Court File and Parties

COURT FILE NO.: CV-19-00141509 DATE: 08032021 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

CITY OF HAMILTON Plaintiff – and – PRIMARY RESPONSE INC. and PRIMARY RESPONSE GW CORPORATION and SHERRI MACDONALD and DIANNE CORNER and GARDA WORLD CANADA SECURITY CORPORATION Defendants

Counsel: Andrei Lezau, for the Plaintiff Alastair McNish, for the Defendants

HEARD: February 10, 2021 via zoom

Reasons for Decision

EDWARDS J.:

Overview

[1] The Defendant Garda Canada Security Corporation (“Garda”) brings this motion where the relief sought is an order striking out the amended statement of claim as against Garda. The basis for this relief is that the Plaintiff has failed to plead a reasonable cause of action against Garda and that it is plain and obvious that the claim against Garda cannot succeed.

The Facts

[2] As this is a motion under Rule 21 requiring the court to accept the facts as pleaded as correct, the following summary of the facts comes from the Plaintiff’s statement of claim.

[3] There are two Defendants that incorporate the words “Primary Response”: specifically, Primary Response Inc. and Primary Response GW Corporation”. I will refer to these two corporate entities as the Primary Response Defendants.

[4] On April 27, 2015, the Plaintiff awarded the Primary Response Defendants a security services contract which had an initial term of one year. The Plaintiff exercised an option under the contract to extend and renew the contract in March 2016 and March 2017. The total value of the contract over the course of five years would have been approximately $4,000,000. One of the terms of the contract, the purpose of which was to provide security services, incorporated an hourly rate, per security guard, per location.

[5] In 2017, the Ontario provincial government raised the minimum wage, as a result of which the Primary Response Defendants sought an agreement from the plaintiff to increase the hourly rates paid to the security guards. The Plaintiff advised the Primary Response Defendants that the contract did not make any provision for changes to the hourly rates.

[6] Discussions took place between the Plaintiff and the Primary Response Defendants that ultimately resulted in the allegation at para. 19 of the statement of claim, that the Primary Response Defendants reneged and unilaterally breached the contract by terminating the provision of security services to the Plaintiff.

[7] The claim against Garda is pleaded as follows:

The City pleads that the Defendant GCSW (Garda) is the new owner of the Primary Response Defendants and is liable for the breach of contract and/or negligence of the Primary Response Defendants and/or the defendant directors.

The Position of Garda

[8] Garda takes the position that the bald pleading in para. 27 of the statement of claim referenced above, cannot create liability in Garda as the new owner of the Primary Response Defendants for any alleged breach of the contract or negligence as it relates to the Primary Response Defendants. Mr. McNish argues that the Primary Response Defendants are an amalgamated corporation and that Garda is simply a new shareholder of Primary Response, which does not make Garda responsible in law for the alleged breaches by the Primary Response Defendants.

The Position of the Plaintiff

[9] Mr. Lezau for the Plaintiff emphasizes that the structure of the purchase and sale between Garda and one of the Primary Response Defendants is essential to the outcome of this motion, as well as a review of the corporate law principles which are applicable to shared transactions.

[10] It is conceded by the Plaintiff that with an asset sale, the purchasing corporation is not liable for the debts and liabilities of the selling company unless they have been specifically assumed or bargained for in the asset, purchase and sale agreement.

[11] Unlike an asset sale, when a corporation acquires another through a share acquisition the successor corporation becomes liable for the debts and liabilities of its predecessor.

[12] As it relates specifically to the transaction in question, Mr. Lezau argues that ss. 179(b) of the Ontario Business Corporations Act is applicable where it states that upon the articles of amalgamation becoming effective, “the amalgamated corporation possesses all of the property, rights, privileges and franchises and is subject to all liabilities, including civil, criminal and quasi-criminal, and all contracts, disabilities and debts of each of the amalgamating corporations”.

[13] As part of the motion materials before this court are responses to demands for particulars. The information gleaned from the information provided in answer to the demand for particulars resulted in an amended statement of claim, where in para. 7 the moving party and Garda was defined as a federally incorporated company with its head office in the Province of Quebec.

[14] The answers to the demand for particulars also reveal that the directors of the amalgamated GW and the Primary Response Defendants, both provincially and federally, are all the same with the same corporate office located in the Province of Quebec.

[15] On the basis of the aforementioned information which is incorporated both from the amended statement of claim and the demand for particulars, the Plaintiff argues that the moving party and Garda are the owner of the Primary Response Defendants as a result of the purchase of shares and/or the amalgamation.

Analysis

[16] The test on a Rule 21.01(1)(b) motion to strike is well known. The motion to strike can only succeed where it is plain and obvious that the statement of claim discloses no reasonable cause of action. It is clear from the case law that all essential elements of a cause of action must be pleaded and that pleading must be read generously with allowances for drafting deficiencies: see Tran v. University of Western Ontario, 2015 ONCA 295, at para. 16.

[17] It is also a fundamental principle of Rule 21.01(1) motion to strike that leave to amend a statement of claim found to be deficient should only be denied in the clearest of cases: see South Holly Holdings Ltd. v. the Toronto Dominion Bank, 2007 ONCA 456, at para. 6.

[18] On the facts as pleaded and given the application of s. 179(b) of the Ontario Business Corporations Act set forth above, I am not satisfied on the basis of the pleading as against Garda that the Plaintiff cannot succeed on the basis of the allegations set forth in the amended statement of claim. If I am wrong in this regard, the Plaintiff shall have liberty to amend its statement of claim to explicitly plead that Garda is an amalgamated corporation of the predecessors Primary Response Defendants, and as such is liable under the contract with the Plaintiff.

[19] As it relates to the issue of costs given the brief submissions provided to me at the commencement of the hearing of this motion, I am satisfied that an award of $3,000 in costs all-inclusive in favour of the Plaintiff is an appropriate disposition. Mr. McNish had indicated that if he had been unsuccessful, he would have anticipated a costs award in favour of the Plaintiff in the range of $5,000. As such, adopting the suggested figure of $3,000 made by Mr. Lezau, in my view is well within the expectations of the losing party.

Justice M.L. Edwards Released: March 8, 2021