ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
RIAZ PISANI
Plaintiff
– and –
BENJAMIN SMITH and AIR CANADA
Defendants
Counsel: Jeffrey E. Feiner and Hilary A. Brown for the Plaintiff Daniel S. Murdoch and Libby Nixon for the Defendants
HEARD: January 16, 2019
ENDORSEMENT
Overview
1The plaintiff is the former chief executive officer, director and shareholder of Contac Services Inc. (“Contac”) and its subsidiary corporations. Until Contac was placed into receivership in early December 2014, Contac carried on as a successful e-commerce business with a global customer base.
2Contac entered into a Service Agreement dated August 31, 2013 with the defendant Air Canada. Pursuant to that Service Agreement, Contac was to provide personal electronic itinerary receipts to Air Canada passengers. In the months following the execution of the Service Agreement, certain disputes arose between Contac and Air Canada. The parties ultimately entered into a Resolution Agreement (effective October 1, 2014) whereby, inter alia, they agreed to rescind the previous Service Agreement. In addition, Contac executed a Full Release in favour of Air Canada in exchange for payment of a one-time development fee of $500,000.00.
3As stated, Contac was ultimately placed into court-ordered receivership. The plaintiff commenced this proceeding by Statement of Claim issued on November 16, 2017 (and subsequently amended on December 3, 2018). In his claim, the plaintiff (in his individual capacity) seeks damages from Air Canada and the co-defendant Benjamin Smith (“Smith”, Air Canada’s former president and chief operating officer) for conspiracy to injure and intentional interference with economic relations, along with punitive, aggravated and exemplary damages.
4The defendants brought a motion under Rules 21.01(b) and 21.01(3)(d) seeking an order striking out the plaintiff’s Amended Statement of Claim without leave to amend on the grounds that the claim (a) discloses no reasonable cause of action and/or (b) is frivolous, vexatious and otherwise an abuse of the court’s process.
5The defendants’ motion was argued before me on January 16, 2019 and I took my decision under reserve.
Motion to Strike
6The test to be employed on a motion to strike is well known and arguably trite. As held by the Supreme Court of Canada in Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, 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.
7As 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.
8A concise and helpful summary of the principles to be applied on a motion to strike, and in particular a motion to strike a claim for intentional interference with economic relations, 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 A.I. Enterprises Ltd. v. Brown 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 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 battleground for highly technical complaints about the form of pleadings for tactical reasons to preclude issues from being heard on their merits.
(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.
The Plaintiff’s Theory of his Case
9At paragraphs 38, 39, 39A and 40 of the Amended Statement of Claim, the plaintiff alleges that, in or around January 2017, he learned from “a former senior director of Air Canada” that during an Air Canada executive meeting, Smith stated that he “didn’t want the plaintiff to get rich off Air Canada”. The plaintiff further alleges that Smith maintained and exhibited a “personal and unwarranted antipathy” towards the plaintiff that led Smith to cause Air Canada to act in bad faith in refusing to fulfill and honour its agreements with Contac.
10The Amended Statement of Claim states that even though it was not in Air Canada’s best interest to breach its agreements with Contac, Smith carried out such decisions for improper purposes and outside the scope of his duty to act in Air Canada’s best interest, all the while motivated by personal antipathy towards the plaintiff.
11There is no dispute that (a) the plaintiff was never privy in contract with Air Canada, and (b) Smith was never a party to either the Service Agreement or the Resolution Agreement.
12The plaintiff alleges two causes of action against the defendants. In particular,
(a) Smith and Air Canada conspired to injure the plaintiff through an agreed upon scheme, the predominate purpose of which was to commit a series of unlawful acts (i.e. causing Air Canada to breach its contractual obligations to Contac) for the sole purpose of causing the plaintiff direct financial harm; and,
(b) Smith and Air Canada intentionally interfered with the plaintiff’s economic and contractual relations by seeking to injure the plaintiff’s economic interests (which interests were “dependent upon the fulfillment of Air Canada’s contractual obligations to Contrac”. The plaintiff alleges that Smith caused Air Canada to breach its contractual obligations to Contac, and such unlawful interference was allegedly “in breach of Smith’s fiduciary duty owed to Air Canada”.
The Resolution Agreement
13A pleading is deemed to include any document incorporated therein by reference if the document forms an integral part of the claim. As held by Justice Perell in McDowell and Aversa v. Fortress Real Capital Inc. 2017 ONSC 4791, the Court should consider any documents specifically referred to and relied upon in a pleading when assessing the merits of a moving party’s request to strike out a pleading.
14At paragraph 37 of the Amended Statement of Claim, the plaintiff alleges that Contac and Air Canada entered into “a new agreement” to salvage the Contac businesses in favour of its creditors, and that the new agreement “purported to settle any differences between Contac and Air Canada.” In my view, it is important to review the terms of this new agreement (which is in fact the Resolution Agreement) when assessing the causes of action pursued by the plaintiff.
15The Resolution Agreement was signed by the plaintiff in his capacity as president of Contac and its subsidiaries, and entered into prior to Contac being placed into receivership. In the preamble to the Resolution Agreement, the parties agreed that there had been a misunderstanding between them with respect to whether Contac had been awarded a specific hotel contract by Air Canada, and since Contac and its subsidiaries were in fact not awarded that contract, in exchange for payment of a $500,000.00 development fee, the parties agreed to rescind the Service Agreement and enter into a new agreement within 10 days thereafter.
16In addition, in consideration of the said payment and other terms and conditions, Contac and its subsidiaries (including their heirs, executors, administrators, representatives and beneficiaries) released Air Canada and its current and past officers, directors and employees from “any and all claims, demands, causes of action, suits, debts, dues, duties, sums of money, accounts, reckonings, covenants, contracts, agreements, promises, damages, liabilities and obligations, both contingent and fixed, known and unknown of every kind and nature whatsoever.”
17I note that nowhere in the Amended Statement of Claim does the plaintiff call the legal status of the Resolution Agreement into question. Simply put, there is nothing in the Amended Statement of Claim which challenges the legal validity or application of the Resolution Agreement.
Decision – Conspiracy to Injure
18There are two recognized forms of the tort of civil conspiracy:
Where the predominate purpose of the defendant is to cause the plaintiff injury (regardless of whether the means used were lawful or unlawful); and,
Where the means used were unlawful, directed towards the plaintiff, and the defendant ought to have known in the circumstances that injury to the plaintiff would likely result.
19I agree with the defendants that the Amended Statement of Claim does not specify which type of conspiracy is being pursued by the plaintiff. During argument, counsel for the plaintiff submitted that the pleading satisfies the constituent elements of either form of the tort.
20The plaintiff is alleging a conspiracy between an company (Air Canada) and its former officer and director (Smith). The defendants rely upon the decision of Justice Braid in Future Health Inc. (Trustee of) v. General Accident Assurance Company of Canada 2016 ONSC 2149 and in particular the following paragraphs:
“Where an employee acts within the scope of his or her authority in the best interests of the corporation, such that the actions complained of are the actions of the corporation itself, it is illogical to say that there can be a civil conspiracy between the employee and his or her employer. There can only be one party with the intent to conspire in such a situation, since the intent of the director or officer, the directing mind of the corporation, is the intent of the corporation: Craik v. Aetna Life Insurance Co. of Canada, [1995] O.J. No. 3286 (Ct. J.), at para. 23 aff’d [1996] O.J. No. 2377 (C.A.).
Where employees act for the benefit of their employer within the scope of their authority, they are not proper parties to a conspiracy claim. Only where ‘the director or officer is acting outside the scope of his or her authority in being motivated by advancing a personal interest contrary to the interest of the corporation, or when the director or officer is committing a fraud or doing something with malice,’ can the individual be subject to personal liability: Craik, supra, at para. 19.”
21In the Amended Statement of Claim, the plaintiff alleges that Smith was acting outside the scope of his employment with and duties owed to Air Canada. In other words, Smith and Air Canada entered into an agreement to allegedly harm the plaintiff, all the while to the detriment of Air Canada. Stripped to its core, the plaintiff is alleging that Air Canada agreed with Smith to take various steps to Air Canada’s detriment, although with the purpose of injuring the plaintiff. Air Canada is alleged to have agreed to cause itself injury in order to injure the plaintiff.
22The Amended Statement of Claim explicitly alleges that in conspiring with Air Canada to cause the plaintiff financial harm, Smith’s interest was separate and distinct from his role as an officer and director of Air Canada. However, I agree with the defendants that a conspiracy to injure requires an agreement between two or more parties to work together with concerted actions in furtherance of that agreement. It is difficult to understand how Air Canada, an alleged party to the conspiracy, would agree to further that conspiracy to its own detriment. There is very little set out in the Amended Statement of Claim to explain how or why Air Canada would enter into such an agreement.
23The plaintiff relies upon the decision of Justice Campbell in Dale v. The Toronto Real Estate Board 2012 ONSC 512 in which The Toronto Real Estate Board (“TREB”) was alleged to have acted in concert with its officers and directors to breach an agreement with the plaintiffs. It was alleged that the conspiracy was carried out in an effort to drive the plaintiffs out of the real estate business. In refusing to strike out the claim, Justice Campbell found that the pleading alleged that the individual defendants acted unlawfully, maliciously and for their own self interest in participating in the unlawful activity in order to eliminate the plaintiff’s new business.
24While such allegations are arguably sufficient for the purpose of a Rule 21 motion, in Dale, TREB was not alleged to have entered into an agreement against its own interest. On the contrary, harming the plaintiffs in Dale would have benefited TREB. This is clearly not the case before me.
25It may be that the plaintiff may be able to adequately explain how and why Air Canada entered into an agreement with Smith to carry out overt acts in furtherance of the alleged conspiracy, i.e. a common goal to injure the plaintiff. Presently, the Amended Statement of Claim does not contain sufficient material facts to achieve this purpose, and I believe that the proper remedy is to strike out the plaintiff’s conspiracy to injure claim with leave to amend.
Decision – Intentional Interference with Economic/Contractual Relations
26The elements of the tort of intentional interference with economic/contractual relations are as follows:
(a) an intention to injure the plaintiff;
(b) interference with the plaintiff’s economic/contractual interests by unlawful means; and,
(c) economic loss on the part of the plaintiff as a result of the defendant’s conduct.
27On its face, the Amended Statement of Claim appears to contain sufficient facts to support the above three elements. However, in A. I. Enterprises Ltd. v. Bram Enterprises Ltd. 2014 SCC 12, the Supreme Court of Canada recently clarified the legal meaning of “unlawful means” in the second required element of the tort.
28In A.I., the Court held that the tort captures the intentional infliction of economic injury on a plaintiff by a defendant’s use of unlawful means against a third party. Specifically, the rationale for applying the tort narrowly focused upon “extending an existing right to sue from the immediate victim of the unlawful act to another party whom the defendant intended to target with the unlawful conduct”.
29The tort must include either conduct that would give rise to a civil cause of action by a third party, or conduct that would have done so if the third party had suffered a loss as a result of that conduct. I rely upon the following excerpt from A.I. (my emphasis in bold):
“The scope of the unlawful means tort depends on the answers to three questions. First, does the unlawful conduct have to be actionable by the person at whom it is immediately directed? In my view, the conduct must be an actionable civil wrong or conduct that would be actionable if it had caused loss to the person at whom it was directed. Second, is there a requirement that the unlawful means not be otherwise actionable by the plaintiff? I propose to answer this question “no”. Third, should the definition of “unlawful means” be subject to principled exceptions? I would also answer this question in the negative. While the approach outlined by these answers leaves only a narrow scope for liability, my view is that it is most consistent with the history and rationale of the tort as well as with its place in the modern scheme of liability for causing economic harm.”
30In my view, the Amended Statement of Claim does not create the parasitic liability outlined in A.I. Specifically, in the face of signing the Resolution Agreement, Contac (the third party) no longer has any “existing right to sue” which could be extended to the plaintiff. While the Amended Statement of Claim does allege that Air Canada intended to target the plaintiff with unlawful conduct, given that Contac released Air Canada and its administrators, representatives, officers, directors and employees from any and all claims, demands or causes of action, Contac no longer has an actionable civil wrong against Air Canada. In the absence of such an existing, actionable wrong, the necessary elements for this narrowly construed tort cannot be satisfied.
31The plaintiff may be in a position to address this deficiency through a further amendment, presumably one which explains how Contac can maintain an actionable civil wrong against Air Canada in the face of the Resolution Agreement. The plaintiff’s claim for intentional interference of economical/contractual relations is thus struck out with leave to amend.
Costs
32As agreed between the parties, as the successful parties on this motion, the defendants are entitled to costs of the motion fixed on a partial indemnity basis in the all-inclusive amount of $15,000.00 payable by the plaintiff forthwith.
COURT FILE NO.: CV-17-0058660
DATE: 20190130
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
RIAZ PISANI
Plaintiff
– and –
BENJAMIN SMITH AND AIR CANADA
Defendants
ENDORSEMENT
Diamond J.
Released: January 30, 2019