Court File and Parties

COURT FILE NO.: CV-18-595011 DATE: 20181212 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

AVANTE AUTOMOBILE (2017) CORPORATION and FRANCESCO SERPA Plaintiffs – and – BMW CANADA INC., HANS BLESSE, MICHAEL FERREIRA and RYAN PUSKAS Defendants

Counsel: Michael John Buccioni for the Plaintiffs Michael D. Schafler and Joseph Pignatelli for the Defendants

HEARD: December 4, 2018

Endorsement

DIAMOND J.:

Overview

[1] In or around April 2012, and through a predecessor company, the corporate plaintiff Avante Automobile (2017) Corporation (“Avante”) entered into a Retailer Agreement with the corporate defendant BMW Canada Inc. (“BMW Canada”).

[2] By Statement of Claim issued on March 29, 2018 (and subsequently amended on November 23, 2018 as described hereinafter), Avante and its principal Francesco Serpa (“Serpa”) commenced this proceeding against BMW Canada and three individual defendants: Hans Blesse (“Blesse”, the president of BMW Canada), Michael Ferreira (“Ferreira”, the national sales director of BMW Canada) and Ryan Puskas (“Puskas”, BMW Canada’s director of sales channel development and customer orientation). I shall refer to Blesse, Ferreira and Puskas collectively as the “individual defendants”.

[3] Following the plaintiffs’ delivery of a Response to Demand for Particulars on July 10, 2018, the individual defendants brought a motion under Rules 21.01(1)(b), 25.06(1) and 25.01 of the Rules of Civil Procedure seeking an Order striking out the Statement of Claim against them.

[4] Approximately ten days before the return of the individual defendants’ motion, the plaintiffs delivered an Amended Statement of Claim pursuant to Rule 26.02(a). The individual defendants took the position that the Amended Statement of Claim still failed to disclose a reasonable cause of action against them, and as such their motion was argued before me on December 4, 2018 based upon the contents of the Amended Statement of Claim.

[5] At the conclusion of the hearing, I took my decision under reserve. These are my reasons.

Rule 21 Motions to Strike

[6] As held by the Court of Appeal in Addison Chevrolet Dealer GMC Limited v. General Motors of Canada Limited, 2016 ONCA 324, the test under Rule 21.01 requires a moving party to show that it is plain and obvious that the pleading discloses no reasonable cause of action, or that the claim has no reasonable prospect of success. Pleadings may be defective when they fail to allege the necessary elements of a claim that, if properly pleaded, would constitute a reasonable cause of action.

[7] The test to be employed on a motion to strike is well known. As held by the Supreme Court of Canada in Hunt v. Carey Canada Inc., assuming that the facts as stated in the statement of claim can be proven, I must decide whether it is “plain and obvious” that the claim discloses no reasonable cause of action. As the pleaded facts are presumed to be true, I can only strike out a claim which has no reasonable prospect of success.

[8] As held by Justice Myers in Salehi v. Professional Engineers Ontario, 2014 ONSC 3816, a claim is to be read generously with allowance for mere drafting deficiencies. The test on a motion to strike is no doubt a stringent one as I must be satisfied that the claim, or a radical defect therein, is certain to fail.

[9] A concise and helpful summary of the principles to be applied on a motion to strike is set out in the decision of the Ontario Divisional Court in Resolute Forest Products Inc. et al v. 2471256 Canada Inc., 2014 ONSC 3996. Those principles are as follows:

a) The words of the statement of claim relating to the cause of action in question should be read generously in favour of a plaintiff so as not to unfairly deny that party the benefit of the pleading. This is particularly so with the tort of intentional interference with economic relations, having regard to Cromwell J.’s comment in Bram Enterprises Ltd. v. A.I. Enterprises Ltd., 2014 SCC 12 at para. 2, that the scope of this tort has been unsettled;

b) Rule 25.06(8) states that full particulars are required when “fraud, misrepresentation, breach of trust, malice or intent is alleged.” Its purpose is to ensure that bald allegations of this nature, totally devoid of any detail, should not be permitted even at this early stage of the action. However, the rule was never meant to stand in the place of discovery but only to ensure that a defendant knows the case it has to meet with respect to such allegations, and is able to plead over. In our view, “full” means sufficient material facts to permit a defendant to respond in a meaningful way at the pleading stage;

c) The “plain and obvious” test sets a high hurdle for a Rule 21.01(1)(b) motion to be successful. It is only in the clearest of cases – where a claim is certain to fail – that a claim should be struck out;

d) Rule 1.04(1) sets out the general principle that should be taken into account in interpreting and applying the Rules of Practice. It provides that “these rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” Thus, Rule 21 motions should not become a tactical battleground for highly technical complaints about the form of pleadings so as to preclude issues from being heard on their merits; and,

e) Parties should not be faced with procedural motions right out of the litigation gate, as such motions only serve to frustrate the advancement of the litigation and result in the building up of unnecessary costs and delay. The purpose of a statement of claim is essentially to frame the issues in controversy and set out the material facts of the claim to allow a defendant to respond by way of a statement of defence. The recent emphasis on access to justice (see for example, Hyrniak v. Mauldin, 2014 SCC 7 at paragraphs 23-24 in respect of Rule 20 motions) supports the view that parties and counsel should engage less in disputing pleading details and move as expeditiously and as cost effectively as possible to a resolution on the merits.

Claims against Officers, Directors and Employees

[10] It is trite to state that a claim against an officer, director or employee of a corporation is only sustainable at law if the claim discloses a basis for attaching liability against the officer, director or employee in his/her personal capacity, and the constituent elements of the cause(s) action are pleaded.

[11] As held by the Court of Appeal for Ontario in Normart Management Ltd. v. West Hill Re-Development Co., absent allegations of fraud, deceit, dishonesty or want of authority on the part of officers, directors or employees of a corporation, those individuals will be protected from personal liability unless the pleading properly sets out the actions or omissions of the individuals (a) to be themselves tortious or (b) exhibit a separate identity or interest from that of the corporation so as to make the act or conduct complained of their own.

[12] In the absence of a factual underpinning to support allegations that individuals were acting outside their capacity as officers, directors or employees of the corporation, those individuals cannot be held civilly liable for the actions of corporations they control, direct or work for at the relevant time.

The Pleading

[13] In the Amended Statement of Claim, the plaintiffs claim damages jointly against all defendants for the following causes of action: (a) loss of goodwill and reputation, (b) breach of contract, (c) negligence (in the alternative to breach of contract) and bad faith bargaining, (d) intentional interference with economic relations, and (e) special damages for various unpaid expenses and costs thrown away.

[14] None of the individual defendants are privy in contract with Avante. The pleading describes Serpa being presented with a “once in a lifetime opportunity” to acquire an authorized BMW automobile dealership, and thereafter entering into the aforesaid Retailer Agreement in April 2012 for a two year term.

[15] The plaintiffs allege that the defendants wrongfully forced the plaintiffs to sell the dealership to a third party in early 2016, contrary to the terms of an Extension Agreement presented by BMW Canada (but apparently not signed by the plaintiffs). The plaintiffs allege that BMW Canada waited until all of the extensive renovations to the dealership location were complete before forcing the plaintiffs to sell the dealership to a third party, thereby depriving the plaintiffs of the benefit of the extensive and expensive renovation project.

[16] The plaintiffs allege that the defendants “orchestrated the circumstances under which the plaintiffs were obligated to undertake the renovations…all the while knowing that it was the defendants’ intention to force the plaintiffs to sell the dealership upon completion of the renovations”.

[17] The plaintiffs further allege that the defendants wrongfully interfered in the dealership listing and sale process, and specifically caused two third parties to walk away from the purchase and sale of the dealership.

Decision

[18] Throughout much of the pleading, the allegations against the individual defendants are lumped in with those against BMW Canada. In the original Statement of Claim, the individual defendants are alleged to have (a) “acted in concert and outside the scope of their normal authority to force Serpa to sell the dealership for reasons only known to them”, and (b) “acted in a manner inconsistent with their obligations under the Retailer Agreement and in their capacity as officers and directors of BMW Canada, and have imposed harsh and unfair conditions on the operation of the dealership.”

[19] It is clear that these original allegations against the individual defendants do not raise any independent tort or a separate identity of interest required at law to establish personal liability. Obviously, the individual defendants cannot “act in a manner inconsistent with their obligations under the Retailer Agreement” when the individual defendants were never parties to that Retailer Agreement. I agree with the defendants that these original allegations do little more than “window dress” the fact that the claims advanced against the individual defendants are related to acts or omissions carried out in their capacity as BMW Canada officers, directors or employees.

[20] In the Amended Statement of Claim, the plaintiffs have attempted to particularize the alleged wrongful conduct on behalf of the individual defendants. This wrongful conduct includes:

• Demanding that the plaintiffs undertake expensive renovations to their dealership when the individual defendants knew or ought to have known that they required the plaintiffs to sell the dealership;
• Failing to make the required payments due to the dealership thereby causing the dealership to incur substantial financial hardship and significant borrowing costs;
• Failing to support the plaintiffs publicly;
• Disclosing confidential information concerning the circumstances surrounding the operation of the dealership and the requirement to sell the dealership to third parties;
• Failing to comply with their obligations under the Dealership Agreement and ancillary agreements; and,
• Failing to provide any basis in law or reasonable explanation for the demand that the plaintiffs sell the dealership.

[21] None of the above particulars are able to support causes of actions against the individual defendants unless the plaintiffs can properly allege that the individual defendants were acting outside their capacity as officers, directors or employees of BMW Canada. In the preamble paragraph to the above list of alleged misconduct on the part of the individual defendants, the plaintiffs allege that the individual defendants were “negligent in undertaking their roles as officers and employees of BMW Canada”. This (obviously) does not establish the required separate identity of interest from that of BMW. On the contrary, the plaintiffs have confirmed in their amended pleading that the acts and/or omissions on the part of the individual defendants were indeed carried out in their roles as officers, directors or employees of BMW Canada. For this reason alone, the Amended Statement of Claim must be struck against the individual defendants.

[22] For completeness of the exercise, I will address the causes of action raised against the individual defendants. The plaintiffs alleged that the individual defendants owed the plaintiffs both a duty of care and a fiduciary duty to “act in accordance with the Dealership Agreement and to act fairly in all dealings with the plaintiffs in the operation of the dealership and in accordance with the manner in which the other BMW dealerships were dealt with.”

[23] There is nothing in the amended pleading which establishes why the individual defendants (who, again, are not privy in contract with Avante) would owe the plaintiffs a duty of care. There is also nothing in the amended pleading explaining what the standard of care of the individual defendants would or could be in the circumstances. As such, the plaintiffs’ claim in negligence against the individual defendants must therefore be struck out.

[24] With respect to the plaintiffs’ claim for breach of fiduciary duty, the elements of a claim for breach of fiduciary duty are:

a) the existence of a fiduciary relationship; b) a fiduciary duty; and c) a breach of that fiduciary duty.

[25] As held by Justice Dunphy in Lam v. The University of Western Ontario Board of Governors et al, 2015 ONSC 1642:

“In my view a fiduciary relationship requires, in addition to the existence of power and the presence of vulnerability, the assumption by the more powerful fiduciary of a duty to act in the best interests of the vulnerable claimed beneficiary. That assumption may arise from a number of sources: it can be an express or implied agreement, it can be a duty imposed by law. However, the relationship arises from more than the mere fact that the actions of X may affect Y in some important way.”

[26] There is no inherent or intrinsic fiduciary nature to the relationship between the plaintiffs and the individual defendants. There is no assumption by the individual defendants to act in the best interest of the plaintiffs. Accepting all the facts pleaded in the Amended Statement of Claim as true, I cannot see any basis to support the existence of a fiduciary duty owed by the individual defendants to the plaintiffs. As such, the plaintiffs’ claim for breach of fiduciary duty against the individual defendants must be struck out.

[27] The plaintiffs’ claim for intentional interference with economic relations cannot survive as pleaded. The essential elements of that tort are as follows:

a) the defendant must have intended to injury the plaintiffs’ economic relations; b) the interference must have been by a legal or unlawful means; and c) the plaintiff must have suffered economic harm or loss as a result.

[28] As recently held by Justice Boswell in 2292142 Ontario Inc. v. Bordin Racing Ltd., 2018 ONSC 1514:

“The tort involves a three party paradigm. More specifically, it permits a plaintiff to sue a defendant for economic loss resulting from the defendant’s unlawful act towards a third party. As Cromwell J. described it in Bram Enterprises Ltd. v. A.I. Enterprises Ltd., 2014 SCC 12, at para. 23:

‘Liability to the plaintiff is based on (or parasitic upon) the defendant’s unlawful act towards the third party. While the elements of the tort have been described in a number of ways, its core captures the intentional infliction of economic injury on C (the plaintiff) by A (the defendant)’s use of unlawful means against B (the third party).’”

[29] There are no allegations in the Amended Statement of Claim to establish that the third parties could have a separate, actionable cause of action against the individual defendants. As such, the plaintiffs’ claim for intentional infliction of economic injury against the individual defendants must be struck out.

[30] For these reasons, the Amended Statement of Claim against the individual defendants is struck out. While the individual defendants requested an order that leave to amend not be granted in the circumstances, I am prepared to afford the plaintiffs a final opportunity to amend their pleading and attempt to cure the various defects. Perhaps there are facts which could support the causes of action raised against the individual defendants, but on the amended pleading before me, no such facts exist.

[31] In accordance with the agreement between the parties, costs of this motion are fixed on a partial indemnity basis and payable by the plaintiffs to the individual defendants in the all-inclusive amount of $11,500.00.

Diamond J. Released: December 12, 2018