Prokuron Sourcing Solutions Inc. v. Sobeys Inc. and Lexmark Canada Inc.

2019 ONSC 7403

COURT FILE NO.: CV-18-606255

DATE: 2019-12-19

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: PROKURON SOURCING SOLUTIONS INC., Plaintiff

AND: SOBEYS INC. and LEXMARK CANADA INC., Defendants

BEFORE: KOEHNEN J.

COUNSEL: Andrew McCoomb, for the Moving Party, Sobeys Inc. Mark Wiffen for the respondent Prokuron Sourcing Solutions Inc. Ejona Xega for Lexmark Canada Inc.

HEARD: November 28, 2019

ENDORSEMENT

[1] The defendant Sobeys Inc. moves for an order striking the statement of claim against it under rule 21.01 (1) (b) as disclosing no reasonable cause of action.

[2] The test to strike a statement of claim as disclosing no cause of action is well-known:

(a) The claim will be struck when it is “plain and obvious” that it discloses no reasonable cause of action: Hunt v. T & N plc, 1990 90 (SCC), [1990] 2 S.C.R 959 at para. 36. The impugned paragraphs should be struck only if the cause of action has no reasonable prospect of success: Rebello v. Bank of Nova Scotia, 2018 ONSC 7127 at para. 5

(b) The words of the claim should be read generously in favour of the plaintiff. Pleadings are to be read as generously as possible to accommodate any inadequacies due to drafting deficiencies: Dawson v. Baker, 2017 ONSC 6477 at para. 39.

(c) Evidence is not admissible under rule 21.01(1)(b) although the court can consider documents referred to in the statement of claim.

(d) The threshold for a statement of claim to survive a motion to strike is not high. A “germ or scintilla” of a cause of action will be sufficient: Dawson at para. 37.

(e) As long as the pleading raises a factual matrix of concern to the plaintiff within which it is possible to locate the defendant’s liability, it will survive the motion: Dawson at para. 39.

[3] Prokuron Sourcing Solutions Inc., was a distributor for the products of Lexmark Canada Inc. One of Prokuron’s customers in that distributorship arrangement was Sobeys. The action arises out of the deterioration of the relationship between Prokuron on the one hand and both Lexmark and Sobeys on the other.

[4] The statement of claim alleges breach of contract, breach of confidence, conspiracy, inducing breach of contract, intentional interference with economic and contractual relations, and unjust enrichment against Sobeys and Lexmark. Sobeys submits that the Prokuron’s pleading discloses no reasonable cause of action for any of these claims. Before proceeding to analyse each cause of action, I should point out that the claim was drafted by Prokuron’s former lawyer and not by Mr. Wiffen who appeared on behalf of Prokuron on the motion before me.

[5] When making its submissions, Sobeys focused on paragraphs 42 to 75 of the statement of claim. Those paragraphs set out various causes of action under specific headings. Each heading then contains a summary the particular cause of action. Sobeys focuses on these descriptions to demonstrate what it asserts are flaws in the pleading. When read in isolation, these paragraphs do indeed contain flaws which might well lead to the claim being struck.

[6] The first 41 paragraphs of the claim, however, set out the material facts on which the summaries of the specific causes of action in paragraphs 42 to 75 are based. Each cause of action that is described in paragraph 42 onward must be read in light of the facts pled in the first 41 paragraphs.

[7] I agree that, even when taken as a whole, the statement of claim is not drafted as clearly or directly as it could be. On my reading, however, it raises at least enough of a “germ or scintilla” of a cause of action to withstand a pleadings motion. By referring to the “germ or scintilla” test I do not mean to indicate that the plaintiff has just barely met the test. When read as a whole, it is not, “plain and obvious” that the statement of claim discloses no reasonable cause of action. It does set out a factual matrix within which it is possible to locate Sobeys’ liability with respect to each of the causes of action with the exception of the claim for intentional interference with economic and contractual relations.

Breach of Contract and Breach of Confidence

[8] I will address these two causes of actions together because they are closely intertwined in the statement of claim and in Sobeys’ argument to strike the claim.

[9] The breach of contract and breach of confidence claims arise out of a Request for Proposals that Sobeys issued in 2018.

[10] In moving to strike the statement of claim, Sobeys focuses on paragraphs 60 to 63 of the pleading which read as follows:

60. “Sobeys–breach of contract: The Plaintiff alleges that Sobeys has failed to abide by the Prokuron Sobeys Supply Agreement by failing to keep confidential the information required by this Agreement. Prokuron alleges that Sobeys has failed to conduct itself fairly or in a manner that demonstrates good faith.”

61. Breach of confidence by Sobeys: The Plaintiff alleges that Sobeys also failed to abide by the terms of the Prokuron Sobeys Supply Agreement by disclosing and requesting to disclose information subject to this Agreement for the one vendor (other than the Plaintiff) from whom Sobeys requested a rebid.

62. The Plaintiff alleges that the Prokuron Sobeys Supply Agreement identified confidential information, and confirmed that the information provided was confidential.

63. The Plaintiff alleges that Sobeys misused the information conveyed to it to directly request that the one other vendor reprice its bid. The Plaintiff alleges that Sobeys did so with the specific intention of causing harm to the Plaintiff and for Sobeys’ own benefit.”

[11] Sobeys submits that the plaintiff does not plead any duty of confidentiality other than that contained in a Supply Agreement between Prokuron and Sobeys which was entered into in 2011 and which expired on its own terms in 2013. Moreover, that Supply Agreement defined what was confidential in terms that did not include pricing. In addition, Sobeys submits that the claim should be struck because Prokuron does not allege that the Request for Proposals imposes a contractual term of confidentiality and because the information was already in the public domain.

[12] There are a number of problems with these submissions on a motion to strike.

[13] First, the statement of claim does not say that the Prokuron Sobeys Supply Agreement expired in 2013. Instead, Sobeys took me to the agreement which indicated that it had a term of two years. Although no evidence is admissible on a motion to strike under rule 21.01 (1) (b), both parties agreed that the court is entitled to look at documents referred to in the statement of claim. That does not, however, and the matter.

[14] It is clear from the statement of claim that the parties continued to have a relationship long after 2013. The precise terms of that relationship will be an issue at trial. Prokuron submits that where parties to a fixed agreement continue to act under the agreement after its expiry, there is an implied renewal of the agreement: TDL Group Corp. v. MRMA Holdings Ltd. 2017 ABQB 713 at para. 19. Although the specific terms on which the parties operated after 2013 may be an issue for trial, it is not for me to determine on a pleadings motion.

[15] Second, with respect to the confidentiality terms of the Prokuron Sobeys Supply Agreement, Sobeys underscores that the agreement defined as confidential information of Prokuron concerning “formulations, formulas, specifications, formula costings and techniques…”. Sobeys submits that this does not include pricing.

[16] Prokuron argues that a trial judge could find that “formulas” and “formula costings” include pricing information. I agree that it would be open to a trial judge to do so.

[17] The statement of claim specifically refers to Prokuron offering discounts and rebates to Sobeys. It is relatively common for a business to create a “pricing formula” based on volume of purchases, speed of payment or other factors. Given that contractual interpretation involves issues of mixed fact and law, and given that I cannot make findings of fact on a pleadings motion, these sorts of interpretive issues should be left to a trial judge and should not be determined on a pleadings motion.

[18] Third, with respect to the submission that Prokuron has not pleaded that pricing was subject to an obligation of confidentiality, I read the statement of claim differently.

[19] Paragraph 1(e) of the statement of claim seeks:

“a declaration that Sobeys has breached the terms of the Request for Proposals for the provision of printing supplies and service;”

[20] As noted earlier, on a motion to strike I am allowed to review documents referred to in the pleading. Sobeys’ Request for Proposals contains the following statement: “We will treat all information in the RFP as confidential and will not share with anyone else.”

[21] The combination of the request for a declaration that Sobeys breached the terms of the Request for Proposals and the confidentiality provision in the RFP communicates a factual matrix of concern to the plaintiff within which it is possible to locate the defendant’s liability.

[22] In addition to the foregoing, paragraph 71 specifically alleges that Prokuron had an agreement with Sobeys pursuant to which sharing of pricing information was prohibited.

[23] Fourth, with respect to the submission that the pricing information about which Prokuron complains was already in the public domain, I also read the statement of claim differently.

[24] In paragraph 36 Prokuron pleads that it allowed Sobeys to share its pricing for Lexmark products with other distributors who intended to submit bids. Paragraph 37 goes on to explain that Sobeys did not select any of the bids that were submitted. Rather, approximately one month after the bids were submitted, Sobeys asked the plaintiff and one other vendor to reprice their bids. In paragraph 38 Prokuron alleges that it “was again asked to share its prices” but that it refused (emphasis added).

[25] Sobeys submits that the information requested in paragraph 36 and 38 are to the same information. I read it differently. Paragraph 38 specifically states that Prokuron was “again asked” to share its pricing information. That suggests a second request which Prokuron refused.

[26] If Sobeys’ point is that Prokuron’s pricing was the same on both occasions, the statement of claim does not say. Sobeys would obviously be free to pursue that theory at trial. Even if the two sets of prices are the same, that would not end the analysis. The fact that the second pricing is the same as the first does not make it any less confidential because the other bidder would not know that the plaintiff’s two bids contained identical pricing.

Conspiracy Claims

[27] The conspiracy claims are found in paragraphs 69 to 72 of the statement of claim.

[28] Sobeys submits that conspiracy claims cannot rest on bald allegations which lump together several defendants and allege that they conspired to do something. A conspiracy claim must provide material facts and full particulars to support the plea. Those facts include the parties to the conspiracy, the relationship, the agreement between them, the purpose of the conspiracy, acts done in furtherance of the conspiracy and any injury to the plaintiff: Research Capital Corp. v. Sky Service Airlines Inc. [2008] O.J. number 2526 at paragraph 47 – 48.

[29] On my reading, paragraphs 69-72 of the statement of claim meet this test. Those paragraphs set out the parties to the conspiracy (Lexmark and Sobeys), set out the agreement between them (a collaborative method for the sale of Lexmark products to Sobeys), set out acts done in furtherance of the conspiracy (sharing the plaintiff’s confidential pricing information with a third party contrary to agreements that each of Lexmark and Sobeys had with the plaintiff) and set out the purpose of the conspiracy (to harm Prokuron). The statement of claim also asserts injury to the plaintiff.

[30] Sobeys submits that Prokuron has not pleaded the particulars of any conspiracy agreement such as when the agreement was formed or what its terms were. It is unlikely that the victim of an alleged conspiracy would ever know at the pleading stage the date on which the conspiracy was formed or the specific terms of the conspiracy. These issues are for discovery, not the statement of claim.

[31] Sobeys submits that if a party is acting in its self-interest, a conspiracy for the purpose of injuring the plaintiff is not made out. To succeed on a conspiracy to injure, the pleading must establish that the predominant purpose of the conspiracy was to harm the plaintiff rather than to pursue self-interest: Fournier Leasing Co. v. Mercedes-Benz Canada Inc. 2012 ONSC 2752 at paras. 76, 79.

[32] Paragraph 69 of the statement of claim states clearly that “Lexmark and Sobeys have conducted themselves in a manner whose predominant purpose was to cause injury to Prokuron.” While Sobeys may wish to defend on the basis that its conduct was aimed at self-interest and not at harming Prokuron, that will be an issue to be explored in the balance of the proceeding. It is not appropriate for me to make that determination on a pleadings motion.

[33] In support of its “self-interest” argument, Sobeys points to paragraph 73 of the statement of claim which pleads that the defendants are enriching themselves. While that may be the case, that statement is made in connection with the claim for restitutionary relief akin to unjust enrichment. The complete paragraph reads:

“Restitutionary relief: The Plaintiff alleges that the conduct of the Defendants, as aforesaid, will enrich each of the Defendants, and correspondingly deprive the Plaintiff. The Plaintiff alleges that there is no juridical reason for this deprivation.”

[34] The fact that the plaintiff claims unjust enrichment does not prevent it from claiming conspiracy as well.

Inducing Breach of Contract

[35] In OPFFA v. Paul Atkinson et al., 2018 ONSC 1207 this court summarized the requirements for inducing breach of contract as follows:

a) the existence of a valid and enforceable contract between the plaintiff and a third party;

b) knowledge on the part of the defendant(s) of the existence of the contract;

c) an intentional act on the part of the defendant(s) to cause a breach of the contract;

d) interference on the part of the defendant(s) that resulted in the breach of the contract; and

e) damage to the plaintiff.

Sobeys submits that the Plaintiff is missing the elements set out in sub -paragraphs (c) and (d) above.

[36] Paragraphs 39-40 of the statement of claim plead that both Lexmark and Sobeys disclosed confidential pricing information of Prokuron to another bidder. The information concerned pricing as between Prokuron and Lexmark as well as pricing information as between Prokuron and Sobeys. Paragraph 41 of the statement of claim states that one of Lexmark or Sobeys approach the other to initiate the disclosure of the confidential information. That information was confidential under agreements that Prokuron had with each of Lexmark and Sobeys. In other words, whichever one of Lexmark or Sobeys initiated the discussion about disclosing confidential information was inducing the other to breach its contract with Prokuron. One can also envisage circumstances in which both Lexmark and Sobeys may be liable.

[37] That is enough to meet the test summarized in Paul Atkinson.

Intentional Interference with Economic and Contractual Relations

[38] In A. I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, [2014] SCJ No. 12 the Supreme Court of Canada clarified the elements of the tort of intentional interference with economic relations. That tort allows the plaintiff to sue a defendant for economic loss where the defendant has engaged in an unlawful act against a third party which caused damage to the plaintiff.

[39] Sobeys submits that this is not alleged here and cannot be inferred. I agree.

[40] The summary of the claim with respect to intentional interference with economic and contractual relations is found at paragraph 67-68 of the statement of claim and reads as follows:

67. The Plaintiff alleges that Sobeys is directly aware of the Prokuron – Lexmark NDA and the Distribution Agreement.

68. The Plaintiff alleges that Sobeys has taken steps to wrongfully effect a breach of the Prokuron - Lexmark NDA and the Distribution Agreement

[41] That strikes me as too bald a pleading. Nowhere does statement of claim allege that Sobeys engaged in an unlawful act towards another party which led the plaintiff to suffer damage. At best, the statement of claim pleads that Sobeys either encouraged Lexmark to disclose confidential information or was receptive to Lexmark’s request that Sobeys disclose confidential information. Neither a request nor cooperation amounts to unlawful conduct towards a third party.

[42] As a result, I would strike paragraphs 67 – 68 and the reference to intentional interference with economic and contractual relations in paragraph 1(a) of the statement of claim. I will, however, grant the plaintiff leave to amend its statement of claim by January 31, 2020 if it wishes to do so. In granting leave to amend I am in no way adjudicating upon any limitations issues.

Unjust Enrichment

[43] With respect to the claim for unjust enrichment, Sobeys submits that it is a bald allegation, lacks detail and has not pleaded any corresponding benefit to Sobeys.

[44] While I agree that the pleading does not appear to contain an express statement to the fact that Sobeys has received a corresponding benefit, the overall nature of the claim is sufficient to infer such a benefit. The essential thrust of the claim is that Sobeys used Prokuron’s confidential pricing information to obtain an advantage in the bidding process. In essence, the complaint is that Sobeys shared Prokuron’s pricing with another bidder in order to obtain equal or better pricing from that other bidder. The implicit benefit to Sobeys is the difference between the third party’s initial price and the price at which the third party ended up supplying to Sobeys. Some or all of that is an implicit benefit to Sobeys which was obtained at the expense of Prokuron.

Conclusion and Costs

[45] As a result of the foregoing I dismiss the motion to strike save and except that I will order that paragraphs 67 - 68 as well as the reference to intentional interference with economic and contractual relations in paragraph 1(a) of the statement of claim be struck out with leave to amend on or before January 31, 2020.

[46] Any party seeking costs may deliver cost submissions to my attention care of Judges’ Reception at 361 University Avenue by January 17, 2020. A party responding to a cost submission may do so by January 24, 2020.

Koehnen J.

Date: December 19, 2020.