THE CLASS PROCEEDING ACT, 1992

BETWEEN:

Plaintiff

And

Defendants

Appearances:

J. Arthur Cogan, QC Counsel for the Plaintiff.

Fred E. Seller Counsel for the Defendants.

The Motion

The defendants submit that the plaintiff’s statement of claim discloses no reasonable cause of action against them and should be struck out pursuant to the rule 21.01 (1) (b) of the Rules of Civil Procedure. In the alternative, the defendants ask that the action be dismissed on the ground that the plaintiff has failed to produce for inspection the plaintiff’s contract with the Ottawa Senators Hockey Club referred to in the statement of claim as required by rule 30.04 (2) & (3). In the further alternative, the defendants seek a dismissal on the ground that the action is frivolous and vexatious.

The Parties to the Action

The plaintiff is a season ticket holder for the home games of the Senators. He acquired the tickets by virtue of a contract with the Ottawa Senators Hockey Club. He brings this action as a class proceeding on behalf of him and on behalf of all other season ticket holders.

The defendant Mr. Yashin is a professional hockey player. Last year he was the star player of the Senators and their captain. He had a contract with the Ottawa Senators Hockey Club to play the 1999-2000 season for an annual salary of 3.6 million U. S. dollars.

The defendant Mr. Gandler is a professional agent employed as such by Mr. Yashin. The corporate defendant is solely controlled and operated by Mr. Gandler to carry on his agency business.

Background

Sometime in the summer of 1999, the defendants notified the Ottawa Senators Hockey Club that Mr. Yashin would not play the 1999-2000 season unless the club agreed to renegotiate his contract. The Ottawa Senators Hockey Club refused. Mr. Yashin did not attend training camp nor has he participated in any of the regular season games to date.

The plaintiff commenced this action. The plaintiff’s claim alleges various intentional torts against both defendants, namely inducing breach of contract, unlawful interference with economic and contractual relations, conspiracy and breach of fiduciary duty. In addition thereto, the claim alleges negligence against Mr. Gandler.

Both in his Factum and at the opening of oral submissions Mr. Cogan indicated that the plaintiff was not pursuing his claim based on the tort of inducing a breach of contract. Therefore, paragraphs 1 (a) I and 2 (a) I of the statement of claim will be struck out.

Rule 21.01 (1) (b): the Applicable Test

On a motion brought pursuant to rule 21.01 (1) (b), the principles to be applied are the following:

1. The allegations of fact in the statement of claim , unless patently ridiculous or incapable of proof, must be accepted as proven;
2. The moving party, in order to succeed, must show that it is plain, obvious and beyond doubt the plaintiff could not succeed;
3. The novelty of the cause of action will not militate against the plaintiff; and,
4. The statement of claim must be read generously with allowance for inadequacies due to drafting deficiencies. See TD Bank v. Deloitte Touche (1991), 5 O. R. (3^rd) 417.

In Dawson v. Rexcraft Storage and Warehouse Inc. [1998] O. J. No. 3240, Borins J. A. describes the test as follows:

Under rule 21.01 (1) (b), a defendant may move to strike out a plaintiff’s statement of claim on the ground that it does not disclose a reasonable cause of action. The essence of the defendant’s motion is that the "wrong", described in the statement of claim, is not recognized as a violation of the plaintiff’s legal rights, with the result that the court would be unable to grant a remedy, even if the plaintiff proved all the facts alleged. Thus, to permit the plaintiff to litigate the claim through discovery and trial would be a waste of both parties’ and the court’s time.

Because the purpose of a rule 21.01 (1) (b) motion is to test whether the plaintiff’s allegations (assuming they can be

proved) state a claim for which a court may grant relief, the only question posed by the motion is whether the statement of claim states a legally sufficient claim, i. e., whether it is substantively adequate. Consequently, the motion’s judge, as mandated by rule 21.01 (1) (b), does not consider any evidence in deciding the motion. The motion’s judge addresses a purely legal question: whether, assuming that the plaintiff can prove the allegations pleaded in the statement of claim, he or she will have established a cause of action entitling him or her to some form of relief from the defendant.

Because the dismissal of an action for failure to state a reasonable cause of action is a drastic measure, the court is required to give a generous reading to the statement of claim, construe it in the light most favourable to the plaintiff, and be satisfied that it is plain and obvious that the plaintiff cannot succeed. See Hunt v. Carey Canada Inc., [1990] S. C. R. 959.

Intentional Interference with Contractual Relations

The defendants submit that the plaintiff has failed to plead three necessary elements of this tort. Mr. Seller relies on the case of Ontario Store Fixtures Inc. v. Mmmuffins Inc. et al. (1989), 70 O. R. (2^nd) 42 for the proposition that this tort consists of the following elements:

1. An enforceable contract;
2. Knowledge of the plaintiff’s contract;
3. An intentional act on the part of the defendant to cause a breach of that contract;
4. Wrongful interference on the part of the defendant;

And

5. Resulting damage.

Mr. Seller argues that the plaintiff has not pleaded the third, fourth and fifth element. Mr. Seller correctly points out that this is an intentional tort and that the defendants conduct must target the plaintiff. He submits that the statement of claim does not allege that he defendants intended to interfere with the plaintiff’s rights but rather that the sole purpose of the defendants’ actions was self-enrichment. This is putting a very restrictive interpretation on the allegations outlined in the statement of claim. On the contrary, a generous reading of the statement of claim indicates that although the real motive of the defendants’ action was self-enrichment, the target of the defendants’ conduct was the season ticket holder. In order to attain their objective the defendants are alleged to have purposely decided to withhold Mr. Yashin’s presence on the ice and thereby willfully and effectively reduce the consideration the plaintiff was entitled to receive in return for the purchase of the season ticket. The statement of claim alleges that the defendants willfully did this in order to get the plaintiff to put pressure on the Ottawa Senators Hockey Club. In this light, the effect on the plaintiff of the defendants’ conduct cannot be said to be merely incidental.

It may be that the actions of the defendants were for the sole purpose of personal gain yet they may very well still constitute the subject tort. Professor Klar in his text Tort Law (Calgary: Carswell 1991) states:

In order to succeed a plaintiff must prove that he defendant intended to procure a breach of contract. In this respect, intention is proven by showing that the defendant acted with the desire to cause a breach of contract, or with the desire to cause a breach of contract, or with the substantial certainty that a breach of contract would result from the defendant’s conduct. Even if the defendant’s motive was not to harm the plaintiff but to further personal interests, the defendant will be held liable when the contractual breach was intended. Despite dicta in some of the case law that an intention to damage or harm the plaintiff is an element of the tort, numerous Canadian and Commonwealth cases have made it clear that malicious motive is not an element of the tort.

See also Greig v. Insole, [1978] 1 W. L. R. 302 at 338 (Ch. D.). Dirassar & James v. Kelly, Douglas & Co. (1966) 59 D. L. R. (2^nd) 452 (B. C. C. A.), Thermo King Corp. v. Provincial Bank of Canada (1981) 130 D. L. R. (3d) 256 (Ont. C. A.), Emerald Construction Co. Ltd.; v. Lowthian [1966] 1 W. L. R. 691 at 704 (C. A. ); Jones Bros. ( Hunstanton) Ltd. v. Stevens [1955] 1 Q. B. 275 at 280.

Mr. Sellar further submits that the statement of claim does not allege that there has been any actual interference with the performance of the plaintiff’s contract. It may very well be that at a later stage in these proceedings, the evidence will establish that the only real term of the contract between the plaintiff and the Ottawa Senators Hockey Club was the right to assist at the home games of the Senators and nothing else. At this stage however the statement of claim alleges that the contract was much more and included the express condition that Mr. Yashin would play and be an integral part of the entertainment package. This is clearly set out in paragraphs 7 through 13, 18 and 19. It cannot be said that by willfully breaching his contract with the Senators, as is alleged, Mr. Yashin did not actually interfere with the performance of the plaintiff’s contract with the Ottawa Senators Hockey Club as the contract is defined in the statement of claim.

The tort of intentional interference with contractual relations is the most recent of the so called "business torts". Clerk and Lindsell on Torts describe it as "a tort of uncertain ambit" and one that is "relatively undeveloped". As it is still evolving, there is even more reason for the proposition that an action based on this tort should only be dismissed at this stage in the clearest of cases.

Furthermore, this tort can be committed indirectly. This is what is being alleged in this case. As set out in the following passage from Fleming, The Law of Torts (7^th ed. 1987), at page 653:

Liability will attach if the intervenor, with knowledge of the contract and

intent to prevent or hinder its performance, either (i) persuades, induces or procures one’ of the contracting parties not to perform his obligations, or (ii) commits some act, wrongful in itself to prevent such performance. The first is usually described as "direct," the second as "indirect" interference; the first involving immediate pressure on one of the contracting parties, while in the second the intervenors acts ‘at one remove.’

It is not clear and obvious that the allegations in the statement of claim do not support indirect interference.

Finally Mr. Seller submits that the statement of claim does not allege that the plaintiff suffered an economic loss. I have not been referred to any cases where the contractual relations allegedly interfered with were the subject of a consumer contract as compared to a business contract. The question then becomes what is a loss that will satisfy that final constituent element of this tort.

In recent times courts have attempted to give monetary damages for loss of enjoyment or dissatisfaction with the product purchased when the plaintiff had entered into a consumer contract for some form of entertainment package. The plaintiff here has pleaded such a loss. It may be that it will be very difficult to prove that the loss suffered was compensable under the terms of the contract. However at this stage this is not the issue. I cannot conclude that it is clear and obvious that the plaintiff will fail on the issue of resultant loss or damage.

Conspiracy

In their factum the defendants argue that the statement of claim does not disclose a reasonable cause of action for conspiracy. The defendants submit in the alternative three basis for their argument:

1. The plaintiff does not allege either that the predominant purpose of the defendants’ conduct was to injure the plaintiff or that the defendants’ conduct was directed towards the plaintiff as required by the definition of civil conspiracy enunciated by the Supreme Court of Canada in Canada Cement Lafarge Ltd. v. British Columbia Lightweight Aggregate Ltd. [1983] 1 S.C.R. 452.
2. The plaintiff has not pleaded with sufficient precision the overt acts which are alleged to have been done by each of the defendants in pursuance and in furtherance of the alleged conspiracy.
3. The alleged conspiracy is based on the same unlawful means and gives rise to the same injury as is alleged in support of the tort of unlawful interference with contractual relations and therefore the claim for conspiracy merges with the other tort.

I am not prepared to strike out the claim of conspiracy on the basis of the first two grounds raised by the defendants. However I have come to the conclusion that the conspiracy claim must be struck on the basis of the doctrine of merger.

The law relating to merger has been stated by Lord Justice Denning in Ward v. Lewis, [1955] 1 All E.R. 55 at p. 56, [1955] 1 W.L.R. 9 (C.A.): It is important to remember that when a tort has been committed by two or more persons an allegation of a prior conspiracy to commit the tort means nothing. The prior agreement merges in the tort.

The facts alleged to support the conspiracy are the very facts on which the claim for interference with contractual rights is founded. Likewise the injury allegedly created by the conspiracy is the same as that created by the other tort. The defendants are alleged to have agreed to interfere with the plaintiff’s contract by withholding the services of Mr. Yashin in wilful breach of Mr. Yashin’s contract with the Ottawa Senators Hockey Club. It is alleged that as a result thereof the plaintiff is not receiving what he had contracted for. As such the plaintiff is merely making an artificial separation of claims. See Elliott v. CBC (1993), 16 O.R. (3d) 677 aff’d (1995), 25 O.R. (3^rd) 302 (C.A.); Normart Management Ltd. v. West Hill Redevelopment Co. (1998), 37 O.R. (3^rd) 97 (C.A.).

Breach of Fiduciary Duty

Court impose fiduciary duties only in situations where someone stands in a particular position of trust by virtue of an agreement or as a result of the circumstances and relationship of the parties.

Certain relationships, because of the inherent purpose of the relationship, impose a duty on one of the parties to act in the best interest of the other party. The classical example of this is the relationship of trustee-beneficiary. Outside these special and well recognized relationships, a fiduciary obligation may arise as a matter of fact out of the special circumstances of a particular relationship. The test to determine if the obligation arises has been defined as follows by La Forest J. in Hodgkinson v. Simms [1994] 3 S.C.R. 409: "…the question to ask is whether given all the surrounding circumstances, one party could reasonably have expected that the other party would act in the former’s best interests with respect to the subject matter at issue. …what is required is evidence of a mutual understanding that one party has relinquished its own self interest and agreed to act solely on behalf of the other."

The statement of claim does not allege any facts to support a finding of a fiduciary relationship between the plaintiff and the defendants. Indeed all the facts alleged by the plaintiff would militate against such a finding. Mr. Yashin is a professional hockey player who offers his services for the best possible monetary remuneration. Mr. Gandler is a professional agent paid by Mr. Yashin to counsel him on how to obtain the best remuneration. The only fact alleged to substantiate a fiduciary duty is the bare statement that the "tickets holders were vulnerable to the defendants: (para.22). The statement of claim does not disclose a reasonable cause of action on the basis of breach of fiduciary duty.

Negligence

The first necessary element of the tort of negligence is that the defendant is under a duty of care towards the plaintiff. In order for a duty to exist there must be a sufficient relationship of proximity between the plaintiff and the defendant.

Mr. Cogan argues that foreseeability of damage to the plaintiff is the only criteria necessary to give rise to a duty of care. That is not the state of the law. Rather there must exist a close and direct relationship between the plaintiff and the defendant before a duty of care arises.

The statement of claim sets out the action against Mr. Gandler in negligence in paragraph 25:

1. The plaintiff states that the defendant Gandler was negligent in his capacity as agent and advisor for Yashin in advising, inducing, coercing, persuading, instigating and procuring Yashin to breach his contract with the club when he knew or ought to have known that said conduct would cause financial and economic damage to the plaintiff and other season ticket holders.