Meditrust Healthcare Inc. v. Shoppers Drug Mart

Meditrust Healthcare Inc. v. Shoppers Drug Mart Collection Decisions of the Court of Appeal Date 1999-09-09 Docket numbers C30879 Judges Carthy, James Joseph; Labrosse, Jean-Marc; Feldman, Kathryn N. Subject Civil Decision Content DATE: 19990909 DOCKET: C30879 COURT OF APPEAL FOR ONTARIO CARTHY, LABROSSE and FELDMAN JJ.A. BETWEEN: ) ) Ronald D. Manes and MEDITRUST HEALTHCARE INC. ) David M. Golden, ) for the appellant Appellant ) ) Mark A. Gelowitz and - and - ) Lisa Sand, ) for the respondents Bloom, SHOPPERS DRUG MART, a division of ) Konviser and Anderson IMASCO RETAIL INC., SHOPPERS ) DRUG MART LIMITED, DAVID BLOOM, ) Vanessa Yolles, ARTHUR KONVISER, LAWRENCE ) for the respondent Hirsch ROSEN, THE SOCIETY FOR CONCERNED ) PHARMACISTS, GLORIA ANDERSON, ) Cheryl Woodin, CAROLINE BEDARD SMITH, THE ) for the respondent Fevang METROPOLITAN TORONTO ) PHARMACISTS ASSOCIATION, RUTH ) Sean Dewart, MALLON, SAM HIRSCH, CANADIAN ) for the respondents Mallon PHARMACEUTICAL ASSOCIATION, ) and The Metropolitan LEROY FEVANG, ONTARIO ) Toronto Pharmacists PHARMACISTS' ASSOCIATION, and ) Association CANADIAN ASSOCIATION OF CHAIN ) DRUG STORES ) ) Respondents ) ) Heard: June 23, 1999 ) On appeal from the order made by Madam Justice Molloy dated October 13, 1998 LABROSSE J.A.: [1] This is an appeal from the October 13, 1998 order of Molloy J. (the “motions judge”) striking out the appellant’s claim against certain individual respondents pursuant to motions brought under Rule 21 of the Ontario Rules of Civil Procedure. [2] The appellant carries on business as a mail-order pharmacy in Canada. It has commenced an action seeking damages from the respondents arising from their alleged participation in a conspiracy to destroy or injure the appellant as a competitor in the retail pharmacy industry. The appellant has also alleged that the respondents have committed numerous other intentional torts against it, namely unlawful interference with economic interests and infliction of economic harm, intentional interference with contractual relations, misleading advertising, injurious falsehood and intimidation. [3] In October 1997, the respondents moved to strike all or part of the statement of claim pursuant to Rule 25.11 and in the alternative, sought particulars of the pleading. In an endorsement dated February 23, 1998, the motions judge ordered that certain paragraphs be struck without leave to amend and further ordered that certain particulars be provided with respect to other paragraphs. Given the large number of changes, she considered that the appropriate disposition was to strike out the statement of claim in its entirety with leave to deliver a fresh or amended statement of claim. [4] Following the delivery of the amended statement of claim, numerous respondents again brought motions, seeking the dismissal of the action pursuant to Rule 21. [5] In a second endorsement dated October 13, 1998, the motions judge ruled that the claims against the individual defendants Bloom, Konviser, Anderson, Mallon, Fevang and Hirsch (the “individual respondents”) be struck out without leave to amend. In reaching her conclusion, the motions judge purported to rely on the decision of this court in ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 26 O.R. (3d) 481. [6] The issue with respect to the individual respondents is whether corporate officers, directors and employees may be held liable for torts committed by them in the course of their employment. A second issue relating only to the respondent Hirsch will be dealt with separately at the end of these reasons. [7] In ScotiaMcLeod, a purchaser of debentures sued a firm of underwriters and a law firm after the debentures proved to be worthless. The defendants brought third-party proceedings against the company financed by the transaction (Peoples Jewellers) and two of its senior officers, Gill and Irving Gerstein. Nine other members of the company’s board of directors were also named in the third-party claim. Specific allegations of negligent misrepresentation were pleaded against the two senior officers. No such allegations were made against the other directors. Instead the claim against them was simply for contribution and indemnity. [8] On a motion brought under Rule 21, the third-party claim was dismissed as not disclosing a reasonable cause of action. On appeal, this court upheld the dismissal of the third-party claim against the nine directors but permitted the claim to proceed against Gill and Irving Gerstein. The issue before the court was clearly stated at p. 490 where Finlayson J.A., for the court, wrote: To my thinking, the appellants' pleadings seek to hold the directors vicariously liable for the negligence of the corporation, Peoples, on whose board the directors sit. The cause of action pleaded against the respondent directors is predicated on personal liability arising out of the actions of Peoples. In the court’s view, the claim could not succeed against the directors in the absence of an allegation of negligence against them for their personal actions, not only actions of the company for which they were the directing minds. Finlayson J. A. also wrote (at p. 494): As I have set out above, the relief claimed against the directors other than Gill and Irving Gerstein is restricted to contribution and indemnity. Such a claim cannot succeed without an allegation of negligence. And at p. 495: …[I]t is obvious from the argument of appellants' counsel that the claim against the directors other than Gill and Irving Gerstein is not based on any personal involvement on the part of any of these directors. No attempt was made to single out their activities as individuals. The claim against them is founded on a theory of liability which does not exist in law. [9] The court, however, allowed the claim to proceed against Gill and Irving Gerstein on the basis they were identified in the pleadings as having been personally involved in the alleged misrepresentations. Finlayson J.A. further stated (at p. 495): Gill and Irving Gerstein are placed in a different position by reason of being the two most senior executive officers of Peoples. It is alleged against them that they were directly and personally involved in the marketing of the debentures and that they were involved in making certain representations personally which were relied upon by the appellants. The appellants have also made an allegation of negligent misrepresentation against both of them personally. While the authorities make clear that officers of corporations who are the directing minds of the corporation have the same identity of interest as the directors and thus the same immunity to suit, I am not prepared to dismiss the action against Gill and Irving Gerstein at this stage. The threshold of sustainability of pleadings is very low. Although I am of the view that the appellants are attempting to stretch the envelope of available jurisprudence to encompass the acts of Gill and Irving Gerstein, an action should not be dismissed at this stage simply because it is novel in law. [10] In effect, this court in ScotiaMcLeod held that an action in tort could proceed against the officers, directors and employees of a corporation provided their personal involvement in the alleged tort was specifically pleaded. [11] The issue of the liability of corporate officers, directors and employees for torts committed by them in the course of their employment was more recently considered by this court in ADGA Systems International Ltd. v. Valcom Ltd. et al. (1999), 43 O.R. (3d) 101, released subsequent to the decision under appeal. [12] In ADGA, the plaintiff sued the corporate defendant, its sole director, and two senior employees, claiming that they had raided the plaintiff’s staff and thereby caused economic damages. The action was framed in tort (inducing breach of contract, interfering with economic interests, inducing breaches of fiduciary duty). The individual defendants succeeded in having the action summarily dismissed against them on the basis that they could not be held liable for actions taken in the best interests of the corporation. This court reversed this decision and allowed the claims against the individual defendants to proceed. [13] Carthy J.A., for the court, reviewed the case law from Canadian and American jurisdictions and stated (at p. 107): The consistent line of authority in Canada holds simply that, in all events, officers, directors and employees of corporations are responsible for their tortious conduct even though that conduct was directed in a bona fide manner to the best interests of the company, always subject to the Said v. Butt [[1920] 3 K.B. 497] exception. [The Said v. Butt exception does not permit a claim for inducement of breach of contract to proceed against a corporate officer or employee where a claim for breach of contract lies against the corporation.] [14] Carthy J.A. further stated (at p. 109): These Canadian authorities at the appellate level confirm clearly that employees, officers and directors will be held personally liable for tortious conduct causing physical injury, property damage, or a nuisance even when their actions are pursuant to their duties to the corporation. [15] Finally, Carthy J.A. alluded to the passage in ScotiaMcLeod which is often quoted as suggesting some limitation on the liability of directors and officers. Finlayson J.A. wrote (at p. 491): Absent allegations which fit within the categories described above [allegations of fraud, deceit, dishonesty or want of authority], officers or employees of limited companies are protected from personal liability unless it can be shown that their actions are themselves tortious or exhibit a separate identity or interest from that of the company so as to make the act or conduct complained of their own. Carthy J.A. commented on this passage as follows (at p. 112): The operative portion of this paragraph is the final sentence which confirms that, where properly pleaded, officers or employees can be liable for tortious conduct even when acting in the course of duty. That this is clearly the intent of what was being stated is evidenced by the conclusion that the action should proceed against two defendants; against whom negligent conduct had been properly pleaded. [16] In ADGA, Carthy J.A. simply relied upon the principles previously enunciated by Finlayson J.A. in ScotiaMcLeod. Both decisions stand for the proposition that a claim in tort may proceed against directors, officers and employees of corporations for acts performed in the course of their duties, provided that (1) the allegations of their personal tortious conduct are properly pleaded and (2) the limited exception in Said v. Butt does not apply. [17] In her first endorsement dated February 23, 1998, the motions judge said at p.6 of her reasons: This is not a situation in which vague allegations of conspiracy have been made without any factual basis whatsoever. Rather, there are extensive references in the pleadings to specific actions undertaken, including references in some cases to the dates and some of the individuals and groups directly involved. There is enough information provided to satisfy me that the plaintiff is not asserting a wild hypothesis with no air of reality or that this is nothing more than a fishing expedition. The plaintiff has some, but not all, of the information it needs to set out all of the elements of the conspiracy plea. In these circumstances, and given the nature of the cause of action and the allegations made, I consider it to be in the interests of justice to allow the plaintiff to proceed at least to the discovery stage. [18] The amended statement of claim expressly alleges that the individual respondents carried out and participated in specifically pleaded tortious acts with the intent necessary for a court to find personal liability if the allegations are established at trial. The constituent elements of the tort of conspiracy have been properly pleaded and it has also been alleged with particularity that the individual respondents, in pursuing the object of destroying the appellant, breached the Competition Act and committed intentional torts. [19] On a motion brought pursuant to Rule 21, the court must accept the facts pleaded as true and the pleadings must be read generously with reasonable allowance for inadequacies relating to drafting deficiencies. See Nash v. Ontario (1995), 27 O.R. (3d) 1 at 6. [20] For the above reasons, the claim should be allowed to proceed against the individual respondents. [21] There is another issue that must be addressed which relates only to the respondent Hirsch. In her first endorsement, the motions judge struck out, without leave to amend, the paragraphs in the statement of claim dealing with an issue of bias with respect to certain discipline proceedings against a Meditrust pharmacist. In her second endorsement, the motions judge concluded that paragraph 112 of the amended statement of claim was simply a rehashing of the allegations which she had ordered struck from the previous pleading. [22] The issue relating to the discipline proceedings was dealt with by the motions judge in her first endorsement. No appeal was taken from that decision. In paragraph 112 of the amended statement of claim, the appellant is seeking to re-litigate the issue. It is precluded from doing so, and the paragraph was correctly struck out without leave to amend. [23] Accordingly, the appeal is allowed, subject to the above exception respecting Hirsch, and the order striking out the amended statement of claim against the individual respondents is set aside. The appellant is entitled to its costs of this appeal. Success being divided as between the appellant and the respondent Hirsch, I would make no order as to costs as between these two parties. RESERVED: