COURT FILE NO.: 50/18
DATE: 2021 05 03
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Royal J&M Distributing Inc.
Plaintiff
Kimpex Inc.
Defendant
BEFORE: Bloom, J.
COUNSEL: John Polyzogopoulos and Andrew Coates, Counsel for the Defendant, the Moving Party
Kiran Patel and Justin Manoryk, Counsel for the Plaintiff, the Responding Party
HEARD: April 19, 2021
E N D O R S E M E N T
I. INTRODUCTION
[1] The Defendant moves under Rule 21.01(1)(b) to strike out claims for damages for conspiracy made in the Fresh As Amended Statement of Claim of the Plaintiff issued February 6, 2018.
II. PROCEDURAL AND FACTUAL BACKGROUND
[2] Royal carries on the business of selling parts and accessories for powersports equipment and was a purchaser of that equipment from Kimpex. The relationship of the parties entered into a period of conflict, including regarding the issue of the resale price of the goods to be used by Royal.
[3] The portions of the Fresh As Amended Statement of Claim state attacked on the motion at bar are:
CONSPIRACY AGAINST ROYAL
- In or about September 2017, Kimpex, Michel Côté, Robert Handfield, Frederic Lagace, and/or others unknown to Royal but known to Kimpex (the “Conspirators”) agreed that they would take steps to damage Royal’s business and reputation, including without limitation:
(a) cutting off the supply of Products by Kimpex to Royal, including by refusing to deliver Products which Kimpex had already agreed, by way of purchase order, to sell to Royal;
(b) encouraging other distributors and suppliers to cease supplying Royal with products;
(c) advising other distributors and suppliers that Royal was going out of business, was not performing well, and/or otherwise should not be dealt with; and
(d) advising Kimpex’s other customers that Kimpex would no longer be dealing with Royal, that Royal was going out of business, was not performing well, and/or otherwise should not be dealt with, and encouraging such other customers to avoid dealing with Royal and to instead deal with Kimpex or another of Kimpex’s customers.
- The steps taken by the Conspirators in furtherance of the conspiracy against Royal are described in further detail below.
[ also attacked are the underlined portions of the paragraphs 40 to 59 reproduced below]
In September and October 2017 and following, the Conspirators engaged in a campaign to discredit Royal with its business partners and in the market generally. The full extent of the Conspirators’ campaign against Royal is known to Kimpex, but not to Royal. The details of the Conspirators’ campaign against Royal which are known to Royal are set out below.
The Conspirators, including Robert Handfield and Frederic Lagace, also made similar statements to Ipone personnel at the EICMA Motorcycle show in November 2017. The Conspirators approached the Ipone representatives at the Ipone booth on the trade show floor, told them that Ipone should no longer do business with Royal, and asserted that Royal’s business was failing.
In addition, the Conspirators organized a telephone and correspondence campaign to Kimpex’s suppliers and customers in which the Conspirators, or others acting on their instructions, contacted suppliers and customers of Kimpex and advised them that Kimpex was ending its relationship with Royal and urging the other businesses to do the same.
The false statements made by the Conspirators were made with malice and intended to harm Royal’s goodwill and business reputation, as well as to cut off the supply of products available to Royal. Further, the words were calculated to disparage Royal in its business and to cause pecuniary damage to Royal in its business.
CAUSES OF ACTION
Conspiracy
The Conspirators pursued the actions pleaded above in combination, by agreement or with a common design, and with the predominant purpose of injuring Royal.
In the alternative, in pursuing the actions pleaded above, the Conspirators acted in combination, committed unlawful acts in doing so, which acts were directed towards Royal with the Conspirators’ knowledge that injury to Royal was the likely result.
As below, Royal did suffer injury as a result of the Conspirators’ acts.
The unlawful acts committed by the Conspirators include the breaches of contract and campaign of defamatory statements and injurious falsehoods described above. In addition, the unlawful acts of the Conspirators include attempting to pressure Royal to maintain prices, contrary to the Competition Act.
More particularly, in threatening to cease supplying Royal with Products and to cancel confirmed purchase orders unless Royal agreed to adhere to the MAP Policy for Kimpex’s house-brand and other Products, in encouraging other suppliers to cease supplying competing products to Royal, and in failing to apply the MAP Policy to Kimpex’s customers equally, the Conspirators attempted to influence upward Royal’s pricing for the Products and competing, non-proprietary products. In this manner, the Conspirators committed overt acts:
(a) which were intended to influence upward, or discourage the reduction of, the price at which Royal offers or advertises the Products and other competing products within Canada and more particularly, Ontario; and
(b) that constituted refusing to supply Products to Royal, and/or treating Royal in a discriminatory manner, given Kimpex’s failure to enforce its MAP Policy with its customers equally, because of Royal's pricing policies.
Such actions of the Conspirators were intended to have and were likely to have an adverse effect on competition in the Canadian market for the Products and other competing products.
Royal pleads that the full particulars of the Conspirators’ conspiracy, including to maintain prices for the Products, are within the knowledge of the Conspirators.
As a result of the conspiracy against Royal, breaches of contract, defamation and/or injurious falsehoods described above, Royal has suffered and will continue to suffer damages including but not limited to damages on account of unsellable inventory, lost profits, loss of goodwill and reputation, and loss of business.
Further, the malicious, high-handed and arbitrary misconduct of Kimpex, in orchestrating the conspiracy as a concerted campaign to damage Royal’s business and reputation warrants an award of punitive damages to ensure that Kimpex is appropriately punished for its conduct and deterred from such conduct in the future.
[4] It is common ground that the individuals alleged in the pleading to be co-conspirators with Kimpex were directing minds of Kimpex.
III. ARGUMENTS OF THE PARTIES
A. Arguments of the Moving Party
[5] The Moving Party argues in support of the motion that price maintenance cannot be the subject of a conspiracy claim until the Competition Tribunal has made an appropriate order and no such order has been made in the case at bar; that the directing minds of a corporation such as the Defendant cannot conspire with it, absent circumstances not alleged in the pleading; that the Plaintiff has failed to plead special damages caused by the alleged conspiratorial conduct; and that the Plaintiff’s claim is defective pursuant to the principle of merger, because it has failed to plead acts beyond those included in the allegations of breach of contract, injurious falsehood, and defamation.
B. Arguments of the Responding Party
[6] The Responding Party argues that the bringing of an action for conspiracy to violate the price maintenance provisions of the Competition Act is not precluded pending an order by the Competition Tribunal; that where acts tortious in themselves are alleged against the directing minds of a corporation, as in the case at bar, those individuals may be the subject of a claim of conspiracy as between them and the corporation even if they are not sued personally; that the principle of merger is not relevant until trial; and that special damages do not have to be separately pleaded regarding a conspiracy claim where the damages are the same as those pleaded in relation to substantive claims.
IV. ANALYSIS
A. Principles Governing the Motion
[7] The parties accept that the following principles apply on the motion before me: (1) I will assume the truth of the facts as pleaded in the Fresh As Amended Statement of Claim (since they are neither patently ridiculous nor incapable of proof); (2) I must determine whether it is plain or obvious that the claims attacked in the pleading disclose no reasonable cause of action; (3) the bar is high on the motion so that neither the complexity of the issues, the novelty of the cause of action, or the potential of a strong defence should prevent a claim from proceeding; and (4) a pleading should be read generously so as not to unfairly deprive the party filing it of its benefit.
[8] I also accept the principle that a court should not strike a claim based on principles of law, when those principles are unsettled. Associate Chief Justice O’Connor for the majority affirmed that principle in Transamerica Life Canada Inc. v. ING Canada Inc. 2003 CanLII 9923 (ON CA), 68 O.R. (3d) 457 (Ont. C.A.) at para. 39.
[9] I intend now to address the following points raised by the parties: (1) whether the Competition Act precludes the conspiracy allegations relating to price maintenance; (2) whether the conspiracy claims must be struck, because the alleged conspirators are the corporation and its directing minds; (3) whether the principle of merger precludes the conspiracy claims alleging conspiracy to breach a contract, conspiracy to defame, and conspiracy to make injurious falsehoods; and (4) whether the conspiracy claims relating to breach of contract, defamation, and injurious falsehood must be struck for failure to plead special damages distinct from those pleaded in relation to those three substantive civil wrongs.
B. The Allegations of Conspiracy to Effect Price Maintenance
[10] The Defendant argues that the Plaintiff’s conspiracy claim based on price maintenance should be struck, because the conduct alleged as an unlawful means is not unlawful until an order of the Competition Tribunal has been made in that regard. The state of the law on this point is uncertain; accordingly, based on the principles reviewed above which apply to a motion to strike, I hold that the claim must proceed to trial where the issue can be decided on a full record. I will now elaborate on this conclusion.
[11] The relevant provisions of the Competition Act provide:
Recovery of damages
36 (1) Any person who has suffered loss or damage as a result of
(a) conduct that is contrary to any provision of Part VI, or
(b) the failure of any person to comply with an order of the Tribunal or another court under this Act,
may, in any court of competent jurisdiction, sue for and recover from the person who engaged in the conduct or failed to comply with the order an amount equal to the loss or damage proved to have been suffered by him, together with any additional amount that the court may allow not exceeding the full cost to him of any investigation in connection with the matter and of proceedings under this section.
PART VIII
Matters Reviewable by Tribunal
Price Maintenance
Price maintenance
76 (1) On application by the Commissioner or a person granted leave under section 103.1, the Tribunal may make an order under subsection (2) if the Tribunal finds that
(a) a person referred to in subsection (3) directly or indirectly
(i) by agreement, threat, promise or any like means, has influenced upward, or has discouraged the reduction of, the price at which the person’s customer or any other person to whom the product comes for resale supplies or offers to supply or advertises a product within Canada, or
(ii) has refused to supply a product to or has otherwise discriminated against any person or class of persons engaged in business in Canada because of the low pricing policy of that other person or class of persons; and
(b) the conduct has had, is having or is likely to have an adverse effect on competition in a market.
Order
(2) The Tribunal may make an order prohibiting the person referred to in subsection (3) from continuing to engage in the conduct referred to in paragraph (1)(a) or requiring them to accept another person as a customer within a specified time on usual trade terms.
Persons subject to order
(3) An order may be made under subsection (2) against a person who
(a) is engaged in the business of producing or supplying a product;
(b) extends credit by way of credit cards or is otherwise engaged in a business that relates to credit cards; or
(c) has the exclusive rights and privileges conferred by a patent, certificate of supplementary protection issued under the Patent Act, trademark, copyright, registered industrial design or registered integrated circuit topography.
When no order may be made
(4) No order may be made under subsection (2) if the person referred to in subsection (3) and the customer or other person referred to in subparagraph (1)(a)(i) or (ii) are
(a) principal and agent or mandator and mandatary;
(b) an entity and an individual who controls it or affiliated entities; or
(c) directors, agents, mandataries, officers or employees of the same entity or of entities that are affiliated.
Suggested retail price
(5) For the purposes of this section, a suggestion by a producer or supplier of a product of a resale price or minimum resale price for the product, however arrived at, is proof that the person to whom the suggestion is made is influenced in accordance with the suggestion, in the absence of proof that the producer or supplier, in so doing, also made it clear to the person that they were under no obligation to accept the suggestion and would in no way suffer in their business relations with the producer or supplier or with any other person if they failed to accept the suggestion.
[12] The Moving Party relies on case law such as Chadha v. Bayer Inc. 1998 CanLII 14791 (ONSC) and Novus Entertainment Inc. v. Shaw Cablesystems Ltd., 2010 BCSC 1030 to support the argument that until an order of the Tribunal has been made under s. 76 of the Competition Act an action for conspiracy to violate s. 76 is not possible by virtue of s. 36(1)(b) of the act.
[13] In response the Responding Party cites case law including Pindoff Record Sales Ltd. v. CBS Music Products Inc., 1989 O.J. No. 1302 (Ont.H.C.) where Justice Montgomery of this court refused to strike a claim on that basis, allowing it to proceed to trial.
[14] I am of the view on authorities cited to me by the parties that the issue is not settled law. A trial judge should be allowed to determine whether the Plaintiff’s claim for conspiracy to violate s. 76 without a an order having first been made by the Tribunal is precluded by s. 36, which on its face appears not to apply to an action for civil conspiracy such as the one at bar.
C. Allegations of Conspiracy Between the Corporation and its Directing Minds
[15] Both parties agree that the applicable principles on this branch of the argument are that a directing mind of a corporation cannot be civilly liable for conspiring with the corporation; that this principle is subject to certain exceptions; and that the exception at issue is the situation where the conduct of the directing mind is tortious in itself. Both parties rely for those principles on Normart Management Ltd. v. West Hill Redevelopment Co. Ltd., 1998 CanLII 2447 (ONCA).
[16] In paragraphs 41 to 45 of the Fresh As Amended Statement of Claim the Plaintiff alleges:
- On or about September 23, 2017, Michel Côté contacted the Canadian agent for lpone SA (a manufacturer of motorcycle products) and SHARK Helmets, by email and telephone. Royal sells lpone products and SHARK helmets to its customers, which at the time it procured from Kimpex or others. Mr. Côté told the agent that:
(a) Royal had breached Kimpex's policies;
(b) Kimpex was ceasing to supply Royal with Products;
(c) Royal's business was not doing well, and that its sales were dropping;
(d) Royal was "no longer the horse to ride", or words to that effect;
(e} The agent's business. and thus lpone and SHARK Helmets, should cease doing business with Royal;
(f) The agent, and thus lpone and SHARK Helmets, should instead deal with another of Kimpex's customers, Royal's main competitor (FortNine).
The Conspirators, including Robert Handfield and Frederic Lagace, also made similar statements to lpone personnel at the EICMA Motorcycle show in November 2017. The Conspirators approached the lpone representatives at the lpone booth on the trade show floor, told them that lpone should no longer do business with Royal, and asserted that Royal's business was failing.
In addition, the Conspirators organized a telephone and correspondence campaign to Kimpex's suppliers and customers in which the Conspirators, or others acting on their instructions, contacted suppliers and customers of Kimpex and advised them that Kimpex was ending its relationship with Royal and urging the other businesses to do the same.
The words complained of were false and defamatory of Royal in their natural and ordinary meaning, including their implied meanings.
The false statements made by the Conspirators were made with malice and intended to harm Royal's goodwill and business reputation, as well as to cut off the supply of products available to Royal. Further, the words were calculated to disparage Royal in its business and to cause pecuniary damage to Royal in its business.
[17] These paragraphs clearly allege conduct by the directing minds of the Defendant which was tortious on their part, including being defamatory. Therefore, the Defendant’s argument that paragraphs should be struck because of an allegation of conspiracy between the corporation and its directing minds cannot succeed.
D. The Application of the Principle of Merger
[18] In McHale v. Lewis, 2018 ONCA 1048 at para. 13 Justice Pardu for the Court defined the principle of merger:
[13]This principle holds that where two or more persons conspire to commit a tort, and the tort is committed, the allegation of conspiracy adds nothing to the claim. A plaintiff is not entitled to be compensated twice for the same harm where the damages from both the conspiracy and the tort are the same: Jevco Insurance Co. v. Pacific Assessment Centre Inc., 2015 ONSC 7751, 128 O.R. (3d) 518 (Div. Ct.).
[19] The Defendant argues that this principle should be applied to strike the portions of the statement of claim pleading conspiracy to defame, to breach a contract, and to convey an injurious falsehood, because they add nothing to those substantive civil wrongs, themselves pleaded.
[20] The Plaintiff argues that the law is settled that the principle of merger applies at trial, and, accordingly, the principle cannot be applied on this motion to strike portions of the Statement of Claim.
[21] I accept the argument of the Plaintiff. In McHale v. Lewis, supra at paragraphs 19 to 21 Justice Pardu for the Court states:
[19] Finally the issue of whether there was any redundancy in the claims successfully made should be left to the trial judge.
[20] In Hunt the court noted further at pp. 991-92:
It seems to me totally inappropriate on a motion to strike out a statement of claim to get into the question whether the plaintiff's allegations concerning other nominate torts will be successful. This [sic] a matter that should be considered at trial where evidence with respect to the other torts can be led and where a fully informed decision about the applicability of the tort of conspiracy can be made in light of that evidence and the submissions of counsel. If the plaintiff is successful with respect to the other nominate torts, then the trial judge can consider the defendants' arguments about the unavailability of the tort of conspiracy. If the plaintiff is unsuccessful with respect to the other nominate torts, then the trial judge can consider whether he might still succeed in conspiracy. Regardless of the outcome, it seems to me inappropriate at this stage in the proceedings to reach a conclusion about the validity of the defendants' claims about merger. I believe that this matter is also properly left for the consideration of the trial judge.
[21] I agree with the observations of Molloy J. in Jevco:
[52] Accordingly, in my view, the law supports permitting the conspiracy claim to be pleaded along with other nominate torts and applying the doctrine of merger only at the end of the trial when it is known if the plaintiff has been fully successful on the nominate torts and whether there is anything added by the conspiracy claim. Further, in the interests of paring down out-of-control interlocutory proceedings and introducing consistency in the law, as a practical matter it is preferable not to resolve these types of claims at the pleadings stage.
E. The Issue of Special Damages
[22] The Moving Party lastly asserts that the pleading is deficient for lack of special damages being pleaded relating to the conspiracy allegations. The Plaintiff responds that the requirement to plead special damages is satisfied by the pleading of special damages which relate to both the conspiracy allegations and the claims of substantive civil wrongs. Specifically, the Plaintiff points to paragraph 1.(a) of the Fresh As Amended Statement of Claim which reads as follows:
I . The Plaintiff, Royal J&M Distributing Inc. ("Royal"), claims against the Defendant, Kimpex Inc. ("Kimpex"):
(a) damages for conspiracy, breach of contract, defamation, and/or injurious falsehood on account of lost profits, loss of business, and unsellable inventory, in amounts to be particularized prior to trial;
[23] The Plaintiff relies on the following observations of Justice Perell at paragraph 13 of Robinson v. Medtronic Inc., 2010 ONSC 1739:
[13] If, as is the situation in the case at bar, a plaintiff’s pleaded damages for negligence are the same as the special damages pleaded for the civil conspiracy, I see no reason for striking out the pleading of the special damages. At the trial, it may come to pass that the Plaintiffs’ claim in negligence fails but their civil conspiracy claim might succeed based on some other wrongful act and the proof of the other constituent elements of the tort of civil conspiracy including the special damages associated with the civil conspiracy.
[24] I accept the Plaintiff’s argument that the pleading of the same special damages for both the substantive civil wrongs and the conspiracy allegations is not a deficiency in the Fresh As Amended Statement of Claim.
[25] The motion at bar is, therefore, dismissed.
V. COSTS
[26] The parties have provided me with their positions on costs in writing.
[27] The Plaintiff seeks $18,278.88 in costs on a partial indemnity basis, highlighting the importance of the issues to the Plaintiff.
[28] The Defendant seeks on a partial indemnity basis $27,156.60, highlighting the importance of the issues to itself and the complexity of those issues.
[29] I take into account the success of the Plaintiff, the importance of the issues to the parties, and the complexity of those issues. I order that the Defendant pay partial indemnity costs of $18,278.88 inclusive of fees, disbursements, and applicable taxes to the Plaintiff within 30 days from the release of this endorsement.
Bloom, J.
DATE: May 3, 2021
COURT FILE NO.: 50/18
DATE: 2021 05 03
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Royal J&M Distributing Inc.
Plaintiff
Kimpex Inc.
Defendant
BEFORE: Bloom, J.
COUNSEL: John Polyzogopoulos and Andrew Coates, Counsel for the Defendant, the Moving Party
Kiran Patel and Justin Manoryk, Counsel for the Plaintiff, the Responding Party
ENDORSEMENT
Bloom, J.
DATE: May 3, 2021