Court File and Parties

COURT FILE NO.: CV-19-629789 DATE: 20200424 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: ANGUS INC., Plaintiff AND: BERETTA FARMS BRANDS LTD., BERETTA FARMS INC., and RECIPE UNLIMITED CORPORATION, Defendants

BEFORE: Stinson J.

COUNSEL: Morris Cooper and Daniel Zacks, for the Plaintiff/Responding Party Ken Prehogan and Nadia Chiesa, for the Defendant/Moving Party, Recipe Unlimited Corporation No one appearing for the Defendants Beretta Farms Brands Ltd. and Beretta Farms Inc.

HEARD at Toronto: February 20, 2020

REASONS FOR DECISION

[1] This is a motion by the defendant, Recipe Unlimited Corporation under r. 21.01(1)(b) of the Rules of Civil Procedure, RRO 1990, Reg. 194, for an order striking the Statement of Claim against it. Recipe argues that the plaintiff, Angus Inc., has failed to plead material facts and particulars to establish the causes of action alleged against it. Recipe therefore submits that the Statement of Claim should be struck because it discloses no reasonable cause of action against Recipe and the action against it should be dismissed.

Facts alleged in the Statement of Claim

[2] The following is a brief summary of the facts alleged in the Statement of Claim which are assumed to be true for purposes of a r. 21.01(1)(b) motion: Knight v. Imperial Tobacco Canada Ltd, 2011 SCC 42 (at para 22).

[3] Plaintiff is the franchisor of the Hero Certified Burger restaurant chain, which is a quick-service restaurant franchise specializing in Canadian-sourced Natural Beef burgers. "Natural Beef” is beef derived from traceable cattle raised in Canada without the use of antibiotics, added hormones or steroids. For some years, plaintiff has sourced the beef for its burgers from the co-defendants, Beretta Farms Brands Ltd. and Beretta Farms Inc. ("Beretta"), most recently pursuant to a Supply Agreement signed in 2015. Beretta is a producer of Natural Beef.

[4] The Supply Agreement provides that Beretta is to supply Natural Beef exclusively to plaintiff in Ontario for use in its Hero Certified burger patties. It requires plaintiff to promote the Beretta brand in its signage and marketing. It prohibits Beretta from allowing any other quick-service restaurant in Ontario to use or advertise the Beretta brand. It has an initial 5-year term expiring December 31, 2020.

[5] Under the Supply Agreement, plaintiff does not purchase Natural Beef directly from Beretta, but through a designated processer, that manufactures its burger patties. Beretta sets the price charged by the processor to plaintiff. Beretta may adjust the price once every six months to reflect any increase in raw material pricing and must provide evidence of that increase.

[6] Plaintiff extensively promoted Natural Beef burgers in the Ontario quick-service restaurant market, using only Natural Beef for all its burgers, and not merely for one premium product among others. Through this marketing, plaintiff created a market and consumer demand for Natural Beef burgers through its franchise locations in Ontario.

[7] On July 8, 2019, Beretta wrote to plaintiff purporting to give notice that it would terminate the Supply Agreement in 90 days. However, the agreement has no termination provision and it does not allow unilateral termination. When plaintiff responded disputing the termination and asserting that it was a breach of the Supply Agreement, Beretta purported to give notice of a 38% increase in the price it was charging for Natural Beef, without justification, also in breach of the Supply Agreement.

[8] Plaintiff asserts that the reason for Beretta’s breaches of the Supply Agreement is that Beretta has entered into a partnership with Recipe for the promotion and sale of Beretta’s Natural Beef in burgers sold by Recipe’s quick-service Harvey’s restaurant chain. Harvey’s is a direct competitor of plaintiff’s Hero restaurant chain. Given Beretta’s obligations of exclusivity to plaintiff, its partnership with Recipe is itself a breach of the Supply Agreement.

[9] Plaintiff asserts that Recipe caused Beretta to breach the Supply Agreement. Recipe knew that Harvey’s was at a competitive disadvantage because Hero offered a Natural Beef hamburger and Harvey’s did not. Recipe knew that Beretta supplied Hero with Natural Beef through an exclusive Supply Agreement with plaintiff. Recipe knew that plaintiff had created valuable brand awareness for Beretta as the predominant source of Natural Beef. Accordingly, Recipe sought to replace plaintiff as Beretta’s partner to gain competitive advantage. This meant procuring Beretta’s breach of the Supply Agreement.

[10] Based on the foregoing facts, in the Statement of Claim plaintiff seeks from Recipe damages of $7.5 million for inducing breach of contract, intentional interference with economic relations, and “misrepresentation in the marketplace”, and $500,000 in punitive damages.

Issues and analysis

Admissibility of documents referred to in the Statement of Claim

[11] As a general rule, no evidence is admissible on a motion brought under r. 21.01(1)(b): r. 21.01(2)(b). Despite that prohibition, the motion records before me contained copies of correspondence exchanged between the parties and their counsel and referenced in the Statement of Claim. Both sides agreed that (subject to relevance) these documents could be considered in deciding the motion because they were referred to in the pleadings.

Test on a r. 21.01(1)(b) motion

[12] The test on a motion for striking out a statement of claim for not disclosing a reasonable cause of action is well established. The court may strike out a pleading where it is plain and obvious that it discloses no reasonable cause of action. In Rausch v. Pickering (City), 2013 ONCA 740, the Court of Appeal stated that a court must take a “charitable” view of a pleading on a motion to strike. Epstein J.A. set out the following principles (at paras. 94-95):

[94] … the Supreme Court has mandated that pleadings are to be construed as generously as possible with a view to accommodating any inadequacies in the form of the allegations due to drafting deficiencies ….

[95] In determining whether pleadings disclose a cause of action, the focus must be on the substance of the pleading, not its form .… Courts have refused to strike pleadings even in cases in which the plaintiff has not specifically pleaded all elements of the cause of action, so long as those elements are implicit in the rest of the pleadings … as long as the existing pleading “raises the factual matrix of concern to the plaintiff and within which [the defendant’s] possible liability is to be located [,] it successfully asserts a cause of action within the meaning of rule 21.01(1)(b).” Thus, even if the plaintiff does not explicitly set out the technical cause of action on which it relies, if the facts as pleaded implicitly advance such a claim, the court ought not to strike the pleadings ….

[13] As mentioned previously, in assessing the causes of action raised in the Statement of Claim, a motion judge proceeds on the basis that the facts as pleaded are true, unless they are manifestly incapable of being proven: Knight v Imperial Tobacco Canada Ltd. That said, bald conclusory statements of fact and allegations of legal conclusion unsupported by material facts should not be assumed to be true: Das v George Weston Limited, 2018 ONCA 1053 (at para 74).

[14] It is incumbent on the plaintiff to clearly plead the facts upon which it relies in making its claim. At the time of a motion to strike, the plaintiff may not be in a position to prove the facts pleaded but the plaintiff must plead them: Knight v Imperial Tobacco Canada Ltd. Rule 25.06(1) of the Rules of Civil Procedure provides that pleadings should contain a concise statement of the material facts on which the party relies for its claim, but not the evidence by which the facts are to be proved.

[15] Against the backdrop of these principles, I turn now to an examination of the adequacy of plaintiff’s pleading of its various claims against Recipe.

Inducing breach of contract

[16] As confirmed by the Court of Appeal in Persaud v. Telus Corp., 2017 ONCA 479 (at para. 26), the tort of inducing breach of contract has four elements:

a) The defendant has knowledge of the contract between the plaintiff and the third party; b) The defendant acts intentionally to cause the third party to breach the contract; c) The defendant’s act caused the third party to breach the contract; and, d) The plaintiff suffered damage due to the breach.

[17] Recipe submits that plaintiff’s plea of this cause of action is based on mere speculation. For the following reasons, I do not accept that submission.

[18] As stated by the Supreme Court in Knight, at the time of a motion to strike, the plaintiff may not be in a position to prove the facts pleaded but it must plead them. This suggests that so-called “speculation” is not by itself improper, provided there is some basis for the plaintiff’s belief in the underlying facts.

[19] In relation to the first element of this cause of action, Recipe’s knowledge of the exclusive Supply Agreement between plaintiff and Beretta is expressly pleaded in para. 31 of the Statement of Claim. In paras. 32 through 35, plaintiff has pleaded various indicia upon which it founds its belief and allegation that Recipe had knowledge of the existence and terms of the agreement. The correspondence from Recipe denying knowledge of the Supply Agreement may or may not prove to be accurate. That issue can be explored through the discovery process.

[20] In relation to the second element of this cause of action, Recipe submits that plaintiff did not plead any material facts to establish that Recipe’s conduct was intended to cause Beretta to breach the Supply Agreement. I do not accept that submission. The details of and basis for this allegation are found in paras. 31 and 35 through 38 of the Statement of Claim.

[21] In relation to the third element of this cause of action, Recipe submits that plaintiff has failed to plead any particulars to show that Recipe’s conduct caused Beretta to breach the Supply Agreement. While such an explicit allegation in those words may be lacking, that allegation is implicit when the pleading is read as a whole. I therefore do not accept this submission.

[22] In relation to the final element of this cause of action, the requirement that the plaintiff must suffer damage due to the breach, the Statement of Claim contains this express allegation in paragraph 39.

[23] I therefore conclude that the Statement of Claim properly pleads a claim against Recipe for the tort of inducing breach of contract.

Intentional interference with economic relations

[24] In Grand Financial Management Inc. v. Solemio Transportation Inc., 2016 ONCA 175 (at para. 62), the Court of Appeal confirmed that the tort of unlawful interference with economic relations has three elements:

a) The defendant must have intended to injure the plaintiff’s economic interests; b) The interference must be unlawful; and, c) The plaintiff must have suffered economic harm as a result.

[25] Recipe submits that plaintiff has failed to plead with sufficient clarity and precision the material facts necessary to establish the elements of the tort of intentional interference with economic relations. It complains that plaintiff made the bald assertion that Recipe intended to harm its economic interests by inducing Beretta to breach the Supply Agreement, but pleaded no material facts in support of this allegation. As a result, the submission continues, this unsupported allegation of intent fails to give Recipe fair notice of the case it is required to meet. I disagree.

[26] In relation to the first element of this cause of action, intent to injure plaintiff’s economic interests, at paragraph 31 of the Statement of Claim, plaintiff pleads that Recipe “intended to procure the breach of the Supply Agreement for its benefit as a competitor and cause [plaintiff] damage." At paragraphs 35, 36, and 37, it pleads the basis for this intention: Recipe was “aware that Harvey’s was at a competitive disadvantage because it did not offer a Natural Beef patty”; Harvey’s asked Beretta to supply it with Natural Beef (and breach the Supply Agreement) “because Hero’s years of marketing Beretta had created valuable brand awareness for Beretta”; and it was because of this relationship between Beretta and Hero “that Recipe induced Beretta to breach its Supply Agreement”. These paragraphs meet the requirement of particularity and provide Recipe with adequate notice of plaintiff’s case.

[27] As to the second requirement, that the interference must be unlawful, that element of plaintiff’s case is met by its allegation that Recipe wrongfully induced Beretta to breach the Supply Agreement, which itself is an actionable tort.

[28] The Statement of Claim also pleads the third requirement, economic harm, in paragraph 39 of the Statement of Claim where it alleges that it has suffered damages due to the defendants’ actions.

[29] I therefore conclude that the Statement of Claim properly pleads a claim against Recipe for the tort of unlawful interference with economic relations.

“Misrepresentation in the marketplace”

[30] This allegation is found in paragraph 28 of the Statement of Claim as follows:

On September 30, 2019, Recipe and Beretta released a national television advertising and marketing campaign announcing that Beretta would now supply Harveys with Canadian-sourced Natural Beef. Beretta and Harveys stated in print that Harveys was now selling the “first ever” Canadian-sourced Natural Beef patties in partnership with Beretta. This allegation was patently untrue and a misrepresentation in the marketplace. Hero had been selling Canadian-sourced Natural Beef patties since 2008, and Beretta Natural Beef since 2015.

[31] In its factum, Recipe submitted that "misrepresentation in the marketplace" has not been recognized as a cause of action at common law in Ontario. In its responding factum, plaintiff stated that what it referred to as “misrepresentation in the marketplace” in its prayer for relief is merely the cause of action of injurious falsehood by another name. In argument, plaintiff’s counsel confirmed this was the true meaning and intent of this allegation.

[32] As noted previously, on a motion such as this the focus must be on the substance of the pleading, not its form. Thus, even if a plaintiff does not explicitly set out the technical cause of action on which it relies, if the facts as pleaded implicitly advance such a claim, the court ought not to strike the pleading.

[33] Assuming that plaintiff actually intends to seek a remedy for the tort of injurious falsehood, at the very least its pleading ought to be amended to reflect that assertion. The question remains whether the elements of that tort have been pleaded.

[34] Injurious falsehood is a recognised cause of action: 2298679 Ontario Inc. et al. v. Northern Homecare Solutions Inc. et al., 2019 ONSC 3055 (at para. 29); Lysko v. Braley, 2006 ONCA 9038 (C.A.) (at para. 133). It has four elements:

a) The publication of false statements reflecting adversely on the plaintiff’s business; b) The defendant made the statements maliciously, without just cause or excuse; c) The defendant intends the statements to induce persons not to deal with the plaintiff; and, d) The plaintiff suffered actual damage.

[35] In relation to the first requirement, paragraph 28 of the Statement of Claim (quoted above) pleads that Recipe’s 2019 advertising campaign falsely stated that Harvey’s was selling the “first ever” Canadian-sourced Natural Beef patties. As to whether this allegation reflected adversely on the plaintiff’s business, plaintiff pleads that it had been selling Canadian-sourced Natural Beef patties since 2008. Therefore, the argument continues, Recipe’s statement reflects adversely on plaintiff because it implies that plaintiff’s extensive promotion of Natural Beef hamburgers was at best misleading to consumers and at worst a lie. Based on those allegations, the first requirement is met.

[36] The second element is that the statements were made “maliciously, without just cause or excuse.” Paragraph 40 of the Statement of Claim expressly alleges malice. However, the pleading does not comply with r. 25.06(8) of the Rules of Civil Procedure, that requires full particulars where malice is alleged. In this respect it is deficient.

[37] The third element of injurious falsehood is that the defendant must intend its statements to induce persons not to deal with the plaintiff. While arguably this is implied by paragraphs 36 and 37, nowhere does the pleading expressly make this allegation.

[38] The final requirement to prove this tort is actual damage. This allegation is made in paragraph 39 of the Statement of Claim.

[39] As regards the claim for injurious falsehood, therefore, the Statement of Claim is deficient in several respects, as follows:

a) It is misdescribed in paragraphs 2(a) and 28 as “misrepresentation in the marketplace”; b) Contrary to the requirement of r. 25.06(8), it fails to contain particulars of the alleged malice; and c) It fails to allege intention on the part of the defendant Recipe to induce persons not to deal with plaintiff.

[40] Given these deficiencies, the plea of “misrepresentation in the marketplace” cannot stand and the references to this purported claim in paragraphs 2(a) and 28 must be struck. The pleading will otherwise stand, and the action will continue as against Recipe and the other defendants. In the circumstances, I grant plaintiff leave to amend to remedy the deficiencies identified in the immediately preceding paragraph, should it be able and choose to do so.

Conclusion and Disposition

[41] For these reasons, the motion of the defendant is granted as regards the allegations of “misrepresentation in the marketplace” in paragraphs 2(a) and 28. Those allegations are struck, with leave to amend. Should plaintiff choose to amend, it shall do so by preparing an Amended Statement of Claim to properly set out its allegations of injurious falsehood. In relation to that tort, it shall also plead particulars of malice, if any, as well as any allegation that the defendant Recipe intended to induce persons not to deal with plaintiff. The amended pleading, if any, shall be filed and served within 30 days.

[42] The motion is otherwise dismissed.

Costs

[43] At the end of oral argument, counsel advised that they had agreed that the successful party should be awarded costs payable by the unsuccessful party in the total amount of $11,000. Based upon my conclusions, success has been divided. That said, the plaintiff prevailed on most of the issues and the action was not struck out in its entirety. I would therefore award the plaintiff costs of the motion in the all-inclusive amount of $8,000, payable by Recipe within 30 days.

Stinson J. Date: April 24, 2020