Court File and Parties
Court File Nos.: CV-18-00608-82-0000, CV-18-000611498-0000, CV-18-00605972-0000 Date: 2019-06-25 Superior Court of Justice – Ontario
Court File No.: CV-18-00608-82-0000 Re: Premium Properties Limited and Colonia Trustco Inc., Plaintiffs And: Nightingale Films Holdings PTY Ltd., Nightingale Pictures PTY Ltd., Bron Creative Corp., Aaron Gilbert and Jason Cloth, Defendants
Court File No.: CV-18-000611498-0000 Re: Premium Trust Inc., Plaintiff And: Harmon Films, LLC, Harmon Monster Films, Inc., Creative Wealth Media Finance Corp., Bron Studios USA Inc., Aaron Gilbert and Jason Cloth
Court File No.: CV-18-00605972-0000 Re: Premium Properties Limited, Colonia Trustco Inc., JAAM Ltd., Corinthian Enterprises Inc. and McFlow Capital Corp., Plaintiffs And: Creative Wealth Media Finance Corp., Henchmen Productions Inc., Jason Cloth and Bron Studios USA, Inc., Defendants
Before: Mr. Justice Chalmers
Counsel: W.A. Derry Millar and John M. Buhlman, for the Plaintiffs Alexander Rose, Patrick Corney, for the Defendants, Nightingale Films Holdings Pty. Ltd., Nightingale Pictures Pty. Ltd., Bron Creative Corp., Bron Studios USA Inc., and Aaron Gilbert Eric Golden, for the Defendants, Jason Cloth and Creative Wealth
Heard: April 17, 2019
Endorsement
Overview
[1] Three actions have been brought by investors who entered into agreements to finance the production of movies:
i) Premium Properties and Colonia Trustco v. Nightingale; court file no.: CV-18-00608082-0000, (the “Nightingale Action”);
ii) Premium Trust v. Harmon Films; court file no.: CV-18-00611498-0000, (the “Monster Action”); and
iii) Premium Properties v. Creative Wealth; court file no.: CV-18-00605972-0000, (the “Henchman Action”).
[2] In each case, the Plaintiffs allege that they invested in financing companies which in turn loaned money to companies which produced the movies. The Plaintiffs allege that the loans have not been repaid.
[3] The following motions have been brought by the Defendants pursuant to R. 21.01 of the Rules of Civil Procedure for an order striking all or part of the Statements of Claim on the basis that the claims do not disclose a reasonable cause of action:
a) Nightingale Action
i) The Defendant, Jason Cloth (“Cloth”) moves for an order striking the claim in its entirety against him,
ii) The Defendants, Nightingale Films Holdings Pty Ltd. (“Nightingale Films”) and Nightingale Pictures Pty Ltd. (“Nightingale Pictures”), and Aaron Gilbert (“Gilbert”) move for an order striking the claim in its entirety against them, and Bron Creative Corp. (“Bron Creative”) moves for an order striking all claims against it except for the claims for breach of contract and breach of trust.
b) Monster Action
i) Cloth moves for an order striking the claim in its entirety against him,
ii) Gilbert moves for an order striking the claim brought against him in gross negligence and breach of trust.
c) Henchman Action
i) Cloth moves to strike the claim in its entirety against him, and Creative Wealth Finance Corp. (“Creative Wealth”) moves for an order striking the allegations brought against it in breach of trust and breach of fiduciary duty.
Background Facts
All Claims
[4] In or about mid-2014, the principals of the Plaintiff Companies, Milton Winberg (“Winberg”) and Andrew Pollack (“Pollack”) were introduced to Cloth. Following that introduction, Cloth contacted Winberg and Pollack to solicit investments in the films that Cloth was financing through companies of which Cloth and/or Gilbert were the directing minds.
[5] Based on the various representations made to them, Winberg and Pollack agreed to invest in the movies promoted by Cloth and loaned money to the companies controlled by Cloth and/or Gilbert.
[6] The structure of the loans was similar in the case of each movie. The “Senior Lender” for each movie was one of the companies controlled by Cloth and/or Gilbert (either Creative Wealth or Bron Creative). The Senior Lender entered into agreements with the producers of the movies to loan money to them to finance the making of the movie. The Senior Lender then entered into agreements with the Plaintiffs whereby the Plaintiffs advanced funds to the Senior Lender in exchange for an interest in the loans made to the movie producers.
Nightingale Claim
[7] In early 2017, Cloth approached Winberg and Pollack and proposed that they participate in loans which were being advanced by Bron Creative to Nightingale Films for the production of the movie, “The Nightingale”.
[8] It is alleged that based on the representations made by Cloth, Winberg and Pollack through their companies, Premium Properties Limited (“Premium Properties”) and Colonia Trustco Inc. (“Colonia”) agreed to loan money to Bron Creative for the Nightingale movie. The Plaintiffs claim they have not been repaid the money loaned to Bron Creative.
[9] On November 1, 2018, Premium Properties and Colonia commenced an action against Nightingale Films, Nightingale Pictures, Bron Creative, Gilbert and Cloth (the “Nightingale Claim”).
Henchmen Claim
[10] In early 2015, Cloth approached Winberg and Pollack and proposed that they participate in two loans to be advanced by Creative Wealth to Henchmen Productions Inc. for the production of the movie, “The Henchmen”.
[11] It is alleged that on the basis of representations made by Cloth, the Plaintiffs, Premiums Properties, Colonia, JAAM Ltd. (“JAAM”), Corinthian Enterprises Inc. (“Corinthian”), and McFlow Capital Corp. (“McFlow”) agreed to loan money to Creative Wealth for the Henchmen movie.
[12] On September 27, 2018, Premium Properties, Colonia, JAAM, Corinthian and McFlow commenced an action against Creative Wealth, Henchmen Productions Inc. (“Henchmen”), Cloth and Bron Studios (the “Henchmen Claim”).
Monster Claim
[13] In early 2016, Cloth approached Winberg and Pollock and proposed that they participate in loans which were being advanced by Creative Wealth and Bron Studios USA Inc. to Harmon Films, LLC and Harmon Monster Films Inc. for the production of the movie, “The Monster”.
[14] It is alleged that on the basis of representations made by Cloth and Gilbert, the Plaintiff, Premier Trust Inc. (“Premium Trust”) agreed to loan money to Creative Wealth for the Monster movie. The Plaintiff claims that it has not been repaid or received any interest owing on the loan.
[15] On December 21, 2018, Premium Trust commenced an action against Harmon Films, LLC, (“Harmon Films”) Harmon Monster Films, Inc., (“Harmon Monster”), Creative Wealth, Bron Studios USA (“Bron Studios”), Gilbert and Cloth. (the “Monster Claim”).
Analysis
Motion to Strike – Rule 21
[16] The moving parties bring these motions pursuant to R. 21.01(1)(b) of the Rules of Civil Procedure to strike out a pleading on the grounds that it discloses no reasonable cause of action.
[17] The principles applicable to motions to strike out claims for disclosing no reasonable cause of action are not in dispute:
(1) The allegations in the Statement of Claim should not be struck unless it is “plain and obvious” that the claim discloses no reasonable cause of action;
(2) The allegations in the Statement of Claim are taken to be true or capable of being proven unless the allegations are perfectly ridiculous or incapable of proof;
(3) The Statement of Claim is to be read generously with due allowance for drafting deficiencies; and
(4) The court should not at this stage of the proceedings, dispose of matters of law that are not fully settled in the jurisprudence: Dylex Ltd. (Trustee of) v. Anderson, (2003), 2003 14551 (ON SC), 63 O.R. (3d) 659 at para. 8.
Claims against Nightingale
[18] In paragraph 1(a) of the Nightingale Claim, Premium Properties and Colonia claim $2,536,187.50 principal owing to each of them for repayment of the loans made to Nightingale Films and Nightingale Pictures pursuant to agreements dated February 14, 2017.
[19] The Nightingale Claim does not set out the basis for the claim against the Nightingale Defendants. The agreements dated February 14, 2017 were the Client Terms Sheets and the Participation Agreements between the Plaintiffs and Bron Creative; Nightingale Films and Nightingale Pictures were not parties to those agreements. The Plaintiffs do not allege that the Nightingale Defendants owed them any fiduciary duty, made any misrepresentations or acted negligently.
[20] The Plaintiffs argue that the claim against the Nightingale Defendants is based on breach of contract. Although there was no contract between the Plaintiffs and the Nightingale Defendants, it is alleged at paragraph 23 of the Nightingale Claim that under the Participation Agreements, Bron Creative sold to the Plaintiffs an undivided fractional interest in the loans made by Bron Creative to Nightingale Pictures and/or Nightingale Films under the Master Term Sheet and the Loan and Security Agreement. The Plaintiffs argue that as a result, Bron Creative’s rights pursuant to the contracts with the Nightingale Defendants were assigned to the Plaintiffs, and therefore the Plaintiffs can proceed with the action to enforce the agreements.
[21] I am not satisfied that the allegation at paragraph 23 is sufficient to establish a reasonable cause of action against the Nightingale Defendants. The Nightingale Claim does not specifically plead that the agreements between Bron Creative and the Nightingale Defendants were assigned to the Plaintiffs, or that the Nightingale Defendants breached the agreements. I therefore order that paragraph 1 of the Nightingale Claim is struck.
Breach of Trust Claims against Gilbert and Cloth
[22] The Plaintiffs claim as against Gilbert and Cloth damages for breach of trust at paragraph 3(a) of the Nightingale Claim, and paragraph 4(a) of the Monster Claim. The Plaintiffs claim as against Cloth for damages for breach of trust at paragraph 4(a) of the Henchmen Claim.
[23] In a claim against a director of a company for breach of trust based on “knowing assistance”, the Plaintiff must establish the following elements:
a. An act of fraud or dishonesty on the part of the corporate trustee;
b. The individual Defendant had actual knowledge of the corporate trustee’s fraudulent or dishonest conduct, or was reckless or willfully blind to it; and
c. The individual Defendant assisted the trustee in perpetrating the dishonest act: Locking v McCowan, 2015 ONSC 4435 at para. 52.
[24] Directing minds of corporations who act with knowledge of the fraudulent or dishonest conduct of the corporation, may be held liable for corporate breaches of trust: Ross Valliant v. Air Canada 1993 CarswellOnt 568 (SCC) at para. 60.
Nightingale Claim
[25] At paragraph 24(c) of the Nightingale Claim it is alleged that Bron Creative is the trustee for the Plaintiff. At paragraph 27, it is alleged that Bron Creative owed a fiduciary duty to the Plaintiffs. At paragraph 29, it is alleged that Cloth and Gilbert, as directing minds of Bron Creative, owed a fiduciary duty to the Plaintiffs.
[26] The basis for the claim in breach of trust as against Cloth and Gilbert is set out in paragraphs 28, 29 and 30 of the Nightingale Claim, in which the following allegations are made:
The breaches of the Loan Agreement were intentional on the part of Bron Creative, Cloth and Gilbert;
Cloth and Gilbert, as the directing minds of Bron Creative, knew or ought to have known of the breaches of contract and fiduciary duties by Bron Creative and participated in them;
Cloth and Gilbert, as the directing minds of Bron Creative, benefited personally from the funding of the movie; and
Cloth and Gilbert put their interests ahead of the Plaintiffs’ interests, thereby breaching their fiduciary duties;
Cloth and Gilbert breached their duty by not making full disclosure to the Plaintiffs and not obtaining the Plaintiffs’ approval of changes to the financing.
[27] I am satisfied that the allegations in the Nightingale Claim are sufficient to disclose a reasonable cause of action in breach of trust, as against Cloth and Gilbert.
Henchmen Claim
[28] At paragraph 23(d) of the Henchmen Claim it is alleged that Creative Wealth was a trustee for JAAM. At paragraph 46 it is alleged that Creative Wealth owed a fiduciary duty to the Plaintiffs. At paragraph 48, it is alleged that Cloth, as the directing mind of Creative Wealth, owed a fiduciary duty to the Plaintiffs.
[29] The basis for the claim in breach of trust, as against Cloth, is set out in paragraphs 47 and 48 of the Henchmen Claim, in which the following allegations are made:
The breaches of the Loan Agreement were intentional on the part of Creative Wealth;
Cloth, as the directing mind of Creative Wealth, knew of the breaches of contract and fiduciary duties of Creative to the Plaintiffs and participated in them;
Cloth, as the directing mind of Creative Wealth, benefited personally from the funding of the movie; and
Cloth put his own interests ahead of the Plaintiff’s interests thereby breaching his fiduciary duty to the Plaintiff.
[30] I am satisfied that the allegations in the Henchmen Claim are sufficient to disclose a reasonable cause of action in breach of trust, and breach of fiduciary duty as against Cloth and Creative Wealth.
Monster Claim
[31] At paragraph 29 of the Monster Claim, it is alleged that Creative Wealth is a Trustee under the Loan Agreements, and owed a fiduciary duty to Premium Trust. At paragraph 31 it is alleged that Cloth, as the directing mind of Creative Wealth, also owed a fiduciary duty to the Plaintiff.
[32] The basis for the claim in breach of trust is set out in paragraphs 30 and 31 of the Monster Claim, in which the following allegations are made:
Cloth, as the directing mind of Creative Wealth, knew of the breaches of contract and fiduciary duties by Creative Wealth and participated in them;
Cloth, was the directing mind of Creative Wealth and he benefited personally from the funding of the movie; and
Cloth put his own interests ahead of Premium Trust’s interests, thereby breaching his fiduciary duty to Premium Trust.
[33] I am satisfied that the allegations in the Monster Claim are sufficient to disclose a reasonable cause of action in breach of trust, as against Cloth.
[34] At paragraph 4(a) of the Monster Claim, the Plaintiffs seek damages for breach of trust as against both Cloth and Gilbert, however there is no reference to Gilbert in paragraphs 30 and 31 of the Monster Claim. There are no allegations in the Monster Claim that Gilbert was a directing mind of Creative Wealth, or knowingly participated in the breaches of contract or fiduciary duties of Creative Wealth.
[35] The Monster Claim does not disclose a reasonable cause of action in breach of trust, as against Gilbert. I therefore order that the Plaintiff’s claim as against Gilbert for damages for breach of trust in paragraph 4(a) of the Monster Claim is struck.
Gross Negligence Claim against Bron Creative, Gilbert and Cloth
[36] At paragraphs 2(a) and 3(a) of the Nightingale Claim, the Plaintiffs claim against Bron Creative, Gilbert and Cloth for damages arising out of gross negligence. At paragraph 2(a) and 3(a) of the Monster Claim, the Plaintiff claims against Creative Wealth, Gilbert and Cloth for damages for gross negligence. No claim for damages arising out of gross negligence is made in the Henchmen Claim.
[37] The claim in gross negligence is a claim for damages for pure economic loss. To succeed in a claim for pure economic loss, the Plaintiff must establish the following facts;
A proximate relationship existed between the Plaintiff and the Defendant (either by demonstrating its case falls into one of those categories of relationships in which proximity has already been found to exist; or by demonstrating that the parties are in such a “close and direct” relationship that it would be “just and fair having regard to that relationship to impose a duty of care in law”);
The injury to the Plaintiff was a reasonably foreseeable consequence of the Defendant’s negligence; and
There are no residual policy considerations outside the relationship of the parties that may negate the imposition of a duty of care: Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, at paras. 25, 32, 37.
[38] Two factors are determinative in the proximity analysis: a Defendant’s undertaking and a Plaintiff’s reliance. If a Defendant makes a representation or undertakes a service in circumstances that invite the Plaintiff’s reasonable reliance, the Defendant is obligated to take reasonable care: Deloitte & Touche v. Livent Inc. (Receiver of), at para. 30.
Nightingale Claim
[39] At paragraph 27 of the Nightingale Claim, it is alleged that as a Trustee under the Loan Agreements, Bron Creative owed a fiduciary duty to the Plaintiffs. At paragraph 29, it is alleged that Cloth and Gilbert, as the directing minds of Bron Creative, also owed a fiduciary duty to the Plaintiffs. A fiduciary relationship is a “close and direct” relationship which would give rise to a duty of care for claims for pure economic loss.
[40] The basis for the claim in gross negligence is set out in paragraphs 27, 28 and 29 of the Nightingale Claim, in which the following allegations are made;
Bron Creative represented to the Plaintiffs that it would ensure that the Plaintiffs’ investments were properly secured, all financing documents were properly entered into, advances were made in accordance with the Loan Agreements, and revenues for the movie were properly collected and distributed to the Plaintiff;
Bron Creative breached its fiduciary duty to the Plaintiffs;
The breaches of the Loan Agreement were the result of Bron Creative’s, Cloth’s or Gilbert’s gross negligence; and
Cloth and Gilbert, as the directing minds of Bron Creative, were aware of the breaches of fiduciary duties of Bron Creative and participated in them.
[41] I am satisfied that the allegations in the Nightingale Claim are sufficient to disclose a reasonable cause of action in gross negligence, as against Bron Creative, Cloth and Gilbert.
Monster Claim
[42] At paragraphs 2(a) and 3(a) of the Monster Claim, the Plaintiff claims against Creative Wealth, Gilbert and Cloth for damages for gross negligence.
[43] The Monster Claim does not make any other reference to a claim in gross negligence. There are no particulars pleaded in the Monster Claim that the Plaintiff sustained damages as a result of the Defendants’ gross negligence.
[44] I am not satisfied that the Monster Claim discloses a reasonable cause of action as against Creative Wealth, Gilbert or Cloth in gross negligence. I therefore order that the Plaintiff’s claim as against Creative Wealth for damages for gross negligence in paragraph 2(a), and as against Cloth and Gilbert in paragraph 4(a) of the Monster Claim, is struck
Misrepresentation Claim against Bron Creative, Gilbert and Cloth
[45] At paragraph 2(a) of the Nightingale Claim, the Plaintiffs claim damages against Bron Creative for misrepresentation, and at paragraph 3(a) the Plaintiffs claim as against Gilbert and Cloth damages for negligent misrepresentation. At paragraph 4(a) of the Monster Claim, the Plaintiffs claim against Gilbert and Cloth damages for negligent misrepresentation. At paragraph 4(a) of the Henchmen Claim, the Plaintiffs claim against Cloth damages for negligent misrepresentation.
[46] For a claim in negligent misrepresentation, the following facts must be plead:
a) a duty of care existed based on a “special relationship” between the representor and the representee;
b) the representation was untrue, inaccurate or misleading;
c) the representor acted negligently in making the misrepresentation;
d) the representee must have reasonably relied on the misrepresentation; and,
e) the reliance must have been detrimental to the representee in that damages resulted: Queen v. Cognos [1993] 1 SCR RSJ at para 18.
Nightingale Claim
[47] In the Nightingale Claim, the Plaintiffs allege certain representations were made by Bron Creative and Cloth which were relied on by the Plaintiffs. There are no allegations of any representations being made by Gilbert, and the Plaintiffs have withdrawn the claim of misrepresentation made against Gilbert.
[48] The Nightingale Claim sets out the following representations which were allegedly made by Bron Creative and/or Cloth:
Cloth had a relationship with Gilbert and that Gilbert’s companies were in the top 5% of successful movie producers (para. 10);
Each investment would be secured in the first position and repayment would be in first priority subject only to guilds and unions (para. 11);
Each investment would be protected by the appointment of a collection account manager (para. 11);
Bron Creative had entered into a Master Term Sheet with Nightingale Files (para. 13);
Screen Australia invested AUD $6,272,300 (para. 18); and
The Tax Credit Loan would be guaranteed by Screen Australia and Screen Tasmania (para. 18)
[49] At paragraph 32 of the Nightingale Claim it is alleged that the representations made by Cloth and Bron Creative were false.
[50] At paragraph 19 of the Nightingale Claim, it is alleged that the Plaintiffs relied on the representations made by Cloth when they agreed to participate in the funding of the movie. At paragraph 32 it is alleged that the Plaintiffs relied on the representations made by Cloth and Bron Creative when they agreed to invest in the movie.
[51] At paragraph 33 of the Nightingale Claim, it is alleged that the reliance on the representations was detrimental to the Plaintiffs. It is alleged that if the Plaintiffs had known the representations were not true, they would not have invested in the movie. It is also alleged that because of the misrepresentations, the Plaintiffs’ investments were severely compromised, grossly different and much riskier than had been represented.
[52] It is the position of Cloth and Bron Creative that the claim cannot succeed, due to the fact that the Participation Agreement entered by the Plaintiffs, provides that there are no representations other than what is set out in the agreement. Reference is made to the entire agreement clause at paragraph 20 of the agreement which provides as follows:
This Agreement constitutes the entire agreement between the parties with respect to the transactions contemplated by it and supersedes all prior agreements, understandings, warranties, covenants, conditions, whether oral or written, of the parties. There are no representations, warranties, covenants, conditions or other agreements, expressed or implied, collateral, statutory or otherwise, between the parties in connection with the subject matter of this Agreement, except as specifically set forth in this Agreement.
[53] Although the Entire Agreement clause may be a defence to the misrepresentation claim it is not relevant on a motion to determine whether the pleadings set out a cause of action.
[54] I am satisfied that the allegations in the Nightingale claim are sufficient to disclose a reasonable cause of action in negligent misrepresentation, as against Cloth and Bron Creative.
Henchmen Claim
[55] Cloth moves to strike the entire claim as against him including the claim for damages for negligent misrepresentations. At paragraph 4(a) of the Henchmen Claim, the Plaintiffs claim against Cloth damages for negligent misrepresentation.
[56] The Henchmen Claim sets out the following misrepresentations which were allegedly made by Cloth:
Cloth and Creative Wealth had a relationship with Gilbert and that Gilbert’s companies were in the top 5% of successful film producers (para. 11);
Any investment would always be secured and repayment would be in first priority subject only to guilds and unions (para. 12);
Each investment would be protected by the appointment of a collection account manager (para. 12);
The movie had been sold to Universal and would be delivered in the summer of 2016 (para. 17);
The movie was being produced by Will Ferrell and that Gerard Butler and Michael Cera would do the voice-overs (para. 17); and
Telefilm Canada would invest $4,000,000 in the movie and there would be $9,400,000 in tax credits and Royal Bank of Canada would participate in the Tax Credit Loan as an investor (para. 17).
[57] At paragraphs 50 - 53 of the Henchmen Claim, it is alleged that the representations made by Cloth, were false.
[58] At paragraphs 13, 18, 50 and 54 of the Henchmen Claim it is alleged that the Plaintiffs relied on the representations made by Cloth when they agreed to invest in the movie. It is alleged at paragraph 54 that because of the misrepresentations the investments were “much riskier” than had been represented.
[59] It is the position of Cloth that even if sufficient particulars are plead against him to support a claim in negligent misrepresentation, the claim cannot succeed due to the fact that the Participation Agreement contains an “Entire Agreement” provision. For the reasons set out above, I am satisfied that the Entire Agreement clause may be a defence to the misrepresentation claim but is not relevant on a motion to determine whether the pleadings set out a cause of action.
[60] I am satisfied that the allegations in the Henchmen Claim are sufficient to disclose a reasonable cause of action in negligent misrepresentation, as against Cloth.
Monster Claim
[61] In the Monster Claim, the Plaintiff is claiming damages for misrepresentation made by Cloth, Creative Wealth, Bron Studios and Gilbert which were relied on by Premium Trust when it decided to invest in the movie. Only Cloth is moving to strike the misrepresentation claim.
[62] The Monster Claim sets out the following representations which were allegedly made by Cloth:
Cloth and Creative Wealth had a relationship with Gilbert and his companies, and that Gilbert’s companies were in the top 5% of independent film producers (para. 13);
The investment would always be secured and payment would be in first priority subject only to guild and union residuals (para. 14);
Each investment would be protected by the appointment of a collection account manager (para. 14);
The investments would be profitable (para. 14);
The movie was already around net $2,200,000 to $2,500,000 (para. 17);
The movie was sold to Amazon or Apple and that distribution was already in place (para. 17); and
The Plaintiff was the only senior lender in first position (para 17).
[63] At paragraphs 33 and 34 it is alleged that the representations were not true. It is alleged that the Loan was not secured, was not in first priority, and there were no distribution agreements in place. It is also alleged that the movie was not sold and that the movie had been sold to Amazon and then Apple.
[64] At paragraphs 18 and 33 it is alleged that the representations made by Cloth were relied upon by the Plaintiff when it decided to invest in the movie. At paragraph 35, the Plaintiff pleads that because of the misrepresentations, its investment was severely compromised, was not guaranteed and was grossly different and much riskier than had been represented.
[65] It is the position of Cloth and Creative Wealth that the claim cannot succeed due to the fact that the Participation Agreement contains an “Entire Agreement” provision. For the reasons set out above, I am satisfied that the Entire Agreement clause may be a defence to the misrepresentation claim but is not relevant on a motion to determine whether the pleadings set out a cause of action.
[66] I am satisfied that the allegations in the Monster Claim are sufficient to disclose a reasonable cause of action in negligent misrepresentation, as against Cloth.
Leave to Amend
[67] Rule 26.01 of the Rules of Civil Procedure permits the court to grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated, by or by costs, or an adjournment.
[68] I am satisfied that this is an appropriate case to grant leave to amend the Statement of Claim. In this way, the Plaintiffs’ actions will be framed so they can be appropriately adjudicated by the court: Spar Roofing & Metal Supplies Limited v. Glynn, 2016 ONCA 296.
Conclusions
[69] For the reasons set out above, I conclude as follows:
Nightingale Claim
There are no allegations in the Nightingale Claim that the Nightingale Defendants owed any duty to the Plaintiffs, or that there was a breach of duty. The allegations in the Nightingale Claim are not sufficient to establish a reasonable cause of action as against the Nightingale Defendants. Paragraph 1 of the Nightingale Claim is struck;
The Nightingale Claim alleges that Cloth and Gilbert, as directing minds of Bron Creative, provided “knowing assistance” and participated in the breaches of fiduciary duty by Bron Creative. The claim in breach of trust as against Cloth and Gilbert is adequately pleaded and is not struck;
The Nightingale Claim alleges that Bron Creative, Gilbert and Cloth were in a proximate relationship with the Plaintiffs and that the breach of the duties set out in the Loan Agreement were as a result of Bron Creative’s, Cloth’s and Gilbert’s gross negligence. The claim for gross negligence as against Bron Creative, Gilbert and Cloth is adequately pleaded and is not struck;
The Nightingale Claim alleges that representations were made by Bron Creative, and Cloth, that the representations were false, and were relied upon by the Plaintiffs to their detriment. The claim in negligent misrepresentation as against Bron Creative and Cloth is adequately pleaded and is not struck. The Plaintiffs have withdrawn the claim in misrepresentation made against Gilbert.
Henchmen Claim
The Henchmen Claim alleges that Cloth, as the directing mind of Creative Wealth, provided “knowing assistance” and participated in the breaches of fiduciary duty and breach of trust by Creative Wealth. The claim for damages in breach of trust as against Cloth and Creative Wealth is adequately pleaded and is not struck;
The Henchmen Claim alleges that the representations made by Creative Wealth and Cloth were false, and were relied upon by the Plaintiffs to their detriment. The claim in negligent misrepresentation is adequately pleaded and is not struck.
Monster Claim
The Monster Claim alleges that Cloth, as the directing mind of Creative Wealth, provided “knowing assistance” and participated in the breaches of fiduciary duty by Creative Wealth. The claim in breach of trust as against Cloth is adequately pleaded and is not struck;
There are no allegations made to the Monster Claim that Gilbert was a directing mind of Creative Wealth or knowingly participated in the beaches of contract or fiduciary duties of Creative Wealth. The claim in breach of trust against Gilbert is struck.
The Monster Claim does not plead any particulars with respect to the claim in gross negligence as against Creative Wealth, Gilbert or Cloth. The claim in gross negligence against Creative Wealth, Gilbert and Cloth is struck.
The Monster Claim alleges that representations made by Cloth were false, and were relied upon by the Plaintiff to their detriment. The claim in negligent misrepresentation against Cloth is adequately pleaded and is not struck.
Disposition
[70] I therefore make the following orders:
a. The Nightingale Claim shall be struck in its entirety as against Nightingale Films and Nightingale Pictures;
b. In the Monster Claim, the claim against Gilbert for damages arising out of breach of trust, is struck;
c. In the Monster Claim, the claim against Creative Wealth, Gilbert and Cloth for damages arising out of gross negligence, is struck;
d. I grant the Plaintiffs leave to amend, pursuant to R.26.01 of the Rules of Civil Procedure. The amended pleadings shall be served on the Defendants within 30 days of the date of this endorsement;
e. Although there was divided success on the motions, the Plaintiffs succeeded on the majority of motions brought against them and as a result are presumptively entitled to their costs of the motions. If the parties are unable to agree on the costs, the Plaintiffs may make written submissions of no more than 3 pages in length (excluding bills of costs and case law) within 21 days of the date of this endorsement. The Defendants may make written submissions on the same basis within 21 days of receiving the Plaintiffs’ submissions.
___________________________________ Chalmers, J.
Date: June 25, 2019