Court File and Parties

COURT FILE NO.: CV-20-638185/CV-20-642411 DATE: 2021-03-31

SUPERIOR COURT OF JUSTICE - ONTARIO

BETWEEN:

Fibracast Ltd., Plaintiff

– and –

Waterspin S.r.l. and Luca Belli, Defendants

AND BETWEEN:

Waterspin S.r.l., Plaintiff

– and –

Anaergia Inc., Anaergia Services, LLC, Benedek Companies, LLC, Fibracast Ltd. and Diana Benedek, Defendants

BEFORE: Pinto J.

COUNSEL: Brian Radnoff and Joshua Suttner, for Fibracast Ltd., Anaergia Inc., Anaergia Services, LLC, and Diana Benedek Tom Arndt, for Waterspin S.r.l.

HEARD: November 25, 2020

REASONS FOR DECISION

Overview

[1] Two motions came before me arising out of two separate, but related, actions. Both actions arose out of a breakdown in the relationship between two corporations operating in the water and wastewater treatment industry.

[2] In the first action, Fibracast Ltd., an Ontario corporation, claims against Waterspin S.r.l., an Italian corporation, and Luca Belli, an Italian businessman who is a shareholder and was a director and chairman of Waterspin (the "Fibracast action"). Instead of bringing a counterclaim against Fibracast in the Fibracast action, Waterspin began a separate action (the "Waterspin action"), naming Fibracast and a number of other corporate entities, Anaergia Inc., Anaergia Services, LLC, and Benedek Companies, LLC (the "Additional Defendants"), and one individual, Diana Benedek, as co-defendants. Luca Belli is separately represented from Waterspin and did not participate in the two motions.

[3] Of the two motions, one proceeded on consent, and the other was contested. On consent, the parties agreed that the Waterspin action should be discontinued, and that Waterspin's claim against Fibracast and the Additional Defendants and Diana should be continued as a counterclaim in the Fibracast action. I granted this motion.

[4] The contested motion and the subject of this decision is a motion by Fibracast, the Additional Defendants, and Diana (the "moving parties") to strike out parties, claims, and pleadings from Waterspin's amended defence and counterclaim ("Waterspin's pleading"). The moving parties cite a variety of grounds for their strike out motion including abuse of process, no reasonable cause of action, and violation of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[5] For the reasons that follow, I grant the moving parties' strike out motion, albeit with leave to amend certain claims, and award costs to the moving parties.

Facts

[6] Fibracast is an Ontario-based designer and manufacturer of FibrePlate™, an immersed wastewater membrane (the "Membrane"). Waterspin is an Italian company that purchases, sells, and services components for water and wastewater treatment plants. Until recently, Waterspin was the Italian distributor for Fibracast's Membrane, pursuant to a Distributor Agreement ("DA") between the parties dated June 23, 2017, governed by the laws of Ontario. The DA had a renewable term of three years, but was not renewed.

[7] In the Fibracast action, Fibracast commenced a claim against Waterspin on March 16, 2020 for:

(a) Payment of US$941,657.51 on account of products supplied to Waterspin under the DA, but not paid for;

(b) An interim, interlocutory, and permanent order requiring Waterspin to comply with the conflict of interest and termination provisions of the DA;

(c) An interim, interlocutory, and permanent order restraining Waterspin from defaming Fibracast; and,

(d) General damages for breach of contract, tortious interference with Fibracast's business relationships and defamation.

[8] In its action, Fibracast also sued Luca Belli. Fibracast alleges that Belli had taken a position with Fibracast's primary competitor in breach of the provisions of the DA.

[9] On June 12, 2020, Waterspin served its defence in the Fibracast action, and concurrently commenced the Waterspin action, naming Fibracast, the Additional Defendants, and Diana. In September 2020, the parties agreed that Waterspin could discontinue its separate action, but continue it as an amended defence and counterclaim in the Fibracast action.

[10] On November 4, 2020, Waterspin served a 206-paragraph amended defence and counterclaim in the Fibracast action. At paras. 129(a)-(q) of Waterspin's pleading, Waterspin sets out 17 claims for relief. I have chosen the following subparagraphs as illustrative of the relief being sought:

(a) Damages for breach of contract, breach of duty of good faith, breach of warranty, tortious interference with Waterspin's business relationships, defamation, and unjust enrichment in the amount $15,000,000.00 or as otherwise determined at trial;

(b) In addition, or in the alternative, general and statutory damages for negligence, negligent misrepresentation, breach of warranty, breach of the duty of good faith and libel in an amount to be determined at trial;

(f) A declaration that the defendants by counterclaim were negligent in the engineering, design, development, research, manufacture, marketing and distribution of the Products; (note that in para. 15 of Waterspin's pleading, "Products" is defined to mean "the technologically advanced membranes (and related equipment) for water and wastewater treatment related equipment that Supplier develops and manufactures. Products includes cassettes and tools provided by Supplier"; where Fibracast is defined as the Supplier);

(g) A declaration that the defendants by counterclaim made certain representations regarding the Products that were false, and that these representations were made negligently;

(h) A declaration that the defendants by counterclaim breached the express and implied warranties in relation to the Products;

(i) A declaration that the defendants by counterclaim either violated the Sale of Goods Act, R.S.O. 1990, c. S.1 or are bound by the provisions thereof or both;

(j) A declaration that the defendants by counterclaim breached implied warranties or conditions under the Sales of Goods Act, or under the common law, pertaining to fitness for use and merchantability of the Products.

(m) An interim interlocutory and permanent injunction requiring the immediate removal and deletion of the comments in Fibracast's April 6 Email and preventing the defendants by counterclaim from publishing any further defamatory material regarding Waterspin;

[11] To say that the relief being sought by Waterspin is expansive, is an understatement. Waterspin's pleading alleges breach of contract, negligence and negligent misrepresentation, breach of express and implied warranties, products liability (defective manufacturing, inadequate warnings, or instructions), libel and defamation, unjust enrichment, and waiver of tort and damages.

[12] Waterspin counterclaims not only against Fibracast, but also against the Additional Defendants and Diana.

[13] With respect to the non-Fibracast defendants by counterclaim, Waterspin's pleading claims that:

(a) Anaergia Inc. is the parent company of Fibracast. Anaergia Inc. is an Ontario corporation and Andrew Benedek, a non-party, is its principal.

(b) Anaergia Services, LLC, is a California corporation wholly owned by Anaergia Inc.

(c) Benedek Companies, LLC, is a company and a defendant named in the style of cause in Waterspin's pleading in the Fibracast action.

(d) Anaergia is not a corporate entity, but the name given by Waterspin to the Anaergia group of companies comprising Anaergia Inc., Anaergia Services, LLC, and Fibracast.

(e) Benedek Inc. is a holding company and parent company of Anaergia.

(f) Andrew Benedek and Diana are spouses who are principals of Benedek Inc.

(g) Diana is also a principal of Fibracast, Anaergia Inc., and Anaergia Services, LLC.

[14] It is important to note that "Benedek Companies, LLC", although named in the style of cause, is not actually referenced in the body of the pleading. Instead, "Benedek Inc.", a North Carolina company, is referenced therein. Given that I am striking out the Additional Defendants, without leave to amend, the distinction between the two companies is irrelevant.

[15] On the contested motion, the moving parties seek that:

(A) Waterspin's pleading should be struck out without leave to amend as against Diana, other than the Defamation Claim, and the Additional Defendants on the basis that it is an abuse of process and discloses no reasonable cause of action.

(B) Paragraphs 129(f)-(j), 139, 141, 143-45, 147-49, 166-70, 172-74, 176-79, 181-86, and 193 of Waterspin's pleading (the "Customer and Product Liability Claims") should be struck, without leave to amend, on the basis that they are scandalous, vexatious, and an abuse of process.

(C) Paragraphs 129(f)-(j) of Waterspin's pleading (the "Inappropriate Relief") should be struck, without leave to amend, on the basis that Waterspin includes broad, general declarations, which are unrelated to the dispute, not available to Waterspin, and inappropriate given the other relief that Waterspin has claimed.

(D) Paragraphs 23-27, 129(f)-(g), 140-45, 147-51, 155-65, and all references to "the Representations" in Waterspin's pleading (the "Misrepresentation Claims") should be struck, without leave to amend, on the basis that Waterspin fails to plead the necessary elements for negligent misrepresentation, and, in the case of Fibracast, the Misrepresentation Claims disclose no reasonable cause of action because of the Entire Agreement Clause.

(E) Paragraphs 118-25, 129(m), and 187-89 and all references to libel and defamation in paras. 129(a)-(b) of Waterspin's pleading (the "Defamation Claim") should be struck on the basis that Waterspin fails to plead the necessary elements for defamation and, accordingly, discloses no reasonable cause of action.

(F) Paragraphs 11, 30, and 65-66, including all footnotes to these paragraphs, and the footnote to para. 67 of Waterspin's pleading, should be struck, without leave to amend, because they plead evidence rather than material facts.

Law of Pleadings

[16] The law applicable to motions brought pursuant to r. 21.01 and r. 25 was aptly summarized by Papageorgiou J. in Cottage Advisors of Canada v. Prince Edward Vacant Land, 2020 ONSC 6445, at paras. 13-16:

[13] Rule 25 of the Rules of Civil Procedure sets out detailed rules applicable to pleadings and there is comprehensive body of case law discussing the various ways that pleadings may be defective.

[14] In Cerqueira v. Ontario, 2010 ONSC 3954, at para. 11, Strathy J., as he then was, set out the following principles applicable to pleadings which are relevant in this case:

(a) the purpose of pleadings is to give notice of the case to be met, to define the matters in issue for the parties and for the court, and to provide a permanent record of the issues raised: 1597203 Ontario Limited v. Ontario, [2007] O.J. No. 2349; Aristocrat Restaurants v. Ontario, [2003] O.[J]. No. 5331 (S.C.J.) at para. 15; Somerleigh v. Lakehead Region Conservation Authority, 2005 CarswellOnt 3546 (S.C.J.) at para. 5;

(b) the causes of action must be clearly identifiable from the facts pleaded and must be supported by facts that are material: CIT Financial Ltd. v. Sharpless, 2006 CarswellOnt 3325;

(c) every pleading must 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; this includes pleading the material facts necessary to support the causes of action alleged;

(f) the court may strike part of a pleading, with or without leave to amend, on the grounds that (a) it may prejudice or delay the trial of an action, (b) it is scandalous, frivolous or vexatious, or (c) it is an abuse of the process of the court: rule 25.11;

(i) allegations of fraud, misrepresentation, negligence and conspiracy must be pleaded with particularity: Lana International Ltd. v. Menasco Aerospace Ltd., [1996] O.J. No. 1448.

[15] As noted in the recent Court of Appeal decision, Burns v. RBC Life Insurance Company, 2020 ONCA 347, at para. 16:

… Each defendant in a statement of claim should be able to look at the pleading and find an answer to a simple question: What do you say I did that has caused you, the plaintiff, harm and when did I do it?

[16] Under Rule 21.01(1)(b), a party may move to strike out a pleading on the ground that it does not disclose a cause of action. On such a motion, the following principles apply:

a. All allegations of fact, unless plainly ridiculous or incapable of proof, must be accepted as proven;

b. The defendant, in order to succeed, must show that it is plain and obvious and beyond doubt that the plaintiff could not succeed in the claim;

c. The novelty of the action will not militate against the plaintiff;

d. The Statement of Claim must be read as generously as possible with a view to accommodating any inadequacies in the allegations due to drafting deficiencies. Jacobson v. Skurka, 2015 ONSC 1699, 125 O.R. (3d) 279, at para. 73; Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at pp. 972-973; Dawson v. Rexcraft Storage and Warehouse Inc. (1998), 164 D.L.R. (4th) 257 (Ont. C.A.), at para. 9.

e. A claim will be found legally insufficient when its allegations "do not give rise to a recognized cause of action or it fails to plead the necessary elements of an otherwise recognized cause of action…[A] plaintiff must, at minimum, plead the basic elements of a recognized cause of action pursuant to which an entitlement to damages is claimed. Vague allegations that make it impossible for [the defendant] to reply should be struck": Aristocrat Restaurants Ltd. v. Ontario, 2003 CarswellOnt 5574, at paras. 18-19.

[18] In Astley v. Verdun (Ont. S.C.), at paras. 52-53, D. Brown J., as he then was, also discussed the purpose of pleadings and the impact of poor pleadings:

[52] Mr. Astley also moved under Rule 25.11 to strike out parts of Mr. Verdun's defence. The purpose of pleadings in a civil action was well summarized by Low J. in Lysko v. Braley, [2004] O.J. No. 4727 (S.C.J.), at paras. 63-64; affirmed on this point (2006), 79 O.R. (3d) 721 (C.A.), at p. 731:

The purpose of pleadings is to define the issues for the parties and for the Court. The pleadings govern the trial and the interlocutory proceedings. A case properly pleaded permits an efficient use of judicial resources and the parties' resources. Bad pleadings do the opposite and more. They are instruments of potential mischief in the litigation process. One of the functions of pleadings is to govern discovery. If a matter is pleaded, it may be discovered upon. Where a pleading is replete with evidence or irrelevant material…it is calculated to open the door to prolonged and potentially abusive discoveries which do not address the real issues between the parties. For that reason, offensive portions of the pleading tend to prejudice or delay the fair trial of the action and are thus an abuse of process. Bad pleadings do no mischief only if all the parties clearly agree that offensive portions will be ignored for all litigation purposes and that the pleading will be made regular prior to trial. There are circumstances where, for reasons of economy, good counsel will agree to act cooperatively in this fashion to minimize costs. There is no such agreement here however, and, to the contrary, the plaintiff argued that the entirety of the pleading was proper and necessary.

[53] Portions of pleadings that depart from that purpose may be struck under Rule 25.11 on the ground that the pleading may prejudice or delay the fair trial of the action, is scandalous, frivolous or vexatious, or is an abuse of process. Courts have held that parts of a pleading may be struck:

(i) which contain allegations that are irrelevant and extraneous: Del Cane v. Alcinii (1998), 24 C.P.C. (4th) 321, (Ont. Master), at p. 326;

(ii) which raise an issue, the determination of which can have no effect on the outcome of the action: Everdale Place v. Rimmer et. al. (1976), 8 O.R. (2d) 641(H.C.J.), at p. 643; Caras v. IBM Canada Ltd., 2004 CarswellOnt 2897 (Master), at para. 8;

(iii) which consist of argument: Solid Waste Reclamation Inc. v. Philip Enterprises Inc. (1991), 49 C.P.C. (2d) 245 (Ont. Gen. Div.), at pp. 261-4; or,

(iv) where the time and effort involved proving an allegation would unduly prolong the discovery process or seriously interfere with a fair and focussed trial on the issues: Del Cane, supra., at p. 326; and Wilson v. Lind (1985), 3 C.P.C. (2d) 113 (Ont. H.C.), at p. 117; Stiles v. Hatfield, [2003] O.J. No. 2365 (S.C.J.), at paras. 27-28.

[19] Lawsuits based on pleadings without supporting material facts are not permitted to proceed on the basis that further investigations will supply those facts. In Andrade v. The Estate of Champakali Bakshi, 2021 ONSC 199, at para. 13, Myers J. held:

[13] The plaintiff would like to investigate the circumstances of the claim more fully and presents a sympathetic figure in light of the trauma alleged. However, the law does not allow lawsuits for investigative purposes generally. It is not appropriate for a plaintiff to make an allegation without knowing the facts necessary to support the cause of action alleged. See Cottage Advisors of Canada v. Prince Edward Vacant Land, 2020 ONSC 6445 and the cases cited at para 22. That is not to say that every possible particular need be known with certainty at the pleading stage. However, a plaintiff must be able to plead facts that make out each of the requisite elements of the cause of action asserted. It is not enough to say that the plaintiff has a sympathetic case and would like to investigate further. Investigations can occur during the running of the limitation period prior to the commencement of a lawsuit. But a claim can only be started once the plaintiff can plead a cause of action.

[20] The law with respect to leave to amend following the striking out of a claim was discussed in Cottage Advisors of Canada, at para. 17:

Leave to amend will only be denied in the clearest of cases when it is plain and obvious that no tenable cause of action is possible on the facts as alleged and there is no reason to suppose that the party could improve his or her case by any amendment: Mitchell v. Lewis, 2016 ONCA 903, 134 O.R. (3d) 524, at para. 21; Conway v. Law Society of Upper Canada, 2016 ONCA 72, 395 D.L.R. (4th) 100, at para. 16; South Holly Holdings Ltd. v. The Toronto-Dominion Bank, 2007 ONCA 456, at para. 6.

[21] Against this backdrop of the law, I will now turn to the merits of the strike out motion and deal with each of the moving parties' issues in turn.

Strike-out Issues

(A) Waterspin's pleading should be struck out without leave to amend as against Diana, other than the Defamation Claim, and the Additional Defendants on the basis that it is an abuse of process and discloses no reasonable cause of action.

[22] The moving parties argue that the dispute arises from the DA, and that the Additional Defendants and Diana are not parties to the DA. Accordingly, since the underlying dispute is, or ought to be about the DA, there is no basis for the non-Fibracast defendants to be included in the action.

[23] The moving parties criticize Waterspin's vague, sweeping, and unparticularized allegations against the non-Fibracast defendants, such as the allegations at paras. 8 and 9 of Waterspin's pleading:

8. Anaergia, including [Fibracast], and Benedek Inc. at all material times carried on business as a partnership, joint venture or other enterprise inextricably interwoven with each other, making each of them vicariously liable for the acts and omissions of the other. They directly and through [Fibracast], have at all material times designed, researched, tested, manufactured, supplied, serviced and maintained submerged membrane wastewater products for [wastewater treatment plants] sold to [Waterspin] and attended at and/or participated attempts [sic] to correct failures of the Products after installation.

9. [Waterspin] could not know what individual actions were taken by [Fibracast], Anaergia or Benedek Inc. because they acted in concert and secretively from [Waterspin].

[24] The moving parties argue that Waterspin does not plead any material facts to establish the above allegations. Nor are any material facts pleaded by Waterspin sufficient to establish vicarious liability between these parties. In other words, the moving parties submit that Waterspin's bald allegation is insufficient to create a legally viable claim. The moving parties contrast this with Waterspin's allegations against Fibracast, which are particularized.

[25] The moving parties also argue, with respect to the Additional Defendants and Diana, that Waterspin does not make any specific allegations about their conduct, and it is impossible to determine which allegations are being made against which specific defendants by counterclaim.

[26] In summary, the moving parties argue that Waterspin has simply pleaded that all of the moving parties were in a proximate and special relationship with Waterspin by virtue of the moving parties work in designing and manufacturing the Products. The Products, as defined in the DA, include any products manufactured by Fibracast, not just those supplied to Waterspin. Therefore, the moving parties submit that it is plain and obvious that Waterspin's pleading vis à vis the Additional Defendants and Diana (but for the Defamation claim) discloses no reasonable cause of action and should be struck without leave to amend. As for Diana being sued in her personal capacity, the moving parties submit that Waterspin has not pleaded any specific facts which permit the court to pierce the corporate veil.

[27] Waterspin, in response, characterizes the contested motion as "procedural wrangling" by the moving parties to prevent the litigation being resolved on its merits. Waterspin submits that the Additional Defendants are members of Anaergia, a group of interrelated companies that design, manufacture, market, sell, and service products in the wastewater industry. Waterspin claims that those products have been subject to recalls, design and manufacturing defects, delayed replacements, and rejected warranty claims. Waterspin has claimed against the Additional Defendants and Diana since Fibracast is not the only party controlling the business.

[28] Waterspin also invokes the wider context of its counterclaim and states that it is not the end user of the impugned products. Rather, it contracts with and distributes Fibracast's products to its customers who pass on the products to end users. Waterspin's customers and the end users have complained of Anaergia's product failures and made various claims and commenced litigation against Waterspin in Italy and elsewhere. To date, Fibracast has not joined in the Italian court proceedings. Waterspin claims that the expansive nature of its pleading reflects the interconnected nature of, and special commercial relationship amongst, Fibracast, the Additional Defendants, Diana, and Waterspin, as well as Waterspin's present uncertainty about who does what amongst the moving parties.

[29] The instant case is reminiscent of the impugned pleadings in Martin v. Astrazeneca Pharmaceuticals PLC, 2012 ONSC 2744, aff'd 2013 ONSC 1169 (Div. Ct.), a class actions proceeding. In Martin, at paras. 117-24, Horkins J. provided a critique of "enterprise liability" pleadings that simply lump various defendants together, including corporations and their subsidiaries:

[117] Not only is the pleading inconsistent but it lacks clarity as to each defendant's role because the pleading simply lumps them together as one.

[118] The statement of claim alleges that the business of each defendant is "inextricably interwoven with that of the other and each is the agent of the other for the purpose of research, development, manufacture, marketing, sale and/or distribution of Seroquel in Canada." Courts have described this approach of lumping all defendants as one as the group or enterprise approach. It is the defendants' position that the enterprise liability allegation is deficient. For the reasons that follow, I agree.

[119] The plaintiffs fail to identify the specific acts undertaken by each defendant which support these causes of action. The only pleaded conduct that is personal to any defendant is that AZ Canada "was involved in and/or responsible for the sales, distribution and marketing of Seroquel in Canada." The defendants, AZ U.K. and AZ U.S., are identified simply as "affiliate[s]" of AZ Canada. There is no indication of which defendant was the designer or manufacturer of Seroquel. Instead, the plaintiffs attribute liability to the defendants en masse, asserting that "[t]he business of each… is inextricably interwoven with that of the other and each is the agent of the other for the purposes of research, development, manufacture, marketing, sale and/or distribution of Seroquel in Canada." This bald assertion of enterprise liability is deficient for three reasons.

[120] First, as a matter of pleading, it is inappropriate to simply "lump together" the three defendants. Allegations of enterprise liability were struck by Cumming J. in Hughes v. Sunbeam Corp. (Canada), [2000] O.J. No. 4595 (S.C.J.) at paras. 48-49, var'd on other grounds (2002), 61 O.R. (3d) 433 (C.A.), leave to appeal to S.C.C. refused, [2002] S.C.C.A. No. 446. This was a proposed class action and the defendants brought a motion to strike the pleading before the certification motion. Cumming J. stated as follows:

The Claim (para. 9) simply lumps together all corporate defendants (other than ULC) and then proceeds to generalize the various allegations as applicable to all defendants indiscriminately. For example, the Claim (para. 11) alleges that the representative plaintiff is the owner of an ionization smoke alarm manufactured by this amorphous collection of Sunbeam defendants. There is no identification of a particular manufacturer of his smoke detector until the Response (para. 2(a)).

In my view, and I so find, the pleading does not disclose any reasonable cause of action based upon the allegation of a single group enterprise by the so-called Sunbeam defendants.

[121] Second, as a matter of substantive law, a parent corporation is not interchangeable with its subsidiary. As the Alberta Court of Appeal stated in Cunningham v. Hamilton, [1995] A.J. No. 476 (C.A.) at para. 4:

… It is true that Broken Hill operates a number of its worldwide companies as an integrated economic unit. But the mere fact it does so does not mean that for legal purposes, separate legal entities will be ignored absent some compelling reason for lifting the corporate veil. …

[122] Accordingly, "[a] position as shareholder, even a controlling shareholder, in a manufacturer is an insufficient foundation in itself to impose a manufacturer's duty": Harrington v. Dow Corning Corp., [1996] B.C.J. No.734 (S.C.J.) at para. 53 aff'd (2000), 193 D.L.R. (4th) 67 (B.C.C.A.), leave to appeal to S.C.C. refused, [2001] S.C.C.A. No. 21. The same rule applies where a manufacturer's duty is sought to be imposed on a subsidiary corporation for the actions of its parent. As the Ontario Court of Appeal noted in Gregorio v. Intrans-Corp., [1994] O.J. 1063 at para. 28, that is inappropriate "unless the subsidiary is under the complete control of the parent and is nothing more than a conduit used by the parent to avoid liability."

[123] Applying these principles, Ontario courts have frequently struck out allegations of enterprise liability where the plaintiff failed to plead material facts that would justify piercing the corporate veil: see Sauer at para. 89; McCutcheon v. The Cash Store Inc. (2006), 80 O.R. (3d) 644 (S.C.J.) at paras. 16-26; Di Gennaro v. BMO Nesbitt Burns Inc., [2007] O.J. No. 3934 (S.C.J.) at paras. 7-11.

[124] As the court stated in the Haskett v. Equifax Canada Inc. (2003), 63 O.R. (3d) 577 (C.A.) at paras. 61-63, leave to appeal to S.C.C. refused, [2003] S.C.C.A. No. 208:

… In order to found liability by a parent corporation for the actions of a subsidiary, there typically must be both complete control so that the subsidiary does not function independently and the subsidiary must have been incorporated for a fraudulent or improper purpose or be used by the parent as a shield for improper activity….

The pleading falls short of suggesting that the relationship of the respective related respondent corporations is that of a conduit to avoid liability, nor is there an allegation that the parent company controls the subsidiary for an improper purpose.

For the above reasons, the claims against the companies as pleaded must be struck out as disclosing no reasonable cause of action.

[30] Waterspin cites competing case law where the court has refused to strike claims involving related companies.

[31] Waterspin claims that De Kever v. Nemato Corp., 2015 ONSC 6273 (Div. Ct.), at para. 3, is authority for the proposition that a bare-bones pleading may survive a motion to strike where material facts are pled and where a narrative shows "an interconnection and a commonality of operations and commercial purposes". I disagree. A review of the case indicates that in De Kever, the Divisional Court upheld a r. 21 motion judge who supported pleadings relying on the common employment test set out in Downtown Eatery (1993) Ltd. v. Ontario (2001), 54 O.R. (3d) 161 (C.A.). The proposition that Waterspin seeks to rely on is inapplicable to the case at bar or outside the employment law context. The conclusion in Downtown Eatery rested more on the plaintiff's relationship to the group of companies, rather than the relationships among the companies in the group: Yaiguaje v. Chevron Corporation, 2018 ONCA 472, 141 O.R. (3d) 1, at para. 69.

[32] Waterspin also relies on United Canadian Malt Ltd. v. Outboard Marine Corp., 48 O.R. (3d) 352 (S.C.), where Nordheimer J., as he then was, refused to strike the plaintiff's pleading in an environmental contamination case. The plaintiff sued the Canadian corporate defendant, its American parent, and the directors of both Canadian and American companies. The defendants brought a motion to strike the claim on the basis that it disclosed no reasonable cause of the action.

[33] At paras. 20-21, Nordheimer J. cited the decision in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Gen. Div.), aff'd [1997] O.J. No. 3754 (C.A.) concerning when it may be appropriate to disregard the separate legal entity of a corporation:

[20] I now turn to a consideration of the principles established by Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co., supra. In his decision, Sharpe J. said at p. 433:

There are undoubtedly situations where justice requires that the corporate veil be lifted. The cases and authorities already cited indicate that it will be difficult to define precisely when the corporate veil is to be lifted, but that lack of a precise test does not mean that a court is free to act as it pleases on some loosely defined "just and equitable" standard.

[21] Mr. Justice Sharpe then went on to outline the two elements that courts will consider in determining whether it is appropriate to disregard the separate legal entity of a corporation. Those two elements are:

(a) complete control of the subsidiary by the parent, in that it must be shown that there is complete domination of the subsidiary by the parent such that the subsidiary does not function independently; or

(b) whether there is conduct akin to fraud that would otherwise unjustly deprive claimants of their rights.

[34] Eighteen years after the decision in United Canadian Malt, Justice Nordheimer, now a member of the Court of Appeal, was part of the panel that decided the current leading case on piercing the corporate veil, Chevron. The majority of the court in Chevron reaffirmed the approach in Transamerica Life Insurance and rejected an independent just and equitable ground for piercing the corporate veil: Chevron, at paras. 66-67. In concurring but separate reasons, Nordheimer J.A. parted company from the majority on whether the test established in Transamerica Life Insurance was the appropriate one to apply in the circumstances of the Chevron case, and the general approach to piercing the corporate veil. Neither the majority nor Nordheimer J.A.'s approach to piercing the corporate veil assists Waterspin in this proceeding.

[35] Bearing in mind the caution in Martin against lumping together related corporations, but also recognizing that there may be exceptional circumstances to disregard the separate legal entity of a corporation as per Transamerica Life Insurance, the question is whether Waterspin's pleading in respect of the non-Fibracast defendants is legally defensible.

The Additional Defendants

[36] I find that para. 8 of Waterspin's pleading, reproduced above, is precisely the type of "enterprise liability" claim that has been struck out by courts where there is little else to support the claim. The allegation in para. 9 that the Additional Defendants "acted in concert and secretively from [Waterspin]" does not improve the matter. It does not relieve Waterspin from its obligation to plead material facts to support its pleading. Here, the so called "additional facts" pleaded and as described below are insufficient.

[37] Paragraphs 4, 5, 6, and 7 speak to Benedek Inc., Anaergia Inc., Anaergia Services, LLC, Benedek Companies, LLC, and Fibracast Ltd. being corporately related, with Fibracast being the other companies' subsidiary. To hold that this establishes potential liability would erase the concept of corporate separateness and cannot be a material fact supporting their inclusion in this lawsuit.

[38] Waterspin alleges at para. 21 that "[Fibracast], Anaergia and Benedek Inc. research, develop, design, test, manufacture, label, advertise, market, sell, supply and distribute various wastewater treatment plant … products, including the Products, FibrePlate and FibrePlate2, "around the globe" including in Canada, Italy and the USA" (emphasis in original). In my view, this is a rehash of the common enterprise approach to pleading and does not demonstrate that non-Fibracast entities had complete control over Fibracast.

[39] At para. 23, Waterspin states that the non-Fibracast entities' "promotion and marketing efforts focus on being a global leader in the research, development and manufacturing of advanced membrane technologies for wastewater treatment", and that Fibracast "represents its products, including the Products, are built on the strengths of previous technologies". Similarly, these statements do not justify the inclusion of non-Fibracast entities in the lawsuit. The only connection Waterspin makes with respect to marketing is that it allegedly relied on Anaergia's joint marketing efforts, which Waterspin then characterizes as "Representations". I deal with Representations in Issue D below.

[40] Waterspin's pleading at para. 25 that "Representations … regarding [Fibracast], Anaergia and their products, continue to be published at www.fibracast.com and www.anaergia.com and elsewhere" are insufficient material facts. As the moving parties point out, a website is not a document or a statement in and of itself, although it can contain documents and statements. Waterspin made much of the fact that Fibracast is referenced on Anaergia's website. However, while this establishes some link between Fibracast and Anaergia, it is insufficient to justify including Anaergia in the lawsuit.

[41] Waterspin claims in its factum that "Benedek Inc exhibited direct and complete control over Anaergia and Fibracast." But this is not pleaded anywhere. The proof? That there are emails from Diana's email address that make no reference to her acting in her capacity with Fibracast. In my view, this falls very far below the legal standard of complete control.

[42] Waterspin also argues that the following references in its pleading are indicative of a "special relationship" that satisfies the legal test for inclusion of non-Fibracast entities in the lawsuit:

(a) Paragraph 10 - that Luca Belli, Waterspin's Chairman at the time Waterspin and Fibracast entered into the DA, was employed by Andrew Benedek's business.

(b) Paragraph 14 - that in the DA, there is a non-solicitation clause that reads, "[b]oth parties agree to not solicit one another's employees including Anaergia."

(c) Paragraphs 23-26 - which reference Anaergia's website www.anaergia.com and the allegation that Fibracast and Anaergia's marketing is interchangeable.

(d) Paragraph 8 - Waterspin routinely communicated with representatives of the non-Fibracast defendants regarding installation, design, repair, and maintenance of the Products and reporting issues.

[43] I find that these references amount to allegations that the Additional Defendants coordinated their business activities but, once again, this is far from alleging complete control of Fibracast by its parent or related corporations.

Diana Benedek

[44] The law in respect of finding an officer, director, or employee of a corporation personally liable for acts carried out under a corporate name was discussed by Nishikawa J. in Khursheed v. Venedig Capital SAS, 2019 ONSC 5190, at paras. 26-29:

[26] The case law makes clear that unless there is an independent cause of action against them, officers, directors and employees are protected from personal liability for acts carried out under a corporate name. As the Court of Appeal stated in ScotiaMcLeod Inc. v. People's Jewellers Ltd. (1995), 26 O.R. (3d) 481 (C.A.), at pp. 490-491:

The decided cases in which employees and officers of companies have been found personally liable for actions ostensibly carried out under a corporate name are fact-specific. In the absence of findings of fraud, deceit, dishonesty or want of authority on the part of employees or officers, they are also rare. … In every case, however, the facts giving rise to personal liability were specifically pleaded. Absent allegations which fit within the categories described above, officers or employees of limited companies are protected from personal liability unless it can be shown that their actions are themselves tortious or exhibit a separate identity or interest from that of the company so as to make the act or conduct complained of their own.

[27] The Court of Appeal went on to say that a corporation's directors or officers may cause it to sign a contract, since a corporation can only operate through human agents. However, this does not mean that "if the actions of the directing minds are found wanting, that personal liability will flow through the corporation to those who caused it to act as it did": Scotia McLeod v. People's Jewellers, at p. 491.

[28] Directors and officers are responsible for their tortious conduct even though that conduct was directed in a bona fide manner to the best interests of the company, subject to the exception for liability for procuring a breach of contract: Adga Systems International Ltd. v. Valcom Ltd. (1999), 43 O.R. (3d) 101 (C.A.), at para. 18. In order to properly plead a cause of action against the directors or officers of a corporation, a separate claim must be stated against the individuals in their personal capacity: Scotia McLeod v. People's Jewellers, at p. 491. The statement of claim must allege actions conducted by the individuals which are themselves tortious or exhibit a separate identity or interest from that of the corporation so as to make the act or conduct complained of their own: Ibid.

[29] Bald allegations that the individual defendants were the guiding minds or alter egos of the corporate defendants or that they dominated or controlled the corporation are not sufficient to pierce the corporate veil: Sauer v. Canada (Attorney General) (2006), 79 O.R. (3d) 19, at para. 89, aff'd on other grounds 2007 ONCA 454, 225 O.A.C. 143; TSCC Corporation No. 2123 v. Times Group Principals, 2018 ONSC 4799, at para. 71.

[45] Waterspin's pleading provides thin gruel to justify piercing the corporate veil of Fibracast and other entities to reach Diana in her personal capacity. At para. 61 of Waterspin's pleading, Waterspin alleges that certain recall notices were signed by Diana; at para. 63, Waterspin alleges that Diana failed to answer certain questions about product failures; at para. 75, Waterspin alleges that Diana sent an email stating that she would prefer to delay unnecessary replacements pending replacement with better products. None of these pleadings suffice to include Diana, in her personal capacity, in the lawsuit.

[46] Given para. 9 of Waterspin's pleading, that it "could not know what individual actions were taken by [Fibracast], Anaergia or Benedek Inc. because they acted in concert and secretively from [Waterspin]", and given the rest of Waterspin's pleading, I find that this is one of those rare cases where there is no reason to suppose that Waterspin could improve its pleading by amendment. This does not preclude Waterspin from seeking leave of the court to amend its pleading if and when it has the sufficient material facts to do so.

[47] Accordingly, I find that Waterspin's pleading should be struck out, without leave to amend, as against Diana, other than the Defamation Claim, and as against the Additional Defendants on the basis that the pleading is an abuse of process and discloses no reasonable cause of action.

(B) The Customer and Product Liability Claims should be struck, without leave to amend, on the basis that they are scandalous, vexatious, and an abuse of process.

[48] The moving parties argue, with respect to these Customer and Product Liability Claims, that Waterspin's pleading fundamentally misconceives the Products because Waterspin's pleading ends up encompassing any products manufactured by Fibracast, sold to anyone, without temporal limitation. This means that Waterspin is suing over products that Fibracast did not supply to Waterspin.

[49] Further, the moving parties argue that Waterspin's pleading is akin to a class action seeking product liability claims on all products sold by Fibracast, whether they were sold to Waterspin or not.

[50] Finally, the moving parties submit that Waterspin ought not to be able to bring claims for damages suffered by third parties based on principles of disgorgement or unjust enrichment. On this last point, Waterspin confirms that it has no intention of making claims on behalf of third parties. However, the focus of the motion is on Waterspin's pleading, not its intentions.

[51] I note that, in response to the moving parties' concerns over the overbroad definition of Products, Waterspin did not offer up an amended pleading on the strike out motion. An amended pleading could have restricted the definition of Products to "Products supplied to Waterspin". That not being the case, I am required to rule on the Waterspin pleading before me.

[52] Waterspin responds to the criticism of its pleading in respect of the Customer and Product Liability claims by arguing that "for Waterspin to be prohibited to claim over for these claims against the manufacturer and designer of the Products … would be unjust."

[53] In my view, this is no answer to the serious problem posed by the broad definition of Products, from the DA, being incorporated into Waterspin's pleading. On the basis of proportionality, fair discovery and trial management principles alone, it would be unreasonable to require the moving parties, or any one of them, to respond to Waterspin's allegations concerning all Fibracast products, some of which have not even been sold to Waterspin.

[54] Compounding the problem is the fact that at paras. 21, 23, and 25 of Waterspin's pleading the phrase "products, including the Products" is used. For instance, para. 25 states:

Representations … regarding Fibracast, Anaergia and their products, including the Products, continue to be published at www.fibracast.com and www.anaergia.com and elsewhere.

[55] Letting this pleading stand would mean that the moving parties would additionally have to respond to Waterspin's generalized claims about all non-Fibracast products. This would massively and, in my view, unjustifiably expand the scope of the Waterspin counterclaim. It would be virtually impossible for the moving parties to respond to the present Waterspin pleading in any coherent fashion. This runs contrary to r. 25 and is not permitted.

[56] I find that paras. 129(f)-(j), 139, 141, 143-45, 147-49, 166-70, 172-74, 176-79, 181-86, and 193 in Waterspin's pleading should be struck, but with leave to amend only with respect to Fibracast products supplied to Waterspin.

[57] I also find that Waterspin ought not to be able to bring claims for damages suffered by third parties based on principles of disgorgement or unjust enrichment and would strike out these claims, without leave to amend: Amyotrophic Lateral Sclerosis Society of Essex, 2017 ONCA 555, at para. 29.

(C) The Inappropriate Relief should be struck, without leave to amend, on the basis that Waterspin includes broad, general declarations, which are unrelated to the dispute, not available to Waterspin, and inappropriate given the other relief that Waterspin has claimed.

[58] The moving parties submit that Waterspin's request for declaratory relief in paras. 129(f)-(j) of the pleading is inappropriate. They argue that since Waterspin is requesting damages for breach of contract and negligence, declarations should not also be requested. Moreover, given that the declarations are being sought in respect of the Products, which are Fibracast products that may not have been supplied to Waterspin, Waterspin ought not to be permitted to seek such declaratory relief. In oral argument, Waterspin's counsel did not oppose this submission and suggested that he would be able to get instructions to withdraw the request for declaratory relief. I agree with the moving parties' submission that declaratory relief should not be sought where other relief is available: Maynes v. Allen-Vanguard Technologies Inc. (Med-Eng Systems Inc.), 2011 ONCA 125, 274 O.A.C. 229, at paras. 41-43.

[59] Therefore, paras. 129(f)-(j) of Waterspin's pleading are struck, without leave to amend.

(D) The Misrepresentation Claims should be struck, without leave to amend, on the basis that Waterspin fails to plead the necessary elements for negligent misrepresentation, and, in the case of Fibracast, the Misrepresentation Claims disclose no reasonable cause of action because of the Entire Agreement Clause.

[60] The moving parties argue that the Misrepresentation Claims allege that all of the moving parties were negligent or made false and misleading representations and warranties to third parties, including Waterspin customers. The moving parties submit that they cannot identify from Waterspin's pleading which moving party was negligent or made the alleged misrepresentations.

[61] Further, the moving parties argue that the breadth and generality of the negligence and misrepresentation claims violate the pleading requirement that negligence and representation claims be specific.

[62] The following two paragraphs from the pleading are illustrative of the moving parties' concern:

26. The defendants by counterclaim made, approved or authorized a number of Representations in, among other things, their written warranties, manuals and bulletins, publications and technical data including, design manual (MBR design Manual), standard control narrative, operations and maintenance manual (O&M Manual), drawings or models of modules, cassettes and typical installations in editable files, reference list, completion certificate of existing references, suggested spare part lists for 3 and 5 years of operation modules and cassettes, as well as media releases, internet, print media, website(s), sales brochures, conference displays, other marketing materials and the DA in relation to the Products. The defendants by counterclaim represented among other things, that the Products:

(a) met or exceeded all relevant emissions regulations;

(b) are a superior water and wastewater filtration design requiring a "smaller footprint" with the "best attributes of hollow-fiber and flat-plate technologies into a single compact, strong, and energy efficient solution offering for wastewater and tertiary applications";

(c) have a higher solids tolerance than hollow fiber and similar solid tolerance to flat plate designs;

(d) are back-washable like a hollow fiber design and can withstand the backpressure strength of a hollow fiber while having the structure of a fiber plate;

(e) submergence is less than compared to current leader (around 8%);

(f) can be used both with and without side gaps;

(g) operate up to 15,000 mg/l [Mixed Liquor Suspended Solids] or [Total Suspended Solids] in the membrane tanks; and

(h) are temperature rated up to 45°C.

The representations set out in paragraphs 23, 24, 25, 26 are the "Representations" that [Waterspin] relied upon.

144. [Waterspin] further pleads that the defendants by counterclaim were negligent with respect to the manufacture of the Products and the fulfillment of their obligations related to the sale and support of the Products.

[63] Waterspin defends its pleading on the basis that the interwoven aspect of the moving parties' conduct is such that Waterspin may not currently be able to identify which impugned act or omission is attributable to which entity. Waterspin argues that it is not plain and obvious that its negligence and misrepresentation claims should be struck.

[64] The law of pleadings is clear that specific acts need to be alleged as against each defendant to support causes of action in respect of negligence and negligent misrepresentation.

[65] In Norman v. Thunder Bay Regional Health Sciences Centre, 2015 ONSC 3252, a class actions certification decision about a chemotherapy drug, Shaw R.S.J. explained the pleading requirements concerning negligence and negligent misrepresentation at paras. 55-65. The expansive pleading in Norman is akin to Waterspin's pleading.

[55] Mustapha v. Culligan of Canada Ltd., 2008 SCC 27, at para. 3, sets out the four elements to which a plaintiff must plead material facts to found a claim in negligence:

[3] A successful action in negligence requires that the plaintiff demonstrate (1) that the defendant owed him a duty of care; (2) that the defendant's behaviour breached the standard of care; (3) that the plaintiff sustained damage; and (4) that the damage was caused, in fact and in law, by the defendant's breach.

[56] Under the heading "Negligence", the Amended Statement of Claim alleges:

41. The Plaintiffs plead that the Defendants were negligent in the manufacturing, storage, mixing, dilution, handling, storage and/or administration of Taxotere and that said negligence caused their losses.

42. The Plaintiffs further plead that the Defendants knew or ought to have known that their negligent manufacturing, storage, mixing, dilution, handling, storage and/or administration of Taxotere would cause the plaintiffs to develop severe respiratory illness or complications, including but not limited to pneumonitis.

43. It is further alleged that the Defendant Physicians, "Pharmacist Doe" and/or "Nurse Doe" continued to prescribe and/or administer Taxotere to the Plaintiffs when they knew or ought to have known that the drug was negligently manufactured, stored, mixed, diluted, handled and/or administered and would cause the Plaintiffs to develop severe respiratory illness or complications, including but not limited to pneumonitis.

44. It is alleged that the Defendants did not warn the Plaintiffs of the potential side effects of Taxotere, including specifically the risk of developing permanently debilitating respiratory illness or pneumonitis.

45. It is also alleged that, in failing to advise the Plaintiffs of the numerous patients of the Hospital who had developed severe respiratory illnesses following the receipt of Taxotere at the Hospital, the Defendants failed to obtain the Plaintiffs' informed consent.

46. The Plaintiffs state that the Defendant Physicians, Hospital, Nurses and Pharmacists fell below the standard of care expected and breached their contractual and fiduciary obligations to exercise all reasonable care and skill in the treatment and care of the Plaintiffs and the Class members.

47. The Plaintiffs state that the Defendant, Sanofi-Aventis, was negligent and breached its contractual obligations to exercise all reasonable care and skill in the manufacturing, processing, handling and distribution of Taxotere for use on the Class members.

48. The Plaintiffs state that the Hospital and the Defendant, Sanofi-Aventis, are liable at law for the negligent acts of its employees, agents or servants.

[57] Following these paragraphs, the Amended Statement of Claim contains further extensive allegations of negligence against all defendants.

[58] In my view, the Amended Statement of Claim is fatally deficient in its pleadings of negligence.

[59] It indiscriminately lumps all defendants together. It fails to clarify each defendant's role. It fails to identify the specific acts alleged as against each defendant to support the causes of action.

[60] Not only are the defendants lumped together, the Amended Statement of Claim does not distinguish between the different negligence claims against the defendants.

[64] When a misrepresentation is pleaded, rule 25.06(8) requires that the pleading shall contain "full particulars". In Hughes v. Sunbeam Corp. (Canada), [2000] O.J. No. 4596 (S.C.J.), at para. 23, Cumming J. described what must be pleaded when an allegation of misrepresentation is made:

23. A pleading of negligent misrepresentation must set forth with careful particularity the material facts in support of establishing the requisite elements for the tort: the representation; when, where, how, by whom and to whom it was made; the existence of a duty of care based upon a "special relationship" between the representor and representee; the falsity of the representation; that the representor acted negligently in making the representation; reasonable reliance by the representee on the representation; and the resulting loss or damage. Queen v. Cognos Inc. (1993), 99 D.L.R. (4th) 626 (S.C.C.) at 643.

[65] No material facts have been pleaded to comply with those required elements of misrepresentation.

[66] In light of the law of pleadings set out above, I find that it would be virtually impossible for the moving parties to look at the Misrepresentation Claims and answer the question: What does Waterspin say we did to cause Waterspin harm and when did we do it?

[67] Paragraphs 23-27, 129(f)-(g), 140-45, 147-51, 155-65, and all references to "the Representations" in Waterspin's pleading, with the exception of para. 145, should be struck, without leave to amend, on the basis that Waterspin fails to plead the necessary elements for negligent misrepresentation. This does not preclude Waterspin from seeking leave of the court to amend its pleading if and when it has the sufficient material facts to do so.

Entire Agreement Clause

[68] At para. 145 of Waterspin's pleading, it alleges that the Entire Agreement Clause in the DA, which is only between Fibracast and Waterspin, is unenforceable as "it would not accord with commercial reality":

145. [Waterspin] and its customers and end users relied, in a reasonable manner, on the Representations which [Waterspin] now pleads are negligent misrepresentations, and the reliance was detrimental to [Waterspin], such that damages resulted. [Waterspin] pleads that the "Entire Agreement Clause" in the DA is not enforceable inter alia because it would not accord with commercial reality to give effect to the entire agreement clause.

[69] The moving parties argue that the "not accord with commercial reality" claim is not an argument known to law and, accordingly, the Entire Agreement Clause is enforceable. If the Entire Agreement Clause is enforceable, then Waterspin's claims based on alleged misrepresentations outside the DA should be struck.

[70] In D.L.G. & Associates Ltd. v. Minto Properties Inc., 2015 ONCA 705, 391 D.L.R. (4th) 505, at para. 39, the Court of Appeal held that it was loathe, at a pleadings stage, to strike down a misrepresentation claim because of an entire agreement clause entered into by the parties that would presumably foreclose liability.

[71] The difference here, the moving parties argue, is that Waterspin is seeking to rebut the Entire Agreement Clause via an argument unknown to law when, in fact, the opposite doctrine, that commercial reality requires the court to give effect to an entire agreement clause, is the sound legal doctrine: No. 2002 Taurus Ventures Ltd. v. Intrawest Corp., 2007 BCCA 228, 281 D.L.R. (4th) 420, at para. 59.

[72] I decline to accept the moving parties' arguments for two reasons. First, a careful reading of the pleading reveals that the words "inter alia" precede the impugned argument in the pleading. I appreciate that the use of inter alia is itself problematic as it provides no details about what other arguments Waterspin intends to raise but, being that as it may, the use of inter alia means that Waterspin has arguments other than the "not accord with commercial reality" claim. The other arguments that Waterspin intends to raise, to explain its claims for misrepresentation in the face of an Entire Agreement Clause, should survive a motion to strike.

[73] Second, the Court of Appeal in D.L.G. & Associates indicates a note of caution about striking misrepresentation claims if otherwise properly pleaded in the face of entire agreement clauses at the pleadings stage. In the circumstances, I find that the appropriate result is to strike the particular clause, para. 145, but grant leave to Waterspin to amend its pleading in this respect without resuscitating the "not accord with commercial reality" argument which, I find, is an argument not based in law. Waterspin should specify in its revised pleading what other arguments, if any, it raises in respect of the Entire Agreement Clause.

(E) The Defamation Claim should be struck on the basis that Waterspin fails to plead the necessary elements for defamation and, accordingly, discloses no reasonable cause of action.

[74] The moving parties submit that Waterspin has failed to plead allegations of defamation with the particularity required by law.

[75] Although several paragraphs of the pleading relate to Waterspin's allegations of defamation, the following three paragraphs were the focus of the moving parties' criticism:

187. [Fibracast]'s April 6 Email and May 2020 Libel Email contain words, phrases and allegations of fact described as above which were, and remain, false and misleading, were intended to injure and damage, and in fact injured and damaged the [sic] [Waterspin]'s goodwill and reputation in that they literally stated that [Waterspin] breached the DA by refusing to share its customer contact information with [Fibracast], and inferentially by implying that [Waterspin] was not capable of installing or inspecting the Products, was incompetent, failed to follow [Fibracast]'s instructions and failed to make timely disclosure to [Fibracast] of material information.

188. Further, by email letter dated October 21, 2020, from [Fibracast]'s counsel Brian Radnoff to [Waterspin]'s customer, Idrosistem, [Fibracast] breached the ongoing obligations of confidentiality from Section 5.2 of the DA and further libeled [Waterspin]. The October 21, 2020 letter expressly libels [Waterspin] by stating that [Waterspin] failed to pay for products thus [Fibracast] cannot provide any warranty on the Products to Idrosistem and inferentially libels [Waterspin] by suggesting that did not comply with RAS influent and aeration level requirements on other plants and likely on Idrosistem's plant as well suggesting [Waterspin] was incompetent. There is no payment requirement in the DA for the warranty to be applicable. It is a new requirement that [Fibracast] now seeks to unilaterally and retroactively impose after [Waterspin] terminated the DA and after the Products were sold.

189. The Plaintiffs seek damages for all comments in [Fibracast]'s April 6 Email and similar communications and the publication [sic] their contents.

[76] The moving parties submit, with respect to para. 187, that the alleged defamatory meanings are pleaded but they are combined, not separated, therefore the moving parties cannot determine which defamatory meanings arise from which email.

[77] At paras. 120 and 123 of Waterspin's pleading, the allegedly defamatory words from Fibracast's April 6, 2020 and May 19, 2020 emails respectively are described, so the criticism is not that the allegedly defamatory words are not included in the pleading. However, the problem is that the pleading does not specify which defamatory meaning corresponds to which words, in which email.

[78] With respect to para. 188, the moving parties submit that Waterspin's pleading indicates the alleged defamatory meaning, but does not specify which words in the October 21, 2020 email it arises from. While Waterspin included, in its Motion Record, a Notice of Libel dated November 5, 2020 that describes what words in the October 21, 2020 email are allegedly defamatory, there is no reference in the pleading itself to that Notice of Libel.

[79] With respect to para. 189, the moving parties complain that the words "and similar communications and the publication [sic] their contents" are vague. It is impossible to know, from Waterspin's pleading, what communications and publications Waterspin considers actionable.

[80] The Court of Appeal in The Catalyst Capital Group Inc. v. Veritas Investment Research Corporation, 2017 ONCA 85, 136 O.R. (3d) 23, at paras. 23-25, has adopted a more flexible approach to defamation pleadings, allowing them to stand in certain circumstances:

[23] Like any pleading, a statement of claim in a defamation action must set out "a concise statement of the material facts on which the [plaintiff] relies": rule 25.06(1). And, of course, the material facts must be sufficient, if proved, to establish a cause of action. In libel actions (defamatory statements in writing, as in this case), the material facts to be pleaded are: (i) particulars of the allegedly defamatory words; (ii) publication of the words by the defendant; (iii) to whom the words were published; and (iv) that the words were defamatory of the plaintiff in their plain and ordinary meaning or by innuendo. See, generally, Alastair Mullis & Richard Parkes, eds., Gatley on Libel and Slander, 12th ed. (London, U.K.: Sweet & Maxwell, 2013), at paras. 26-1 to 26-26; Lysko v. Braley (2006), 79 O.R. (3d) 721 (C.A.), at para. 91; Metz v. Tremblay-Hall (2006), 53 C.C.E.L. (3d) 107 (Ont. S.C.), at para. 13.

[24] At one time, the weight of authority required the pleading of these essential elements with strict precision, including the exact wording complained of and the names of all persons to whom the words had been published. It was, and remains the case that pleadings in defamation actions attract a more critical evaluation than pleadings involving other causes of action; they require a more detailed outline of the material facts alleged in support of the claim. Courts are attentive to guard against "fishing expeditions" in such cases. This is because – given the serious nature of such allegations and the significance of context in assessing them – it is particularly important that the defendant know the case it has to meet.

[25] While the need for as much precision as possible and for enhanced judicial scrutiny continues, however, more recent authorities have applied greater flexibility in permitting defamation pleadings to stand in certain circumstances where the plaintiff is unable to provide full particulars of all allegations. These circumstances include situations where the plaintiff has revealed all the particulars within its knowledge, where the particulars are within the defendant's knowledge, and – importantly – where the plaintiff has otherwise established a prima facie case of defamation (including publication) in the pleading. See, for example, Paquette v. Cruji (1979), 26 O.R. (2d) 294 (H.C.), at p. 296-97; Magnotta Winery Ltd. v. Ziraldo (1995), 25 O.R. (3d) 575 (C.J.), at pp. 583-84; Lysko, approving Paquette and Magnotta Winery, at paras. 93-95; and Guergis v. Novak, 2013 ONCA 449, 116 O.R. (3d) 280, at para. 52.

[81] The question is whether the deficiencies in Waterspin's defamation pleadings are serious enough to warrant striking out the pleading, with or without leave to amend. The modern, flexible approach to defamation pleadings does not mean that certain prerequisites with respect to a defamation pleading can be set aside. Here, with respect to paras. 187-89 in Waterspin's pleading, there are serious deficiencies that no amount of flexibility can countenance. The moving parties should not have to guess at the emails, words, and defamatory meanings being referenced with respect to para. 187. These should have been pleaded precisely. The words said to be defamatory are not pleaded in para. 188, a fundamental requirement to plead defamation, and para. 189 is too vague to let stand.

[82] I find that for the foregoing reasons paras. 118-25, 129(m), and 187-89 and all references to libel and defamation in paras. 129(a)-(b) of Waterspin's pleading should be struck. However, as the failure is one of imprecision, I would permit Waterspin to amend its pleading to specify which defamatory meanings arise from which emails and words therein; and with respect to which publications Waterspin is seeking damages.

(F) Paragraphs 11, 30, and 65-66, including all footnotes to these paragraphs, and the footnote to para. 67 of Waterspin's pleading, should be struck, without leave to amend, because they plead evidence rather than material facts.

[83] The moving parties submit that paragraphs in Waterspin's pleading refer to evidence, rather than material facts, contrary to r. 25.06.

[84] In Jacobson v. Skurka, 2015 ONSC 1699, 125 O.R. (3d) 279, at paras. 43-44, the distinction between material facts and evidence is explained:

[43] Rule 25.06 (1) draws a distinction between the "material facts" and "the evidence by which those facts are to be proved." A material fact may itself be relevant evidence and particulars of material facts may also be relevant evidence, so the distinction drawn in the rule is not a litmus test clear differentiation, but the essence of the directive of rule 25.06 is clear enough that a pleading is not the place for a party to lead relevant evidence and to present argument to prove his claim or defence.

[44] A pleading should not describe the evidence that will prove a material fact; pleadings of evidence may be struck out: Sun Life Assurance Co. of Canada v. 401700 Ontario Ltd. (1991), 3 O.R. (3d) 684 (Gen. Div.). The difference between pleading material facts and pleading evidence is a difference in degree and not of kind: Toronto (City) v. MFP Financial Services Ltd., [2005] O.J. No. 3214 at para. 15 (Master). What the prohibition against pleading evidence is designed to do is to restrain the pleading of facts that are subordinate and that merely tend toward proving the truth of the material facts: Grace v. Usalkas, [1959] O.W.N. 237 (Ont. H.C.J.); Phillips v. Phillips (1878), 4 Q.B.D. 127 (C.A.). Even a pleading of an admission, which is a type of evidence, may be struck out: Davy v. Garrett (1878), 7 Ch. D. 473 (C.A.); Sun Life Assurance Co. of Canada v. 401700 Ontario Ltd.

[85] I find that the paras. 11, 30, and 65-66, including all footnotes to these paragraphs, and the footnote to para. 67 of Waterspin's pleading are descriptions of the evidence that Waterspin will use to prove its case. They are not the material facts themselves. Accordingly, they are struck out and, as they are evidence, without leave to amend.

Conclusion

[86] The Waterspin action is discontinued, and Waterspin's claim against Fibracast and the Additional Defendants and Diana is continued as a counterclaim in the Fibracast action.

[87] In the Fibracast action, Waterspin's pleading is struck out, without leave to amend, as against Diana, other than the Defamation Claim, and as against the Additional Defendants. This does not preclude Waterspin from seeking leave of the court to amend its pleading if and when it has the sufficient material facts to do so.

[88] The following paragraphs of Waterspin's pleading are hereby struck:

(a) Paragraphs 139, 145, 166-70, 172-74, 176-79, 181-86, and 193, but with leave to amend only with respect to Fibracast products supplied to Waterspin. However, I note that Waterspin ought not to be able to bring claims for damages suffered by third parties based on principles of disgorgement or unjust enrichment and would strike out these claims, without leave to amend.

(i) Specifically, for para. 145, with leave to amend without resuscitating the "not accord with commercial reality" argument. Waterspin should specify in its revised pleading what other arguments, if any, it raises in respect of the Entire Agreement Clause.

(b) Paragraphs 129(f)-(j) of Waterspin's pleading, without leave to amend.

(c) Paragraphs 23-27, 140-44, 147-51, 155-65, and all references to "the Representations" in Waterspin's pleading, without leave to amend, on the basis that Waterspin fails to plead the necessary elements for negligent misrepresentation. This does not preclude Waterspin from seeking leave of the court to amend its pleading if and when it has the sufficient material facts to do so.

(d) Paragraphs 118-25, 129(m), and 187-89 and all references to libel and defamation in paras. 129(a)-(b) of Waterspin's pleading, with leave to amend to specify which defamatory meanings arise from which emails and words therein; and with respect to which publications Waterspin is seeking damages.

(e) Paragraphs 11, 30, and 65-66, including all footnotes to these paragraphs, and the footnote to para. 67 of Waterspin's pleading, without leave to amend.

Costs

[89] The moving parties are entitled to costs on both motions and the discontinued Waterspin action. If the parties cannot agree on quantum and other aspects of costs, the defendants may make written submissions as to costs within 15 days of the release of these Reasons. Waterspin has 10 days after receipt of the moving parties' submissions to respond. Such written submissions shall not exceed five (5) double-spaced pages, exclusive of Costs Outlines, Bills of Costs, Offers to Settle and authorities and are to be hyperlinked or forwarded to me via my judicial assistant. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.

Pinto J.

Date: March 31, 2021

COURT FILE NO.: CV-20-638185/CV-20-642411

DATE: 2021-03-31

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Fibracast Ltd.

Plaintiff

– and –

Waterspin S.r.l. and Luca Belli

Defendants

AND BETWEEN:

Waterspin S.r.l.

Plaintiff

– and –

Anaergia Inc., Anaergia Services, LLC, Benedek Companies, LLC, Fibracast Ltd. and Diana Benedek

Defendants

REASONS FOR JUDGMENT

Pinto J.

Released: March 31, 2021