Court File and Parties

COURT FILE NO.: CV-20-00638692-00CL DATE: 20210430 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: REAO CAPITAL INC., 8337373 CANADA INC., SHI HAO ZHAO, Plaintiffs/Responding Parties AND: PANO CAPITAL INC., PANO TECH INC., CITADEL PRIVATE INVESTMENT INC., CITADEL MC CAPITAL CORP., FEI FEI JIANG also known as FAITH JIANG, YANG LI, ZI JUN ZHENG also known as BETTY ZHENG, HAO LIN YANG, NAN LI, KAN GAO, Defendants/Moving Parties

BEFORE: Dietrich J.

COUNSEL: Sunny Wu, for the Plaintiffs/Responding Parties Terry Corsianos, for the Defendants/Moving Parties

HEARD: April 7, 2021

ENDORSEMENT

[1] This motion involves two related actions. I will refer to the within action, commenced in 2020, as the “Toronto Action.” The other action is an action commenced by some of the defendants in the Toronto Action, in 2017, in Newmarket, Ontario (bearing Court File No. CV-17-132058). I will refer to that Action as the “Newmarket Action.”

[2] The defendants named in the Toronto Action, with the exception of Nan Li (the “Pano Parties”), bring this motion for an order pursuant to rule 21.01(3)(d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 dismissing, striking, or staying, in whole or in part, the Toronto Action as an abuse of process.

[3] In the alternative, if the Toronto Action is not dismissed, struck or stayed, the Pano Parties move for an order pursuant to rule 21.01(1)(b) of the Rules for an order that certain claims made in the statement of claim in the Toronto Action be struck as against each of Zi Jun (Betty) Zheng, Hao Lin Yang, Kan Gao and Fei Fei (Faith) Jiang. The Pano Parties assert that these claims (the “Impugned Claims”) fail to disclose reasonable causes of action against them in the Toronto Action. If it is ordered that the Toronto Action proceed, then the Pano Parties also seek an order pursuant to s. 107 of the Courts of Justice Act, R.S.O. 1990, c. C.43 that the Newmarket Action and the Toronto Action be consolidated in Toronto and heard by a judge on the Commercial List.

[4] For the reasons that follow, I find that the Toronto Action should not be struck on the grounds of abuse of process. The Impugned Claims should be struck, but the plaintiffs in the Toronto Action should be given an opportunity to amend their pleadings in respect of those claims. To guard against the possibility of inconsistent findings in the Newmarket Action and the Toronto Action, which involve common parties, whose disputes arise out of the same agreement, the Newmarket Action and the Toronto Action should be consolidated, or tried at the same time, or one immediately after the other, as determined by the trial judge.

Analysis

Should the Toronto Action be dismissed on the grounds of abuse of process?

[5] The Pano Parties argue that the plaintiffs in the Toronto Action should not be permitted to pursue the Toronto Action because it is an abuse of process. The Pano Parties assert that in pith and substance the Toronto Action is virtually identical to a counterclaim that the plaintiffs in the Toronto Action, as defendants in the Newmarket Action, brought and then abandoned.

[6] On February 20, 2019, the plaintiffs in the Toronto Action, as defendants in the Newmarket Action, filed a notice of motion in which they sought to amend their pleadings to add three of the Pano Parties to their counterclaim in the Newmarket Action. Included with the notice of motion was a draft Fresh as Amended Statement of Defence and Counterclaim. On October 16, 2019, counsel, who was then acting for the plaintiffs in the Toronto Action, advised that he had been instructed to vacate the motion because the plaintiffs did not intend to amend their pleadings at that time.

[7] The Pano Parties assert that the plaintiffs in the Toronto Action should be estopped from attempting to relitigate claims that they have already advanced in their Fresh as Amended Statement of Defence and Counterclaim and then abandoned.

[8] Based on the record and the submissions of counsel, I am not satisfied that the Toronto Action should be struck as an abuse of process.

[9] I agree that there is overlap in the pleadings set out in the notice of motion that was not pursued and the statement of claim in the Toronto Action, including the counterclaims against the plaintiffs in the Newmarket Action, the claims against Yang Li, and the claims against Zi Jun (Betty) Zheng. However, two new parties, Hao Lin Yang and Kan Gao, have been added to the statement of claim in Toronto, who were not parties named in the pleadings that were abandoned. Further, the plaintiffs in the Toronto Action submit that the Toronto Action is focused on matters of competition, and includes a claim for significant damages allegedly owing to them, as opposed to the Newmarket Action, which is focused on oppressive conduct.

[10] I would also note that this is not a situation in which the plaintiffs in the Toronto Action are attempting to relitigate a cause which has already been decided by a court of competent jurisdiction. Relitigation in that context, in my view, could be found to be an abuse of process.

Should the Impugned Claims in the Toronto Action be struck?

[11] The Pano Parties assert that certain pleadings against defendants Zi Jun (Betty) Zheng, Hao Lin Yang, Kan Gao and Fei Fei (Faith) Jiang in the Toronto Action should be struck on the basis that they disclose no reasonable cause of action. The Impugned Claims are found in the statement of claim at paras. 1(iii) and 57 to 65 (as against Zi Jun (Betty) Zheng); at paras. 1(iv) and 66 to 72 (as against Hao Lin Yang); at paras. 1(v) and 73 to 77 (as against Kan Gao); and at paras. 1(vi) and 78 to 81 (as against Fei Fei (Faith) Jiang). The Rules permit the court to strike a claim where it is clear and obvious that no cause of action has been disclosed.

[12] The threshold for striking a pleading is high. A pleading will be sustained if there is a “germ” or “scintilla” of a cause of action; and the pleadings are to be read generously: Hugh v. Carey Canada Inc., 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959. However, the statement of claim must contain a concise statement of the material facts on which the party relies for its claim: Burns v. RBC Life Insurance Company, 2020 ONCA 347, 151 O.R. (3d) 209 at para 16.

[13] To strike a pleading on the grounds that it discloses no cause of action, having assumed that the facts as pleaded have been proven, it must be “plain and obvious” that the claim must fail: Hunt v. Carey Inc., 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959.

[14] I find that the plaintiffs in the Toronto Action have drafted pleadings that are prolix, but nonetheless fail to include material facts in support of the Impugned Claims and do not address the essential elements of the torts they allege. Without these material facts and essential elements, it is not obvious that the claims could succeed in law.

[15] In Burns at para. 16, the Court of Appeal for Ontario held that “[e]ach defendant named 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 caused you, the plaintiff, harm, and when did I do it?” I am not satisfied that the pleadings, as drafted, would permit each of the defendants Zi Jun (Betty) Zheng, Hao Lin Yang, Kan Gao and Fei Fei (Faith) Jiang to answer this question.

[16] Accordingly, I find that the Impugned Claims are defective and must be struck.

[17] However, the issues in the Toronto Action are very important to the plaintiffs and the stakes are high for them. In my view, it is appropriate that the plaintiffs be given an opportunity to amend the Impugned Claims.

Should the Newmarket Action and the Toronto Action be consolidated?

[18] The Pano Parties submit that if the Toronto Action is to proceed, then the Newmarket Action and the Toronto Action should be heard together by a judge on the Commercial List in Toronto. The Pano Parties assert that such consolidation is appropriate given the depth of experience on the Commercial List in dealing with cases involving oppression.

[19] The plaintiffs in the Toronto Action submit that the Newmarket Action and the Toronto Action should not be consolidated. They assert that such consolidation would be prejudicial to the plaintiffs in the Toronto Action because the Newmarket Action is nearly ready for trial and the Toronto Action is only at the pleadings stage. They assert that the questions of law between the two Actions are very different and that the relief sought does not arise out of the same transaction or occurrence or series of transactions or occurrences.

[20] I do not agree with the plaintiffs’ submissions. It is readily apparent that the questions of fact are common in both Actions. A number of the parties are common to both Actions. Both Actions stem from a disagreement over whether certain parties complied with the terms of a singular Unanimous Shareholders’ Agreement made the 3rd day of April 2017. Should the actions proceed independently, there would be a real risk of inconsistent findings regarding the interpretation of the Unanimous Shareholders’ Agreement.

[21] The consolidation process will avoid a multiplicity of proceedings and promotes a more expeditious and less expensive determination of the proceedings. Any question of prejudice to the plaintiffs in the Toronto Action could be addressed by the trial judge.

[22] The parties will need to coordinate their efforts so that a motion may be brought in accordance with the Consolidated Provincial Practice Direction before the Regional Senior Judge in Toronto or the Regional Senior Judge in Newmarket for a determination on where the consolidated proceeding will be tried.

Disposition

[23] The Pano Parties’ motion is dismissed with regard to the dismissal of the Toronto Action and granted with regard to the striking of the Impugned Claims in the plaintiffs’ statement of claim in the Toronto Action. The Newmarket Action and the Toronto Action shall be consolidated and tried at the same time, or one immediately after the other, as determined by the trial judge.

Costs

[24] Success on this motion is divided. I fix the costs at $12,000, inclusive of HST and disbursements, payable in the cause.

Dietrich J.

Date: April 30, 2021