Kaissieh v. Done, 2022 ONSC 425

COURT FILE NO.: CV-19-28527

DATE: 20220118

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Ronny Kaissieh

Plaintiff

– and –

Steven Done, Nick Tschilenge, Mofun Loft Inc., Mahmoud Rafih aka Hamoody Rafih, Rafih Automotive Group Inc. and Mercedes-Benz Canada Inc.

Defendants

Joseph Romano DeLuca, for the Plaintiff/ Responding Party

Peter W. Choe and Harvey Lim, for the Defendant/Moving Party, Mercedes-Benz Canada Inc.

Adam Varro, for the Defendants, Mahmoud Rafih aka Hamoody Rafih and Rafih Automotive Group Inc., taking no position

No one appearing for the Defendant, Mofun Loft Inc.

Steven Done, acting in person, taking no position on the Motion

No one appearing for the Defendant, Nick Tschilenge

HEARD: October 18, 2021

VERBEEM J.

I) Nature of the Motion

[1] The defendant Mercedes-Benz Canada Inc. (“Mercedes”) moves for an order striking the statement of claim against it, without leave to amend, pursuant to rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“Rules”), on the basis that it fails to disclose a reasonable cause of action against it.

[2] Further, or in the alternative, Mercedes seeks an order dismissing the action or striking the statement of claim against it, without leave to amend, pursuant to rr. 21.01(3)(d) and 25.11(b) of the Rules, respectively, on the basis that it is frivolous and vexatious.

[3] The plaintiff resists the motion. He contends that the statement of claim, as plead, adequately discloses: reasonable causes of action against the moving party in negligence and waiver of tort; and a reasonable basis of liability founded in the concept of vicarious liability.

[4] On specific inquiry by the court during submissions, plaintiff’s counsel confirmed that the plaintiff is not seeking leave to amend the statement of claim. In his view, the statement of claim discloses sufficient material facts to adequately support the causes of action asserted against Mercedes. As a result, he says the motion must be dismissed.

[5] For the following reasons, I accept the moving party’s position. The statement of claim will be struck, against the defendant Mercedes, without leave to amend, and the action will be dismissed against it.

II) Nature of the Action

[6] The action, which was commenced by statement of claim issued on December 19, 2019, is premised principally on pleaded events that occurred between October 2017 and January 2018, alleged to be associated with the asserted intentional tortious conduct of all the defendants except the moving party. The statement of claim collectively refers to the defendants other than Mercedes, as the “Conspirators” and further alleges that they engaged in fraud, forgery, conspiracy and theft of the plaintiff’s identity, in furtherance of the unlawful “straw buy” of a luxury Mercedes-Benz vehicle for the purpose of re-selling it overseas, at a substantial profit.

[7] The plaintiff alleges that in carrying out their “straw buy” conspiracy, the Conspirators obtained and used the plaintiff’s personal information in December 2017, without the plaintiff’s consent: to transfer the registered ownership of the subject vehicle from Rafih Automotive Group Inc. (“Rafih Automotive”) as vendor, to the plaintiff, without the plaintiff taking physical possession of the vehicle or advancing funds for same; to forge the plaintiff’s signature on all documentation related to the ownership transfer; and to facilitate the export of the vehicle from Canada, by the defendant Mofun Loft Inc., acting ostensibly (but not actually) as the plaintiff’s agent.

[8] The statement of claim does not allege that Mercedes was a participant in the alleged conspiracy, fraud, identity theft, forgery or any other intentional tort, nor that it participated in the “straw buy” scheme.

[9] The statement of claim does allege that: Mercedes is liable in negligence for failing to prevent the plaintiff from becoming a victim of the Conspirators’ fraud, conspiracy and intrusion upon seclusion; and Mercedes is vicariously liable for the intentional tortious conduct of the defendant Rafih Automotive and its vice-president, Mahmoud Rafih aka Hamoody Rafih (collectively “the Rafih defendants”).

[10] The factual narrative in which Mercedes’ liability is said to arise is generally set out in the statement of claim as follows:

a) While employed as a bus driver in October 2017, the plaintiff’s supervisor, the defendant Steven Done (“Done”), advised him that he could earn between $1,000 and $5,000, if he purchased a luxury vehicle on behalf of someone else, who was otherwise unable to do so. The plaintiff would take legal ownership of the vehicle solely for the purpose of immediate resale to a customer overseas. He would not take physical possession or control of it (paras. 12 and 15);

b) Done disclosed that the plaintiff’s participation in the proposed transaction would be limited to: providing a copy of his Ontario driver’s licence; and signing a copy of the ownership documents related to the subject vehicle. The plaintiff would be paid for the use of his personal information and for affecting the purchase. A transaction in which a vehicle is purchased on behalf of someone else, for the purpose of immediate resale, is known as a “straw buy” (paras. 17, 18, 21 and 22);

c) Done told the plaintiff that the proposed transaction was “entirely legal”. Yet, s. 4(4) of the Motor Vehicle Dealers Act, 2002, S.O. 2002, c. 30. Sched. B (“MVDA”), prohibits straw buy transactions in Ontario (paras. 19, 20 and 24);

d) On December 23, 2017, the plaintiff voluntarily provided his Ontario driver’s licence to Done and allowed him to photocopy it (para. 25);

e) Unbeknownst to the plaintiff, on December 24, 2017, the registered ownership of a luxury Mercedes brand vehicle was ostensibly transferred to him as purchaser, by the defendant, Rafih Automotive as seller, and a policy insuring the vehicle was obtained in the plaintiff’s name. The plaintiff never signed a sale agreement or any other document related to the purchase of a vehicle from the defendant, Rafih Automotive. The plaintiff’s signature was forged on all documentation related to the transfer of ownership (paras. 29, 33, 34 and 46);

f) At all material times, the defendant, Hamoody Rafih, served as the Vice-President of Rafih Automotive, which carries on business as a luxury car dealership under the trade name, Overseas Motors Mercedes Benz. Using the plaintiff’s “stolen personal information” and under the auspices of Rafih Automotive, Hamoody Rafih financed the sale of the subject vehicle through the defendants Mofun and Nick Tschilenge (“Tschilenge”), for eventual resale overseas (paras. 6, 7, 8, 50 and 73);

g) On December 27, 2017, the plaintiff, who was unaware of the fact that ownership of the subject vehicle had already been registered in his name: advised the defendant, Done, that he did not want to participate in the proposed purchase transaction; instructed the defendant, Done, not to use his personal information or his name in the purchase transaction; and believed that his involvement in the matter was over (paras. 27, 30 and 31);

h) On January 20, 2018, the plaintiff received proof of insurance with respect to the subject vehicle, made out in his name. He subsequently learned that ownership of the vehicle had been transferred from Rafih Automotive and its ownership and related insurance were registered to him personally (paras. 32 and 34);

i) On January 22, 2018, the plaintiff attended at Rafih Automotive and spoke with the defendant, Hamoody Rafih, who refused to explain the ownership transfer to him. Later, the defendant, Done, contacted the plaintiff and acknowledged appropriating the plaintiff’s identify for use in the purchase transaction and offered to pay the plaintiff a small cash amount. Done further acknowledged that he was party to an unlawful agreement with the co-defendants, Hamoody Rafih and Tschilenge, and he had made an agreement with the Rafih defendants for the purchase of the subject vehicle. Done sought to ensure that the plaintiff would not contact the police (paras. 36-43, inclusive);

j) Subsequently, the plaintiff learned that the subject vehicle was exported from Canada by the defendant, Mofun, and its agent, the defendant Tschilenge, who used the plaintiff as a stand-in customer for export for the purpose of reselling the vehicle abroad (paras. 5, 25, 48 and 49).

[11] In the foregoing context, the plaintiff alleges that the defendants, Hamoody Rafih, Rafih Automotive, Done, Tschilenge, and Mofun, committed intentional torts of fraud, intrusion upon seclusion and conspiracy in relation to the unlawful and non-consensual use of his personal information in the “straw buy” scheme. Mercedes is not alleged to have committed any of the pleaded intentional torts. To the contrary, the statement of claim alleges that one of the objectives of the pleaded conspiracy was to breach a “franchise agreement between Rafih Automotive and [Mercedes] and, thereby, tortiously interfere in the contractual relations and business affairs of DaimlerAG and Mercedes Benz dealerships worldwide” (para. 68(b)). The plaintiff further alleges that Rafih Automotive conspired (or allowed Hamoody Rafih to conspire) to defraud its franchisor, Mercedes, among others (para. 72), and that Rafih Automotive’s conduct did, in fact, defraud Mercedes (para. 74).

[12] Although the moving party is not alleged to have engaged in any intentional tortious conduct with respect to the plaintiff nor to have participated in the alleged unlawful “straw buy” scheme, the plaintiff claims that liability sounds against the moving party in negligence, vicarious liability, and “waiver of tort as a cause of action.”

[13] In the foregoing context, I will now identify the principles applicable to the moving party’s request that the statement of claim be struck for disclosing no reasonable cause of action. I will then explain why the application of those principles to the statement of claim, as plead, justifies granting the relief sought in that regard.

III) The Legal Principles Applicable to Mercedes’ Motion to Strike the Statement of Claim for Failing to Disclose a Reasonable Cause of Action

[14] The following principles apply to the determination of Mercedes’ request to strike the statement of claim pursuant to r. 21.01(1)(b) on the basis that it does not disclose a reasonable cause of action.

(i) The Function of Pleadings

[15] In a civil action, pleadings serve several important functions, including: clearly and precisely defining the controversy between the parties; providing adverse parties with fair notice of the precise case to be met and the remedies sought against them; and assisting the court in determining the truth of the allegations made: National Trust Co. v. Furbacher, [1994] O.J. No. 2385 (Gen. Div.) at 17.

(ii) The Necessity of Pleading Material Facts to Support All of the Constituent Elements of a Cause of Action Asserted by a Statement of Claim

[16] The Rules create a system of “fact pleading” in which the parties to an action are compelled to disclose, through their respective pleadings, the facts upon which they rely to support their claim or defence. Rule 25.06(1) specifies that:

[e]very pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence, but not the evidence by which those facts are to be proved. [Emphasis added.]

[17] The causes of action advanced by a plaintiff in a statement of claim must be clearly identifiable from the facts pleaded and must be supported by pleaded facts that are material: Cerqueira v. Ontario, 2010 ONSC 3954, at para. 11. For the purpose of pleadings, a fact is “material”, if it is necessary for a complete cause of action. If a material fact necessary for a cause of action is omitted, the statement of claim is bad and the appropriate remedy is a motion to strike the pleading, not a motion for particulars: Regional Plaza Inc. v. Hamilton-Wentworth (Regional Municipality) (1990), 1990 CanLII 6761 (ON SC), 12 O.R.(3d) 750 (Gen. Div.); Balanyk v. University of Toronto, 1999 CanLII 14918 (ON SC), [1999] O.J. No. 2162 (S.C.).

[18] Bare allegations and conclusory legal statements based on assumption or speculation are not material facts: Das v. George Weston Limited, 2017 ONSC 4129, at para. 17, aff’d 2018 ONCA 1053 (“Das”).

(iii) Striking a Statement of Claim for Failing to Disclose a Reasonable Cause of Action Pursuant to r. 21.01(1)(b) of the Rules

[19] Rule 21.01(1)(b) of the Rules permits a party to move before a judge, “to strike out a pleading on the ground that it discloses no reasonable cause of action or defence”. No evidence is admissible on such a motion.

[20] In Powell v. Shirley, 2016 ONSC 3577, at para. 35, Leach J. helpfully sets out the following principles, which are applicable to a motion to strike a statement of claim for failing to disclose a reasonable cause of action, as derived from Supreme Court of Canada jurisprudence [citations omitted]:

• A claim will only be struck out if it is plain and obvious, assuming the facts pleaded to be true, that the pleading discloses no reasonable cause of action. Another way of putting the test is that the claim has no reasonable prospect of success. Where a reasonable prospect of success exists, the matter should be allowed to proceed to trial.

• The power to strike out claims that have no reasonable prospect of success is a valuable housekeeping measure essential to effective and fair litigation. It unclutters the proceedings, weeding out the hopeless claims and ensuring that those that have some chance of success go on to trial. This promotes two beneficial goals: efficiency in the conduct of litigation, and correct results.

• Valuable as it is, a motion to strike pleadings as disclosing no reasonable cause of action must be used with care, as the law is not static and unchanging. On a motion to strike, it accordingly is not determinative that the law has not yet recognized a particular claim. The court instead must ask whether, assuming the pleaded facts to be true, there is a reasonable prospect that the claim will succeed. The approach must be generous and err on the side of permitting a novel but arguable claim to proceed to trial.

• When the court considers a motion to strike a claim for failure to disclose a reasonable cause of action, a claimant has the benefit of the court assuming pleaded facts to be true. No evidence is admissible in relation to such a motion. However, there are limits on the extent to which this approach operates in the claimant’s favour. For example, facts are not assumed to be true if they are manifestly incapable of being proven. Moreover, it is incumbent on a claimant to clearly plead the facts upon which it relies in making his or her claim. A claimant is not entitled to rely on the possibility that new facts may turn up as the case progresses. The claimant may not be in a position to prove the facts pleaded at the time of the motion. He or she may only hope to be able to prove them. But he or she must plead them. [Emphasis added.]

[21] The court’s ability to strike a statement of claim for failing to disclose a reasonable cause of action must be used with considerable care. The applicable test imposes a high standard that requires the court to read the claim as generously as possible because cases should, if possible, be determined on their merits, based on evidence adduced before a trier of fact: Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, [2020] 447 D.L.R. (4th) 543 (“Atlantic Lottery”), at paras. 87-88.

[22] Issues that are novel, complex and important should normally be decided on a full factual record after trial: Del Giudice v. Thompson, 2021 ONSC 5379, at para. 127 (“Del Giudice”). Nonetheless, novelty alone is not a sufficient reason to allow a proposed cause of action to proceed to trial. To proceed, a novel claim must: be arguable; have some elements of a cause of action recognized in law; be a reasonable and arguable incremental extension of established law; and have a reasonable prospect of success: Atlantic Lottery, at para. 19; Darmar Farms Inc. v. Syngenta Canada Inc., 2019 ONCA 789, at para. 51.

IV) The Principles Applied

[23] Applying the foregoing principles, I conclude that the moving party has met its heavy onus to establish that the statement of claim fails to disclose a reasonable cause of action or basis of liability against Mercedes. The reasons for my conclusion follow, beginning with the asserted cause of action in negligence.

(a) The Asserted Cause of Action in Negligence

[24] The plaintiff’s claim against Mercedes in negligence, is rooted in a general allegation that Mercedes breached a duty of care that it owed to the plaintiff, to prevent him from becoming a victim of the intentional tortious conduct of the Conspirator defendants.

[25] The elements of a cause of action in negligence, which are not in dispute, are succinctly set out in 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35, [2020] 450 D.L.R. (4th) 181, at para. 18 (“Maple Leaf Foods”):

1. the existence of a duty of care owed by the defendant to the plaintiff to take reasonable care in the circumstances;

2. the defendant’s conduct breached the applicable standard of care;

3. the plaintiff sustained compensable loss or damage;

4. the damages were caused, in fact and in law, by the defendant’s breach

[26] In this case, the difficulty with the statement of claim is that while it pleads the foregoing elements, it does so through bare factual and legal conclusory statements asserting the presence of the requisite elements of the tort, in the absence of adequate (if any) material facts to support the conclusions alleged. Recently, Brown J.A. writing for a unanimous majority, reaffirmed that “[a] r. 21.01(1)(b) motion focuses on the legal sufficiency of a plaintiff’s pleading, in the sense of determining whether the plaintiff has pleaded the material facts necessary to support a cause of action recognized by the law” (emphasis added): The Catalyst Group Inc. v. Dundee Kilmer Developments Limited Partnership, 2020 ONCA 272, 447 D.L.R. (4th) 610, at para. 39. In this case, the plaintiff has failed to do so.

[27] Instead, the statement of claim does little more than identify the elements of the proposed negligence cause of action and summarily attribute them to Mercedes. That approach is not consistent with a fact-based pleadings system in which a plaintiff must plead the material facts that support each of the constituent elements of an asserted cause of action, in a clear and concise manner. It was incumbent on the plaintiff to do so, relative to the asserted negligence cause of action. For the reasons that follow, I am satisfied that the statement of claim does not do so.

[28] The allegations in support of the negligence claim against Mercedes are, essentially, plead at paras.:

• 7 and 10-11 (bare allegations of a “franchisor/supplier” and “franchisee/retailer” relationship between Mercedes and Rafih Automotive and a legal relationship of agency between Mercedes and Rafih Automotive and its employees);

• 93-96 (bare allegations of the existence of Mercedes’ proposed duty of care and its asserted breach of same);

• 97 and 104 (bare allegations of causation and losses sustained by the plaintiff);

• 1(b) (a claim for special damages that is not limited to damages for fraud, intrusion upon seclusion, and conspiracy); and

• 1(c) and 97-101 (remedial “waiver of tort” in favour of an accounting and disgorgement as a remedy for Mercedes’ negligence).

[29] In my view, on a generous reading of the entirety of the statement of claim and assuming the material facts plead therein as true, it is plain and obvious that the negligence cause of action asserted against Mercedes has no reasonable prospect of success. To explain my determination in that regard I will analyze the content of the statement of claim as it relates to each element of the tort of negligence, beginning with the pleaded allegations in support of the proposed duty of care owed by Mercedes to the plaintiff.

(i) Failure to Plead Adequate Material Facts to Support the Existence of the Proposed Duty of Care Owed by Mercedes to the Plaintiff

[30] Whether a duty of care exists, in the particular circumstances of a case, is a question of law that attracts a two-stage analytical approach that derives from the principles set out in Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.), as adapted and applied in several decisions of the Supreme Court of Canada, including Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537.

[31] The first stage of the Anns/Cooper test asks whether there is a relationship of proximity between the plaintiff and the alleged tortfeasor, in which the failure to take reasonable care might reasonably cause loss or harm to the plaintiff: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 39.

[32] When the inquiry is made at the pleadings stage, the court must first determine whether the facts, as plead, bring the claim either directly or by analogy, within a category of cases that have been previously judicially recognized as establishing a prima facie duty of care. If so, the court will assume a prima facie duty of care exists and move to the second stage of the inquiry, which I will address later below: Cavanaugh v. Grenville Christian College, 2013 ONCA 139, 304 O.A.C. 163, at para. 45 (“Cavanaugh”).

[33] If the facts do not place the case within an established category, the court must determine whether a new duty of care should be recognized in the circumstances, by considering the principles of foreseeability of harm and proximity of relationship. If that inquiry is answered in the negative, the pleaded negligence claim fails because it does not disclose a prima facie duty of care: Cavanaugh, at para. 45.

[34] Conversely, if the court is satisfied that the pleading discloses a prima facie duty of care, it will proceed to the second stage of the inquiry, which is focused on determining whether there are residual policy considerations that justify the court not recognizing the proposed duty: Cavanaugh, at para. 46.

[35] The proposed duty of care in this case fails at the first stage of the inquiry for two reasons.

[36] First, the facts plead in the statement of claim do not directly or by analogy bring the claim within a category of cases in which a prima facie duty has been previously recognized. Second, the pleaded material facts do not adequately support the requisite elements of foreseeability of harm and proximity of relationship necessary to reasonably disclose a prima facie duty of care. As a result, the pleaded legal conclusion that the proposed duty of care exists is not supported by the material facts plead. I will expound these findings below.

1. The Proposed Duty of Care Does Not Fall Within a Previously Recognized Category of Cases

[37] The plaintiff specifically alleges the following duty of care:

• Mercedes owed the plaintiff “a duty of care to prevent him from being a victim of (1) intrusion upon seclusion, (2) fraud and (3) conspiracy” (para. 93);

[38] Contextually, the material facts plead in support of the existence of the proposed duty of care are limited to the following:

• Rafih Automotive operates as a luxury car dealership under the trade name Overseas Motors Mercedes-Benz (para. 7);

• Mercedes operates as a “supplier/franchisor” of Mercedes-Benz brand luxury cars to Rafih Automotive as a “retailer/franchisee with territorial rights in the Windsor area market” (para. 10);

• “At all material times, Rafih Automotive…and its employees served as agents for Mercedes…” (para. 11).

[39] Neither the motion records and facta filed by the parties, nor their respective submissions during the motion, provide any basis to conclude that there is a category of cases that recognizes a duty of care generally owed, in all circumstances, by a “retailer/franchisor” to persons who fall victim to the intentional torts of intrusion upon seclusion, conspiracy and fraud (or other intentional tortious conduct) committed by the corresponding “retailer/franchisee”. The plaintiff does not submit otherwise, and the parties have not identified any legal authorities establishing that such a duty has been previously recognized.

[40] Instead, the plaintiff submits that the proposed duty of care is a novel one that the law ought to now recognize, to deter and minimize the incidents of identity theft fueled by unlawful “straw buy” transactions.

[41] In arriving at the conclusion that the proposed duty has not been previously recognized, I have remained mindful that the plaintiff pleads that Rafih Automotive and its employees were, at all times, Mercedes’ agents. I appreciate that there are cases in which a principal, in a legal relationship of agency, has been found liable in negligence for failing to minimize the risk of intentional tortious conduct by its agent, that subsequently results in loss to a third party. However, it is unnecessary to determine whether the recognized duty in such cases is analogous to the duty proposed in this instance because the pleading of agency in the statement of claim is not sufficient to operably attract the law of agency. Instead, it amounts to a single bare conclusory assertion, which is unsupported by any pleaded material facts.

[42] The colloquial use of the term “agent” or the description of a relationship as one of “agency” (i.e. the manner in which para. 11 of the statement of claim is plead) does not, itself attract the operation of the law of agency. A party that alleges the existence of such a relationship must specifically plead both its existence and adequate material facts in support of that legal conclusion: G.H.L. Fridman, Canadian Agency Law, 3rd ed. (Toronto: LexisNexis Canada Inc., 2017), at p. 6-7 (“Canadian Agency Law”).

[43] In order for a relationship to come within the scope of the law of agency, it must conform to the following definition:

Agency is the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal’s legal position by the making of contracts or the disposition of property.

Canadian Agency Law, at p. 5.

[44] The law of agency will not apply in the absence of a relationship in which the agent is endowed by the principal with the power to change the principal’s position and the principal is subjected to the lability of such a change. The endowment of such power and the susceptibility of such liability are essential features of agency. To be an agent, a person must have been authorized by the principal, to act in a manner that will affect the legal situation of the principal for whom the agent acts, vis-à-vis a third party. In the absence of such authority there is no legal agency: Canadian Agency Law, at pp. 4-6.

[45] Once the issue of agency is raised, its determination is a question of fact that must be decided by reference to the relevant case-specific circumstances, including the extent of the alleged agent’s actual or apparent authority to affect the alleged principal’s legal position, in a manner that binds the alleged principal: see Ontario College of Pharmacists v. 1724665 Ontario Inc., 2013 ONSC 4295, at paras. 101-106 (citing with approval G.H.L. Fridman, Canadian Agency Law, 2nd ed. (Markham: LexisNexis Canada Inc., 2012), at para. 1.3), aff’d 2013 ONCA 381. The factual inquiry may also involve: the language of any agreement between the parties; the extent of the alleged principal’s control over the alleged agent’s acts; the parties’ respective conduct; and the extent to which the alleged principal evinced an intention to a third party, to be bound by the acts of the alleged agent.

[46] In this case, no material facts are plead in the statement of claim to support the pleaded conclusion that Rafih Automotive and its employees were Mercedes’ agent(s), apart from the assertion that those entities were parties to “a franchisor/supplier” and “franchisee/retailer” relationship. The court was not referred to any authorities that support the proposition that a legal relationship of agency exists, in all circumstances, between a franchisor and a franchisee. To the contrary, the case law emphasizes the importance of examining the nature of the relationship between the franchisor and franchisee, in the context of the case-specific facts, to determine if an agency relationship exists: Jogia v. RE/MAX Ontario, et al., 2020 ONSC 733 (“Jogia”), at paras. 39-43.

[47] The statement of claim does not disclose any case-specific material facts to support the allegation of a legal relationship of agency between Mercedes and Rafih Automotive. Specifically, it does not plead any facts with respect to:

(a) the alleged scope of Rafih Automotive’s actual or apparent authority as agent, including the extent of its ability to alter Mercedes’ legal position, in any respect;

(b) the degree of control afforded to Mercedes over Rafih Automotive’s business and operations, nor the manner in which it exercised its authority, if any, in that regard; and

(c) any other case-specific circumstances that give rise to the alleged agency relationship (i.e. there are no allegations that: the asserted agency relationship was created by the express terms of an agreement or a specified pattern of conduct between Mercedes and Rafih Automotive; Rafih Automotive was engaged in marketing and selling vehicles and negotiating and executing vehicle sales contracts on Mercedes’ behalf; Mercedes authorized Rafih Automotive to engage in such activities on its behalf; nor that Rafih Automotive held out to the public, at large, that it had such authority).

[48] In arriving at the conclusions above, I am mindful that the relevant case law recognizes that: documents referred to in a pleading are incorporated, by reference, into the pleading; and the court is entitled to consider any documents specifically referred to and relied on in a pleading when determining whether a plaintiff has plead a reasonably viable cause of action: see Das, at paras. 31, 71, and 74, leave to appeal refused, [2019] S.C.C.A. No. 69.

[49] In that respect, the statement of claim does plead: that Rafih Automotive conspired with the other Conspirators to breach an alleged “franchise agreement” between Rafih Automotive and Mercedes; and that Rafih Automotive breached that agreement through its unlawful acts. The statement of claim does not expressly plead and the plaintiff does not otherwise submit that he relies on the existence of the alleged “franchise agreement” to support the causes of action he asserts against Mercedes. Rather, the existence of the agreement appears to be plead for the purpose of establishing the scope of the intentional misconduct engaged in by the Rafih defendants, which is alleged to include: conspiracy to breach the “franchise agreement” and the actual breach of that agreement.

[50] To the extent that the alleged “franchise agreement” exists, in fact, it was not included in the motion materials delivered by the moving party or by the plaintiff. During submissions, I expressly raised with counsel, both that the existence of the “franchise agreement” had been plead and that a copy of the alleged agreement was not contained in the motion materials. I also observed that to the extent the plaintiff was relying on that agreement, it would normally form part of his pleadings.

[51] Notwithstanding my comments in that regard, both the moving party and the plaintiff proceeded to fully argue the merits of the portion of the motion related to the requested r. 21.01(1)(b) relief, on the record available at the hearing, which was limited to the statement of claim. Neither party requested an opportunity to provide the court with a copy of the alleged franchise agreement; neither party requested an adjournment to further consider the issues that I raised in relation to the alleged agreement; and neither party made any submissions with respect to the potential impact of the alleged agreement on the disposition of the motion. Instead, the plaintiff posited that the existing pleaded material facts, alone, disclosed the bare minimum required to adequately support the causes of action asserted against Mercedes.

[52] In the context of the foregoing, I declined to interfere with the parties making submissions based only on the materials that they respectively filed, but it remains that only those materials form the record upon which the motion must be determined. The alleged “franchise agreement” is not part of that record and, as a result, it does not assist the plaintiff in demonstrating that adequate material facts have been plead to support his pleaded conclusion that a legal relationship of agency existed between Mercedes and Rafih Automotive, at any time.

[53] For all of the reasons above, I conclude that the statement of claim fails to disclose material facts to support its conclusory allegation of a legal relationship of agency between Mercedes and the Rafih defendants.

[54] In turn, since the statement of claim does not adequately plead a relationship of agency, I am satisfied that the nature of the relationship between the plaintiff and the moving party does not fall within a previously judicially recognized category of cases giving rise to a prima facie duty of care, nor is it analogous to one. As a result, it is necessary to determine whether the pleaded facts disclose a relationship that gives rise to a prima facie duty of care at common law, after considering the requisite elements of “foreseeability of harm” and “proximity of relationship”. In so doing, I conclude that the statement of claim fails to set out adequate material facts to support either aspect of the inquiry. Therefore, it is plain and obvious that the statement of claim, as plead, is incapable of reasonably supporting the prima facie existence of the duty of care proposed by the plaintiff. I will explain.

2. Lack of Pleaded Material Facts to Adequately Support A Prima Facie Duty of Care Based on Foreseeability and Proximity

[55] As set out above, the first stage of the Anns/Cooper test mandates a determination of whether a relationship of proximity exists between the parties, “in which [the] failure to take reasonable care might foreseeably cause loss or harm to the plaintiff.” If so, a prima facie duty of care will be established.

[56] For the purpose of an asserted cause of action in negligence, the plaintiff bears the legal burden of establishing the existence of a duty of care, at law. In order to do so, “the plaintiff must provide a sufficient factual basis to establish that the harm [complained of] was a reasonably foreseeable consequence of the defendant’s conduct in the context of a proximate relationship. In the absence of such evidence, the claim may fail” (emphasis added): see Rankin (Rankin’s Garage Sales) v. J. J., 2018 SCC 19, [2018] 1 S.C.R. 587, at para. 19 (“Rankin”).

[57] The foreseeability aspect of the duty of care inquiry objectively focuses on whether someone in the defendant’s position ought to have reasonably foreseen the harm complained of, rather than whether the specific defendant did so, in fact. Courts must remain vigilant in order to ensure that the “foreseeability” analysis is not clouded by the fact that harm actually occurred. Rather, the analysis is properly focused on whether foreseeability was present prior to the incident occurring, without the benefit of hindsight. Foreseeability requires a higher threshold than “mere possibility” of harm. It also requires that the general harm complained of, and not its manner of incidence, be reasonably foreseeable. The determinative question is whether the plaintiff has offered facts to persuade the court that “the risk of the type of damage that occurred was reasonably foreseeable to the class of plaintiff that was damaged” (emphasis in original): see Rankin, at para. 24.

[58] In accordance with the foregoing, the common law requires that there be a sufficient factual basis to reasonably ground foreseeability. In this case, the statement of claim fails to disclose adequate, if any, material facts to support foreseeability. The only allegations plead in the statement of claim that relate directly to “foreseeability” are set out at: para. 95 (alleging that Mercedes knew or ought to have known about the Conspirators’ tortious acts); and para. 96 (alleging that the plaintiff suffered harm as “a direct, proximate and foreseeable result of the defendants’ conduct” (emphasis added)).

[59] In my view, it is plain and obvious that the combined content of the paragraphs referred to above, amounts to a bare assertion of foreseeability, unsupported by pleaded material facts. Such a pleading neither reasonably nor adequately justifies recognition of a prima facie duty of care. For example, the statement of claim fails to disclose any material facts to support the plaintiff’s conclusory allegation that Mercedes “knew or ought to have known” about the Conspirators’ tortious acts. That is not adequate. The material facts upon which the moving party is alleged to have “known or ought to have known” must be pleaded in order to properly establish foreseeability: see Cavanaugh, at paras. 71-73.

[60] The statement of claim also fails to disclose material facts supporting the requisite proximity between the plaintiff and Mercedes that reasonably and adequately justify recognition of a prima facie duty of care. In submissions, the plaintiff posits that Mercedes was his “neighbour” at the time it negligently failed to prevent him from becoming a victim of the intentional tortious conduct of the Conspirators. Despite that submission, the statement of claim does not allege the existence of a direct relationship between Mercedes and the plaintiff, at any time that the Conspirators’ tortious conduct is alleged to have occurred. Although not determinative of the issue, the absence of a direct relationship between the alleged tortfeasor and the alleged victim can strongly militate against a finding of sufficient proximity. In this case:

• The statement of claim does not factually allege that: Mercedes was an actual, or ostensible party, to the transfer of the vehicle’s registered ownership from Rafih Automotive to the plaintiff; or that it was an actual, or ostensible party, to the vehicle purchase agreement. Instead, the statement of claim: identifies Rafih Automotive as the transferor of the vehicle’s ownership; and alleges that Rafih Automotive acquired the vehicle from Mercedes, on a wholesale basis, some time before Rafih Automotive transferred ownership to the plaintiff (paras. 34 and 75).

• The statement of claim does not factually allege that Mercedes made any representations or engaged in any conduct upon which the plaintiff relied, at any time. Moreover, there is no allegation that Mercedes and the plaintiff interacted, in any way, before the vehicle’s ownership was transferred.

• There is no factual allegation that Mercedes held, received or disclosed any of the plaintiff’s personal information prior to, or at the time of, the Conspirators’ ongoing tortious conduct, or that it permitted third parties, including the Conspirators, to access such information and there are no factual allegations that the Conspirators otherwise obtained the plaintiff’s personal information from Mercedes. Instead, the plaintiff pleads that he voluntarily provided his personal information directly to Done when the plaintiff originally communicated his willingness to participate in the vehicle transfer transaction, as described by Done. The statement of claim does not allege that Done had any form of relationship with Mercedes, at any time.

[61] Additionally, for reasons I have previously set out, the plaintiff’s bare allegation of a relationship of agency between Mercedes and the Rafih defendants is not supported by any pleaded material facts. In the absence of a properly pleaded allegation of a legal relationship of agency, its alleged existence between the Rafih defendants and Mercedes is not available to assist the plaintiff in establishing sufficient proximity between himself and the moving party, for the purpose of determining whether a prima facie duty of care is reasonably disclosed by the statement of claim.

[62] Further, apart from the bare general allegations of agency, “supplier/retailer” and “franchisor/franchisee” relationships, the plaintiff has failed to plead any material facts disclosing any material facts that establish the nature of the relationship between Rafih Automotive and Mercedes. The statement of claim does not assert any material facts that:

• Mercedes exercised any control over the manner in which Rafih Automotive conducted its day-to-day “vehicle sales” business, nor that Mercedes exercised any control over the manner in which Rafih Automotive disposed of the vehicles that it purchased, on a wholesale basis, from Mercedes (except for limiting Rafih Automotive’s geographic territory) (paras. 70, 74, 75 and 76);

• Mercedes was vested with supervisory authority over Rafih Automotive’s business and operations;

• Mercedes had the power to discipline Rafih Automotive’s employees and officers (including Hamoody Rafih) or to oversee their conduct;

• Rafih Automotive was required to disclose pending vehicle sales to Mercedes; Mercedes had the power to review and reject pending vehicle sales before they were finalized; or that as a matter of practice, before Rafih Automotive’s pending vehicle sales to third parties were completed, Mercedes routinely received, or was entitled to receive, information from Rafih Automotive, particularizing the pending sales in a manner that adequately permitted Mercedes to verify the legitimacy of the proposed sale transactions.

[63] As a result of all of the foregoing, I conclude that even when it is read in a generous and forgiving manner, the statement of claim fails to set out any material facts that have a reasonable chance of establishing a close and direct relationship between the plaintiff and Mercedes that is sufficient to recognize the proposed duty of care owed by Mercedes “to prevent the plaintiff from being the victim of intrusion upon seclusion, fraud and conspiracy” (as alleged at para. 93), in all of the circumstances disclosed by the statement of claim.

[64] In the absence of pleaded material facts supporting the existence of a relationship between the plaintiff and Mercedes that gives rise to a prima facie duty of care at common law, it would not be just and reasonable to impose an obligation on Mercedes to take reasonable care not to injure the plaintiff, in the circumstances that are pleaded in the statement of claim.

[65] Since the duty of care proposed in the statement of claim fails at the first stage of the Anns/Cooper analysis, it is not necessary to consider whether policy considerations ought to negative the proposed duty.

[66] As a result of the foregoing, it is plain and obvious that the negligence cause of action that the plaintiff asserts against Mercedes cannot succeed. On that basis alone, the negligence claim ought to be struck pursuant to r. 21.01(1)(b) of the Rules.

[67] In arriving at the foregoing conclusion, I am mindful that the proposed duty of care owed by a “supplier/franchisor” to a third party who is, or may be, victimized by the intentional tortious conduct of the corresponding “retailer/franchisee” may be viewed as novel, in the sense that it has not been recognized in any previously decided cases. Novelty alone is not a basis to reject a proposed duty of care, especially at the pleadings stage. Conversely, novelty alone cannot justify a finding of a prima facie duty of care for the purpose of a motion brought pursuant to r. 21.01(1)(b) of the Rules. The proposed novel cause of action must still be supported by pleaded material facts that justify recognition of the prima facie existence of the proposed duty of care. In this case, it is the lack of such pleadings that is fatal to a finding that the statement of claim discloses a reasonable cause of action against Mercedes in negligence, rather than the novelty of same.

[68] In addition to the foregoing, the statement of claim also fails to disclose a reasonable cause of action in negligence against Mercedes because the other requisite elements of that tort are similarly unsupported by pleaded material facts. I will explain further below.

(ii) Lack of Pleaded Material Facts to Adequately Support the Conclusory Allegation that Mercedes Breached its Proposed Duty of Care

[69] It is plain and obvious that the negligence cause of action against Mercedes cannot succeed because the material facts pleaded and assumed to be true, do not support the general allegation that Mercedes breached its proposed duty of care.

[70] The breach allegation is exclusively set out at para. 94 of the statement of claim, which states that Mercedes is “liable for failing to take reasonable care to ensure its agents [Rafih Automotive and its employees] would not commit [intrusion upon seclusion, fraud and conspiracy].” The allegation is not supported by any pleaded material facts identifying the conduct or steps Mercedes reasonably ought to have undertaken in order to do so.

[71] Instead of pleading material facts concerning the nature and extent of the moving party’s alleged unreasonable conduct, the statement of claim, as plead, implicitly reasons that because the plaintiff was the victim of intrusion upon seclusion, fraud, and conspiracy, as committed by the Conspirators, Mercedes must have breached its proposed duty of care to prevent the plaintiff from being victimized in that manner. That approach does not accord with the requirements of r. 25.06(1). The factual happening of “loss or damage” does not necessarily lead to the inescapable conclusion that an operable duty of care was breached. To support an allegation of a breach, material facts about the alleged unreasonable conduct must be plead. Bare conclusory allegations of a breach of a standard of care with undefined parameters do not constitute a proper pleading of material facts.

[72] Moreover, from a functional perspective, the statement of claim does not reasonably inform Mercedes about the specifics of the case it has to meet, in respect of its alleged breaching conduct. Instead, Mercedes’ breach of the proposed duty of care is plead as a wide net of general, unspecified and boundless conduct capable of supporting an interminable fishing expedition at the discovery stage. That is not the function of a properly pleaded statement of claim.

(iii) Failure to Plead Material Facts to Adequately Support the Conclusory Allegation of Cause in Fact

[73] Generally, to establish “cause in fact”, a plaintiff is required to prove that “but for” the subject defendant’s breach of the applicable standard of care, the plaintiff’s losses would not have occurred: Clements v. Clements, 2012 SCC 32, [2012] 2 S.C.R. 181, at para. 46.

[74] The statement of claim fails to plead any material facts in support of the “cause in fact” element of the negligence cause of action asserted against Mercedes. Instead, the plaintiff attempts to address that requisite element in a conclusory manner, at paras. 96 and 104 of the statement of claim, which state:

96. The plaintiff suffered harm as a direct, proximate and foreseeable result of the defendants’ wrongful conduct.

97. The acts, omissions, wrongdoings, and breaches of legal duties and obligations by the defendants have caused or materially contributed to the plaintiff and others suffering injury, economic loss and damages, the particulars of which shall be provided.

[75] Contextually, the primary instrumentality of the plaintiff’s losses is alleged to be the Conspirators’ intentional tortious conduct. Mercedes is alleged to be liable for failing to engage in reasonable, albeit unspecified, conduct to prevent the plaintiff from becoming a victim of their conduct. The general conclusory causation allegations set out above, are made without any specific material facts plead in support, which is particularly problematic in the absence of any pleaded material facts identifying Mercedes’ alleged unreasonable breaching conduct. In the combined result, even on a generous reading, the statement of claim merely discloses that Mercedes engaged or failed to engage in some unspecified conduct that failed to protect the plaintiff from the Conspirator defendants’ intentional tortious conduct, and its failure to do so resulted in losses to the plaintiff.

[76] In the absence of supporting material pleaded facts, the causative nexus between Mercedes’ alleged breach and the plaintiff’s losses is difficult to discern, in the factual landscape plead in the balance of the statement of claim. The Conspirators’ intentional tortious conduct is principally alleged to have been committed in the context of Rafih Automotive’s transfer of the vehicle’s registered ownership from itself to the plaintiff. The plaintiff effectively pleads the impugned vehicle transfer took place: during the time period in which his consent to participate in the transaction was operable (i.e. between the time he gave his driver’s licence to Done on December 23, 2017 and the time he expressed his unwillingness to be further involved, on December 27, 2017); and after he voluntarily provided his own personal information for that purpose. Those actions combined with the Conspirators’ use of that information and their actions to carry out the transfer are essentially what is alleged to have caused the plaintiff to suffer potential losses. In that context, there are no pleaded material facts specifying how Mercedes’ conduct caused or contributed to the plaintiff’s potential losses or how his potential losses would have been avoided “but for” Mercedes’ unspecified unreasonable conduct.

[77] In the result, when assumed to be true, the factual allegations in the statement of claim do not support the requisite “cause in fact” element of the tort of negligence. In this case, it is not enough to plead only generalized conclusions in that regard, in the absence of supporting material facts.

(iv) Lack of Pleaded Material Facts to Support That the Plaintiff Sustained Compensable Loss or Damage as a Result of Mercedes’ Unreasonable Conduct

[78] As I will explain later below, to establish negligence a plaintiff must demonstrate, among other things, that he or she actually sustained losses that are compensable in damages, as a result of the defendant’s unreasonable conduct. In this case, the statement of claim fails to plead any specific losses actually suffered by the plaintiff that are compensable in damages, resulting from Mercedes’ alleged breach of its proposed duty of care. Instead, the material facts plead in the statement of claim are directed at the potential that the plaintiff may, at some point in the future, suffer economic harm as a result of Mercedes’ alleged unreasonable conduct. That type of “loss” generally does not attract an award of compensatory damages. In turn, the absence of a compensable pleaded loss undermines the plaintiff’s remedial request to apply “waiver of tort” to compel Mercedes to disgorge any revenue that it received in relation to the subject vehicle. I will explain.

[79] As against Mercedes, the plaintiff seeks a judgment compelling it to account for and disgorge all revenue it derived from the sale of the subject vehicle, which was registered to the plaintiff as part of the “straw buy”. Contextually, Mercedes is not among the defendants who are alleged to have: sold or transferred the vehicle to the plaintiff; forged the plaintiff’s signature on documentation related to the transfer of the ownership from Rafih Automotive to the plaintiff; or been wilfully blind to the forgery (see paras. 34 and 56).

[80] The premise of the plaintiff’s remedial disgorgement request against Mercedes is founded in allegations that:

• Mercedes Canada profited from the Conspirators’ intentional tortious conduct (para. 95);

• Mercedes Canada negligently breached its duty, thereby giving rise to the equitable doctrine of waiver of tort (para. 98); and

• To allow the defendants to retain revenue derived from the conspiracy would constituent unjust enrichment, whereby the defendants would profit from their own wrongdoing (para. 99).

[81] Yet, the statement of claim does not set out any material facts to support its assertion that Mercedes profited from the other defendants’ tortious acts of intrusion upon seclusion, conspiracy and fraud. Instead, the pleaded factual narrative is consistent with Rafih Automotive purchasing the vehicle wholesale form Mercedes at some point before the plaintiff’s personal information was used by the Conspirators to facilitate the transfer of the vehicle’s ownership from Rafih Automotive to the plaintiff (i.e. before the Conspirators’ alleged intrusion upon seclusion and fraud). Similarly, the statement of claim does not allege material facts that Mercedes was involved in any acts that advanced or facilitated the subsequent offshore transfer of the vehicle by the Conspirator defendants. Finally, there are no pleaded material facts setting out the manner in which Mercedes “profited” or received any benefit from either the offshore transfer or the “straw buy” scheme, in general. To the contrary, the plaintiff pleads that the purpose of the “straw buy” conspiracy was, in part, to defraud Mercedes (paras. 71, 72 and 74).

[82] Additionally, as a precondition to a “gain-based remedy” such as disgorgement, the plaintiff must first establish actionable misconduct in the form of a completed tort by the defendant against whom the remedy is sought. In the context of a negligence claim, that requires the plaintiff to establish, among other things, the requisite element of compensable loss or damage caused by the tortfeasor’s unreasonable conduct. “Tort law does not treat plaintiffs ‘merely as a convenient conduit of social consequences’ but rather as ‘someone to whom damages are owed’ to correct the wrong suffered’” (emphasis added): see Atlantic Lottery, at para. 34. Granting disgorgement as a remedy for a cause of action asserted in negligence, in the absence of proof of damage, would result in a remedy “arising out of a legal nothingness” (emphasis added): see Atlantic Lottery, at para. 33.

[83] In this case, the statement of claim only sets out general conclusory statements that the plaintiff has suffered damages and economic losses as a result of the defendants’ actionable misconduct (paras. 96 and 104), the nature and extent of which are informed by the relief claimed at para. 1 of the statement of claim, where the following remedial requests are made:

(a) $100,000 as general damages for fraud, intrusion upon seclusion and conspiracy (by its express term, that aspect of the claim does not apply to the negligence cause of action plead against Mercedes);

(b) Special damages to be determined at trial (against all defendants);

(c) An accounting and disgorgement (against all defendants);

(d) Aggravated, exemplary and punitive damages (these types of damages are not claimed against Mercedes – the material facts plead in support of this aspect of the plaintiff’s claim are alleged at paras. 107-110 of the statement of claim, against the “Conspirator” defendants only).

[84] Therefore, the only pleaded request for damages against Mercedes is in the form of special damages. The statement of claim does not set out any material facts concerning special damages that the plaintiff has actually incurred as a result of Mercedes’ alleged unreasonable conduct. Instead, the plaintiff pleads that as a result of the Conspirators’ tortious conduct, he is now exposed to a risk of potentially suffering various forms of economic loss in the future, including:

(a) he is “exposed to” liability as the registered owner of the vehicle (para. 64);

(b) his insurance record and premiums could be “deleteriously affected” (para. 66); and

(c) he “is at risk of liability in connection with any damages in which the [vehicle] is involved” (para. 66).

[85] The statement of claim fails to identify any other special damages that arise from a loss or losses caused by Mercedes’ alleged unreasonable conduct. Instead, it pleads that particulars of such damages “will be provided”. There is no indication that any “special damages” particulars were provided to the moving party in advance of this motion. As a result, the only allegations of fact concerning the losses and damages suffered by the plaintiff remain those that are set out above, all of which are associated with the risk of future harm, as distinct from actual harm that the plaintiff has suffered, in fact. That is not enough to complete the tort of negligence.

[86] The common law does not recognize a right to be free from the prospect of damage. Rather, it recognizes “a right not to suffer damage that results from exposure to an unreasonable risk” (emphasis in original): see Atlantic Lottery, at para. 33; Maple Leaf Foods, at para. 44. Therefore, negligence law does not recognize “the risk of injury or harm” or, “increased risk of injury or harm” as compensable types of damage. The tort of negligence does not offer compensation for “damage” that has not yet occurred, absent a negligently created risk that exposes the plaintiff to an imminent, real and substantial danger to health and safety: see Del Giudice, at para. 232.

[87] In this case, the statement of claim does not plead material facts to support that Mercedes’ alleged unreasonable conduct has resulted in an imminent, real and substantial danger to the plaintiff’s health and safety. Instead, the damages claim against Mercedes is confined to “pure economic loss” associated with risks that may or may not materialize in the future. That type of “damage” is not compensable at law, in negligence. In the absence of a factually supported and legally viable claim for compensatory damages being plead in the statement of claim, it is plain and obvious that: the cause of action against Mercedes in negligence cannot reasonably succeed; and that “remedial waiver of tort”, in the form of disgorgement, is not a viable remedial request against Mercedes, or one that is adequately supported by pleaded material facts.

(v) Summary of Findings with Respect to the Cause of Action in Negligence Asserted Against Mercedes

[88] For all of the reasons set out above, I conclude that the statement of claim does not disclose adequate material facts to support its bare conclusory allegations and general legal conclusions, in respect of:

(a) the existence of the proposed duty of care owed by Mercedes to the plaintiff;

(b) Mercedes’ alleged breach of that duty;

(c) the allegation that the plaintiff has suffered actual losses that entitle him to compensable damages, as a result of Mercedes’ breach; and

(d) the causal connection, in fact, between any losses suffered by the plaintiff and Mercedes’ alleged breach.

[89] The absence of any one of the foregoing requisite elements determinatively supports the conclusion that a cause of action in negligence against Mercedes is not reasonably disclosed by the statement of claim. With all four of the cause of action’s requisite elements unsupported by adequate pleaded material fact, I find that the cause of action in negligence against Mercedes has no reasonable chance to succeed. Moreover, the statement of claim, as plead, does not accord with the functional purpose of pleadings, because it fails to disclose to the moving party, in any reasonable sense, the case it must meet.

[90] As a result, the negligence claim against Mercedes should be struck, pursuant to r. 21.01(1)(b) of the Rules.

(b) The Asserted Basis of Liability Founded in Mercedes’ Alleged Vicarious Liability for the Intentional Tortious Conduct of the Rafih Defendants

[91] The statement of claim pleads that Mercedes is vicariously liable for the intentional tortious conduct of the Rafih defendants. The pleaded allegations of material fact in support of that basis of liability are scant, specifically:

• Mercedes-Benz Canada Inc. (“Mercedes Canada”) operates as a supplier/franchisor of Mercedes-Benz brand luxury cars to Rafih Automotive Group Inc. (“Rafih Automotive”) as retailer/franchisee with territorial rights in the Windsor area market (para. 10).

• At all material times, Rafih Automotive and its employees served as agents for Mercedes Canada, for whose acts Mercedes Canada is vicariously liable (para. 11) (emphasis added).

• Mercedes Canada knew or ought to have known about the Conspirator defendants’ “tortious acts” (intrusion upon seclusion, fraud, and conspiracy) and it profited from same (para. 95) (emphasis added).

[92] In my view, on a generous and collective reading of the paragraphs referred to above, in the context of the statement of claim as a whole, it is plain and obvious that the statement of claim fails to disclose a reasonable basis for imposing liability on Mercedes pursuant to the concept of vicarious liability.

[93] As plead, the linchpins to the allegation that Mercedes is vicariously liable for the Rafih defendants’ intentional tortious conduct are: the “franchisor/franchisee” relationship between Mercedes and Rafih Automotive; and the pleaded legal conclusion that a relationship of agency existed between Mercedes and the Rafih defendants. Rule 25.06(2) of the Rules provides that a party may raise a point of law in a pleading, but conclusions of law may be pleaded only if the material facts supporting them are pleaded. I have already explained my reasons for concluding that the statement of claim fails to disclose any material facts in support of the alleged relationship of agency. In the absence of a reasonably tenable pleading of agency, the statement of claim fails to disclose a reasonable basis to impose vicarious liability on Mercedes. I will explain.

[94] Vicarious liability is not a distinct tort, but rather a theory that holds one person responsible for the misconduct of another because of the nature of the relationship between them. The categories of relationships, in law, “that attract vicarious liability are neither exhaustively defined nor closed”: see 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2011 SCC 59, [2001] 2 S.C.R. 983, at para. 25. In order for vicarious liability to be imposed on one party for the tortious conduct of another party, the plaintiff generally must establish that:

(a) the relationship between the tortfeasor and the person against whom liability is sought is sufficiently close to make a claim of vicarious liability appropriate; and

(b) the tort is sufficiently connected to the tortfeasor’s assigned tasks, such that the tort can be regarded as a materialization of the risks created by the enterprise.

See K.L.B. v. British Columbia, 2003 SCC 51, [2003] 2 S.C.R. 403, at para. 19; Kassian Estate v. Canada (Attorney General), 2015 ONCA 544, at para. 11.

[95] Vicarious liability is typically imposed in the context of “employer/employee” and “principal/agent” relationships. Although the relational categories that attract vicarious liability are not closed, the “franchisor/franchisee relationship” (as alleged in the present case) is generally held to be more akin to an “owner/independent contractor” relationship with the result that “the franchisor is not typically exposed to vicarious liability for alleged wrongs committed by the franchisee”: see Jogia, at para. 44; Chow v. Subway Franchise Restaurants of Canada Ltd., 2017 BCSC 1034, at para. 42.

[96] Nonetheless, there may be circumstances in which a franchisor should appropriately be held vicariously liable for the acts or omissions of its franchisee, based on policy grounds. Such circumstances may be operable where the franchisor exercises a significant degree of control over the franchisee’s day-to-day operations and stands to profit from those operations. In such cases “the franchisor arguably ought to assume the business risk associated with the franchisee’s operations”: see Jogia, at para. 45.

[97] In my view, there are no material facts plead in the statement of claim that reasonably support the imposition of vicarious liability on policy grounds, in the context of the pleaded “franchisor/franchisee” relationship between Mercedes and Rafih Automotive. Specifically, the statement does not plead any material facts:

(a) that Mercedes exercised any control, let alone “a significant degree of control” over Rafih Automotive’s day-to-day operation;

(b) concerning the general nature and extent of the franchisee’s (Rafih defendants) conduct, that was authorized by the franchisor (Mercedes);

(c) concerning the general nature and extent of any power afforded to the Rafih defendants by Mercedes;

(d) concerning the nature and extent of any power conferred by Mercedes on the Rafih defendants, specifically in relation to the plaintiff;

(e) that identify the tasks, if any, that were assigned to the Rafih defendants by Mercedes, in the context of the franchisor/franchisee relationship, nor the manner in which such tasks were connected to, and implicated in, the Rafih defendants’ intentional tortious conduct (which is pleaded to include conspiracy to defraud Mercedes, itself);

(f) concerning the nature and extent of the opportunity that Mercedes afforded to the Rafih defendants, respectively, to abuse their power;

(g) concerning the extent to which the Rafih defendants’ intentional tortious conduct may have furthered the aims of Mercedes (apart from an unspecified conclusory pleading that Mercedes somehow profited from the “straw buy” transaction); and

(h) concerning the degree to which the risk of harm to the plaintiff was increased, if at all, because Mercedes put Rafih Automotive in its position as a franchisee and required Rafih Automotive to perform tasks that Mercedes assigned to it.

[98] In my view, on a generous reading of the statement of claim and assuming all facts plead as true, it is plain and obvious that a basis of liability against the moving party framed in vicarious liability for the intentional tortious conduct of the Rafih defendants, qua franchisee, has no reasonable chance of success, as it is pleaded. The allegations asserting the vicarious liability basis of liability are principally restricted to bare conclusory statements of law that are not supported by pleaded material facts. Finally, the statement of claim fails to plead any material facts to support a deviation from the general principle that a franchisor is not typically exposed to vicarious liability for the alleged wrongdoings committed by the franchisee.

[99] For all of these reasons, the claim for vicarious liability against the moving party should by struck pursuant to r. 21.01(1)(b) of the Rules.

(c) The Asserted Cause of Action in Waiver of Tort

[100] The “waiver of tort” cause of action advanced in the statement of claim is not a viable cause of action, in law. I will briefly explain.

[101] At para. 102 of the statement of claim, the plaintiff pleads:

By waiver of tort as cause of action, the plaintiff is entitled to damages and disgorgement equal to the revenues derived from the intrusion upon seclusion, fraud, and from the conspiracy. [Emphasis added.]

[102] In Atlantic Lottery, at paras. 15 and 27, the Court definitively held that “waiver of tort” does not exist as a cause of action under Canadian law. The Court explains its reasoning for not recognizing waiver of tort as a new cause of action at paras. 23-35 of its reasons. As a result, the waiver of tort cause of action alleged against Mercedes is legally untenable.

[103] I am mindful that the plaintiff submits that Atlantic Lottery was decided in the context of a class action proceeding and is, therefore, distinguishable from the “waiver of tort” as a cause of action that he advances in this proceeding. I disagree. Whether a single plaintiff asserts the proposed cause of action solely on his own behalf, or it is asserted by a representative plaintiff on behalf of a class, it remains that the Court has clearly and unambiguously declined to recognize waiver of tort as an independent cause of action in Canada. Its determination in that regard is binding on this court.

[104] Therefore, it is plain and obvious that the cause of action the plaintiff asserts as “waiver of tort” has no reasonable chance of success. Since it is doomed to fail, it should be struck pursuant to r. 21.01(1)(b) of the Rules. I now turn to the moving party’s requests to dismiss the action pursuant to r. 21.01(3)(d) and strike the pleading pursuant to r. 25.11(b).

V) Mercedes’ Request to Dismiss the Action or Strike the Statement of Claim Against It, On the Basis That the Action and Pleadings are Frivolous And/Or Vexatious

[105] Pursuant to r. 21.01(3)(d) of the Rules, a defendant may move, before a judge, to have an action dismissed on the ground that the action is frivolous or vexatious, or is otherwise an abuse of the process of the court and the judge may make an order or grant judgment accordingly.

[106] Pursuant to r. 25.11 of the Rules, the court may strike out a pleading that may prejudice or delay the fair trial of the action or that is scandalous, frivolous, vexatious, or an abuse of process of the court.

[107] For the purpose of r. 21.01(3)(d), there is a degree of overlap in the meaning of the terms “frivolous”, “vexatious”, and “abuse of process”, reflecting the reality that they are intangible and discretionary principles and doctrines: see Currie v. Halton Regional Police Services Board (2003), 2003 CanLII 7815 (ON CA), 179 O.A.C. 67, [2003] 233 D.L.R. (4th) 657 (Ont. C.A.), at paras. 13-17 (“Currie”). In Currie, the Court of Appeal provides general guiding descriptions of what might be encompassed within these concepts:

• A “frivolous” claim may include a claim “that has no legal basis or merit, especially one brought for an unreasonable purpose such as harassment”;

• A “vexatious” claim has been defined as including claims “where it is obvious that an action cannot succeed, or [where] the action would lead to no possible good, or if no reasonable person can reasonably expect to obtain relief.” Vexatious actions also include “those brought for an improper purpose, including the harassment and oppression of other parties by multifarious proceedings brought for purposes other than the assertion of legitimate rights” (para. 11); and

• The doctrine of “abuse of process” engages the inherent power of the court to prevent the misuse of its procedure in a way that would be “inconsistent with the objectives of public policy”, “manifestly unfair to a party to the litigation before it, or would in some way bring the administration of justice into disrepute”. The doctrine generally applies in circumstances “where a party resorts to the process of the court not principally for the relief which the court can grant, but instead to employ the process of the court coercively to obtain some other and wrongful advantage from the other party and this wrongful purpose is reflected in some act or threat in furtherance of the purpose” (para. 16).

[108] In the context of r. 21.01(3)(d), a claim may also be found to be frivolous, vexatious or an abuse of process where it asserts untenable pleas, contains insufficient material facts to support the allegations made, is generally without merit or is commenced for an extraneous or collateral purpose: see White v. Canada, 2011 ONSC 5816, at para. 20 (“White”). In White, the court also held, at para. 24:

A claim may be found to be frivolous, vexatious or an abuse of process where it contains insufficient material to support the allegations made or to permit a defendant to respond to a claim. ...Where the minimum level of factual disclosure has not been attained, the granting of a motion to strike pursuant to Rule 21 is an appropriate remedy, as opposed to granting leave to amend or an order for particulars. [Citations omitted.] [Emphasis added.]

[109] The court may consider extrinsic evidence on a motion brought pursuant to r. 21.01(3)(d).

[110] A court should only stay or dismiss a claim pursuant to r. 21.01(3)(d) in the clearest of cases: see Currie, at para. 18.

[111] The decided cases also offer guidance with respect to the meaning of “frivolous”, “vexatious”, and “scandalous” for the purpose of r. 25.11(b) of the Rules. For example, in George v. Harris, [2000] O.J. No. 1762 (S.C.), at para. 20 (“George”), the court states:

It is clear that a document that demonstrates a complete absence of material facts will be declared to be frivolous and vexatious. Similarly, portions of a pleading that are irrelevant, argumentative or inserted for colour, or that constitute bare allegations should be struck out as scandalous. The same applies to a document that contains only argument and includes unfounded and inflammatory attacks on the integrity of a party, and speculative, unsupported allegations of defamation. In such a case the offending statements will be struck out as being scandalous and vexatious. In addition, documents that are replete with conclusions, expressions of opinion, provide no indication whether information is based on personal knowledge or information and belief, and contain many irrelevant matters, will be rejected in their entirety. [Citations omitted.]

[112] In applying the foregoing principles, I observe that in response to Mercedes’ request that the action be dismissed or the statement of claim be struck against it, pursuant to rr. 21.01(3)(d) and 25.11(b) of the Rules, the plaintiff has sworn an affidavit in which, among other things, he:

(a) deposes that he first saw the vehicle purchase agreement, dated December 23, 2017, ostensibly between Rafih Automotive and himself, some time after March 8, 2021. He observes that on the face of the agreement Rafih Automotive is described as “Overseas Motors of Mercedes-Benz” and the agreement features the Mercedes-Benz trade symbol;

(b) observes that the vehicle purchase agreement indicates that there were “no open recalls” on the subject vehicle. He further deposes to his belief that this information demonstrates a connection between the vehicle’s manufacturer and the safety of the new owner and anyone else operating the subject vehicle, as well as, his belief that a potential for recall evinces a continuing relationship between the “purchaser of the vehicle, the dealership and the manufacturer/supplier”;

(c) deposes to the interactions between himself and the defendant Done that led to the “straw buy”, including voluntarily providing Done with his driver’s licence on December 23, 2017, and his subsequent advice to Done that he no longer wished to participate in the purchase, on December 27, 2017;

(d) deposes to the circumstances through which he discovered that his personal information had been used in the “straw buy” transaction;

(e) deposes to and appends as exhibits, copies of correspondence passing between his counsel and counsel for the moving party, concerning the “merits” of the plaintiff’s action against Mercedes;

(f) appends commentary from a website maintained by the Commission of Inquiry into Money Laundering in British Columbia, regarding the use of “luxury vehicle sales” in certain money laundering activities;

(g) deposes to his belief that:

i) Mercedes was negligent in its dealings with Rafih Automotive and its negligence led to the theft of his identity;

ii) Mercedes cannot, in good faith, plead that unlawful activities involving its products and the Rafih “franchise” were not within its knowledge and control;

iii) through its negligence, Mercedes allows illegal activities at Rafih Automotive, in order to maintain its own profits; and

iv) Mercedes likely “turned a blind eye to illegal activities at Rafih Automotive”, including the unlawful use of his identity;

(h) appends an article written by the defendant, Mahmoud Rafih, which addresses the rise of identity fraud in vehicle purchases and recommends that motor vehicle dealers utilize “identification due diligence checklists”;

(i) deposes to his belief that he is “at risk”, as a result of the theft of his identity, because it could negatively affect his insurance, his financial well-being, and expose him to liability;

(j) appends a portion of content from Rafih Automotive’s website indicating that it has a 40-year business relationship with Mercedes Canada. He observes that on its website, Rafih Automotive publishes detailed information about servicing and warranties related to Mercedes-Benz vehicles and he offers his own belief that as a result, the moving party and Rafih Automotive are closely linked beyond the sale of products. He also deposes to his belief that the foregoing statements are designed to publicly represent that there is an ongoing relationship between buyer, dealership (Rafih Automotive), and manufacturer, as well as to demonstrate an enduring trust between Rafih Automotive and Mercedes;

(k) deposes to his belief that Rafih Automotive and Mercedes have a close and profitable relationship;

(l) deposes to his belief that Mercedes owed him a duty of care, but chose to profit instead of discharging its duty. In his view, Mercedes should be held responsible for the fraud perpetrated on him by the co-defendants; and

(m) deposes to his belief that Mercedes abandoned its duty to him, in exchange for what it must have known were wrongful gains obtained through its agents, the Rafih defendants.

[113] Mercedes has also adduced evidence on the motion in the form of a copy of the vehicle purchase agreement, ostensibly between Rafih Automotive and the plaintiff. Mercedes observes that the agreement was made on the same day that the plaintiff gave his driver’s licence to Done, and four days before the plaintiff asserts that he “changed [his mind] about the deal” and “informed Steve Done that [he] no longer wanted to participate”. The moving party reasons that the plaintiff’s communicated withdrawal from participation in the “straw buy” transaction, had no practical effect because it came after the purchase of the vehicle had already been completed.

[114] In addition, relying on the evidentiary record adduced by the plaintiff, Mercedes references correspondence exchanged between its former counsel and plaintiff’s counsel, which it submits demonstrates that the plaintiff does not possess material facts to support the conclusory factual allegations and legal conclusions pleaded against it in the statement of claim. Mercedes submits that through his correspondence, plaintiff’s counsel has expressly indicated that the plaintiff is effectively relying only on “what may be revealed on discovery” to support the pleaded causes of action against Mercedes. Mercedes observes that in correspondence exchanged between counsel, plaintiff’s counsel states, among other things: “The facts may show that Mercedes provides training and supervision to its dealership”; and “We need to know whether there is evidence of an agent/principal relationship between Mercedes and Rafih Automotive Group.” As a result, Mercedes posits that the plaintiff’s claim against it is best characterized as a “fishing expedition”.

[115] In my view, the plaintiff’s evidence with respect to the relationship between Mercedes and Rafih Automotive, albeit largely comprised of his subjective belief, is more comprehensive in scope than the material facts disclosed in the statement of claim. But, it does not assist in remedying that pleading’s fundamental defect, which is its failure to plead adequate, or almost any, material facts in support of the numerous conclusory allegations of fact and law against Mercedes, in respect of the asserted causes of action.

[116] I am mindful that the court’s discretion to stay or dismiss a claim pursuant to r. 21.01(3)(d) should only be exercised in the clearest of cases. I am satisfied this is such a case. As this court held in White, at para. 20, a claim may be found frivolous, vexatious, or an abuse of process where it “contains insufficient material facts to support the allegations made” or “is generally without merit” (emphasis added). I have previously identified the lack of adequate pleaded material facts in support of all of the constituent elements of the negligence cause of action asserted against Mercedes and the absence of adequate or any pleadings of material fact in support of the vicarious liability “basis of liability” asserted against Mercedes.

[117] For the purpose of the relief claimed by Mercedes pursuant to rr. 21.03(d) and 25.11(b) of the Rules, the absence of almost any material pleaded facts capable of supporting the causes of action and “basis of liability” advanced by the plaintiff against Mercedes (in circumstances where the minimal facts that are pleaded are wholly inadequate to do so) render the statement of claim “frivolous and vexatious” in relation to those claims in accordance with the manner in which those terms were interpreted both in George and White.

[118] The legally untenable nature of the plaintiff’s claim founded in “waiver of tort as a cause of action” against Mercedes renders that aspect of the statement of claim “generally without merit” and therefore, “frivolous and vexatious” for the purpose of rr. 21.01(3)(d) and 25.11(b) of the Rules.

[119] Again, I am mindful that resort to the foregoing rules to dismiss an action or strike a pleading should be sparingly taken and then only in the clearest cases. That high threshold is met in this case. Here, the plaintiff correctly states, at para. 22 of his factum: “A pleading must set out those facts capable of supporting the particular causes of action that are plead.” Yet, the failure of the statement of claim to meet that mandatory requirement throughout the portions of the pleading that assert causes of action against Mercedes, is substantial, repeated, and extreme. The affidavit evidence delivered by the plaintiff does not change the fact that the statement of claim remains devoid of adequate and sufficient pleaded material facts in support of the causes of action/theories of liability pursued against the moving party.

[120] All of the reasons above justify dismissing the action against the moving party pursuant to r. 21.01(3)(d) and striking the pleading pursuant to r. 25.11(b) of the Rules.

VI) Should The Statement Of Claim Be Struck Against Mercedes Without Leave To Amend?

[121] The moving party submits that if the statement of claim is struck, the plaintiff should not be granted leave to amend it. In response, the plaintiff, somewhat curiously, indicates that he does not seek leave to amend the statement of claim. The plaintiff reasons that the requisite elements of the causes of action and basis of liability that he asserts against Mercedes are adequately pleaded in the statement of claim and are adequately supported by material facts disclosed therein.

[122] Consistent with his stated position, the plaintiff has not proposed a draft amended pleading to address the asserted deficiencies and weaknesses that are identified in the moving party’s motion record and factum. Nor has he requested, in any of his motion record, his factum or his submissions, leave to amend in the event that his primary position regarding the adequacy of the statement of claim is not accepted and the court rules that it ought to be struck, or the action ought to be dismissed. Finally, as I have set out earlier, in response to the court’s specific inquiry during submissions, plaintiff’s counsel unequivocally indicated that he did not seek leave to amend the statement of claim.

[123] I characterize the plaintiff’s position above, as being “somewhat curious” because normally, when a pleading is struck as defective, leave to amend should only be denied in the clearest of cases, when it is plain and obvious that “no tenable cause of action is possible on the facts as alleged”: see Mitchell v. Lewis, 2016 ONCA 903, 134 O.R. (3d) 524, at para. 21; Conway v. The Law Society of Upper Canada, 2016 ONCA 72, 344 O.A.C. 291, at para. 16. The plaintiff makes no submissions in that respect. Instead, he rests on his submission that the statement of claim as drafted is adequate, albeit minimally so. I disagree, for the reasons I have already set out. The pleading is not adequate, and it must be struck.

[124] Even so, I have considered whether leave to amend the statement of claim ought to be granted notwithstanding the fact that it was not sought and despite plaintiff’s counsel’s express submission that the plaintiff is not seeking leave to amend. Ultimately, I have determined that it would not be appropriate to do so in this instance.

[125] The plaintiff is represented by experienced and exceptionally competent counsel who has indicated that leave to amend is not sought by the plaintiff. In all the circumstances, I find that the court should accept that position without engaging in unrequested judicial interference. There may be strategic reasons and/or other circumstances underwriting the plaintiff’s decision not to seek leave to amend, of which the court is not aware. The court should not engage in “second guessing” a party’s informed decision not to seek a certain form of relief on a motion, particularly when that decision is made by a party who is not under a legal disability and is represented by legal counsel throughout.

[126] For the foregoing reasons, despite there being circumstances where leave to amend might have been granted if requested, based on the plaintiff’s submission that he is not seeking such relief, I will not order it.

VII) Nature of the Relief Ordered

[127] As a result of the foregoing, an order will go striking the statement of claim against the defendant, Mercedes-Benz Canada Inc., without leave to amend, pursuant to rr. 21.01(1)(b) and 25.11(b) of the Rules and dismissing the action against Mercedes-Benz Canada Inc. pursuant to r. 21.01(3)(d) of the Rules.

VIII) Costs

[128] Neither the moving party nor the plaintiff delivered costs outlines in advance of the motion hearing and they did not have costs outlines available at the return of the motion. As a result, the issue of costs must be determined, either by agreement or judicial determination, after further submissions.

[129] I strongly encourage the parties to resolve the issue of costs, between themselves. If the parties are unable to do so, the moving party, Mercedes, may deliver a costs outline accompanied by concise written submissions of no more than three pages, double-spaced, 12-point font and any relevant rule 49 offers, within 30 days of the date of these reasons.

[130] The responding party, plaintiff, may deliver a costs outline and concise written submissions of no more than four pages, double-spaced, 12-point font and any relevant rule 49 offers, within 21 days of the date of delivery of the moving party’s submissions.

[131] The moving party may deliver a brief reply of no more than two pages, double-spaced, 12-point font, within 14 days of the date of delivery of the responding party’s submissions.

[132] Order to go accordingly.

Original signed by Justice Gregory J. Verbeem

Gregory J. Verbeem

Justice

Released: January 18, 2022