Court File and Parties

COURT FILE NO.: CV-23-80466 DATE: 2024-01-09

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Empire Steel Inc. and Steelserve Corp Plaintiffs

Sam Gebrael, Counsel for the Plaintiffs

• and -

2469521 Ontario Inc., DBA Dass Metal Products & Dass Steel Service Centre, 2835085 Ontario Inc., John Doe Corporation, Jaswant Dass, Preet Dass and Navjot Dass Defendants

Jonathan Chen and Nikolas De Stefano, Counsel for the Defendants

HEARD: November 24, 2023

THE HONOURABLE JUSTICE M. BORDIN

REASONS FOR DECISION

Overview

[1] This action arises out of the sale of $4,457,784.18 in steel coils to the defendant 2469521 Ontario Inc. (“246”). Partial payment was made. The damages sought are $3,574,590.72.

[2] The defendants have brought a rule 21.01(1)(b) and rule 25.11 pleadings motion. They assert that the pleadings relating to breach of court orders and contempt, and the causes of action pleaded as against the individual defendants Jaswant Dass, Preet Dass and Navjot Dass should be struck as not disclosing a reasonable cause of action. The defendant 2835085 Ontario Inc. (“283”) asserts that there is no viable cause of action pleaded against it. The defendants also assert that certain pleadings are frivolous, scandalous and vexatious and should be struck.

[3] The defendants’ position is that this action is a simple claim for breach of contract dressed up as various causes of action. They say that the factual foundation for all the causes of action is the same as the factual foundation for the breach of contract claim.

[4] The defendants’ motion to strike was based on the Fresh as Amended Statement of Claim (“Fresh Claim”), which was the third iteration of the statement of claim. The defendants say that the defects with the Fresh Claim cannot be fixed through further amendments.

[5] The plaintiffs assert that the claim is properly pleaded and that the motion should be dismissed, or, in the alternative, that they should be allowed to amend the statement of claim. In response to the motion, the plaintiffs served and filed a proposed Amended Fresh as Amended Statement of Claim (the “Proposed Claim”), which would be the fourth version of the Statement of Claim.

[6] The defendants did not object to my consideration of the allegations in the Proposed Claim. In my view, it is appropriate to consider the pleadings in the Proposed Claim as it sets out the plaintiffs’ response to the pleading motion and the plaintiffs’ response to the alleged deficiencies in the Fresh Claim. The Proposed Claim assists the court in addressing whether the asserted causes of action could potentially survive a pleadings motion and whether leave to amend should be granted.

[7] The plaintiffs say that this action is really a claim about fraud and that the corporate veil can be pierced in cases of fraud and dishonesty.

[8] The Fresh Claim addresses two different “events” although the allegations overlap somewhat. The first is comprised of the events leading up to the formation of the contract and the failure to pay for the steel coils. The second relates to subsequent events concerning allegations that the defendants engaged in conduct to prevent the plaintiffs from recovering some of the steel coils. The first can be loosely referred to as the contract, breach of contract or non-payment allegations. The second, as the fraudulent scheme allegations. The fraudulent scheme allegations also incorporate some allegations regarding what took place leading up to the contract and breach of contract.

[9] One difficulty with the plaintiffs’ pleading is that it fails to delineate the allegations with respect to the contract and breach of contract allegations from the fraudulent scheme allegations. As a result, the claim is difficult to parse, leading to pleading deficiencies.

[10] The difficulty with the defendants’ position is that it fails to differentiate between the two events. As a result, the defendants’ position has merit with respect to much of the complaint regarding the pleadings against the individual defendants where it concerns the breach of contract allegations, but the defendants fail to address the fraudulent scheme allegations or attempt to characterize them as a simple breach of contract.

Causes of Action Pleaded

[11] The plaintiffs plead the following “causes of action” which are at issue on this motion:

a. Piercing the corporate veil;

b. Fraud;

c. Breach of court orders;

d. Negligent misrepresentation;

e. Conversion;

f. Unjust enrichment;

g. Oppression; and

h. Conspiracy.

The Pleaded Facts

[12] The facts which underpin the claims other than breach of contract, are found primarily in paragraphs 25, 29, 31, and 43 of the Fresh Claim. The Proposed Claim sets out additional allegations in paragraph 84. Read generously, the facts underpinning the claims in the Fresh Claim, other than breach of contract, are that the defendants:

a. altered or fabricated contract and other documents;

b. asserted that the coils they received were damaged, unusable and illegal;

c. told the plaintiffs the coils were sold to a scrap dealer;

d. acquired and passed off damaged coils as coils delivered by the plaintiffs;

e. intentionally damaged coils;

f. made false statements about the provenance of certain coils;

g. destroyed materials which identified the coils and fabricated false identifying materials;

h. fabricated numerous documents including invoices, purchase orders, scrapping documents, reports of sales of the coils, and other documents;

i. incorporated a corporation which the defendants asserted had sold coils in the possession of the defendant corporations to establish that the coils in their possession were not the coils sold by the plaintiffs; and

j. interfered with the plaintiffs’ ability to recover steel coils.

[13] In paragraph 84 of the Proposed Claim, the plaintiffs plead that the individual defendants, Preet, Navjot and Jaswant Dass personally engaged in or directed others to engage in the aforementioned conduct.

[14] In short, the facts pleaded support allegations that the defendants not only acquired steel coils from the plaintiffs which they did not pay for, but that the defendants put into action a plan or a course of conduct designed to establish that the coils sold by the plaintiffs were of little value (compared to their purchase price), had been sold, and that the coils which were in the possession of the defendants were from another supplier in order to obtain most of the coils purchased from the plaintiffs without paying for them.

Rule 21.01(1)(b)

[15] Under rule 21.01(1)(b) the court may strike out a pleading on the ground that it discloses no reasonable cause of action. A claim will only be struck if it is plain and obvious, assuming the facts pleaded to be true, that the pleading discloses no reasonable cause of action. Where a reasonable prospect of success exists, the matter should be allowed to proceed to trial: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 17.

[16] A rule 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: The Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership, 2020 ONCA 272, 150 O.R. (3d) 449, at para. 39.

[17] The court must ask whether, assuming the facts pleaded are 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: Imperial Tobacco, at para. 21.

[18] A motion to strike for failure to disclose a reasonable cause of action proceeds on the basis that the facts pleaded are true unless they are manifestly incapable of being proven or are patently ridiculous. No evidence is admissible on the motion. The facts pleaded are the basis upon which the possibility of success of the claim must be evaluated: Imperial Tobacco, at para. 22. A defendant who resorts to rule 21.01(1)(b) must take the plaintiff's pleaded claim at its provable highest: Catalyst, at para. 45.

[19] A claim, or portions of it, should be struck where the allegations do not give rise to a cause of action, the plaintiff fails to plead a necessary element of a cause of action, or the allegations in the pleading are conjecture, assumptions, or speculation unsupported by material facts: see MacLean v National CarWash Solutions, 2020 ONSC 6032 at para. 22.

[20] If the claim has some chance of success, it must be permitted to proceed; the threshold for sustaining a pleading is not high: see Trillium Power Wind Corporation v. Ontario (Natural Resources), 2013 ONCA 683, 117 O.R. (3d) 721; MacKinnon v. Ontario Municipal Employees Retirement Board, 2007 ONCA 874, 88 O.R. (3d) 269. A defendant must meet the much higher standard of establishing that the claim as pleaded has no reasonable prospect of success: Catalyst, at para. 47.

[21] I bear these principles in mind in the analysis of the various claims and causes of action pleaded.

Leave to Amend

[22] A pleading should not lightly be struck without leave to amend. Leave to amend should be denied only in the clearest of cases. This is particularly so where the deficiencies in the pleading may be cured by an appropriate amendment: South Holly Holdings Limited v. The Toronto-Dominion Bank, 2007 ONCA 456, at para. 6; Tran v. University of Western Ontario, 2015 ONCA 295, at para. 26.

[23] Leave should be granted unless it would occasion prejudice that cannot be compensated by costs or an adjournment; they are shown to be scandalous, frivolous, vexatious or an abuse of the court's process; or they disclose no reasonable cause of action: Andersen Consulting v. Canada (Attorney General), 150 O.A.C. 177, at para. 37. The defendants did not argue that leave to amend would cause them prejudice.

[24] A party should not be given unlimited scope to amend its pleading: Tran, at para. 27.

[25] It is only where it is clear that the plaintiff cannot allege further material facts that he knows to be true to support the allegations that leave to amend will be refused: Miguna v. Ontario (Attorney General), 205 O.A.C. 257, at para. 22.

[26] I bear these principles in mind in determining whether leave to amend should be granted.

Piercing the Corporate Veil

[27] Piercing or lifting the corporate veil is an equitable exception to certain statutory rules. Those rules provide that a corporation is a separate legal person (with the consequence that its property, rights, and obligations are its own, not those of the individuals through whom it acts) and that a shareholder is not liable for any act, default, obligation, or liability of the corporation: FNF Enterprises Inc. v. Wag and Train Inc., 2023 ONCA 92, 165 O.R. (3d) 401, at para. 17.

[28] As set out by the Ontario Court of Appeal in Yaiguaje v. Chevron Corporation, 2018 ONCA 472, 141 O.R. (3d) 1, at para. 65, the starting point is the decision of Sharpe J., as he then was, in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Gen. Div.), at pp. 433-34, aff’d [1997] O.J. No. 3754 (C.A.) where he found that there are only three circumstances where the court will pierce a corporate veil:

a. When the court is construing a statute, contract or other document.

b. When the court is satisfied that a company is a "mere facade" concealing the true facts.

c. When it can be established that the company is an authorized agent of its controllers or its members, corporate or human.

[29] The Ontario Court of Appeal has repeatedly rejected an independent, just and equitable ground for piercing the corporate veil in favour of the approach taken in Transamerica: Yaiguaje v. Chevron Corporation, 2018 ONCA 472, at para 70. The Transamerica test is consistent with the principle reflected in the various business corporation statutes in Canada that corporate separateness is the rule. Where the corporate form is being abused to the point that the corporation is not a truly separate corporation and is being used to facilitate fraudulent or improper conduct, the law recognizes an exception to this rule: Yaiguaje, at para. 70.

[30] The court will disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct: 642947 Ontario Ltd. v. Fleischer (2001), 56 O.R. (3d) 417 (C.A.), at para. 68; Transamerica, at pp. 433-434.

[31] The first element of the Transamerica test requires not just ownership or control of a corporation, but complete domination or abuse of the corporate form. The second element requires fraudulent or improper conduct and contemplates that it is that conduct that has given rise to the liabilities the plaintiff seeks to enforce. Where those two elements are present, the corporate veil will be lifted to prevent the person who engaged in that conduct from asserting that the liabilities the fraudulent or improper conduct gave rise to are those of the corporation only: FNF, at para. 20.

[32] In FNF at para. 21, the Ontario Court of Appeal explained that the court in Fleischer, at para. 68, expanded on the meaning of “fraudulent or improper conduct”:

Typically, the corporate veil is pierced when the company is incorporated for an illegal, fraudulent or improper purpose. But it can also be pierced if when incorporated “those in control expressly direct a wrongful thing to be done”.

[33] The court in Sigma Convector Enclosure Corp. v. Fluid Hose & Coupling Inc., 2022 ONSC 4371, at para. 52 summarized the law as follows:

The corporate veil may be pierced when the corporation is incorporated for an illegal, fraudulent or improper purpose, or where respecting the separate legal personality of the corporation would be flagrantly unjust. The separate existence of a corporation may be ignored when the corporation is under the complete control of the shareholder and its existence is being used as a means to insulate the shareholder from responsibility from fraudulent or illegal conduct. There is, however, no stand-alone just and equitable standard for piercing the corporate veil, and it is important that courts be rigorous in enforcing the principle that, absent extraordinary circumstances, a corporation is a separate legal entity distinct from its shareholders and from its subsidiary corporations. [Citations omitted.]

[34] The fact that a director or officer decided, in that capacity, that a corporation should breach a contract does not amount to the type of improper conduct that justifies piercing the corporate veil, at least where the director or officer could not be sued for the tort of inducing breach of contract under the doctrine in Said v. Butt, [1920] 3 K.B. 497: FNF, at para. 24.

[35] A claim that the corporate veil should be pierced cannot succeed on the non-payment and breach of contract claim and any such claim is struck out. However, the fraudulent scheme allegations, if properly pleaded, stand on different footing.

[36] The plaintiffs have pleaded that the individual defendants dominated and controlled the corporate defendants and that the corporate defendants are being used as a shield for fraudulent conduct: see paragraphs 77 and 85 of the Fresh Claim. For the purposes of a pleading motion, this is sufficient to meet the first part of the Transamerica test.

[37] The allegations in the Fresh Claim set out allegations of fraudulent or improper conduct that theoretically give rise to the liabilities the plaintiffs seek to pursue. This is sufficient to meet the second part of the Transamerica test. The claim to pierce the corporate veil to impose liability on the individual defendants is sufficiently pleaded.

[38] The defendants seek to strike paragraph 3 of the Fresh Claim which seeks a declaration that the separate identities of the corporate plaintiffs be disregarded and that they be treated as one defendant. The plaintiffs do not assert that any of the corporations own the other corporations. The allegation in paragraph 3 does not fit the test for piercing a corporate veil which relates to the individuals behind the corporation, not other corporations that are not owners. The plaintiffs tendered no authorities that support that a claim as pleaded in paragraph 3 of the Fresh Claim is viable. Paragraph 3 of the Fresh Claim is struck out.

Liability of Directors, Officers and Employees

[39] The following principles pertaining to liability of officers and directors are taken from ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 26 OR (3d) 481, at pp. 14-16:

a. Directors, officers and employees may be personally liable for actions ostensibly carried out under a corporate name where there has been fraud, deceit, dishonesty or want of authority on the part of employees or officers.

b. Those cases in which the corporate veil has been pierced usually involve transactions where the use of the corporate structure was a sham from the outset or was an afterthought to a deal which had gone sour.

c. Absent allegations which fit within the categories described above, directors, officers or employees of limited companies are protected from personal liability unless it can be shown that their actions are themselves tortious or exhibit a separate identity or interest from that of the company so as to make the act or conduct complained of their own.

d. To hold the directors personally liable, there must be some activity on their part that takes them out of the role of directing minds of the corporation.

[40] Officers, directors and employees of corporations are responsible for their tortious conduct even though that conduct was directed in a bona fide manner to the best interests of the company, always subject to the Said v. Butt exception: ADGA Systems International Ltd. V. Valcom Ltd. (1999), 43 OR (3d) 101, at para. 18.

[41] While the scope of individual liability as distinct from corporate liability is not always clear, it is undisputed that when a plaintiff purports to sue both a corporation and individuals within that corporation (whether officers, directors or employees), the plaintiff must plead sufficient particulars which disclose a basis for attaching liability to the individuals in their personal capacities. “Properly pleaded” as it relates to personal liability of corporate directors, officers and employees must be read as ‘specifically pleaded’; a separate claim must be stated against the individual in his personal capacity: Tran, at para 17.

[42] I bear these principles in mind when considering the causes of action alleged against the individual defendants.

Fraud (Paras. 28-33 and 42-49 of the Fresh Claim and of the Proposed Claim)

[43] The defendants seek to strike out the fraud claim against the individual defendants.

[44] The elements of civil fraud were set out by the Supreme Court of Canada in Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 126 at para. 21:

a. a false representation made by the defendant;

b. some level of knowledge of the falsehood of the representation on the part of the defendant (whether through knowledge or recklessness);

c. the false representation caused the plaintiff to act; and

d. the plaintiff’s actions resulted in a loss.

[45] I do not agree with the defendants’ position that the Proposed Claim could not, if properly pleaded, set out a claim against the individual defendants in fraud that could survive a rule 21 motion. As noted above, directors, officers and employees may be personally liable for actions ostensibly carried out under a corporate name where there has been fraud, deceit or dishonesty.

[46] The Fresh Claim pleads facts which could support a pleading of fraud. Indeed, apart from the breach of contract pleadings, the thrust of the allegations pleaded in the Fresh Claim as well as the added pleadings in the Proposed Claim are allegations of fraud.

[47] However, some of the allegations of fraud in the Fresh Claim appear to be a restatement of the facts that underpin the breach of contract claim, which are not in and of themselves necessarily fraudulent. It is also difficult to discern which alleged false representations were actually made to the plaintiffs and by whom. The Fresh Claim does not distinguish which of the alleged fraudulent representations were made to and relied or acted upon by the plaintiffs. Finally, the Fresh Claim does not plead particulars of the fraudulent representations and knowledge of the falsehood of the representation on the part of the individual defendants.

[48] I conclude, therefore, that the Fresh Claim does not properly plead all the elements of fraud sufficient to disclose a reasonable cause of action against the individual defendants.

[49] Paragraphs 28-33 and 42-49 of the Fresh Claim are struck out as against the individual defendants. However, it is not clear that the plaintiffs cannot allege further material facts to support the allegation of fraud. Therefore, leave is granted to amend to plead fraud against the individual defendants.

Contempt or Breach of a Court Order is Not a Cause of Action

[50] The plaintiffs seek a declaration that the defendants violated various court orders. The defendants seek to strike out the pleadings relating to the alleged breach of court orders.

[51] A civil action for breach of a court order has never been recognized as a method of enforcing court orders: Frame v. Smith, [1987] 2 S.C.R. 99 at p. 132.

[52] No separate claim lies for a breach of a court order. The remedy for such a breach is found in contempt proceedings: Love v Bell ExpressVu Limited Partnership, 2006 MBCA 92, 273 D.L.R. (4th) 761, at paras. 23-24.

[53] A contempt proceeding engages procedural issues which are at odds with the civil litigation process. The Supreme Court explained that a contempt order is a declaration that a party has acted in defiance of a court order. The gravity of a contempt order is underscored by the criminal law protections afforded to the person against whom such an order is sought. Not only is that person not compellable but he or she is not competent to act as a witness for the prosecution. The significance of a contempt order is also evident from the sanction faced by the offender. In Canada, an individual in contempt of court can be committed to jail or may face the imposition of any other sanction available for a criminal offence, such as a fine or community service: Pro Swing Inc. v Elta Golf Inc., 2006 SCC 52, [2016] 2 S.C.R. 612, at para. 35.

[54] At paragraphs 24, 25, 26, 27, and 55(d) of the Fresh Claim the plaintiffs plead that the defendants breached court orders. Paragraphs 25 and 26 plead the particulars of the alleged breaches.

[55] The allegations in paragraph 24, the opening sentence of paragraph 25, the first line of paragraph 26, the entirety of paragraph 27 and paragraph 55(d) allege the orders were breached. These paragraphs disclose no cause of action, are not relevant to any of the causes of action in the claim, are superfluous and are struck out without leave to amend. Any other pleadings that allege the defendants thwarted or attempted to thwart the orders are also struck out without leave to amend.

[56] Read in context, the pleading of the terms of the orders in paragraph 23 and the particulars of the steps taken to allegedly breach the orders in paragraphs 25 and 26 of the Fresh Claim support an assertion that the defendants took steps to interfere with the plaintiffs’ ability to inspect, identify, catalogue, and recover for preservation any remaining steel coils. The plaintiffs say that these are material facts in support of the causes of action as well as the punitive, exemplary and aggravated damages and go to the heart of the knowledge the defendants had of the alleged fraudulent scheme. In my view, these allegations are relevant to the alleged fraudulent scheme and should not be struck out.

Negligent Misrepresentation (Paras. 42-49 of the Fresh Claim and of the Proposed Claim)

[57] The defendants seek to strike out the allegations of negligent misrepresentation against the individual defendants.

[58] The plaintiffs mix the negligent misrepresentation and fraudulent misrepresentation causes of action in paras. 42-49 of the Proposed Claim.

[59] As set out by the Supreme Court of Canada in Queen v. Cognos Inc., [1993] 1 SCR 87, the elements of negligent misrepresentation are:

a. there must be a duty of care based on a "special relationship" between the representor and the representee;

b. the representation in question must be untrue, inaccurate, or misleading;

c. the representor must have acted negligently in making said misrepresentation;

d. the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and

e. the reliance must have been detrimental to the representee in the sense that damages resulted.

[60] The claim of negligent misrepresentation suffers from the same deficiencies as the fraud claim. In addition, the Fresh Claim baldly pleads that the defendants owed the plaintiffs a duty of care. The claim does not set out the basis upon which the defendants owed a duty of care to the plaintiffs at the time of contracting. The Fresh Claim does not set out the basis of the duty of care, if any, that would arise after the contract. The plaintiffs did not advance a basis for a duty of care in submissions or in their factum.

[61] In addition, the pleading does not disclose how the plaintiffs relied on the negligent misrepresentations and how it led to the damages suffered by the plaintiffs.

[62] I conclude that the Fresh Claim does not properly plead all the elements of negligent misrepresentation against the individual defendants. In my view, it is clear the plaintiffs cannot allege further material facts that they know to be true to support the allegations and such a claim has no reasonable prospect of success.

[63] The pleading of negligent misrepresentation in paragraphs 42-49 of the Fresh Claim is struck out as against the individual defendants without leave to amend the claim.

Conversion (Paras. 59-63 of the Fresh Claim and 61-66 of the Proposed Claim)

[64] The defendants seek to strike out the conversion claim against the individual defendants.

[65] The elements of a claim for conversion are: (1) the plaintiff has an immediate right to possession of personal property; (2) the personal property is identifiable or specific; and (3) the defendant takes, uses, or destroys the goods or interferes with the plaintiff’s right of possession: Fasteners & Fittings Inc. v. Wang, 2020 ONSC 1649.

[66] The defendants say the plaintiffs’ conversion claim is grounded on an allegation that a product was delivered and not paid for. As pleaded, the Fresh Claim does not sufficiently plead the third element of conversion against the individual defendants.

[67] However, the Proposed Claim demonstrates that it may be possible to plead facts to support all three elements of conversion as against the individual defendants arising out of the alleged fraudulent scheme.

[68] Accordingly, the cause of action of conversion against the individual defendants as pleaded in paragraphs 59–63 of the Fresh Claim is struck out with leave to amend.

Unjust Enrichment and Restitution (Paras. 64-71 of the Fresh Claim and 67-74 of the Proposed Claim)

[69] The defendants seek to strike out the unjust enrichment and restitution claim against the individual defendants.

[70] The defendants assert that the unjust enrichment claim is really a breach of contract claim for which the individual defendants cannot be liable. The defendants reference Ciccocioppo Design/Build Inc. v Gruppuso, 2017 ONSC 2012, 76 CLR (4th) 293, at paras. 18 and 19 in support of their position that the claim for unjust enrichment cannot succeed because there is a contract in place which provides a juristic reason for the conduct. The defendants say that the allegations are undifferentiated allegations against multiple defendants without specifying who did what and cannot ground liability. I agree that the claim against the individual defendants in unjust enrichment for non-payment of the contract in the Fresh Claim cannot succeed and discloses no reasonable cause of action against the individual defendants.

[71] However, this does not deal with the alleged fraudulent scheme. Read generously, the unjust enrichment claim incorporates the fraudulent scheme allegations. The fraudulent scheme allegations may eliminate the juristic reason. The Proposed Claim demonstrates that it may be possible to sufficiently plead against the individual defendants the elements of benefit to the defendants, deprivation to the plaintiffs, and lack of juristic reason.

[72] Accordingly, the claim of unjust enrichment against the individual defendants pleaded in paragraphs 64–68 of the Fresh Claim is struck out with leave to amend.

[73] The defendants also challenge the “claim” of restitution. Restitution is a remedy, not a cause of action. It is either available to the successful plaintiff or not. While vaguely pleaded, the plaintiffs have not brought a cause of action for restitution but are seeking it as a remedy. Whether the plaintiffs will be entitled to restitution should not be determined on a pleadings motion.

Oppression (Paras. 72-75 of the Fresh Claim and 75-79 of the Proposed Claim)

[74] The defendants seek to strike out the oppression claim against the individual defendants.

[75] The Court of Appeal summarized the necessary elements of an oppression claim in Abbasbayli v. Fiera Foods Company, 2021 ONCA 95, 456 DLR (4th) 668, at para. 44:

The necessary elements of an oppression claim were recently articulated by the Supreme Court in Wilson v. Alharayeri, 2017 SCC 39, [2017] 1 S.C.R. 1037. First, the complainant must identify the reasonably held expectations they claim to have been violated by the conduct at issue. Second, the complainant must show that these reasonable expectations were violated by corporate conduct that was oppressive or unfairly prejudicial to or that unfairly disregarded the interests of any security holder, creditor, director or officer of the corporation: at para. 24. The Supreme Court in Wilson also observed that to impose personal liability, there must be oppressive conduct that is properly attributable to the director’s implication in the oppression and the imposition of personal liability must be fit in all the circumstances: at paras. 47-48.

[76] Although not necessary to a claim for oppression against the directors, the plaintiffs have not pleaded that the individual defendants stripped the corporation of assets or diverted assets for their own benefit.

[77] The pleading of oppression in the Fresh Claim is deficient. It does not address the required elements for an oppression claim against the directors. It does not set out the plaintiffs’ reasonable expectations of the corporations or directors, that those reasonable expectations were violated by oppressive corporate conduct, or the basis upon which the oppressive conduct can be properly attributable to the directors and how they are implicated in the oppression. Those elements cannot be inferred from the Fresh Claim.

[78] As a result, the oppression claim against the individual defendants in paragraphs 72-75 of the Fresh Claim is struck out. It is possible, based on the Proposed Claim, that the plaintiffs may be able to plead the facts necessary to seek an oppression remedy against the individual defendants. However, I make no determination in that regard, nor do I make a determination of whether the plaintiffs are complainants under the Business Corporations Act, R.S.O. 1990, c. B.16. Leave to amend to plead oppression against the individual defendants is granted.

Conspiracy (Paras. 50-58 of the Fresh Claim and 50-60 of the Proposed Claim)

[79] The defendants seek to strike out the conspiracy claim against all defendants.

[80] As set out in Canada Cement LaFarge Ltd. v. B.C. Lightweight Aggregate Ltd., [1983] 1 S.C.R. 452 at pp. 471-472:

The law of tort does not permit an action against an individual defendant who has caused injury to the plaintiff, the law of torts does recognize a claim against them in combination as the tort of conspiracy if:

a. whether the means used by the defendants are lawful or unlawful, the predominant purpose of the defendants' conduct is to cause injury to the plaintiff; or,

b. where the conduct of the defendants is unlawful, the conduct is directed towards the plaintiff (alone or together with others), and the defendants should know in the circumstances that injury to the plaintiff is likely to and does result.

In situation (2) it is not necessary that the predominant purpose of the defendants' conduct be to cause injury to the plaintiff but, in the prevailing circumstances, it must be a constructive intent derived from the fact that the defendants should have known that injury to the plaintiff would ensue. In both situations, however, there must be actual damage suffered by the plaintiff.

[81] In Tran, at paragraph 21, citing Normart Management Ltd. v. West Hill Redevelopment Co. Ltd (1998), 37 O.R. (3d) 97, the Court of Appeal held that a statement of claim alleging conspiracy should describe who the parties are and their relationship with each other. It should allege the agreement between the defendants to conspire, and state precisely what the purpose or what were the objects of the alleged conspiracy, and it must then proceed to set forth, with clarity and precision, the overt acts which are alleged to have been done by each of the alleged conspirators in pursuance and in furtherance of the conspiracy; and lastly, it must allege the injury and damage occasioned to the plaintiff thereby.

[82] The following principles are taken from Normart:

a. A directing mind could make an agreement with another corporation by making an agreement with the directing mind of that other corporation, but if both directing minds are acting on behalf of their respective corporations, the agreement is between the two corporations.

b. An agreement between two corporations to injure can amount to the tort of conspiracy, but it does not necessarily follow that those who, as directing minds, caused their respective corporations to enter into the agreement are themselves party to the conspiracy.

c. The decision of the directing minds of the two corporate entities to cause their corporations to ignore their corporate obligations under a joint venture agreement and pursue an independent course cannot amount to a conspiracy by the directing minds to injure the third contracting party or its directing mind.

d. Simply reciting a series of events and stating that they were intended to injure the appellant is hardly sufficient to establish a conspiracy at law particularly where the same facts have already been pleaded in support of an action for breach of contract.

e. When a tort has been committed by two or more persons, an allegation of a prior conspiracy to commit the tort means nothing. The prior agreement merges in the tort.

[83] The claim of conspiracy, as pleaded in and as supported by the facts alleged in the Fresh Claim is sufficiently pleaded. However, as set out in Normart, at para. 16, I must determine whether the allegations relating to the claim of conspiracy and the ensuing damages are substantially the same as those of the other causes of action pleaded, such as fraud, negligent misrepresentation, conversion etc., such that the causes of actions relate to the same underlying factual foundation and no significant differences between the causes of actions and the conspiracy claim emerge.

[84] The factual foundation pleaded for the conspiracy claim is identical to that which underpins the allegations of breach of contract and the various torts pleaded relating to the alleged fraudulent scheme. The damages are the same. On a plain reading of the statement of claim, the appellant seeks to convert its action against the defendants for breach of contract and the various torts pleaded with respect to the subsequent alleged fraudulent scheme into a conspiracy claim. The pleading of conspiracy adds nothing to the claim.

[85] The claim of conspiracy in paragraphs 50-58 of the Fresh Claim is struck out against all defendants without leave to amend.

Claim Against 2835085 Ontario Inc.

[86] The defendants seek to strike out the claim against 283.

[87] The only allegations against the defendant 283 is that 283 owned the property where alleged fraudulent activities took place (paragraphs 8 and 82 of the Fresh Claim). It is pleaded that the defendant Jaswant Dass is the sole director of 283 and 246 and that those corporations share a head office (paragraphs 10 and 81 of the Fresh Claim). It is alleged that Jaswant Dass used or allowed 283 to be used as a storage space for coils that had reportedly been sold for scrap.

[88] Other than the above, the only allegations in the Fresh Claim pertaining to Jaswant Dass are that shortly after the final delivery was made in mid-November, Navjot Dass and Jaswant Dass cut off all communications with the plaintiffs without any explanation. The Proposed Claim pleads further particulars of what Jaswant Dass was alleged to have done.

[89] The Fresh Claim does not plead sufficient particulars against 283 or its director to base liability on any of the causes of action advanced. However, without making a determination that such a claim will disclose a reasonable cause of action, it is possible that such a claim could be properly pleaded.

[90] The claim against 283 in the Fresh Claim is struck out with leave to amend.

Rule 25.11

[91] In their notice of motion, the defendants seek to strike out paragraphs 1(d)(i), 1(d)(ii), 1(d)(iii), 1(d)(iv), 1(e), 2, 3, 23 - 27, 29(c), 31(e), 31(g), 31(h), 31(6), 50 – 58, and 72 – 85 of the Fresh Claim. In their factum, the defendants assert that these paragraphs should be struck out on the basis that they are frivolous and vexatious, are inflammatory, offensive, superfluous and not capable of affecting the outcome of the proceeding and are inserted solely for colour.

[92] Under rule 25.11 the court may strike out or expunge all or part of a pleading, with or without leave to amend, on the ground that the pleading is scandalous, frivolous or vexatious.

[93] The defendants direct the court to Abbasbayli v. Fiera Foods Company, 2021 ONCA 95, 456 D.L.R. (4th) 668, Huachangda Canada Holdings Inc. v Solcz Group Inc., 2019 ONCA 649, 147 O.R. (3d) 644, and Jacobson v Skurka, 2015 ONSC 1699, 125 O.R. (3d) 279.

[94] Under rule 25.11(b) it is appropriate to strike allegations of wrongdoing or illegal conduct of a party which have no relevance to a claim: Abbasbayli, at para. 62.

[95] A fact that is relevant to a cause of action cannot be scandalous, frivolous or vexatious. On the other hand, a pleading that raises irrelevant or superfluous allegations that cannot affect the outcome of an action is scandalous, frivolous or vexatious, and should be struck out: Huachangda, at para. 15.

[96] A pleading is not the place for a party to lead relevant evidence and to present argument to prove its claim or defence and a pleading should not describe the evidence that will prove a material fact: Jacobson, at paras. 43-44.

[97] Paragraphs 1(d)(i), 1(d)(ii) are tied to the oppression claim and are struck out with leave to amend. Paragraph 1(d)(iii) relates to all the claims against the individual defendants and are struck out with leave to amend. Paragraph 2 seeks a declaration tied to the claim to pierce the corporate veil and survives the pleading motion. Paragraph 1(d)(e) seeks a declaration that the defendants violated court orders and is struck out. Paragraph 3 has been dealt with above where I address piercing the corporate veil and is struck out.

[98] Paragraphs 31 (g), (h) and 31(6) of the Fresh Claim plead particulars of the alleged fraudulent scheme and are relevant as I have discussed above and are not struck out.

[99] I have addressed paragraphs 23-27 where I address the allegations of breach of court orders. Similarly, paragraphs 50–58 of the Fresh Claim which set out the allegations of conspiracy have been addressed above as have paragraphs 72–85 which address allegations of oppression and piercing the corporate veil.

[100] In paragraphs 29(c) and 31(e) of the Fresh Claim the plaintiffs assert that the defendants pressured their employees to provide false statements under oath and that the individual defendants swore false affidavits.

[101] The doctrine of absolute privilege contains several basic elements: no action lies, whether against judges, counsel, jury, witnesses or parties, for words spoken in the ordinary course of any proceedings before any court or judicial tribunal recognized by law; the privilege extends to documents properly used and regularly prepared for use in the proceedings; and a statement will not be protected if it is not uttered for the purposes of judicial proceedings by someone who has a duty to make statements in the course of the proceedings: Salasel v. Cuthbertson, 2015 ONCA 115, 124 O.R. (3d) 401; Amato v. Welsh, 2013 ONCA 258, 362 D.L.R. (4th) 38, at para. 34.

[102] The immunity extends to any action, however framed, and is not limited to actions for defamation: Amato, at para. 35.

[103] In my view, the allegations that a defendant swore a false affidavit are irrelevant or superfluous allegations that cannot affect the outcome of the action and are scandalous, frivolous or vexatious. Therefore, the allegation in paragraph 31(e) cannot be sustained and is not a proper pleading and is struck pursuant to rule 25.11. I note that similar allegations are made in the Proposed Claim and any attempt to make such allegations in a further amended claim is improper.

[104] However, in my view, this privilege does not apply to the allegations that the individual defendants pressured some of their employees to provide false statements under oath. Those pleadings are not struck out.

Costs

[105] The parties are encouraged to resolve the issue of costs. If they are unable to do so, they may submit a bill of costs and make written submissions consisting of not more than three double-spaced pages in length, together with any relevant offers to settle and excerpts of any legal authorities referenced, according to the following timetable:

a. The plaintiff shall serve its costs submissions, if any, by no later than January 22, 2024.

b. The defendants shall serve their costs submissions, if any, by no later than February 1, 2024.

[106] All submissions are to be filed with the court, with a copy to the judicial assistants at: St.Catharines.SCJJA@ontario.ca, by end of day February 1, 2024.

[107] If no submissions or written consent to a reasonable extension are received by the court by February 1, 2024, the matter of costs will be deemed to have been settled.

M. Bordin, J. Released: January 9, 2024