COURT FILE NO.: CV-17-588442

DATE: 2020/03/30

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

FASTENERS & FITTINGS INC.

Plaintiff

• and -

ZHIHAI WANG, YUEHONG CHANG, MJKE ENTERPRISES INC., DAWEI LIANG, DAOHONG WANG, SIJUN TAN, QINGDAO TOP STEEL INDUSTRIAL CO., LTD., YANTAI XINCHENG STANDARD FASTENERS CO., LTD. and MEKFAST COMPANY LIMITED

Defendants

Counsel:

Young Park and Maxwell Reedijk for the Plaintiff

Chloe Snider and Kristjan Surko for the Defendants Zhihai Wang, MJKE Enterprises Inc., Yuehong Chang and Mekfast Company Limited

Rebecca Huang for the Defendants DaWei Liang, DaoHong Wang, SiJun Tan, Qingdao Top Steel Industrial Co., Ltd. and YanTai Xincheng Standard Fasteners Co. Ltd.

HEARD: March 13, 2020

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] The Plaintiff, Fasteners & Fittings Inc. (“F&F”), sues:

a. Zhihai (Michael) Wang; his wife, Yuehong (Joanne) Chang; MJKE Enterprises Inc., and Mekfast Company Limited, collectively the “Ontario Defendants”; and,

b. Dawei (David) Liang, Sijun Tan, Doahong Wang (“Mr. Wang Sr.”), Qingdao Top Steel Industrial Co. Ltd. (“Top Steel Industrial”), and YanTai Xincheng Standard Fasteners Co. Ltd. (“YanTai Fasteners”), collectively the “PRC Defendants” (Peoples’ Republic of China Defendants).

[2] The Ontario Defendants and the PRC Defendants respectively bring motions to strike F&F’s Amended Amended Statement of Claim.

[3] For the reasons that follow, the Amended Amended Statement of Claim is struck out in its entirety but with leave to deliver a Fresh as Amended Statement of Claim in accordance with the directives set out in these Reasons for Decision.

B. Procedural Background

[4] The procedural background to the Defendants’ motions is as follows:

a. On December 14, 2017, F&F commenced this action and filed a Statement of Claim. It advanced claims of breach of contract, inducing breach of contract, breach of fiduciary duty, breach of confidence, misrepresentation, fraud, conversion and conspiracy.

b. On December 22, 2017, F&F delivered an Amended Statement of Claim to correct a typo at paragraph 38.

c. F&F served the Ontario Defendants - excluding Mekfast Co., which had not yet been named as a party – and began the protracted process of serving the PRC Defendants in China pursuant to the Hague Convention.

d. On January 4, 2018, the Ontario Defendants, excluding Mekfast Co., delivered a Demand for Particulars and a Request to Inspect Documents.

e. On January 31, 2018, F&F delivered a Response to the Demand for Particulars.

f. On February 28, 2018, the Ontario Defendants, excluding Mekfast Co., delivered their Statement of Defence and Counterclaim. It is a 21-page, 108 paragraph pleading that denies the allegations of breach of contract, inducing breach of contract, breach of fiduciary duty, breach of confidence, misrepresentation, fraud, conversion and conspiracy. At paragraphs 2, 91, 96-97, the Ontario Defendants, excluding Mekfast Co., plead that F&F’s action is an abuse of process and brought for illegal collateral purposes as follows:

2. This action is an abuse of process. The plaintiff/defendant by counterclaim, Fasteners & Fittings Inc. ("F&F"), has commenced this action for improper and collateral purposes: to stop Michael from competing with F&F, when he is free to do so, in order to preserve or enhance F&F's dominant position in the fasteners market in Canada; to avoid paying the defendant, Qingdao Top Steel Industrial Co., Ltd. ("Top Steel"), the amounts owing to it; and to intimidate and obtain payments from the defendants without reasonable justification or excuse.

Abuse of Process

91. This action is an abuse of the court’s process. The allegations against [Mr. Wang], MJKE and [Ms. Chang] are groundless and F&F is motivated by an intention to hurt the reputations of [Mr. Wang] and [Ms. Chang] and to gain business leverage and competitive advantages as a result.

92. As set out in paragraphs 96-97 of the Statement of Defence, this action is an abuse of process. It is devoid of foundation and has been used for extraneous purposes: to undermine or eliminate competition and to permit F&F to preserve or enhance its dominant position in the fasteners market in Canada. F&F commenced the Claim as a means to abuse its dominant position in breach of s.78 of the Competition Act, R.S.C. 1985, c. C-34.

g. On March 22, 2018, F&F delivered its Reply and Defence to the Counterclaim of the Ontario Defendants, excluding Mekfast Co.

h. On April 2, 2018, the Ontario Defendants, excluding Mekfast Co., delivered their Reply in the Counterclaim.

i. Service was achieved on the PRC Defendants and on September 12, 2019, counsel for the PRC Defendants provided F&F with a draft Notice of Motion attacking F&F’s Amended Statement of Claim. The PRC Defendants invited F&F to amend its Amended Statement of Claim to cure deficiencies with respect to the pleading of: (a) personal liability claims against the individual PRC Defendants; (b) contract claims against the PRC Defendants; (c) the claims of deceit/misrepresentation against the PRC Defendants; (d) the conspiracy claim; and (e) the claim against Top Steel Industrial or Mr. Liang for the pre-payment of US $340,000.

j. On October 3, 2019, F&F’s counsel confirmed that the contract claims do not extend to the personal PRC Defendants, but otherwise F&F refused to amend or withdraw its claims.

k. On October 25, 2019, (a) the PRC Defendants brought a motion to strike F&F’s Amended Statement of Claim; and (b) the Ontario Defendants brought a motion to strike F&F’s Amended Statement of Claim.

l. On November 21, 2019, F&F delivered an Amended Amended Statement of Claim that added Mekfast Co. as a Defendant pursuant to rule 26.02(b) which allows a pleading to be amended on filing the consent of all parties and, where a person is to be added or substituted as a party, the person’s consent.

[5] In this procedural background, there is one technical matter that should be foreshadowed because it will be discussed later. In this regard, it should be noted that the Ontario Defendants bring their motion to strike notwithstanding that with the exception of Mekfast Co., the Ontario Defendants have already delivered a Statement of Defence and a Counterclaim.

C. Facts

1. The Amended Amended Statement of Claim

[6] The following description of the factual background is taken exclusively from F&F’s Amended Amended Statement of Claim.

[7] Ted Robinson is the owner of F&F. F&F is an Ontario corporation, headquartered in Milton, Ontario. It sells fasteners, including bolts, cap screws, nuts, washers, screws, threaded rods, and anchors.

[8] The Defendant Zhihai (Michael) Wang lives in Mississauga with his wife, the Defendant Yuehong (Joanne) Chang. In 1999, shortly after Mr. Wang emigrated to Canada from China, F&F hired Mr. Wang as a purchasing agent to purchase fasteners from China and Asia.

[9] F&F pleads that Mr. Wang had a contractual and a fiduciary relationship with F&F through an oral employment contract and later through an oral engagement between F&F and Mr. Wang’s personal corporation, MJKE Enterprises. F&F pleads the employment contract and the Engagement were governed by the law of Ontario.

[10] F&F pleads that Mr. Wang as its purchasing agent and later through MJKE Enterprises, Mr. Wang was entrusted with F&F’s confidential, business, and proprietary information, including customer information, pricing, and marketing policies, etc.

[11] F&F pleads that Mr. Wang was entrusted and given autonomy and authority to make all of F&F’s purchasing decisions. F&F pleads that Mr. Wang’s duties included: (a) purchasing fasteners for F&F at the lowest prevailing prices; (b) loyalty and fidelity; (c) the proper use of confidential information without breach of confidence or misappropriation; and (e) not to compete and not to divert business from F&F.

[12] In May 2000, Mr. Wang introduced Mr. Robinson to the Defendant DaWei (David) Liang, who is a resident of Qingdao, Shandong Province, PRC. Mr. Liang was a university classmate of Mr. Wang. Mr. Robinson was told that Mr. Liang owned trading companies in China that were licenced to export fasteners. F&F began using Mr. Laing’s connections to obtain fasteners from China to export to Canada.

[13] In August 2004, the Defendant Top Steel Industrial was incorporated in China. It is headquartered in Qingdao, Shandong Province, PRC. Top Steel Industrial exports fasteners, and F&F was to become Top Steel Industrial’s predominant customer.

[14] Mr. Liang was a minority shareholder of Top Steel Industrial, an officer, employee, and supervising director of Top Steel Industrial. The Defendant SiJun Tan, who is a resident of YanTai, Shandong Province, PRC, was a minority shareholder of Top Steel Industrial, an officer, employee, and manager of Top Steel Industrial.

[15] In late 2004, Mr. Wang and Mr. Laing advised F&F that Mr. Laing was planning to start a manufacturing company in the City of YanTai with Mr. Tan, to manufacture fasteners for F&F.

[16] In March 2005, the Defendant YanTai Fasteners was incorporated in China. It is headquartered in YanTai, Shandong Province, PRC. It manufacturers screws, which it supplies to Top Steel Industrial for exportation to F&F in Canada.

[17] Mr. Liang was a minority shareholder of YanTai Fasteners and an officer, and supervising director of the corporation. Mr. Tan was a minority shareholder of YanTai Fasteners and an officer, employee, and manager of the corporation.

[18] Mr. Robinson was falsely told that Mr. Laing was the majority shareholder of YanTai Fasteners and that Mr. Tan was a significant shareholder and that each of their wives also held small interests in Yan Tai Fasteners.

[19] F&F pleads in its Amended Amended Statement of Claim that in truth Mr. Wang was the principal shareholder of and exercised de facto control over Top Steel Industrial and YanTai Fasteners and that the Defendants concealed Mr. Wang’s control of these corporations from F&F.

[20] F&F pleads that the Defendant Ms. Chang was also a major shareholder and senior officer of Top Steel Industrial and of YanTai Fasteners and that the Defendants concealed Ms. Chang’s role with Top Steel Industrial and YanTai Fasteners from F&F.

[21] F&F pleads that it entered into a Supply Agreement with the Defendants. Under this agreement, the Defendants agreed to manufacture fasteners for F&F through YanTai Fasteners and its predecessor and related companies and to export the product through trading companies like Top Steel Industrial and its predecessor and related companies. F&F pleads that the Supply Agreement was made in Ontario and that it was governed by the law of Ontario.

[22] F&F pleads that the terms of the Supply Agreement included the following: (a) the Defendants would sell product at the lowest prevailing prices; (b) the Defendants would exclusively supply F&F with fasteners in perpetuity; or (c) in the alternative, the Defendants could not terminate the Supply Agreement without providing F&F with reasonable notice in writing.

[23] The above state of affairs persisted from the start of Mr. Wang’s employment in 1999 and then changed slightly in 2015. In October 2015, Mr. Wang resigned as an employee of F&F, but was retained to be F&F’s exclusive purchasing agent through his personal company, the Defendant MJKE Enterprises, which is an Ontario corporation with its registered office in Mississauga, Ontario. F&F and MJKE Enterprises entered into an oral Engagement contract.

[24] In January 2017, the Defendant DaoHong Wang who resides in YanTai, Shandong Province, PRC became the principal shareholder, executive director, and manager of Top Steel Industrial. Mr. Wang, Sr. is the father of Mr. Wang.

[25] F&F pleads that from 1999 to April 2017, Mr. Wang, MJKE Enterprises, Ms. Chang, Mr. Laing, Mr. Tan, Mr. Wang Sr., Top Steel Industrial, and YanTai Fasteners conspired together and executed a sophisticated “Fraudulent Scheme” that defrauded F&F of millions of dollars by overcharging F&F for its purchases of fasteners from China.

[26] F&F pleads that the Defendants established manufacturing companies, including YanTai Fasteners and its predecessors to manufacture fasteners to be exported to F&F and that the Defendants established trading companies in China, including Top Steel Industrial and its predecessors, to export fasteners to F&F.

[27] F&F pleads that the manufacturers and the trading companies were controlled by Mr. Wang who because of his autonomy at F&F controlled both the demand side and the supply side of the export and import transactions.

[28] F&F pleads that the Defendants falsely represented that Mr. Laing owned Top Steel Industrial and its predecessor or related companies and that Mr. Laing and Mr. Tan owned YanTai Fasteners and its predecessor or related companies.

[29] F&F pleads that the Defendants misused confidential information and overcharged for the fasters and the related packaging and products and that the prices charged for the produce were above the lowest prevailing price. F&F pleads that the Defendants took for themselves the overcharge, which was an illegal premium,

[30] F&F pleads that this Fraudulent Scheme lasted for more than 19 years, until Mr. Robinson discovered it in April 2017.

[31] In April 2017 discovered that: (a) from at least 2008 (if not earlier) to January 2017, Mr. Wang and Ms. Chang were senior officers that together held an approximately 94% interest in Top Steel Industrial: (b) since at least April 2008 (if not earlier), Mr. Laing held only 5% of the shares of Top Steel Industrial; and (c) since at least August 2010 (if not earlier), Mr. Chang held 64% of the shares of YanTai Fasteners and the position of Executive Director Mr. Laing held only a 5% interest; (d) in January 2017 Mr. Wang arranged for the transfer of the shares that he and Ms. Chang owned of Top Steel Industrial to Mr. Wang Sr. who became the executive director and manager.

[32] On May 29, 2017, F&F terminated its engagement with MJKE Enterprises. That day Mr. Robinson met Mr. Wang in his office at F&F and gave him with a termination letter. Mr. Robinson recorded the meeting. After reviewing the letter, Mr. Wang admitted the Fraudulent Scheme but said that it was for the benefit of F&F. At this meeting, Mr. Wang offered to arrange for F&F to be purchased by a Chinese investor, but Mr. Robinson rejected this proposal.

[33] In its Termination Letter to Mr. Wang, F&F demanded that Mr. Wang, Ms. Chang, Mr. Laing, Mr. Tan, Top Steel Industrial and YanTai Fasteners deliver all the documentation with respect to the Supply Agreement from June 1999 to May 29, 2017. It demanded that Mr. Wang deliver all his electronic information stored on computers and digital devices. The Defendants refused or failed to respond to these demands.

[34] At the meeting, Mr. Wang threatened to stop all shipments of fasteners from Top Steel Industrial, but he eventually agreed that Top Steel Industrial would continue making shipments provided that F&F paid in advance plus 15% on account of F&F’s outstanding indebtedness to Top Steel Industrial, which was approximately US $3.9 million.

[35] After MJKE Enterprise’s termination, due to F&F’s near complete dependence on Top Steel Industrial and YanTai Fasteners, F&F continued to obtain product from them, and F&F purchased approximately U.S. $2.5 million of goods between June 2017 and September 2017.

[36] On September 25, 2017, after receiving US $340,000 from F&F for a shipment of fasteners that had not yet been delivered, Top Steel Industrial notified F&F that it would not make any further shipments, unless F&F paid an additional US $714,000 towards F&F’s indebtedness, which was then approximately US $2.9 million.

[37] However, in light of the Fraudulent Scheme, F&F refused to pay the outstanding indebtedness, and it denies that it owed any money to Top Steel Industrial.

[38] F&F did not receive delivery of the goods ordered for which it had already paid US $340,000 and Top Steel Industrial delivered the goods to another customer.

[39] After September 2017, the Defendants stopped supplying product to F&F including an outstanding order for $1.5 million. F&F was forced to find a new source of supply on short notice and at higher prices because of rising costs of the steel and zinc used in the manufacture of fasteners.

[40] In October 2017, Mr. Wang joined Grip Clinch Canada, a division of the Defendant Mekfast Co. as a senior officer, director, and major shareholder. He recruited two former F&F employees to join Mekfast Co. and began soliciting F&F's customers using the confidential and proprietary information that he had misappropriated.

[41] The allegations of misconduct that are the main subject matter of the Ontario Defendants’ and the PRC Defendants’ motion to strike are found in paragraphs 50 to 56 and 64.1 to 67 of the Amended Amended Statement of Claim, which paragraphs are set out below.

Misconduct of the Defendants

Michael breached his duties to F&F

50. By planning, implementing and executing the Fraudulent Scheme to F&F's detriment Michael breached his contractual duties to F&F under his Employment Agreement and Engagement, as well as his fiduciary duties and his duty of confidence to F&F.

Defendants deceived F&F

5l. Each of the Defendants continually represented to Mr. Robinson and F&F that (a) [Mr. Laing] owned and controlled Top Steel (and the other trading companies that supplied fastener to F&F), (b) [Mr. Laing] owned and controlled YanTai, (c) Tan was a significant shareholder of YanTai and/or (d) concealed the fact that [Mr. Wang] owned and controlled Top Steel and YanTai. The Defendants knowingly made these false representations (by commission and omission) to F &F with the intent to deceive, which F&F relied upon to its detriment. As such, the Defendants have committed the tort of deceit.

Defendants committed the tort of conspiracy

52. The Defendants (other than Grip Clinch. as defined below) conspired colluded and acted in concert on dates known to them to plan. implement and execute the Fraudulent Scheme. They acted in furtherance of this joint plan from as early as June 1999 to at least the end of May 2017 by misusing F&F's Confidential Information to inflate the prices they charged F&F for its purchases of fasteners and packaging and by concealing Michael's ownership and control of the entire supply chain in China including Top Steel and YanTai, as well as their respective predecessor and related companies.

53. In so doing, these Defendants (a) made an agreement to injure F&F, (b) used unlawful means for the predominate purpose of injuring F&F or knowing that their acts would result in injury to F&F, (c) acted in furtherance of their agreement to injure and (d) F&F suffered damage as a result as described below.

54. Full and further particulars of these Defendants' misconduct are known to these Defendants but are not known by the Plaintiff at this time. F&F will rely upon such further particulars of these Defendants' misconduct at or prior to the trial of this action as they are disclosed in this action.

Defendants were unjustly enriched

55. F&F also relies on the equitable doctrine of unjust enrichment to reclaim the losses it suffered from the Fraudulent Scheme as the Defendants have wrongfully received a benefit (the amounts they overcharged F &F from June 1999 to at least May 29, 2017), F &F has suffered a corresponding deprivation and there is no juristic reason for the Defendants to retain such benefits.

Breach of the duty of confidence owed to F&F

56. Michael breached the duty of confidence he owed to F&F by disclosing the Confidential Information to the Co-conspirator and by using such information to execute the Fraudulent Scheme. The Co-conspirators are also liable for such breach of confidence as they acted in concert with [Mr. Wang] to use the Confidential Info1mation, which they knew or ought to have known was proprietary to F&F and disclosed by [Mr. Wang] in breach of confidence, to execute the Fraudulent scheme to their benefit.

57. l In May 2018, F&F obtained confirmation that [Mr. Wang] had been appointed a director and the President of Grip Clinch, which affirmed its earlier suspicions that Michael had become a principal of, and acquired a controlling interest in, Grip Clinch.

64.2 F&F pleads that Grip Clinch obtained F&F's Confidential Information (including information on F&F' customers, inventory requirements and pricing) from Michael with knowledge that it was disclosed in breach of Michael's duty of confidence. Grip Clinch then misused F&F's Confidential Information to lure customers away from F&F by offering better prices and products that Grip Clinch knew that F&F did not have in inventory after Top Steel and YanTai stopped shipments including, the F&F Fasteners.

64.3 Grip Clinch expanded its business to F&F's detriment by securing a ready supply of inventory from Top Steel and YanTai, acquiring the F&F Fasteners (which F&F had ordered before the price of steel and zinc rose in June 2017) at pre-inflation prices and sel1ing these fasteners at low prices and high margins (margins that F&F should have received) to new customers, including distributors and F&F's customers.

64.4 F&F pleads that, at a time known only to the Defendants but on or before September 25, 2017, Grip requested. ordered or purchased the F&F Fasteners from Top Steel knowing they had been ordered by F&F. By doing so Grip Clinch induced Top Steel to breach its contractual duty to supply these fasteners to F&F and committed the tort of conversion by wrongfully interfering with F&F's right to possess these fastener.

64.5 The Defendants conspired, colluded and acted in concert on dates known to them to plan, implement and execute a scheme to deprive F&F of its principal supply of inventory, supply fasteners (including the F&F Fasteners) to Grip Clinch and divert business away from F&F to Grip Clinch. The Defendants made an agreement to injure F&F. used unlawful means for the predominate purpose of injuring F&F or knowing that their act would result in injury to F&F, acted in furtherance of their agreement to injure and F&F suffered damages as a result as described below.

64.6 Full and further particulars of the Defendants’ misconduct are known to them but are not known by the Plaintiff. F&F will rely upon such further particulars of the Defendants’ misconduct at or prior to the trial of this action as they are disclosed in this action.

64.7 Grip Clinch has profited from its misconduct as described about in subparagraphs 64.1 to 64.6. F&F has suffered corresponding deprivations and there is no juristic reason for the Grip Clinch to retain such benefits. The Plaintiff pleads and relies on the equitable doctrine of unjust enrichment to reclaim these losses from Grip Clinch.

Breach of contract by the Defendants

65. By abruptly and arbitrarily ceasing to supply F&F with further shipments of fasteners effective September 29, 2017, the Defendants Top Steel and YanTai have acted in bad faith and breached their obligations under the Supply Agreement to supply F&F with fasteners tin perpetuity and/or to provide F&F with reasonable notice of its intent to terminate the agreement.

66. Given that F&F has been purchasing fasteners from the Defendants for over 19 years from June 1999 to September 2017, and began purchasing all of its fasteners made in China from Top Steel and YanTai Since their inception, F&F is entitled to minimum reasonable notice period of at least 10 years.

Michael induced a breach of contract

67. Michael was fully aware of F&F’s near complete dependence on Top Steel for fasteners under the Supply Agreement when he intentional directed Top Steel and YanTai to cease supplying fasteners to F&F in breach of contract.

[42] The Amended Amended Statement of Claim goes on to claim damages and to explain the nature of those damages.

[43] In its Amended Amended Statement of Claim, in paragraph 1, F&F makes the following claim for relief.

The Plaintiff claims:

(a) an accounting of all profits, revenues, income and other benefits that the Defendants have made and will make as a result of their breach of contract, breach of fiduciary duty, breach of confidence, misrepresentations, conspiracy, inducing a breach of contract and/or unjust enrichment;

(b) an order requiring the Defendants to disgorge all profits, revenues, income and other benefits described in sub-paragraph 1(a) above;

(c) in the alternative to subparagraphs 1(a) and (b) above, damages as against the Defendants on a joint and several basis

(i) in the minimum amount of US $10,000,000 for the losses suffered by the Plaintiff as a result of the unlawful conduct of the Defendants in jointly developing, implementing and executing the Fraudulent Scheme (as defined below) from June 1999 to May 2017; and

(ii) in the minimum amount of US $5,000,000 for wrongful termination of the Supply Agreement (as defined below) by the Defendants on September 25, 2017;

(d) a declaration that F&F does not owe any amounts to the Defendants under the Supply Agreement or otherwise, including for the F&F Payables (as defined below);

(e) exemplary and punitive damages against each Defendant in the amount of $1,000,000;

(f) prejudgment and postjudgment interest in accordance with sections 128 and 129 respectively of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended ("Courts of Justice Act");

(g) the costs of this proceeding on a substantial indemnity basis, plus all applicable taxes; and

(h) such further and other relief as to this Honourable Court may seem just.

2. Additional Facts

[44] In its response to the Demand for Particulars, F&F stated that the representations were primarily made orally and continually by Mr. Wang. No other defendants are identified as having made express representations.

[45] As noted above in the procedural background, on October 3, 2019, F&F’s counsel confirmed that the contract claims do not extend to the personal PRC Defendants.

[46] F&F, in its Reply and Defence to the Counterclaim of the Ontario Defendants, pleaded that it had no dealings with Mr. Wang Sr. and that there were no communications between Mr. Robinson and Mr. Wang Sr.

D. Discussion and Analysis

Introduction

[47] Pursuant to rules 21.01(b), 25.06, and 25.11 of the Rules of Civil Procedure,[^1] the Ontario Defendants seek an Order:

a. striking out without leave to amend the allegations made against the individual Ontario Defendants, Mr. Wang and Ms. Chang, as officers and directors of the corporate defendants, Top Steel Industrial and YanTai Fasteners because no separate wrongdoing or separate identity or interest from that of the corporations is alleged;

b. striking out without leave to amend the conclusory allegations of fraudulent misrepresentation, conspiracy, and breach of confidence that lack the necessary material facts to disclose reasonable causes of action; and,

c. striking out without leave to amend the pleadings of evidence, concerning a so-called admission, which pleadings do not contain materials facts and which pleading have been pled for the improper purpose of colouring the Court’s opinion of the Ontario Defendants.

[48] More precisely, the Ontario Defendants seek an Order striking out: (a) paragraphs 9, 24-38, 47-49, 51-56, 64.4-64.5 and 67-69 of the Amended Amended Statement of Claim as against the Ontario Defendants; (b) the prayer for relief in paragraph 1 of the Amended Claim as appropriate; and (c) all references Ms. Chang, the “Co-Conspirators”, and the “Fraudulent Scheme”, without leave to amend.

[49] Pursuant to rule 21.01(b) of the Rules of Civil Procedure, the PRC Defendants seek an Order striking out: (a) the claims against Mr. Liang, Mr. Tan, and Mr. Wang Sr. in their personal capacity; (b) the breach of contract claim; (c) the deceit claim; (d) the conspiracy claim; and (e) the conversion claim.

[50] Taken together, the motions of the PRC Defendants and the Ontario Defendants challenge the totality of F&F’s Amended Amended Statement of Claim.

[51] For the purposes of the two motions before the court, it is necessary to understand the legal architecture or design of the Amended Amended Statement of Claim, and in particular, it is necessary to understand and to keep in mind the nature of the claims made against individual Defendants, each of which are entitled to know the case that that each respectively are expected to meet.

[52] Given that with a few exceptions, the Amended Amended Statement of Claim lumps together all the Defendants and given that the pleading lacks precision and specificity in making claims against individual Defendants, although a necessary task, it is far from easy to describe the legal design of F&F’s pleading. That said, my analysis is that the design of the Amended Amended Statement of Claim is as follows:

a. F&F advances its breach of contract, breach of confidence, fraudulent misrepresentation (deceit), conspiracy, and unjust enrichment claims against all of the Defendants.

b. There are two fraudulent misrepresentation or deceit claims. One concerns the Fraudulent Scheme. The second concerns the misappropriation of $340,000 of goods that were paid for but not delivered to F&F.

c. Although F&F advances a breach of contract claim against all Defendants, in particular it claims that Top Steel Industrial and YanTai Fasteners acted in bad faith and breached their obligation to supply fasteners in perpetuity or to give reasonable notice (10 years) of the termination of the Supply Agreement.

d. There are two conspiracies. The first conspiracy involves all the Defendants, save Mekfast. This conspiracy is associated with the so-called Fraudulent Scheme. The second conspiracy is the agreement of the Defendants to use confidential information to support the unlawful competition of Mekfast.

e. F&F advances a breach of fiduciary duty and breach of employment or retainer contract and a breach of confidence claim against Mr. Wang and MJKE Enterprises.

f. F&F advances an inducing breach of contract claim against Mr. Wang.

g. F&F advances a conversion claim against Mekfast Co.

[53] In the discussion that follows, in the first section, I shall first set out the general rules of pleading. In the second section, I shall address F&F’s technical argument that the Ontario Defendants with the exception of Mekfast Co. are precluded from attacking the Amended Amended Statement of Claim because these Defendants have already defended the pleading they now challenge. In the third section, I shall identify the paragraphs of the pleading that violate the technical rules of pleading. In the fourth section, I shall address the thorny issue of pleading claims against corporate shareholders, officers, directors, and employees. In sections five to twelve, I shall address the various claims advanced by F&F. In section 13, I shall address the issue of whether leave to amend should be granted F&F.

[54] As foreshadowed above, my ultimate conclusion is that the Amended Amended Statement of Claim is struck out in its entirety but with leave to deliver a Fresh as Amended Statement of Claim in accordance with the directives set out in these Reasons for Decision.

1. The Rules of Pleading

[55] At the highest level of generality, it may be said that a proper pleading must accomplish the two substantive legal tasks of: (a) complying with the technical rules of pleading under the Rules of Civil Procedure; and (b) pleading a legally viable claim or defence.

[56] As for the technical rules of pleading, rule 25.06 (1) directs that every pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence, but not the evidence by which those facts are to be proved. A pleading should be brief, clear, focused and contain the skeletal or core facts and not the evidence that details those facts unless particulars are required by the rules.[^2]

[57] Material facts include facts that the party pleading is entitled to prove at trial, and at trial, anything that affects the determination of the party’s rights can be proved; accordingly, a material fact includes facts that can have an effect on the determination of a party’s rights.[^3] A fact that is not provable at the trial or that is incapable of affecting the outcome is immaterial and ought not to be pleaded.[^4] A pleading of fact will be struck if it cannot be the basis of a claim or defence and is designed solely for the purposes of atmosphere or to cast the opposing party in a bad light.[^5] As described by Riddell J. in Duryea v. Kaufman,[^6] such a plea is said to be “embarrassing”.

[58] “Material” facts include facts that establish the constituent elements of the claim or defence.[^7] The causes of action must be clearly identifiable from the facts pleaded and must be supported by facts that are material.[^8]

[59] A pleading shall contain material facts, but it should not contain the evidence by which those facts are to be proved.[^9] Pleadings of evidence may be struck out.[^10] The prohibition against pleading evidence is designed to restrain the pleading of facts that are subordinate and that merely tend toward proving the truth of the material facts.[^11]

[60] Under rule 25.11, the court may strike out a pleading that may prejudice or delay the fair trial of the action or that is scandalous, frivolous, vexatious or an abuse of process of the court.[^12] The same test that is used for striking a pleading for the failure to show a reasonable cause of action; i.e., the plain and obvious test, is used to determine whether a pleading is scandalous, frivolous or an abuse of process of the court.[^13]

[61] A claim may be found to be frivolous, vexatious or an abuse of process when it asserts untenable pleas, is argumentative, contains insufficient material facts to support the allegations made, or is made for an extraneous or collateral purpose.[^14] For the purpose of rule 25.11, the term “scandalous”, includes allegations that are that are irrelevant, argumentative, simply inserted for colour or to impugn the behaviour or character of the other party unrelated to the issues in the litigation.[^15] Parties are to be allowed a great deal of latitude in how they plead, but there are limits, and the court has the jurisdiction to strike a pleading to remove the pleading of evidence, prolix or vague allegations, repetitive or redundant allegations, or inconsistent allegations that are not clearly pled as alternatives and to direct a party to plead with certainty, precision and with sufficient particulars.[^16]

[62] A scandalous pleading refers to indecent or offensive allegations designed to prejudice the opponent or unnecessary allegations maliciously directed at the moral character of the opponent.[^17] Pleadings that are irrelevant, argumentative or inserted only for colour, or that constitute bare unfounded allegations should be struck out as scandalous.[^18] A pleading that raises an issue that cannot influence the outcome of the action is scandalous.[^19] The pleading is struck out because it serves no purpose other than to add colour or argument and to disconcert or humiliate the opponent.[^20] References in pleadings to settlement offers, discussions, and negotiations, which are privileged communications, are scandalous, frivolous or vexatious and should be struck from the pleading.[^21] The rule authorizing the court to strike out a pleading as prejudicial, scandalous, frivolous, vexatious, or an abuse of the process of the court is exercised only in the clearest of cases.[^22]

[63] Where a pleading is struck as defective, leave to amend should only be denied in the clearest cases when it is plain and obvious that no tenable cause of action is possible on the facts as alleged.[^23] The usual practice is to grant the plaintiff leave to amend unless it is clear that the plaintiff cannot improve its case by any further and proper amendment.[^24]

[64] Rule 21.01 (1)(b) is the rule of pleading that addresses whether the pleader has pled a legally viable claim or defence; it states:

WHERE AVAILABLE

To any Party on Question of Law

21.01(1) A party may move before a judge, […]

(a) […]

(b) to strike out a pleading on the ground that it discloses no reasonable cause of action or defence, and the judge may make an order or grant judgment accordingly.

(2) No evidence is admissible on a motion, …

(b) under clause (1)(b).

[65] Where pursuant to rule 21.01 (1)(b), a defendant submits that the plaintiff’s pleading does not disclose a reasonable cause or action, to succeed in having the action dismissed, the defendant must show that it is plain, obvious, and beyond doubt that the plaintiff cannot succeed in the claim.[^25] Matters of law that are not fully settled should not be disposed of on a motion to strike, and the court's power to strike a claim is exercised only in the clearest cases.[^26]

[66] In R. v. Imperial Tobacco Canada Ltd.,[^27] the Supreme Court of Canada noted that although the tool of a motion to strike for failure to disclose a reasonable cause of action must be used with considerable care, it is a valuable tool because it promotes judicial efficiency by removing claims that have no reasonable prospect of success and it promotes correct results by allowing judges to focus their attention on claims with a reasonable chance of success.

[67] On a motion under rule 21.01 (1)(b), the court accepts the pleaded allegations of fact in the statement of claim as proven, unless they are patently ridiculous or incapable of proof.[^28]

[68] The failure to establish a cause of action usually arises in one of two ways: (1) the allegations in the statement of claim do not come within a recognized cause of action; or (2) the allegations in the statement of claim do not plead all the elements necessary for a recognized cause of action.[^29] If the cause of action pleaded has been recognized, all of its essential elements must be pleaded.[^30] If a material fact necessary for a cause of action is omitted, the statement of claim is bad and the remedy is a motion to strike the pleadings, not a motion for particulars.[^31]

2. The Timing of a Pleadings Motion

[69] Normally, when a defendant brings a motion to challenge a plaintiff’s statement of claim, the defendant should do so before delivering a statement of defence, because the delivery of the statement of defence may be taken as a further step waiving any irregularity of the statement of claim.[^32]

[70] In the immediate case, F&F takes the position that the Ontario Defendants’ motion should be dismissed because the Ontario Defendants (with the exception of Mekfast Co.) have delivered a comprehensive Statement of Defence and Counterclaim and also a Reply pleading in the Counterclaim.

[71] However, the delivery of a statement of defence does not always preclude a motion to assert that the plaintiff’s claim does not disclose any reasonable cause of action, as for instance where the statement of defence clearly reserves the right to dispute the existence of a cause of action.[^33]

[72] In the immediate case, there are at least four reasons why F&F’s technical argument fails.

[73] First, having recently delivered an amended pleading (the Amended Amended Statement of Claim), technically speaking, the pleadings have reopened, and the Ontario Defendants may replead or they may bring a pleadings motion, which is what they have done in the immediate case.

[74] Second, there is, in any event, no impediment to Mekfast Co. one of the Ontario Defendants, bringing a pleadings motion because it has yet to deliver any statement of defence.

[75] Third, there is no impediment to the PRC Defendants bringing their motion, and in that motion, the Ontario Defendants would be an affected person and thus entitled to appear and make argument.

[76] Fourth, it is in interests of justice that there be one set of pleadings against the co-defendants, particularly in a case such as the immediate case where a conspiracy claim along with several other joint and several liability allegations are being made.

[77] For these reasons, I shall hear the Ontario Defendants’ motion notwithstanding that some of the Defendants have previously delivered pleadings.

3. Defective Pleadings

[78] Having reviewed the Amended Amended Statement of Claim, in my opinion, the following paragraphs do not plead material facts and in whole or in part contravene the rules of pleading with respect to pleading evidence and argument and these paragraphs should be struck out with leave to amend; namely: paragraphs 33, 34, 35, 36, 37, 58, 59, 63, 64, 70, and 71.

4. Claims Against Corporate Shareholders, Directors, Officers, and Employees

[79] Personal liability is not engaged solely because a corporation acts through human agency.[^34] In the Court of Appeal decision Montreal Trust Co. of Canada v. ScotiaMcLeod,[^35] Justice Finlayson stated:

A corporation may be liable for contracts that its directors or officers have caused it to sign, or for representations those officers or directors have made in its name, but this is because a corporation can only operate through human agency, that is, through its so-called "directing mind". Considering that a corporation is an inanimate piece of legal machinery incapable of thought or action, the court can only determine its legal liability by assessing the conduct of those who caused the company to act in the way that it did. This does not mean, however, that if the actions of the directing minds are found wanting, that personal liability will flow through the corporation to those who caused it to act as it did. To hold the directors of Peoples personally liable, there must be some activity on their part that takes them out of the role of directing minds of the corporation.

[80] Shareholders, directors, officers, and employees, however, may be liable for their own tortious conduct.[^36] To properly plead a case of personal liability of a shareholder, director, officer, or employee, the plaintiff must specifically plead a cause of action against the individual in his or her personal capacity.[^37] To quote Justice Finlayson, to hold shareholders, directors, officers, or employees personally liable, there must be some activity on their part that takes them out of the role of directing minds of the corporation.

[81] In Lobo v. Carleton University,[^38] the Court of Appeal stated for employees to be liable in tort for conduct associated with the work of their employee: (1) the actions of the employee must be in and of itself tortious; or (2) the actions of the employee must exhibit a separate identity or interest from those of the employer so as to make the employee’s conduct his or her own discrete conduct; liability does not attach merely by virtue of the fact that the shareholder, director, officer, or employee will gain financially as a result of his or her position within the corporation.[^39]

[82] Inquiries into whether a shareholder, director, officer or employee of a corporation is personally liable are fact-specific.[^40] If the claim against the shareholder, director, officer or employee is that his or her acts were tortious, the pleading must be intensely scrutinized so that the court can strike out claims that are improperly pleaded or claims where the material facts do not justify the allegations of a personal tort.[^41]

[83] In Piedra v. Copper Mesa Mining Corp.,[^42] the Court of Appeal stated at paragraph 75:

75. Since the plaintiffs' claims against the Directors rest solely on the assertion that the Directors' acts were themselves tortious, the plaintiffs' pleadings against the Directors must withstand a high degree of scrutiny. See for example, Abdi Jama (Litigation Guardian of) v. McDonald's Restaurants of Canada Ltd., [2001] O.T.C. 203 (S.C.), at para. 10. This accords with the responsibility of the courts to be "scrupulous in weeding out claims that are improperly pleaded or where the evidence does not justify an allegation of a personal tort": ADGA, at p. 114. As this court has indicated, were it otherwise, there is a risk that corporate officers and directors could be "driven away from involvement in any respect in corporate business by the potential exposure to ill-founded litigation": ADGA, at pp. 104-105.

[84] When a plaintiff sues both a corporation and individuals within that corporation, including officers, directors or employees, the plaintiff must plead sufficient particulars that disclose a basis for attaching liability to the individuals in their personal capacities.[^43]

[85] In the immediate case F&F argues that its pleading satisfies the above principles about the liability of shareholders, directors, officers, and employees. It submits that it has pleaded independent causes of action against each of the individual Defendants, such as deceit, breach of the duty of confidence, and conspiracy.

[86] F&F’s argument, however, fails, because with an exception for Mr. Wang, all of F&F’s causes of action are associated with the individual Defendants’ activities with the corporate Defendants as their human actors and spokespersons. The individual Defendants and the corporate Defendants are being sued for the same alleged misdeeds. It is the corporate Defendants that are being sued for other discrete claims for which the corporations have discrete liability.

[87] With an exception for Mr. Wong, who is alleged to be the mastermind of all the alleged wrongdoing, against the other individual defendants, F&F baldly pleads that were committing wrongs independent from their activities at the corporate defendants and that they individually profited from the wrongdoing. However, simply saying that the individual defendants individually committed wrongs or that they individually gained something from the alleged misdeeds of Mr. Wang and the corporate Defendants is insufficient. Rather, F&F must plead the material facts that ground an individual and discrete personal liability. There must be something more than guilt by association.

[88] As the discussion below of the various causes of action, will reveal, with an exception for the claims against Mr. Wang, F&F’s Amended Amended Statement of Claim does not plead the material facts necessary to advance claims against the individual Defendants in their personal capacities.

5. The Breach of Contract Claims

[89] Save for certain contracts governed by the Statute of Frauds,[^44] which contracts must be in writing to be enforceable, contracts may be oral or in writing. In the immediate case, F&F makes three breach of contract claims. All three of the contracts are oral contracts; no written contracts are pleaded. All three of the contracts are pled as having been made in Ontario and as being governed by the law of Ontario.

[90] Thus, F&F alleges that: (a) Mr. Wang breached his employment contract; (b) MJKE Enterprises breached the Engagement contract; and (c) the Defendants breached the Supply Agreement.

[91] A claim for breach of contract must contain sufficient particulars to identify: (a) the nature of the contract; (b) the parties to the contract; (c) the facts supporting privity of contract between the plaintiff and defendant; (d) the relevant terms of the contract; (e) which term or terms were breached; and (f) the damages that flow from the breach.[^45]

[92] In the immediate case, in my opinion, the breach of employment contract claim and the breach of the Engagement contract claim as against Mr. Wang and MJKE Enterprises are adequately pleaded.

[93] In my opinion, the breach of the Supply Agreement claim is also adequately pleaded as against Top Steel Industrial and YanTai Fasteners.

[94] The same cannot be said with respect to the claim that the personal defendants, MJKE Enterprises, or Mekfast Co. breached the Supply Agreement. The directors and officers of a corporation are not liable for their corporations breach of contract when acting in the normal course of the business of the corporation.[^46] These claims against the individual Defendants should be struck.

[95] As noted above in the procedural background section of these Reasons for Decision, on October 3, 2019, F&F’s counsel confirmed that the contract claims do not extend to the personal PRC Defendants, but given the vagueness of the Amended Amended Statement of Claim in lumping the Defendants together, that does not go far enough in clarifying the nature of the contract claims that may proceed.

[96] While there appears to be sufficient material facts pleaded to establish privity of contract amongst F&F, Top Steel Industries, and YanTai Fasteners for the Supply Agreement, there are no material facts supporting privity of contract for the Supply Agreement between F&F and Mr. Wang, MJKE Enterprises, Ms. Chang, Mr. Laing, Mr. Tan, Mr. Wang Sr., and Mekfast Co.

[97] There are no material facts to support the allegation that these individual Defendants contracted with F&F. There are no particulars of the nature of any contract with the individuals nor particulars of what terms were breached by these Defendants. I would add that any breach of contract claim against Mr. Wang Sr. would need additional particulars because there is no material facts pleaded that connects him to a contractual relationship for the time between 1999 and January 2017.

[98] It follows that the claim for breach of contract against Mr. Wang, MJKE Enterprises, Ms. Chang, Mr. Laing, Mr. Tan, Mr. Wang Sr., and Mekfast Co. should be struck out without leave to amend.

[99] Before moving on, I should add with respect to the breach of contract claim for the Supply Agreement that while not a fatal defect, there are no material facts or particulars pleaded about the formation of the contract that would support F&F’s assertion that the Supply Agreement was made in Ontario and governed by the law of Ontario, which is likely but not inevitably the case.[^47] Should F&F take up the opportunity that I shall be giving it to deliver a Fresh as Amended Statement of Claim, it might address this issue.

6. The Inducing Breach of Contract Claim

[100] The elements of a claim of inducing breach of contract are: (a) the plaintiff is a party to a valid and enforceable contract; (b) the defendant is aware of the contract and its terms; (c) the defendant intends to procure a breach of the contract; (d) the defendant persuades or induces a contracting party to breach the contract with the plaintiff; and, (e) the plaintiff suffers damages as consequence of the breach of the contract.[^48] The tort of inducing a breach of contract is aimed at circumstances where a person interferes with somebody else’s contractual relations, and this tort is not about failing to perform one’s own promises, which is not a tort but a breach of contract claim.

[101] F&F advances an inducing breach of contract claim against Mr. Wang. F&F alleges that he “directed” Top Steel and YanTai to breach the Supply Agreement. The Ontario Defendants move to have this claim struck.

[102] In my opinion, the claim against Mr. Wang for inducing a breach of contract should be struck but with leave to amend and to replead the claim.

[103] The problem with the current pleading is that the inducing breach of contract claim is confused or muddied by how F&F has pleaded Mr. Wang’s alleged misconduct in the Amended Amended Statement of Claim. As it currently exists, F&F’s pleading of inducing breach of contract against Mr. Wang is problematic on two counts.

[104] First, in the Amended Amended Statement of Claim, it seems that Mr. Wang is alleged to be a contracting party to the Supply Agreement. If that is true, he is not inducing a breach of contract, he is breaching it.

[105] Second, if Mr. Wang is to be regarded as interfering with somebody else’s contract, i.e., the contract(s) amongst F&F and Top Steel Industrial and YanTai Fasteners, it seems it is because of his role at these corporations. However, as discussed above, directors of a company are not liable for inducing a corporation to breach a contract when they are performing their functions as an officer or director. Thus, Michael cannot be liable for inducing Top Steel Industrial or YanTai Fasteners to breach a contract solely because, as a director or officer, he directed them to do so.

[106] However, independent of his role as a director or officer and in his role as an employee of F&F, it is not plain and obvious that Mr. Wang could not be liable for inducing a breach of the contract among F&F and Top Steel Industrial or YanTai Fasteners

[107] Therefore, the claim for inducing breach of contract as against Mr. Wang should be struck out but with leave to amend.

7. The Breach of Confidence Claim

[108] The elements of a breach of confidence claim are: (a) that plaintiff’s information is confidential; (b) that plaintiff conveyed the information in confidence; (c) the confidential information was used by the party to whom it was communicated to the detriment of the plaintiff or it was used to the detriment of the plaintiff by a person who received the information with knowledge of its confidentially.[^49]

[109] In my opinion, the breach of confidence claim is adequately pleaded as against Mr. Wang, MJKE Enterprises, Top Steel Industrial, YanTai Fasteners, and Mekfast Co.

[110] However, the breach of confidence claim does not differentiate the activities of Ms. Chang, Mr. Laing, Mr. Tan, and Mr. Wang, Sr. from their roles as shareholders, officers, directors, or employees of Top Steel Industrial and YanTai Fasteners. With respect to these individual Defendants, the breach of confidence claim does not allege any conduct that is either tortious in itself or that exhibits a separate identity of interest from that of the corporation.

[111] Therefore, with the exception of Mr. Wang, the breach of confidence claim does not sound against the individual Defendants in their personal capacities.

[112] Therefore, the breach of confidence claim as against Ms. Chang, Mr. Laing, Mr. Tan, and Mr. Wang, Sr should be struck out without leave to amend.

8. The Conversion Claim

[113] F&F advances a conversion claim against Mekfast. The factual background to F&F’s conversion claim is that it paid US $340,000 for a shipment of goods that were not delivered and were delivered by Top Steel Industrial to Mekfast.

[114] In contract and property law theory, with the signing of an agreement for the purchase of goods, the buyer obtains a proprietary right in the goods. Conversion is a tort that along with the torts of trover, detinue, and trespass provide remedies for the wrongful taking of or harm to personal property. These torts are connected to the interference with a person’s having a right of possession to personal property.

[115] The elements of a claim for conversion are: (1) the plaintiff has an immediate right to possession of personal property; (2) the personal property is identifiable or specific; and (3) the defendant takes, uses, or destroys the goods or interferes with the plaintiff’s right of possession.[^50]

[116] In my opinion, the conversion claim is adequately pleaded, and it should not be struck.

9. The Fraudulent Misrepresentation Claim Connected to the Fraudulent Scheme

[117] F&F Fasteners pleads a deceit or fraudulent misrepresentation claim against all the Defendants. The deceit is connected to what F&F describes in its Amended Amended Statement of Claim as the Fraudulent Scheme.

[118] Rule 25.06 (8) of the Rules of Civil Procedure provides that where fraud is pleaded, the pleading must contain full particulars. Fraud is a serious allegation, and where a party alleges conduct akin to fraud or intentional misconduct, particulars of the specific facts that are required to ground such an action must be pleaded.[^51] Fraud involves dishonest and moral wrongdoing, and a party alleging fraud must plead the required elements of the tort along with specific facts that would constitute fraud.[^52]

[119] The elements of a claim of fraudulent misrepresentation are: (1) a false statement by the defendant; (2) the defendant knowing that the statement is false or being indifferent to its truth or falsity; (3) the defendant having an intent to deceive the plaintiff; (4) the false statement being material and the plaintiff having been induced to act; and, (5) the plaintiff suffering damages.[^53]

[120] The particulars of a fraudulent misrepresentation claim are: (a) the misrepresentation; (b) the when, where, how, by whom and to whom the statement was made; (c) its falsity; (d) the defendant knowing the statement to be false or being reckless about the truth or falseness of the statement; (e) the defendant’s intention that the plaintiff should rely upon the statement; (f) the plaintiff detrimentally relying on the statement; and (g) resulting loss or damage to the plaintiff.[^54]

[121] In the immediate case, there are two major problems with respect to the pleading of fraudulent misrepresentation or deceit against all of the Defendants; namely;

a. there is a problem with respect to the when, where, how, by whom and to whom elements of the claim, which require individual treatment defendant by defendant as the circumstances of their alleged misrepresentation made to F&F; and

b. there is the problem of differentiating the alleged misrepresentations made by Ms. Chang, Mr. Laing, Mr. Tan, and Mr. Wang, Sr. from their roles as shareholders, officers, directors, or employees of Top Steel Industrial and YanTai Fasteners.

[122] Without any details of the circumstances, F&F pleads the each of the Defendants continually made the misrepresentation that led F&F to be unaware the Mr. Wang was the principal of Top Steel Industrial and YanTai Fasteners. While grouping or lumping together some or all of a set of Defendants sometimes may produce a satisfactory pleading, more often than not, it is inappropriate.

[123] In the immediate case, with respect to the pleading of fraudulent misrepresentation for analytical purposes, the Defendants can be divided in five subsets with some overlapping memberships. The five subsets are: (a) Mr. Wang and Mr. Laing; (b) Top Steel Industrial and YanTai Fasteners, (c) Ms. Chang, Mr. Laing, Mr. Tan, and Mr. Wang, Sr. as owners, officers, directors, or employees of Top Steel Industrial and YanTai Fasteners; (d) Ms. Chang, Mr. Tan, Mr. Wang Sr.; and (e) Mekfast Co.

[124] In my opinion, with respect to the first subset of Mr. Wang and Mr. Laing, sufficient particulars and details of the elements of the deceit claim have been provided to allow these Defendants to respond to the fraudulent misrepresentation claim. The Amended Amended Statement of Claim reveals direct interactions between Mr. Robinson and Mr. Wang and Mr. Laing. (However, I foreshadow to say that for other reasons, discussed below, the fraudulent misrepresentation claim should be struck against Mr. Laing.)

[125] With respect to the second subset of Top Steel Industrial and YanTai Fasteners to the extent that the corporation’s representations were made by Mr. Laing, once again, there are sufficient particulars for Top Steel Industrial and Yan Tai Fasteners to plead. To quote again from Justice Finlayson in Montreal Trust Co. of Canada v. ScotiaMcLeod, supra, a corporation may be liable for representations made by officers or directors in the corporation’s name, but this is because a corporation can only operate through human agency.

[126] However, with respect to the third subset of Ms. Chang, Mr. Laing, Mr. Tan, and Mr. Wang, Sr. as owners, officers, directors, and employees of Top Steel Industrial and YanTai Fasteners, for the reasons set out above, there is no a fraudulent misrepresentation claim against them because their representations were made as representatives of Top Steel Industrial and YanTai Fasteners. With respect to the fraudulent misrepresentation claim, F&F does not provide material facts that support an allegation of conduct by the individual Defendants that is either tortious in itself or that exhibits a separate identity of interest from that of the corporation. It follows that the fraudulent misrepresentation claim should be struck against this subset of Defendants. I do not grant leave to amend.

[127] With respect to the fourth subset, of Ms. Chang, Mr. Tan, and Mr. Wang Sr., there is a separate reason that the fraudulent misrepresentation case against them personally should be struck.

[128] Assuming that a claim independent from the claim against their corporations could be fashioned against Ms. Chang, Mr. Tan, and Mr. Wang Sr., that claim would be a claim of a misrepresentation by silence. The essence of the claim against Mr. Chang, Mr. Tan and Mr. Wang Sr. is that by their silence they respectively did not disabuse Mr. Robinson of his belief that Mr. Laing and Mr. Tan were the principals of Top Steel Industrial and YanTai Fasteners and that they failed to alert Mr. Robinson that Mr. Wang was the majority owner of these corporations.

[129] It is doctrinally possible to be liable for a fraudulent misrepresentation by omission or silence. In the Court of Appeal decision Midland Resources Holding Ltd. v. Shtaif,[^55] Justice David Brown stated at paragraphs 163-164 of his judgment for the Court:

163. A misrepresentation can involve not only an overt statement of fact, but also certain kinds of silence: the half-truth or representation that is practically false, not because of what is said, but because of what is left unsaid; or where the circumstances raise a duty on the representor to state certain matters, if they exist, and where the representee is entitled, as against the representor, to infer their non-existence from the representor's silence as to them: Robert Van Kessel and Paul Rand, The Law of Fraud in Canada (Toronto: LexisNexis, 2013), at 2.69 and 2.72.

164. The significance of silence always falls to be considered in the context in which it occurs: Demagogue Pty. Ltd. v. Ramensky (1992), 39 F.C.R. 31, 110 A.L.R. 608 (Aus. F.C.), at p. 32 F.C.R. As explained by Professor Waddams: "Almost always something is said to induce the transaction and it is open to the court to hold that the concealment of the material facts can, when taken with general statements, true in themselves but incomplete, turn those statements into misrepresentations": S.M. Waddams, The Law of Contracts, 6th ed. (Aurora, Ont.: Canada Law Book Inc., 2010), at para. 439.

[130] However, as noted by Justice Brown, the significance of silence depends on the facts or the particular case and silence may not be a representation, unless there is a duty to disclose.

[131] Generally speaking, however, there is no duty to disclose between negotiating parties.[^56] There are however exceptions.[^57] For example, if a person who has made a representation that he or she believes to be true subsequently discovers that the representation was false or has become false, then the case law imposes a duty on the person to advise the other contracting party. By imposing a duty on the person making the original statement to disclose his or her changed knowledge and belief, this line of authority removes the conceptual problem of the statement having been initially made with the defendant’s words and belief being in accord, which is to say without fraud. Instead, there is now a discord between words and belief, the fraud elements of a deceit or fraudulent misrepresentation claim may be proven.

[132] The plaintiff’s task, however, is not done. To use the words of Justice Esson, in Rainbow Industrial Caterers Ltd. v. C.N.R.[^58] (a case which involved the defendant’s failure to advise of changed circumstances in a contract to provide catering services for railway workers), the plaintiff must still prove that “there was a deliberate concealment of altered circumstances with the intention of deceiving the contractor and thus inducing it to enter into a new contract”. The plaintiff must still prove the second element of fraud, the intent to deceive.

[133] While there are cases where a defendant can be liable for a misrepresentation by silence,[^59] in the immediate case, there are no pleaded material facts that would support a claim for a misrepresentation by silence against Ms. Chang, Mr. Tan, and Mr. Wang Sr. A representation or a misrepresentation is a communicative act and there are no material facts pleaded in the immediate case that there were any face-to-face or even remote communications between Mr. Robinson and Ms. Chang, Mr. Tan, or Mr. Wang, Sr.

[134] For example, Mr. Robinson did not meet Mr. Wang Sr. and there was no correspondence or communications between them. If there were such correspondence or communication, then Mr. Wang Sr. should be told the material facts of that correspondence. The situation is the same for Mr. Tan. As for Ms. Chang, there has to be something more than the fact that she is married to Mr. Wang to give rise to a duty to advise Mr. Robinson of what her husband was doing.

[135] In this last regard, although F&F pleaded that Mr. Laing’s and Mr. Tan’s spouses had share interests in Top Steel Industrial and YanTai Fasteners, understandably, F&F did not sue these spouses for their silence in not disclosing the truth of the corporate governance of the corporations. F&F must have understood that it could not plead the material facts of circumstances that would make these silent spouses liable for fraudulent misrepresentation. F&F’s claim against Ms. Chang is similarly untenable in the absence of material facts beyond her marriage to Mr. Wang.

[136] I, therefore, conclude that for this separate reason, the misrepresentation claims against Ms. Chang, Mr. Tan, and Mr. Wang Sr. should be struck. I do not grant leave to amend.

[137] With respect to the fifth subset. There are no material facts pleaded that would support a fraudulent misrepresentation claim Mekfast Co. with respect to the Fraudulent Scheme.

[138] The conclusion of this analysis is that the fraudulent misrepresentation claims against Mr. Wang, MJKE Enterprises, Top Steel Industrial, and YanTai Fasteners should not be struck but the claims against Ms. Chang, Mr. Laing, Mr. Tan, Mr. Wang, Sr. and Mekfast Co. should be struck without leave to amend.

[139] Before moving on to the next cause of action, I note that the Ontario Defendants and the PRC Defendants both submitted that with respect to F&F’s fraudulent misrepresentation claim, the particularities of how F&F altered its position are missing and this was another defect in the pleading.

[140] I disagree, because it seems obvious that F&F altered its position by overpaying for the fasteners or by making purchases that it otherwise would not have made.

[141] I also disagree with the PRC Defendants’ submission that details or particulars must be pleaded of such things as details of the lowest prevailing price, the markets for the pricing, the alternatives that may have been forgone because of having been induced to purchase from Top Steel Industries and the particulars of the transactions in which losses occurred. Those details are not material facts but the evidence to prove the material facts.

10. The Fraudulent Misrepresentation Claim with respect to the $340,000 Payment

[142] F&F also alleges fraudulent misrepresentation against Mr. Wang, Mr. Laing, and Top Steel Industrial arising from a pre-payment by F&F of $340,000.00 to Top Steel Industrial based on an alleged representation that Top Steel Industrial would deliver the shipment of fasteners after receiving the pre-payment when it had no intention of doing so.

[143] There are at least three problems with respect to this pleading. The first problem is that there are no material facts pleaded that support a claim against Mr. Laing. It was Mr. Wang at the recorded meeting in Mr. Robinson’s office who made the representation to Mr. Robinson that Top Steel Industrial would continue to supply goods albeit on different terms for payment and delivery.

[144] Second, the representation by Mr. Wang, which comes after the revelation that he is the owner of Top Steel Industrial, would have been a representation made by Mr. Wang as the spokesman or human agency of Top Steel Industrial and for the reasons discussed above, the misrepresentation claim sounds against the corporation and not against Mr. Wang in his personal capacity.

[145] Third, a representation is a statement of a past or present fact. A statement about a future event is a predication or a promise that might ground liability in contract as a warranty, but it would not ground liability in tort.

[146] For these reasons, I conclude that the fraudulent misrepresentation claim with respect to the $340,000 payment should be struck. I do not grant leave to amend. (In any event, F&F can assert claims with respect to the $340,000 as part of its breach of contract and conversion claims.)

11. The Unjust Enrichment Claim

[147] A claim for unjust enrichment requires that the plaintiff show that: (a) the defendant has been enriched; (b) the plaintiff experienced a corresponding deprivation; and (c) there is no juristic reason for the defendant’s enrichment at the expense of the defendant.[^60]

[148] In my opinion, F&F has adequately pleaded an unjust enrichment claim against Mr. Wang, MJKE Enterprises, Top Steel Industrial, YanTai Fasteners, and Mekfast Co.

[149] For the reasons expressed above, there, however, is no unjust enrichment claim against Ms. Chang, Mr. Laing, Mr. Tan, and Mr. Wang, Sr. because their acts of omission or commission were acts on behalf of the corporations with which they were associated and their actions do not exhibit a separate identity or interest from those corporations.

12. The Conspiracy Claim

[150] As noted above, in the immediate case, there are two conspiracies. The first conspiracy involves all the Defendants, save Mekfast. This conspiracy is associated with the so-called Fraudulent Scheme. The second conspiracy is the agreement of the Defendants to use confidential information to support the unlawful competition of Mekfast.

[151] The elements of a claim of civil conspiracy are: (1) two or more defendants make an agreement to injure the plaintiff; (2) the defendants: (a) use some means (lawful or unlawful) for the predominate purpose of injuring the plaintiff, or (b) use unlawful means with knowledge that their acts were aimed at the plaintiff and knowing or constructively knowing that their acts would result in injury to the plaintiff; (3) the defendants act in furtherance of their agreement to injure; and, (4) the plaintiff suffers damages as a result of the defendants' conduct.[^61]

[152] The second element of a civil conspiracy cause of action has come to identify two distinct types of civil conspiracy, i.e., (1) the illegal means conspiracy; and (2) the predominate purpose of injuring the plaintiff conspiracy.

[153] What is required to meet the unlawful means element of the tort of conspiracy is that each of the defendants engage in conduct that is wrong in law.[^62] Conduct that is wrong in law is of two types: (1) conduct that is actionable as a matter of private law such as breach of contract, misrepresentation, intentional interference with economic relations, wrongful interference with contractual rights, nuisance, intimidation, and defamation; and (2) conduct that is illegal such as criminal conduct, quasi-criminal conduct, and breach of a statute that does not grant a private right of action.[^63]

[154] To make out a conspiracy to injure, the defendant's predominant purpose must be to inflict harm on the plaintiff. It is not enough if harm is the collateral result of acts pursued predominantly out of self-interest. The focus is on the actual intent of the defendants and not on the consequences that the defendants either realized or should have realized would follow.[^64] Unless an unlawful means is used, an ordinary commercial transaction or business competition designed to advance one’s economic interests, does not constitute a conspiracy to injury even though the complaining party may suffer an economic loss as a result.[^65]

[155] Each individual defendant is entitled to know the case they must meet; this is particularly true for the conspiracy pleading because, although conspiracy is a tort committed by a group, the liability of each defendant arises because they individually participated as a member of the group.[^66]

[156] A conspirator is not liable vicariously for what somebody else did; he or she is liable for having participated and contributed to the conspiracy. In a conspiracy pleading, it is necessary to set out discretely the particular acts of each co-conspirator so that each defendant can know what he or she is alleged to have done as part of the conspiracy.[^67] A recitation of a series of events coupled with an assertion that they were intended to injure the insufficient, and it is not appropriate to lump some or all of the defendants together into a general allegation that they conspired to injure the plaintiff.[^68] If the plaintiff does not, at the time of pleading have knowledge of the facts necessary to support the cause of action, then it is inappropriate to make the allegations in the statement of claim.[^69]

[157] A pleading of conspiracy should specify: (1) who the parties are and their relationship with one another; (2) the agreement between the defendants to conspire and its purpose or object; (3) (4) the overt acts that are alleged to have been done by each of the conspirators in furtherance of the conspiracy and these are to described with clarity and precision; and (4) the damages occasioned to the plaintiff as a result of the conspiracy.[^70]

[158] In the immediate case the alleged co-conspirators in the first conspiracy are Mr. Wang, Ms. Chang, MJKE Enterprises, Mr. Laing, Mr. Tan, Mr. Wang, Sr., Top Steel Industrial, and YanTai Fasteners. With an exception for Mr. Wang, who is the mastermind of the Fraudulent Scheme, this conspiracy claim should be struck against the personal Defendants (Ms. Chang, Mr. Laing, Mr. Tan and Mr. Wang, Sr.).

[159] These claims should be struck because there are no pleaded material facts supporting an allegation of separate wrongdoing or separate identity or interest from that of the corporations. Moreover, the pleading wants for material facts describing with clarity and precision the overt acts of each co-conspirator, which Defendants have inappropriately been lumped together. The conspiracy claim against these individual Defendants should be struck out. I do not grant leave to amend.

[160] That leaves a conspiracy claim against Mr. Wang, Top Steel Industrial, and YanTai Fasteners. In my opinion, because of the illegal use of confidential information and the breach of contract claims, this is an adequately pleaded conspiracy pleading.

[161] The alleged co-conspirators in the second conspiracy are Mr. Wang, Ms. Chang, MJKE Enterprises, Mr. Laing, Mr. Tan, Mr. Wang, Sr., Top Steel Industrial, YanTai Fasteners, Mekfast Co. With an exception for Mr. Wang, who is the mastermind of the diversion of business to and competition by Mekfast, this conspiracy claim should be struck against the personal Defendants (Ms. Chang, Mr. Laing, Mr. Tan and Mr. Wang, Sr.).

[162] These claims against the individual Defendants should be struck because there are no pleaded material facts supporting an allegation of separate wrongdoing or separate identity or interest from that of the corporations. Moreover, the pleading wants for material facts describing with clarity and precision the overt acts of each co-conspirator, which Defendants have inappropriately been lumped together. The conspiracy claim against these Defendants should be struck out. I do not grant leave to amend.

[163] That leaves the second conspiracy claim against Mr. Wang, Top Steel Industrial, YanTai Fasteners, and Mekfast Co. In my opinion, because of the illegal use of confidential information, this is an adequately pleaded conspiracy pleading.

13. Should Leave to Amend be Granted?

[164] For the reasons set out above, the pleadings against the individual Defendants with the exception of the various claims against Mr. Wang have been struck without leave to amend.

[165] I do not grant leave because there is no reason to think that F&F can fashion claims that assert separate wrongdoing or a separate identity or interest from that of the corporations.

[166] Indeed, it is the activities of the corporations, in breaching the promises of the Supply Agreement that is the critical material fact that underlies the various cause of action. Moreover, F&F has demonstrated an inability to plead material facts against the individual Defendants in their personal capacity with the specifically required to plead the misrepresentation, deceit, and conspiracy causes of action that are F&F’s main claims. There are also technical breaches of the rules of pleading.

[167] I, therefore, grant the motions of the Ontario Defendants and the PRC Defendants and strike out the Amended Amended Statement of Claim but with leave to deliver a Fresh as Amended Statement of Claim in accordance with the directives set out in these Reasons for Decision.

E. Conclusion

[168] For the above reasons, the Amended Amended Statement of Claim is struck out in its entirety but with leave to deliver a Fresh as Amended Statement of Claim in accordance with the directives set out in these Reasons for Decision.

[169] In the circumstances of the Covid-19 emergency, these Reasons for Decision are deemed to be an Order of the court that is operative and enforceable without any need for a signed or entered, formal, typed order.

[170] If the parties cannot agree about the matter of the costs of the two motions, they may make submissions in writing beginning with the submissions of the Ontario Defendants and the PRC Defendants within twenty days of the release of these Reasons for Decision followed by F&F’s submissions within a further twenty days.

[171] The parties may submit formal orders for signing and entry once the court re-opens; however, these Reasons for Decision are an effective and binding Order from the time of release.

Perell, J.

Released: March 30, 2020

[^1]: R.R.O. 1990, Reg. 194. [^2]: Mudrick v. Mississauga Oakville Veterinary Emergency Professional Corp., [2008] O.J. No. 4512 (Master). [^3]: Brydon v. Brydon, [1951] O.W.N. 369 (C.A.); Hammell v. British American Oil Co., [1945] O.W.N. 743 (Master); Daryea v. Kaufman (1910), 21 O.L.R. 161 (H.C.J.). [^4]: Wood Gundy Inc. v. Financial Trustco Capital Ltd., [1988] O.J. No. 275 (H.C.J.); Guaranty Trust Co. of Canada v. Public Trustee (1978), 1978 CanLII 1704 (ON SC), 20 O.R. (2d) 247 (H.C.J.); Everdale Place v. Rimmer, (1975), 1975 CanLII 337 (ON SC), 8 O.R. (2d) 641 (H.C.J.); Elder v. Kingston (City), [1953] O.W.N. 409 (H.C.J.). [^5]: Canadian National Railway Co. v. Brant (2009), 2009 CanLII 32911 (ON SC), 96 O.R. (3d) 734 (S.C.J.); Wilson v. Wilson, [1948] O.J. No. 62 (H.C.J.). [^6]: Duryea v. Kaufman (1910), 21 O.L.R. 165 at p. 168 (H.C.J.). [^7]: Philco Products, Ltd. v. Thermionics, Ltd., 1940 CanLII 43 (SCC), [1940] S.C.R. 501. [^8]: Cerqueira v. Ontario, 2010 ONSC 3954 at para. 11. [^9]: McDowell and Aversa v. Fortress Real Capital Inc., 2017 ONSC 4791; Murray v. Star, 2015 ONSC 4464; Mudrick v. Mississauga Oakville Veterinary Emergency Professional Corp., [2008] O.J. No. 4512 (Master). [^10]: Envirochill Cryogen Development Corporation v. University of Ontario Institute of Technology, 2018 ONSC 766 (Master); Jacobson v. Skurka, 2015 ONSC 1699; Sun Life Assurance Co. of Canada v. 401700 Ontario Ltd. (1991), 1991 CanLII 7050 (ON SC), 3 O.R. (3d) 684 (Gen. Div.). [^11]: Grace v. Usalkas, [1959] O.W.N. 237 (H.C.J.). [^12]: 876502 Ontario Inc. v. I.F. Propco Holdings (Ontario) 10 Ltd. (1997), 1997 CanLII 12196 (ON SC), 37 O.R. (3d) 70 (Gen. Div.); R. Cholkan & Co. v. Brinker (1990), 1990 CanLII 6865 (ON SC), 71 O.R. (2d) 381 (H.C.J.)Demeter v. British Pacific Life Insurance Co. (1983), 1983 CanLII 1838 (ON SC), 43 O.R. (2d) 33 (H.C.J.), affd (1984), 1984 CanLII 1996 (ON CA), 48 O.R. (2d) 266 (C.A.); Foy v. Foy, (1978), 1978 CanLII 1394 (ON CA), 20 O.R. (2d) 747 (C.A.). [^13]: Resolute Forest Products Inc. v. 2471256 Canada Inc. (c.o.b. Greenpeace Canada), 2016 ONSC 5398 (Div. Ct.); Miguna v. Toronto (City) Police Services Board, 2008 ONCA 799. [^14]: Carney Timber Co. v. Pabendinskas, 2008 CanLII 63163 (ON SC), [2008] O.J. No. 4818 (S.C.J.); Hainsworth v. Ontario, [2002] O.J. No. 1380 (S.C.J.); Panalpina Inc. v. Sharma, [1988] O.J. No. 1401 (H.C.J.). [^15]: Holder v. Wray, 2018 ONSC 6133 (S.C.J.); Carney Timber Co. v. Pabendinskas, 2008 CanLII 63163 (ON SC), [2008] O.J. No. 4818 (S.C.J.); George v. Harris, [2000] O.J. No. 1762 (S.C.J.). [^16]: Cadieux (Litigation guardian of) v. Cadieux, 2016 ONSC 4446 (Master); Dolan v. Centretown Citizens Ottawa Corp., 2015 ONSC 2145 (Master); Fockler v. Eisen, 2012 ONSC 5435. [^17]: Wolker v. Ogilvie Realty Ltd., [2006] O.J. No. 381 (S.C.J.); 876502 Ontario Inc. v. I.F. Propco Holdings (Ontario) 10 Ltd. (1997), 1997 CanLII 12196 (ON SC), 37 O.R. (3d) 70 (Gen. Div.); Paul v. Paul (1980), 1980 CanLII 1838 (ON SC), 28 O.R. (2d) 78 (H.C.J.). [^18]: Gardner v. Toronto Police Services Board, [2006] O.J. No. 3320 (Ont. S.C.J.), var’d 2007 ONCA 489; Senechal v. Muskoka (District Municipality), [2003] O.J. No. 885 (S.C.J.); Solid Waste Reclamation Inc. v. Philip Enterprises Inc., 1991 CanLII 7369 (ON SC), [1991] O.J. No. 213 (Gen. Div.). [^19]: Caras v. IBM Canada Ltd., [2004] O.J. No. 3009 (Master); Everdale Place