Court File and Parties

Court File No.: CV-23-00702243-0000 Date: 2025-10-16 Superior Court of Justice - Ontario

Re: Mahmood Famil Eghbalian, Plaintiff / Responding Party And: 9946268 Canada Ltd., Ioan Hossu, and Labiofam S.A., Defendants / Moving Party

Before: Parghi J.

Counsel:

• Nikolas Shymko, for the Plaintiff/Responding party
• Rebecca Huang and Ryan Pistorius, for Ioan Hossu, the Defendant/Moving Party

Heard: October 2, 2025

Endorsement

Introduction

[1] The individual defendant, Ioan Hossu, brings a motion to strike the action against him under rule 21, without leave to amend.

[2] For the reasons below, I strike the breach of contract, breach of duty of good faith in contractual performance, and breach of fiduciary duty claims against Mr. Hossu, without leave to amend. I strike the fraudulent misrepresentation, fraud, and unjust enrichment claims against him, with leave to amend. I do not strike the conversion claim.

The Request to Adjourn and the Production of Information About Mr. Hossu's Cuban Bank Account

[3] The plaintiff asked that this motion be adjourned to be heard along with a motion he has brought under rule 45.02 seeking the payment of funds into court. That motion has been commenced via Notice of Motion dated September 16, 2025 but has not yet moved forward on the merits. Mr. Hossu opposed the request for an adjournment.

[4] I declined to adjourn the motion and provided oral reasons for my decision, which I will briefly summarize here because they resulted in the issuance of certain orders.

[5] The concern driving the adjournment request is that the funds in dispute may be dissipated. The plaintiff is concerned that if the action against Mr. Hossu is struck, the funds Mr. Hossu is holding for FTI will be spent and the plaintiff will have no recourse.

[6] In my view, this concern is unfounded. There is no evidence that the funds have been spent to date. The "screenshot" containing information about the account provided by plaintiffs' counsel is not, in my view, probative of any dissipation. Moreover, Mr. Hossu has provided an undertaking to the court, on behalf of his company, that the funds will not be spent. His counsel has provided me with an assurance in open court that the funds will not be spent.

[7] I appreciate that the information provided to date about where the funds are held is somewhat vague. There is no bank name or account number. This information should be provided to plaintiff's counsel so that the undertaking to keep the disputed funds in the bank account can be more granular and compliance with it more readily verifiable.

[8] During the morning break, Mr. Hossu's counsel obtained the name of the bank in which the funds are held and she has undertaken to provide that information to plaintiff's counsel.

[9] Mr. Hossu's counsel is also instructed to ask Mr. Hossu for the account number, and if Mr. Hossu does not have it, to find out if he is able to obtain it without having to travel to Cuba to visit the branch in person. Mr. Hossu is to make best efforts to obtain the bank account information without going to the bank in person. I am willing to provide a formal request for the bank account information, if it will assist. If Mr. Hossu is unable to obtain the information from here despite his best efforts, then he is to obtain it when he next travels to Cuba. His counsel advises that he travels there several times a year, so I anticipate that he will be able to get the information quite soon even on this scenario.

[10] Mr. Hossu's counsel is to report to plaintiffs' counsel on Mr. Hossu's best efforts to obtain the bank account information by the end of November 2025.

The Law on Motions to Strike

[11] After I gave my ruling denying the adjournment request, we proceeded to hear the motion on the merits.

[12] In a motion to strike under rule 21.01(1)(b), the test is whether, reading the Amended 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, 339 O.A.C. 359, at para. 36; Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at p. 980).

[13] The facts pleaded in the Amended 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).

[14] 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, [2011] 3 S.C.R. 45, 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, 136 O.R. (3d) 654, at para. 15; Trillium Power Wind Corporation v. Ontario (Natural Resources), 2013 ONCA 683, 117 O.R. (3d) 721, at para. 31). In this vein, the Court of Appeal for Ontario 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).

[15] 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., 68 O.R. (3d) 457 (C.A.), at para. 38; Rausch v. Pickering (City), 2013 ONCA 740, 313 O.A.C. 202, at para. 34).

The Law on Granting Leave To Amend

[16] Pleadings "should not lightly be struck without leave to amend" and 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). As the Court of Appeal put it in Miguna v. Ontario (Attorney General), 205 O.A.C. 257 (C.A.), at para. 22, "[i]t is only where it is clear that the plaintiff cannot allege further material facts that he knows to be true to support the allegations that leave to amend will be refused."

[17] Mr. Hossu makes two main submissions as to why leave to amend should not be granted if any portions of the pleading are struck. First, he submits, certain deficiencies in the pleading cannot be cured via amendment. Second, to the extent that any deficiencies can be cured via amendment, the amended pleading, which will have to include the dates of some of the events at issue, will make clear that there is a limitation period defence. As a consequence, states Mr. Hossu, if an amendment of the pleading is called for, I should order that the plaintiff is to propose amendments for Mr. Hossu to consider, and that if Mr. Hossu does not consent to the proposed amendments, the plaintiff is to bring a motion for leave to amend.

[18] I do not agree with that proposed approach. I have assessed whether to grant leave to amend based on the legal test, as articulated above. Any purported limitation period defences are for another day. I do not address them here. I am not prepared to deny leave to amend simply because Mr. Hossu believes that in the future he will be able to successfully advance a limitation period defence.

The Breach of Contract and Breach of Duty of Good Faith in Contractual Performance Claims

[19] The Amended Statement of Claim pleads two allegations of breach of contract. Neither has any reasonable prospect of success against Mr. Hossu personally.

[20] The core of the claim of personal liability for breach of contract on the part of Mr. Hossu is what the plaintiff characterizes as the "Personal Agreement" that he and Mr. Hossu entered into. The details of this agreement are pleaded in the following way:

21. Mr. Hossu then began representing to Mr. Eghbalian and Mahraz that Labiofam would be able to pay the Invoice Amount immediately if it were able to do so into a bank account denominated in Cuban Pesos. Mr. Hossu further represented that he would personally facilitate the transfer of the Invoice amount from Labiofam to 9946 Canada, and then to FTI, if the latter agreed to accept payment from Labiofam, of the Invoice Amount, in a Cuban Pesos denominated bank account.

22. In reliance of Mr. Hossu's representations, FTI agreed to have Labiofam remit the Cuban Peso equivalency of the Invoice Amount into Mr. Hossu's personal Cuban bank account, to then have it transferred to FTI's Canadian bank account, at the spot rate (the "Personal Agreement").

[21] Mr. Eghbalian asserts that the Personal Agreement was a binding legal agreement that Mr. Hossu entered into personally with him, that Mr. Hossu breached the agreement by not providing the funds once they were received, and that this amounts to breach of contract in Mr. Hossu's personal capacity.

[22] I do not agree.

[23] Even accepting the facts in these paragraphs of the pleading to be true, they do not demonstrate the existence of a legally binding contract that could ground a claim of personal liability on the part of Mr. Hossu. As the two paragraphs, read together, make clear, Mr. Hossu offered to have 994 receive a payment from Labiofam, and then provide it to FTI, if FTI agreed to accept the payment in a Cuban pesos-denominated bank account. But what FTI in turn agreed to is not what Mr. Hossu offered. FTI agreed to have the funds remitted in Cuban pesos into Mr. Hossu's personal bank account, not into 994's bank account, as Mr. Hossu offered. FTI also agreed to then have the funds transferred to FTI's Canadian bank account at the spot rate, not transferred to a Cuban pesos-denominated bank account, as stipulated in Mr. Hossu's offer.

[24] Thus, what FTI agreed to was, by the plaintiff's own description of it, materially different from what Mr. Hossu offered. Even on the express language of the pleading, there was no meeting of the minds. As such, even if the facts surrounding the Personal Agreement are assumed to be true, they do not demonstrate the existence of a legally valid contract to which Mr. Hossu was bound, and in which a claim of personal liability for breach of contract can be rooted.

[25] As such, any claims against Mr. Hossu arising from an alleged breach of the Personal Agreement have no reasonable prospect of success. Even if the facts pleaded regarding the Personal Agreement are assumed to be true, they are not sufficient to establish personal liability on the part of Mr. Hossu.

[26] It is therefore appropriate to strike the claim of breach of the Personal Agreement as against Mr. Hossu. I do not grant leave to amend the claim. Applying Miguna, I find that it is clear that Mr. Eghbalian cannot allege further material facts in respect of the Personal Agreement that he knows to be true and which would "cure" the deficiency in the pleading. Nothing in the balance of the pleading, in the motion materials before me, or arising from oral argument persuades me that there are any material facts known to be true that he can plead that would demonstrate that there was in fact a binding contract. As a consequence, there is no basis on which to grant leave to amend this claim.

[27] The related claim of breach of the duty of good faith in contractual performance in relation to the Personal Agreement is also struck as against Mr. Hossu. This claim has no reasonable prospect of success if there is no underlying contract.

[28] The breach of contract claim further pleads that 994 contracted for the purchase of the products supplied to Labiofam, and that, in breach of this contractual obligation, "the defendants" failed or refused to remit the invoice amount to FTI. The agreement alleged to have been breached is the distribution agreement, the parties to which were 994 and FTI. Mr. Hossu was not a party to the distribution agreement in his personal capacity. He therefore cannot be said to be liable for any breach of the distribution agreement, unless some basis for personal liability has been properly pleaded.

[29] No such basis for personal liability is pleaded.

[30] 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 representative 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).

[31] As such, a pleading against a corporate representative 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 (Libfeld, at para. 17). It must plead "specific, identified acts or omissions" by the representative and the facts giving rise to personal liability (at para. 18). A corporate representative cannot be found personally liable "solely because a corporation acts through human agency. […] To properly plead a case of personal liability […], the plaintiff must specifically plead a cause of action against the individual in his or her personal capacity" (Aviva Canada Inc. v. Lyons Auto Body Limited, 2019 ONSC 6778, at para. 61).

[32] No cause of action for breach of the distribution agreement is pleaded against Mr. Hossu in his personal capacity. It is not pleaded that 994 is a sham corporation that was incorporated for a fraudulent or improper purpose or used as a shell for improper activity. Nor is it pleaded that Mr. Hossu, as 994's representative, acted outside the scope of his duties or contrary to 994's best interests, or committed any acts that are tortious in themselves, in relation to the distribution agreement. The conduct that he is criticized for appears to be conduct he engaged in on behalf of the company. Such pleadings are not enough to support piercing the corporate veil. They suggest, incorrectly, that personal liability arises "solely because a corporation acts through human agency."

[33] As such, the allegation that Mr. Hossu is personally liable for any breach of the distribution agreement by 994 has no reasonable prospect of success.

[34] I therefore strike the claim for breach of the distribution agreement as against him. I do not grant leave to amend. I do not have reason to expect that amending the pleading can cure its deficiencies. Nothing in the balance of the pleading, in the motion materials before me, or arising from oral argument persuades me that there are any material facts known to be true that, if pleaded, would "cure" the deficient pleading of this claim. There are no specific acts or omissions on the part of Mr. Hossu that could be pleaded to properly anchor a claim of personal liability against him. There are no facts relating to 994 being a sham corporation that could be pleaded to ground a claim of personal liability.

[35] The claim of breach of the duty of good faith in contractual performance of the distribution agreement is also struck as against him, without leave to amend, for the same reasons.

Fraudulent Misrepresentation and Fraud

[36] The Amended Statement of Claim only pleads fraudulent misrepresentation. It does not advance a separate cause of action for fraud.

[37] I find that the claim of fraudulent misrepresentation against Mr. Hossu has no reasonable prospect of success.

[38] There are five essential components of a claim for fraudulent misrepresentation (Chaba v Khan, 2020 ONCA 643 at para. 15):

(1) the defendant made a false representation of fact; (2) that the defendant knew the statement was false or was reckless as to its truth; (3) that the defendant made the representation with the intention that it would be acted upon by the plaintiff; (4) that the plaintiff relied upon the statement; and (5) that the plaintiff suffered damage as a result.

[39] Rule 25.06(8) requires that full particulars be pleaded when fraud or misrepresentation is alleged.

[40] The Amended Statement of Claim pleads fraud as follows:

46. The plaintiff pleads that 9946 Canada/or Mr. Hossu intentionally, knowingly and/or recklessly represented to FTI, inter alia, that:

(a) it would be difficult, if not impossible, for FTI to contract directly with Labiofam;

(b) Labiofam would only remit payment to a Cuban bank account;

(c) Labiofam would only remit payment in Cuba's local currency;

(d) Labiofam made its payment in Cuban Pesos; and,

(e) the bank account in which Labiofam's payment of the Invoice Amount was deposited restricts the transfer of funds to FTI.

47. The plaintiff pleads that these representations were made fraudulently or otherwise improperly by Mr. Hossu for the purpose or [sic] obtaining and retailing [sic] the Invoice Amount from Labiofam.

48. The plaintiff pleads that based on these representations, FTI agreed to allow 9946 Canada to contract directly with Labiofam, and have Labiofam pay 9946 Canada directly for the supply of FTI's products.

[41] The Amended Statement of Claim appears to allege that the misrepresentations at issue were made by 994 and/or Mr. Hossu. However, even if Mr. Hossu made misrepresentations on behalf of 994, that would not be enough to ground a finding of personal liability, unless 994 were a sham corporation (and there is no pleading to this effect), or unless in making his representations, Mr. Hossu acted outside the scope of his duties or committed any independent tort (which is likewise not pleaded).

[42] Nor are the requisite elements of fraudulent misrepresentation properly pleaded. For instance, it is not pleaded that Mr. Hossu knew the alleged misrepresentations to be true or that he intended to deceive the plaintiffs. As such, even if the facts pleaded are assumed to be true, they are not sufficient to establish the cause of action of fraudulent misrepresentation.

[43] Nor is the pleading of fraud sufficiently particularized under rule 25.06(8). For instance, it does not specify when the alleged misrepresentations are alleged to have been made or when the alleged reliance on the misrepresentations took place.

[44] It is therefore plain and obvious that there is no reasonable prospect that the fraudulent misrepresentation claim could succeed against Mr. Hossu. The claim should therefore be struck. For the same reasons, the claim of fraud should be struck.

[45] I grant leave to amend these claims. There would be a basis for claiming personal liability on the part of Mr. Hossu if his alleged fraudulent misrepresentations amounted to independent torts. As presently drafted, the pleading is unclear on this point. Additionally, I am of the view that the additional required elements of fraudulent misrepresentation and the missing particulars are material facts that can be pleaded.

[46] I therefore grant leave to amend the claims of fraudulent misrepresentation and fraud against Mr. Hossu personally. Those amendments must respond to the concerns outlined above, and must provide clear particulars to meet the requirements of rule 25.06(8) and to address all of the elements of the tort.

[47] Any amendments must also clarify whether fraud is being alleged as a separate cause of action or whether the term "fraud" is simply being used interchangeably with the term "fraudulent misrepresentation". If fraud is alleged as a separate claim, all particulars must be provided and the requirements outlined above are to be satisfied. If fraud is not a separate claim, then references to fraud as a self-standing tort should be removed from the pleading to avoid confusion.

Unjust Enrichment

[48] The claim of unjust enrichment likewise has no reasonable prospect of success against Mr. Hossu personally.

[49] There are three elements to a claim of unjust enrichment: (1) an enrichment of the defendant, (2) a corresponding deprivation of the plaintiff, and (3) the absence of a juristic reason for the enrichment (Garland v. Consumers Gas Co., 2004 SCC 25, [2004] 1 SCR 629, at para. 30).

[50] The pleading of unjust enrichment is as follows:

52. Further, or in the alternative, the plaintiff pleads that FTI provided the Products to 9946 Canada in order for it to supply those Products to Labiofam.

53. The plaintiff pleads that Labiofam paid 9946 Canada for the supply of said Products.

54. The plaintiff pleads that, 9946 Canada retained the payment of the monies paid by Labiofam, for which there is no juristic reason.

55. Further, or in the alternative, the plaintiff pleads that it provided Labiofam the Products pursuant to the Personal Agreement.

56. The plaintiff pleads that pursuant to the Personal Agreement, Mr. Hossu obtained payment from Labiofam for the Products, and retained said payment.

57. The plaintiff pleads that he suffered a loss due to Mr. Hossu's retention of said payments, for which there is no juristic reason.

[51] I am satisfied that the element of unjust enrichment on the part of Mr. Hossu is properly pleaded. The Amended Statement of Claim asserts that the funds at issue were paid to Mr. Hossu's personal bank account, and remain there. This is sufficient to establish that Mr. Hossu has been unjustly enriched, in his personal capacity, by the receipt and retention of the funds at issue.

[52] I am also satisfied that the absence of any juristic reason for the unjust enrichment is properly pleaded, in paragraph 57.

[53] However, the corresponding deprivation to Mr. Eghbalian in his personal capacity is not adequately pleaded. It was FTI that incurred the financial loss due to the funds not being repaid by 994. The basis on which Mr. Eghbalian says that this deprivation attached to him personally is unclear.

[54] As such, even if the facts pleaded are assumed to be true, they are not sufficient to establish the cause of action of unjust enrichment. It is therefore plain and obvious that there is no reasonable prospect that the unjust enrichment claim can succeed against Mr. Hossu.

[55] I accordingly dismiss the claim of unjust enrichment as against Mr. Hossu personally, but grant leave to amend. In my view, the deficiency in this pleading is one that can be remedied. Mr. Eghbalian appears to take the view that he steps into the shoes of FTI as its creditor, such that the alleged deprivation affected him personally, and not just FTI. It is appropriate to give Mr. Eghbalian the opportunity to plead this position, or any other basis for the claim that he has personally experienced a deprivation, in order to "cure" the pleading of this cause of action.

Conversion

[56] The defendants assert that allegations of conversion made against 994 are identical to those made against Mr. Hossu. It is pleaded against each of them that they "caused an interference by obtaining the Invoice Amount from Labiofam for" themselves, and used the invoice amount or otherwise dispossessed the plaintiffs of it for their own benefit, "in a manner that is inconsistent with the plaintiff's right of possession." 994 and Mr. Hossu are alleged to have taken the same improper actions in respect of the same funds. The defendants say that this means the cause of action of conversion has been improperly pleaded and must be struck.

[57] I do not agree. As discussed above, the funds at issue appear to sit in a bank account held by Mr. Hossu in his personal capacity. The claim that Mr. Hossu is personally involved in the conversion thus has some factual basis. It is therefore proper to plead that he is personally involved in the conversion.

[58] I therefore find that the claim of conversion as against Mr. Hossu should not be struck.

Breach of Fiduciary Duty

[59] The claim of breach of fiduciary duty has no reasonable prospect of success against Mr. Hossu personally.

[60] The Supreme Court of Canada has described the factors that give rise to an ad hoc fiduciary duty as the following: (1) the alleged fiduciary's undertaking to act in the alleged beneficiary's best interest; (2) a defined person or class vulnerable to the fiduciary's control; (3) a beneficiary's legal or substantial practical interest that may be adversely impacted by the fiduciary's exercise of discretion or control; and (4) the beneficiary's vulnerability arising from the relationship (Alberta v Elder Advocates of Alberta Society, 2011 SCC 24 at paras. 30-36).

[61] The Amended Statement of Claim alleges that Mr. Hossu was Mr. Eghbalian's fiduciary. The claim of breach of fiduciary duty is pleaded thus:

60. The plaintiff pleads that Mr. Hossu undertook to act in the plaintiff's best interest and that FTI relied on Mr. Hossu's knowledge of business operations and banking protocols in Cuba. This reliance made the plaintiff vulnerable to Mr. Hossu.

61. The plaintiff pleads that this reliance and vulnerability amounted to a fiduciary duty owed to the plaintiff by Mr. Hossu.

62. The plaintiff pleads that FTI entered into the Amended Agreement, granting Mr. Hossu and 9946 Canada exercise of discretion and control over FTI's legal or substantial practical interest of its business in Cuba.

63. The plaintiff pleads that in breach of the [sic] Mr. Hossu's fiduciary duty, he made misrepresentations that led to his and 9946's benefit, at the detriment of FTI, for which he suffered damages.

64. The plaintiff pleads that in contravention of his legal or substantial practical interest, Mr. Hossu and/or 9946 Canada obtained and retained the Invoice Amount and used it for his/its own personal benefit.

[62] The claim that Mr. Hossu owed FTI and/or Mr. Eghbalian a fiduciary duty is not tenable as a matter of law. The parties had a commercial relationship. Such a relationship is not a fiduciary one. I am provided with no case law to the contrary. Mr. Eghbalian says that Mr. Hossu was his and/or FTI's fiduciary because he had much more expertise in Cuban business and banking requirements than they did. I am provided with no legal authority for the proposition that the fact that one party to a commercial relationship has more knowledge or expertise in a particular field of business than the other renders them a fiduciary. Nor do I consider this argument to be commercially practical.

[63] Nor are the elements of the cause of action of breach of fiduciary duty adequately pleaded. The Amended Statement of Claim pleads that Mr. Hossu undertook to act in the plaintiff's best interests, but provides no particulars of how, when, or in what manner Mr. Hossu made such an undertaking. It provides only a bald, conclusory statement that an undertaking was provided. It is also ambiguous as to whether the alleged undertaking was made to FTI or Mr. Hossu. As a matter of law, the shareholder of one company cannot have a fiduciary duty to the shareholder of another company. The particulars of this alleged undertaking therefore ought to be described clearly. The way in which Mr. Eghbalian was vulnerable in his personal capacity as a result of the alleged fiduciary relationship should also be pleaded clearly, given that he and FTI are separate legal personalities.

[64] It is therefore plain and obvious that there is no reasonable prospect that the breach of fiduciary duty claim could succeed against Mr. Hossu. The claim should be struck.

[65] I do not grant leave to amend. I do not have reason to expect that amending the pleading can cure its deficiencies. Nothing in the balance of the pleading, in the motion materials before me, or arising from oral argument persuades me that there are any material facts known to be true that, if pleaded, would show that there was a fiduciary relationship between Mr. Hossu and Mr. Eghbalian. As a consequence, there is no basis on which to grant leave to amend this claim.

Conclusion

[66] I accordingly strike the breach of contract, breach of duty of good faith in contractual performance, and breach of fiduciary duty claims against Mr. Hossu, without leave to amend. I strike the fraudulent misrepresentation, fraud, and unjust enrichment claims against Mr. Hossu, with leave to amend. I do not strike the conversion claim.

[67] Success on this motion was mixed. The parties are therefore responsible for their respective costs on the motion.

Parghi J.

Date: October 16, 2025