Kraik v. Ungar

Ontario Reports

Ontario Superior Court of Justice

Bell J.

November 25, 2020

153 O.R. (3d) 782 | 2020 ONSC 7221

Case Summary

Civil procedure — Pleadings — Striking out — Plaintiff and defendant working for different branches of company — Defendant convincing plaintiff to relocate from Ottawa to Saskatoon — Plaintiff's employment subsequently terminated and plaintiff issuing statement of claim for fraudulent misrepresentation, interference with contractual relations and breach of contract — Statement of claim struck as disclosing no reasonable cause of action — Plaintiff did not plead that defendant's actions as an employee exhibited an identity or interest separate from the employer so as to establish personal liability.

Contracts — Breach of contract — Liability — Plaintiff and defendant working for different branches of company — Defendant convincing plaintiff to relocate from Ottawa to Saskatoon — Plaintiff's employment subsequently terminated and plaintiff issuing statement of claim for fraudulent misrepresentation, interference with contractual relations and breach of contract — Statement of claim struck as disclosing no reasonable cause of action — Breach of contract claim failed because contract was between plaintiff and employer.

Damages — Punitive damages — Plaintiff and defendant working for different branches of company — Defendant convincing plaintiff to relocate from Ottawa to Saskatoon — Plaintiff's employment subsequently terminated and plaintiff issuing statement of claim for fraudulent misrepresentation, interference with contractual relations and breach of contract — Plaintiff seeking punitive damages — Statement of claim struck as disclosing no reasonable cause of action — No independent, recognized cause of action to which punitive damages could attach.

Torts — Fraudulent misrepresentation — Plaintiff and defendant working for different branches of company — Defendant convincing plaintiff to relocate from Ottawa to Saskatoon — Plaintiff's employment subsequently terminated and plaintiff issuing statement of claim for fraudulent misrepresentation, interference with contractual relations and breach of contract — Statement of claim struck as disclosing no reasonable cause of action — Plaintiff did not plead that defendant's actions as an employee exhibited an identity or interest separate from the employer so as to establish personal liability — Plaintiff also failed to plead two requisite elements of fraudulent misrepresentation.

Torts — Intentional interference with contractual relations — Plaintiff and defendant working for different branches of company — Defendant convincing plaintiff to relocate from Ottawa to Saskatoon — Plaintiff's employment subsequently terminated and plaintiff issuing statement of claim for fraudulent misrepresentation, interference with contractual relations and breach of contract — Statement of claim struck as disclosing no reasonable cause of action — Claim for interference with contractual relations failed because statement of claim did not plead unlawful act by defendant against employer.

The plaintiff was hired to work at a financial services company in Ottawa. The defendant was a manager in the company's Saskatoon branch. After the plaintiff had been with the company for about two years, the defendant proposed to him that he take on the role of sales manager in Saskatoon. The plaintiff accepted the offer and resigned from his Ottawa position. His employment was terminated after about 20 months. He issued a statement of claim for fraudulent misrepresentation, interference with contractual relations, breach of contract and foreseeable economic losses. He also claimed punitive, aggravated and exemplary damages. He pleaded that the defendant made false representations to induce him to take on the Saskatoon position, namely that the defendant was working on a new business model that would enhance the plaintiff's ability to earn commissions. He further alleged that the defendant's instruction to focus on sales support for the first few months in his new position rather than sell life insurance personally constituted a fundamental breach of his contract of employment with the company and compromised his ability to increase his income. He claimed that he afforded the defendant several opportunities to correct his fundamental breaches of and interference with his employment contract, but that the defendant failed to do so. He also alleged that the defendant failed to disclose "compromising facts" affecting his compensation. The defendant moved to strike the statement of claim on the ground that it disclosed no reasonable cause of action against him.

Held, the motion should be granted.

It was plain and obvious that the claim had no reasonable prospect of success. Regarding fraudulent misrepresentation, the pleading tied the alleged representations to the defendant's position as branch manager. The defendant was an employee of the company, with responsibilities for hiring and retaining employees. The allegations against him related to decisions made within his ostensible authority as an employee. His actions as pleaded did not exhibit a separate identity or interest from that of the company. There was no pleading that the defendant was acting outside his capacity as an employee and no factual underpinning to support such an allegation. Personal liability did not attach simply because the claim pleaded that the defendant acted as alleged in order to advance his own financial and career interests. In addition, the statement of claim failed to plead two of the requisite elements of fraudulent misrepresentation. First, the allegations were in relation to future events rather than a statement of a past or present fact. Second, the plaintiff did not allege that he repudiated his employment contract.

The breach of contract claim failed because the contract was between the plaintiff and the company. It was not open to the plaintiff to plead that the defendant breached the contract when the defendant was not a party to it. There was no allegation that the company breached the contract. Further, the plaintiff failed to plead facts that would have given rise to separate personal liability.

The claim for interference with contractual relations failed because the statement of claim did not plead an unlawful act by the defendant against the company.

The claim for punitive damages failed in the absence of any independent, recognized cause of action to which punitive damages could attach. The defendant had advanced an alternative argument to strike out individual paragraphs of the statement of claim, and that argument would have succeeded had the entire statement of claim not been struck out with no leave to amend.

S. (F.) v. H. (C.), 1996 10207 (ON CA), [1996] O.J. No. 1303, 133 D.L.R. (4th) 767, 22 R.F.L. (4th) 226, 62 A.C.W.S. (3d) 940 (C.A.), affg 1994 7515 (ON SC), [1994] O.J. No. 2630, 120 D.L.R. (4th) 432, 22 C.C.L.T. (2d) 292, 9 R.F.L. (4th) 419, 51 A.C.W.S. (3d) 497 (Gen. Div.), apld

Bhasin v. Hrynew, [2014] 3 S.C.R. 494, [2014] S.C.J. No. 71, 2014 SCC 71, 379 D.L.R. (4th) 385, 464 N.R. 254, [2014] 11 W.W.R. 641, J.E. 2014-1992, 4 Alta. L.R. (6th) 219, 27 B.L.R. (5th) 1, 20 C.C.E.L. (4th) 1, 245 A.C.W.S. (3d) 832, EYB 2014-244256, 2015 CCLG para. 25-556, 2014EXP-3530, consd

Other cases referred to

A.I. Enterprises Ltd. v. Bram Enterprises Ltd., [2014] 1 S.C.R. 177, [2014] S.C.J. No. 12, 2014 SCC 12, 366 D.L.R. (4th) 573, 453 N.R. 273, J.E. 2014-216, 416 N.B.R. (2d) 1, 21 B.L.R. (5th) 173, 7 C.C.L.T. (4th) 1, 48 C.P.C. (7th) 227, 237 A.C.W.S. (3d) 551, EYB 2014-232319, 2014EXP-416; Alleslev-Krofchak v. Valcom Ltd., [2010] O.J. No. 3548, 2010 ONCA 557, 266 O.A.C. 356, 322 D.L.R. (4th) 193, 76 C.C.L.T. (3d) 163, 192 A.C.W.S. (3d) 684; Aspiotis v. Coffee Time Donuts Inc., [1995] O.J. No. 419, 53 A.C.W.S. (3d) 508, 1995 CarswellOnt 2887 (Gen. Div.); Canadian National Railway Co. v. Brant (2009), 2009 32911 (ON SC), 96 O.R. (3d) 734, [2009] O.J. No. 2661, [2009] 4 C.N.L.R. 47, 178 A.C.W.S. (3d) 339 (S.C.J.); Correia v. Canac Kitchens (2008), 91 O.R. (3d) 353, [2008] O.J. No. 2497, 2008 ONCA 506, 294 D.L.R. (4th) 525, 58 C.C.L.T. (3d) 29, 167 A.C.W.S. (3d) 422, 67 C.C.E.L. (3d) 1, 240 O.A.C. 153, [2009] CLLC para. 210-001; Crown Crest Financial Corp. v. Sabbah, [2019] O.J. No. 6255, 2019 ONSC 7114, 61 C.C.L.T. (4th) 292 (S.C.J.); Fasteners & Fittings Inc. v. Wang, [2020] O.J. No. 1381, 2020 ONSC 1649 (S.C.J.); Frank v. Kalokina, [2014] B.C.J. No. 2496, 2014 BCSC 1866; George v. Harris, [2000] O.J. No. 1762, 97 A.C.W.S. (3d) 225, 2000 CarswellOnt 1714 (S.C.J.); Grand Financial Management Inc. v. Solemio Transportation Inc., [2016] O.J. No. 1089, 2016 ONCA 175, 263 A.C.W.S. (3d) 374, 395 D.L.R. (4th) 529, 5 P.P.S.A.C. (4th) 88, 346 O.A.C. 173; Gulfview Contracting Ltd. v. Liquid Rubber Engineered Coatings Ltd., [2011] O.J. No. 5394, 2011 ONSC 7103, 99 B.L.R. (4th) 306, 16 C.L.R. (4th) 150, 210 A.C.W.S. (3d) 379 (S.C.J.); Javitz v. BMO Nesbitt Burns Inc. (2011), 105 O.R. (3d) 279, [2011] O.J. No. 877, 2011 ONSC 1332 (S.C.J.); Lobo v. Carleton University, [2012] O.J. No. 3161, 2012 ONCA 498, 265 C.R.R. (2d) 1; McCabe v. Roman Catholic Episcopal Corp. (2019), 146 O.R. (3d) 607, [2019] O.J. No. 1351, 2019 ONCA 213, 433 D.L.R. (4th) 91, 56 C.C.L.T. (4th) 100; Nash v. Ontario (1995), 1995 2934 (ON CA), 27 O.R. (3d) 1, [1995] O.J. No. 4043, 59 A.C.W.S. (3d) 1083 (C.A.); Ontario Store Fixtures Inc. v. Mmmuffins Inc. (1989), 1989 4229 (ON SC), 70 O.R. (2d) 42, [1989] O.J. No. 1357, 17 A.C.W.S. (3d) 1006 (H.C.J.); R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45, [2011] S.C.J. No. 42, 2011 SCC 42, 335 D.L.R. (4th) 513, 419 N.R. 1, [2011] 11 W.W.R. 215, J.E. 2011-1326, 308 B.C.A.C. 1, 21 B.C.L.R. (5th) 215, 83 C.B.R. (5th) 169, 86 C.C.L.T. (3d) 1, [2011] I.L.R. para. G-2404, 205 A.C.W.S. (3d) 92, 2011 CCLG para. 25-249, 2011EXP-2380, 25 Admin. L.R. (5th) 1; ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 1995 1301 (ON CA), 26 O.R. (3d) 481, [1995] O.J. No. 3556, 129 D.L.R. (4th) 711, 87 O.A.C. 129, 23 B.L.R. (2d) 165, 9 C.C.L.S. 97, 59 A.C.W.S. (3d) 213, 1995 SOACQ para. 10,015 (C.A.); Whiten v. Pilot Insurance Co. (2002), 58 O.R. (3d) 480, [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, 2002 SCC 18, 209 D.L.R. (4th) 257, 283 N.R. 1, J.E. 2002-405, 156 O.A.C. 201, 20 B.L.R. (3d) 165, 35 C.C.L.I. (3d) 1, [2002] I.L.R. I-4048, 111 A.C.W.S. (3d) 935, REJB 2002-28036

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 21.01(1)(b), (3)(d), 25.06(1), 25.11(a), (b)

Authorities referred to

Perell, Paul M. & John W.Morden, The Law of Civil Procedure in Ontario, 3rd ed. (Toronto: LexisNexis Canada, 2017)

MOTION to strike statement of claim as disclosing no reasonable cause of action.

Michael G. Kraik, for plaintiff.

Todd J. Burke and Katie Gauthier, for defendant.

Endorsement of BELL J.: —

Overview

[1] Mr. Kraik is a former employee of Sun Life Assurance Company of Canada ("Sun Life"). From April 2018 to mid-November 2019, when his employment with Sun Life was terminated, Mr. Kraik was the Sales Manager in Sun Life's Saskatoon branch. He reported directly to Mr. Ungar. In this action, Mr. Kraik claims damages against Mr. Ungar for fraudulent misrepresentation, interference with contractual relations, breach of contract and "foreseeable economic losses". Mr. Kraik also claims punitive, aggravated and exemplary damages against Mr. Ungar.

[2] Sun Life is not a party to the action.

[3] Mr. Ungar moves to strike out the statement of claim on the ground that it discloses no reasonable cause of action against him. In the alternative, Mr. Ungar seeks an order striking out numerous paragraphs of the statement of claim on the grounds that they contain argument, plead evidence and/or are scandalous, frivolous, or vexatious.

[4] Mr. Kraik characterizes Mr. Ungar's conduct as "an ongoing and multiplying series of torts" and maintains that even if his pleading could have been better "wordsmithed", the statement of claim pleads all of the requisite elements for each cause of action and meets the heightened pleading requirements where civil fraud is alleged.

[5] The statement of claim suffers from a crucial flaw: it does not plead that Mr. Ungar's actions as an employee of Sun Life exhibit an identity or interest separate from his employer so as to make Mr. Ungar personally liable to Mr. Kraik. Mr. Kraik's contract of employment was with Sun Life, not with Mr. Ungar. It is, therefore, plain and obvious that the claims as pleaded against Mr. Ungar are certain to fail. Accordingly, the statement of claim is struck out without leave to amend.

The Allegations in the Statement of Claim

[6] Mr. Kraik was hired by Sun Life in December 2015 when he was a resident of Ottawa. From January 2016 to March 2018, Mr. Kraik was Director, Estate & Financial Planning Services at Sun Life. Mr. Ungar was involved in Mr. Kraik's hiring.

[7] In March 2018, Mr. Ungar -- at that time, the Financial Centre Manager of Sun Life's Saskatoon branch -- proposed to Mr. Kraik that Mr. Kraik take on the role of Sales Manager in Saskatoon. The statement of claim pleads Mr. Ungar represented to Mr. Kraik that: (i) for 12 months, Mr. Kraik would be paid what he was currently earning in salary and bonuses as Director, Estate & Financial Planning Services; (ii) thereafter, Mr. Kraik would earn a fixed percentage of ongoing branch earnings that would produce at least the equivalent of Mr. Kraik's current salary and bonuses, and that amount would grow in tandem with his productivity; and (iii) Mr. Kraik would be able to earn commissions on the life insurance policies that he personally sold.

[8] The statement of claim alleges that in order to persuade Mr. Kraik to accept the position of Sales Manager, Mr. Ungar also informed Mr. Kraik that he, Mr. Ungar, was working on a new business model for Sun Life. Mr. Ungar told Mr. Kraik that when the new model was introduced, Mr. Kraik's sales abilities would be highly valued and would result in him earning significantly greater income than most other Sun Life managers across Canada.

[9] On March 16, 2018, Mr. Kraik signed the offer for the position of Sales Manager. He then gave notice of his resignation as Director, Estate & Financial Planning Services.

[10] In May 2018, Mr. Ungar instructed Mr. Kraik that for the first few months in his new position, he should focus on providing sales support and not plan to sell life insurance personally. Mr. Kraik alleges that this instruction constituted a fundamental breach of Mr. Kraik's contract of employment with Sun Life and compromised Mr. Kraik's ability to increase his income.

[11] The statement of claim then proceeds to detail discussions between Mr. Kraik and Mr. Ungar regarding the interpretation of Mr. Kraik's contract of employment, whether Mr. Kraik would be interested in becoming an Advisor and assurances made by Mr. Ungar regarding a higher-earnings split for Mr. Kraik.

[12] Mr. Kraik alleges that Mr. Ungar was provided several opportunities to correct his fundamental breaches of and interference with Mr. Kraik's contract of employment with Sun Life. Mr. Kraik alleges that by his failure to do so and in his ongoing deceptions, Mr. Ungar knowingly, or recklessly and negligently, caused Mr. Kraik to lose a significant amount of personal income during his tenure as Sales Manager in Saskatoon.

[13] In addition, the statement of claim alleges that Mr. Ungar failed to disclose "compromising facts" affecting Mr. Kraik's compensation. Paragraphs 45 to 55 of the statement of claim are headed "Compromised Branch Compliance Environment". Paragraphs 56 to 66 of the pleading are entitled "Improper Insurance Sales Involving Chinese Immigrant Clients". Paragraphs 67 to 72 appear under the heading "Toxic Branch Environment".

The Test Under Rule 21.01(1)(b) -- No Reasonable Cause of Action

[14] The applicable law is not in dispute. Assuming the facts pleaded to be true, a claim will only be struck if it is plain and obvious the claim has no reasonable prospect of success: R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45, [2011] S.C.J. No. 42, 2011 SCC 42, at para. 17. The court's approach on a motion to strike must be generous and err on the side of permitting a novel but arguable claim to proceed to trial: Imperial Tobacco, at para. 21. The statement of claim must be read generously, with allowance for inadequacies due to drafting deficiencies: Nash v. Ontario (1995), 1995 2934 (ON CA), 27 O.R. (3d) 1, [1995] O.J. No. 4043 (C.A.), at p. 6 O.R.

[15] Where the defendant's wrongdoing as described in the statement of claim is not a violation of the plaintiff's legal rights, the plaintiff is not entitled to a remedy, even if the plaintiff were able to prove all the material facts pleaded in the statement of claim: Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3rd ed. (Toronto: LexisNexis Canada, 2017), at p. 614.

The Causes of Action

(i) Fraudulent misrepresentation

[16] Mr. Kraik pleads that Mr. Ungar made false representations to induce him to take on the Sales Manager position in Saskatoon. The false representations include that Mr. Kraik would be able to earn commissions on life insurance policies that he personally sold.

[17] Mr. Ungar submits that it is plain and obvious that Mr. Kraik's claim of fraudulent misrepresentation has no reasonable prospect of success because: (i) the pleaded acts were carried out in Mr. Ungar's capacity as an employee of Sun Life; (ii) the alleged misrepresentations do not qualify as fraudulent misrepresentations; and (iii) Mr. Kraik took no steps to void and repudiate the contract after discovering the falsity of the representations.

[18] A corporation can only operate through human agency. It is for this reason that a corporation may be liable for contracts that its directors or officers have caused it to sign or for representations its directors or officers have made; however, to hold the directors or officers personally liable, there must be some activity on their part that takes them out of the role of directing minds of the corporation: ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 1995 1301 (ON CA), 26 O.R. (3d) 481, [1995] O.J. No. 3556 (C.A.), at p. 491 O.R.

[19] For an employee to be personally liable in tort, the actions of the employee must themselves be tortious or the actions of the employee must exhibit a separate identity or interest from that of the corporation or employer so as to make the act or conduct complained of the employee's own: Lobo v. Carleton University, [2012] O.J. No. 3161, 2012 ONCA 498, 265 C.R.R. (2d) 1, at para. 6.

[20] The statement of claim does not plead a want of authority on the part of Mr. Ungar. In his submissions, Mr. Kraik acknowledged he was not in a position to plead that Mr. Ungar's actions were unauthorized by Sun Life.

[21] The statement of claim does not plead that Mr. Ungar's actions exhibit a separate identity or interest from that of Sun Life. To the contrary, the pleading ties the alleged representations to Mr. Ungar's position as Financial Centre Manager of Sun Life's Saskatoon branch. The representations were alleged to have been made by Mr. Ungar to persuade Mr. Kraik to accept the position of Sales Manager in Saskatoon. The statement of claim pleads that in the fall of 2018, Mr. Kraik met with Mr. Ungar's superior and raised a "wide spectrum" of human resource concerns relating to Mr. Ungar's ongoing management of Sun Life's Saskatoon branch. When Mr. Ungar terminated Mr. Kraik's employment, Mr. Ungar is alleged to have given as the reason, Sun Life's national reorganization.

[22] In summary, Mr. Ungar was an employee of Sun Life, with responsibilities for hiring and retaining employees. The allegations made against Mr. Ungar relate to decisions made within his ostensible authority as a Sun Life employee. His actions as pleaded did not exhibit a separate identity or interest from that of Sun Life. There is no pleading that Mr. Ungar was acting outside his capacity as an employee and no factual underpinning to support such an allegation. Personal liability does not attach simply because the claim pleads that Mr. Ungar acted as alleged in order to advance his own financial and career interests at Sun Life.

[23] Accordingly, I am striking out the fraudulent misrepresentation claim under rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, because it is plain and obvious that this claim against Mr. Ungar has no reasonable prospect of success. To be clear, and to address submissions made by Mr. Kraik, I am not striking the pleading on the ground of vicarious liability. This is not a vicarious liability case and Mr. Kraik has not sued Sun Life. On his own admission, Mr. Kraik is not in a position to plead whether Mr. Ungar's acts were authorized or unauthorized.

[24] In addition, the claim of fraudulent misrepresentation has no reasonable prospect of success because the statement of claim fails to plead two of the requisite elements of the tort.

[25] As set out in S. (F.) v. H. (C.), 1994 7515 (ON SC), [1994] O.J. No. 2630, 120 D.L.R. (4th) 432 (Gen. Div.), at pp. 435-36 D.L.R., affd 1996 10207 (ON CA), [1996] O.J. No. 1303, 133 D.L.R. (4th) 767 (C.A.), the required elements of fraudulent misrepresentation are:

(i) the representations complained of were made by the defendant;

(ii) the representations were false in fact;

(iii) when they were made, the representations were known to be false or they were made recklessly, that is, without knowing whether they were true or false;

(iv) the representations induced the plaintiff to enter the contract to his prejudice; and

(v) within a reasonable time after the discovery of the falsity of the representations, the plaintiff elected to void the contract and, accordingly, repudiated it.

[26] A representation is a statement of past or present fact, in contrast to a promise or a prediction: Fasteners & Fittings Inc. v. Wang, [2020] O.J. No. 1381, 2020 ONSC 1649 (S.C.J.), at para. 145. In Fasteners & Fittings, Perell J. found a party's statement that it would deliver the shipment of fasteners after receiving pre-payment when the party had no intention of doing so, to be a promise or a prediction, not a statement of a past or present fact. Justice Perell concluded that the fraudulent misrepresentation claim should be struck without leave to amend.

[27] The statements alleged to have been made by Mr. Ungar were in relation to future events: Mr. Ungar promised that Mr. Kraik would be able to earn commissions on the life insurance policies that he sold personally and Mr. Ungar predicted that when the new business model was introduced at Sun Life, Mr. Kraik would earn significantly more income that most Sun Life managers. At para. 14 of the statement of claim, Mr. Kraik pleads that Mr. Ungar's "affirmations on prospective compensation tied to sales production by Managers was a fiction invented by [Mr.] Ungar to induce [Mr.] Kraik to contract". While predictions and promises might ground liability in contract as a warranty, they do not, however, ground liability in tort: Fasteners & Fittings, at para. 145.

[28] In addition, Mr. Kraik has not alleged that he repudiated his employment contract with Sun Life. To the contrary, Mr. Kraik has pleaded that his employment contract was terminated by Mr. Ungar.

[29] The fraudulent misrepresentation claim is struck out for these additional reasons. I do not grant leave to amend.

(ii) Breach of contract

[30] At various points in the statement of claim, Mr. Kraik pleads that there was a contract of employment and he specifically pleads that the contract was between himself and Sun Life. In his submissions, Mr. Kraik confirmed that he is not alleging any breach by Sun Life of his employment contract.

[31] It is not open to Mr. Kraik to claim that Mr. Ungar breached the contract when the contract at issue is between Mr. Kraik and Sun Life. Mr. Kraik is not a party to that contract. As the court stated in Aspiotis v. Coffee Time Donuts Inc., [1995] O.J. No. 419, 1995 CarswellOnt 2887 (Gen. Div.), at para. 10:

If the claim against the two officers is based on breach of contract, the short answer is that the officers are not parties to the contract. The November 12 Agreement, to the extent that it constitutes an enforceable contract at all, is between the plaintiff and Coffee Time.

[32] When a corporate body breaches its contract, the breach of contract must have been procured and induced by the corporation's representatives and agents through whom the corporation acts; however, to hold employees separately liable for the breach of contract is unreasonable and would result in every plaintiff with a cause of action for breach of contract against a corporation being able to sue the individuals who were responsible for the corporation's actions: Gulfview Contracting Ltd. v. Liquid Rubber Engineered Coatings Ltd., [2011] O.J. No. 5394, 2011 ONSC 7103, 99 B.L.R. (4th) 306 (S.C.J.), at paras. 8-9.

[33] It is plain and obvious that the breach of contract claim against Mr. Ungar cannot succeed. This claim is struck out without leave to amend.

[34] In response to Mr. Ungar's motion, Mr. Kraik proposes, in his factum, six additional paragraphs to address any deficiencies in and to "expand on" his breach of contract claim. As I read them, the proposed paragraphs purport to advance a claim for inducing breach of contract. They include the following statements:

-- In so stating, the defendant thereby counselled a direct breach of the contract of employment even as it was on the cusp of being signed back by the plaintiff.

-- Practically, this assurance [that Mr. Kraik would be expected to focus solely on increasing sales revenues for the branch] was at complete odds with the employment agreement he had just delivered to the plaintiff for his signature.

-- The foregoing conduct by the defendant constituted a forced, fundamental breach by the plaintiff of the standard employment agreement that was apparently signed by the more than 200 other Sales Managers. . . .

-- To the plaintiff's expressed concern that he would be put in breach of his contract of employment and so was at immediate legal risk, the defendant stated that Sun Life's head office only looked to him for financial results . . .

-- [T]he defendant offered up no legal safety to the plaintiff.

-- As such, the defendant did legally put the plaintiff in the position of committing an ongoing breach of his employment agreement with Sun Life.

[35] As set out by Perell J. in Crown Crest Financial Corp. v. Sabbah, [2019] O.J. No. 6255, 2019 ONSC 7114, 61 C.C.L.T. (4th) 292 (S.C.J.), at para. 21, relying on Correia v. Canac Kitchens (2008), 2008 ONCA 506, 91 O.R. (3d) 353, [2008] O.J. No. 2497 (C.A.), at para. 99, the elements of a claim of inducing breach of contract are:

(i) the plaintiff is a party to a valid and enforceable contract with a third party;

(ii) the defendant is aware of the contract and its terms;

(iii) the defendant intends to procure a breach of the contract;

(iv) the defendant persuades or induces the third party to breach its contract with the plaintiff; and

(v) the plaintiff suffers damages as a consequence of the breach of the contract.

[36] The tort of inducing breach of contract requires that there be an actual breach: Alleslev-Krofchak v. Valcom Ltd., [2010] O.J. No. 3548, 2010 ONCA 557, 322 D.L.R. (4th) 193, at paras. 92-93.In the proposed paragraphs, Mr. Kraik confirms that his contract was with Sun Life, but there is no allegation that Sun Life breached its contract with Mr. Kraik.

[37] Mr. Kraik relies on the Supreme Court of Canada's decision in Bhasin v. Hrynew, [2014] 3 S.C.R. 494, [2014] S.C.J. No. 71, 2014 SCC 71, to assert that Mr. Ungar's interference with Mr. Kraik's contractual relations is legally actionable even if there is no privity of contract between Mr. Kraik and Mr. Ungar. In Bhasin, at para. 33, the Supreme Court of Canada recognized that good faith contractual performance is a general organizing principle of the common law of contract and that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations. At para. 88, the Supreme Court of Canada stated:

The duty of honest performance has similarities with the existing law in relation to civil fraud. . . . [T]he contractual duty of honest performance does not require that the defendant intend that his or her representation be relied on. . . . As for the tort of civil fraud, breach of the duty of honest contractual performance does not require the defendant to intend that the false statement be relied on . . .

[38] Bhasin does not assist Mr. Kraik. The tort of inducing breach of contract still requires that the third party -- Sun Life -- must have breached its contract with the plaintiff. It is plain and obvious that an inducing breach of contract claim against Mr. Ungar cannot succeed.

[39] In addition to these deficiencies, Mr. Kraik has failed to plead facts that would give rise to separate personal liability for the tort of inducing breach of contract. In Ontario Store Fixtures Inc. v. Mmmuffins Inc. (1989), 1989 4229 (ON SC), 70 O.R. (2d) 42, [1989] O.J. No. 1357 (H.C.J.), the plaintiff brought an action against the corporate defendant for failing to pay for goods and services. The plaintiff also claimed against a corporate officer for intentionally inducing breach of contract. The amended statement of claim was struck out without leave to amend. At p. 44 O.R., MacFarland J., as she then was, wrote:

I am of the view that to give rise to a separate claim for intentional inducement of breach of contract as well as a claim for breach of contract arising out of the same circumstances, there must be separate identities of interest, otherwise there is mere duplication under another label. It seems to me implicit in the definition.

(iii) Interference with contractual relations

[40] In his statement of claim, Mr. Kraik alleges that Mr. Ungar interfered with Mr. Kraik's contract of employment with Sun Life.

[41] A defendant will have intentionally interfered with the plaintiff's economic interests or caused loss by unlawful means if: (i) the defendant commits an unlawful act against a third party; (ii) in committing that unlawful act, that defendant intended to cause economic harm to the plaintiff; and (iii) that act causes economic harm to the plaintiff: A.I. Enterprises Ltd. v. Bram Enterprises Ltd., [2014] 1 S.C.R. 177, [2014] S.C.J. No. 12, 2014 SCC 12, at para. 5; Grand Financial Management Inc. v. Solemio Transportation Inc., [2016] O.J. No. 1089, 2016 ONCA 175, 395 D.L.R. (4th) 529, at para. 62.

[42] Conduct is "unlawful" within the meaning of the tort if it would give rise to a civil claim by the third party, or if it would give rise to a civil claim by the third party had the third party suffered loss as a result of the conduct: A.I. Enterprises, at para. 76.

[43] Mr. Kraik submits that the facts pleaded in the statement of claim fit within this legal framework: Mr. Kraik alleges that Mr. Ungar counselled and caused Mr. Kraik to breach his employment agreement, and intentionally, fraudulently and illegally interfered with Mr. Kraik's contractual relationships which foreseeably caused Mr. Kraik to suffer a significant loss of income. Mr. Kraik asserts that Mr. Ungar's conduct would have been actionable by Sun Life against Mr. Kraik or could have precipitated a legal action by Sun Life against Mr. Kraik had the company suffered a financial loss due to Mr. Kraik's not meeting his contractual obligations.

[44] I disagree. Under this tort, liability to the plaintiff is based on the defendant's unlawful act towards the third party. As Cromwell J. stated in A.I. Enterprises, at para. 23, "its core captures the intentional infliction of economic injury on C (the plaintiff) by A (the defendant)'s use of unlawful means against B (the third party)". The statement of claim does not plead an unlawful act by Mr. Ungar against Sun Life. The pleading does not set out facts that establish that Sun Life could have had a separate, actionable claim against Mr. Ungar.

[45] The fact that the statement of claim does not plead any facts to support an allegation that Mr. Ungar was acting outside his capacity as an employee of Sun Life renders it plain and obvious that the interference with contractual relations claim cannot succeed. The following statement by the court in Frank v. Kalokina, [2014] B.C.J. No. 2496, 2014 BCSC 1866, at para. 37, explains:

There is only the plaintiff and Sun Life, which acts or omits to act through employees and agents like [the individual defendant]. The claim, properly construed, is not that [the individual defendant] induced Sun Life to breach its contract, or interfered with contractual relations between Sun Life and the plaintiff, but rather that she carried out Sun Life's breach of contract as its agent.

[46] The interference with contractual relations claim is struck out, without leave to amend.

(iv) The claim for punitive damages

[47] It is well-established that punitive damages are to punish an independent actionable wrong that is the product of egregious, high-handed and outrageous conduct. Punitive damages are not intended to be compensatory; instead, they act as a deterrent for exceptional misconduct: McCabe v. Roman Catholic Episcopal Corp. (2019), 146 O.R. (3d) 607, [2019] O.J. No. 1351, 2019 ONCA 213, at para. 64, citing Whiten v. Pilot Insurance Co. (2002), 58 O.R. (3d) 480, [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, 2002 SCC 18, at para. 94.

[48] Punitive damages are not standalone damages. In this case, the misconduct pleaded discloses no reasonable cause of action against Mr. Ungar based on fraudulent misrepresentation, breach of contract, or intentional interference with contractual relations. There is no independent, recognized cause of action to which punitive damages can attach.

Specific Paragraphs of the Statement of Claim

[49] In the alternative, Mr. Ungar argues that numerous statements in the statement of claim offend rules 21.01(3)(d), 25.06(1), 25.11(a) and/or (b) of the Rules of Civil Procedure and should be struck out on these grounds.

[50] A pleading shall contain a concise statement of the material facts on which the party relies, but not the evidence by which those facts are to be proved: rule 25.06(1). As Strathy J., as he then was, stated in Canadian National Railway Co. v. Brant (2009), 2009 32911 (ON SC), 96 O.R. (3d) 734, [2009] O.J. No. 2661 (S.C.J.), at para. 27: "[u]nnecessary paragraphs should be struck so as to refine and focus the pleading". This is because pleadings define the issues in the action. "If a party is required to respond to irrelevant facts, inquire into those facts on discovery and respond to evidence of those facts at trial, the litigation and trial will be diverted by inquiries into facts that have no connection to the real issue before the court": Canadian National Railway Co., at para. 29.

[51] The court may strike out all or part of a pleading on the ground that the pleading may prejudice or delay the fair trial of an action or the pleading is scandalous, frivolous, or vexatious: rules 25.11(a) and (b). Rule 21.01(3)(d) provides that a defendant may move before a judge to have an action stayed or dismissed on the ground that the action is frivolous, vexatious, or an abuse of the process of the court. Portions of a pleading that are irrelevant, argumentative, or inserted for colour or that constitute bare allegations should be struck out as scandalous: George v. Harris, [2000] O.J. No. 1762, 2000 CarswellOnt 1714 (S.C.J.), at para. 20.

[52] Had I not determined that the statement of claim should be struck out without leave to amend, I would have struck out the following paragraphs, in whole or in part.

(i) Paragraphs 7 to 11

[53] These paragraphs describe Mr. Kraik's career prior to joining Sun Life and his role as Director, Estate & Financial Planning Services at Sun Life. Paragraphs 10 and 11 describe a telephone call between Mr. Ungar and Mr. Kraik in March 2018, prior to the call during which Mr. Ungar proposed that Mr. Kraik take on the role of Sales Manager.

[54] Mr. Kraik's argument as to why these paragraphs are necessary -- to explain Mr. Ungar's "precise personal and financial ground" and why Mr. Ungar valued Mr. Kraik's skills and experience -- confirms my view that these paragraphs plead evidence and not material facts.

(ii) Last sentence of para. 12

[55] This sentence states "Kraik submits that this last element [the ability to earn commissions] was the real differentiator between his then existing role and the Sales Manager role being put forward by Ungar." This sentence is argumentative -- in fact, it is framed as a submission -- and should be struck out as scandalous.

(iii) Last three sentences of para. 14

[56] In these sentences, Mr. Kraik states that he has "seen no evidence" that Sun Life planned to reward managers for their financial productivity, describes Sun Life's new business model in mid-2019, and argues what Mr. Ungar "must have known". They are argumentative and should be struck out as scandalous.

(iv) Last sentence of para. 15

[57] This sentence states "[t]he urgency in returning to Saskatoon was unclear and was solely at Ungar's behest". The sentence pleads evidence. It is also argumentative. It should be struck out on these grounds.

(v) Paragraphs 16 to 21

[58] Paragraph 16 alleges that Mr. Kraik's "accelerated hiring" was a "scheme elaborated by [Mr.] Ungar". In para. 17, Mr. Kraik states that he weighed the upside of the offer of employment against the move back to Saskatchewan, away from his family. Paragraphs 18 to 21 are the opening paragraphs of the section entitled "Tortious Conduct by Ungar". In these paragraphs, Mr. Kraik references documents in which Mr. Ungar's promise to Mr. Kraik as to the latter's ability to earn income on personal sales is said to be incorporated. Mr. Kraik describes the calculation he made prior to accepting the offer.

[59] Mr. Kraik's position is that in these paragraphs, he is "setting down the foundation for proof of the defendant's misrepresentations and inducement to contract". I agree. These paragraphs plead evidence and not material facts. They should be struck out as contrary to rule 25.06(1).

(vi) First sentence of para. 22

[60] This sentence states that Mr. Kraik passed the requisite exams in ten days. This sentence pleads evidence. It should be struck out.

(vii) Paragraphs 25 to 35

[61] Paragraphs 25 to 28 describe Mr. Kraik's meetings with Mr. Ungar in May 2018 and August 2018. Paragraph 29 deals with Mr. Ungar's suggestion that Mr. Kraik become an Advisor. In paras. 30 to 35, Mr. Kraik describes other opportunities Mr. Ungar allegedly had to "correct his legal breaches".

[62] Mr. Ungar's position is that these paragraphs plead evidence, not material facts, and should be struck out. Mr. Kraik submits that these paragraphs set out Mr. Ungar's ongoing fraudulent misrepresentations and show Mr. Kraik's persistence that he be permitted to earn income as contractually agreed. As Mr. Kraik puts it in his written submissions, "[i]n other words, they revealed the repeated opportunities given to the defendant to mitigate, all of which goes to punitive damages".

[63] These paragraphs do not set out material facts that would support an independent actionable wrong. They set out the means by which Mr. Kraik intends to prove his persistence. I agree with Mr. Ungar that these paragraphs plead evidence and not material facts.

[64] In my view, para. 29 is also argumentative -- "he [Mr. Ungar] was seeking a means to extricate himself from the legal quandary that he had created" and "[n]otably, for [Mr.] Ungar's purposes, it would not matter whether [Mr.] Kraik delivered branch revenues as a Sales Manager or as an Advisor" -- and should also be struck out on this basis.

(viii) Paragraph 36 except the last sentence

[65] These sentences describe events in the period prior to the termination of Mr. Kraik's employment with Sun Life and deal with what Mr. Kraik "surmised" Mr. Ungar was going to do. The last sentence of para. 36, which Mr. Ungar does not seek to have struck out, pleads that two weeks later, Mr. Ungar terminated Mr. Kraik's employment without legal cause, citing Sun Life's reorganization as the reason for the termination.

[66] Mr. Kraik submits that the paragraph is "essential in that it alleges that fraud coloured virtually everything that the defendant had communicated to the plaintiff". The claims against Mr. Ungar are for fraudulent misrepresentation, breach of contract and interference with contractual relations. There is no generalized claim for fraud.

[67] At their highest, the sentences under scrutiny plead evidence. The material fact is contained in the last sentence of the paragraph. The impugned sentences are also argumentative and inserted for colour, and they should be struck out as scandalous.

(ix) Paragraph 39

[68] In this paragraph, Mr. Kraik purports to describe Mr. Ungar's "unbridled greed". This characterization is a personal attack on Mr. Ungar in relation to a non-material fact: the timing of Mr. Kraik's termination. I agree with Mr. Ungar that this paragraph should be struck out on the ground that it is vexatious and scandalous.

(x) Paragraphs 41 to 72

[69] Mr. Kraik submits that these paragraphs of the statement of claim speak to Mr. Ungar's intent and set down the factual underpinnings for proof at trial regarding Mr. Ungar's interference with Mr. Kraik's contractual relations with Sun Life. Mr. Kraik alleges that Mr. Ungar retaliated against him because he discussed Mr. Ungar's ongoing torts, managerial misconduct and compliance failures with Mr. Ungar's superior. Mr. Kraik's position is that Mr. Ungar's retaliation against him "was a behavioural pattern adopted with previous Sales Managers who had refused to bend to the defendant's will".

[70] In para. 41, Mr. Kraik asserts that he was, in effect, teaching advisors how to do what he would have done to generate commission income. The paragraph describes Mr. Kraik's intention to implement untried national sales approaches. This paragraph pleads evidence and not material facts.

[71] In my view, paras. 42 and 43 constitute argument. Paragraph 42 includes the sentence "it is reasonable to conclude that [Mr.] Ungar never intended to permit [Mr.] Kraik to gain any personal, financial upside". In para. 43, Mr. Kraik argues that he would have earned more and would not have had to make sacrifices involving his family had he remained Director, Estate & Financial Planning Services. These paragraphs should be struck out.

[72] Paragraph 44 states that at no point did Mr. Ungar disclose "relevant, material, and compromising facts" affecting Mr. Kraik's compensation. These facts are then described. Subparagraph 44(a) refers to an "arbitrary" corporate mechanism. The relevance to the causes of action alleged against Mr. Ungar is not evident. The subparagraph also pleads evidence, not material facts.

[73] Subparagraph 44(b) attacks Mr. Ungar's character and uses words such as "unethical" and "nakedly selfish". I agree with Mr. Ungar that these statements are not made in relation to any material facts. A pleading of fact that is not the basis of a claim and inserted for the sole purpose of "atmosphere" will be struck. So, too, if the only purpose of the pleading is to cast the opposing party in a bad light, it will be struck out: Canadian National Railway Co., at para. 28. Subparagraph 44(b) falls squarely within this prohibition.

[74] Subparagraph 44(c) serves as an attack on the abilities of the other managers in the Saskatoon office and on Mr. Ungar's character for "blameshift[ing]". These statements, too, are not made in relation to any material facts. Subparagraph 44(c) should be struck out.

[75] Subparagraph 44(d) can only be described as a personal attack on Mr. Ungar's son-in-law. Mr. Kraik argues in subpara. 44(d) itself that "[t]hese facts greatly matter in the instant context . . . As a consequence of [Mr.] Ungar's parasitical nepotism, [Mr.] Kraik's earnings predictably stalled and then dropped. Had [Mr.] Kraik known of this family hire when he was still at EFPS, he would have insisted on higher entry pay for returning to Saskatoon, as well as a higher earnings split thereafter."

[76] These statements are not material facts. They are not pleaded in relation to any of the causes of action asserted. They are included to embarrass Mr. Ungar (and his son-in-law) and to cast Mr. Ungar in a bad light. They are also framed as argument. This subparagraph should be struck out on the basis that it is vexatious and scandalous.

[77] Paragraphs 45 to 55 appear in the statement of claim under the heading "Compromised Branch Compliance Environment". In these paragraphs, Mr. Kraik alleges that he discovered regulatory compliance issues in the Saskatoon branch and notified Mr. Ungar about his concerns. The pleading describes in detail a "serious compliance concern" alleged to involve fraud on clients, including through the use of forged signatures.

[78] These allegations should be struck out. These paragraphs plead irrelevant evidence -- for example, a ruling by the Mutual Funds Dealers Association -- and are included for the purpose of painting Mr. Ungar in a negative light. At para. 49, for example, Mr. Kraik describes Mr. Ungar's comments about an advisor as defamatory. Paragraph 50 alleges wrongdoing by a third party: "the initial Advisor on the file . . . had committed fraud on the clients, including through the use of forged signatures on a policy with substantial annual premiums". If allowed to remain in the pleading, these paragraphs would expand the breadth and complexity of the lawsuit, with minimal probative value. They would also require discovery of the alleged wrongdoing in relation to confidential customer accounts. There would likely be interlocutory motions in respect of confidentiality issues and the rights of non-parties to protect their privacy: Javitz v. BMO Nesbitt Burns Inc. (2011), 105 O.R. (3d) 279, [2011] O.J. No. 877, 2011 ONSC 1332 (S.C.J.), at paras. 25-29.

[79] These paragraphs also contain argument. For example, para. 48 begins "[t]he foregoing facts are material and relevant because" and "[Mr.] Kraik asserts that [Mr.] Ungar's instinct for self-preservation colours what happened next".

[80] For these reasons, paras. 45 to 55 of the statement of claim should be struck out.

[81] Paragraphs 55 to 66 of the statement of claim appear under the heading "Improper Insurance Sales Involving Chinese Immigrant Clients". In these paragraphs, Mr. Kraik alleges wrongdoing by Mr. Ungar and Vancouver Advisors in relation to specific clients. Again, the paragraphs plead facts and evidence that are entirely irrelevant to the claims against Mr. Ungar. These paragraphs, if permitted to remain in the pleading, would only serve to divert the litigation and the trial by inquiries into allegations that have no connection to the issues before the court. They should be struck out.

[82] Paragraphs 67 to 72 of the statement of claim appear under the heading "Toxic Branch Environment". In these paragraphs, Mr. Kraik describes alleged human resources concerns relating to Mr. Ungar's ongoing management of the Saskatoon branch. These statements are irrelevant to the claims pleaded against Mr. Ungar.

[83] In my view, these paragraphs are also vexatious and scandalous because they are replete with descriptions of Mr. Ungar that have no place in the pleading. The descriptions are inflammatory and can only have been included to embarrass and prejudice Mr. Ungar. For example, in paras. 67 and 68, Mr. Kraik describes Mr. Ungar as "a psychopath", "racist", "toxic and corrosive", "obese and unhealthy" and "sexist and a misogynist".

[84] I would also have struck out paras. 67 to 72 of the statement of claim.

Disposition

[85] The statement of claim is struck out without leave to amend.

[86] If the parties are unable to agree on costs, they may make written submissions, not to exceed three pages. Mr. Ungar is to deliver his submissions by December 9, 2020. Mr. Kraik is to deliver his responding submissions by December 23, 2020. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs between themselves.

Motion granted.

End of Document