Court File and Parties
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
NDRIVE, NAVIGATION SYSTEMS S.A.
Plaintiff
– and –
SI ZHOU (aka SI (SILAS) ZHOU aka SILAS ZHOU), AGUAZION INC., HAKEMI & RIDGEDALE LLP and TOM HAKKEMI
Defendants
C. Groper, for the Plaintiff
N. Emblem and M. Bacal, for the Defendants Zhou and Aguazion Inc
AND BETWEEN:
SI ZHOU (aka SI (SILAS) ZHOU aka SILAS ZHOU), AGUAZION, INC. And AQUA LATITUDE INTERNATIONAL LIMITED
Plaintiffs by Counterclaim
– and –
NDRIVE, NAVIGATION SYSTEMS S.A., JOAO FILIPE DOS SANTOS TEIXERA NETO, ANDREIA SUSANA DIAS and EDUARDO AUGUSTO DE SOUSA CARQUEJA
Defendants by Counterclaim
N. Emblem and M. Bacal, for Zhou and Aguazion Inc., Plaintiffs by Counterclaim
C. Groper, for the Defendants by Counterclaim
HEARD: June 1, 2021
REASONS ON MOTION
McCarthy J.
[1]
Introduction
The Defendants/Plaintiffs by Counterclaim (referred to simply as the “Defendants”) move to strike out all or portions of 16 paragraphs of the defence to counterclaim of the Plaintiff/Defendant by Counterclaim (“referred to as the Plaintiff”) dated January 27, 2021
2The Defendants move under Rule 25.11. That rule provides as follows:
25.11 The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document
a) may prejudice or delay the fair trial of the action;
b) is scandalous, frivolous or vexatious; or
c) is an abuse of the process of the court
3The Defendant breaks down the impugned paragraphs into three categories:
i) Paragraphs dealing with allegations of motive, intent or purpose;
ii) Paragraphs dealing with the Defendants having failed to provide particulars upon service of a demand for particulars; and
iii) Paragraphs dealing with the commencement and discontinuance of action number CV-20-659 (“the discontinued action”) and the settlement offer received from the Defendants (who were plaintiffs in that discontinued action) on April 15, 2020 (“the settlement offer”)
[4]
The Parties' Positions
In respect of the first category, the Defendants contend that it is improper for the Plaintiff to plead intent, purpose or motive in advancing their defence to counterclaim. They rely on the leading authority of Huachangda Canada Holdings Inc. v Solcz Group Inc., 2019 ONCA 649 (ONCA).
5In respect of the second category, the Defendants contend that the allegations serve no useful purpose, are entirely irrelevant, and can have no bearing on what the court needs to decide in the case. In respect of the third category, those same considerations apply; in addition, they are offensive to rule 49.06(1) which states that no statement that an offer to settle has been made shall be contained in any pleading.
[6]
Analysis
For the following reasons, I would dismiss the motion:
The threshold for striking a pleading under Rule 25.11 is a high one. Parties are free to frame their pleadings as they choose. That right is not to be lightly infringed by the court: see Sheppard International Trading v Baghai, 2008 CarswellOnt 1074 at para. 12.
Pleading motive is proper when it is relevant or material to a cause of action or a defence. In the Huachangda decision at para. 3, the Ontario Court of Appeal confirmed that a plea of ulterior motive, improper intent, or malice in bringing an action may be permitted where the plea is an essential part of a cause of action or a defence, or where it is otherwise relevant, such as where it bears on a claim of abuse of process. In the case at bar, the defence to counterclaim clearly contains an allegation of abuse of process at paragraph 4.
This was not a motion under rule 21.01 (1) (b) which would permit a judge to strike out a pleading on the ground that it discloses no reasonable cause of action or defence. Even if it were, the law recognizes abuse of process as both a possible cause of action and a defence that may be available in appropriate circumstances: see Marineland of Canada Inc. v Niagara Action for Animals, 2004 CarswellOnt 3821, at para. 29.
I find that rule 49.06(1) does not apply to the settlement offer made to NDrive and its principals. In Larose Estate v Garneau Estate, 1996 CarswellOnt 4623 at para. 11, this Court held that the rule refers only to offers to settle served or filed in the proceeding in which it was made. I adopt that reasoning: the settlement offer referred to in the impugned pleading was not made in the context of the present action but rather in the discontinued action.
The allegations about the settlement offer form part of both the overall narrative and the specific assertion about the intention and motive of the present Defendants in launching both the pleading in the discontinued action and the counterclaim. It therefore speaks to the issue of abuse of process. It cannot be said that it is irrelevant to that defence.
I am not persuaded that any settlement privilege has been infringed in the defence to counterclaim. First, there are no details of the settlement offer in the impugned pleading; rather the paragraphs in question focus on the context and circumstances in which the discontinued action was commenced, and the settlement offer advanced. This forms part of the overall assertion of abuse of process. Second, by mentioning the settlement offer in his affidavit sworn on May 14, 2020 and at the same time referencing a footnote which contained the email now found at paragraph 26 of the impugned pleading, I find that Mr Zhou has effectively waived settlement privilege on behalf of the Defendants. To be sure, that email containing the settlement offer was already part of the court record well before the impugned pleading was issued.
In respect of the paragraphs referencing the Defendants’ failure to provide particulars, I was directed to no authority to support the position that such references in a pleading are improper, frivolous, vexatious or an abuse of process. In my view, the failure to provide particulars of the allegation against the directors could be highly relevant to the abuse of process defence. The law is clear that an abuse of process may exist where corporate officers or directors are named as parties to corporate litigation in their personal capacities: see Ontario Consumers Home Services v Enercare, 2014 ONSC 4154. Moreover, when a plaintiff sues both a corporation and individuals within that corporation, be they directors or employees, the pleading must contain sufficient particulars which would form a basis for liability against such individuals: see 460635 Ontario Ltd. v 1002953 Ontario Inc., 1999 CanLII 789 (ON CA), [1999] O.J. No. 4071 at para. 8. A review of the Defendants’ own counterclaim reveals that the allegations against the directors of NDrive are not particularized and consist largely of blanket statements against both NDrive and the directors as a group. While it is true that the Plaintiffs did not move for compliance with the demand for particulars, this hardly matters. The fact that claims against the directors were not particularized and that a reply to a demand for particulars was not forthcoming may prove to be probative of the abuse of process defence.
[7]
Disposition and Costs
For the foregoing reasons, the Defendants’ motion is dismissed. The Plaintiff was entirely successful in resisting this motion. This was a simple motion and not terribly complex. I see no reason to award costs on a substantial indemnity basis. I find that $9,000 costs on a partial indemnity is fair, reasonable and proportionate. The Defendants shall pay the Plaintiff its costs of the motion fixed in the amount of $9,000. Those costs are payable forthwith.
Justice J. R. McCarthy
Released: June 1, 2021