Court File and Parties

COURT FILE NO.: CV-20-00641468

DATE: 2020-11-16

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Enercare home and commercial services limited partnership, Plaintiff

AND: grand hvac leasing ltd., perras mechanical services ltd., richard courtemanche, jodran douglas colby and william james lane, Defendants

BEFORE: Davies J.

COUNSEL: Andrew Ottaway, for the Plaintiff Cameron D. Neil, for the Defendant Grand HVAC Leasing Ltd. No one appearing for the other defendants

HEARD at Toronto (by video): November 3, 2020

REASONS FOR DECISIONS

[1] Enercare Home and Commercial Services Ltd. and Grand HVAC Leasing Ltd. are both in the water heater rental business. On May 25, 2020, Enercare issued a statement of claim in which it claims $2 million in damages from Grand HVAC and others for breach of confidence, intentional inducement of breach of contract and unjust enrichment. Enercare also seeks an injunction restraining Grand HVAC from using or disclosing Enercare’s confidential information.

[2] Enercare claims that Perras Mechanical Services Ltd. enrolled water heater rental customers for Enercare and serviced water heaters as its agent for years. Enercare claims that, unbeknownst to Enercare, the principals of Perras started a new company, Grand HVAC, to compete directly with Enercare and used Enercare’s confidential information to convince customers to switch from Enercare to Grand HVAC. Enercare claims that Grand HVAC misused confidential information to take customers from Enercare in six specific housing complexes in southwest Ontario. Enercare also claims that three of the officers of Perras and Grand HVAC conspired to misuse Enercare’s confidential information to improperly take Enercare’s customers.

[3] Grand HVAC delivered a statement of defence and counterclaim. Grand HVAC denies the allegations made by Enercare. Grand HVAC claims that it has been in the water heater rental business since 2012 and has openly operated out of the same premises as Perras since then. Grand HVAC claims that it did not receive or use confidential information from Enercare to acquire customers.

[4] Grand HVAC also advances a counterclaim against Enercare. Grand HVAC claims that in 2019 and 2020, several multi-residential housing developments decided to switch their water heater rental contracts from Enercare to Grand HVAC. Grand HVAC says it bought water heaters previously owned by Enercare and thereby acquired the rental customers from Enercare. Grand HVAC now claims that Enercare has reneged on those contracts.

[5] Grand HVAC seeks the following relief in its counterclaim:

(a) a declaration that it owns the water heaters in question. It also seeks an order vesting ownership in the water heaters to Grand HVAC;

(b) an unspecified amount damages for breach of contract and an accounting and disgorgement of rental profits collected by Enercare for water heaters purchased by Grand HVAC;

(c) an unspecified amount of damages for trespass to chattels, conversion of property, loss of reputation, lost goodwill and lost profits;

(d) an injunction prohibiting Enercare from billing, invoicing or otherwise charging former customers for the rental of water heaters that HVAC bought from Enercare;

(e) an order directing Enercare to issue a credit or refund to Grand HVAC customers who were improperly charged rent for water heaters purchased by Grand HVAC; and

(f) an order compelling Enercare to provide buyout quotes to Grand HVAC upon request.

[6] Enercare brings a motion under rule 21.01(1)(b) to strike Grand HVAC’s counterclaim in its entirety on the basis that it does not disclose a reasonable cause of action. In the alternative, Enercare argues that certain portions of the statement of defence and counterclaim should be struck under rule 21.01(1)(b) or rule 25.11.

[7] Grand HVAC concedes that there is no basis for its claim for trespass to chattels, and that claim should be struck. Grand HVAC also acknowledges that its claim must be amended to comply with rule 25.06(9), which requires a party claiming damages to state the amount of damages claimed in respect of each claim. Finally, Grand HVAC has agreed to remove the language from paragraph 35 of its pleadings that imputes an improper motive to Enercare for pursuing its original action. Otherwise, Grand HVAC argues that its counterclaim pleads material facts to support each claim and should not be struck.

[8] For the reasons that follow, the motion is granted and the counterclaim is struck with leave to Grand HVAC to file an amended counterclaim in accordance with these reasons.

A. The counterclaim does not disclose a reasonable cause of action

[9] Pleadings must be brief, clear and concise. They must contain the material facts that establish the constituent elements of each claim or defence: see Philco Products Ltd., v, Thermionics, 1940 43 (SCC), [1940] S.C.R. 501 (SCC).

[10] For the purpose of this motion, I must take the facts as pleaded in the counterclaim to be true and I must read the pleadings generously.

[11] The defendant’s counterclaim should only be struck under rule 21.01(1)(b) if it is plain and obvious that the claim has no reasonable prospect of success: see Paton Estate v. Ontario Lottery and Gaming Corporation, 2016 ONCA 458 at para. 12; Wellington v. Ontario, 2011 ONCA 274 at para. 14, Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959 at pp. 978 - 980. Rule 21.01(1)(b) is not designed to prevent a party from advancing a claim that might not succeed or is even unlikely to succeed. It is only meant to dispose of claims that are doomed to fail: see Atlantic Lottery Corp. Inc.v. Babstock, 2020 SCC 19 at para. 19, R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42 at para. 21.

[12] There are two ways in which a claim can fail to establish a cause of action under rule 21.01(1)(b). Either the allegations do not come within a recognized cause of action or the allegations do not plead all the necessary elements for a recognized cause of action: see Fasteners & Fitters v. Wang, 2020 ONSC 1649 at para. 68. If the defendants plead a recognized cause of action, all the essential elements of that cause of action must be pleaded.

i. Breach of Contract

[13] In its counterclaim, Grand HVAC claims damages and other forms of relief for breach of contract. The breach of contract claim relates to four housing complexes with multiple residential customers in each.

[14] A claim for breach of contract must contain sufficient facts to establish six elements: (1) the nature of the contract; (2) the parties to the contract; (3) privity of contract between the plaintiff and defendant; (4) the relevant terms of the contract; (5) which term was breached; and (6) the damages that flow from the breach: see Fasteners & Fitters at para. 91.

[15] Grand HVAC concedes that its breach of contract claim is defective because it does not plead the amount of damages claimed. Grand HVAC intends to file an amended statement of claim to specify the damages sought for breach of contract. Otherwise, Grand HVAC argues that the materials facts pleaded are sufficient to support its breach of contract claim. I disagree.

[16] In its counterclaim, Grand HVAC states that the counterclaim “concerns a number of water heaters” over which Grand HVAC and Enercare both assert ownership. The nature of the alleged contracts, namely the purchase of water heaters by Grand HVAC from Enercare, is established. It can also be inferred from the pleadings that Grand HVAC alleges that the contracts were formed through the exchange of correspondence and through the conduct of the parties, although no written contracts are pleaded. Giving Grand HVAC’s pleadings the most generous reading possible, I find that it has pleaded enough material facts to establish the first three essential elements of a breach of contract claim.

[17] However, there are no material facts to establish the relevant terms of the contract. There are no facts pleaded about how many contracts Grand HVAC says it entered with Enercare, which water heaters Grand HVAC claims it bought or what conditions, if any, attached to the purchase of the water heaters. There are also no facts alleged in relation to when ownership of the water heaters transferred from Enercare to Grand HVAC.

[18] Grand HVAC takes the position that the correspondence between Grand HVAC and Enercare about the buyouts has been incorporated by reference into the counterclaim and provides sufficient detail to meet the test under rule 21.01(1)(b) for pleading breach of contract. Enercare filed some of the correspondence referenced in the counterclaim on the motion. However, the correspondence does not disclose the formation of any contract between the parties or the terms of any agreement.

[19] By way of example only, the correspondence shows that on November 22, 2019 Enercare sent Grand HVAC a quote to buyout Enercare’s rental contracts for Cahiague Cooperative Homes. The quote was for $38,520.47. The correspondence also says that Grand HVAC must pay the outstanding amounts in full before Enercare will process the equipment buyout. Grand HVAC sent a cheque to Enercare in relation to Cahiague Cooperative Homes for $25,156.43. Enercare cashed the cheque provided by Grand HVAC. Even if I accept that the cashing of the cheque shows that some agreement was reached for which Enercare accepted $25,156.43 in consideration, there are no material facts pleaded that disclose what Grand HVAC says it bought for $25,156.43 and on what the terms.

[20] There are similarly no material facts pleaded in relation to the terms of the alleged contracts for the other three housing sites. In relation to two of the other sites, Grand HVAC alleges that it sent cheques to Enercare but the cheques were not cashed. In relation to those two sites, the pleadings do not even disclose when or how Grand HVAC alleges a contract was formed.

[21] There are also no material facts contained in the counterclaim in relation to which term or terms of the contracts that Enercare is alleged to have breached. In its counterclaim, Grand HVAC alleges that in a letter dated May 11, 2020, Enercare took the position that Grand HVAC had not bought the water heaters at the four identified sites. Grand HVAC claims that Enercare has “reneged” on the buyout contracts. There are, however, no material facts to support this claim. There are no facts pleaded in relation to what contracts existed, what the terms were, what terms were reneged upon, or what Enercare has done to renege on the contracts.

[22] According to the counterclaim, Grand HVAC bought several water heaters at each of the four housing sites identified. In each case, the property manager at the house site authorized the purchase of multiple water heaters by Grand HVAC from Enercare. The individual residents living in the units with the water heaters did not agree to the transfers themselves. Grand HVAC claims that Enercare is now taking the position that a property manager of a multi-unit house complex cannot authorize a buyout; individual residents have to request the transfer of services from Enercare to Grand HVAC. It is not clear, however, how sending a letter setting out this position and disputing the ownership of the water heaters, without more, could constitute a pleading of a breach of the alleged contracts or could amount to reneging on a contract by Enercare.

[23] Grand HVAC’s breach of contract claim – including all the various forms of relief claimed – is defective and must be struck. Grand HVAC is granted leave to amend its claim to plead material facts in relation to each element of the breach of contract(s) alleged.

[24] In its counterclaim, Grand HVAC also “pleads and relies on the doctrine of estoppel by conduct.” Enercare argues that estoppel by conduct is the same as promissory estoppel and cannot be the basis of a cause of action. Enercare argues that promissory estoppel or estoppel by conduct “can be used only as a shield and not a sword”: see Doef’s Iron Works Ltd. v. Mortgage Corp. Canada Inc., 2004 34620 (ON CA) at paras. 1 – 2. It is not clear from the counterclaim whether Grand HVAC is advancing estoppel by conduct as a stand alone cause of action or only intends to argue that Enercare’s conduct in cashing the cheques, closing the transactions and ceasing to bill clients are material facts in support of its claim that it had a valid contract with Enercare. To the extent that Grand HVAC relies on the conduct of Enercare, it should be clear in its amended pleadings how that conduct is relevant. If Grand HVAC claims that estoppel by conduct creates a separate cause of action, its position must be clearly and concisely set out in its amended pleadings.

ii. Conversion of Property

[25] The tort of conversion provides a remedy for the wrongful taking of or damage to personal property. In this case, a proper claim of conversion of property must contain material facts to establish (1) Grand HVAC has a right to possess personal property; (2) the property is identifiable or specific; and (3) Enercare has taken, used, destroyed or interfered with Grand HVAC’s right of possession: see Fasteners & Fittings, at para. 115

[26] Grand HAVC has claimed it has a right to possess some residential water heaters previously owned by Enercare as a result of various buyout agreements. However, the counterclaim does not contain material facts to establish which water heaters Grand HVAC claims a right to possess. There are also no facts pleaded to establish that Enercare had done anything, other than question the validity of the buyout agreements, to take or use or destroy the water heaters or to interfere with Grand HVAC’s right to possess them. I, therefore, find that this claim should be struck.

[27] Enercare argues that leave to amend should not be granted because the tort of conversion relates only to chattel and water heaters are fixtures, not chattel. Enercare relies on Manning v. Furnasman, 1985 3736 (MB CA), a 1985 bankruptcy decision from the Manitoba Court of Appeal, in support of its position. In that case, a couple hired a builder to build them a house. The builder hired a sub-contractor to install a furnace and water heater in the house. The builder went bankrupt before the project was finished and before the sub-contractor was paid for the water heater and furnace. The sub-contractor registered a lien on the house under the Personal Property Security Act. The sub-contractor took the position that he was entitled to remove the furnace and water heater unless the homeowners paid his account. In that context, in concurring reasons, Justice O’Sullivan held that furnaces and water heaters are fixtures because they are installed as a permanent part of the land and the lien should be discharged. The majority of the court decided the case on another basis. Assuming the tort of conversion applies only to chattel, I am not satisfied on the basis of this one decision that the law is settled on whether water heaters are chattel. I am, therefore, not convinced that Grand HVAC’s claim of conversion of property is doomed to fail on this basis.

[28] While I find that the conversion of property claim is not adequately pleaded and should be struck, Grand HVAC is granted leave to amend this element of its claim.

iii. Claims seeking relief on behalf of Grand HVAC customers

[29] In its counterclaim, Grand HVAC seeks injunctive relief to prohibit Enercare from “billing, invoicing or otherwise charging the members and tenants of the subject locations … for the rental of water heaters and/or from placing their accounts in ‘collections’ or reporting their accounts to credit bureaus.” Grand HVAC also seeks an order “directing Enercare to issue credits and/or refunds to account holders for improperly collected rentals” for the water heaters purchased by Grand HVAC. Finally, Grand HVAC seeks an order compelling Enercare to provide buyout quotes when requested by the property manager of a cooperative housing corporation (as opposed to requiring individual residents to request a quote).

[30] Enercare argues and I agree that Grand HVAC cannot seek relief for wrongs done to non-parties to an action: see Rousay v. Rousay, 2013 ONSC 4280 at para. 27.

[31] If Enercare continues to bill customers who have switched over the Grand HVAC, that is a matter between the customer and Enercare. Enercare may or may not have valid reasons to continue to bill customers who have switched to Grand HVAC or to place accounts into collection. Grand HVAC does not have standing to resolve billing issues between its customers and Enercare, or to seek refunds on behalf of its customers. In my view, the claims for relief on behalf of other parties cannot succeed and should be struck without leave to amend.

[32] The claim for a declaration that Enercare is required to produce buyout quotes when requested by an authorized representative and an order requiring Enercare to do so is of a different nature. This is not a claim for relief on behalf of another party. Grand HVAC claims that the property manager of a fifth housing complex has duly authorized Grand HVAC as its agent for the purpose of obtaining a buyout quote and Enercare, taking the position that Grand HVAC is not duly authorized, has refused to provide a quote. Grand HVAC is, therefore, seeking a remedy on its own behalf having purportedly been authorized to obtain a quote.

B. Conclusion

[33] There are other problems with the counterclaim as drafted. For example, Grand HVAC claims damages for “loss of reputation, lost goodwill and lost profits”. These are heads of damages, not causes of action. The counterclaim does not set out the material facts in support of those damages claims or the basis on which those damages arise in this case.

[34] While the counterclaim clearly sets out the facts Grand HVAC intends to prove, it does not contain all the material facts necessary for each claim and does not relate the facts pleaded to the causes of actions alleged or the relief sought in a meaningful way. The motion to strike the counterclaim is, therefore, granted. Paragraphs 48(a) and 48(h) of the counterclaim are struck without leave to amend. The balance of the counterclaims is struck with leave to amend.

[35] I encourage the parties to reach an agreement on the issue of costs. In the event they cannot reach an agreement, the plaintiffs may serve and file written submissions on costs of no more than five (5) pages double-spaced together with their costs outline and any supporting authority on or before November 23, 2020. The defendant may serve and file written responding submissions on costs of no more than five (5) pages double-spaced with supporting authorities on or before December 4, 2020. These submissions must be filed with the Court and delivered electronically to my assistant. In the event that I do not receive any written cost submissions by December 8, 2020, I will deem the issue of costs to have been settled.

Davies J.

Date: November 16, 2020