Endorsement

Date: 2025-02-25
Court: Superior Court of Justice – Ontario

Re: Natalie Cammalleri, Paul Cammalleri, 2196022 Ontario Inc., and Giuseppe Geraci, Moving Parties
And: Rosanna Saraceno, Respondent

Before: Renu Mandhane Parghi
Counsel:

• Madeleine Dusseault, for the Moving Parties 2196022 Ontario Inc. and Giuseppe Geraci
• Alexandra Heine, for the Moving Parties Natalie Cammalleri and Paul Cammalleri
• Adriana Di Biase, for the Respondent, Rosanna Saraceno

Heard: 2025-01-28

Introduction

[1] This action involves allegations of fraud in connection with a series of mortgage loans taken out by the Plaintiff at the request of her aunt, the Defendant Antonella Moretto. It is alleged that Ms. Moretto told the Plaintiff she needed money, urged the Plaintiff to re-mortgage her home to secure loans for Ms. Moretto’s own benefit, and never paid the Plaintiff back, leading to the Plaintiff defaulting on her mortgage in 2020. The Plaintiff describes the alleged fraud as a conspiracy that involved all of the Defendants, in various roles. She seeks damages and other relief for “breach of contract, negligent and fraudulent misrepresentation, fraud, conspiracy, unjust enrichment, breach of fiduciary duty, negligence and/or breach of duty of good faith”.

[2] The Defendants Natalie Cammalleri, Paul Cammalleri, 2196022 Ontario Inc. (“219”), and Giuseppe Geraci (together, the “Moving Defendants”) bring this motion. Natalie Cammalleri, Paul Cammalleri, and 219 are among the private lenders alleged to have made the mortgage loans to the Plaintiff. Mr. Geraci is an officer and director of 219. The Moving Defendants describe the alleged mortgage fraud as centred around Ms. Moretto. They seek to strike the Statement of Claim under rules 21.01(1)(b) and 25.11 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, without leave to amend, on the basis that it discloses no reasonable cause of action against them and is frivolous, vexatious, and an abuse of process.

[3] For the reasons below, I grant the rule 21.01(1)(b) motion in part. I strike the claims of negligent misrepresentation, fraudulent misrepresentation, fraud, breach of fiduciary duty, and negligence, without leave to amend. I strike the claim against Mr. Geraci personally, with leave to amend. I do not strike the remaining claims. I dismiss the rule 25.11 motion.

Preliminary Issues

Admissibility of Supplemental Motion Materials

[4] An issue arose during the hearing regarding supplemental motion materials that the Plaintiff filed and wished to rely on. The materials consisted of judicial decisions that, in her view, demonstrated that the Plaintiff’s claims are not frivolous or vexatious. The materials were served mere days before the motion hearing and well after facta were filed. They were also served over a year after the deadline had passed for serving motion records.

[5] I allowed counsel for the Plaintiff to make narrow submissions relying on the supplemental motion materials for the purposes of the rule 25.11 branch of her motion only, and advised her that I would rule on their admissibility thereafter. I also heard submissions in reply from the Moving Defendants regarding the materials, during which I learned of the late service of the materials. I advised the parties that I would provide my ruling on the materials in my reasons on the main motion. I do so now.

[6] In my view the supplemental motion materials are improper and inadmissible. They were delivered over a year after a court-ordered deadline. No explanation for this extreme tardiness was provided. Court-imposed timetables are there for a reason and ought not to be departed from so lightly. Furthermore, the materials are not relevant. They do not assist me in evaluating whether the pleadings are proper – an issue that turns on the express language of the pleadings and nothing more. Indeed, this is why rule 21.01(2)(b) precludes the use of evidence on rule 21.01(1)(b) motions. Here, the arguments underlying the rule 21.01(1)(b) and rule 25.11 motions are the same: that the pleading lacks material facts, contains bare allegations, and is frivolous and vexatious as a result. It follows, therefore, that evidence should not be admitted for either motion. Additionally, I have concerns about the materials being prejudicial, as they consist of unproven allegations of wrongdoing advanced by and against some of the Defendants.

[7] I therefore do not admit the Plaintiff’s supplemental motion materials.

Leave to Amend the Original Statement of Claim

[8] An issue also arose during the hearing over an Amended Statement of Claim served by the Plaintiff only a few days before this motion was heard, and well over a year after the motion was brought. The Moving Defendants submitted before me that a pleading that is the subject of a motion to strike may only be amended with leave of the court, that the Plaintiff did not seek leave to amend the pleading, and that the Amended Statement of Claim is therefore improper. Having said that, they framed their submissions before me primarily in relation to the Amended Statement of Claim and were prepared to proceed with the motion on the basis of the Amended Statement of Claim.

[9] After hearing both parties’ submissions, I ruled that the Plaintiff was required to obtain leave to file the Amended Statement of Claim, based on this court’s reasons in Vale Canada Limited v. Solway Investment Group Limited et al., 2021 ONSC 7562. I advised that I would provide additional reasons with my reasons on the main motion. I do so now.

[10] Vale is dispositive of the issue before me. In Vale, the defendants brought motions to strike a claim under r. 21.01(1)(a) and (b), in response to which the plaintiff delivered an amended Statement of Claim that the defendants characterized as a “nullity” because it had been delivered after their motion was brought. Justice Koehnen considered the “potential conflict” between rule 21.01, which allows for a pleading to be struck on the ground that it discloses no reasonable cause of action of defence, and rule 26.02(a), which allows a party to amend its pleading without leave before the close of pleadings unless the amendment involves adding, deleting, or substituting a party.

[11] Koehnen J. concluded that “a party that wishes to amend its claim in the face of a motion to strike should seek leave to do so even if the amendment is sought before the pleadings are closed.” He reasoned (at para. 8; also see paras. 16-53):

It strikes me that this approach is more consistent with: (i) the language of r. 26 when read in the context of the Rules as a whole; (ii) the Ontario Court of Appeal’s jurisprudence touching on this issue; (iii) judicial economy; and (iv) the overall trend to take a pragmatic approach to the interpretation of the Rules so that actions can be determined on their merits sooner rather than later. Although this determination can no doubt be frustrating to a defendant who has based its r. 21 motion on a certain set of assumptions that are then changed at the last minute, such frustration can be addressed through an appropriate costs award including, where appropriate, costs on a full indemnity scale.

[12] The court’s reasons in Vale readily apply here. I therefore find that the Plaintiff was required to seek leave to file the Amended Statement of Claim.

[13] After providing my ruling on this issue, I invited the parties to make submissions on whether such leave should be granted. The Plaintiff made submissions seeking leave to amend. The Moving Defendants took no position. I advised that I would provide my decision on the motion for leave to amend together with my decision on the main motion. I do so now.

[14] Rule 26.01 is explicit that the court “shall grant leave to amend” a pleading unless the amendment would result in prejudice that could not be compensated for by costs or an adjournment.

[15] In my view, the amendment of the original Statement of Claim into the Amended Statement of Claim does not prejudice the Moving Defendants in a way that is not compensable by a costs award. For example, there is no prejudice to them in the form of any foregone limitation period defence, examination for discovery, or documentary discovery. Additionally, the mortgages at issue are still registered against the Plaintiff’s property.

[16] That said, the Moving Defendants originally conceived of, and advanced, this motion based on the original pleading, not the amended version served on them by the Plaintiff late in the day. The Moving Defendants did, to their credit, “pivot” so that they could address the amended pleading in oral argument. Indeed, the amended version formed the focus of their submissions. Yet it is certainly unfair that they had to deal with a moving target for the purposes of this motion. In my view, this prejudice can and should be compensated by way of a costs award.

[17] For these reasons, and recognizing the mandatory language of rule 26.01, I grant leave to amend the original Statement of Claim into the Amended Statement of Claim delivered by the Plaintiff shortly before the hearing (the “Claim”). The Claim accordingly forms the focus of my reasons below.

The Amended Statement of Claim

[18] The causes of action advanced in the Claim are breach of contract, negligent and fraudulent misrepresentation, fraud, conspiracy, unjust enrichment, breach of fiduciary duty, negligence and/or breach of duty of good faith.

[19] The facts pleaded in the Claim may be summarized as follows:

a. In 2016, Ms. Moretto asked the Plaintiff for a loan, proposing to pay her back within a very short time and suggesting that the Plaintiff take a loan secured against the equity in her property.

b. To facilitate this, Ms. Moretto introduced the Plaintiff to the Jane Doe Defendant, “Sabine,” who represented that she was a mortgage broker with the Defendant Diamond Financial Services (“Diamond Financial”), that the fastest way to help Ms. Moretto was to take out a private second mortgage against the Plaintiff’s property, and that the Plaintiff would need to sign the loan documents to obtain the loan funds for Ms. Moretto.

c. Ms. Moretto and Sabine made various misrepresentations to the Plaintiff, including that Ms. Moretto was having significant financial problems due to bad investments, needed the Plaintiff’s help to obtain a loan, needed to secure her loan against the Plaintiff’s home, would be fully liable to repay any such loan, would provide a promissory note to this effect, and would pay back any mortgages registered against the Plaintiff’s property within a year.

d. The Plaintiff relied on the misrepresentations to take out a series of purported loans secured against her property. Loans were purportedly made by the Defendant Didi Cammalleri and the Moving Defendant Natalie Cammalleri in 2016 and 2017, by the Moving Defendants Paul Cammalleri and Natalie Cammalleri in 2018, and by the Moving Defendant 219 in 2018. The specifics of the various mortgage agreements are described, including the principal amount of each mortgage, its interest rate, and its maturation date, and the specifics of each underlying loan arrangement including the loan amount, lender names, and information regarding the registration or discharge of mortgages pursuant to the loan.

e. Ms. Moretto and the other Defendants know each other and knew or ought to have known that the Plaintiff was unsophisticated and vulnerable to Ms. Moretto.

f. The Plaintiff picked up a cheque for the amount of the first loan, was instructed to give the funds immediately to Ms. Moretto, and did so by depositing the cheque and immediately taking out a bank draft to pay the funds to Ms. Moretto.

g. The Plaintiff did not receive any funds, cheques, or other payment for the remaining three loans, did not receive and/or benefit from any of the funds advanced, and did not receive any consideration from any of the mortgages registered against her property.

h. In fact, the purportedly advanced funds were “recycled” or paid back amongst the Defendants, such that no money was actually advanced or due and owing pursuant to the mortgages, with the intention that Ms. Moretto would then default on the loans and the Defendants would demand payment from the Plaintiff and enforce the mortgages against her property.

i. In accordance with this “scheme,” and in breach of her agreement with the Plaintiff, Ms. Moretto did not repay the loans, resulting in mortgage default and the Plaintiff receiving a Notice of Sale in respect of the property.

[20] The Claim goes on to address the various causes of action, remedies sought, and damages claimed, including the depletion of the full equity of the Plaintiff’s property, the actual and anticipated demands for repayment of the loans, the risk of the Plaintiff’s property being sold pursuant to power of sale, and harm to the Plaintiff’s credit rating.

The Rule 21.01(1)(b) Motion

The Law

[21] In a motion to strike under rule 21.01(1)(b), the test is whether, reading the Statement of Claim generously, and assuming that the facts in it can be proved, it is plain and obvious that there is no reasonable prospect that the action can succeed (Frank v. Legate, 2015 ONCA 631, at para. 36; Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at p. 980).

[22] The facts pleaded in the Statement of Claim “are the firm basis upon which the possibility of success of the claim must be evaluated” under rule 21.01(1)(b); a party must plead all the facts that it must prove to establish a cause of action (Floryan v. Luke et al., 2023 ONSC 5108, at para. 8).

[23] All allegations of fact pleaded are generally assumed to be true for the purposes of this analysis. However, this principle does not apply if the pleaded factual allegations are patently ridiculous or manifestly incapable of proof (R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, at paras. 21-22). Nor does it apply to bald conclusory statements of fact unsupported by material facts (Castrillo v. Workplace Safety and Insurance Board, 2017 ONCA 121, at para. 15; Trillium Power Wind Corporation v. Ontario (Natural Resources), 2013 ONCA 683, at para. 31). In this vein, the Court of Appeal has upheld a lower court’s decision to strike a portion of a pleading where “the brief reference to [the] tort in the pleading was so vague that a defendant who read it would have no idea what conduct was being alleged against them” (Frank, at para. 84).

[24] The court is to read the impugned pleading generously to allow for drafting deficiencies and the plaintiff's lack of access to key documents and discovery information (Transamerica Life Canada Inc. v. ING Canada Inc., at para. 38; Rausch v. Pickering (City), 2013 ONCA 740, at para. 34).

The Breach of Duty of Good Faith and Breach of Contract Claims

[25] The Claim alleges that the Defendants had an obligation to act in good faith in their dealings with the Plaintiff with respect to the registration of the mortgages. As a result of the “scheme” they carried out and the misrepresentations made to her, each of the Defendants breached this duty of good faith and breached their contractual obligations to her arising from the mortgages, including by never truly advancing the funds to register the mortgages, and/or by the advance being repaid to them through the recycling of funds.

[26] The Moving Defendants assert that a breach of contract claim is improper because it fails to plead the necessary elements of such a claim: the relevant terms of any contract, the terms that were allegedly breached, and the conduct giving rise to the breach (Nanra v. NRI Legal Services, 2017 ONSC 4503, at para. 19).

[27] I do not agree. In my view, these elements of the breach of contract claim are pleaded.

[28] The Claim identifies all the relevant terms of the loan and mortgage agreements and discusses each mortgage agreement and underlying loan arrangement with some granularity, as discussed above. The relevant terms pleaded include the amounts being loaned by the Moving Defendants to the Plaintiff, that the loans were being secured through a charge on her property, the amount of that charge, and that the funds were being received for Ms. Moretto.

[29] The conduct giving rise to the breach is pleaded. The Claim alleges that the Defendants breached their contractual obligations to the Plaintiff by never actually advancing the loans and/or receiving repayment of the loans they advanced. It is pleaded in respect of various mortgages that the Plaintiff “did not receive any funds, cheque and/or other payment evidencing the purported advance of any monies”. The alleged “scheme” that enabled this alleged breach is also pleaded in some detail, as discussed below.

[30] The description of the alleged breach makes clear what terms of the agreements are alleged to have been breached: the terms regarding the advancement and repayment of the funds. This is not made express in the Claim, but is manifestly clear when the Claim is read as a whole.

[31] The breach of contract claim is therefore adequately pleaded.

[32] The Moving Defendants assert that the Claim fails to specify which good faith doctrinal duty was allegedly breached by the Defendants. They submit that if it is alleged that the duty of good faith and honesty in contractual performance was breached, the Claim must identify the manner in which those terms were breached, the contractual terms breached, and the damages that flow from the breach (Tribute (Cogan) Limited v. Township of Adjala-Tosorontio, 2021 ONSC 4746, at para. 13).

[33] I agree that the Claim does not expressly invoke the good faith duty of honesty. It would be preferable if it did. However, when the Claim is read as a whole and construed liberally, as it must be for the purposes of this motion, it is clear that the allegation of breach of duty of good faith relates to the duty of honesty in contractual performance. The Claim alleges that the Moving Defendants breached their duty of good faith through the “scheme” they carried out and the misrepresentations made to the Plaintiff. Accepting the allegations of a “scheme” as true, as I must for the purposes of this motion, it is clear that the alleged “scheme” involved dishonesty on the part of the Moving Defendants, who did not actually advance the funds to register the mortgages (a dishonest act) and/or received repayment of the advanced funds via the recycling of funds (a dishonest act). As such, the duty of good faith pleaded to have been breached is duty of honesty.

[34] The other required elements – the manner in which the terms of the mortgage agreements were allegedly breached, the contractual terms alleged to have been breached, and the damages alleged to flow from the breach – are all pleaded, as discussed above.

The Negligent Misrepresentation, Fraudulent Misrepresentation, and Fraud Claims

[35] The Claim asserts that Sabina and Ms. Moretto made misrepresentations to the Plaintiff negligently, fraudulently, and intentionally, with the intent to induce her to grant the mortgages to obtain the funds sought by Ms. Moretto. The misrepresentations were made with the knowledge and acquiescence of all the Defendants, who worked together and knew the misrepresentations were false and would induce the Plaintiff to grant the mortgages, to her detriment.

[36] Claims of fraud and fraudulent misrepresentation require the defendant to have made a false representation of fact to the plaintiff (Paulus v. Fleury, 2018 ONCA 1072, at paras. 8-9). Claims of negligent misrepresentation require the defendant to have made a representation that is untrue, inaccurate, or misleading (Queen v. Cognos Inc., [1993] 1 SCR 87, at p. 110).

[37] The Claim does not allege any such false, untrue, inaccurate, or misleading representations by any of the Moving Defendants. To the contrary, the only alleged misrepresentations are said to have been made by the Defendants Sabine and Ms. Moretto. The Moving Defendants are alleged to have known about, acquiesced to, and benefited from such misrepresentations, but that does not mean that they actually made the misrepresentations, which is what these causes of action require.

[38] The Plaintiff suggests that the Moving Defendants need not have made the misrepresentations themselves for this cause of action to properly be advanced against them. She suggests that once a conspiracy is asserted, as has been here, it is sufficient for another alleged co-conspirator to have made the misrepresentations. No authority is cited to me in support of this proposition. It is clear at law that a conspirator is not vicariously liable for what someone else does: they are liable for having participated and contributed to the conspiracy (Fasteners & Fittings Inc. v. Wang, 2020 ONSC 1649, at para. 156). I therefore do not accept this submission.

[39] The allegations of negligent misrepresentation, fraudulent misrepresentation, and fraud against the Moving Defendants are improper and cannot be remedied. The Moving Defendants are not alleged to have made any misrepresentations of fact, and on the facts do not appear to have made any misrepresentations of fact. These causes of action against them are to be struck.

The Conspiracy Claim

[40] The Claim pleads that the Defendants knew each other and together “intentionally, maliciously, and recklessly” “devised, conspired, and/or agreed to carry out” a “scheme” to wrongfully appropriate funds from the Plaintiff. They “fabricated a story” that Ms. Moretto “needed money so as to misappropriate funds from” the Plaintiff. Through this alleged “scheme,” Ms. Moretto and Sabine made misrepresentations to the Plaintiff for the purpose of securing the mortgages. The other Defendants purported to advance funds to Ms. Moretto, and those “purported advanced funds would be recycled and/or paid back amongst the Defendants, so no money was actually advanced and/or due and owing pursuant to the mortgages”. The mortgages were registered against the Plaintiff’s property, Ms. Moretto would default on them, and the Defendants would then demand payment from the Plaintiff and enforce the mortgages against her property. The Defendants “worked in concert and collectively, with the specific purpose of wrongfully eliciting funds from” the Plaintiff “for their own personal benefit and to the detriment and harm of” the Plaintiff.

[41] A pleading of conspiracy must specify the following: (a) who the parties are and their relationship with one another; (b) the agreement between the defendants to conspire and the purpose or object of that agreement; (c) the overt acts done by the conspirators in furtherance of the conspiracy, which should be “described with clarity and precision” “so that each defendant can know” what they are alleged to have done as part of the conspiracy”; and (d) the damages occasioned as a result of the conspiracy (Fasteners & Fittings Inc., at para. 156).

[42] The Moving Defendants assert that the Claim does not plead the contents of the alleged agreement between the Defendants; when the alleged agreement was formed, between whom, and what was agreed upon; the means that the Moving Defendants used to injure the Plaintiff; and the specific acts the Moving Defendants are alleged to have carried out in furtherance of the alleged conspiracy. Relatedly, they submit that it fails to plead the unlawful conduct at the root of the conspiracy, because even if the Defendants recycled the funds among one another, that does not disclose unlawful conduct.

[43] I am unable to agree. The contents of the agreement – that is, the substance of the “scheme” allegedly agreed to – are described in some detail in the Claim. The parties to that alleged “scheme” are identified. The specific acts the Moving Defendants are alleged to have taken in furtherance of the conspiracy are pleaded. The Claim describes the actions of the Moving Defendants, all of whom were private mortgage lenders (or, in the case of Mr. Geraci, the directing mind of a lender corporation), including that they allegedly did not advance funds they purported to advance, or did receive loan repayments that they claimed not to have received. Additionally, it identifies which specific loans the individual Moving Defendants advanced or purportedly advanced to the Plaintiff and provides information about those loans. In my view, this is sufficient.

[44] While the Claim does not expressly plead a date or time frame when the alleged agreement was formed, that is not in fact a requirement for a proper pleading, based on the case law. In any event, the Claim clearly conveys that Ms. Moretto approached the Plaintiff in August 2016, and the first of the loans was arranged in September 2016. Presumably, the alleged agreement among the Defendants was entered into sometime before then. In my view, this provides sufficient particularity as to the time frame.

[45] I am unable to agree that no unlawful conduct has been disclosed by the Claim. The Claim alleges that by recycling the funds with one another, the Defendants received repayment of the funds they advanced, but nonetheless claimed not to have received such repayment. In other words, they fraudulently claimed they were not repaid the funds, and sought to enforce the mortgages and commence power of sale proceedings on that basis. This is the unlawful conduct disclosed by the Claim: not simply that they recycled money among one another, but that they did so to conceal that they had in fact been repaid the loans.

The Unjust Enrichment Claim

[46] The Claim asserts that the Plaintiff received no funds or consideration from the mortgages, and that the Defendants knew this and nonetheless worked together to carry out the “scheme” and register the mortgages against the Plaintiff’s title. They were accordingly unjustly enriched to the corresponding detriment of the Plaintiff. The money purportedly advanced for the mortgages was either never truly advanced and/or any purported advance was repaid to the mortgagees through the recycling of funds. There is no juristic reason for this enrichment and deprivation.

[47] The Moving Defendants state that the allegation of unjust enrichment is deficient because it does not specify how the Moving Defendants have been enriched.

[48] I do not agree. The Claim asserts that the Moving Defendants were enriched by purporting to loan money to the Plaintiff without actually doing so, and/or asserting that they were not paid back for the loans when they were in fact paid back for them, and then seeking to enforce payment of the loans by enforcing the mortgages against the Plaintiff. This is clear from the Claim read as a whole, and particularly from the portions of the Claim detailing the alleged “scheme” and the alleged wrongdoing with respect to the loans. Indeed, the Plaintiff pleads that efforts are now underway to sell her property under power of sale. Enrichment to the Moving Defendants is clearly pleaded.

[49] The Geraci Defendants further allege that the Plaintiff fails to plead why the mortgage agreement does not constitute a juristic reason for the enrichment.

[50] I cannot agree. Read as a whole, the Claim clearly alleges that the Moving Defendants did not comply with the terms of the mortgage agreement and underlying loan arrangement, by not advancing the loans they were supposed to, and/or by claiming those loans were not repaid to them when in fact they were “recycled” among the Defendants and paid back. If the mortgage agreement’s terms were not honoured, they cannot form a juristic reason for the enrichment.

The Breach of Fiduciary Duty and Negligence Claims

[51] The Claim pleads that Sabine had a fiduciary duty to the Plaintiff and knew the Plaintiff relied on the misrepresentations she and Ms. Moretto made to her. Additionally, Sabine and/or Diamond Financial acted as agents for the Defendants in respect of the mortgages, including when the misrepresentations were made to the Plaintiff, and as a consequence the Defendants had a fiduciary relationship with the Plaintiff.

[52] The allegation that Sabine and/or Diamond Financial acted as agents for the Defendants in respect of the mortgages is unexplained and unsupported. It is a bald assertion and inadequately pleaded. Even if this allegation were properly advanced, it would not help the Plaintiff. Whether there was a fiduciary relationship or duty care between the Plaintiff and the Moving Defendants turns on the relationship between them, not on the relationship between Sabine (or Diamond Financial) and them.

[53] In any event, this claim is not tenable as a matter of law. The Moving Defendants are the Plaintiff’s creditors. The relationship between a creditor and debtor is governed by contract and there is no duty of care in connection with the making of the loan (XPG v. Royal Bank, 2017 ONSC 2598, at para. 356, citing Canada Trustco Mortgage Co. v. Pierce, at para. 27 and Baldwin v. Daubney, at paras. 13-14). The relationship between a financial institution lender and its customer borrower has similarly been found to be a “purely commercial relationship” that does not give rise to a fiduciary duty absent some special relationship or exceptional circumstance (Canada Trustco, at para. 27). No such special relationship or exceptional circumstances is argued before me. As such, the relationship between the Plaintiff and the Moving Defendants does not to give rise to a duty of care or fiduciary duty, as a matter of law.

[54] It is therefore plain and obvious that the Plaintiff’s claims in negligence and breach of fiduciary duty against the Moving Defendants cannot be successfully made and should be struck.

The Claim against Giuseppe Geraci Personally

[55] The Moving Defendant Giuseppe Geraci seeks to have the claim against him struck on the basis that it discloses no basis for personal liability against him as the director or officer of the Moving Defendant 219. The Claim makes various allegations against Mr. Geraci, together with the other Defendants. Although certain paragraphs of the Claim address only the “Mortgagee Defendants,” which include 219 but not Mr. Geraci individually, in general the allegations discussed above are made against all the Defendants collectively, including Mr. Geraci.

[56] In Libfeld v. Patica Corporation, 2018 ONSC 3373, this court, observing that the courts “have set a high bar” for piercing the corporate veil to allow actions against individual directors, considered the requirements for pleading claims against corporate representatives. It held that for a corporate officer or employee to be found personally liable for a tort asserted against the company, “there must be a basis for alleging that” they “dominated and directed the company to engage in wrongful conduct, which conduct was a kin to fraud, deceit, dishonesty or want of authority” (at para. 16).

[57] As such, a pleading against a corporate officer or employee must support a finding of such domination and direction by the corporate representative (Libfeld, at para. 16). It can plead that the corporation was used as a sham from the outset, or that the representative acted outside the scope of their duties or contrary to the best interests of the corporation in a manner that harmed the plaintiff, or acted in furtherance of their duties but their acts themselves are tortious (at para. 17). It must plead “specific, identified acts or omissions” by the representative and the facts giving rise to personal liability. A separate claim must be stated against the individual in their personal capacity (at para. 18).

[58] The Claim alleges that Mr. Geraci “is an officer, director, and controlling mind of” 219 and that at all material times he “authorized and directed” 219 “to carry out the wrongful actions of” 219 described in the Claim. In my view, this is adequate to support a finding of domination and direction of 219 by Mr. Geraci.

[59] The Claim further alleges that Mr. Geraci “authorized and directed” 219 to engage in the “scheme” described in the Claim. That alleged “scheme” required 219 to either purport to loan money to the Plaintiff but not actually loan it to her, or claim that it was not paid back for the loan when it in fact was, and to then seek to enforce payment of the loan. In my view those actions are “wrongful conduct … a kin to fraud, deceit, dishonesty or want of authority.”

[60] The suggestion appears to be that the dishonest nature of these alleged actions places them outside the scope of Mr. Geraci’s corporate duties. It is difficult to see how one could construe such dishonest actions as being consistent with his duties to 219. To the extent that these dishonest acts were purportedly carried out in furtherance of his duties to the corporation, they are tortious acts, carried out in furtherance of a pleaded conspiracy. Thus, Mr. Geraci’s alleged actions were either outside the scope of his corporate duties or tortious acts, either of which would support the claim of personal liability against him.

[61] However, this is not pleaded expressly. It should be. Mr. Geraci should be able to readily identify the basis on which his acts are alleged to have fallen outside the scope of his duties. As currently drafted, the Amended Statement of Defence does not enable him to do so.

[62] Additionally, the Claim does not expressly articulate a separate claim against Mr. Geraci in his personal capacity outside of its introductory language. It should. It makes a generally worded allegation that he directed 219’s acts and is therefore personally liable for them. It then describes those acts and the alleged “scheme”. However, having described the alleged “scheme” and the various causes of action against the Defendants collectively to which it gives rise, the Claim does not return to the issue of Mr. Geraci and further explain the claim against him personally, against the backdrop of the now-articulated allegations against 219 and the other Defendants. As a consequence, the claim requires Mr. Geraci to thread together various strands of the Claim to try to appreciate the claim against him. The claim against Mr. Geraci personally is therefore struck.

Whether the Deficiencies Should be Struck or Leave to Amend Granted

[63] Having identified these deficiencies in the Claim, I must now consider whether, once those pleadings are struck, leave to amend them should be granted.

[64] The jurisprudence is clear that pleadings “should not lightly be struck without leave to amend” and that such leave “should only be denied in the clearest of cases when it is plain and obvious that no tenable cause of action exists on the alleged facts and there is no reason to expect that” amending the pleading can cure its deficiencies (Burns v. RBC Life Insurance Co., 2019 ONSC 6977, at para. 21). Whether the defendant would be prejudiced is a factor to be considered when deciding whether to grant leave to amend a pleading (South Holly Holdings Limited v. The Toronto-Dominion Bank, 2007 ONCA 456, at para. 6).

[65] On the alleged facts, it is plain and obvious that no tenable causes of action of negligent or fraudulent misrepresentation or fraud exist against the Moving Defendants. The Moving Defendants are not pleaded to have made any negligent or fraudulent misrepresentations to the Plaintiff. The only misrepresentations referred to in the Claim were allegedly made by other Defendants, not the Moving Defendants. A claim of negligent misrepresentation is rooted in an alleged misrepresentation. So is a claim of civil fraud or fraudulent misrepresentation. There is no such misrepresentation here. As such, it is plain and obvious that no cause of action for negligent or fraudulent misrepresentation exists. There is no amendment that could be made to the Claim that would save it. These claims are therefore appropriately struck without leave to amend.

[66] It is similarly plain and obvious that there is no tenable cause of action of breach of fiduciary duty or negligence. The Moving Defendants owed no duty of care or fiduciary duty to the Plaintiff, as a matter of law. They cannot be found to have breached duties they did not have. This, too, is not a deficiency that can be cured through amendment.

[67] By contrast, it is not plain and obvious that, on the alleged facts, there is no tenable cause of action for personal liability on the part of Mr. Geraci. The Claim does articulate the basis for such a claim against him, although it does so too obliquely. I am therefore of the view that amending the pleading of the claim against Mr. Geraci personally could cure its deficiencies. If the Claim were amended so as to expressly and clearly identify the basis on which Mr. Geraci’s acts are alleged to have fallen outside the scope of his duties as a director, and to set forth a separate claim against him personally after pleading the alleged “scheme” and the role of the various Defendants in it, this would, in my view, cure the deficiencies discussed above.

[68] I am also of the view that no prejudice would result to the Moving Defendants if amendments to the Claim were permitted. The Moving Defendants claim no such prejudice and there is no evidence before me of such prejudice.

[69] The Moving Defendants submit that the Plaintiff has already had two “kicks at the can” to deliver a proper pleading, and should not be afforded another one. While the Plaintiff has already had two opportunities to regularize the pleading, in my view, in the totality of the circumstances, it is appropriate to allow her another such opportunity. The deficiency in the pleading of personal liability against Mr. Geraci is not fatal or even serious. It is simply that, while the Claim contains the required elements, they are scattered and implied throughout the document. The Plaintiff needs to make clearer and more explicit what is already there. In these circumstances, it is not plain and obvious that there is no tenable cause of action. There is a strong presumption in favour of allowing amendments except where the “plain and obvious” threshold is met. I therefore find that amendment is appropriate.

The Rule 25.11 Motion

[70] The rule 25.11 motion is substantively identical to the rule 21.01(1)(b) motion to strike. It is predicated on the position that the Claim is devoid of material facts and is therefore frivolous, vexatious, and scandalous.

[71] For the reasons discussed above, I do not agree that the Claim is devoid of material facts. To the contrary, it adequately pleads several causes of action and provides detail on the alleged “scheme” that lies at the root of the various causes of action.

[72] Natalie Cammalleri and Paul Cammalleri further assert that the Claim will prejudice the fair trial of the action within the meaning of rule 25.11(a) because the Plaintiff “is employing a ‘shot gun’ approach to naming defendants in a lawsuit,” which will complicate the litigation and “make it impossible” for them to know the case to meet. This argument was not advanced in oral argument. In any event, it lacks merit. The Moving Defendants were all lenders of the mortgages at issue, or, in the case of Mr. Geraci, the directing mind of the corporate mortgage lender. They are all alleged to have participated in and benefited from the alleged conspiracy. I fail to see how naming them amounts to a “shot gun” approach. Nor can I accept the claim that these defendants do not know the case to meet given that the pleading is adequate in most respects.

Order Granted

[73] On the rule 21.01(1)(b) motion, I make the following order:

a. The claims of negligent misrepresentation, fraudulent misrepresentation, breach of fiduciary duty, fraud, and negligence as against the Moving Defendants are struck without leave to amend; and

b. The claim against Mr. Geraci personally is struck, with leave to amend.

[74] I dismiss the rule 25.11 motion.

[75] The parties are to attempt to work out the issue of costs together, bearing in mind my comments in paragraph 16 of this Endorsement. If the parties are not able to agree on costs by March 24, 2025, they may advise me through my judicial assistant, and I will provide a timetable for written costs submissions.

Renu Mandhane Parghi
Date: February 25, 2025