Tadiem Inc. v. Allied Properties Management LP 2019 ONSC 2351

COURT FILE NO.: CV-16-553068

DATE: 2019/04/12

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Tadiem inc.

Plaintiff/Defendant by Counterclaim

• and -

ALLIED PROPERTIES MANAGEMENT LP, ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST, 1413882 ONTARIO LIMITED and 1301553 ONTARIO LIMITED

Defendants/Plaintiffs by Counterclaim

Lucas Lung for the Plaintiff

Vedran Simkic for the Defendant

HEARD: April 8, 2019

PERELL, J.

REASONS FOR DECISION

[1] The Defendants Allied Properties Management LP, Allied Properties Real Estate Investment Trust, 1413882 Ontario Limited, and 1301553 Ontario Limited (collectively “Allied Properties”) were the landlords of two properties, one on Wellington Street and the other on King Street in the City of Toronto. The properties were formerly leased to the Plaintiff Tadiem Inc. Tadiem moved out, and it rented from the Canadian Broadcasting Corporation (“CBC”). During the lease negotiations with CBC, Tadiem disparaged its former landlord Allied Properties.

[2] In May 19, 2016, Tadiem sued Allied Properties because Tadiem believed that it had been overcharged while a tenant, and Tadiem believed that it had been the victim of negligent misrepresentations. Tadiem sued Allied Properties for $3.4 million.

[3] On December 1, 2017, Allied Properties counterclaimed for $3 million. Allied Properties alleged that Tadiem intentionally interfered with its economic relations by making disparaging, untrue and false statements to the CBC and to CBRE Limited, during the negotiations in April 2015 over the terms of the lease between CBC, as landlord, and Tadiem, as tenant. CBRE was CBC's commercial real estate broker in those negotiations.

[4] On June 25, 2018, Tadiem (defendant by counterclaim) advised Allied Properties (plaintiff by counterclaim) that it planned to commence a third party claim for contribution and indemnity against CBC and CBRE.

[5] Pursuant to rules 29.01 and 29.02 of the Rules of Civil Procedure, on September 4, 2018, Tadiem brought a motion for an order granting it leave to issue the third party claim. Pursuant to rule 29.09, Allied Properties opposed the motion. (The proposed third parties were not given notice of the motion and did not participate in the hearing before the Master.)

[6] For present purposes, the relevant portions of Rule 29 are set out below:

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

(a) is or may be liable to the defendant for all or part of the plaintiff's claim;

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

(i) a transaction or occurrence or series of transactions or occurrences involved in the main action, or

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

(c) should be bound by the determination of an issue arising between the plaintiff and the defendant.

29.02 (1) A third party claim (Form 29A) shall be issued within 10 days after the defendant delivers a statement of defence, or at any time before the defendant is noted in default.

(1.1) A third party claim may be issued within 10 days after the plaintiff delivers a reply in the main action to the defendant's statement of defence.

(1.2) A third party claim may be issued at any time with the plaintiff's consent or with leave, which the court shall grant unless the plaintiff would be prejudiced thereby.

29.09 A plaintiff is not to be prejudiced or unnecessarily delayed by reason of a third party claim, and on motion by the plaintiff the court may make such order or impose such terms, including an order that the third party claim proceed as a separate action, as are necessary to prevent prejudice or delay where that may be done without injustice to the defendant or the third party.

[7] Tadiem’s proposed Third Party claim against CBC and CBRE stated:

CLAIM

1. The plaintiff/defendant by counterclaim, Tadiem Inc. (“Tadiem”), claims against the third parties:

(a) Contribution and indemnity for any and all damages, interest and costs that Tadiem is found to owe to the defendants/plaintiffs by counterclaim (collectively, “Allied") on account of the counterclaim in the main action;

(b) Costs of the main action and of the Third Party Claim on a basis;

(c) Such further and other relief as counsel may advise Honourable Court may permit.

A. The Third Parties

2, At all material times, Canadian Broadcasting Corporation (“CBC”) was the landlord of a building municipally known as 250 Front Street West, Toronto, Ontario (“CBC Building”). Both Tadiem and a company related to Allied currently are tenants CBC of in the CBC Building.

3. At all material times, CBRE Limited (“CBRE”) was the commercial real estate broker for CBC, CBRE was also concurrently the commercial real estate broker for Allied.

B. Lease between CBC and Tadiem

4. Pursuant to a lease dated April 10, 2015 (“CBC-Tadiem Lease”), CBC leased to Tadiem certain office space in the CBC Building.

5. The terms of the CBC-Tadiem Lease were negotiated by CBC and Tadiem in or around April 2015. Both CBC and Tadiem were represented by commercial real estate brokers, who were present for the negotiations: CBRE represented CBC; and Devencore Realities Corporation Canada Limited (“Devencore”) represented Tadiem.

6. The lease negotiations between CBC and Tadiem were highly confidential and commercially sensitive. The CBC-Tadiem Lease contained a term prohibiting the disclosure of non-public information disclosed during the course of the negotiations. Section 17.27 of the CBC-Tadiem Lease provided as follows:

Subject to the provisions of the Access to Information Act … both parties shall ensure that non-public information owned by the other party, and disclosed to a party in any matter in the course of the negotiation of the Lease and/or contained within the Lease, shall remain confidential and not be disclosed to any third party, save and expect for its solicitors, advisors or agents or others for the purpose of interpreting or carrying out obligations under this Lease or assessing the value of this Lease, and unless required by law in the case of voluntary disclosure. The party which discloses the information to a third party shall remain responsible for any breach of this confidentiality provision or privacy provision by such third party. This present provision shall remain in effect after the expiration of this Lease and for three (3) years henceforth.

C. Allied’s Counterclaim in the Main Action

7. In the main action, Allied has asserted a counterclaim against Tadiem for intentional interference with economic relations alleging, inter alia, that in or around April 2015, during Tadiem’s negotiations with CBC over the terms of the CBC-Tadiem Lease, representatives of Tadiem and/or its agent Devencore made “disparaging, untrue and false statements” regarding Allied to employees of CBC and others in the commercial leasing industry. In particular, Allied has alleged that representatives of Tadiem made statements that represented Allied “as the worst landlord to deal with and as scammers and liars” (the “Alleged Statements").

8. According to a Response to Demand for Particulars. Allied discovered the Alleged Statements through “representatives of CBC”.

D. Liability of Third Parties

9. In its Fresh as Amended Reply and Defence to Counterclaim, Tadiem denies of the allegations in Allied’s counterclaim. In particular, Tadiem denies that Alleged Statements were made, either during its other time. The allegations in this Third Party Claim are strictly in the alternative to the defences pleaded by Tadiem in its Fresh as Amended Reply and Counterclaim.

10. In the event Tadiem is adjudged liable in the from the Alleged Statements, which Allied representatives of CBC, Tadiem is entitled to contribution and indemnity from the third parties.

11. In those circumstances, CBC is liable to Tadiem for breach of the CBC-Tadiem Lease. Section 17.27 of the CBC-Tadiem Lease prohibited the disclosure of any non-public information disclosed during the lease negotiations. The disclosure of the Alleged Statements to Allied, either by CBC or by its agent CBRE, for which CBC is liable constitutes a breach of section 17.27 of the CBC-Tadiem Lease by CBC.

12. If it is proven in the main action that CBRE disclosed the Alleged Statements to Allied, CBRE is directly liable to Tadiem for intentional interference with economic relations.

13. CBRE’s disclosure of the Alleged Statements to Allied constituted an unlawful act that is actionable by CBC against CBRE, or would have been actionable had CBC suffered damages. As CBC’s commercial real estate broker, CBRE owed a duty of care as well as fiduciary duties to CBC. Those duties included, inter alia:

(a) A duty to avoid causing reasonable foreseeable harm to CBC;

(b) A duty to avoid conflicts of interest, including a duty to not prefer the interests of one client over another; and

(c) A duty to not disclose confidential information that it learned during the course of its retainer.

14. By disclosing the Alleged Statements to Allied, CBRE breached the aforementioned duties. In particular, the disclosure of the Alleged Statements was also a breach of the fiduciary duties that CBRE owed to CBC. By disclosing the Alleged Statements to Allied, CBRE disclosed confidential information it learned as a result of its retainer by CBC, and preferred the interests of one client, Allied, over the interests of and at the expense of another client, CBC.

15. By disclosing the Alleged Statements to Allied, CBRE intended to cause harm to Tadiem. CBRE disclosed the Alleged Statements to Allied for the express purpose of assisting Allied with its counterclaim against Tadiem.

16. Tadiem is entitled to be fully indemnified by the third parties for any amounts it may be adjudged liable to Allied in the main action. Tadiem is also entitled to be fully indemnified for any and all legal costs it is forced to incur defending the counterclaim in the main action and in prosecuting the Third Party Claim

17. The defendant pleads and relies on the provisions of the Negligence Act, R.S.O. 1990, c. N.1.

18. Tadiem proposes that the trial of the Third Party Claim be held in Toronto concurrently with the trial of the counterclaim in the main action.

[8] On December 27, 2018, Master Short granted leave to Tadiem to issue its third party claim.[^1] Allied Properties now appeals the Master’s Order.

[9] Allied Properties submits that the Master erred by:

a. misapprehending and misapplying rule 29.02(1.2) and Rule 21.01(1)(b) of the Rules, including failing to exercise his gatekeeper function;

b. failing to determine that the Third Party Claim is fatally flawed as there is no factual basis in the pleading to establish common liability for contribution by CBC and/or CBRE with respect to Tadiem's False Statements (i.e., it is not alleged that CBC or CBRE somehow made, forced or coerced Tadiem to make the statements);

c. failing to find that the Third Party Claim does not disclose a reasonable cause of action;

d. misapprehending and misapplying the law of contribution and indemnity;

e. relying on positions which were not advanced on the motion; and

f. failing to recognize that there is no basis in the pleadings for the Order.

[10] While Allied Properties alleges a host of errors made by the Master, ultimately its complaint is encompassed by an argument that while under rule 29.01(a), a defendant may join as a third party (CBC and CBRE) a person who may be liable to the defendant all or part of the plaintiff's claim, in the immediate case, there is no legal basis for CBC and CBRE to be liable for all or part of Allied Properties’ (the plaintiff by counterclaim’s) claim against Tadiem (the defendant by counterclaim) and, therefore, there is no basis for Tadiem’s claim for contribution and indemnity in the Third Party claim and no basis for joining CBC and CBRE as third parties.

[11] Allied Properties fundamental argument for its appeal, however, fails.

[12] During argument Allied Properties (as plaintiff by counterclaim) conceded that Tadiem (as defendant by counterclaim) had pleaded a reasonable causes of action against CBC and CBRE for breach of contract and for intentional interference with economic relations, but Allied Properties empathetically submitted that these standalone causes of action against the proposed third parties did not support or connect to a claim for contribution or indemnity or to a claim under the Negligence Act by Tadiem against the proposed third parties. In other words, Allied Properties submitted that it was plain and obvious that Tadiem’s third party claim for contribution and indemnity was not authorized by rule 29.01(a) and, therefore, Tadiem could not be permitted to commence a third party claim.

[13] The fundamental flaw with Allied Properties argument is the premise that Tadiem had designed its third party claim and its submissions to the Master so narrowly as to be confined to rely exclusively on rule 29.01(a).

[14] The Master did not view Tadiem’s third party claim that narrowly, and he noted, correctly in my view, that a third party claim against CBC and CBRE was supported by rule 29.01(b) and by rule 29.01(c).

[15] In other words, as the third party claim was designed by Tadiem: (1) CBC and CBRE might be liable to Tadiem for independent claims of breach of contract or for intentional interference with economic relations arising out of the transactions involved in the main action (rule 29.01(b)(i)); (2) CBC and CBRE might be liable to Tadiem for independent claims of breach of contract or for intentional inference with economic relations arising out of a related transaction (rule 29.01(b)(ii)); or (3) CBC and CBRE should be bound by the determination of an issue arising between Allied Properties (the plaintiff by counterclaim) and Tadiem (the defendant by counterclaim) (rule 29.01(c)).

[16] Thus, I agree with Tadiem’s argument set out in paragraph 2 of its factum, which states:

2. Allied's primary argument in this appeal is based on a fundamental misunderstanding of the proposed claims against the third parties. Contrary to what is alleged by Allied, the proposed third party claim is not based on the statutory cause of action in s. 2 of the Negligence Act that the third parties breached duties owed to Allied thereby causing or contributing to the damage alleged by Allied. In advancing this argument, Allied purports to rely on a single reference to the Negligence Act at the end of the proposed third party claim while completely ignoring the actual substance of the pleading. As is clear from the proposed pleading, Tadiem's third party claim is grounded in duties in contract and in tort that the third parties owed directly to Tadiem. Tadiem alleges that a breach of those duties caused it to suffer damages that are related to the damage that is alleged by Allied in the main action.

[17] And, I see no merit to Allied Properties’ arguments that the Master misapplied or misunderstood Rule 29 or relied on positions that were not advanced on the motion.

[18] I also see no merit to the related and overlapping arguments that the Master erred by: failing to conclude that the third party claim did not disclose a reasonable cause of action; failing to conclude that there was no reasonable cause of action for contribution and indemnity; failing to determine that the third party claim for contribution and indemnity was fatally flawed; misapprehending and misapplying the law of contribution and indemnity; failing to recognize that there is no basis in the pleadings for the Order allowing the third party claim; and failing to exercise his gatekeeper function.

[19] The thrust of all of these arguments is that on a motion under Rule 29, the court should apply the standard used on a motion to strike pleadings under Rule 21 and the court ought not to allow a legally untenable third party claim to be issued.

[20] As I have already noted, Allied Properties concedes that Tadiem did plead legally viable claims for breach of contract and intentional interference with economic relations against the proposed third parties. It appears to me that in the case at bar, the Master did consider whether it was plain and obvious that there was no legally viable third party claim, and he decided that it was not plain and obvious that there was no claim.

[21] In paragraph 41 of his Reasons for Decision, referring to Tate Andale Canada Ltd. v DiClemente,[^2] he said that in considering whether to extend the time for a third party claim, the court should apply a test similar to rule 21.01 (1)(b). In paragraph 54 of his decision, he stated that in deciding whether to grant leave to issue a third party claim, the Court may consider the tenability of the proposed third party claim; however the threshold for establishing tenability is very low and akin to the test applicable in motions to strike. (See also paragraphs 55 to 60 of his Reasons.) Therefore, to the extent that it was necessary to perform a gatekeeper function, the Master made no error in his conclusion that the third-party proceeding should be allowed to proceed.

[22] For the above reasons, the appeal is dismissed with costs of $7,500, all inclusive, payable forthwith.

Perell, J.

Released: April 12, 2019

COURT FILE NO.: CV-16-553068

DATE: 2019/04/12

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

TADIEM INC.

Plaintiff/Defendant By Counterclaim

• and -

ALLIED PROPERTIES MANAGEMENT LP, ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST, 1413882 ONTARIO LIMITED and 1301553 ONTARIO LIMITED

Defendants/Plaintiffs by Counterclaim

REASONS FOR DECISION

PERELL J.

Released: April 12, 2019

[^1]: Tadiem Inc. v. Allied Properties Management LP, 2018 ONSC 7676 (Master). [^2]: (1994), 36 C.P.C. (3d) 351 at 365 (Ont. Master); affirmed (1995), 36 C.P.C. (3d) 351 (Ont. Gen. Div.),