Court File and Parties

Court File No.: CV-23-00710556
Date: 2025-06-27
Court: Superior Court of Justice - Ontario

Plaintiff: 1943528 Ontario Inc.
Defendant: Bayview Foodmart Ltd.

Before: E. M. Schabas
Counsel:

• Sinziana Hennig, for the Plaintiff
• James Wortzman and Jared Wortzman, for the Defendant

Heard: 2025-04-28

Reasons on Motion to Strike

Overview

[1] The Plaintiff has commenced an action seeking specific performance of an agreement it claims it reached with the Defendant to purchase the Defendant’s supermarket business known as Bayview Foodmart. The proposed transaction included purchasing the assets of the business and an assignment of the Defendant’s lease for the premises where the supermarket is located.

[2] The Defendant moves to strike the Plaintiff’s claim without leave to amend pursuant to Rules 21.01(1)(b) and/or 25.11 of the Rules of Civil Procedure (“Rules”).

[3] The Defendant raises three grounds on which it submits that the claim should be struck for failing to disclose a reasonable cause of action:

(1) the Plaintiff has failed to plead any material facts that could constitute acceptance of an agreement between the parties;

(2) the Plaintiff is not a party to the alleged agreement and has no standing to enforce it; and

(3) as the alleged agreement deals with an assignment of a lease and an interest in land, and there is no agreement in writing, the alleged agreement is unenforceable under the Statute of Frauds.

[4] For the reasons that follow I agree with the Defendant and grant the motion and strike the claim with leave to amend on a limited basis.

Rules 21 and 25

[5] Under Rule 21.01(b), a party may move to strike out a pleading on the ground that it discloses no reasonable cause of action. Pursuant to Rule 25.11, the Court may also strike a pleading on the ground that it is frivolous, vexatious, or is an abuse of process.

[6] A motion to strike ought to be granted where, assuming all facts pleaded to be true, it is “plain and obvious” that the pleading discloses no reasonable cause of action. The Court of Appeal recently addressed the test in Rivard v. Ontario, 2025 ONCA 100 at para. 22:

A claim should only be struck under r. 21.01(1)(b) if it is plain and obvious that there is no reasonable prospect it can succeed…. A court must assume that all facts pleaded in the statement of claim are true, unless they are patently ridiculous or incapable of proof … The court must read the statement of claim as generously as possible, with a view to accommodating any inadequacies in the pleading … . A claim should not be struck just because it is novel, or because the underlying law is unsettled, or because the plaintiff’s odds of success seem slim….[Citations omitted]

[7] Evidence is not admissible on a Rule 21.01(1)(b) motion; but documents specifically referred to in a pleading form part of the pleading and may be considered.

[8] Pursuant to Rule 25.06(1), the material facts relied upon must be pleaded, but not the evidence by which those facts will be proven. The material facts must be sufficient to establish a cause of action that is legally complete: Aristocrat Restaurants Ltd. v. Ontario, [2003] O.J. No. 5331 (S.C.), at para. 20; Wakeling v. Desjardins General Insurance Group Inc., 2020 ONSC 6809 at para. 47; aff'd 2021 ONCA 672.

[9] On motions under Rule 21, the test is a high one: the court “must be satisfied that, on the face of the action and in all the circumstances, it is plain and obvious that the action cannot succeed”: Connor v. Scotia Capital Inc., 2018 ONCA 73 at para. 3. Further, one must bear in mind that a Rule 21 motion is not a motion for summary judgment; findings must be based on the pleadings and documents referred to in the pleadings, not on evidence or speculation. The plaintiff is not required to adduce evidence or put its best foot forward.

Lack of Material Facts of an Agreement

[10] The Plaintiff has pleaded that it made three offers to the Defendant. It pleads that offers were made on July 20, 2023, and on August 2, 2023, both of which had a “Schedule ‘A’” appended to them “that provided particulars and specifics as it relates to all necessary terms and conditions for the closing of the Transaction.” The third offer was made on August 17, 2023, as pleaded in paragraph 12 of the Statement of Claim:

On or about August 17th, 2023, the Plaintiff increased their offer to purchase the Business to $3,200,000.00 with a completion date of March 15, 2024 (“Third Offer”). The Defendant accepted the Plaintiff's third offer.

[11] It is also pleaded that on August 16, 2023, the Plaintiff provided the Defendant with a deposit of $50,000 which “was explicitly to be credited towards the Purchase of the Business as well as the cost of the renewal and assignment of the Lease.”

[12] The Plaintiff pleads that by mid-August 2023, the parties “had agreed to all essential terms necessary to close the transaction and the Defendant had paid the Deposit to this effect.”

[13] The Statement of Claim then pleads that the third offer “contained a revised Schedule ‘A’, with various additional terms including restraining the Defendant from negotiating with anyone else and that the deposit would reduce the purchase price by $100,000.” The Plaintiff also pleads that over the next two months steps were taken in furtherance of the agreement, including confirming that the landlord “was comfortable with the lease being assigned to the Plaintiff.” It is also pleaded that the parties agreed to a number of amendments to their agreement, but that “all essential terms were agreed upon and remained consistent.”

[14] The Plaintiff pleads in paragraph 20 that on October 24, 2023, the Defendant “took the position that the Defendant would not proceed with the transaction because the Defendant did not know the ‘identity’ of the purchasing corporation.” In paragraph 25, the Plaintiff pleads that on October 30, 2025, “the Plaintiff received an email from the Defendant's counsel stating that the Defendant would not proceed with Agreement.”

[15] Following the commencement of this action, the Defendant requested to inspect the following documents referred to in the Statement of Claim:

(i) all offers, draft agreements of purchase and sale, and any executed agreements of purchase and sale (including schedules and addendums);

(ii) any acceptance in writing; and

(iii) the October 30, 2023, email from Defendant's counsel.

[16] The Plaintiff produced the three offers, which were drafts of Agreements of Purchase and Sale. None were executed or signed. Unlike the first two offers, the August 17, 2023 Agreement of Purchase and Sale, which it is alleged was accepted, refers to but does not contain a Schedule “A”. The Plaintiff confirmed that there was no acceptance in writing.

[17] The email of October 30, 2023, was produced, in which counsel for the Defendants wrote:

As you know, my clients require as a condition of this Agreement, that in the event the transaction does not close, or in the event that there is an act of default that triggers the right of the Landlord to seek indemnity from my clients, or in the event of a sale or assignment of the business, that the Landlord gives a right to my clients to assume the lease and operate the business again.

I have spoken to Mark Johnson by phone this morning and he advised me that the Landlord will NOT give any such right.

Therefore, my clients have concluded that the risks they will be assuming under this structure, (of personally indemnifying the lease until 2031 AND that the Landlord will NOT give them any right to assume the lease and operate the business again) are too high.

They are not prepared to proceed.

[18] Defendant’s counsel submits that the Plaintiff has failed to plead material facts supporting a viable cause of action. In particular, counsel argues that the Plaintiff has failed to plead any material facts relating to acceptance of the August 17, 2023 offer, including how it was accepted and what was accepted.

[19] I agree. The pleading that the August 17, 2023 Agreement of Purchase and Sale was accepted is a “bald conclusory statement of fact”, not a material fact. As was held in Castrillo v. Workplace Safety and Insurance Board, 2017 ONCA 121, para. 15, and Meekis v. Ontario, 2021 ONCA 534, para. 16, the Court is not required to assume that bald conclusory statements of fact are true. The distinction between the two was addressed by the Court of Appeal in Rivard at para. 47:

Castrillo and Meekis do not expand on how to distinguish a material fact from a bald conclusory statement of fact. Guidance is provided in Burns v. RBC Life Insurance Company, 2020 ONCA 347, para. 16: “Each defendant named in a statement of claim should be able to look at the pleading and find an answer to a simple question: What do you say I did that has caused you, the plaintiff, harm, and when did I do it?”

[20] In my view, merely asserting that the Defendant accepted the offer does not provide sufficient material facts. It is a bald pleading without any description of what facts the Plaintiff relies on to support its assertion. This is particularly necessary when the Plaintiff made three different offers in writing, none of which were signed by either party and the Plaintiff has since confirmed that there was no acceptance in writing. Further, the pleading goes on to refer to conditions and terms which the Defendant required in order to proceed with the transaction which are inconsistent with an acceptance and the conclusion of an agreement.

The Plaintiff’s Standing

[21] The August 17, 2023 Agreement of Purchase and Sale describes the Buyer as “HE WENG QING … A NEW CORPORATION TO BE INCORPORATED.” The Defendant submits that no material facts have been pleaded to indicate that the Plaintiff is that corporation, or that the Plaintiff was even incorporated after August 17, 2023. Counsel for the Defendant argues that these are essential material facts which must be pleaded.

[22] The Defendant refers to s. 21(2) of the Business Corporations Act, RSO 1990 c. B.16, which provides:

(2) A corporation may, within a reasonable time after it comes into existence, by any action or conduct signifying its intention to be bound thereby, adopt an oral or written contract made before it came into existence in its name or on its behalf, and upon such adoption,

(a) the corporation is bound by the contract and is entitled to the benefits thereof as if the corporation had been in existence at the date of the contract and had been a party thereto; and

(b) a person who purported to act in the name of or on behalf of the corporation ceases, except as provided in subsection (3), to be bound by or entitled to the benefits of the contract.

[23] As the Defendant points out, the Statement of Claim makes no reference to the Business Corporations Act, nor does it plead any facts showing that the Plaintiff corporation has taken any action or by conduct signified its intention to be bound by the August 17, 2023 Agreement of Purchase and Sale.

[24] In my view, the Defendant’s argument has merit. While the Plaintiff is correct that it is not unusual for parties to enter into a contract in trust for a new corporation to be incorporated, there are requirements that must be met, and which are not met here.

[25] The requirements of s. 21(2) of the Business Corporations Act can benefit both sides. As seen in Sherwood Design Services Inc. v. 872935 Ontario Ltd., the adoption of the contract by the new corporation can protect the other party, as the corporation then becomes liable if the agreement is not completed or the corporation breaches the contract. While there need not be formality about the “manner of adoption” by the corporation, as Abella J.A. (as she then was) found in Sherwood Design at paras. 12 and 14, there must be some notification that informs the parties “who will be responsible for a failure to close.”

[26] In my view, the failure to plead any facts that suggest the Plaintiff is in fact the corporation incorporated subsequent to reaching the Agreement in order to be the buyer is a “radical defect” making it “plain and obvious” that the Plaintiff lacks standing.

[27] I also observe that the August 17, 2023 Agreement of Purchase and Sale does not contain the words “in trust” following He Weng Qing’s name, unlike the first two offers. Neither counsel addressed this discrepancy in argument, but it means that there was an individual buyer who would have standing to seek to enforce it, but He Weng Qing is not the Plaintiff in this action.

Application of the Statute of Frauds

[28] The Defendant also relies on the Statute of Frauds, RSO 1990 c. S.19. Sections 2 and 4 of that Act require that leases and agreements relating to land shall be in writing. However, the documents produced by the Plaintiff, and the confirmation that there was no acceptance in writing, establish that no written agreement was reached between the parties and therefore any alleged agreement is presumptively unenforceable.

[29] In response, the Plaintiff relies on the doctrine of part performance which can “avoid the inequitable operation of the Statute of Frauds”: Hill v. Nova Scotia (Attorney General), para. 16. This was explained in Steadman v. Steadman, [1976] A.C. 536, [1974] 2 All E.R. 977 (H.L.), at p. 558 A.C, quoted with approval by Cory J. in Hill at para. 10:

[This doctrine] was evoked when, almost from the moment of passing of the Statute of Frauds, it was appreciated that it was being used for a variant of unconscionable dealing, which the statute itself was designed to remedy. A party to an oral contract for the disposition of an interest in land could, despite performance of the reciprocal terms by the other party, by virtue of the statute disclaim liability for his own performance on the ground that the contract had not been in writing. Common Law was helpless. But Equity, with its purpose of vindicating good faith and with its remedies of injunction and specific performance, could deal with the situation. . . . Where, therefore, a party to a contract unenforceable under the Statute of Frauds stood by while the other party acted to his detriment in performance of his own contractual obligations, the first party would be precluded by the Court of Chancery from claiming exoneration, on the ground that the contract was unenforceable, from performance of his reciprocal obligations; and the court would, if required, decree specific performance of the contract. Equity would not, as it was put, allow the Statute of Fraud ‘to be used as an engine of fraud.’ This became known as the doctrine of part performance -- the ‘part’ performance being that of the party who had, to the knowledge of the other party, acted to his detriment in carrying out irremediably his own obligations (or some significant part of them) under the otherwise unenforceable contract. [Citations omitted]

[30] Recently, in 2730453 Ontario Inc. v. 2380673 Ontario Inc., 2025 ONCA 112 at para. 29, the Court of Appeal reiterated its description of the detrimental reliance required for the doctrine of part performance to be met which it had stated in Erie Sand and Gravel Limited v. Tri-B Acres Inc., 2009 ONCA 709 at para. 64:

Hill stands for this principle: if one party to an otherwise unenforceable agreement stands by while the other party acts to its detriment by performance of its contractual obligations, the first party will be precluded from relying on the requirements in the Statute of Frauds to excuse its own performance.

[31] Has there, then, been part performance in which the Plaintiff has “acted to his detriment in carrying out irremediably his own obligations (or some significant part of them) under the otherwise unenforceable contract”? In my view, the answer is no.

[32] Accepting for the purposes of argument that the Plaintiff is the purchaser and that there was an agreement between the parties, the pleading does not support applying the exception of part performance.

[33] It is not “part performance” that the parties had, as is pleaded, agreed to all essential terms. That is just pleading an agreement.

[34] Nor is the payment of the deposit part performance. As the Court of Appeal stated in Erie, at para. 97:

…delivery of an offer to purchase land, with a deposit, will not normally amount to part performance. It happens every day and is not suggestive of a pre-existing agreement in respect of the land. In fact, it suggests the opposite -- namely, that the offeror is hoping to be able to enter into an agreement to purchase the property.

[35] The deposit was made prior to August 17, 2023, and has no relationship to the deposits actually required by the August 17, 2023 Agreement which contemplated much larger sums.

[36] The “steps taken to close the transaction” pleaded in the Statement of Claim refer, largely, to steps taken by the Defendant’s landlord and what are described as “minor and immaterial” amendments. These are not actions taken by the Plaintiff to its detriment in carrying out its obligations.

[37] While it has been held that acts of the Defendants can support a finding of part performance (see, e.g., Erie at paras. 75–78; 2730453 Ontario Inc. at para. 34), the issue remains whether “there has been detriment” to the party seeking to enforce the agreement. Further, acts of part performance must not only be “unequivocally referable to the property in question; the conduct must also, in and of itself, indicate that there had been some ‘dealing with the land’”: Erie at para. 90.

[38] No dealing with the land by the Defendant has been pleaded. Rather, the steps taken by both parties, as pleaded, appear to be more in the nature of negotiations and steps towards reaching an agreement, not in fulfillment of an agreement already reached. In this regard, the actions pleaded are not similar to the actions found by the trial judge to constitute part performance in 2730453 Ont. Inc. v. 2380673 Ont. Inc., 2022 ONSC 6660 at paras. 119–121. That case was largely about a failure to close an agreement, not about whether there was an agreement. In my view, it is plain and obvious that the facts pleaded by the Plaintiff, if proven at trial, do not provide a basis to find part performance.

[39] In short, therefore, the pleading does not contain material facts to support a conclusion that the Plaintiff acted to its detriment in carrying out obligations under the August 17, 2023 offer that would take the unexecuted Agreement of Purchase and Sale outside the ambit of the Statute of Frauds.

Leave to Amend

[40] Courts should always consider whether a deficient pleading can be cured by an amendment. Leave to amend a statement of claim “should be denied only in the clearest of cases, when it is plain and obvious there is no tenable cause of action, the proposed pleading is scandalous, frivolous or vexatious, or there is non-compensable prejudice to the defendants.” It has been held that even when allegations are “bald and lack supporting material facts” this is “not itself a reason for refusing leave to amend.” Rather, “unless it is ‘plain and obvious’ that there is no chance of success, a claim, even a novel one, ought to be allowed to proceed.” Fernandez Leon v. Bayer Inc., 2023 ONCA 629 at paras. 5 and 8.

[41] In my view, this is a “clearest of cases”, at least in respect of the claim for specific performance and damages arising out of the Agreement. The documents produced and response provided by the Plaintiff make clear that there is no agreement in writing between the parties. This cannot be improved by further amendment and means that the Statute of Frauds is a complete bar to the action.

[42] On the other hand, the Plaintiff’s claim for return of the deposit is tenable if the Plaintiff’s standing is clarified and properly pleaded. This requires pleading that the Plaintiff is in fact a corporation incorporated after August 17, 2023, and was incorporated for the purpose of acquiring the Defendant’s assets.

Conclusion and Costs

[43] In conclusion, the action for specific performance is struck out. Leave is granted to the Plaintiff to amend the claim in order to plead material facts supporting the Plaintiff’s standing in order to pursue the return of the deposit only.

[44] The Defendant is largely successful on the motion and is entitled to costs on a partial indemnity scale. The Defendant’s Costs Outline seeks $15,397.85 inclusive of disbursements and HST. This is considerably less than the amount sought in the Plaintiff’s Costs Outline and, in my view, is a fair and appropriate amount which the Plaintiff ought reasonably to have expected to pay. Accordingly, the Defendant shall have its costs in the amount of $15,397.85.

E. M. Schabas
Date: June 27, 2025