Court File and Parties
COURT FILE NO.: CV-17-588442
MOTION HEARD: 20210518
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Fasteners & Fittings Inc., Plaintiff
AND:
Zhihai Wang, MJKE Enterprises Inc., Qingdao Top Steel Industrial Co., Ltd., YanTai Xincheng Standard Fasteners Co,, Ltd. and Mekfast Company Limited, Defendants
BEFORE: Master Jolley
COUNSEL: Rebecca Huang and Ian Literovich, Counsel for the Moving Party Defendants Qingdao Top Steel Industrial Co., Ltd. and YanTai Xincheng Standard Fasteners Co., Ltd.
Young Park and Alexander Evangelista, Counsel for the Responding Party Plaintiff
Kristjan Surko, Counsel for the Defendants Zhihai Wang, MJKE Enterprises Inc. and Mekfast Company Limited
HEARD: 18 May 2021
REASONS FOR DECISION
[1] The defendants Qingdao Top Steel Industrial Co., Ltd. and YanTai Xincheng Standard Fasteners Co., Ltd. (“these defendants”) bring this motion for particulars of the oral agreement alleged by the plaintiff in its Fresh as Amended Statement of Claim dated 15 July 2020 (the “Claim”) for supply of fasteners (the “Supply Agreement”).
[2] The plaintiff denies that further particulars are required. Further, it argues that this issue has already been decided by Perell, J. on an earlier motion by these defendants and is res judicata.
A. Are particulars required?
[3] The terms of the Supply Agreement are primarily detailed in paragraphs 22, 23 and 24 of the Claim, reproduced below.
Through a course of conduct followed by the parties since the inception of Top Steel and Yantai until September 2017, F&F had a supply agreement with Top Steel and Yantai whereby Yantai manufactured screws for sale to F&F through Top Steel and Top Steel exported fasteners it sourced from manufacturers in China, including Yantai, to F&F.
The Supply Agreement included the following express and implied terms: (a) Top Steel and Yantai would sell exclusively to F&F in Canada fasteners, screws and related packaging at the lowest prevailing prices; (b) Top Steel and Yantai would exclusively supply F&F with fasteners in perpetuity; and (c) in the alternative to (b), Top Steel and Yantai could not terminate the Supply Agreement without providing F&F with reasonable notice in writing.
The Supply Agreement was made in Ontario and is governed by the laws of Ontario and Canada, as applicable, as F&F received notice in Ontario of the acceptance by Top Steel and Yantai of the terms of the Supply Agreement.
[4] These defendants served a number of demands for particulars, first, concerning the course of conduct referenced in paragraph 22 and most recently, concerning the Supply Agreement and the details of its offer, negotiation and acceptance.
[5] In answer to the demand for particulars of the formation of the Supply Agreement, including “when, where and with whom it was made, whether it was done orally or in writing, and the precise terms of the Supply Agreement”, the plaintiff advised:
The Supply Agreement was entered into orally and through a course of conduct between Michael, MJKE and F&F.
[6] It also particularized the course of conduct, as follows:
... the "course of conduct followed by the parties" was primarily as follows: (i) F&F would deliver a purchase order to Top Steel or Yantai and (ii) Top Steel or Yantai would communicate acceptance of the purchase order by delivering an executed "Sales Contract" to F&F, which was received by F&F in Ontario. During the material times, F&F understood that David was preparing and delivering the "Sales Contracts" which communicated acceptance on behalf of Top Steel and Yantai to F&F.
[7] The plaintiff then delivered a further reply on 8 January 2021, as follows:
At all material times, the Plaintiff understood and was led to believe that the initial discussions that led to the Supply Agreement occurred as follows:
The individuals involved in these initial discussions were Michael on behalf of F&F and David on behalf of Top Steel and Yantai.
These initial discussions were likely verbal, took place over a period of time, and occurred before April / May 2005 when F&F received its first shipment of fasteners and invoice from Top Steel.
In these initial discussions, Michael on behalf of F&F requested that Top Steel supply fasteners to F&F and that Yantai manufacture fasteners for supply to F&F through Top Steel.
David, on behalf of Top Steel and Yantai, communicated by phone to Michael his acceptance of the agreement to supply and manufacture fasteners for F&F.
David was in China when he communicated acceptance and Michael was in Ontario when he received notice of such acceptance.
After discovering the Fraudulent Scheme in or around April 2017 and more specifically that Michael beneficially owned and had de facto control over Top Steel and Yantai (as pleaded in paragraph 29 of the Fresh as Amended Statement of Claim), F&F has reason to believe that Michael orchestrated the arrangements described above while he was in Ontario.
The express and implied terms of the Supply Agreement pleaded in paragraph 23 of the Fresh as Amended Statement of Claim were subsequently formed through an ongoing course of conduct, some particulars of which were provided in Response to Demand for Particulars of the Defendants, Qingdao Top Steel Industrial Co., Ltd. and Yantai Xincheng Standard Fasteners Co., Ltd., dated October 8, 2020, #2.
[8] These defendants originally moved on this motion for 28 particulars of the formation of the Supply Agreement, with numerous questions directed at the offer, the negotiations and the acceptance. At the hearing of this motion, they revised their request to particulars relating to the offer only, namely:
a) Who offered what terms of the Supply Agreement, and when?
b) Where was the person making the offer when the offer was being made?
c) Who received the offer?
d) What consideration was given by the offeror?
e) What terms did the offeror provide in exchange for consideration?
f) Who accepted what terms of the Supply Agreement?
g) When did the offeree accept the contract?; and
h) When, where and how did the offeror receive notification of the offeree’s acceptance.
[9] These defendants argue that the Claim and the particulars to date fail to identify the date and place where the terms were agreed and who agreed to the terms, which are key material terms to any oral agreement (The Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited 2016 ONSC 7365 at paragraphs 41-43).
[10] They argue the place where the agreement was reached is particularly relevant given the international nature of the arrangement. Under Ontario law, the agreement will be found to have been reached in the location where the offeror receives notification of the offeree’s acceptance. If the agreement was reached in Ontario, these defendants argue it will be governed by the International Sales Conventions Act, adopted by Ontario. The position on the ramifications of the agreement being made in China were not made clear on this motion.
[11] In reviewing the particulars provided, with the supplementary information offered during the hearing, as noted below, I am satisfied that the questions listed in paragraph 8, above, have been answered.
[12] The plaintiff has provided the name of the person who made the offer (in part answer to (a)) and the person who accepted (in answer to (f)). In answer to (c), it advised that the discussions were verbal and took place before April or May 2005. This answer was further refined during the course of argument to be, for Top Steel, since its incorporation in August 2004 and, for Yantai, between March 2005 when it was incorporated and May 2005, when it sent its first invoice to the plaintiff.
[13] The plaintiff, through Michael, requested that Top Steel supply fasteners to the plaintiff and that Yantai manufacture the fasteners for supply to the plaintiff through Top Steel in further answer to (a).
[14] It advised that acceptance of the offer was by telephone with David on behalf of these defendants phoning from China and the plaintiff receiving that acceptance in Ontario (in answer to (b), (f) and, along with the information in paragraph 12, above, (h)).
[15] These defendants take the position that they still need material facts with respect to the plaintiff’s allegation that the relationship was one of exclusivity, that goods would be sold at the lowest price and that the agreement could only be terminated on reasonable notice. They further argue they need to know which of the terms were express and which of the terms were implied.
[16] The plaintiff advised during the course of the motion that the exclusivity term was an express term. The other terms were implied and are detailed in the following two paragraphs.
[17] It also advised during the motion that the term that the goods would be provided at the lowest prevailing rates was not raised during the initial discussions but was developed over time and implied in the parties’ course of conduct. At the outset, the product was delivered and paid and that was how the price was agreed. Paragraphs 22 and 24 of the Claim make it clear that the terms developed over time as the relationship lengthened.
[18] The term that the agreement would be in perpetuity was also not an agreed upon term at the outset but one that developed over the course of the parties’ long term relationship. Similarly, the term of termination only on reasonable notice was not express, but was implied as the relationship became one of long duration. The terms that the fasteners would be supplied at the lowest prevailing prices was something that became implied over time.
[19] The plaintiff argues that consideration was payment for the goods delivered, as this was a supply of goods agreement. As noted in its response of 8 October 2020, the plaintiff would deliver a purchase order to one of these defendants. The defendant would communicate acceptance of the purchase order by delivering an executed “Sales Contract” to the plaintiff, which the plaintiff received in Ontario. The plaintiff understood that David was preparing the “Sales Contracts” which communicated acceptance on behalf of these defendants to the plaintiff.
[20] Through the combination of the plaintiff’s responses to the demands for particulars provided prior to the motion and the further responses it provided in the course of argument, I am satisfied that these defendants now have sufficient particulars to plead a defence to the formation of the Supply Agreement. In the language of Pennyfeather v Timminco Limited 2011 ONSC 4257 at paragraph 60, the particulars provided have clarified the Claim sufficiently to enable these defendants to frame their answer and to prevent surprise at trial. Any further details can be explored during examination for discovery.
[21] As noted in these reasons, a number of these particulars were not provided in advance of the motion and have not been committed to writing such that these defendants could rely on them and the plaintiff be bound by them. The plaintiff is to provide the particulars which it gave during its submissions on the motion and as noted above, in writing within 20 days of this endorsement.
B. Was this issue already determined by Perell, J.?
[22] I find that this issue was not determined by Perell, J. in his decision on the defendants’ Rule 21 motion released 30 March 2020.
[23] These defendants brought a motion before Perell, J. to strike various parts of the Claim. With respect to the pleading concerning the Supply Agreement, they alleged it did not disclose a reasonable cause of action due to its lack of particularity.
[24] Both parties rely on the reasoning of Perell, J. for their respective positions.
[25] The plaintiff argued that Perell, J. found that it had adequately pleaded the breach of the Supply Agreement against these defendants. His Honour noted in paragraph 91 that:
A claim for breach of contract must contain sufficient particulars to identify: (a) the nature of the contract; (b) the parties to the contract; (c) the facts supporting privity of contract between the plaintiff and defendant; (d) the relevant terms of the contract, (e) which term or terms were breached; and (f) the damages that flow from the breach.
[26] Having reviewed the pleading, Perell, J. held in paragraph 93 that the breach of the Supply Agreement was adequately pleaded. He further confirmed in paragraph 96 that “sufficient material facts were pleaded to establish privity of contract amongst F&F, Top Steel Industries, and YanTai Fasteners for the Supply Agreement.”
[27] The plaintiff arguds that, as the court already found that sufficient materials facts were pleaded to establish both privity of contract and breach of the Supply Agreement, the defendants are precluded from relitigating their position that the Claim does not contain sufficient particulars of those issues and that particulars are warranted.
[28] These defendants argue that Perell, J. found that, while the Claim was not so bald as to be struck, material facts were omitted that should be addressed in the next version of the pleading. They rely on paragraph 99 of his reasons, which read:
[99] Before moving on, I should add with respect to the breach of contract claim for the Supply Agreement that while not a fatal defect, there are no material facts or particulars pleaded about the formation of the contract that would support F&F's assertion that the Supply Agreement was made in Ontario and governed by the law of Ontario, which is likely but not inevitably the case. Should F&F take up the opportunity that I shall be giving it to deliver a Fresh as Amended Statement of Claim, it might address this issue.
[29] It must be noted that the motion before Perell, J. was not a motion for particulars. It was a motion to strike under Rule 21. So while that portion of the pleading was found to meet the Rule 21 test, that does not mean that particulars would not have been ordered on a particulars motion. A pleading may have sufficient material facts to survive a Rule 21 challenge and yet still require particulars so that issues are defined, surprise is prevented and the responding party is able to frame his answer.
[30] Perell, J. held that the lack of particulars were not “fatal”, i.e. the claim would not be struck under Rule 21, but there were material facts that had not been pleaded concerning the formation of the Supply Agreement. Perell, J’s comment was more than a suggestion; it was a heads up that the plaintiff might face this very motion for particulars if the issue he signaled was not addressed in its Fresh as Amended Statement of Claim.
Conclusion
[31] Per paragraph 22, above, the plaintiff is to provide the particulars which it gave during its submissions on this motion and which are noted herein, in writing within 20 days of this endorsement.
Costs
[32] The parties have uploaded their costs outlines. If the parties cannot agree on costs by 30 June 2021, they may also file cost submissions no more than three pages in length with my assistant trial co-ordinator Ms. Meditskos at Christine.Meditskos@ontario.ca.
Master Jolley
Date: 4 June 2021