COURT FILE NO.: CV-22-00689774 -00A1 DATE: 20250307 SUPERIOR COURT OF JUSTICE - ONTARIO RE: MICHAEL WEKERLE, WEKERLOO DEVELOPMENTS INC., WATERLOO INNOVATION NETWORK INC., WATERLOO INNOVATION NETWORK 1 INC., WATERLOO INNOVATION NETWORK 2 INC., WATERLOO INNOVATION NETWORK 3 INC., WATERLOO INNOVATION NETWORK 385 INC., WATERLOO INNOVATION NETWORK 405 INC., WATERLOO INNOVATION NETWORK 450 INC. and WATERLOO INNOVATION NETWORK 460 INC. Plaintiffs AND: MARK ALLAN ARBOUR, WATERLOO INNOVATION NETWORK PM INC., JEFF MCQUITTY, 2427204 ONTARIO LTD., TAMMY MARIE ARBOUR AKA TAMMY MONA LISA ARBOUR, TYSON JAMES COMTOIS-ARBOUR AKA TYSON ARBOUR, AVRIL MARIE LAVALLEE, MCCARTER GRESPAN BEYNON WEIR PC, CHRIS KOTSEFF, CBRE LIMITED, JONES LANG LASALLE REAL ESTATE SERVICES, INC., COREY JOHN DELANEY, JOHN DOE, JANE DOE, ABC CORPORATION, and XYZ CORPORATION Defendants AND : PRICEWATERHOUSECOOPERS LLP and COREY POECHMAN Third Parties BEFORE: L. Brownstone J. COUNSEL: Paul H. Starkman and Calvin Zhang , for the Defendants Mark Allen Arbour, Waterloo Innovation Network PM Inc., Tammy Marie Arbour, Tyson James Comtois-Arbour, 2427204 Ontario Ltd. ) (responding parties) Lucas E. Lung and Maya Kotob, for the Third Party PricewaterhouseCoopers LLP (moving party) Jason Woycheshyn and Manon Landry , for the Third Party Corey Poechman HEARD: February 13, 2025 ENDORSEMENT [ 1 ] This motion to strike arises in the context of four proceedings that I am case managing. The action bearing court file number CV-22-00689774 is commonly referred to by the parties as “the main action” or “the fraud action”. Several of the defendants in that action [1] , referred to collectively here as “the Arbour defendants”, recently issued a third-party claim against PricewaterhouseCoopers and Mr. Poechman. The Arbour defendants’ third-party claim seeks contribution and indemnity from the third parties for any amounts for which the Arbour defendants are found liable to the plaintiffs in the main action. I refer to the plaintiffs as the plaintiffs or the Wekerle group. [ 2 ] The third parties, PwC and Mr. Poechman, move to strike the claim against them on the basis that it discloses no reasonable cause of action. The third parties also argue that the claim is so devoid of material facts that it is fatally deficient and ought to be struck. They argue that the claim’s deficiencies are fundamental and cannot be cured by amendments. Therefore, leave to amend should not be granted. [ 3 ] The Arbour defendants argue that amendments are not required, but, in the alternative, they should be granted leave to amend if the pleadings are struck. [ 4 ] To understand the arguments, the underlying action must be reviewed. The Main Action The amended statement of claim [ 5 ] The statement of claim was issued on November 4, 2022, and amended on May 17, 2024. The amended claim is extensive. What follows is a bare overview of its contents, particularly as they relate to the Arbour defendants. [ 6 ] The allegations in the claim arise from a business relationship between Mr. Wekerle and Mr. Arbour. In brief, in about 2014, Mr. Wekerle began to purchase some of BlackBerry’s real estate in Waterloo, Ontario. Mr. Wekerle incorporated separate holding companies for the purchase of each property (the various Waterloo Innovation Network Inc. (or WIN) plaintiffs, referred to as the WIN Holdcos). Wekerloo Developments Inc. is an investment holding company and the parent company of the WIN Holdcos. [ 7 ] Mr. Wekerle also incorporated the defendant WIN PM as the property management entity for the properties purchased by each WIN Holdco. [ 8 ] Mr. Wekerle met Mr. Arbour and hired him initially as a property manager for the Holdcos’s properties. Over time, Mr. Arbour’s responsibilities increased. Mr. Wekerle made Mr. Arbour a signing officer for the WIN Holdcos and WIN PM, and Chief Operating Officer of Wekerloo. [ 9 ] In 2019, Mr. Wekerle transferred the shares of WIN PM to Mr. Arbour. Mr. Wekerle claims that the transfer was temporary, and that he remained the beneficial owner of WIN PM. Mr. Arbour disagrees. [ 10 ] The claim alleges that several years after the WIN PM share transfer, Mr. Wekerle hired Deloitte to obtain some financial information from Mr. Arbour about WIN PM and the WIN Holdcos. Mr. Arbour, according to the claim, was not very responsive and resigned abruptly shortly thereafter. The claim alleges that Mr. Wekerle then discovered that the Arbour defendants had perpetrated a significant fraud against the Wekerle group. The claim alleges, among other things, that Mr. Arbour unlawfully sold assets, misappropriated funds, received secret commissions, and gave himself and others unauthorized bonuses, diverting millions of dollars from the Wekerle group for the personal benefit of the Arbour defendants. [ 11 ] The amended claim seeks damages in the amount of $15 million and other relief for fraud, conspiracy, conversion, breach of trust, breach of contract and unjust enrichment. In addition to the Arbour defendants, the plaintiffs claim against some legal and real estate professionals. [ 12 ] Additionally, one of the defendants in the main action is Corey Delaney. Mr. Delaney is a chartered professional accountant. The claim alleges Mr. Delaney was engaged to provide financial and accounting advice to WIN PM and the WIN Holdcos. The claim alleges that “Delaney's failure to identify and investigate various badges of fraud resulted in the issuance of materially misleading financial statements.” The plaintiffs sue Mr. Delaney for breach of contract, negligent misrepresentation, and negligence. The plaintiffs allege Mr. Delaney breached his duty of care to the Wekerle Group, and that “he knew or ought to have known it was reasonably foreseeable that a breach of Delaney's duties of care would result in injury to the Wekerle Group.” [ 13 ] The claim alleges that “[y]et more [of Arbour’s frauds] were carried out in coordination with the McCarter Grespan Defendants, the Broker Defendants, and Delaney.” The crossclaims [ 14 ] Mr. Delaney defended the action in a statement of defence and crossclaim dated November 21, 2022. That pleading states that Mr. Delaney “assisted WIN PM on a part-time basis in maintaining rent rolls, providing revenue forecasting and financial reporting, and assisted in carrying out due diligence for possible new properties. He was not responsible for any bookkeeping duties.” Mr. Delaney identifies Mr. Poechman as the controller of WIN PM and the WIN Holdcos from 2019 to June 30, 2022. Mr. Delaney pleads that he relied on the accuracy of the bookkeeping and financial records prepared by others, and on the accuracy of the financial statements provided by PwC. [ 15 ] Mr. Delaney crossclaims against Mr. Arbour and WIN PM for contribution and indemnity for any amounts for which he is found liable to the plaintiffs. He does not assert third-party claims against PwC, Mr. Poechman, or anyone else he identifies in his pleading as assisting with the bookkeeping and financial records. [ 16 ] The Arbour defendants, in a pleading dated January 19, 2023, defended the claim and crossclaimed against Mr. Delaney (and the other non-Arbour defendants) for contribution and indemnity with respect to any relief obtained by the plaintiffs against them. The third-party claim [ 17 ] On October 30, 2024, the Arbour defendants issued a third-party claim against PwC and Mr. Poechman. The claim seeks contribution and indemnity for any amounts for which the Arbour defendants may be found to be responsible to the plaintiff in the main action. [ 18 ] The third-party claim is not lengthy. For ease of reference, I set out its salient paragraphs here: 3. The Third Party Plaintiffs repeat and rely on the facts stated in their Statement of Defence and Counterclaim. The Third Party Plaintiffs also rely upon the facts set out in paragraphs 176 to 183 of the Statement of Claim against Delaney to the extent necessary for this Third Party Claim. Third Parties 4. From 2014 to 2022, Delaney and PwC were responsible for preparing financial statements, rent rolls, financial forecasts and financial estimations for Wekerloo, WINPM and Wekerloo's subsidiary corporations in addition to Wekerle's personal tax returns. PwC also prepared and generated invoices for WINPM in relation to work performed for Wekereloo and its subsidiary corporations which invoices were paid by WINPM. 5. Poechman replaced Deanna Guitard and was the controller of WINPM from March 2019 to June 2022. As controller, Poechman prepared QuickBooks accounts for PwC to review and provided tax advice with respect to preparation of WINPM and Wekerloo Financial Statements and Tax Returns, which has a direct impact on the financials and tax obligations of Arbour and WINPM. 6. The administrator login credentials for WINPM's QuickBooks Online Account, were in the power, control and possession of Delaney and Poechman. Poechman was also responsible for HST filings, and monthly payroll source deductions of WINPM, Wekerloo and its subsidiary corporations. 7. From 2014 to January 1, 2019, Wekerloo, WINPM and Wekerloo subsidiary corporations were related corporations and allocations of shareholder loans and other payments were made by the Third Party Defendants. PwC, Poechman and Delaney acknowledged that after January 1, 2019, WINPM, Wekerloo, Wekerloo subsidiary corporations and Wekerle were no longer related parties from a tax point of view. Notwithstanding this knowledge, the Third Party Defendants continued to treat WINPM as a related party and thus continued to make entries in the books and accounts on the basis of related party status for the transfer of funds to and from Wekerle's Shareholders Account, which should not have been made in view of the end of the related party status among the above corporations and persons as of January 1, 2019, when Arbour became the Sole Shareholder and Director of WINPM. 8. After January 1, 2019, Wekerloo, including its subsidiary corporations, Wekerle and WINPM were no longer “related” parties for tax purposes, yet the Third Party Defendants negligently continued to prepare WINPM's Financial Statements and Tax Returns along with the Financial Statements and Tax Returns for Wekerloo and other subsidiary corporations. 9. The Third Party Defendants owed a duty of care to Arbour and WINPM in relation to the preparation of tax returns and financial statements in accordance with tax law and to provide their services in accordance with the standard of care of a reasonably competent tax professional providing such advice and services. The Third Party Defendants breached their duty and standard of care as set out above. 10. In addition, PwC, Delaney and Poechman had an obligation to advise Arbour and WINPM of a conflict of interest which existed in the circumstances when they represented WINPM and Arbour on the one hand and Wekerloo and Wekerloo's subsidiary corporations and Wekerle on the other hand with respect to the same issues. Arbour and WINPM were adverse in interest to Wekerloo, Wekerloo subsidiary corporations, Wekerle and other corporations owned by Wekerle. PwC, Delaney and Poechman owed fiduciary duties with respect to the provision of tax advice to Arbour and WINPM and had conflicting interests by continuing to represent Wekerloo, Wekerloo subsidiary corporations and Wekerle after Arbour purchased the shares on WINPM on or about January 1, 2019. The Third Party Defendants breached their duties by failing to perform their services in accordance with tax law and reasonably competent tax professionals and failing to advise of a conflict of interest that existed at that time. 11. The Third Party Plaintiffs claim contribution and indemnity in respect of the claims made against Arbour and WINPM in relation to provision of tax advice, preparation of financial statements and tax returns, and inaccurate and incomplete entries made in the Books of WINPM and failed to properly address payments made to and from WINPM and Wekerloo in relation to the Parties' Shareholders Account which were the responsibility of Delaney, Poechman and PwC . Liability of Third Parties 12. In the event the Plaintiffs are successful in the main Action, which claims are denied by the Third Party Plaintiffs, such damages were caused and/or contributed to by the negligence and/or breach of contract by the Third Party Defendants as set out above. [ 19 ] That is, the third-party claim alleges the third parties provided the Arbour defendants with negligent advice and services regarding tax and HST filings, source deductions, treatment of shareholder accounts, tax returns, and financial statements not being prepared in accordance with tax law. In addition, the claim alleges that the third parties breached their fiduciary duties to the Arbour defendants by failing to advise the Arbour defendants that there was a conflict of interest since they worked for both the Arbour defendants and the Wekerle group after Arbour’s share purchase of WIN PM in January 2019. Striking a pleading as disclosing no cause of action [ 20 ] To strike a pleading under rule 21.01(1)(b) of the Rules of Civil Procedure , R.R.). 1990, Reg. 194, the moving parties must show that it is plain and obvious that a claim cannot succeed; it must have no reasonable prospect of success: R. v. Imperial Tobacco, 2011 SCC 42 , [2011] 3 SCR 45, at para. 17 . [ 21 ] The facts alleged in the pleading are to be accepted as true unless they are patently ridiculous or incapable of proof: Imperial Tobacco , at para. 22 ; r. 21.01(1)(b). [ 22 ] The bar for the party moving to strike a claim is high. The pleading must be read generously in favour of the claimant. [ 23 ] At the same time, motions to strike are a useful tool in weeding out hopeless claims and promoting litigation efficiency: Imperial Tobacco , at paras. 19-20 . [ 24 ] Claimants must clearly plead the facts. The facts as pleaded are the basis on which the court evaluates the possibility of the claim’s success: Imperial Tobacco at para. 22 . [ 25 ] Here, the claim is only for contribution and indemnity. Presumably, this is because the case was brought within two years of the service of the statement of claim, but not within two years of the underlying actions complained of. The claim does not seek damages for alleged breach of contract, breach of fiduciary duty, or negligence on the part of the third parties to the Arbour defendants. The third-party claim must be analyzed as what it is on its face – a claim for contribution and indemnity. The claim for contribution Governing principles [ 26 ] The law governing contribution among joint tortfeasors was recently reviewed by Centa J. in Mulchan v. Evans , 2022 ONSC 5354 , at paras. 23-28 . [ 27 ] Justice Centa reviewed the three categories of tortfeasors: joint tortfeasors who act together to cause the same damage, several tortfeasors whose separate acts combine to cause the same damage, and several tortfeasors whose acts combine to cause different damage. The first two categories of tortfeasors, whose conduct causes the same damage, are concurrent tortfeasors. [ 28 ] Under the common law, joint tortfeasors (the first category) were jointly and severally liable to a plaintiff who had been harmed, while several concurrent tortfeasors (the second category) were severally liable. There was no right of contribution between several tortfeasors (the second and third categories). [ 29 ] The Negligence Act, (now R.S.O. 1990, c. N.1 ) changed the common law, with the result that all concurrent tortfeasors (the first two categories) are jointly and severally liable to the injured party. Further, the Negligence Act provides for a statutory right of contribution and indemnity for concurrent tortfeasors. There remains no right of contribution among several tortfeasors whose acts caused different damages (the third category). [ 30 ] While the Arbour defendants do not plead the Negligence Act in their third-party claim, their counsel made it clear in submissions that they intend to rely upon the Act in advancing their claim. The relevant provisions of the Negligence Act are the following:
- Where damages have been caused or contributed to by the fault or neglect of two or more persons, the court shall determine the degree in which each of such persons is at fault or negligent, and, where two or more persons are found at fault or negligent, they are jointly and severally liable to the person suffering loss or damage for such fault or negligence, but as between themselves, in the absence of any contract express or implied, each is liable to make contribution and indemnify each other in the degree in which they are respectively found to be at fault or negligent.
- A tortfeasor may recover contribution or indemnity from any other tortfeasor who is, or would if sued have been, liable in respect of the damage to any person suffering damage as a result of a tort by settling with the person suffering such damage, and thereafter commencing or continuing action against such other tortfeasor, in which event the tortfeasor settling the damage shall satisfy the court that the amount of the settlement was reasonable, and in the event that the court finds the amount of the settlement was excessive it may fix the amount at which the claim should have been settled.
- Wherever it appears that a person not already a party to an action is or may be wholly or partly responsible for the damages claimed, such person may be added as a party defendant to the action upon such terms as are considered just or may be made a third party to the action in the manner prescribed by the rules of court for adding third parties. Positions of the parties The third parties [ 31 ] The third parties argue the Arbour defendants’ claim for contribution cannot possibly succeed against them. In order for a claim for contribution to succeed, the person from whom contribution is sought must owe a duty to the plaintiff: Imperial Tobacco at para. 29; Becker v McMurter , 2015 ONSC 4207 , 51 C.L.R. (4th) 161 , at para. 33 . The third-party claim alleges no such duty. Rather, it alleges that the third parties owed a duty of care to the Arbour defendants, not the plaintiffs. This cannot ground a claim for contribution. The Arbour defendants [ 32 ] The Arbour defendants disagree that in order to sustain a claim for contribution, the third parties must owe a duty to the plaintiff. They rely on case law which I will discuss below and on rule 29.01(a) which provides: 29.01 A defendant may commence a third party claim against any person who is not a party to the action and who, (a) is or may be liable to the defendant for all or part of the plaintiff’s claim; Analysis Rule 29.01(a) [ 33 ] Rule 29.01(a) cannot, in my view, supplant the substantive law concerning when a claim for contribution and/or indemnity may be available. That is, if there is a possible claim for contribution and/or indemnity against the third parties, the third-party claim is properly brought under rule 29.01(a). Rule 29.01(a) confers the ability to bring a claim but still requires that there be a viable legal basis for the defendant’s claim. Rule 29.01(a) works in concert with the right to claim contribution and indemnity in order to bring efficiency to proceedings and avoid a multiplicity of proceedings. It provides the appropriate procedure for a properly founded claim. The Negligence Act and the case law [ 34 ] As noted, the Arbour defendants do not plead the Negligence Act , but raise it in their factum. The Arbour defendants do not plead that they are joint tortfeasors with the third parties, nor did they suggest such a theory of the case in their factum or in oral argument. Rather, they claim that the third parties are joint tortfeasors with Mr. Delaney and that they, the Arbour defendants, are the aggrieved party. They do not plead that the third parties breached any obligations to the plaintiffs. The breaches are all claimed to be towards the Arbour defendants. [ 35 ] Under the Negligence Act , however, the Arbour defendants can only claim contribution and indemnity from joint tortfeasors. They do not allege that the third parties are joint tortfeasors with the Arbour defendants towards the plaintiffs. Rather, they allege that the third parties are joint tortfeasors with Mr. Delaney towards the Arbour defendants. [ 36 ] The Supreme Court of Canada has held that in order for a claim for contribution to succeed, the person from whom contribution is sought must owe a duty to the plaintiff: Imperial Tobacco at para. 29. [ 37 ] The Arbour defendants rely on Tuffnail v. Meekes , 2020 ONCA 340 ; 449 D.L.R. (4th) 478. There, Mr. Tuffnail had attended a wedding reception, after which he was seriously injured as a passenger in a car accident. Mr. Tuffnail and his family sued the driver of the car, the groom who had hosted the reception, and State Farm, his own automobile insurer from whom he had purchased underinsured motorist coverage. State Farm brought a third-party claim against the bartender for contribution and indemnity. State Farm alleged the bartender was negligent and/or breached the Liquor License Act , thereby causing or contributing to the accident. Because State Farm had not caused or contributed to Mr. Tuffnail’s damages, it could not assert a right of contribution and indemnity against the bartender under s. 1 of the Negligence Act . Rather, it sought contribution and indemnity through its subrogated third-party claim. [ 38 ] The court noted that in exercising its right of subrogation, an insurer advances only the cause of action that the insured would otherwise have against the tortfeasor. The court had to determine whether State Farm could proceed by way of a third-party claim in its own name. The third-party claim alleged negligence on the part of the third party vis-à-vis the plaintiff. The court stated at para. 50: I would add that even if an insurer’s objective in bringing a third party claim is only to protect its right to subrogate in relation to amounts it is called upon to pay the insured plaintiff, and the insurer accordingly restricts its third party claim to a claim in contribution for amounts it is required to pay the insured plaintiff, such a claim is necessarily founded on the third party’s potential responsibility for causing the insured’s damages. [ 39 ] I do not agree with the Arbour defendants’ submission that in Tuffnail , the court “confirmed that direct liability to the plaintiff is not a prerequisite for the valid contribution claim and it is sufficient that the third party is potentially liable for the defendant’s damages.” Indeed, the court specifically noted that the claim was predicated on the third party’s potential responsibility for causing the insured, that is, the plaintiff’s, damages. The case considers the position of an insurer who proceeds by way of subrogated claim. The insurer stands in the place of the insured (in Tuffnail , the insured was the plaintiff). The insurer is advancing the claim the plaintiff would have had against the third party. Liability of the third party to the plaintiff was certainly required. [ 40 ] The Arbour defendants also rely on Ottawa Carleton Standard Corporation No. 838 v. Redevelopment Group , 2019 ONSC 7005 , 8 C.L.R. (5th) 346, at para. 19 for the proposition that third parties need not owe a duty to the plaintiffs to ground a claim for contribution and indemnity. That case does not support that proposition. Quite the opposite. That case provides that a defendant does not need an independent cause of action to make a third-party claim – it is sufficient that the third party owe a duty of care to the plaintiff. [ 41 ] The question is not, as the Arbour defendants argue in their factum, whether a claim is available against parties not named by the plaintiffs in the original lawsuit. I agree with the Arbour defendants that of course it is. That is the nature of a third-party claim and specifically adverted to in section 5 of the Negligence Act . But that does not answer the question of whether a third-party claim for contribution must allege a duty owed to the plaintiff. [ 42 ] I find, in accordance with Imperial Tobacco and the case law that follows it, that in order to claim contribution from the third parties, the Arbour defendants would have to allege the third parties owed duties to the plaintiff. The third-party claim makes no such allegation, nor was such an alternative position put forward in argument. In essence, the third-party claim as currently drafted is a claim for damages disguised as a claim for contribution. The claim for contribution cannot stand, given there is no alleged duty owing from the third parties to the plaintiff, and no basis on which the third parties and the Arbour defendants are said to be, or could be found to be, concurrent tortfeasors. The claim for indemnity Governing principles [ 43 ] A right to indemnity may only arise by express or implied contract, or by implication if the circumstances demand a legal or equitable right to indemnify. Addison & Leyen Ltd. v. Fraser Milner Casgrain LL P, 2014 ABCA 230 , 1 Alta. L.R. (6th) 166, at para. 22 . [ 44 ] A right to indemnity under an implied contract is different from a right to damages: Addison at para. 23. [ 45 ] I will summarize the principles below, but I believe that excerpts from the case law are instructive on the genesis and scope of indemnification. [ 46 ] In McFee v. Joss , (1925), 1925 386 (ON CA) , 56 O.L.R. 578 (C.A.), [1925] 2 D.L.R. 105, the Court of Appeal explained where an implied indemnity may exist. There, the driver of the car had been negligent. The car’s owner had been ordered to pay damages as the result of the negligent driver’s accident. The court considered whether the negligent driver should have to indemnify the owner of the car for the damages that resulted from his conduct, which the owner had been required to pay. The court reasoned as follows. …[A]n implied contract of indemnity arises in favour of a person who, without fault on his part, is exposed to liability and compelled to pay damages on account of the negligence or tortious act of another, provided the parties were not joint tortfeasors in such a sense as to prevent recovery; that is, where the act done is not clearly illegal it itself. This right of indemnity is based upon the principle that every one is responsible for his own negligence, and if another is, by a judgment of a Court, compelled to pay damages which ought to have been paid by the wrongdoer, such damages may be recovered from the wrongdoer . [ 47 ] The Alberta Court of Appeal in Addison explained the roots of implied indemnity as being found in the principles of unjust enrichment. The court explained as follows: [34]… First, the common law of implied indemnity is rooted in the principles of restitution and unjust enrichment. An indemnity permits the reimbursement of damages paid by an innocent party to a third party on behalf of the true wrongdoer, where that wrongdoer should otherwise have been liable to pay. A right to reimbursement through an implied indemnity does not arise in every situation in which A becomes liable to C in connection with the negligence of B. That connection must be supported by a theory of legal or equitable liability between the third party and the party against whom the indemnity is sought ( Ryan v Dew Enterprises Ltd at para 54). [35] A simple statement of this requirement is provided by Professor Charles Mitchell in his text, The Law of Contribution and Reimbursement (New York: Oxford University Press, 2003) at 5: “Claims for contribution and reimbursement lie between two parties who both initially owe legal liabilities to a third party” (emphasis added). Put another way, the circumstances must be such that the putative party against whom the indemnity was sought could have been liable to the third party for all or part of the claim against the party seeking the indemnity. [40] An implied indemnity may arise where the wrongdoer’s negligence causes damage to a third party for which the party seeking the indemnity is held liable. However, there must be a connection between the wrongdoer, the third party, and the damage. [ 48 ] I note that the references to “third parties” in these excerpts equate to plaintiffs in the case before me. [ 49 ] As stated by the Newfoundland Court of Appeal and cited by the Alberta Court of Appeal in Addison , “ An example of a claim to indemnity arising from implication of law is where an act is done at the request of another, the act turns out to be injurious to a third party and in consequence of doing the act the doer incurs liability to the third party”: Ryan v Dew Enterprises Ltd , 2014 NLCA 11 , 347 Nfld. & P.E.I.R. 274 , at para. 54 . [ 50 ] Equitable indemnity is a narrow doctrine: Imperial Tobacco at para. 147 ; Addison at paras. 29-30. [ 51 ] To summarize, the right to indemnification may arise by express contract or by implication. A right to be indemnified is different than a right to damages. The implied right to be indemnified may arise in two ways. First, there may be an implied contract between the party seeking indemnification and the indemnifier. Second, where one person is compelled to pay damages that ought to have been paid by the “real” wrongdoer, those damages may be recovered from the wrongdoer. A party will be entitled to claim indemnification where the party is an innocent party who has been compelled to pay damages that were caused by another party in whole or in part. A party may claim indemnity from a party who could have been liable directly to a third party for all or part of the claim against the party seeking the indemnity. Position of the parties The third parties [ 52 ] The third parties argue that there can be no claim for indemnity against them. As there is no express contract for indemnification, the Arbour defendants must be relying upon an implied indemnity. The third parties argue that, in order for there to be a right to indemnity, there must be a causal connection between the alleged wrongdoing of the party seeking indemnity, and the alleged wrongdoing of the proposed indemnifier. Here, they argue, there is no possible causal connection between the claim against the Arbour defendants and the Arbour defendants’ claim against the third parties. [ 53 ] That is, the statement of claim alleges the Arbour defendants engaged in various intentional wrongdoing, including wrongly taking control of WIN PM, misappropriating funds, taking secret commissions, and failing to repay a personal loan. The third-party claim alleges that the third parties breached their duty of care owed to the Arbour defendants in relation to the preparation of tax returns and financial statements, failed to advise the Arbour defendants of a conflict of interest in that the third parties provided services to both the Arbour defendants and the Wekerle group, and wrongly treated WINPM as a related party and thus continued to make entries in the books and accounts on the basis of related-party status when they should not have done so. [ 54 ] The third parties argue there is no way to connect the claims of intentional misfeasance made in the amended statement of claim against the Arbour defendants with the claims that the third parties failed to give proper tax advice, failed to prepare proper financial statements, and caused inaccurate entries in WIN PM’s books. Further, the third parties argue that indemnification is sought for liability that is wholly attributable to the Arbour defendants’ own fraudulent or oppressive conduct. As stated by this court: “ A defendant is not liable for any injuries for which the defendant’s negligence is not a cause. Where a Plaintiff limits its claim to the damages that can be attributed to the fault of the Defendant, a third-party action for contribution and indemnity is properly struck out”: Becker at para. 25 . The Arbour defendants The Arbour defendants argue that they are entitled to seek contribution and indemnification even if the allegations against them are characterized as allegations of fraud. They argue that Tzaras v. Tzaras , 2016 ONSC 4717 , 132 O.R. (3d) 471, stands for the proposition that contribution and indemnity can be sought even in cases of fraud. Analysis [ 55 ] I return to the pleadings to ground the analysis. [ 56 ] The third-party pleading seeks contribution and indemnity in respect of the claims made against Arbour and WINPM related to the provision of tax advice, preparation of financial statements and tax returns, inaccurate and incomplete entries in WINPM’s books, and failure to properly address payments made to and from WINPM and Wekerloo in relation to the parties' shareholders accounts. [ 57 ] The amended statement of claim does not claim against the Arbour defendants or Delaney for anything to do with tax advice. Therefore, there can be no claim for contribution and indemnity for amounts owing by the Arbour defendants to the plaintiffs for such claims. [ 58 ] With respect to the remainder of the allegations the Arbour defendants make, the amended statement of claim alleges: ▪ Arbour would direct the controller, Lisa Biefer, on how to record transactions and enter bookkeeping, including inter-company journal entries that were later used by Delaney to construct financial records (at para. 105) ▪ Arbour directed tenants to pay rent to WIN PM instead of the WIN Holdcos. Arbour would direct Biefer to record the rent payments through WIN PM, not Wekerloo. As a consequence, WIN PM owes the WIN Holdcos. about $2,400,000 in rent (at paras. 109-111) ▪ Arbour misappropriated and transferred a large tax refund received by WIN 2 to WIN PM (at paras. 114-115) ▪ Arbour directed Delaney and McCarter Grespan to refuse Wekerle’s access to financial documentation, and to release such documentation only to Arbour (at para. 127) [ 59 ] The allegations in the amended statement of claim against Mr. Delaney, relied on by the Arbour defendants in the third-party claim, are that Mr. Delaney should have identified and investigated various badges of fraud, and that his failure to do so resulted in the issuance of materially misleading financial statements. Mr. Delaney was required to ensure that the financial statements did not contain false or misleading information. He should have made reasonable inquiries to determine whether reported information was accurate. His failure to inform himself that the Arbour Group was engaging in misfeasance resulted in the issuance of materially misleading financial statements. [ 60 ] The plaintiffs allege that the Arbour defendants engaged in intentional acts to perpetrate a fraud and misappropriate funds. They allege that part of this was carried out by Mr. Arbour instructing Ms. Biefer about how she was to record transactions in the company’s books, on which Mr. Delaney later relied. [ 61 ] The third-party claim pleads no connection between the third parties and the plaintiffs’ claimed damages. There is no allegation in the third-party claim that the third parties owed duties to the plaintiffs or caused the plaintiffs’ damages. Nor is it alleged that the third parties directed the Arbour defendants or anyone else to participate in the Arbour defendants’ alleged misdeeds, or that the third parties participated in those alleged misdeeds, or that they were required to and failed to identify or investigate the Arbour defendants’ misdeeds. [ 62 ] There is no allegation of an express or implied contract for indemnity. There is no suggestion that the third parties are the “real” wrongdoers vis-à-vis the plaintiffs’ claims, and that it would be inequitable for damages to be paid by the Arbour defendants when they were caused by the third parties. There is no suggestion that the third parties could have been liable directly to the plaintiffs for all or part of the claim against the party seeking the indemnity. [ 63 ] I do not find that the Tzaras case assists the Arbour defendants. That case considered whether the doctrine of ex turpi causa (that a party should not be able to pursue damages in connection with its own wrongful act) applies to prevent a third-party claim for contribution and indemnity. The third parties were alleged to have perpetrated a fraud. It is not a case where someone alleged to have perpetrated a fraud brought a third-party claim based on negligence for indemnification of the fraud. [ 64 ] In my view, Tzaras is best understood if considered in the context of the proposition that an implied indemnity will arise where the party from whom the indemnity is sought could have been liable in whole or in part to the party who received the damages award. In Tzaras , the third parties were alleged to be part of the fraud. [ 65 ] This case is the opposite. The Arbour defendants seek indemnification for their allegedly fraudulent acts, but do not allege the third parties were part of those acts. They allege the third parties engaged in torts against them, not in any wrongdoing they may have committed against the plaintiffs. [ 66 ] I agree with the third parties that there is no connection pleaded between the damages the plaintiffs claim to have sustained and the purported actions of the third parties. The pleading does not allege a situation in which the Arbour defendants may have to pay the plaintiffs for actions caused by or contributed to by the third parties. [ 67 ] Whether the pleading could sustain a claim for damages from the third parties to the Arbour defendants is not the issue. The issue is whether it can sustain a claim for indemnity. I find that it cannot, as drafted, for the reasons above. Disposition on striking of the claim [ 68 ] In summary, the claim is struck as disclosing no reasonable cause of action because the third-party claim: ▪ alleges no duties owing to the plaintiffs; ▪ does not allege that the third parties are joint tortfeasors with the Arbour defendants toward the plaintiffs; ▪ does not allege the third parties could have been liable to the plaintiffs for all or part of the claim; ▪ does not suggest or identify any unjust enrichment or other equitable unfairness that would result from the Arbour defendants not being able to seek indemnity from the third parties; and ▪ does not demonstrate any connection between the wrongdoing alleged by the plaintiffs against the Arbour defendants, the damages the plaintiffs claim to have suffered, and the actions pleaded in the third-party claim to have been engaged in by the third parties. Leave to Amend [ 69 ] The third parties state the cause of action is fatally flawed and cannot be cured by an amendment. They argue that the defects are not a matter of drafting that could be cured with an amendment. The only cure would be to change the pleading fundamentally, to plead a different theory of the case. The third parties argue that amendments are not intended to allege whole new theories of liability, but to cure defective drafting in support of the theories that are alleged. [ 70 ] The Arbour defendants state that they should be granted leave to amend if there are deficiencies in the claim. [ 71 ] I accept the Arbour defendants’ submission that a claim “should be read generously to accommodate drafting deficiencies”, and that “pleadings should be struck out without leave to amend only in the clearest of cases, especially if the deficiencies in pleadings can be fixed by amendment and there is no prejudice to the responding party in granting leave to amend”: Lorion v 1163957799 Quebec Inc ., 2015 ONSC 2417 at paras. 14-16 . [ 72 ] The courts have explained when leave to amend should not be granted as follows: Leave to amend the claim should not be granted where there is no reason to suppose that the party can improve their case by amendment, or if an entirely new cause of action would have to be set up by way of amendments that prejudiced the defendants: Miguna v. Ontario (Attorney General) , 2005 46385 (Ont. C.A.).: Dean v. ICCRC , 2020 ONSC 2486 , at para. 35 . [ 73 ] In accordance with my reasons above, the new claim will have to look very different from the claim as currently drafted in order to survive further attack. However, the third parties did not allege any prejudice that would flow from granting leave to amend, even if the amendments significantly change the foundation of the claim. In these circumstances, heeding the words of Dean v. ICCRC set out above, I find that the Arbour defendants should be granted leave to amend the third-party claim. The amended claim must meet the legal tests described above to sustain a claim for contribution and/or indemnity. It must plead the material facts, in more detail than was contained in the original third-party claim, in support of the allegations. It must not be a claim for damages disguised as a claim for contribution and indemnity. Disposition [ 74 ] The third-party claim is struck with leave to amend within the parameters set out above. A fresh as amended third-party claim shall be served by March 21, 2025. [ 75 ] The parties are encouraged to agree upon costs. If they are unable to agree, the third parties may make costs submissions of no more than three double-spaced pages within seven days. The Arbour defendants may respond with the same page limits within seven days thereafter. There shall be no reply submissions without leave. Submissions may be sent to my judicial assistant at linda.bunoza@ontario.ca. L. Brownstone J. Date: March 7, 2025 [1] Mark Allen Arbour, Waterloo Innovation Network PM Inc., Tammy Marie Arbour, Tyson James Comtois-Arbour, and 2427204 Ontario Ltd.