it is used to establish significant goodwill in the reports amongst its clients who rely upon them. It has also attached as an appendix, portions of the style and content of its report and contents of a report used by S & T in trying to solicit clients of the plaintiff. In other words, there is a body of facts pleaded to establish goodwill in style and content of the reports.

[9] However, in my view, whether the style and content of a written report of this nature can be recognized as a “get-up” as defined in the law is a different matter: Ciba-Geigy Ltd. v. Apotex Inc., 1992 SCC 33, [1992] 3 S.C.R. 120. There is a serious question whether it fits within the concept of a “get up” which is defined as the appearance of a product that plays a crucial role in the purchase of that product. The plaintiff’s claim is a novel position, as conceded in oral argument, with potentially wide ramifications if recognized.

[10] However, after some thought, I have concluded that the claim for passing off should not be struck for this reason. It is not determinative on a motion to strike that the law has not yet recognized a particular claim or that the claim is novel: Paton Estate v. Ontario Lottery and Gaming Corp., 2018 ONCA 458 at para. 12, 48. As noted by the court in that case, a pleadings motion is not a summary judgment motion. The common law evolves by permitting litigation of novel claims provided it is not certain to fail and the requisite material facts are pleaded. Here, the defendants have not shown the claim has no reasonable prospect of success. I find that sufficient material facts have been pleaded to support it.

C. The claim for unlawful interference with the plaintiff’s economic relations

[11] The defendants submit that the pleadings do not establish a reasonable cause of action for the tort of unlawful interference with economic relations by failing to plead material facts that show a) an intention by the defendants to injure the plaintiff, and b) the defendants’ interference with the plaintiff’s economic interests are done by unlawful means against a third party, for which the third party could bring an action if it suffered damages: AI Enterprises v. Bram Enterprises Ltd, 2014 SCC 12 at para. 23.

[12] Let me deal with the first point. It is true that the statement of claim does not specifically plead that the defendants intended to injure the plaintiff. The law establishes that an incidental harm caused by the defendant even where the defendant knows it is extremely likely that harm to the plaintiff may result, does not suffice for the tort. Intentional targeting of the plaintiff is required. However, a subjective intention is commonly proven by circumstantial evidence as seldom there is direct evidence of such an intention. In this case, what is pleaded is that the defendants did specifically target the plaintiff. It is not being pleaded that the defendants’ economic activity for its own benefit was based upon a broader marketplace strategy such as simply copying the plaintiff’s reports. It is pleaded that in December 2017, the defendants specifically approached firms that referred claimants to the plaintiff for the preparation of reports. They did so with marketing materials that was false or misleading by affiliating S & T’s service as those of the plaintiff’s. They used a report that reproduced the look, feel, organization, and layout of the plaintiff’s reports as a part of S & T’s campaign to drive the plaintiff’s clients to S & T. Based on these facts, it is not a great leap to infer an intention on the part of the defendants to injure the plaintiff. At this stage of the action, a more detailed pleading about the intent of the defendants is not required: Paton Estate at para. 47. I note parenthetically that if this was the only deficiency in the pleading, leave to amend would have been assured and the pleading could have been amended readily and forthwith.

[13] In response to the defendants’ submission regarding the inadequacy of material facts supporting the second requirement of the tort, I agree with the plaintiff that the third party has been identified by the pleadings. The plaintiff points to the paragraph in its statement of claim where it states that the insurers, lawyers, forensic experts, and adjudicators (who are defined to be the public for the purpose of the pleadings) rely on the plaintiff’s reports and trust the quality of them. The plaintiff has averred it has developed and cultivated a comprehensive referral network and has established significant goodwill in their reports. It is pleaded that the defendants’ false and misleading representations to the public that their reports were associated with the plaintiff were intentional ones. I find that it is this public that is the third party that falls within the requirements of the tort. They have an actionable wrong if this public suffered damages given the defendants’ unlawful means. While the defendants argue that the public in this statement of claim is too speculative and amorphous, I find that it has been sufficiently identified to be those who use and rely upon the plaintiff’s reports and who may have been exposed to the marketing of the defendants or have used their services under the alleged false pretenses, such that they could have suffered damages as a result.

[14] I appreciate that these facts are not specifically referred to under the tort of unlawful interference with the economic relations of the plaintiff. Indeed, the statement of claim makes reference to other paragraphs when dealing with the ways this tort was conducted. However, the material facts regarding the third party do not have to be neatly tied to this requisite element, so long as the essential material facts are pleaded: Paton at paras. 14, 48. In this case, those facts are pleaded.

[15] Thus, for these reasons, the motion to strike is dismissed.

[16] If the issues of costs cannot be resolved between the parties, I will entertain written submissions, each one limited to one page. The plaintiff shall file within 20 days of the release of these reasons. The defendants shall file within 10 days thereafter. There will be no reply submissions without leave of the court.

Justice S. Nakatsuru Released: October 5, 2018