Cerieco Canada Corp. v. Mizrahi et al., 2024 ONSC 7001

COURT FILE NO.: CV-22-00681586-CLA2

DATE: 2024-12-13

SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

RE: CERIECO CANADA CORP., Plaintiff

AND:

SAM MIZRAHI, JENNY COCO, BOSCO CHAN (a.k.a. Ye Chen), MIZRAHI COMMERCIAL (THE ONE) LP, MIZRAHI COMMERCIAL (THE ONE) GP INC., MIZRAHI DEVELOPMENT GROUP (THE ONE) INC., MIZRAHI INC., LIVESOLAR CAPITAL CORP., 10216267 CANADA CORP., COCO PAVING INC., 12823543 CANADA LTD., SAM M INC., DENTONS CANADA LLP and PHILIP RIMER, Defendants

AND:

CHINA MACHINERY ENGINEERING CORPORATION, LONG HAI WANG, RICHARD YU, RAYMOND JAMES LTD., KEVIN CHEN, 2694128 ONTARIO INC., NINA PERFETTO, FOGLER RUBINOFF LLP, BARRY ROTENBERG, CHAITONS LLP, PETER LISTON, AVRIL LAVALLEE and MCCARTER GRESPAN BEYNON WEIR PROFESSIONAL CORPORATION, Third Parties

BEFORE: KIMMEL J.

COUNSEL: Linda Fuerst, Robert Brush & Mitchell Fournie, for the Third Party Raymond James Ltd. (Moving Party on Motion)

Junior Sirivar & Eli Berg, for Third Parties Richard Yu, Kevin Chen and 2694128 Ontario Inc. (Moving Parties on Motion)

David M. Golden & Charlotte Butler, for Third Parties Avril Lavallee and McCarter Grespan Beynon Weir Professional Corporation (Moving Parties on Motion)

Gavin J. Tighe & Baruch Wise, for Third Parties Nina Perfetto and Fogler Rubinoff LLP (Moving Parties on Motion)

Demetrios Yiokaris, for Third Parties Barry Rotenberg and Chaitons LLP (Moving Parties on Motion)

John Mather & Max Libman, for Third Party Long Hai Wang (Moving Party on Motion)

Peter Liston, Self-represented Third Party (Moving Party on Motion)

Sean Dewart & Mathieu Belanger, for the Defendants Dentons Canada LLP and Philip Rimer (Responding Parties on Motion)

Brendan Monahan, for the Plaintiff

HEARD: November 4 and 5, 2024

ENDORSEMENT (Third party rule 21 motions to strike)

The Main Action and Third Party Claim

[1] Dentons Canada LLP and Philip Rimer (collectively, "Dentons") commenced an omnibus Third Party Claim on April 2, 2024 (the "Third Party Claim") in the context of litigation initiated by the plaintiff ("CERIECO") against various defendants, including Dentons.

[2] The litigation arises out of losses CERIECO allegedly suffered on advances it made to Mizrahi Commercial (The One) LP (“MCLP”) totaling more than $200 million pursuant to a June 2017 contractor’s loan (the “Loan”) for a proposed mixed-use construction project in Toronto marketed as “The One” (the “Project”). Dentons was the lawyer for CERIECO at all material times.

The Statement of Claim in the Main Action

[3] In its Fresh As Amended Statement of Claim (the "Statement of Claim") CERIECO sues Dentons for negligence, breach of fiduciary duty, and breach of contract arising out of Dentons’ role in connection with various agreements. Those agreements resulted in the subordination and/or loss of CERIECO’s security over the Loan, including certain subordination agreements which CERIECO denies having authorized.

CERIECO's Allegations Relating to the SCA Amendment and Release of Guarantee

[4] In 2017, the Loan was guaranteed pursuant to a joint and several limited guarantee and indemnity agreement in favour of CERIECO (the "Guarantee") by the following defendants: Coco Paving, Sprott Bridging Income Fund LLP, Sam M. Inc. and Mizrahi Development Group (The One) Inc. (collectively, the "Guarantors"). In 2021, CERIECO entered an amendment to a Supplier Credit Agreement ("SCA Amendment") that included a release of the Guarantee in exchange for the payment of $7.5 million (the "Release").

[5] CERIECO's Statement of Claim alleges, inter alia, that the Release and the associated fee were fraudulent because Bosco Chan ("Bosco") did not have authority to execute documents on behalf of CERIECO and the Guarantors knew or ought to have known that. Further, the $7.5 million Release fee paid by or on behalf of the Coco Defendants (Jenny Coco, Coco Paving and 12823543 Canada Ltd.) was paid to Bosco and Sam Mizrahi ("Mizrahi") or his corporate entities (the "Mizrahi Defendants"), not CERIECO.

[6] Avril Lavallee and McCarter Grespan Beynon Weir Professional Corporation acted as the escrow agent ("Escrow Agent") in respect of the $7.5 million Release fee eventually paid to Mizrahi and Bosco. They were the lawyers of the Mizrahi Defendants. Another lawyer, Peter Liston ("Liston"), who is said to have sometimes represented CERIECO and sometimes represented Bosco, is alleged to have been involved in the improper payment of the Release fee to Bosco as well.

[7] CERIECO alleges specifically that Dentons knew that only Long Hai Wang (“Wang”), a director of CERIECO, was authorized by CERIECO to enter into agreements on its behalf and bind CERIECO. Dentons is alleged to have wrongfully accepted and acted on instructions given by Richard Yu ("Yu") and Kevin Chen ("Chen") purportedly given on behalf of CERIECO. As their employers, Raymond James Ltd. ("RJ") and 2694128 Ontario Inc. ("269") are said to be vicariously liable for the actions of Yu and Chen, respectively.

CERIECO's Allegations Relating to the Meritz Financing and Subordination of the Loan

[8] When construction financing was obtained in late August 2019 from a Korean lender named Meritz Securities Co., Ltd. ("Meritz"), CERIECO's debenture that was registered against title to the project lands was subordinated to that of Meritz. CERIECO alleges that it was unaware of, and did not agree to, the subordination of its security to Meritz.

[9] Dentons were not the only lawyers acting for CERIECO at this time. Barry Rotenberg at Chaitons LLP (the "Chaitons Third Parties") prepared the initial commitment letter for this loan and was advising CERIECO about it.

Dentons' Defences

[10] Dentons statement of defence and counterclaim in the main action ("Defence and Counterclaim") asserts, among other things, that CERIECO is responsible for its own losses. Dentons has cross-claimed against some of the other named co-defendants for contribution and indemnity, including the Coco Defendants and the Mizrahi Defendants. They have similarly cross-claimed against Dentons for contribution and indemnity.

[11] The primary theory of Dentons' Defence and Counterclaim in the main action is that the plaintiff should be held contributorily responsible, including for the misfeasance (alleged misrepresentations, negligence and breaches of duties) of the Third Parties to the extent the Third Parties were acting as the plaintiff's agents and their actions caused or contributed to the plaintiff's losses. This same theory of contributory responsibility applies to Dentons' defence to the crossclaim by the Coco-Defendants against Dentons, in which Dentons seeks to hold the Coco-Defendants (plaintiffs by crossclaim) responsible for the misfeasance (alleged negligence and breaches of duties) of their lawyers and agents, the Third Parties Nina Perfetto and Fogler Rubinoff (the "FR Third Parties").

Dentons Third Party Action

[12] In the Third Party Claim, Dentons repeats and relies upon its primary Defence and Counterclaim in the main action, including allegations of misfeasance against the Third Parties for which Dentons maintains that CERIECO bears responsibility (under the counterclaim). Dentons concedes that it cannot claim contribution and indemnity from the Third Parties for matters that are the plaintiff's own responsibility and that form part of Dentons' Defence and Counterclaim (or Defences to Crossclaims) in the main action.

[13] However, Dentons also seeks contribution and indemnity from the Third Parties for any damages awarded against Dentons in the main action or in any crossclaims (including the cross-claims against it by the Coco Defendants and the Mizrahi Defendants). It maintains that, if the Third Parties are found not to have been acting as the plaintiff's agents and their negligence falls "outside of the scope of the agency"(or outside the scope of any other capacity for which the plaintiff can be held contributorily responsible for their actions), then the Third Party Claim raises the possibility of an independent claim in tort against some of the Third Parties as joint tortfeasors who may have caused or contributed to CERIECO's claimed losses. Dentons also has asserted direct claims for misrepresentation and breach of warranty of authority against the Yu and Chen Third Parties and Wang, if it turns out that they did not have the authority to give instructions and/or sign documents on behalf of CERIECO.

The Rule 21 Motions to Strike

[14] All of the Third Parties except China Machinery Engineering Corporation ("CMEC"), the parent company of CERIECO in China, have brought motions under r. 21 to strike the Third Party Claim in its entirety, without leave to amend.

[15] There are seven motions in total. At the court's request, the Third Parties have prepared a road map of the nature of the claims and issues applicable to each. The following summary of the grounds upon which the Third Parties seek to strike the Third Party Claim has been extracted from that very helpful road map, which set the stage for these motions.

[16] The primary arguments advanced by the Third Parties are that Dentons has not pleaded sufficient material facts to establish misrepresentations, negligence or other breaches of duty committed outside the moving parties' roles as the plaintiff's agents (in which capacity they say the plaintiff would be responsible for their actions or inactions and they cannot be sued).

[17] The specifics of each of their arguments vary depending on the Third Party's alleged role or relationship with the plaintiff who have asserted claims against Dentons (CERIECO and plaintiffs by crossclaim in the main action). Their roles, as alleged by Dentons, are as follows:

a. Yu, Chen and 269 (the "Yu and Chen Third Parties"): Agents and advisors to CERIECO (negligently conveyed information, advice, and instructions between the plaintiff and Dentons).

b. RJ (also part of the Yu and Chen Third Parties): Employer of Richard Yu (vicariously liable for his conduct).

c. Avril Lavallee, McCarter Grespan Beynon Weir PC: In their capacity as the "Escrow Agent", they released the Release Fee under the Escrow Agreement to someone other than the plaintiff; in their capacity as the MG Third Parties, they acted as lawyers for the Mizrahi Defendants, plaintiffs by crossclaim (failed to make reasonable inquiries in connection with the release of the Loan Guarantee).

d. Long Hai Wang ("Wang"): Director of the plaintiff (represented to Dentons that he knew of and approved the impugned transactions underlying the plaintiff's claim on behalf of CERIECO).

e. Barry Rotenberg, Chaitons LLP (the "Chaitons Third Parties"): Lawyers for plaintiff (prepared the July 17, 2019 Commitment Letter and were responsible for bringing the Subordination Agreement to the plaintiff's attention).

f. Nina Perfetto, Fogler Rubinoff LLP (the "FR Third Parties" or the "Coco Lawyers"): Lawyers for the Coco Defendants (failed to make reasonable inquiries in connection with the release of the Loan Guarantee).

g. Peter Liston ("Liston"): alleged to have been a lawyer for CERIECO; sometimes acted as the personal lawyer for Bosco Chan (alleged to have disbursed funds without a resolution authorizing either the release of the Coco Guarantees, or the payment of the accommodation release fee to parties other than the plaintiff).

[18] The Third Parties also each raise additional arguments for striking Dentons' claims on the basis that the pleading is speculative and lacking in particulars of material facts or essential elements of the asserted causes of action, as follows:

a. Yu and Chen Third Parties (including RJ): No tenable claim is pleaded for breaches of duties owed to the plaintiff or for negligent misrepresentations made to Dentons, or for breach of warranty of authority, and no tenable claim is pleaded that RJ and 269 are vicariously liable for Yu and Chen's conduct, respectively.

b. The Escrow Agent and MG Third Parties: The Third Party Claim fails to disclose a reasonable cause of action against the Escrow Agent and/or for the release from escrow of the Release fee, and no tenable claim is pleaded that the MG Third Parties owed a fiduciary duty, ad hoc or otherwise, beyond their limited role as escrow agent under the Escrow Agreement.

c. Wang: No tenable claim is pleaded for negligent misrepresentation or for breach of warranty of authority, and those claims are incapable of being pled in a manner that discloses a reasonable cause of action.

d. Chaitons Third Parties: Dentons' claim is nonsensical from a timing perspective, and there is no causal connection. Also, there are policy concerns associated with claims against counsel that undermine a lawyer's loyalty to its client and raise difficult issues regarding solicitor-client privilege and the lawyer's ability to defend themself.

e. The Fogler Rubinoff Third Parties: No allegations regarding direct representations or duty of care owed to Dentons are pleaded. There are also policy concerns associated with claims against counsel that undermine a lawyer's loyalty to its client. These types of claims also raise difficult issues regarding solicitor-client privilege and the ability of the lawyer to defend itself when its client may not waive privilege. The existence of the allegations also creates a conflict of interest for the Coco Lawyers continuing to act for the Coco Defendants in the main action so leave should not be granted without good reason.

f. Peter Liston: No one except Dentons alleges that he was retained by CERIECO to act in connection with the release of the Coco Guarantee. Liston denies acting for CERIECO. It is alleged that he sometimes acted for Bosco. Dentons has cross-claimed against Bosco in the main action, raising policy concerns regarding discovery of a lawyer to a party who may not waive privilege.

[19] The Third Parties say that Dentons' direct claims against them are speculative and have been pleaded without the necessary foundation of supporting material facts, despite having had many months to supplement or amend them, and that these claims must be presumed to be incapable of rectification, or they would have been supplemented by now.

[20] CERIECO takes no position on these motions.

The Issues to be Decided

[21] The issues to be decided on the motions are:

a. Have the moving Third Parties established that Dentons has not pleaded sufficient material facts to establish negligence on their part outside the scope of their role as agent to the plaintiff (plaintiffs by crossclaim)?

b. Have any of the moving Third Parties established additional grounds for striking the claims against them (beyond the agency vs. advisor question), such as the impossibility of success, missing elements of the causes of action pleaded, or because they are too general, speculative and fail to disclose the material facts needed to establish the causes of action?

c. Is the Third Party Claim fundamentally flawed such that it is not capable of rectification, or should leave to amend be granted?

Analysis

[22] The identified issues (and any related sub-issues) will be addressed in turn. Where the claims against individual (or groups of) Third Parties are different and give rise to different considerations, they are addressed separately as applicable. Each aspect of the analysis has been undertaken under the general purview of the test on a r. 21 motion. Given the number of motions and parties, passages from the relevant pleadings have been repeated in this endorsement. While this is someone cumbersome and has added to the length of this endorsement, it was determined to be the most convenient way to orient the analysis where different considerations may apply.

[23] Despite the different considerations, the same test applies to each motion. Rule 21 permits a court to strike a pleading that fails to disclose a reasonable cause of action. That will occur if the allegations do not give rise to a recognized cause of action, the claim fails to plead the necessary elements of a cause of action, or if it fails to plead material facts in support of a cause of action, as required by Rule 25.06(1). The material facts provide the foundation upon which the possibility of success of a claim will be evaluated against each defendant: see Burns v. RBC Life Insurance Company, 2020 ONCA 347, 151 OR (3d) 209, at paras. 16 – 19.

[24] The test on a Rule 21.01(1)(b) motion to strike is well established:

a. The onus is on the moving party to establish that, assuming the pleaded facts to be true, it is "plain and obvious" that the pleading discloses no reasonable cause of action: see McCreight v. Canada (Attorney General), 2013 ONCA 483, 116 OR (3d) 429, at para. 39, citing R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 17.

b. The pleading must be read generously in favour of the plaintiff, with allowance for drafting deficiencies: see McCreight, at para. 39, citing Wellington v. Ontario, 2011 ONCA 274, 105 O.R. (3d) 81, at para. 14.

c. While the court must accept the facts that are pleaded as true, this obligation "does not extend to bald conclusory statements of fact, unsupported by material facts" or allegations that are patently ridiculous or incapable of proof: see Trillium Power Wind Corporation v. Ontario (Natural Resources), 2013 ONCA 683, 117 OR (3d) 721, at para. 31; World Financial Solutions Inc. v. 2573183 Ontario Ltd., 2024 ONSC 1748, at para. 19; McCreight, at para. 29.

d. If the cause of action pleaded has been recognized, all of its essential elements must be pleaded. If a cause of action has not been recognized, the court needs to determine whether it is plain and obvious that the claim will not succeed. A claim should not be struck merely because it is novel: see Imperial Tobacco, at para. 21.

a) Agency vs. Non-Agency Third Party Claims

[25] Under the Negligence Act, R.S.O. 1990, c. N.1, where two or more individuals have jointly caused or contributed to the damages suffered by the plaintiff, those individuals are jointly and severally liable for the damages (s. 1). Between themselves they may each seek indemnity from the other to the extent that they are liable, such that each individual is only liable for their respective portion of the damages (s. 1). Where the plaintiff only sues some but not all of the individuals responsible for the damages, any of the individuals being sued has the right to add an individual not already being sued to the litigation in order to seek the contribution and indemnity they are entitled to under s. 5.

[26] The relevant mechanism for adding another party to the litigation in such cases is a third-party claim under r. 29.01(a), which permits defendants to commence claims against individuals who are not already parties to the litigation where such individuals are liable or "may be liable to the defendant for all or part of the plaintiff's claim". The cause of action in such cases is a claim for contribution and indemnity under the Negligence Act: see Hengeveld v. The Personal Insurance Company, 2019 ONCA 497, 146 OR (3d) 182, at para. 19.

Analytical Framework: Are the Third Parties the Plaintiff's Agents or Advisors?

[27] The Third Parties are all alleged by Dentons to have been either agents of, or advisors to, CERIECO (the plaintiff in the main action) or to the Coco Defendants and Mizrahi Defendants (plaintiffs by crossclaim in the main action).

[28] Dentons' primary Defence and Counterclaim in the main action is that the individuals it was providing information and advice to, taking instructions from and otherwise dealing with, were all acting as agents for CERIECO, or were acting in capacities for which CERIECO is responsible. If the acts or omissions of those agents resulted in the loss or dilution of some of CERIECO' security (e.g., as a result of the Release of the Loan Guarantees and/or subordination of its security to the Meritz loan), Dentons contends that CERIECO is itself entirely or contributorily responsible.

[29] The same primary defence is raised by Dentons in response to the crossclaims by the Coco Defendants and the Mizrahi Defendants with respect to the acts or omissions of their lawyers (the FR Third Parties for the Coco Defendants, and the MG Third Parties for the Mizrahi Defendants), for which it seeks to hold the Coco Defendants and the Mizrahi Defendants (who are plaintiffs in the crossclaims) contributorily responsible, respectively.

[30] The Third Parties argue that the defences raised by Dentons seeking to hold CERIECO responsible for the acts and omissions of the Third Parties who were acting on its behalf render the Third Party Claim impossible of success. This position is based on a body of caselaw that has developed in the context of third-party claims brought by a defendant against someone who is the plaintiff's lawyer, or some other type of professional advising the plaintiff. The development of the law in this area was recently summarized by the Court of Appeal for Ontario in Hengeveld, at paras. 30-35 and 41-44. Much of the focus of the submissions of the Third Parties was on this argument.

[31] Two lines of case law have emerged, both of which have been recognised as good law; see Hengeveld, at paras. 30-35 and 41-44. In the first line of cases, the professionals (typically lawyers) have been found to be acting as agents to the plaintiff, and as such the third party claims have been struck. In the second line of cases, the professionals have been found to be acting in some advisory capacity to the plaintiff but not as their agent, and as such the third party claims have been permitted to continue.

[32] Under the first line of cases originating with Adams v. Thompson, Berwick, Pratt & Partners (1987), 1987 CanLII 2590 (BC CA), 15 B.C.L.R. (2d) 51 (C.A.), a third-party claim is not available against someone acting as an agent to the plaintiff because the defendant can avoid paying more than their share of the damages by raising a contributory negligence defence against the plaintiff under the Negligence Act (in Ontario, s. 3). The key question in this first line of cases is whether the actions of the third party can be attributed to the plaintiff. Where the actions of the third party fall entirely within the scope of an agency relationship between the third party and the plaintiff, they will be attributable to the plaintiff and will not provide a basis for a third-party claim as they can be raised as a defence: see Hengeveld at para. 31 citing Adams at pp. 55-56. Where the plaintiff takes steps to expressly distance themselves from responsibility for, or the consequences of, the actions of the third party, that could militate against the existence of an agency relationship in this context: see: Davy Estate v. Egan, 2009 ONCA 763, 97 O.R. (3d) 401, at para. 23 citing Macchi S.p.A. v. New Solution Extrusion Inc., 2008 ONCA 586, at paras. 1-2 ("Macchi C.A."); Hengeveld at paras. 36-37, 42.

[33] If the plaintiff is held to be contributorily negligent for the actions of the third-party agent, the defendant can only be held liable for its respective portion of the plaintiff's damages. That leaves nothing for them to seek indemnity in respect of and therefore leaves no cause of action for a third-party claim (under ss. 2 and 5 of the Ontario statute): see Adams, at pp. 55-56; Hengeveld, at paras. 23-25 and 29-32; Taylor v. Canada (Attorney General), 2009 ONCA 487, 95 O.R. (3d) 561, at para. 20.

[34] The second line of cases applies to circumstances where the third party is not alleged to be acting as the plaintiff's agent. In such cases, the third party's negligence is not directly attributable to the plaintiff. Therefore, the door is left open for a defendant to bring a third-party claim against them seeking contribution and indemnity where that has been properly pleaded: see 478649 Ontario Ltd. v. Corcoran (1994), 1994 CanLII 219 (ON CA), 20 O.R. (3d) 28 (C.A.), at p. 35; Hengeveld, at paras. 43-44; see also Cardar Investments Ltd. v. Thorne Riddell (1989), 1989 CanLII 4183 (ON SC), 71 OR (2d) 29 (Div. Ct.).

[35] The key question in this second line of cases involving professionals engaged by a plaintiff is whether the third party was providing advice to the plaintiff, as opposed to dealing with others on behalf of the plaintiff. The Court of Appeal distinguished Corcoran from Adams and Macchi (C.A.) on this basis, in Hengeveld (at para 44):

In Corcoran the plaintiff retained and received advice from two professionals — its lawyer and its realtor. There was no finding of the type of agency situation described in Adams, making the lawyer's allegedly negligent conduct attributable to the plaintiff. There was no suggestion that the lawyer acted on behalf of the plaintiff in dealing with others in a manner analogous to filing a prospectus (as in Adams), filing a financing statement (as in Macchi), or dealing with Personal Insurance about the preservation of evidence (as in this case). Unlike in Corcoran, Personal Insurance here has not pointed to any alleged act of negligence which the Hengevelds could say was, although committed by their lawyers, not their responsibility vis-à-vis Personal Insurance. Corcoran was distinguished in Macchi, an agency situation case, and it is similarly distinguishable here. [Emphasis Added]

[36] There is a nuanced exception in the second line of cases that was recognized in both Adams (at p. 57) and Hengeveld (at pars. 32, 39-40). Where a lawyer acts in an advisory role, not as an agent involved in the creation of the original loss, but gave negligent advice to the plaintiff with respect to mitigating their loss, the proper course is for the defendant to raise the issue as a defence in the main action. Since it is the plaintiff's obligation to mitigate its loss, a failure to mitigate (even if due to negligent advice from a third party) is still attributable to the plaintiff. In such circumstances, where the lawyer's negligence will be accounted for in the aspects of the defence dealing with the plaintiff's duty to mitigate there is, like in the first line of agency cases, no basis for a third-party claim. If the plaintiff has a claim against the professional for bad advice regarding mitigation, that is a separate matter between them.

[37] In summary, where the fault of a third party will necessarily be imputed to the plaintiff and can be accounted for in the apportionment of responsibility to the plaintiff by way of a defence or counterclaim, there is no foundation for a third-party claim. In such circumstances, it can be said in the context of a r. 21 motion that any such Third Party Claims, as they stand or may reasonably be amended, disclose a question that is "doomed to fail": see Atlantic Lottery Corp. Inc. v Babstock, 2020 SCC 19, [2020] 2 SCR 420, at para. 90, (per Karakatsanis J. dissenting in part, but not this point), cited in PMC York Properties v. Siudak, 2022 ONCA 635, 473 DLR (4th) 136, at para. 32.

Third Party Claims Against CERIECO's Representatives

[38] As previously noted, Dentons' primary defence to CERIECO's claims (also adopted in its Third Party Claim) is that the Third Parties, Wang (CERIECO's director), the Yu and Chen Third Parties (Yu and Chen as conduits for advice to and instructions from Wang, and their employers alleged to be vicariously liable), were agents of the plaintiff.

[39] If those were claims being asserted by Dentons against those Third Parties then the Third Party Claim they would have no basis in law, and would be "doomed to fail" under the first line of Hengeveld cases. That would be grounds to strike the Third Party Claim as against them since Dentons has (or could) raise the allegations against those third-party agents of the plaintiff as part of Dentons' Defence and Counterclaim and Defence to Cross-Claim, which seeks to hold the plaintiff contributorily responsible under the Negligence Act for any of the losses that the plaintiff (or its agents) caused itself.

[40] However, this is not the end of the analysis. Dentons maintains that it has repeated the agency assertions in the Third Party Claim for context and as a springboard for its Third Party Claim in the alternative. Dentons pleads and asserts, in the alternative (as r. 25.06(4) permits it to do) that if these Third Parties were acting in non-agency, advisory or other capacities that cannot be attributed to CERIECO (or apportioned to its own contributory negligence) and its primary defence (by which it seeks to hold CERIECO contributorily responsible for the actions of any of the Third Parties that Dentons has asserted were the plaintiff's agents) is not successful, then Dentons seeks contribution and indemnity under the Negligence Act directly from those Third Parties as joint tortfeasors who owed duties to CERIECO and whose negligent acts, omissions or advice caused or contributed to its losses. Thus, these alternative third party claims are not ipso facto precluded by the first line of cases.

[41] Although the pleadings are different given the different roles of each of the Third Parties, in each case the Third Party Claim alleges that the Third Parties breached duties they owed to the plaintiff (e.g. acted without the plaintiff's authority, provided negligent advice, breached other duties owed to the plaintiff), and in some instances misrepresented to Dentons their authority to act on behalf of the plaintiff. Those are alleged to constitute independent tortious acts that caused or contributed to the plaintiff's losses but for which the plaintiff itself might not be held to be contributorily responsible.

i. Yu and Chen Defendants

[42] The clearest example of this alternative liability scenario is found in the Third Party Claim against the Yu and Chen Defendants, that asserts:

[9] Yu was employed by Raymond James at all material times as a Vice President for Raymond James Real Estate Investment Banking, and Raymond James is vicariously liable for his tortious conduct in issue in this third party claim.

[32] Chen and Yu acted as the plaintiff's trusted advisors and conveyed information and advice from and instructions to Dentons on behalf of the plaintiff, CMEC and CERIECO as set out in Dentons' defence.

[33] Further, or in the alternative, Chen carried on business through 2694128 Ontario Inc., of which he is a principal or employee, and it is vicariously liable for his negligence and wrongdoing described below.

[34] Chen and Yu knew or ought to have known that the plaintiff was relying on them to convey information and advice accurately and faithfully from Dentons to Wang and others on the plaintiff's behalf, and to convey information, inquiries and instructions accurately and faithfully from and on behalf of Wang to Dentons. They thus owed the plaintiff a duty of care.

[35] In paragraph 108(b) of Dentons defence, Dentons alleges that Chen and Yu acted as the plaintiff's agent for the purpose of conveying advice and instructions to and from Dentons. Dentons alleges further that if they failed to do so accurately and faithfully, this constituted contributory negligence on the part of the plaintiff.

[36] In the alternative to the allegations in paragraph 108(b) of Dentons' defence, if the plaintiff alleges and establishes that Chen and Yu did not act as its agents and therefore the plaintiff is not responsible for their negligence in failing to faithfully and accurately convey information, advice and instructions, then Chen and Yu are liable for their own negligence in this regard, which negligence caused or contributed to the damages the plaintiff seeks to recover from Dentons in the main action.

[43] These Third Parties contend that there is no scenario in which they could owe a duty to CERIECO and not be acting as CERIECO's agent vis a vis others, which takes them right back to the agency based first category of Hengeveld cases, that would hold CERIECO responsible for their actions (under the indoor management rule) and preclude claims against them. The difficulty with this is that CERIECO is alleging that they did not have its authority to deal with Dentons (or others) on CERIECO's behalf.

[44] Yu and Chen were not directors, officers or employees of CERIECO but they did have advisory roles. The alternative theory of liability of the Yu and Chen Third Parties is predicated on the possibility that CERIECO may successfully establish (as it asserts in its Reply in the main action) that Yu and Chen were not its fully authorized agents with authority to make and implement decisions on CERIECO's behalf in all respects and were not in regular communication with Wang or authorized to receive advice and transmit instructions on CERIECO's behalf. CERIECO also denies that the subordination of its security to Meritz was discussed in the telephone call that took place on the eve of closing the Meritz financing, but does not deny that Yu and Chen were on the call.

[45] These are examples of CERIECO "distancing" itself from the Yu and Chen Third Parties (see Macchi C.A., at paras. 2-3). If CERIECO succeeds in distancing itself from the actions of Yu and Chen so as to avoid being held contributorily responsible for their actions, then Dentons seeks to hold the Yu and Chen Third Parties jointly and severally liable as joint tortfeasors who contributed to the same losses CERIECO claims from Dentons.

[46] It cannot be said based on the pleadings as they stand that the negligence or breaches of duty of Yu and Chen will necessarily be imputed to CERIECO. Put another way, it cannot be said the pleadings and alleged facts do not give rise to the possibility of a claim for which the plaintiff might not be responsible: see Federal Pioneer Ltd. v. Montreal Trust Co. of Canada, 1997 CarswellOnt 865 (Div. Ct.), at para. 3.

[47] The Third Party Claims against the Yu and Chen Defendants cannot be said to have no chance of success based on the first line of Hengeveld cases.

ii. Wang

[48] The pleading against Wang in the Third Party Claim is different than the pleading against the Yu and Chen Third Parties. It alleges that:

[25] Wang represented that he fully understood, agreed with and approved of the transactions as explained by Dentons, Chan, Chen and Yu and that he himself discussed with Meritz, and represented and warranted that he had conferred with CMEC and CERIECO to the extent necessary and had full authority to approve the transactions on behalf of CMEC, CERIECO and the plaintiff.

[26] If, as the plaintiff alleges, CMEC and CERIECO were required to but did not authorize the transactions of which the plaintiff complains in the main action, the resulting damages were caused or contributed to in whole or in part by Wang's negligence. [listed particulars at paras. 26 and 30 in pleading not reproduced]

[27] … If, as the plaintiff alleges, Wang's representations [to Dentons] were inaccurate, his negligence in making them caused or contributed in whole or in part to the damages the plaintiff seeks to recover from Dentons in the main action.

[29] Further, Wang is liable to Dentons for breach of warranty of authority in relation to himself and in relation to the authority [sic] Chan, Chen and Yu.

[31] By reason of the matters set out above, Wang breached the fiduciary obligations he owed the plaintiff as one of its directors and his duties under s. 122 of the Canada Business Corporations Act, RSC 1985, c. C-44, and in doing so caused or contributed in whole or in part to the damages the plaintiff seeks to recover from Dentons in the main action.

[49] The agency relationship between Wang and CERIECO is not directly pleaded, but it is necessarily implied given his role as a director. The true position of directors is that of agents for the company: see Mutual Construction v. Hardwick, 2009 BCSC 117, at paras. 50 and 51.

[50] Unlike Yu and Chen, no party (including either CERIECO or Dentons) has asserted that Wang was acting in any capacity other than as a director of CERIECO. Counsel for CERIECO confirmed during the hearing that its position is that Wang was at all times acting in his capacity as a director of CERIECO and there is no allegation by CERIECO that his acts or omissions were improper or outside the bounds of his role at CERIECO. In other words. there is no misalignment between the positions of Wang and CERIECO. Consistent with this, Wang is CERIECO's proposed discovery witness.

[51] A director acting in that capacity on behalf of a corporation is a quintessential agency relationship, where the principal is bound by the conduct of the agent when the allegations against the individual are in his capacity qua director: see Renegade v. Hees, 1994 CarswellOnt 2249 at paras. 20 and 23.

[52] Further, in such circumstances, Wang's alleged misconduct while acting with the apparent or ostensible authority of CERIECO would be attributable to CERIECO under the indoor management rule codified in s. 18 of the CBCA. Not only has CERIECO not done so, it would be prevented by this rule from disclaiming the actions of Wang based on something other than the outward representations it made to Dentons about his authority.

[53] Based on the current pleadings, taken as true, everything currently alleged against Wang (whether it be negligence for not verifying who was signing documents on CERIECO's behalf and that they had the requisite authority, or that he misrepresented his authority or the authority of others), involved actions he carried out qua director that would necessarily be imputed to CERIECO. On this basis, I find that the Third Party Claim against Wang has no chance of success since it falls squarely under the first line of Hengeveld cases. Wang's motion to strike the Third Party Claim against him is granted.

[54] Dentons counters that, just because CERIECO is not presently alleging that Wang acted outside the scope of his authority, that does not mean that CERIECO will not later make that allegation. It contends that if that occurs and the plaintiff seeks to distance itself from Wang and disclaim that he was CERIECO's agent, Dentons will claim contribution and indemnity in respect of any negligent acts or omissions of Wang that are found to have been carried out outside of his role as a director/agent of CERIECO. However, this alternative scenario is not expressly pleaded, unlike how it is pleaded in paragraph 36 of the Third Party Claim in relation to the Yu and Chen Defendants. Wang maintains that this alternative scenario has not been pleaded, and cannot be, because it is too speculative.

[55] Dentons also argues that because it has alleged that Wang breached his fiduciary obligations to CERIECO, that takes its Third Party Claim against him outside of the agency scenario. They rely on Federal Pioneer, at paras. 3-4, where a crossclaim against a director alleged to have breached his fiduciary duties was allowed to stand. That case does not provide the details of the pleading, but a bald assertion of breach of fiduciary duty that has absolutely no evidentiary foundation will not save the Third Party Claim against Wang from being struck in this case. Further, Federal Pioneer was dealing with a crossclaim so the director was already a party to the action which might have had some influence on the outcome.

[56] Dentons has also pleaded direct claims against Wang for misrepresentations and breach of warranty of authority which are discussed later in this endorsement.

iii. Speculative Pleadings in the Alternative

[57] Speculative pleadings are not an answer to a r. 21 motion to strike. Litigants cannot make bald, injurious assertions that have no foundation. Miguna v. Ontario (Attorney General) (2005), 2005 CanLII 46385 (ON CA), 262 DLR (4th) 222 (C.A.), at para. 18 is instructive on this point:

[18] At the same time, it is appropriate to reiterate at this point the observation of Dickson J. in Operation Dismantle, supra, at p. 455 that “allegations based on assumptions and speculation” need not be taken as true, because it would be improper to do so, as they are incapable of proof. Mr. Miguna must have knowledge of the facts supporting his claims and not merely plead allegations that he believes may or may not be true. Rosenberg J. put it this way, in Region Plaza Inc. v. Hamilton-Wentworth (Regional Municipality) (1990), 1990 CanLII 6761 (ON SC), 12 O.R. (3d) 750 (H.C.J.) at 757:

. . . If the plaintiff does not at the outset have knowledge of the facts that give rise to the conclusions of malice, breach of duty, conspiracy to intentionally injure, etc., then it is inappropriate to make these allegations in the statement of claim. It may be that in the future the plaintiff will determine facts as a result of discovery or in some other way that will support some or all of the allegations. . . [B]ut until the plaintiff has knowledge of some facts on which to base the conclusions alleged in the statement of claim, it is improper to allow these conclusions to be pleaded baldly and without any supporting facts.

[58] This passage is particularly apt in relation to Dentons' position in relation to its Third Party Claim against Wang, which has absolutely no foundation based on the current pleading. It does not, however, overrule the possibility of a non-agency relationship in other circumstances where this has been recognized.

[59] Dentons points to Cardar and Corcoran to support their proposition that a degree of speculation is acceptable where the question of agency cannot clearly be settled on the facts as pled. Specifically, they point to the fact that in both cases the third-party claims were allowed to proceed, not because it was established that the third parties were not agents of the plaintiffs, but because the facts as pled disclosed that they may not have been, or there were circumstances that made it uncertain whether they were: see Corcoran, at p. 35; Cardar, at p. 33-34.

[60] The following quote from Adams at p. 56, further supports the idea that where there is uncertainty in whether the third party was an agent of the plaintiff, the claim should not be struck:

On the other hand, where the pleadings and the alleged facts raise the possibility of a claim against the third party for which the plaintiff may not be responsible, the third party claim should be allowed to stand. [Emphasis Added]

[61] The contingent alternative claims against the Yu and Chen Defendants, dependent upon the agency analysis, are inherently speculative at the pleadings stage. While their allegedly negligent acts or omissions or breaches of duty may be the same whether they were acting as agents of CERIECO or in some other capacity, the material facts that would confirm whether these Third Parties were, or were not, acting as an agent of the plaintiff (or in some other capacity for which the plaintiff bears the responsibility) may not be established until at least the discovery stage. The agency question in the context of this pleading is an ancillary procedural matter that is relevant at this stage to determine whether it is open to bring the Third Party Claim, or only as a defence to the main action. Cardar and Corcoran allow for a certain degree of speculation within the pleading about the possibility that the agency relationship may not be established.

[62] There is a sufficient foundation for the alternative claims in CERIECO's reply (for example when it pleads affirmatively that only Wang, and therefore by necessary implication, not Yu and Chen, had the authority to act on CERIECO's behalf) and in the Third Party Claim against them to raise the possibility that their agency may not be established. These alternative non-agency based claims against the Yu and Chen Third Parties that fall under the second line of Hengeveld cases have an inherent, but acceptable, degree of speculation.

iv. The Escrow Agent

[63] The Third Party Claim against the MG Parties in their capacity as the Escrow Agent begins with reference to the contractual agency relationship between the Escrow Agent and the plaintiff (and others). However, this pleading, reinforced by Dentons' submissions on this motion, makes it clear that Dentons does not rely on the term 'agent' in this context to signify that the MG Third Parties acted as CERIECO's agent, meaning that their breach of duty would reduce CERIECO's recovery.

[64] Rather, Dentons relies upon this contractual relationship to set up a different claim against the Escrow Agent: for breach of its duties as an ad hoc fiduciary. This claim is discussed in the next section of this endorsement dealing with impossible or insufficiently pleaded claims. It is mentioned here only to clarify that, just because the Escrow Agent is an agent, Dentons' Third Party Claim against the Escrow Agent is not predicated upon breaches of the Escrow Agreement per se (a contractual claim that would not, in any event, fall under the Negligence Act in any event).

Third Party Claims Against Other Legal Advisors: Non-Agency Based Claims

[65] Dentons has also claimed contribution and indemnity from two other lawyers who it pleads were lawyers acting for the plaintiff (the Chaitons Third Parties and Liston), and from two other lawyers who were acting for the co-defendants/plaintiffs by crossclaim (the FR Defendants for the Coco Defendants, and the MG Defendants for the Mizrahi Defendants). For purposes of this analysis, references to "plaintiff" or "plaintiffs" includes CERIECO as well as the co-defendants/plaintiffs by crossclaim who have asserted crossclaims against Dentons in the main action.

[66] Dentons pleads that these Third Parties gave negligent advice to their clients, the plaintiffs, or were negligent by their action or inaction, or breached fiduciary or other duties. Dentons alleges that these parties' negligence caused or contributed to the same losses that those plaintiffs are seeking to recover from Dentons, and for which Dentons can, in turn, seek contribution and indemnity under s. 5 of the Negligence Act by its Third Party Claim under r. 29.01(a).

[67] The allegations against these Third Party lawyers are not that they were acting as agents for their clients; the allegations are that they were negligent or breached duties they owed to their clients. For this reason, Dentons argues that it does not matter that CERIECO, the Coco Defendants and the Mizrahi Defendants are not alleging that these other lawyers gave them negligent advice or were negligent or breached fiduciary or other duties. This is because the court only need consider whether there is a "distancing" between the lawyer and client if the starting point is an agency relationship, such as in Davy (reaffirming Macchi, see Hengeveld, at para. 42), to raise the spectre of a possible non-agency scenario. These claims fall within the second line of Hengeveld cases to begin with, so they would not be considered to be ipso facto doomed to fail on the agency theory.

[68] I agree. These Third Party Claims fall within the second category of cases discussed in Hengeveld that, unlike the first category of cases, cannot be said to have no chance of success if the pleading is taken to be true.

[69] If Dentons' claims against these Third Parties are going to be struck, it will not be on the basis of the first line of Hengeveld cases involving agency claims. The determination of whether these alternative Third Party Claims can survive a r. 21 motion is dependent upon the other/additional grounds that the Third Parties have raised in support of their r. 21 motions, with respect to the sufficiency of the pleading or other obstacles that might render the claims against these Third Parties untenable for other reasons (discussed below).

b) Additional Grounds for Striking Third Party Claims

[70] "The bar for striking a pleading is very high". This high standard applies to factual matters, and to questions of law, and mixed fact and law. The facts that are pleaded are treated as true, unless they are manifestly incapable of being proven. Drafting deficiencies are to be accommodated. The purpose of motions to strike is to weed out clearly untenable causes of action that have no chance of success: see PMC York Properties, at paras. 31 and 34.

[71] The Third Parties have raised various other arguments for striking Dentons' Third Party Claim against each of them.

Impossibility of Success for Reasons Other Than the First Line of Cases in Hengeveld

[72] Some of the Third Parties have identified other grounds of impossibility of success of Dentons' claims against them.

i. The Escrow Agent

[73] The Escrow Agent relies upon the contractual terms under which it was appointed, which are incorporated by reference into the Third Party Claim that makes express reference to the Escrow Agreement. The terms for the payment of the accommodation release fee under that contract are not alleged to have been breached. While Dentons asserts that the payments made by the Escrow Agent to Bosco and Mizrahi were not authorized by it, it does not assert that the terms for release of funds under the Escrow Agreement were not satisfied. Further, other provisions of the Escrow agreement expressly stipulate that the Escrow Agent shall have no liability or responsibility for claims relating to the Escrowed Funds. That agreement also contains a provision that the parties are required to indemnify the Escrow Agent except for losses flowing from its gross negligence, which is not alleged.

[74] The Escrow Agent contends that its relationship to CERIECO is inextricably tied to a contract that governs their relationship. Contribution and indemnity under the Negligence Act (for tort claims) is not available for concurrent liability in contract. Escrow agents do not generally owe fiduciary duties, especially where their liability is restricted by the terms of the Escrow Agreement, as in this case: see Loeppky et al v. Taylor Mccaffrey LLP et al (2002), 2023 MBCA 101 at para. 60; Plant Technology International Inc. v. Peter Kiewet Sons Co. (2002), 15 C.P.C. (6th) 84 (Ont. S.C.), at paras. 80-81.

[75] To get around this, Dentons asserts that the Escrow Agent also owed, and breached, a non-contractual ad hoc fiduciary duty to CERIECO and can be held contributorily responsible through that cause of action. It pleads as follows:

[15] MG is liable for Lavallee's negligence and breach of fiduciary duty described below. Dentons relies on s. 61.0.5 of the Law Society Act, RSO 1990, c. L.8.

[52] The plaintiff alleges that the accommodation release fee paid by Coco for the release of the Coco guarantees was paid [by the Escrow Agent] to Chan and Mizrahi, and not received by the plaintiff.

[53] MG acted as escrow agent with respect to the accommodation release fee and Lavallee thereby became an ad hoc fiduciary of the plaintiff, or in the alternative owed the plaintiff a duty of care.

[54] If, as the plaintiff alleges, funds were not paid to it, but rather were paid to Chan and Mizrahi or to others on their behalf, Lavallee and MG breached the fiduciary duty they owed the plaintiff or were negligent in failing to ensure that the accommodation release fee was received by the plaintiff or a party properly authorized by the plaintiff to receive it. They thereby caused or contributed to some or all of the damages Coco seeks to recover in its crossclaim against Dentons, and the damages the plaintiff seeks to recover from Dentons in the main action.

[76] The concept of an ad hoc fiduciary is not novel. However, it cannot arise simply by virtue of someone being appointed Escrow Agent. This seems trite, which might explain why the Court of Appeal decision in 417217 Ontario Inc. v. River Trail Estates Inc., 2024 ONCA 491, was not cited by the parties. Since that case makes this point directly, I have cited it in the interests of completeness:

[52] For an ad hoc fiduciary relationship to arise, the alleged fiduciary must undertake to act in the best interests of the alleged beneficiary; the duty must be owed to a defined person or class of persons who are vulnerable to the fiduciary in the sense the fiduciary has a discretionary power in respect of them; and, the fiduciary’s power may affect the legal or practical interest of the alleged beneficiary: Elder Advocates of Alberta Society v. Alberta, 2011 SCC 24, [2011] 2 S.C.R. 261, at paras. 30, 33, 34.

[53] While River Trail Inc had a contractual duty to 141, the trial judge pointed to no evidence to ground the leap from River Trail Inc owing a contractual duty to 141 to it becoming a fiduciary in respect of 141. On the record, I see no basis for such a finding. Reference alone to the interconnectedness of Mr. Sharma, Mr. Suleman, 141, and the Joint Venture’s various holding companies is insufficient to ground a finding that each separate legal entity could exercise discretionary power over the others and had undertaken to act in the best interests of each and every one of the others.

[77] Material facts supporting the existence of an ad hoc fiduciary duty owed by the Escrow Agent outside of the relationship created and governed by the Escrow Agreement have not been pleaded. The bald assertion of an ad hoc fiduciary relationship is not sufficient to disclose a reasonable cause of action against the Escrow Agent (in that specific capacity). For these reasons, the Third Party Claim against the Escrow Agent is struck. The Third Party Claim against the MG Third Parties, acting as the lawyers for the Mizrahi Defendants (and not as Escrow Agent), is discussed in the next section of this endorsement.

ii. Claims Against Other Lawyers

[78] Dentons' primary defence to the crossclaim by the Coco Defendants is to assert that they relied on the advice of their own lawyers, the FR Third Parties, that Dentons owed the Coco Defendants no duty of care and they did not rely on Dentons' advice. This aspect of Dentons' defence goes to the issues of reliance (duty of care) and causation, more so than to raise a point of contributory negligence against those plaintiffs by crossclaim.

[79] In the Third Party Claim, Dentons asserts that the FR Third Parties were negligent and breached duties to their clients and that caused or contributed to the same loss that the Coco Defendants are claiming Dentons caused them in their crossclaim. For example, the loss of the benefit of the Release if it is found not to have been duly authorized by CERIECO and to be invalid. In other words, it was the FR Third Parties who owed a duty to the Coco Defendants to ensure that they received a duly authorized and valid release.

[80] Dentons' primary defence to the crossclaim by the Mizrahi Defendants is essentially the same, as it relates to their lawyers, the MG Third Parties.

[81] The allegations against these Third Party lawyers arise entirely in their capacity as legal advisors to those plaintiffs by crossclaim, not for acts they undertook as agents for them. These Third Parties are alleged to have given negligent advice and breached duties to those plaintiffs by crossclaim, thereby causing or contributing to their clients' losses.

[39] The plaintiff alleges that it did not authorize the release or purported release of the Coco guarantees and seeks damages and other relief from Dentons with respect to the release of the Coco guarantees.

[40] Perfetto acted for the defendants Jenny Coco, Coco Paving and 12823543 Canada Ltd. (collectively, "Coco") with respect to inter alia the release of the Coco guarantees. Lavallee acted for the defendant Sam Mizrahi and parties related to him with respect to inter alia the release of the Coco guarantees.

[41] The Coco parties have delivered a crossclaim in the main action in which they seek damages of $7.5 million against Dentons on the basis inter alia that Dentons was Coco's fiduciary and that it knowingly misrepresented that the release of the Coco guarantees had been authorized by the plaintiff.

[45] The damages that Coco seeks to recover from Dentons in the crossclaim were caused or contributed to in whole or in part by Perfetto's negligence. The particulars of her negligence include the following [subparagraphs of particulars not included]

[46] In the alternative, other members of Foglers or lawyers employed as associates of the firm, whose identities are known to Foglers but not Dentons, acted for and advised Coco with respect to the release of the Coco guarantees and were negligent in the manner set out above. Foglers is liable for their negligence.

[55] The defendants Sam Mizrahi, Mizrahi Inc. and Sam M Inc. (the "Mizrahi Defendants") have crossclaimed against Dentons and for the purpose of their crossclaim have adopted and relied on the allegations in the plaintiff's statement of claim as they relate to the actions of Dentons. Dentons has denied liability and responded to those allegations as set out in Dentons' defence.

[56] … it is Lavallee and MG, not Dentons, that owed the Mizrahi Defendants a duty of care.

[57] If the Mizrahi Defendants were not adequately advised and their interests were not adequately represented and protected in the transactions at issue, any resulting damages were caused by deficiencies in the advice and conduct of Lavallee and MG, not Dentons.

[58] Accordingly, Dentons is entitled to contribution and indemnity from Lavallee and MG to the extent that their advice and conduct in representing the Mizrahi Defendants fell below the standard of care and such negligence caused or contributed to the damages that the Mizrahi Defendants seek to recover from Dentons in their crossclaim.

[82] The FR Third Parties argue that Dentons cannot allege they breached duties to their clients that the clients are not alleging were breached. They emphasize that their solicitor-client relationship has not been fractured. However, that argument fails to account for the distinction drawn in Macchi (S.C.) between the situation in that case, where the client was unable to distance himself from the actions of his solicitor who was simply acting as a creditor's agent for purposes of registering a security interest), and the situation in Corcoran, where the possibility existed that the client would not be responsible for the negligence alleged by a third party against his solicitor who failed to give proper advice to the client about the terms of an agreement of purchase and sale that may have contributed to the client's loss: see Macchi s.p.a. v. New Solution Extrusion Inc., 2007 CanLII 48653 (ON SC) at paras. 19-23 ("Macchi (S.C.)").

[83] Davy is similarly distinguishable since it involved a defence that the plaintiff failed to mitigate, in which the third party claim against the plaintiff's solicitor was struck because the failure to mitigate, even if due to the negligence of the lawyer, was an obligation that the plaintiff could not avoid by distancing himself from his lawyer's bad advice regarding mitigation.

[84] The nature of the alleged negligence of the FR Third Parties and the MG Third Parties is more akin to the situation in Corcoran. The possibility exists that those Third Parties (the clients) would not be responsible for the negligence and breaches of duty alleged by Dentons against the Third Parties' own lawyers, that those other lawyers failed to do the very things or give their clients advice about the very same matters that form the basis of the plaintiffs' (the other lawyers' clients) claims against Dentons.

[85] This leads into the second argument raised by the FR Third Parties and MG Third Parties, which rests upon the:

[o]bvious mischief [that] arises from allowing one party to sue another party's solicitor. Such claims invade the sanctity of the solicitor- client relationship. The solicitor's loyalty to the client is undermined. Difficult issues regarding solicitor-client privilege are bound to arise in relation to the solicitor's defence.

(Davy, at para. 28).

[86] However, this policy argument raised by the FR Third Parties and the MG Third Parties again fails to account for the qualification in the very next sentence of the Davy case (at para. 28), that: "[t]hese policy reasons cannot prevail in cases like Corcoran where the defendant has a valid legal claim against [sic] solicitor for contribution and indemnity, but in a case such as the present one, the policy coincides with the strict letter of the law."

[87] Dentons' Third Party Claims against the lawyers for the plaintiffs by crossclaim do not come out of the blue. They are grounded in assertions made by those plaintiffs, the other lawyers' clients, against Dentons. It is not surprising, given the nature of the allegations of these other lawyers' clients against Dentons that it would allege that those parties' own lawyers might share some or all of the responsibility for the losses of their own clients.

[88] It was noted that the continuation of the Third Party Claim against the FR Third Parties may present a problem for them continuing to act for the Coco Defendants in defence of this action and the pursuit and defence of crossclaims, because they also must now defend the Third Party Action and they may have diverging interests from their clients about matters such as waiver of privilege and the disclosure of the advice that was sought and received. If that is the case, then it is better that this be addressed now at this early stage of the proceeding.

[89] The Chaitons Third Parties and Liston are alleged by Dentons to have given negligent advice and breached duties owed to CERIECO as its lawyers, thereby causing or contributing to its losses:

[13] Chaitons is liable for Rotenberg's negligence, described below.

[47] In or around July 2019, the plaintiff retained Rotenberg and Chaitons to act for it with respect to the commitment letter referred to at paragraphs 73 and 74 of Dentons' defence. The retainer included drafting a commitment letter satisfactory to Meritz and opining on its enforceability, to facilitate the Meritz senior lender financing transaction.

[50] … If, as the plaintiff alleges, it was ignorant of the deep subordination of its security as part of the Meritz financing, Rotenberg fell below the standard of care in failing to apprise his client of this fact which caused or contributed in whole or in part to the damages the plaintiff seeks to recover from Dentons in the main action.

[51] In the alternative, other members of Chaitons or lawyers employed as associates of the firm, whose identities are known to Chaitons but not Dentons, acted for and advised the plaintiff with respect to the commitment letter referred to above and were negligent in the manner set out above. Chaitons is liable for their negligence.

[59] Beginning in or before May 2021, Liston acted or purported to act on behalf of the plaintiff with respect to the release of the Coco guarantees.

[60] The $7.5 million accommodation release fee paid by or on behalf of Jenny Coco or a related party for the release of the Coco guarantees was released by MG as escrow agent to Linton in trust and paid as follows [particulars of payments omitted, none to CERIECO]:

[62] Liston was aware or ought to have been aware of the need for a valid authorizing resolution and the need for a contemporaneous written authorization and direction signed by all of the directors of the plaintiff if the accommodation release fee was to be disbursed to parties other than the plaintiff. His failure to ensure that these were in place fell below the standard of care and his negligence in this regard caused or contributed to any damages the plaintiff has suffered by reason of its failure to receive the $7.5 million accommodation release fee.

[90] These Third Party lawyers for the plaintiff CERIECO raise similar arguments and policy concerns associated with a third party inserting itself into, and invading the sanctity of, their relationship with their clients or former clients. Their arguments face similar challenges. These particular allegations by Dentons are in relation to their advisory (non-agency) roles and the possibility that exists that the plaintiff may not be held contributorily responsible for their negligent advice that may have contributed to the plaintiff's loss.

[91] The Chaitons Third Parties also have raised an additional impossibility argument predicted on timing and causation. Their retainer to prepare the commitment letter on behalf of CERIECO for the Meritz financing was in July 2019 and pre-dated negotiation and drafting of Meritz financing documents. They contend that they could not have provided negligent advice to CERIECO in July 2019 about documents that were not negotiated, drafted and signed until afterwards, in August 2019. They assert that CERIECO retained other counsel (including Dentons) after the Meritz loan commitment was signed, who advised CERIECO about the risks of this transaction and implications for CERIECO's security. This is alleged to have broken the chain of causation between the Chaitons Third Parties and CERIECO, without which there can be no claim for contribution and indemnity.

[92] This causation argument is said to be based on admitted (pleaded) facts by Dentons: Dentons admits that it was retained in late July or early August 2019 to document the Meritz Financing (Defence, paras. 75 and 79). Dentons also pleads that on August 28, 2019 CERIECO received advice from Bennett Jones LLP regarding the risk; and Bennett Jones LLP, inter alia, opined that CERIECO would subordinate its security to $890 million in security in favour of Meritz. Both of these retainers are subsequent to the July 17, 2019 Commitment Letter and prior to the finalization of the Meritz Financing and the subordination of CERIECO's security (Defence, paras. 85, 86 and 89).

[93] In Crawford-Montaque v. Benjamin, 2017 ONSC 6729, at paras. 20-22, the plaintiff's action against his former lawyer was dismissed on the basis that "the causal connection was broken by the retainer of new counsel", following Nicolardi v. Daley, 2009 CanLII 2918 (ON SCDC), at paras. 11-13. If the Chaiton Third Parties' alleged negligence did not cause any loss to CERIECO, then there can be no claim for contribution and indemnity by Dentons under the Negligence Act.

[94] Dentons' response to this argument is that it is not something that can be determined on a r. 21 pleadings motion. I agree. Whether or not the advice and recommendations of the Chaitons' lawyers regarding the Meritz financing caused or contributed to any of the losses associated with that financing suffered by CERIECO cannot be determined based on the pleadings. Among other things, it might be dependent on the extent to which the retainers and advice of the different lawyers overlapped, were qualified in any way and/or continued to be relied upon. Despite what is in the pleading and can be taken to be true or "admitted", these other aspects of the causation analysis are not addressed in the pleading and this issue cannot be finally decided at this stage without an evidentiary foundation.

[95] Liston relies upon the arguments made by the other lawyers to the extent they apply to him; but none have resulted in the Third Party Claim being struck against the other lawyers and they will not lead to it being struck as against Liston. Liston raised a number of arguments that go to the merits of the claims against him. Primarily, the argument that Liston advanced on his own behalf is that he was not acting as CERIECO's lawyer in respect of the release of the Guarantees and that the assertions made against him are factually incorrect. However, it is not open to the court to consider anything other than what is alleged in the pleading on a r. 21 motion, that must be accepted as true for the purpose of the motion. Given how many lawyers were involved and the various capacities in which they appear to have bene involved, it is not manifestly unreasonable at this stage to accept Dentons' pleading, that Liston was acting as the lawyer for CERIECO as alleged.

[96] Liston also argues that Dentons is impermissibly suing him to gain discovery about his solicitor-client dealings with another defendant to the main action, Bosco: see Galligan v. Angoss, 2019 ONSC 1603, at paras. 27-28. There is no foundation for this assertion.

[97] I am mindful of the challenges that allowing Dentons' claims against the Third Party lawyers will raise for the conduct of these proceedings. However, Dentons is facing a massive claim and was not the only lawyer involved in the matters that the plaintiffs are complaining about. As a matter of policy, Dentons' ability to pursue all available avenues of contribution and indemnity should not be compromised because of the inconvenience and complications that are anticipated in having to navigate privilege and other issues associated with the addition of counsel for other parties.

Unparticularized Claims

[98] The moving parties point to several authorities which stand for the proposition that a claimant cannot allege anything in their statement of claim which they do not know or believe to be true, thereby precluding the possibility of speculation in a pleading: see Miguna, at paras. 18, 22; RWDI Air Inc. v. N-SCI Technologies Inc., 2015 ONCA 817, at para. 14; Cottage Advisors of Canada v. Prince Edward Vacant Land, 2020 ONSC 6445, at para. 22.

[99] The Court of Appeal in Miguna was dealing with bald, speculative pleadings, but also considered (at para. 21) the essential question of whether "[t]he factual assertions gleaned from the statement of claim and outlined above, however – together with certain others not mentioned – if proved, could give rise to the essentials of the causes of action".

[100] This attack on the Third Party Claim in directed to the alleged insufficiency of the material facts and elements of the pleaded direct causes of action (malfeasance) against the Third Parties, for misrepresentation, breach of warranty of authority, as well as to the claims for contribution and indemnity. Dentons maintains that this bar remains low and has been satisfied.

[101] Dentons insists that its Third Party Claim pleads with sufficient specificity all of the material facts and elements of the causes of action against each of the Third Parties, with one exception that it concedes and seeks leave to amend for: Raymond James Ltd., argues that the allegation that it is vicariously liable for Mr. Yu's wrongs is not adequately pleaded because there is no allegation that Mr. Yu was acting in the course of his employment. He was an employee of Raymond James at all material times and virtually all his communications emanated from his employer's email server. If there is any deficiency in the third-party claim in this respect, it is easily remedied with a minor amendment and is not a 'radical defect' of the sort that justifies striking the claim. The same would be true with respect to Mr. Chen's one-person corporation.

i. Negligent Advice By Other Lawyers to the Plaintiff

[102] The claims against the lawyers for other parties also raise specific considerations when it comes to examining the particulars of the alleged negligence. These claims are necessarily at this stage somewhat speculative and general because, until there is disclosure of the advice sought and received, Dentons as a plaintiff outside of the solicitor-client relationship would have no particulars of these allegations. Essentially, the same allegations made against Dentons are made against these other lawyers in relation to the advice that they provided, or did not provide, to their clients who are suing Dentons.

[103] Those lawyers know whether they did, or did not provide advice about the matters that Dentons is being accused of doing, or not doing. I do not consider any further particulars to be required for those other lawyers to defend the Third Party Claim.

ii. Direct Causes of Action Against the Yu and Chen Third Parties

[104] Certain of the Third Parties are alleged to have direct liability to Dentons. For example, Dentons alleges that the Yu and Chen Defendants negligently misrepresented their authority to receive and transmit advice, and to provide instructions and sign documents on behalf of CERIECO. Dentons also pleads breach of warranty of authority against these Third Parties. These are independent causes of action: see Mahendran v. 9660143 Ontario Inc., 2022 ONCA 676, at para. 10 and Attis v Ontario (Minster of Health), 2011 ONCA 675 at para. 18.

[105] Dentons seeks contribution and indemnity from them for contributing to the same loss that CERIECO is seeking to recover from Dentons for Dentons' alleged negligence in not ensuring that those individuals had the requisite authority from CERIECO. It has already been determined that these claims are not doomed to fail on grounds of impossibility. However, they must be properly particularized in order to disclose a reasonable cause of action.

[106] On a preliminary point, Dentons' written submissions made reference to the fact that no demand for particulars was delivered by the moving Third Parties. The moving parties rightly point out that if the Third Party Claim is devoid of essential material facts in support of the pleaded causes of action, the appropriate course was a motion to strike and not a demand for particulars. This was addressed by Perell J. in Pennyfeather v Timminco Limited, 2011 ONSC 4257, at para. 51: "The material facts are to be stated concisely, which is to say that they should be set out with precision and clarity. If a material fact necessary for a cause of action is omitted, the Statement of Claim is bad and the remedy is a motion to strike the pleadings, not a motion for particulars."

[107] The actions of the Third Parties said to give rise to their liability, whether as agents to the plaintiff or as independent tortfeasors, are the same. This part of the analysis is focused on the independent torts. The Yu and Chen Third Parties argue that the Third Party Claim does not plead a representation made by them to Dentons that was false, which is an essential element to both claims for negligent misrepresentation and for breach of warranty of authority.

[108] Dentons alleges they negligently misrepresented they had authority to speak on behalf of CERIECO but provides no particulars of when or to whom such representations were made to Dentons, and provides no link to specific work that Dentons did for CERIECO in reliance upon those representations that is the subject of the main action (e.g. no causation, another essential element of these causes of action, pleaded). Strictly speaking, these material facts and essential elements of the independent torts have not been pleaded.

[109] While maintaining its position that the causes of action in negligent misrepresentation and breach of warranty of authority were sufficiently particularized in the Third Party Claim, Dentons filed a clerk's affidavit attaching a selection of emails said to be examples of the constant communications between Dentons, Yu, Chen and Wang, which Dentons claims are incorporated by reference into the Third Party Claim (in the section dealing with allegations against Wang), at para. 23:

[23] At all material times, Dentons, Chan, Chen and Yu were in on-going communication with Wang concerning the plaintiff's investment in The One, by email, WeChat and other forms of electronic communication, and by telephone and in-person meetings. They explained to Wang all aspects of the transactions of which the plaintiff complains in the main action, including without limitation the subordination of the plaintiff's security to the Meritz and Junior Hana financings described in Dentons' defence.

[110] Under r. 21.01(2)(b), no evidence is admissible on a r. 21.01(1)(b) motion to strike out a pleading. This is because on such a motion, the allegations in the statement of claim are presumed to be accurate, unless they are patently ridiculous or incapable of proof: see PMC York Properties, at para. 31; Nash v. Ontario (1995), 1995 CanLII 2934 (ON CA), 27 OR (3d) 1, at p. 6.

[111] However, the courts have affirmed that where a document or statement is incorporated into a pleading by reference within the meaning of r. 25.06(7), it may be relied on in a r. 21.01(1)(b) motion: see McCreight, at paras. 30-32, citing Montreal Trust Co. of Canada v. Toronto Dominion Bank (1992), 40 C.P.C. (3d) 389 (Ont. S.C.); see also Web Offset Publications Limited v. Vickery (1999), 1999 CanLII 4462 (ON CA), 43 OR (3d) 802 (C.A.) at p. 803. In such cases, the document is admissible because it is not considered evidence, but rather forms part of the pleading in question and therefore must be considered in assessing whether to strike the pleading out.

[112] Incorporation by reference for the purpose of a r. 21 motion is limited to incorporating such documents which form an integral part of the factual matrix of the allegation in the pleading, and excludes those which are merely evidence of those facts: see McCreight, at para. 32; Montreal Trust, at paras. 4-5. Such documents must be specifically referred to and relied on in the pleading in order to be incorporated by reference: see Web Offset, at p. 803; Sauer v. Canada (Attorney General), 2005 CanLII 35783 (ON SC), at para. 7.

[113] Dentons says these emails demonstrate the "advisory" roles played by Yu and Chen (to Wang) and their central role in the August 2019 construction financing transaction – they transmitted the authorizing resolutions. The existence of these emails demonstrates that more could be specified if it is determined that the existing plea is too general (and if the emails themselves are too specific).

[114] The Yu and Chen Defendants (and Wang, although the Third Party Claim is being struck against him for other reasons) object to Dentons' reliance on these emails as particulars of the claims against them, arguing that the reference to the emails in the pleading lacks the requisite level of specificity for incorporation by reference. It is also noted that the selected emails are not, as described, emails between Wang and/or Yu and Chen (although Dentons pleads in its Defence and Counterclaim and the Third Party Claim that it was Wang's practice to send documents he signed to Yu and Chen to forward to Dentons).

[115] The selected emails, (described by Dentons as a miniscule sampling of the thousands of emails) from among many that might be captured by the broad pleading in paragraph 23 of the Third Party Claim, are merely some of the evidence that supports the assertion that there were ongoing communications concerning the plaintiff's investment in The One among Dentons, Chan, Chen and Yu. They cannot all be fairly considered to comprise the factual matrix or essential elements of the causes of action pleaded against the Yu and Chen Third Parties. Accordingly, these select emails are not properly before the court for consideration on the r. 21 motions and I have not taken them into account in the analysis of whether Dentons' claims against the Yu and Chen Third Parties are pleaded with sufficient specificity to survive a r. 21 motion to strike.

[116] Reading the Third Party Claim as a whole, and in the context of the pleadings in the main action, the allegations by Dentons can be fairly read to be that these individuals generally held themselves out to and dealt with Dentons on the premise that they had CERIECO's authority and were its duly authorized representatives. The broad assertion is that Dentons relied upon this in accepting their instructions and the signatures that they provided (for example, in connection with the SCA Agreement and Releases), and in transmitting its advice to CERIECO through them (for example, in relation the Meritz financing).

[117] For reasons indicated earlier, even though the Third Party Claims against the Yu and Chen Third Parties may be generally understood, the pleading does not sufficiently connect the dots about Dentons' reliance upon the authority that they represented and warranted to have, in terms of the specific advice Dentons says it provided to CERIECO through the Yu and Chen Third Parties (that they may be found not to have been authorized to receive and/or to have failed to pass along to CERIECO), and specific instructions that it says it received from them on behalf of CERIECO regarding the SCM Agreement and Release of the Guarantees and the subordination of its security to the Meritz financing that form the basis of CERIECO's claims.

[118] There is the further issue with the Third Party Claim against RJ, arising from Dentons' acknowledged failure to properly plead the essential elements for holding RJ vicariously liable for Yu's conduct. Dentons it concedes that the allegation that RJ is vicariously liable for Mr. Yu's wrongs is not adequately pleaded because there is no allegation that Mr. Yu was acting in the course of his employment/

[119] For reasons discussed in the next section of this endorsement, leave is granted for Dentons to amend its Third Party Claim to provide the missing material facts or constituent elements to the independent (alternative) direct causes of action against the Yu and Chen Third Parties (including but not limited to any that may be discerned from the emails that the court has not admitted into the record on this motion) within 30 days of this endorsement.

[120] The Third Parties raised another argument that they say is dispositive. They argue that Dentons had a professional obligation to "know its client" (CERIECO), and an obligation to have a record of who it was authorized to accept instructions from under Rule 3.2-3 of the Law Society of Ontario's Rules of Professional Conduct (the "LSO Requirements"). The argument made is that this is the only representation of authority that Dentons could reasonably rely upon in providing advice to and accepting instructions and signatures from CERIECO’s representatives. Since it has not pleaded this to apply to the Yu and Chen Third Parties (or Wang, for that matter) it should be presumed that it did not have that authority in writing and that is an essential missing element of these independent torts.

[121] While the LSO requirements may prove to be a relevant fact in the ultimate determination of whether Denton's reliance on the authority of CERIECO's representatives, this is a defence (lack of authority) and is not a basis for striking the Third Party Claim, which pleads that these individuals represented that they did have this authority through their dealings and conduct with Dentons. Even if this rule of professional conduct is the standard, and even if Dentons fell below that standard and did not have a record of everyone who was authorized to instruct on behalf of CERIECO, if they represented that they did have this authority, they may still be found to have contributed to CERIECO's loss. These LSO requirements are not dispositive of the Third Party Claims against the Yu and Chen (or any other) parties at this pleadings stage.

c) Leave to Amend

[122] Insofar as deficiencies have been identified in the Third Party Claim's specificity and articulation of the necessary elements of the pleaded causes of action against the Third Parties leading to it being struck, the usual result would be to grant leave to amend where the defect can be cured. Leave is to be denied only in the clearest of cases: see Asghar v. Toronto Police Service, 2019 ONCA 479, at para. 9; South Holly Holdings Limited v. Toronto-Dominion Bank, 2007 ONCA 456, at para. 6.

[123] Where deficiencies are identified, the court should "always" consider if they can be addressed through an amendment, because "cases should be determined on their merits based on the evidence presented before judges at trial": see PMC York Properties, at para. 31. Generally speaking, leave should only be denied in the clearest of cases, where the plaintiff cannot properly allege further material facts to establish their causes of action: see Miguna, at paras. 18-22; RWDI Air, at para. 14; Filler Depot v. Copart Canada Inc., 2024 ONSC 466, at para. 19.

[124] The Third Parties rely upon TSCC Corporation No. 2123 v. Times Group Principals, 2018 ONSC 4799 (at para. 88) for their contention that:

[88] Leave to amend should be refused where there is no reason to believe that the party’s case could be improved by an amendment. “[I]f it is clear that the plaintiff cannot allege further facts that they know to be true to support the allegations in the pleading, leave to amend will not be granted”: [Miguna v. Ontario, para. 18].

[125] In the few instances (above) where the court has determined that further particulars are needed and leave to amend should be granted, that has been considered and determined on the basis that there is reason to believe that the Third Party Claim can be improved by the amendment.

[126] The Third Parties contend that, since Dentons has not, to date, proposed an Amended Third Party Claim and sought leave to amend it to include the missing essential elements of the baldly asserted causes of action, it should be presumed that they are unable to do so. That logic does not follow. To the contrary, there is a line of authority in this court that considers it to be generally impermissible for a responding party to serve an amended statement of claim in response to a motion to strike as the motion must be decided based on the facts as they existed at the time the motion was served: see Brent Hillier and Maverick Paintball Inc. v. Craig (Sandy) Hutchens et al, 2012 ONSC 5988, at paras. 14-15. The reasoning behind this is that, if the courts were to consider amendments made to statements of claim after a motion to strike was brought, it would invariably prejudice the rights of moving parties: see Rooney et al. v. Woodland Park et al., 2011 ONSC 6758, at para. 12.

[127] This court has recognized that there is an inherent conflict between the general principle that motions should be argued based on the facts as they existed at the time the motion was brought, and r. 26 which allows parties to amend their statements of claim without leave before the close of pleadings: see Vale Canada Limited v. Solway Investment Group Limited et al., 2021 ONSC 7562, at paras. 29-31. After considering (at paras. 16-28) various cases in this area (including Hillier, Family Delicatessen Ltd. v. London (City), 2006 CanLII 5135 (ON CA), at para. 1; Piedra v. Copper Mesa Mining Corporation, 2011 ONCA 191, 332 DLR (4th) 118, at para. 97; and PaineWebber Mortgage Acceptance Corp. (Trustee of) v. Mundi, [2004] O.J. No. 6173), the court in Vale concluded (at paras. 22 and 30-31 and 44) that, while not required, if a party responding to a motion to strike seeks leave to amend their statement of claim, the court may determine the leave motion before the motion to strike.

[128] Dentons did not bring a motion for leave to amend, or ask the court to consider a proposed amended pleading before the r. 21 motions were argued. However, it did ask for leave to amend any aspects of its Third Party Claim found to be deficient, with the benefit of the court's guidance regarding any areas of deficiency. In the instances where the court has found the pleading to be deficient in the sufficiency of the particulars of the claims against the Yu and Chen Third Parties, I have determined that it is appropriate for leave to be granted to Dentons to amend its Third Party Claim against them to remedy these deficiencies.

[129] As Roberts JA stated in PMC York Properties stated (at para. 34): "long gone are the days where proceedings could be terminated at the early pleadings stage on mere technicalities that can be cured by amendment unless it would result in non compensable prejudice to the opposing party or the administration of justice." No such prejudice has been argued or demonstrated in this case and leave should be granted for any necessary amendments to be made to plead, with proper specificity, the causes of action that have been struck.

[130] Conversely, the Third Party Claims against Wang and the Escrow Agent (in that capacity) are not struck on grounds of mere technicality, but rather on grounds that they are deficient in respects that could only be remedied at this time by assertions that would be wholly speculative. Accordingly,

a. The Third Party Claim against Wang is struck and leave to amend is not granted at this time because Dentons would have to rely upon impermissible pure speculation to assert a non-agency based claim against Wang; however if facts come to light that could support a non-agency based claim against him, Dentons' may seek leave to amend its Third Party Claim at that time.

b. The Third Party Claim against the Escrow Agent (in that capacity) is struck and leave to amend is not granted at this time because Dentons would have to rely upon impermissible pure speculation to assert a claim predicated on the existence of an ad hoc fiduciary duty against the Escrow Agent; however, if facts come to light that could support the existence of an ad hoc fiduciary duty owed by the Escrow Agent that is grounded in something more than the Escrow Agreement, Dentons' may seek leave to amend its Third Party Claim at that time.

Summary of Outcome of Rule 21 Motions

[131] The following determinations were made (above):

a. The Third Party Claim against Wang has no chance of success since it falls squarely under the first line of Hengeveld cases. Wang's motion to strike the Third Party Claim against him is granted, without leave to amend at this time.

b. The Third Party Claim against the Escrow Agent has no chance of success having regard to the Escrow Agreement and the lack of any foundation, beyond speculation, for an ad hoc fiduciary duty to exist outside of the Escrow Agreement. The motion to strike the Third Party Claim against the Escrow Agent (in that capacity only) is granted, without leave to amend at this time.

c. Leave to amend the Third Party Claims against the Yu and Chen Third Parties is granted to provide the particulars indicated above. The proposed amended pleading shall be delivered within 30 days and if there remain concerns about the sufficiency of the claims against these Third Parties a case conference may be scheduled before me so that further directions may be provided as deemed appropriate. The court is not inviting, and is unlikely to entertain, another round of motions given the status of these case managed proceedings and the need to move forward with discoveries.

d. The balance of the motions are dismissed.

[132] It is expected that there may be some timetabling implications arising out of this order. These may be addressed at the next scheduled case conference, or at a further case conference to be scheduled before me in the normal course to address any timetabling issues that the parties are unable to resolve or that require adjustments to the court ordered timetable.

Costs

[133] The parties have uploaded their costs outlines into Case Center but have not yet had the opportunity to make any cost submissions. At the conclusion of the hearing, the court was advised that the parties agree that partial indemnity is the appropriate scale of costs. Now that the outcome of these motions is known, the parties shall meet and confer to determine if an agreement can be reached regarding the costs of these motions, failing which a case conference may be arranged for further directions regarding any cost submissions that the parties wish to make.

Kimmel J.

Date: December 13, 2024