Court File and Parties

Court File No.: CV-17-00586660-0000 Date: 2022-05-04 Superior Court of Justice - Ontario

Re: RIAZ PISANI, Plaintiff And: BENJAMIN SMITH and AIR CANADA, Defendants

Before: Koehnen J.

Counsel: Jeffrey E. Feiner and Hilary A. Brown, for the Plaintiff Daniel S. Murdoch and Ritika Rai, for the Defendants

Heard: April 19, 2022

Endorsement

[1] By reasons dated March 30, 2019, Diamond J. struck out the Amended Statement of Claim in this action with leave to amend. [1] The plaintiff’s motion for leave to appeal to the Divisional Court was dismissed without reasons on October 25, 2019.

[2] In response, the defendants have delivered a Fresh as Amended Statement of Claim which the defendants now also move to strike as disclosing no reasonable cause of action.

[3] The defendants submit that the only issue on this motion is whether the plaintiff has corrected the deficiencies that Diamond J. noted in his reasons when striking the earlier claim. The plaintiff submits that he has corrected those deficiencies. In addition, the plaintiff submits that since Diamond J. struck out the earlier pleading, the law has changed in a way that should allow the current claim to proceed.

[4] For the reasons set out below, I strike out the Fresh as Amended Statement of Claim without leave to amend. In my view, the plaintiff has not remedied the deficiencies Diamond J. noted and the law has not changed in a way that allows the plaintiff to overcome those deficiencies. In essence, the plaintiff invites me to read, with fresh eyes, what is essentially the same pleading as was struck out and conclude that it should withstand a motion to strike. That is essentially re-arguing the motion that was argued before Diamond J. Moreover, even if I read the pleading with fresh eyes, I come to the same conclusion that Diamond J. arrived at.

A. Factual Background

[5] The factual background is contained in the statement of claim. I assume those facts to be provable for purposes of this motion.

[6] Pisani was at all material times the owner, President and Chief Executive Officer of Contac Services Inc. and its subsidiaries (collectively, “Contac”). [2] Contac and Air Canada reached an agreement pursuant to which Contac would provide services to Air Canada on an exclusive basis. Disagreements arose about the scope of the contract and Air Canada’s alleged delay in implementing it. The disagreements were settled by a Resolution Agreement in October 2014 which contemplated an ongoing relationship between Contac and Air Canada and a payment from Air Canada to Contac. The Resolution Agreement also contained a full and final release.

[7] Contac continued to suffer financial difficulties allegedly as a result of Air Canada’s failure to pay its bills to Contac. In late November 2014, secured creditors of Contac forced Pisani to resign and on December 2, 2014, a receiver manager was appointed over Contac and its subsidiaries.

[8] Pisani claims against Air Canada and Benjamin Smith. Smith was the executive at Air Canada with responsibility for the Contac relationship. The claim is based primarily on the tort of unlawful means, also known as intentional interference with economic relations.

[9] The tort of intentional interference with economic relations affords a plaintiff a claim where the defendant inflicts unlawful conduct on a third party with the intention of harming the plaintiff. Here Pisani alleges that Air Canada inflicted unlawful conduct on Contac by breaching its contract with Contac; all with the intention of harming Pisani.

[10] In addition, the claim alleges that Smith and Air Canada conspired to commit the tort of intentional interference with economic relations.

[11] Pisani’s first claim was based on the same two causes of action.

[12] Diamond J. dismissed the intentional interference claim because the tort requires that the party that is the object of the wrongful conduct (Contac) have an actionable claim against the defendant(s). Contac had no such claim because the Resolution Agreement released both Air Canada and its employees from any such claim.

[13] Diamond J. dismissed the conspiracy claims by relying on case law to the effect that there can be no conspiracy between a corporate officer who is acting within the scope of his or her authority and the corporation because the intent of the officer is the intent of the corporation [3] and that an officer can be held personally liable only where he/she is acting outside of the scope of his/her authority and is advancing a personal interest. Diamond J. noted that the Amended Statement of Claim alleged that Smith was acting outside the scope of his employment and outside of his duties to Air Canada. That, however, required Air Canada to conspire with Smith to commit acts that were outside of Smith’s corporate authority and were to Air Canada’s detriment. In other words, Smith and Air Canada allegedly entered into an agreement to harm the plaintiff, all to the detriment of Air Canada. [4]

[14] In striking out the statement of claim with leave to amend, Diamond J. noted:

It may be that the plaintiff may be able to adequately explain how and why Air Canada entered into an agreement with Smith to carry out overt acts in furtherance of the alleged conspiracy, i.e. a common goal to injure the plaintiff. Presently, the Amended Statement of Claim does not contain sufficient material facts to achieve this purpose, and I believe that the proper remedy is to strike out the plaintiff’s conspiracy to injure claim with leave to amend. [5]

B. Has the Plaintiff Addressed the Deficiencies Diamond J. Noted?

[15] The subject of this motion is the Fresh as Amended Statement of Claim. In my view, the amendments do not address the two principal deficiencies Diamond J. noted.

[16] As a starting point, the defendants observed that in his factum to the Divisional Court, Pisani effectively admitted that he could not correct the deficiencies. In paragraph 46 of that factum Pisani said:

[Justice Diamond’s] Reasons effectively deny Pisani from recovering pursuant to the two causes of action as pleaded. An amendment will not bring the plaintiff within the scope of the torts as redefined by the Motion Judge.

The Fresh as Amended Statement of Claim is consistent with that position.

[17] The motion materials contain a black line which compares the Fresh as Amended Statement of Claim to the pleading that was before Diamond J. In my view, the amendments are not material to the issues Diamond J identified.

[18] The only amendment that the plaintiff pointed me to that addresses an issue Diamond J. raised is a statement in paragraph 41 to the effect that the settlement agreement does not bar the claim because it is not a claim by Contac but by Pisani. That, however, adds nothing. It was clear from the pleading that the claim before Diamond J. was one by Pisani, not Contac.

[19] The Fresh as Amended Claim also withdraws the allegation that Smith acted outside of the scope of his lawful authority as an officer of Air Canada and in breach of his duty to act in Air Canada’s best interests. That, however, does not address the concerns about conspiracy because the claim now in essence says that Smith was acting in the course of his duties as an officer of Air Canada when conspiring with Air Canada. As noted in paragraph 13 above, the actions of Smith in that context are those of Air Canada and no conspiracy is possible.

[20] The real focus of the plaintiff’s argument was not that he had addressed the deficiencies that Diamond J. noted but that the claim addresses a novel issue of law, namely the extent to which the tort of intentional interference with contractual relations is available where the direct object of the unlawful conduct (Contac) has settled its claim with the defendant.

[21] In A.I. Enterprises v. Bram Enterprises, [6] the Supreme Court of Canada noted that the unlawful conduct must be actionable by the person at whom it was directed. [7] As noted, Contac released any claims against Air Canada and its employees in the Resolution Agreement, as a result of which Contac no longer has an actionable claim against the defendants.

[22] Pisani submits that this is inequitable because it would mean that the true victim of the harm could always be deprived of a lawsuit if the defendant simply persuaded the immediate target of the harm to settle.

[23] I note to start that this is no different than the situation that was before Diamond J. when he struck out the earlier pleading and that was before the Divisional Court when it dismissed the motion for leave to appeal. The plaintiff is in essence asking to reargue before me the same case that was before Diamond J. and the Divisional Court. In my view that is not appropriate. As noted in Hunt v. Sun Life Assurance Co. of Canada, [8]

An issue once decided, should generally not be re-litigated. Duplicative litigation, potential inconsistent-results, undue cost and inconclusive proceedings are to be avoided. Strong policy grounds exist for courts to exercise their discretion and refuse re-litigation of same matter. [9]

[24] I will nevertheless address the plaintiff’s arguments on the merits in this regard “with fresh eyes.”

[25] I agree with the plaintiff that there could be circumstances in which it could be unjust to deprive a plaintiff of an intentional interference claim simply because the defendant has settled with the immediate object of the unlawful conduct. Courts are able to address those injustices if and when they arise. There is, however, no such injustice here. Pisani signed the Resolution Agreement and the release with Air Canada. The release provides that Contac and “its representatives” were releasing Air Canada and its employees. The release defines Pisani as Contac’s representative. In other words, Pisani was releasing claims just as Contac was.

[26] Pisani responds by saying that, while he signed as a releasor, the only claims that were being released were claims that Contac had against Air Canada. While that appears to be the case, this is a circumstance in which it is appropriate to require Contac to have an actionable claim against Air Canada for the interference with contractual relations claim to survive. I say this for several reasons.

[27] First, as noted, Pisani signed the release for Contac. Pisani is identified as having acquired Contac and being its CEO and President. [10] Put more directly, Pisani appears to be the sole shareholder of Contac. In circumstances where the sole shareholder of a corporation is personally releasing claims between the corporation and the defendant, it does not strike me as unjust to apply the requirement that the object of the unlawful conduct have an actionable claim to support a claim for intentional interference with economic relations.

[28] Second, shareholders do not generally have a right of action for harm against the corporation. A shareholder cannot both benefit from limited liability and at the same time still sue for harm done to the corporation. As the Supreme Court of Canada put it in Brunette v Legault Joly Thiffault, [11]

It would be incoherent – and indeed, unjust – for shareholders to benefit from limited liability while at the same time gaining a right of action in relation to faults committed against the corporation in which they hold shares…the corporate veil is impermeable on both sides; just as shareholders cannot be liable for faults committed by the corporation, so too are they barred from seeking damages for faults committed against it. [12]

[29] Third, in defining the tort of unlawful interference with economic relations in A.I. Enterprises Ltd. v. Bram Enterprises Ltd., [13] the Supreme Court of Canada went out of its way to underscore the limited nature of the tort with statements like:

In light of the history and rationale of the tort and taking into account where it fits in the broader scheme of modern tort liability, the tort should be kept within narrow bounds. [14]

The scope of the unlawful means tort should be understood in the context of the broad outlines of tort law’s approach to regulating economic and competitive activity. Several aspects of that approach support adopting a narrow scope for the unlawful means tort: the common law accords less protection to purely economic interests; it is reluctant to develop rules to enforce fair competition; it is concerned not to undermine certainty in commercial affairs; and the history of the common law shows that tort liability, if unduly expanded, may undermine fundamental rights. [15]

[30] These statements make clear that the Supreme Court of Canada was both seeking to do justice in individual cases but at the same time put a relatively narrow limit on the tort.

[31] Finally, in defining the tort, the court described it as a “liability stretching” tort rather than one that broadens the basis of civil liability. In other words, it is not now that Air Canada and Smith are liable to Pisani, per se, for the harm done to Contac but it is that their liability to Contac could be “stretched” to include Pisani on the basis that their conduct was intended to harm him. Pisani knew there was harm to Contac. He knew he would suffer derivative harm for that conduct in his capacity as owner of Contac. He nevertheless signed a settlement agreement that released Air Canada. For a sole shareholder to cause his corporation to release claims against defendants but then turn around and sue those defendants in his personal capacity based on a theory of “stretched” liability seems incompatible with the concepts of commercial certainty, and the limited scope of the tort of wrongful interference in economic relations.

[32] The plaintiff further submits that there has been a change in the law since Diamond J. released his reasons. In support of this submission, the plaintiff points to the Supreme Court of Canada’s decision in Corner Brook (City) v. Bailey [16] which holds that releases are contractual agreements like any other and are to be interpreted according to the ordinary rules of contractual interpretation. Contractual interpretation is, in turn, a fact specific exercise because it involves a mixed question fact and law. On my reading, of Corner Brook and the reasons of Diamond J., the former would not have any effect on the policy reasons for applying the release here to preclude a claim for wrongful interference.

[33] To the extent I am considering the motion de novo rather than considering only whether the plaintiff has corrected the earlier deficiencies in his claim, the test to strike a statement of claim as disclosing no cause of action is well-known:

(a) The claim will be struck when it is "plain and obvious" that it discloses no reasonable cause of action. [17] The impugned paragraphs should be struck only if the cause of action has no reasonable prospect of success. [18]

(b) The words of the claim should be read generously in favour of the plaintiff. Pleadings are to be read as generously as possible to accommodate any inadequacies due to drafting deficiencies. [19]

(c) Evidence is not admissible under rule 21.01(1)(b) although the court can consider documents referred to in the statement of claim.

(d) The threshold for a statement of claim to survive a motion to strike is not high. A “germ or scintilla” of a cause of action will be sufficient. [20]

(e) As long as the pleading raises a factual matrix of concern to the plaintiff within which it is possible to locate the defendant's liability, it will survive the motion. [21]

[34] The defendants have met this test. It is plain and obvious that the claim for intentional interference with economic relations has no reasonable prospect of success because Contac has no actionable claim against the defendants by virtue of the Resolution Agreement. The claim for conspiracy has no reasonable prospect of success because it involves a conspiracy between and officer of Air Canada acting in his corporate capacity and Air Canada. That has been held to be a conspiracy between Air Canada and itself which is a legal impossibility. [22] I also note that the conspiracy described in the Fresh Amended Statement of Claim was to commit the tort of intentional interference with economic relations, [23] which, as already noted, is not available to the plaintiff because of the release.

Disposition and Costs

[35] For the reasons set out above, I strike out the statement of claim as disclosing no cause of action. Given the history and the submissions in the matter I do not think anything would be served by granting leave to amend.

[36] The defendants seek costs on a substantial indemnity scale in the amount of $36,860.81. The plaintiff submits that substantial indemnity costs are not warranted. In addition, the plaintiff points to paragraph 7 of the defendants’ factum which says that it largely replicates the arguments before Justice Diamond.

[37] In my view, partial indemnity costs are more appropriate. The defendants’ bill of costs for partial indemnity costs comes to $24,680. The defendants rely on Ontario v Satschko, [24] where the court awarded substantial indemnity costs on a second motion to strike where the plaintiff had not taken into account the court’s directions on the first motion.

[38] I would still be inclined to fix costs at the sum of $24,680. I note that the substantial indemnity costs at $36,000 include approximately $12,000 for the costs of a factum. Given that the factum largely replicated the factum on the first motion to strike, that strikes me as a fairly significant sum. In addition, costs of the first motion were settled at $15,000. That set at least one bench mark of what reasonable costs would be. While I will not hold the defendants to that settlement, it strikes me that the lower sum of $24,680 is more in keeping with what the plaintiff might reasonably expect than is the higher figure of $36,000.

Koehnen J. Date: 2022-05-04

Footnotes

[1] Pisani v. Smith, 2019 ONSC 727. [2] Fresh as Amended Statement of Claim paras. 3 and 5. [3] Pisani at para. 20 citing Future Health Inc. (Trustee of) v. General Accident Assurance Company of Canada 2016 ONSC 2149 at paras. 49-50. [4] Pisani at paras. 21-22. [5] Pisani at para. 25. [6] A.I. Enterprises v. Bram Enterprises, 2014 SCC 12, [2014] 1SCR 177; 2014 SCC 12. [7] Ibid. at para. 26. [8] Hunt v. Sun Life Assurance Co. of Canada, 2012 ONSC 1635. [9] Hunt, at para. 16. [10] Fresh as Amended Statement of Claim, paras. 3 and 5. [11] Brunette v Legault Joly Thiffault, s.e.n.c.r.l., 2018 SCC 55. [12] Ibid. at para. 27. Although the Court was addressing the issue there in the context of the Quebec Civil Code, there is no material difference in concept here between the Civil Code or the common law. [13] A.I. Enterprises Ltd. v. Bram Enterprises Ltd., 2014 SCC 12, [2014] 1 SCR 177. [14] Ibid. at para. 5. See also para. 26. [15] Ibid. at para. 29. [16] Corner Brook (City) v. Bailey, 2021 SCC 29. [17] Hunt v. T & N plc, [1990] 2 S.C.R. 959 at para. 36. [18] Rebello v. Bank of Nova Scotia, 2018 ONSC 7127 at para. 5. [19] Dawson v. Baker, 2017 ONSC 6477 at para. 39. [20] Dawson at para. 37. [21] Dawson at para. 39. [22] Pisani at para. 20; Future Health Inc. (Trustee of) v. General Accident Assurance Company of Canada 2016 ONSC 2149 at paras. 49-50. [23] Fresh as Amended Statement of Claim, para 61. [24] Ontario v Satschko, 2008 CarswellOnt 1140.