Court File and Parties

COURT FILE NO.: 17-73292A1 DATE: 20190111

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Westeinde (FNP) Inc. James Lawrence MacGillivray, for the Plaintiff (not in attendance) Plaintiff

– and –

RE/MAX CORE REALTY INC. Defendant Martin Z. Black, for the Defendant

-and-

RE/MAX ONTARIO-ATLANTIC CANADA INC. o/a RE/MAX INTEGRA Aislinn Reid, for the Third Party Third Party

HEARD at Ottawa: November 22, 2018

ENDORSEMENT

AITKEN J.:

Nature of Proceedings

[1] The Third Party, RE/MAX Ontario-Atlantic Canada Inc. (“RE/MAX Integra” or the “Third Party”), brings a motion under rr. 21.01(1)(b) and 29.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for an order striking out, without leave to amend, the claims in the Amended Third Party Claim alleging:

i. unfair and discriminatory business practices, because the claim discloses no reasonable cause of action (paras. 1.c.i., 17, and 33);

ii. breaches of common law duties of fair dealing, to act honestly, to act in accordance with reasonable commercial standards, and to act in good faith towards the Defendant, RE/MAX Core Realty Inc. (“RE/MAX Core”), because the Defendant failed to plead any material facts in support of that claim (paras. 1.c.ii., 16(b), 16(d), and 16(f)-(i));

iii. breaches of s. 3 of the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (the “AWA”), because the Defendant failed to plead any material facts in support of that claim (paras. 1.c.iii. and 16(e)); and

iv. interference with economic and contractual relations, because the Defendant failed to plead any material facts in support of that claim (paras. 1.c.iv. and 17).

[2] The Third Party argues that only the issues of indemnity and contribution and costs sought in paragraphs 1.a. and 1.b. of the Amended Third Party Claim should be before the court in this litigation.

[3] The Defendant, RE/MAX Core Realty Inc. (“RE/MAX CORE” or the “Defendant”) consents to paragraph 1.c.i. of the Amended Third Party Claim being struck. The Defendant acknowledges that any claim relating to unfair and discriminatory business practices is subsumed under claims relating to common law and statutory duties of fair dealing, acting honestly, acting in good faith, and acting in accordance with reasonable commercial standards.

[4] In its Factum, the Third Party raised an additional issue that it had not raised in its Notice of Motion, namely, whether allegations made by the Defendant in the Amended Third Party Claim regarding disciplinary action taken by the Third Party against the Defendant, before the events outlined below, should be struck in their entirety as not properly being the subject of a third party claim (paras. 18-30 and 32(f)). The Defendant objected to the Third Party raising this issue at the last moment, without proper notice to the Defendant. I will deal with this matter below.

Pleadings

[5] On July 13, 2017, the Plaintiff, Westeinde (FNP) Inc., issued a claim against the Defendant for damages for breach of contract, namely, a commercial lease effective March 8, 2017, for office premises at 50 Frank Nighbor Place, Ottawa (the “leased premises”). The Statement of Claim alleges that the lease was for a term of seven years commencing on July 1, 2017, with rent payable on the first day of each month. The Defendant undertook in the lease that, at all times throughout the term of the lease, it would continuously conduct its business in the leased premises. The Defendant failed to take possession of the leased premises on July 1, 2017. The Defendant failed to make the payments on account of rent which were due and payable on July 1, 2017. On July 12, 2017, the Plaintiff terminated the lease as a result of the breach of the lease by the Defendant.

[6] In its Statement of Defence, the Defendant alleges that a lease was never finalized between itself and the Plaintiff. Although the Defendant had signed a draft lease in regard to the leased premises and had provided it to the Plaintiff’s agent, the Defendant had advised the agent in advance and at the time of delivery of the signed draft lease that, before the Defendant could sign a binding agreement to lease or a lease, the Defendant required the written, unconditional approval of the Defendant’s franchisor, namely the Third Party. Before the Plaintiff signed the draft lease and returned a signed copy to the Defendant, the Defendant advised the Plaintiff’s agent in writing that the Defendant could not and would not proceed with the lease, given the lack of a positive reply from the Third Party. The Defendant retracted the signed draft lease before it was accepted by the Plaintiff. The Defendant did not deliver the deposit as required under the draft lease.

[7] The Defendant states the following in its Amended Third Party Claim:

• The Third Party was a franchisor of a RE/MAX real estate agency system under a written franchise agreement with the Defendant for the City of Ottawa.
• In February 2017, the Defendant discussed with the Third Party its desire to open a secondary “team” office in the Kanata area of Ottawa as an outgrowth of the Defendant’s successful downtown office. The Defendant identified the leased premises as an ideal location to open and operate such secondary office.
• On February 7, 2017, the Third Party approved in writing the new team office to be located at the leased premises, subject only to two conditions to which the Defendant agreed. The Defendant requested the Third Party to prepare the appropriate disclosure documents for its review. The Defendant continued negotiations with the Plaintiff in regard to the lease of the leased premises.
• On March 1, 2017, the Third Party sent disclosure documents to the Defendant, again confirming the approval of the Defendant’s lease of the leased premises.
• Relying on the Third Party’s approval, on the morning of March 8, 2017, the Defendant finalized its negotiations with the Plaintiff’s agent, signed the draft lease, and arranged to have it delivered to the Plaintiff’s agent in the early afternoon the same day.
• At 11:47 a.m. on March 8, 2017, the Third Party sent an email to the Defendant which read: I have tried to reach out to you and due to the urgent nature of my call, I am writing to you; however, please call me to discuss as soon as possible. I am writing to advise you that we can not approve an expansion for you at 50 Frank Nighbor Place in Kanata [the Leased Premises]. I sincerely apologise and take full responsibility for this error; however, we did not realise that it was within a kilometre’s walking distance of RE/MAX Affiliates. I am hoping that you haven’t signed a lease at this location yet. PLEASE DO NOT SIGN A LEASE AT THIS LOCATION. If you already have, please forward me a copy of the lease and the contact information of the landlord, as I will work with them directly to get you out of the lease, if necessary. I will work with you to obtain a more acceptable location as soon as we resolve this matter. Again, our sincerest apologies. Please call me asap.
• The Defendant’s representatives did not see this email until after the draft lease was en route or delivered to the Plaintiff’s agent.
• The leased premises are, in fact, more than three kilometres’ walking distance from the leased premises.
• The Defendant immediately responded to the Third Party disputing the reason given for its rescission of its approval and advising the Third Party that the Defendant had relied on such approval in expending time and money.
• On March 9, 2017, at 11:41 a.m., the Third Party sent an email to the Defendant, which read in part: Thank you for your message last night. Unfortunately, you cannot open a RE/MAX franchise at 50 Nighbor Place. If you do so, you will be in breach of your current franchise agreement with us. If you have not already signed the lease for that location, please do not do so. If you have signed a lease, please forward to us the fully signed copy so we can review and determine the best way to get you out of the lease with the least amount of expense, which of course we will cover.
• On March 16, 2017, in response to a March 10, 2017 demand letter from the Plaintiff’s lawyers to the Defendant, the Third Party wrote directly to the Plaintiff’s lawyers, stating: Pursuant to our franchise agreement with the Tenant the Tenant is required to obtain our written approval prior to opening a RE/MAX office at a particular location. We initially granted our conditional approval to the Tenant to open a RE/MAX franchise office at the Leased Premises on February 7, 2017. Since that time, we realize that the Leased Premises is not located where we initially understood it to be. This was our mistake but given the proximity of the Leased Premises to other RE/MAX franchisees, we cannot grant our consent or approval for the Tenant to open a RE/MAX franchise office at the Leased Premises. We communicated this to the Tenant via email on the morning of March 8, 2017. We understand that the Landlord may have incurred certain costs and/or damages related to the Tenant not being permitted to operate its RE/MAX franchise office from the Leased Premises. Please advise us of the quantum of such costs and/or damages so we can work with the Tenant to ensure the Landlord is compensated accordingly.
• The Defendant persisted in seeking the Third Party’s approval for the Defendant to open a team office at the leased premises, but the Third Party refused and repeatedly advised the Defendant that it would be in breach of its franchise agreement if it proceeded with the lease.

Legal Principles relating to r. 21.01(1)(b)

[8] The test on a motion to strike out a claim under r. 21.01(1)(b) of the Rules is whether it is plain and obvious that the claim discloses no cause of action. The Ontario Court of Appeal in Grand River Enterprises Six Nations Ltd. v. Attorney General (Canada), 2017 ONCA 526, stated, at paras. 15-16:

On a motion to strike for failure to disclose a reasonable cause of action, the Supreme Court has identified the test to be whether the claim has no reasonable prospect of success: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 17; Odhavji Estate v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R. 263, at paras 14-15; Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at p. 980.

The courts have emphasized that motions to strike must be approached “generously”, erring on the side of allowing novel but arguable claims to proceed to trial, as “actions that yesterday were deemed hopeless may tomorrow succeed”: Imperial Tobacco, at para. 21.

(See also Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at paras. 17 and 21.)

[9] On a motion to strike a pleading, “the court must take the facts alleged in the challenged pleading as true unless they are patently ridiculous or incapable of proof”, and “the court should read the pleading generously, making allowances for drafting deficiencies” (Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 68 O.R. (3d) 457, 234 D.L.R. (4th) 367 (C.A.), at para. 38).

[10] Under r. 25.06(1) of the Rules, every pleading should contain a concise statement of the material facts on which the party relies, but not the evidence by which the facts are to be proven (Knight, at paras. 22 and 23; and Aristocrat Restaurants Ltd. v. Ontario, 2003 CarswellOnt 5574 (S.C.J.), at para. 20). One purpose of requiring the claimant to state the material facts on which the claimant relies is so that the responding party understands the nature of the claims being advanced and has the opportunity of responding to those claims. As stated by Cameron J. in Balanyk v. University of Toronto (1999), 1 C.P.R. (4th) 300 (Ont. S.C.J.), at para. 46:

Neither the opposite party nor the court should be forced to nit-pick their way through a long, complex and sometimes redundant and split pleading, parsing each paragraph and each sentence with a view to extracting the claims and related material facts and redrafting them into a clear and precise pleading. It is the responsibility of the party pleading to plead in accordance with the requirements of our law and the purpose of pleading.

[11] Under r. 25.06(8) of the Rules:

Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred.

Thus, it has been held that a pleading of breach of good faith must contain full particulars of the breach. The alleged breaches must be individually identified in the pleading and supported by material facts on the face of the pleading. (See AGFA Inc. v. Partners Prepress, at para. 18.)

Analysis

Good Faith and Honest Dealing

Common Law Duty

[12] It is settled law that good faith performance obligations exist in regard to franchise agreements (Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494; Country Style Food Services Inc. v. 1304271 Ontario Ltd. (2005), 200 O.A.C. 172 (C.A.), at paras. 96-97; Shelanu Inc. v. Print Three Franchising Corp. (2003), 64 O.R. (3d) 533 (C.A.), at para. 5). That means that “parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily” (Bhasin, at para. 63). In Bhasin, at para. 65, Cromwell, J. explains further:

The organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. While “appropriate regard” for the other party’s interests will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases. It merely requires that a party not seek to undermine those interests in bad faith.

[13] In Bhasin, the Supreme Court of Canada added weight to the importance of good faith dealings by not only recognizing that there are categories of relationships in which good faith performance obligations exist (insurance, employment, tendering, and franchise), [1] but by also recognizing a broad umbrella of an organizing principle of good faith performance of contracts. The Supreme Court stopped short, however, of defining in general terms the limits of the organizing principle of good faith (at para. 90), and left that concept to evolve over time through jurisprudence.

[14] In Bhasin, the Supreme Court did take the step, however, of creating a new general duty of honesty in contractual performance as a manifestation of the general organizing principle of good faith in contract law. As explained by Cromwell J. at paras. 73-75:

I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one’s contractual performance. Recognizing a duty of honest performance flowing directly from the common law organizing principle of good faith is a modest, incremental step. The requirement to act honestly is one of the most widely recognized aspects of the organizing principle of good faith. [Citations omitted.]

I am … concerned only with a new duty of honest performance and, as I see it, this should not be thought of as an implied term, but a general doctrine of contract law that imposes as a contractual duty a minimum standard of honest contractual performance. It operates irrespective of the intentions of the parties, and is to this extent analogous to equitable doctrines which impose limits on the freedom of contract, such as the doctrine of unconscionability.

Viewed in this way, the entire agreement clause … of the Agreement is not an impediment to the duty arising in this case.

[15] Further, at para. 93, when summarizing principles, Cromwell J. stated:

(3) It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.

[16] In Bhasin, the Supreme Court found that the defendant had breached its commercial dealership agreement with the plaintiff when it failed to act honestly with the plaintiff in exercising the non-renewal clause in the agreement. The defendant was not under any legal obligation under the commercial dealership agreement to renew the agreement with the plaintiff. Nevertheless, there was a finding of fact that, in the period leading up to the defendant exercising the non-renewal clause in the agreement, the defendant had not been honest with respect to its own intentions and with respect to the role it was asking one of the plaintiff’s competitors to perform. There was a finding of fact that the defendant had made a number of factual misrepresentations to the plaintiff. Finally, there was a finding of fact that the defendant’s dishonesty was directly and intimately connected to the defendant’s performance of the agreement with the plaintiff. These findings resulted in the plaintiff being able to recover damages from the defendant for breach of contract.

[17] In the case at hand, the Defendant, in an earlier version of the Third Party Claim, made a claim for breach of contract. That claim was deleted in the Amended Third Party Claim and replaced by a claim for damages based on a number of factors, one being “breaches of common law duties of fair dealing, to act honestly, to act in accordance with reasonable commercial standards, and to act in good faith towards the Defendant.” Bhasin stands for the proposition that such allegations, if proven, can found a claim for breach of contract. It did not recognize a breach of the common law duties referred to above as supporting a separate cause of action unrelated to the performance of the contract (see paras. 103 and 108).

[18] This conclusion is consistent with the analysis in Fairview Donut Inc. v. TDL Group Corp., 2012 ONSC 1252. In Fairview Donut, Strathy J. was considering a situation where plaintiff franchisees were suing the franchisor for breach of contract, breach of the duty of good faith and fair dealing at common law and under the Arthur Wishart Act, and several other causes of action. Strathy J. provided the following summary of relevant legal principles:

• Section 3(1) of the Arthur Wishart Act, which imposes a duty of fair dealing in the performance and enforcement of franchise agreements, is a codification of the common law (at para. 495).
• The Arthur Wishart Act is remedial legislation designed to address the power imbalance between franchisor and franchisee. It should be given a generous interpretation to give effect to this purpose (at para. 496).
• “The duty of good faith and fair dealing and the duty to act in accordance with reasonable commercial standards, as expressed in the Arthur Wishart Act, relate to the performance and enforcement of the franchise agreement. The duty is imposed in order to secure the performance of the contract the parties have made. It is not intended to replace that contract with another contract or to amend the contract by altering the express terms of the franchise contract …” (at para. 500).
• “… in assessing whether a party has demonstrated good faith and fair dealing in the performance and enforcement of the agreement, the party’s conduct must be considered in the context of and in conjunction with the contract that the parties have made. It is not a stand-alone duty that trumps all other contractual provisions” (at para. 501).

(See also Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673, 268 O.A.C. 279, at paras. 26-28 regarding the purpose of s. 3(2) of the Arthur Wishart Act, and the particular importance assigned to the duty of good faith in the context of franchise agreements.)

[19] In my view, it is debatable whether the Defendant in the case at hand was obliged to include a claim for damages for breach of contract, in addition to claiming damages for breach of the duty of good faith and fair dealing at common law, because it is understood that a breach of the duty of good faith and fair dealing at common law is a subset of a breach of contract. But in any event, what is required in any pleading in which a cause of action based on a breach of the duty of good faith and fair dealing at common law is being advanced are particulars providing the material facts relating these allegations to the performance of the contract. In 1523428 Ontario Inc. v. TDL Group, 2018 ONSC 5886, another case of a franchisee suing a franchisor, Morgan J. stated at para. 45:

While this breach of contract claim, including a breach of duty of good faith claim, can potentially survive a challenge at this stage, it can only do so once particulars are provided. These must include some identification of the contractual terms that have been breached, the manner in which those terms were breached, and the damages that flow from the breach. [Citations omitted.]

[20] As was done in Bhasin, the Defendant in this case needed to connect the Third Party’s failure to act in good faith, to act honestly, and to act in accordance with reasonable commercial standards to the Third Party’s performance of the Franchise Agreement between the Defendant and the Third Party. In Bhasin, the court found that Can-Am’s breach of contract consisted of its failure to be honest with Bhasin in regard to its settled intentions with respect to renewal of their contract. Here, the allegation is that the Third Party’s failure to act in good faith, honestly, and in accordance with reasonable commercial standards relates to how the Third Party handled the Defendant’s request to open a “team” office. The Defendant had the ability to tie the allegations it made in the Amended Third Party Claim to the Franchise Agreement; for example, reference could have been made to the following clauses:

9.2 Franchisee agrees not to open any additional offices without first securing the written permission of RE/MAX, which permission shall not be unreasonably withheld. [Emphasis added.]

21.1 Whenever this agreement requires the approval or consent of RE/MAX, Franchisee agrees to make a timely written request for it. The approval or consent of RE/MAX will not be valid unless it is in writing. Except where this agreement expressly obligates RE/MAX to approve reasonably or not unreasonably to withhold approval of any of Franchisee’s actions or requests, RE/MAX shall have the absolute right to refuse any request by Franchisee or to withhold approval of any action or omission by Franchisee. [Emphasis added.]

There may be other aspects of the Franchise Agreement that are implicated.

[21] As observed by Strathy J. in Fairview Donut, at para. 502, the content of the duty of good faith and fair dealing has been expressed as including, among other obligations:

Where the franchisor is given a discretion under the franchise agreement, the discretion must be exercised “reasonably and with proper motive, and may not do so arbitrarily, capriciously, or in a manner inconsistent with the reasonable expectations of the parties.” [Citations omitted.]

[22] Pursuant to r. 25.06(8) of the Rules, the Defendant is obliged to plead the full particulars of any breach of good faith or any dishonest or misleading behaviour of the Third Party on which the Defendant is relying to prove breach of contract. The Defendant has provided some particulars in this regard. I point to the following statements in the Amended Third Party Claim:

• At para. 9: The said email [from the Third Party] read as follows: “… we did not realize that it was within a kilometre’s walking distance of RE/MAX Affiliates”.
• At para. 10: The reference to “RE/MAX Affiliates” is to another Re/Max franchisee which operated its business under that name, at 5517 Hazeldean Road, Stittsville, more than 3 kilometres’ walking distance from the Leased Premises. Both locations are identified on Google Maps and other websites available to all members of the public, such that the Third Party knew, or ought to have known, that its grounds for rescinding its approval were unfounded.
• At para. 15: The Third Party is therefore liable … as a result of reversing its decision to approve the Leased Premises, falsifying reasons to reverse its decision, …
• At para. 16: … the Third Party was disingenuous in its rationale for reversing its approval, and … acted arbitrarily … by reversing its approval without valid reasons; favouring Re/Max Affiliates over the Defendant; allowing other Re/Max franchisees to operate offices within shorter distances than the distance between the Leased Premises and the Re/Max Affiliates office; and not applying the same or consistent policies for all Re/Max franchisees regarding the opening of new locations.
• At paras. 18: … the Third Party also favoured Re-Max Affiliates and acted in a discriminatory and arbitrary manner, and in bad faith, towards the Defendant by initiating a disciplinary proceedings against the Defendant in March 2017 in the manner set out in paras. 19-30.

[23] The Defendant did not specifically identify clauses 9.2 and 21.1 of the Franchise Agreement, when providing particulars of the shortcomings of the Third Party’s behaviour. At the very least, reference should have been made to clause 9.2 of the Franchise Agreement.

Arthur Wishart Act

[24] Section 3 of the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 reads as follows:

Fair dealing

3 (1) Every franchise agreement imposes on each party a duty of fair dealing in its performance and enforcement. 2000, c. 3, s. 3 (1).

Right of action

(2) A party to a franchise agreement has a right of action for damages against another party to the franchise agreement who breaches the duty of fair dealing in the performance or enforcement of the franchise agreement. 2000, c. 3, s. 3 (2).

Interpretation

(3) For the purpose of this section, the duty of fair dealing includes the duty to act in good faith and in accordance with reasonable commercial standards. 2000, c. 3, s. 3 (3).

[25] I have already provided a synopsis of the interrelationship between these statutory duty of good faith and the common law duty of good faith which acts as an organizing principle in common law. (See paragraph 18 above and Fairview Donut, at paras. 495-502.)

[26] Section 3(2) of the Arthur Wishart Act recognizes a right of action for damages for breach of the duty of fair dealing in the performance or enforcement of the franchise agreement. With this clear and unambiguous wording, I see no requirement for a potential claimant to couch an action under s. 3(2) as a claim for damages for breach of contract. Nevertheless, the requirement still exists for the claimant to provide material particulars in the pleading tying the other party’s actionable behaviour to the terms of the franchise agreement (see 1523428 Ontario Inc. v. TDL Group, 2018 ONSC 5886, at para. 52).

Conclusion regarding Good Faith Claims

[27] Paragraphs 1.c.ii. and 1.c.iii. of the Amended Third Party Claim are struck because the Defendant failed to plead sufficient material facts to support those causes of action. More specifically, the Defendant failed to tie in the Third Party’s alleged actionable misbehaviour with the contractual provisions in the Franchise Agreement that were implicated.

[28] In Aristocrat Restaurants, at paras. 78-86, Epstein J. considered those circumstances in which an order to strike pleadings should be accompanied by a term giving the claimant leave to amend. Relying on Andersen Consulting Ltd. v. Canada (Attorney General) (2001), 150 O.A.C. 177 (C.A.), per Moldaver J.A., at para. 37, and Lido Industrial Products Ltd. v. Exbar Properties Inc. (1988), 28 O.A.C. 385 (Div. Ct.), Epstein J. concluded, at para. 86, that:

… in disposing of a motion to strike when a recognized cause of action has been improperly pleaded but can be put right without non-compensable prejudice to the defendants, the preferred route is to afford the plaintiff the opportunity, upon appropriate terras [sic], to plead the cause properly within the action before the court.

In her view, leave to amend should only be refused in the clearest of cases.

[29] The Third Party relies on the recent case of Sheridan v. Ontario, 2015 ONCA 303, where the Ontario Court of Appeal upheld a motion judge’s refusal to grant leave to amend parts of a statement of claim that had been struck. The motion judge found that there had been more than ample opportunity for the plaintiff to have amended its statement of claim following service of the defendant’s notice of motion seeking to strike pleadings. The motion judge also noted that if a 38-page pleading was bereft of substantive material facts to support the causes of action pleaded, it was unrealistic to expect that there were facts which could be pleaded that would cure the observed deficiencies.

[30] Similarly, in 1523428 Ontario Inc. v. TDL Group, 2018 ONSC 5886, Morgan J. struck out claims without leave to amend in circumstances where the party had had ample time to amend its pleadings but had never done so, and where Morgan J. found that no amount of particulars could possibly salvage the particular causes of action in question.

[31] Here, the Notice of Motion was served on the Defendant in June 2018, and the motion was heard on November 22, 2018. There was ample time for the Defendant to amend its Amended Third Party Claim to add the missing, and required, particulars. Nevertheless, refusing to grant leave to amend pleadings is within the court’s discretion. I do not consider this an appropriate case in which to exercise such discretion. First, unlike the Statement of Claim in Sheridan, the Amended Third Party Claim here contains many material facts to support the Defendant’s claim that the Third Party breached its duty of fair dealing toward the Defendant. Second, unlike the claims in Sheridan and 1523428 Ontario Inc., the Defendant’s claim against the Third Party in this regard can be saved with minimal additions to the claim to relate the claim back to the parties’ obligations under the Franchise Agreement. Third, the Amended Third Party Claim is a short and concise document that already sets out for the Third Party the nature of the Defendant’s complaint with the Third Party’s behaviour.

[32] Paragraphs 1.c.ii. and 1.c.iii of the Amended Third Party Claim are struck. The Defendant shall have 30 days in which to serve and file an Amended Amended Third Party Claim including the necessary material facts to support these causes of action.

Intentional Interference with Economic Relations/Unlawful Interference with Economic Relations

[33] The Defendant, in paragraph 17 of the Amended Third Party Claim, asserts that the Third Party’s interventions as outlined above “also constituted deliberate and tortious interference with the Defendant’s economic and contractual relations”. In essence, the Defendant alleges that the Third Party committed the tort of intentional or unlawful interference with economic relations.

[34] In Bram Enterprises Ltd. v. A.I Enterprises Ltd., 2014 SCC 12, [2014] 1 S.C.R. 177, at para. 5, Cromwell J. set out the scope of this tort.

In light of the history and rationale of the tort and taking into account where it fits in the broader scheme of modern tort liability, the tort should be kept within narrow bounds. It will be available in three-party situations in which the defendant commits an unlawful act against a third party and that act intentionally causes economic harm to the plaintiff.

[35] Here, the Defendant (referred to as the “plaintiff” in Bram) does not allege that the Third Party (referred to as the “defendant” in Bram) committed any unlawful act against the Plaintiff (referred to as the “third party” in Bram), and no material facts relating to any such unlawful act are plead. The only unlawful activity plead by the Defendant relates to unlawful behaviour of the Third Party directed at the Defendant, not the Plaintiff. This does not fit the framework provided by Cromwell J. in Bram.

[36] The Defendant relies on Resolute Forest Products Inc. v. 2471256 Canada Inc., 2013 ONSC 5822, 6 C.C.L.T. (4th) 167, but that case was decided prior to Bram and relied on earlier Ontario Court of Appeal decisions. As well, in Resolute, Resolute pleaded that the defendants had harassed, intimidated and exerted pressure on Resolute’s customers (i.e. parties who were neither the plaintiff nor the defendant in the case). The court was unable to find that these allegations could not possibly give rise to an actionable claim by Resolute’s customers against the defendants.

[37] In the case at hand, there are no allegations in the Amended Third Party Claim that could possibly qualify as an allegation of unlawful behavior on the part of the Third Party against the Plaintiff. Thus, it is plain and obvious on the face of the pleading that the Defendant’s claim against the Third Party for damages for intentional or unlawful interference with economic relations will fail.

[38] Paragraphs 1.c.iv. and 17 (in regard to “deliberate and tortious interference with the Defendant’s economic and contractual relations”) are struck, without leave to amend.

Disciplinary Matter

[39] In paragraphs 18 to 30 and 32(f) of the Amended Third Party Claim, the Defendant sets out allegations that the Third Party acted in a discriminatory and arbitrary manner, and in bad faith, towards the Defendant by initiating a disciplinary proceeding against the Defendant in March 2017. In its Notice of Motion served in June 2018, the Third Party did not ask that these paragraphs in the Amended Third Party Claim be struck. It was only in the Third Party’s Factum served on November 12, 2018, that the Third Party asked that paragraphs 18-30 and 32(f) in the Amended Third Party Claim be struck.

[40] The motion was argued on November 22, 2018. At the hearing of the motion, the Defendant took the position that the Third Party should not be allowed to argue this issue due to inadequate notice to the Defendant. Although the Third Party provided no reason why it had not provided proper notice to the Defendant that it would be seeking to have struck all portions of the Amended Third Party Claim dealing with “The Disciplinary Matter”, I proceeded to hear the Third Party’s arguments and the Defendant’s responses in this regard. The Defendant had an opportunity to deal with the issue in its responding Factum. The Defendant’s counsel was prepared to argue the point at the hearing and did so effectively. Where possible, the court should try to deal with as many preliminary and procedural issues as possible at one hearing in an effort to be efficient and avoid additional expense to the parties and further delay in the proceedings.

[41] The Third Party argues that the allegations made by the Defendant in the Amended Third Party Claim under the heading “The Disciplinary Matter” are not the proper subject matter of a third party claim under r. 29 of the Rules. The Defendant argues that this portion of its pleading is acceptable under r. 29.01(b)(ii), which reads:

29.01 A defendant may commence a third party claim against any person who is not a party to the action and who,

(b) is or may be liable to the defendant for an independent claim for damages or other relief arising out of,

(ii) a related transaction or occurrence or series of transactions or occurrences; …

[42] Paragraph 18 of the Amended Third Party Claim states:

In addition to the foregoing, the Third Party also favoured Re/Max Affiliates and acted in a discriminatory and arbitrary manner, and in bad faith, towards the Defendant by initiating a disciplinary proceeding against the Defendant in March 2017 (the “Disciplinary Matter”).

[43] The Defendant went on in the remaining paragraphs in the Amended Third Party Claim to provide particulars as to how the Third Party acted in bad faith and in an arbitrary manner toward the Defendant in regard to the Disciplinary Matter.

[44] In Allan v. Bushnell T.V. Co. Ltd., [1968] 1 O.R. 720 (C.A.), at 723, the Ontario Court of Appeal stated in regard to third party claims:

… there must be a connection of fact or subject-matter between the cause of action upon which the plaintiff sued and the claim of the defendant for redress against the third party; and, such claim would ordinarily arise out of relations between the defendant and the third party anterior to those between the plaintiff and the defendant which precipitated the main action.

[45] Here, during the same month that the Defendant was negotiating with the Third Party for approval to open a team office in Kanata and the Third Party ultimately withheld its approval for fear of negatively impacting RE/MAX Affiliates, the Third Party was taking steps to discipline the Defendant for actions on its part which the Third Party deemed was harmful to RE/MAX Affiliates. The Defendant alleges that the Third Party acted arbitrarily and in bad faith in its dealings with the Defendant in regard to both issues. The Defendant alleges that the Third Party engaged in unfair dealing with the Defendant by imposing different policies on the Defendant than those being imposed on competitor franchisees. According to the Defendant, the Third Party’s handling of the request by the Defendant to open a team office and the Third Party’s handling of discipline issues with the Defendant are two examples, close in time, of such unfair, arbitrary, discriminatory, and bad faith dealings. Both examples occurred in the context of the on-going relationship between the Defendant and the Third Party under the Franchise Agreement.

[46] In my view, the temporal and subject-matter connections between the two issues make it appropriate for the Disciplinary Matter to be included in the Amended Third Party Claim – not as a separate cause of action, but as part of the particulars of the Third Party’s alleged breach of its common law and statutory duty of good faith and honest dealing. That being said, it is still incumbent on the Defendant when amending the Third Party Claim to provide more particulars to tie the allegations against the Third Party under the Disciplinary Matter heading in the Amended Third Party Claim to those provisions in the Franchise Agreement, or policies issued thereunder, that are implicated.

[47] The Plaintiff was served with the Third Party’s Notice of Motion and chose not to file any materials or appear on the motion. I take from the Plaintiff’s silence that the Plaintiff is not concerned about any delay or extra costs that might be incurred as a result of the Defendant having initiated the Third Party Claim and subsequently amending it to broaden its allegations against the Third Party.

Costs

[48] If the parties cannot agree on the issue of costs, written submissions may be submitted within 30 days of the release of this endorsement.

AITKEN J.

Date of Release: January 11, 2019

[1] Joseph T. Robertson, “Good Faith as an Organizing Principle in Contract Law: Bhasin v. Hrynew – Two Steps Forward and One Look Back” 93 C.B.R. 809, at 834.