Paul Shelley First Plaintiff And: Rick Lewis Second Plaintiff And: Big Land Construction Ltd. Third Plaintiff And: Lynda NoËl First Defendant And: Charles Deslauriers Second Defendant And: Laval Fortin Ltée Third Defendant, 2020 NLSC 54

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Shelley v. Noël , 2020 NLSC 54 Date : May 1, 2020 Docket : 201801G8033 Between: Paul Shelley First Plaintiff And: Rick Lewis Second Plaintiff And: Big Land Construction Ltd. Third Plaintiff And: Lynda NoËl First Defendant And: Charles Deslauriers Second Defendant And: Laval Fortin Ltée Third Defendant Before: Justice Daniel M. Boone Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: March 13, 2020

Summary: In an action arising out of the alleged mismanagement of a closely held corporation, the Plaintiffs asserted causes of action in conversion,negligence, breach of contract and unjust enrichment, and a claim for oppression remedy. The Defendants applied to strike the claimsunder Rules 14.24(1)(

a) and 7.04(2)(a). The Court allowed the application to strike the causes of action asserted by the individualplaintiff shareholders in conversion, negligence and breach of contract, and their claim for an oppression remedy. The Court dismissedthe application to strike the actions in unjust enrichment, and the actions by the company in conversion, negligence, and breach ofcontract against the corporate Defendant. Appearances: Kyle R. Rees and Kevin J. Galway Appearing on behalf of the Plaintiffs Sheri H. Wicks Appearing on behalf of the Defendants Authorities Cited: CASES CONSIDERED: Roberts v.

Browning Ferris Industries Ltd. (1998), (NL CA), 170 Nfld. & P.E.I.R. 228,522 A.P.R. 228 (Nfld. C.A.); Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42,; Seascape 2000 Inc. v. Canada (Attorney General)2012 NLTD(G) 185; BAE-Newplan Group Ltd. v. Altius Minerals Corp., 2012 NLCA 21; Walsh v. TRA Co., 2007 NLCA 50; Andrews v.Canada (Attorney General), 2014 NLCA 32; Montreal Trust Co. of Canada v. Hickman, 2001 NFCA 42; Humby Enterprises Ltd. v. A.L.Stuckless & Sons Ltd., 2003 NLCA 20; GRI Simulations Inc. v.

Pro-Dive Oceaneering, 2004 NLCA 74; McNamara Construction Co. v.Newfoundland Transshipment Ltd. (1999), (NL SC), 172 Nfld. & P.E.I.R. 208, 528 A.P.R. 208 (Nfld. S.C.(T.D.));Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, (SCC), [1996] 3 S.C.R. 727; U.F.C.W., Local1252 v. Cashin (1996), (NL SC), 149 Nfld. & P.E.I.R. 112, 467 A.P.R. 112, (Nfld. S.C.(T.D.)); Hollins v Fowler,

(1875) LR 7 HL 757, [1874-80] All ER Rep 118; Foss v. Harbottle (1843), 2 Hare 461, 67 E.R. 189 (Eng. V.-C.); NPV Management Ltd.v. Anthony, 2003 NLCA 41; Hercules Managements Ltd. v. Ernst & Young, (SCC), [1997] 2 S.C.R. 165; Walsh v.T.R.A. Co., 2015 NLTD(G) 27; London Drugs Ltd. v. Kuehne & Nagel International Ltd., (SCC), [1992] 3 S.C.R. 299;Garland v. Consumers' Gas Co., 2004 SCC 25; Pro-Sys Consultants Ltd. v. Microsoft Corp., 2013 SCC 57; Atlantic Lottery CorporationInc.-Société des loteries de l'Atlantique v. Babstock, 2018 NLCA 71; American Reserve Energy Corp. v. McDorman, 2002 NFCA 57;Mangrove v.

Newfoundland & Labrador, 2009 NLTD 115; Waxman v. Waxman, (ON CA), 2004 CarswellOnt 1715,44 B.L.R. (3d) 165 (Ont. C.A.); Holden v. Infolink Technologies Ltd., 2006 CarswellOnt 910, 146 A.C.W.S. (3d) 70 (Ont. Sup. Ct. J.);Pappas v. Acan Windows Inc. (1991), (NL SC), 90 Nfld. & P.E.I.R. 126, 2 B.L.R. (2d) 180, (Nfld. S.C.(T.D.));Malata Group (HK) Ltd. v. Jung, 2008 ONCA 111; Rea v. Wildeboer, 2015 ONCA 373 STATUTES CONSIDERED: Corporations Act, R.S.N.L. 1990, c. C-36 RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D.

TEXTS CONSIDERED: Potter et al, Fraud Unravels Everything: A Limited Justification for Piercing the Corporate Veil, in Todd L.Archibald, ed, Annual Review of Civil Litigation, (Toronto: Thomson Reuters, 2019); Linda D. Rainaldi & Kim Kreuzer eds., Remediesin Tort (Toronto: Thomson Reuters, 1987, 2019); Cameron Harvey & Darcy MacPherson, Agency and Partnership Law Primer, 5th ed.(Canada: Thomson Reuters, 2016) REASONS FOR JUDGMENT Boone, J.: INTRODUCTION [1] This action arises out of a dispute over the management of a closely held corporation. The Plaintiffs include the corporation

and two of its shareholders. They make allegations of mismanagement and financial impropriety against the Defendant. [2] This is a pleadings motion. The Defendants have not yet filed Defences. They ask the Court to strike the Plaintiffs’ claimsunder Rule 14.24(1)(

a) of the Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D. (“Rules”) because they say that thePlaintiffs’ pleadings do not disclose any cause of action. Alternatively, each of the Defendants individually seek separate orders pursuantto Rule 7.04(2)(

a) removing them from the action as a whole or in respect of certain claims. [3] The Plaintiffs say that their pleadings disclose causes of action against some or all of the Defendants in conversion, negligence,breach of contract, and unjust enrichment. The individual Plaintiffs also claim that they are entitled to the statutory remedy foroppression. [4] The parties agree on the test that the Court should apply to determine whether the pleadings disclose a cause of action.

Theirsubmissions on this application also did not diverge in any significant way in the description of the requisite elements of the causes ofaction under consideration. The primary issues, therefore, are whether the pleadings set out the necessary elements of each cause ofaction. Two secondary issues arise: (

i) if the necessary elements of a cause of action are not pleaded, then can amendment cure thedeficiency; (ii) if the necessary elements of a cause of action are disclosed, then should particulars nevertheless be ordered. THE PLAINTIFFS’ PLEADINGS [5] The pleadings the Court will examine for disclosure of a cause of action are the Statement of Claim and the Reply to anyDemand for Particulars: Roberts v. Browning Ferris Industries Ltd. (1998), (NL CA), 170 Nfld. & P.E.I.R. 228, 522A.P.R. 228 (Nfld.

C.A.) at paragraph 23. [6] Under the terms of the Rules, no evidence is admissible on an application under Rule 14.24(1)(a). The application proceeds onthe assumption that the Plaintiffs will prove the pleaded facts if the matter proceeds to trial. Although evidence may be filed in supportof an application under Rule 7.04(2)(a), neither party proffered any evidence in this case.

Facts Alleged [7] The Plaintiffs’ pleadings state a description of each of the parties and their relationship to each other (and to some others whoare not parties). [8] Big Land Construction Ltd. (“Big Land”) is a general construction contractor.

The company incorporated in this jurisdictionin 2009 and its shareholders and directors have been the same since its formation. [9] The directors of Big Land are the Plaintiffs, Paul Shelley (“Shelley”) and Rick Lewis (“Lewis”), the Defendant Lynda Noël(“Noël”), and a non-party, Johnny Adams (“Adams”). [10] Shelley and Lewis each own 25.5 percent (and therefore together own a majority) of the shares of Big Land.

Lavalin FortinAdams, a Quebec corporation (“LFA”), owns the remaining 49 percent of the shares. [11] Adams, Noël, and Defendant Charles Deslauriers (“Deslauriers”) are the directors of LFA. [12] Adams owns 51 percent of the shares of LFA. The Defendant Lavalin Fortin Ltée. (“LFL”), a Quebec corporation, owns theother 49 percent of the shares. [13] Noël and Deslauriers are the directors of LFL.

They each hold 50 percent of the shares of LFL through separate holdingcompanies in which they are each the sole shareholders. [14] LFL managed the operations of Big Land under a contractual arrangement that started in 2009. LFL gave notice to terminatethe contract in August 2018. [15] In

summary, then, although Shelley and Lewis controlled a majority of the shares of Big Land, they agreed that LFL wouldmanage the operations of the company. LFL was a shareholder in LFA, the minority shareholder of Big Land.

The individualDefendants indirectly owned all the shares of LFL and were personally involved in the management of Big Land as the operating mind,employees, or agents of LFL. [16] Big Land earned at least $17 million in revenue, from four major construction projects, during the period that LFL managed itsoperations. [17] However, Big Land never earned any profits and never paid out any dividends to the shareholders. [18] The Plaintiffs in essence complain that Big Land never made any profits because the Defendants siphoned money out of thecompany and into the coffers of LFL, and that the individual Defendants gained from this through their indirect shareholding in LFL.

The Plaintiffs allege that the Defendants engaged in the following specific wrongful conduct: 23) The Plaintiffs state that since Big Land’s incorporation in 2009, the Defendants have diverted profits from Big Land and havereceived and retained benefits from their management and control of Big Land and have acted oppressively, unfairly prejudicial, andhave unfairly disregarded the interests of Big Land, its directors, and its shareholders, without proper authority or regard to the rights ofShelley and Lewis as directors, and as shareholders. These actions include but are not limited to:

a) Diverting all of Big Land’s profits from 2009 to present to LFL through the payment of excessive management fees and costs,as well as the assumption of shared expenses with other parties by Big Land;

b) Unlawfully entering into contracts, conducting transactions, or facilitating transfers of funds without Shelley and/or Lewis’ knowledge, consent, or authorization, contrary to the Corporations Act ;

c) Withholding financial and operational information from Shelley and Lewis, notwithstanding Shelley and Lewis’ position in Big Land as directors, and shareholders, contrary to the Corporations Act ;

d) Controlling Big Land’s operations, affairs, finances, and accounting practices in a manner so as to minimize the Defendants’ financial risk and maximize the Defendants’ benefits at the expense of Big Land and its shareholders;

e) Submitting grossly inflated invoices to Big Land from LFL for ‘management fees’ and other “costs” and facilitating payment of these invoices from Big Land without the knowledge, consent, or authorization of Shelley and/or Lewis; and

f) Failure to declare reasonable or any dividends to the shareholders of Big Land from the date of its incorporation to the date of the issuance of this Statement of Claim. Remedies Claimed [ 19 ] The Plaintiffs seek the following orders as remedies for that wrongful conduct:

a) That the Defendants are ordered to provide forensic and audited accounting of Big Land under section 371(3) (1) of the Corporations Act , R.S.N.L. 1990, c. C-36 (“ Corporations Act ”) to determine the amount of funds, or the value of goods and services, improperly appropriated by the Defendants, their associates, affiliates, partners, and/or other businesses under their control;

b) That all transactions, flowing from Big Land to LFL are ordered to be set aside or varied until a proper accounting for LFL’s management fees and costs can be undertaken, under section 371(3) (

i) of the Corporations Act to determine the amount of funds or the value of goods and services improperly appropriated by the Defendants, their associates, affiliates, partners, and/or other businesses under their control;

c) That transactions flowing from Big Land to LFL are ordered to be set aside or varied until a proper accounting for LFL’s management fees and costs can be undertaken, under section 371(3) (

h) of the Corporations Act to determine the amount of funds or the value of goods and services improperly appropriated by the Defendants, their associates, affiliates, partners, and/or other businesses under their control;

d) Disgorgement of funds identified as improperly appropriated by the Defendants;

e) Judgment against the Defendants in the amount as determined by this Court as representing the value of the services and goods, wages paid but not earned, contracts granted to affiliated or related companies, or any other benefit to the Defendants, their associates, affiliates, partners, and/or businesses under their control;

f) That all costs including the valuation of any goods or services appropriated by the Defendants for their own use, or the use of others at their discretion, auditor fees, accounting fees, corporate filings fees, disbursements or ancillary costs, plus the costs and legal fees that may be incurred by the Plaintiffs to verify the calculation of the amounts deemed owing, and the legal fees of Shelley and Lewis, and Big Land, be paid by Noël and LFL;

g) That the Defendants are ordered to account for monies that should have been paid to the shareholders of Big Land as dividends, and that Big Land shall in turn declare a dividend to Shelley in the amount of 25.5 percent and Lewis in the amount of 25.5 percent of said recovered monies under section 371(3) (

j) of the Corporations Act in the manner and fashion that is most tax effective for Shelley and Lewis;

h) That Big Land is ordered to be dissolved and liquidated, under section 371(1)

l) of the Corporations Act ;

i) That the Defendants be required to indemnify Shelley and Lewis from any liability arising from their position as directors; THE TEST FOR STRIKING FOR WANT OF A CAUSE OF ACTION [ 20 ] A cause of action is the nexus between facts and remedy.

Certain sets of facts fit within legal theory so that once a Plaintiff demonstrates those facts then, subject to available defences, the Court will remedy the harm, or rectify the loss, or alter the situation that has arisen from those facts. [ 21 ] The Rules of Court require that a plaintiff’s pleadings disclose a cause of action and provide that a pleading that does not do so is liable to be struck: 14.24(1) The Court may at any stage of a proceeding order any pleading, affidavit or statement of facts, or anything therein, to be struck out or amended on the ground that

(

a) it discloses no reasonable cause of action or defence [ 22 ] The requirement that a party seeking a remedy plead a cause of action recognizes that there is no purpose in expending time and resources to demonstrate that certain facts occurred unless the Court can be moved to do something to alter the situation created by those facts. In that sense, the issues raised on an application such as this one are fundamentally about access to justice: Knight v. Imperial Tobacco Canada Ltd. , 2011 SCC 42 ; Seascape 2000 Inc. v.

Canada (Attorney General) 2012 NLTD(G) 185 . [ 23 ] In a case involving claims alleged against multiple parties, the requirement that the pleadings disclose a cause of action applies to each person by and against whom the claims are made. In such a case, each defendant can apply to be struck from the case as a whole, or from a particular cause of action alleged, by invoking Rule 7.04(2)(a): 7.04

(2) At any stage of a proceeding the Court may, on such terms as it thinks just and either of its own motion or on application of any party to the proceeding, (

a) order any party who is not a proper or necessary party, to cease to be a party. [ 24 ] The tests to determine whether the pleadings disclose a cause of action at all and whether a cause of action is specifically disclosed against one of several parties are the same: BAE-Newplan Group Ltd. v. Altius Minerals Corp ., 2012 NLCA 21 . [ 25 ] This Court has considered and applied the test for striking pleadings for want of a cause of action in dozens of cases.

The test is similar to that used in other Canadian jurisdictions and in the United Kingdom and has been simply stated as providing that a claim will be struck only if it is plain and obvious that it has no chance of success: Walsh v. TRA Co., 2007 NLCA 50 . In Seascape , Orsborn, C.J., as he then was, considered whether the restatement of the test by the Supreme Court of Canada in Knight , signaled that a more intense scrutiny was required.

This is because the Supreme Court in Knight described the test as an inquiry as to whether the pleadings disclose a reasonable prospect of success, as opposed to any chance of success. This case does not require that I consider that issue any further, as my conclusions would be the same regardless of which standard is applied. [ 26 ] The Court will apply the test by comparing the pleaded cause of action against any applicable mandatory rules of pleading and the elements of causes of action recognized by statute or precedent.

However, the mere novelty of a cause of action does not preclude a Plaintiff relying on it. The Courts have long recognized that the viability of novel causes of action ought generally be resolved on a full record rather than a pleadings motion. Yet, a cause of action that has already been authoritatively denied is not novel. In order to persuade the Court to allow a previously denied cause of action to survive a Rule 14.24(1) (

a) motion, it is incumbent on the Plaintiff to demonstrate a principled distinction of fact or policy or social circumstances between the case under consideration and the preceding cases. As Green, C.J. put it in Andrews v.

Canada (Attorney General) , 2014 NLCA 32 , paragraph 12 , it is incumbent on a party relying on a novel tort in the face of an application to strike to convince the Court that “the claim is based on rational argument that involves an extension, development or reasonably arguable reversal of some existing legal rule or principle.” [ 27 ] A finding that a Plaintiff’s pleadings as presented fail to disclose a plea of material facts that make up a cause of action with sufficient prospect for success does not lead inexorably to the conclusion that the impugned pleading should be struck.

Before coming to that conclusion, the Court must first consider whether the deficiency in pleading is curable by an amendment. This requirement is expressly included in Rule 14.24(1) , which states that the Court may order that a deficient or offensive pleading be “struck out or amended.” Montreal Trust Co. of Canada v. Hickman , 2001 NFCA 42 ; Humby Enterprises Ltd. v. A.L. Stuckless & Sons Ltd. , 2003 NLCA 20 , GRI Simulations Inc. v.

Pro-Dive Oceaneering , 2004 NLCA 74 . [ 28 ] The jurisdiction of the Court to order an amendment on a Rule 14.24(1) application does not depend for its exercise upon the Plaintiff making an application for an amendment, as it arises from the terms of the Rule . (see Roberts ). [ 29 ] A plaintiff who calls on the Court to right an alleged wrong ought not be denied justice as a result of poor legal drafting.

However, the exercise involved in determining whether amendment can cure a deficient pleading does not require that the Court draft the necessary amendment for the plaintiff or suggest to the Plaintiff specific new allegations of fact that could support a proper pleading. Rather, the role of the Court is to carefully consider the Plaintiff’s pleadings to discern whether the conduct or circumstance for which the Plaintiff seeks a remedy could, if implicit allegations were stated explicitly, support a cause of action known to law.

As Green, C.J. put it in Montreal Trust : 12 There will be many situations where a cause of action cannot be said to exist on the material facts as pleaded but it will be apparent what the intent of the pleader is and that by the addition of omitted material facts upon which the claimant will be relying or the variation of existing pleaded material, a cause of action known to the law would be said to exist.

It would be unfair to the pleader in such circumstances, and a violation of the principle that cases should, if possible, be disposed of on their merits, to strike the claim without allowing the pleader an opportunity to attempt to cure the defect (but with, perhaps, appropriate penalties in costs). [ 30 ] And later in the decision : 53 …So long as it discloses an intention to assert a skeleton, or even a ghost of a claim known to the law (even though all of the constituent elements may not be properly pleaded), then the court may, if it is of the opinion that the claim can be properly described and fairly asserted without irremediable prejudice to the other side, allow the claimant to put flesh on the skeleton (and maybe even supply a few missing bones), by permitting or ordering amendments and/or particulars to ensure, amongst other things, that: (

i) the pleading clearly indicates which of the facts alleged relate to which cause of action against which defendant; and (ii) sufficient particulars are given to enable the defendant to know what particular factual scenarios are being alleged that, if proven, will constitute each cause of action and will justify each of the remedies sought. [ 31 ] Green, C.J. mentioned in that excerpt that an order for particulars is another possible outcome of an application to strike. In an earlier part of the Montreal Trust decision, he described when an order for particulars, rather than an order to amend, would be an

appropriate response at paragraph 15: 15 Furthermore, a statement of claim should not generally be struck out where the deficiency lies in the lack of particulars of a claimthat is otherwise supported by a "bare bones" plea of appropriate material facts. In this situation, the problem lies not in any failure toidentify a potentially applicable cause of action but in the failure to demonstrate how the identified cause of action is specificallyapplicable to the specific claims against the particular defendant.

Thus, if the types of particulars that are specifically required by therules as, for example in Rule 14.11, are not given or it is apparent that other particulars are necessary to enable the other side to know thecase he or she has to meet or to properly respond to the claim, the remedy is to order further and better particulars, not the striking of theclaim. [32] Orsborn, J. in McNamara Construction Co. v. Newfoundland Transshipment Ltd. (1999), (NL SC), 172Nfld. & P.E.I.R. 208, 528 A.P.R. 208 (Nfld.

S.C.(T.D.)) also recognized that it is appropriate to order particulars when the Statement ofClaim impugned by a Rule 14.24(1)(

a) application sets out the minimum required to plead a cause of action, but in a manner that makesit difficult for the Defendant to plead effectively in response. 23 Thus, although a pleading may contain the minimum level of disclosure of material fact, and thus not be liable to be struck, itmay nonetheless be sufficiently lacking in certain specifics as to not allow a considered response. Hence particulars may be ordered, in sofar as they may be necessary to enable the opposing party to appreciate the case against it sufficiently for the purpose of pleading inresponse.

ANALYSIS [33] The Plaintiffs’ pleadings include the Statement of Claim and a Reply to a Demand for Particulars. Those pleadings characterizethe alleged misbehavior of the Defendants as follows:

a) Paying amounts belonging directly to Big Land and indirectly to Shelley and Lewis to others without permission from the owners;

b) Failing to comply with lawful requests for information;

c) Misrepresentation of the actual financial state of Big Land;

d) Oppressive behavior;

e) Conduct that favoured certain stakeholders in Big Land over others;

f) Acting outside the scope of responsibility entrusted or delegated to the Defendants;

g) Submitting grossly inflated invoices;

h) Negligence;

i) Breach of contract;

j) Acting for their own benefit rather than for the benefit of Big Land and its shareholders;

k) Misappropriation of funds;

l) Violation of director’s duties;

m) Conversion of money belonging to the Plaintiffs; and

n) Behavior justifying disgorgement of benefits received by the Defendants. [34] The Plaintiffs do not explicitly name the causes of action on which they rely. The parties agreed that this is not a fataldeficiency; that it is sufficient to meet the test for disclosure of a cause of action if the pleading includes the requisite factual elements. In response to the Defendants’ application, the Plaintiffs say that the pleadings disclose the following causes of action:

a) Conversion;

b) Negligence;

c) Breach of contract;

d) Unjust enrichment; and

e) Oppression. [35] The Plaintiffs did not specifically plead which causes of action each Plaintiff was relying on against each Defendant. Instead,the Plaintiffs claimed all of the remedies against all of the Defendants. On the hearing of this application, the Plaintiffs conceded thateach listed cause of action was not sustainable by each Plaintiff against each Defendant. Once the Plaintiffs made that concession, thenit was requisite that they then identified each cause of action on which each Plaintiff relied against each Defendant.

The Plaintiffsconceded at the hearing that none of them could claim for breach of contract against the individual Defendants, and that the individualPlaintiffs could not claim an oppression remedy against Deslauriers. Otherwise, the Plaintiffs maintained that they would rely on all ofthe asserted causes of action. Therefore, the primary questions that I must address are whether the following causes of action aredisclosed in the Statement of Claim and Reply to Demand for Particulars:

a) An action by each Plaintiff against each Defendant for conversion, negligence and unjust enrichment.

b) An action by Big Land for breach of contract against LFL; and

c) An action by each of Shelley and Lewis for an oppression remedy against each of Noël and LFL. CONVERSION [36] The tort of conversion is a strict liability tort with the following necessary elements as set out in Boma Manufacturing Ltd. v.Canadian Imperial Bank of Commerce, (SCC), [1996] 3 S.C.R. 727 at paragraph 31: “The tort of conversion involvesa wrongful interference with the goods of another, such as taking, using or destroying these goods in a manner inconsistent with theowner's right of possession.” [37] In U.F.C.W., Local 1252 v. Cashin (1996), (NL SC), 149 Nfld. & P.E.I.R. 112, 467 A.P.R. 112, (Nfld.

S.C.(T.D.)), Russell, J. utilized the following definition of the tort of conversion: 323 In Klar — Remedies in Tort Law (Carswell, 1991) the tort of conversion is defined as "the wrongful dealing with the chattel in amanner inconsistent with another person's right to immediate possession. It involves the intentional exercise of control over a chattelwhich so seriously interferes with the right of another to control it, that the intermeddler may justly be required to pay its full value".(Seealso K.R. Thompson Engineering Ltd. v. Webster (1980), (NB KB), 31 N.B.R. (2d) 329 (N.B.

Q.B.)). [38] The material facts set out in the Statement of Claim describe the bare elements necessary for a plea in conversion: that theDefendants converted the assets of the Plaintiffs. In the Statement of Claim, the Plaintiffs alleged: 21.

The Plaintiffs state that the Defendants operated Big Land in such a way so as to reduce the profitability of Big Land (to zero) fortheir own gain, or the gain of others, and have converted to their own use and benefit the assets and property of Big Land…. [39] The individual Plaintiffs allege that as shareholders, they had a material and financial interest in the property of Big Land andare therefore entitled to a remedy for this conversion. [40] The Defendants argued that a person who had been lawfully in possession of property of another cannot be liable for conversionof that property unless the alleged tortfeasor fails to comply with a demand for its return.

The authorities support this position: Hollins vFowler,

(1875) LR 7 HL 757, [1874-80] All ER Rep 118. Where, as here, the plaintiff pleads that the property was lawfully in thepossession of the defendants (under the management contract between Big Land and LFL), then the plaintiff must also plead that theDefendant did not comply with a demand for return of the property. Big Land does not explicitly plead this. However, the Plaintiffs doallege in the Statement of Claim that they have made numerous demands of the Defendants for information regarding the management ofthe operations of Big Land and that the Defendants refused to provide this information.

A demand for return of property is implicit inthe allegation that the Plaintiffs approached the Defendants suggesting impropriety by the Defendants and a refusal to cooperate ininvestigation by the Defendants.

It is therefore appropriate to give the Plaintiffs an opportunity to amend the Statement of Claim toinclude an allegation that it demanded return of property from the Defendants and that the Defendants refused. [41] Because the claim is asserted by and against multiple parties, determination that the constituent elements of an action inconversion have been pleaded does not end the enquiry as to whether the pleadings will survive this application. The test must beapplied from the perspective of each party: on behalf of which Plaintiffs, and against which Defendants has the cause of action beensufficiently pleaded?

Which Plaintiffs? [42] The individual Plaintiffs have no reasonable prospect of succeeding in a claim for conversion. The pleadings assert that theassets of Big Land were converted. Big Land has a separate legal personality from its shareholders. As shareholders, the individualPlaintiffs have an interest in the financial wellbeing of Big Land, but they do not have a proprietary or immediate possessory interest inthe assets of the corporation. The shareholders cannot assert personal claims that arise from a wrong perpetrated against the corporation:Foss v. Harbottle (1843), 2 Hare 461, 67 E.R. 189 (Eng.

V.C.) and NPV Management Ltd. v. Anthony, 2003 NLCA 41 at paragraph 21: In a discussion in Hercules Management, in which a distinction is drawn between a personal and a derivative action, La Forest J. said, atparagraph 62: One final point should be made here. Referring to the case of Goldex Mines Ltd. v. Revill (1974), (ON CA), 7 O.R.(2d) 216 (C.A.), the appellants submit that where a shareholder has been directly and individually harmed, that shareholder may have apersonal cause of action even though the corporation may also have a separate and distinct cause of action.

Nothing in the foregoingparagraphs should be understood to detract from this principle. In finding that claims in respect of losses stemming from an allegedinability to oversee or supervise management are really derivative and not personal in nature, I have found only that shareholders cannotraise individual claims in respect of a wrong done to the corporation. Indeed, this is the limit of the rule in Foss v. Harbottle.

Where,however, a separate and distinct claim (say, in tort) can be raised with respect to a wrong done to a shareholder qua individual, a personalaction may well lie, assuming that all the requisite elements of a cause of action can be made out. [43] In short, Shelley and Lewis cannot claim for conversion of property that they did not own or have a right to possess. [44] Therefore, the claims in conversion asserted by Shelley and Lewis are struck. Which Defendants?

[ 45 ] The Defendants Noël and Deslauriers argued that even if the pleadings disclose a cause of action in conversion, it is only sufficiently pleaded against LFL. They rely in this regard on the Plaintiffs’ answer to a demand for particulars as to the manner in which the individual Defendants gained personally from the conversion of assets. The Plaintiffs responded that the gain resulted from the individual Defendants’ indirect ownership of the shares of LFL, which allegedly profited from the conversion of the assets of Big Land.

The Defendants argue that the claim in conversion against the individual Defendants inappropriately seeks to pierce the corporate veil and render the individual Defendants liable for the actions of a company because they were its operating mind. [ 46 ] However, I am not prepared to find on this motion that the action in conversion against Deslauriers and Noël depends on piercing the corporate veil. Conversion is a strict liability tort established once the plaintiff demonstrates that the defendant has wrongfully interfered with the plaintiff’s immediate right of possession of property.

It depends, therefore, on proof of the defendant’s actions, and not on proof of the defendant’s gain. The Statement of Claim and Reply to Demand for Particulars allege that Deslauriers and Noël actively participated in the conversion of Big Land assets.

That is sufficient to ground a plea in conversion against them. [ 47 ] Further, and in any event, the corporate veil has been pierced by Canadian courts in circumstances where the operating mind of a corporation explicitly directs a wrongful, intentional act to be done: see Potter et al, Fraud Unravels Everything: A Limited Justification for Piercing the Corporate Veil , in Todd L. Archibald, ed, Annual Review of Civil Litigation , (Toronto: Thomson Reuters, 2019). The corporate veil has been pierced specifically in actions for conversion. The authors of Linda D.

Rainaldi & Kim Kreuzer eds., Remedies in Tort (Toronto: Thomson Reuters, 1987, 2019), at pages 4-60, paragraph 91.1, cite case law for the following propositions,: A director or shareholder who commits a tort of conversion will be personally liable for the conversion. That individual is the primary tortfeasor responsible for the conversion occurring and the fact that he or she was acting on behalf of the company is no defence.

Where the conduct of the sole officer, director and shareholder of the corporate defendant is intentional, wilful and deliberate, both the principle and the company are jointly liable for the torts of conversion and trespass. [ 48 ] The Plaintiffs plead at paragraph 12 of the Statement of Claim, that “[a]s the sole shareholders and directors of LFL, Noël and Deslauriers are LFL’s operating mind…” [ 49 ] The pleading in conversion by Big Land against the individual Defendants, read generously as I am directed to do, discloses a cause of action that has the requisite prospect for success to survive this application to strike.

Is the Action in Conversion pleaded with Sufficient Particularity? [ 50 ] The Defendants demanded particulars as to the assets and property of Big Land that allegedly were converted.

The Plaintiffs replied that the lack of disclosure by the Defendants regarding the operations of Big Land precluded them from being specific, but that the assets and property included “monies, other financial instruments, and property and/or equipment procured and purchased in order to carry out and complete contract work, and other projects, which said property/equipment was subsequently sold.” [ 51 ] Although the Statement of Claim pleads sufficient material facts supporting a cause of action in conversion on behalf of Big Land, the lack of particular description of the assets allegedly converted means that the Defendants cannot effectively plead in defence.

In argument, the Plaintiffs suggested that the Defendants were in control of the operations of Big Land during the time that the acts constituting conversion were committed, and that this precludes specific description of the assets converted. However, according to the Statement of Claim, the management contract between Big Land and LFL ended in August 2018. The individual Plaintiffs have been in position to control the operations of the company for some time and ought to be able to state what is allegedly missing. The plea as it is now allows for nothing other than a general denial.

A specific description of the assets allegedly converted is necessary before the Defendants can plead effectively in defence. [ 52 ] Therefore, this is a case where particulars ought to be ordered.

I order that the Plaintiffs provide particulars describing the assets of Big Land that were allegedly converted by LFL NEGLIGENCE [ 53 ] Each of the Plaintiffs asserts a claim in negligence against each of the Defendants. [ 54 ] A viable plea in negligence must include material facts supporting each of these elements: duty of care, breach, and damage caused by the breach. [ 55 ] The Plaintiffs’ claims in negligence are set out in the Statement of Claim: 24.

The Plaintiffs repeat the foregoing paragraphs and state that the Defendants’ conduct was negligent and/or grossly negligent and/or characterized by willful and wanton misconduct, said manner consisting of inter alia : a. Charging and collective excessive management fees and costs from Big Land; b.

The Defendants, to the detriment of Big Land and its shareholders, were entering into contracts, conducting transactions, or facilitating transfers of funds without Shelley and/or Lewis’ knowledge, consent, or authorization, in exchange for benefits which would accrue to the Defendants, rather than Big Land and its shareholders. And that the Defendants owed the Plaintiffs a duty of care, and that the Defendants breached the standard of care. [ 56 ] The Plaintiffs’ pleadings include allegations that the actions of the Defendants caused loss to Big Land, described at various

points as decreased value of the company, reduced profitability, misappropriated funds, converted assets, and payment of managementfees described as excessive. The individual Plaintiffs allege that they suffered loss in the form of undeclared dividends that they wouldhave been paid if Big Land had been profitable. [57] The pleadings do not explicitly allege that the Defendants’ breach of the duty of care caused these losses.

However, the bonesof a claim (duty, breach, damage and causation) in negligence can be discerned in the pleadings, and the interests of justice require thatthe Plaintiffs be given an opportunity by amendment to assemble those bones into an anatomically correct skeleton of a claim, byincluding a plea that the alleged breaches of duty caused the losses alleged. [58] However, again because the claim is asserted by and against multiple parties, determination that the constituent elements of anaction in negligence have been pleaded (or can be after amendment) does not end the enquiry as to whether the pleadings will survivethis application.

I must apply the test from the perspective of each party: on behalf of which Plaintiffs, and against which Defendants hasthe cause of action in negligence been sufficiently pleaded? Which Plaintiffs? [59] The claims asserted in negligence on behalf of Shelley and Lewis have no reasonable prospect of success against eitherDefendant. [60] A fatal deficiency in the pleading in negligence on behalf of Shelley and Lewis is the failure to plead a duty of care that couldpossibly be recognized at law.

Other fatal deficiencies could emerge from analysis of this claim tested against other requisite elements ofa viable negligence claim; but there is no need to go further as the claim fails on the duty of care analysis. The law not only has failed torecognize the existence of a duty of care owed to the shareholders of a corporation to avoid damage to the corporation but has expresslynegated the existence of such a duty. [61] The claim in negligence by Shelley and Lewis is based on the management of Big Land by the Defendants, and the individualPlaintiffs claim in their capacity as shareholders of Big Land.

They allege that they did not receive dividends because the Defendants’negligent mismanagement dissipated the financial wellbeing of the company so that it was unable to pay dividends to the shareholders. [62] In Hercules Managements Ltd. v. Ernst & Young, (SCC), [1997] 2 S.C.R. 165, the Supreme Court of Canadadetermined an appeal from a

summary judgment dismissing an action by shareholders against the auditors of corporations based onallegedly negligent auditor reports. The shareholders alleged that their reliance on the reports led to loss of capital and equity in thecompany and the consequent loss of value of their shareholding. The Supreme Court decided the case in favour of the auditors based ona duty of care analysis. Writing for the Court, LaForest J. said as follows concerning the question whether the interests of an individualshareholder were protected by the imposition of a duty of care: 59 The rule in Foss v.

Harbottle provides that individual shareholders have no cause of action in law for any wrongs done to thecorporation and that if an action is to be brought in respect of such losses, it must be brought either by the corporation itself (throughmanagement) or by way of a derivative action. The legal rationale behind the rule was eloquently set out by the English Court of Appealin Prudential Assurance Co. v. Newman Industries Ltd., [1982] 1 All E.R. 354 (Eng. C.A.), at p. 367, as follows: The rule [in Foss v. Harbottle] is the consequence of the fact that a corporation is a separate legal entity.

Other consequences are limitedliability and limited rights. The company is liable for its contracts and torts; the shareholder has no such liability. The company acquirescauses of action for breaches of contract and for torts which damage the company. No cause of action vests in the shareholder. When theshareholder acquires a share he accepts the fact that the value of his investment follows the fortunes of the company and that he can onlyexercise his influence over the fortunes of the company by the exercise of his voting rights in general meeting.

The law confers on himthe right to ensure that the company observes the limitations of its memorandum of association and the right to ensure that othershareholders observe the rule, imposed on them by the articles of association. If it is right that the law has conferred or should in certainrestricted circumstances confer further rights on a shareholder the scope and consequences of such further rights require carefulconsideration.

To these lucid comments, I would respectfully add that the rule is also sound from a policy perspective, inasmuch as it avoids theprocedural hassle of a multiplicity of actions. [63] Although Hercules was particularly concerned with a claim by investors against the auditors of a corporation for negligentmisrepresentation, the rationale of the decision is equally applicable to a claim by shareholders against a third party operator fornegligent mismanagement.

In this case, by the same reasoning, if the Defendants owed a duty of care in respect of the management ofBig Land, then they owed that duty to Big Land and not to the individual shareholders. [64] The principle that an individual shareholder cannot claim in negligence for a wrong resulting in loss to the corporation has beenapplied in this jurisdiction: NPV Management Ltd. v. Anthony. This principle was succinctly stated and applied by Whelan, C.J., in thecontext of a 14.24(1)(

a) application, in Walsh v. T.R.A. Co., 2015 NLTD(G) 27, at paragraph 32: “in order to personally claim theimpugned damages, the Plaintiffs must show not only an independent relationship or duty existing between them and the wrongdoer, butalso that the damages represent a loss separate from that of their Corporations that is causally linked to the personal wrong done to thePlaintiffs.” [65] In NPV Management and Walsh, the damage claimed by the plaintiff shareholders was loss of share value.

I see no differencein principle between an alleged duty to avoid loss of that nature and an alleged duty to avoid the loss of dividends. As applied to thiscase, the result is that the Statement of Claim fails to disclose a viable action in negligence on behalf of Shelley and Lewis against LFLor against Deslauriers.

[66] The pleadings do not clearly set out an express plea of negligence against Noël as a director of Big Land, but Plaintiffs’ counselsubmitted in argument that the references to Noël’s conduct in that capacity, combined with the allegations of negligence against her,amount to such a plea. Neither side on this application presented authority to delineate the common law duty of care owed by a directorto the shareholders of a closely held corporation. Generally, the directors of a corporation owe duties to the corporation and not toindividual shareholders.

Regardless, the preceding analysis of the negligence claims of Shelley and Lewis against the other Defendantsand Noël in other capacities applies equally to the claim against Noël in her capacity as a director of Big Land. The claimed loss ofdividends is not protected by a duty of care owed by a director to the shareholders of a corporation. Which Defendants? [67] The material facts pleaded do support the existence of a duty of care owed by LFL to Big Land, based on the relationshipbetween the companies.

Big Land hired LFL to manage its operations and it would have been clear to LFL that negligence inmanagement would harm the interests of Big Land. The fact that the relationship arose from contract does not preclude a concurrentclaim for negligence. No policy rationale negates the existence of this duty. [68] The material facts also support a plea of breach of a duty of care. The claim is one of mismanagement.

It seems primarilydirected toward allegations of intentional acts on the part of all Defendants, but, again read generously, an alternate plea of negligentmanagement can be discerned within the pleadings. [69] I have previously discussed that the claim against the individual Defendants in conversion was sufficiently supported by theallegation that they acted as the operating mind of LFL. However, the claim against them in negligence is not supported by thisallegation.

The same considerations that might support a plea to pierce the corporate veil in respect of intentional wrongful conductwould not support such a plea against them as directors, shareholders, or officers based merely on their having directed the negligentactivity of LFL. [70] However, the Plaintiffs also plead that Deslauriers and Noël acted as employees and/or agents, and/or representatives of LFL inthe management of the operations and finances of Big Land. The allegation that they were acting as representatives is either another wayof alleging that they were agents or it has no legal significance.

The allegation of the other capacities in which they were acting raisesthe question whether there is an independent cause of action in negligence against an employee or agent of a corporation, in the absenceof a plea that the employee or agent was acting outside the scope of employment or agency. [71] The concept of vicarious liability renders one person, such as a principal or employer, liable for the acts of another, such as anagent or employee.

However, the imposition of vicarious liability on another does not absolve the actor, such as the agent or employeefrom liability for his or her actions. [72] In respect particularly of employees, the law in Canada is that the mere fact that an employee was acting to further the interestsof the employer does not preclude the determination that the employee owed a duty of care. Writing for the majority of the SupremeCourt of Canada in London Drugs Ltd. v.

Kuehne & Nagel International Ltd., (SCC), [1992] 3 S.C.R. 299 at paragraphs186-187, Iacobucci, J. stated: 186 Having said this, I wish simply to add what has already become evident by my conclusion. There is no general rule in Canada tothe effect that an employee acting in the course of his or her employment and performing the "very essence" of his or her employer'scontractual obligations with a customer does not owe a duty of care, whether one labels it "independent" or otherwise, to the employer'scustomer. Our law of negligence has long since moved away from a category approach when dealing with duties of care.

It is now wellestablished that the question of whether a duty of care arises will depend on the circumstances of each particular case, not on pre-determined categories and blanket rules as to who is, and who is not, under a duty to exercise reasonable care. There may well be caseswhere, having regard to the particular circumstances involved, an employee will not owe a duty of care to his or her employer's customer.Indeed, the respondents have provided this Court with a series of decisions where this conclusion appears to have been reached: seeSealand of the Pacific Ltd. v. Robert C.

McHaffie Ltd., (BC CA), [1974] 6 W.W.R. 724, 51 D.L.R. (3d) 702(B.C.C.A.); Moss v. Richardson Greenshields of Canada Ltd., (MB CA), [1989] 3 W.W.R. 50, 56 Man. R. (2d) 230(C.A.); Summitville Consolidated Mining Co. v. Klohn Leonoff Ltd. (July 6, 1989), Doc. Vancouver C880756 (B.C.S.C.); and R.M. & R.Log Ltd. v. Texada Towing Co. (1967), (CA EXC), 62 D.L.R. (2d) 744, [1968] 1 Ex. C.R. 84. 187 However, this does not mean that this is the necessary result in all factual situations.

Abstaining from commenting on theconclusions reached in the cases cited, I find nothing in any of them, nor have I found anything else, which supports the type of blanketrule advocated by the respondents. At best, these decisions simply confirm that the question of whether a duty of care arises between anemployee and his or her employer's customer depends on the circumstances of each particular case.

The mere fact that the employee isperforming the "very essence" of a contract between the plaintiff and his or her employer does not, in itself, necessarily preclude aconclusion that a duty of care was present. [73] The doctrinal basis for this statement of the law has been questioned, including in the vigorous dissent on this question byLaForest, J. in London Drugs. However, it still accurately states the law for the purposes of considering this pleadings motion. [74] The same result holds for the action against Deslauriers and Noël in their alleged capacity as agents of LFL.

As professorsHarvey and MacPherson succinctly state in Cameron Harvey & Darcy MacPherson, Agency and Partnership Law Primer, 5th ed.(Canada: Thomson Reuters, 2016) at page 126: “It is trite to say that agents are personally liable for a tort they commit, even though itwas committed by or with the authority of the principal and was done solely for the benefit of the principal…” [75] Therefore, the claims in negligence against Deslauriers and Noël individually have sufficient prospect of success to survive theirapplication to strike. [76] However, the bare allegation of agency is a plea that is not conducive to a fulsome reply.

Agency can arise in many different

ways. The Plaintiffs must provide Deslauriers and Noël with particulars as to the basis for the allegation that their alleged breach of theduty of care occurred during the course of their activity as agents of LFL. [77] In

summary then, the Statement of Claim discloses a cause of action in negligence by Big Land against LFL and againstDeslauriers and Noël in their alleged capacity of employees and agents of LFL. The actions in negligence by Shelley and Lewis againstall Defendants are struck. BREACH OF CONTRACT [78] The Defendants conceded that the Statement of Claim adequately pleaded a cause of action for breach of contract by Big Landagainst LFL, and the Plaintiffs conceded that they were not relying on an action for breach of contract by the individual Plaintiffs oragainst the individual Defendants.

On my reading of the Plaintiffs’ pleadings, each concession was appropriate. [79] Therefore, the only breach of contract action disclosed is by Big Land against LFL. The pleadings alleging an action in breachof contract by the individual Plaintiffs and against the individual Defendants are struck. UNJUST ENRICHMENT [80] There are three requisite elements of a traditional plea in unjust enrichment: (

i) enrichment of the defendant, (ii) correspondingdeprivation of the plaintiff, and (iii) the lack of a juristic reason for the defendant to retain the benefit: Garland v. Consumers' Gas Co.,2004 SCC 25; Pro-Sys Consultants Ltd. v. Microsoft Corp., 2013 SCC 57; Atlantic Lottery Corporation Inc.-Société des loteries del'Atlantique v. Babstock, 2018 NLCA 71. [81] The Plaintiffs say that a plea for a remedy for unjust enrichment is set out in the Statement of Claim: 21.

The Plaintiffs state that the Defendants operated Big Land in such a way so as to reduce the profitability of Big Land (to zero) fortheir own gain, or the gain of others, and have converted to their own use and benefit the assets and property of Big Land and have beenimproperly and unjustly enriched by their operation of Big Land to the corresponding deprivation of the Plaintiffs, for which thePlaintiffs are entitled to be compensated in damages. [82] This paragraph alleges the essential elements of enrichment and corresponding deprivation.

It also sets out a sufficientallegation that there is no juristic reason for the Defendants to retain the benefit that corresponds to their deprivation. At trial or otherfinal disposition of this claim, the Court will decide the third element for unjust enrichment in two parts: Garland, at paragraphs 44-46. First, the plaintiff will be required to establish a prima facie case by showing that there is no juristic reason among establishedcategories that allows the defendant to retain the benefit.

Second, the defendant may rebut the prima facie case by demonstrating thatthere is another legitimate reason to deny recovery to the plaintiff. A plaintiff is required to plead facts that address the first phase; anyinvocation of the second part of the test would be for a defendant to plead in defence. For the purposes of deciding this application, Ifind it to be a sufficient plea of absence of juristic reason that the Plaintiffs alleged that the Defendants’ enrichment “improperly andunjustly” resulted from the Defendants’ mismanagement of Big Land and conversion of its assets.

Enrichment (Which Defendants?) [83] The Defendants demanded particulars as to the benefits that they each allegedly gained from conversion and mismanagementand as to the others who benefited. The Plaintiffs replied that LFL gained from the conversion and sale of Big Land assets and that Noëland Deslauriers gained indirectly from the conversion and sale of Big Land assets by LFL, and by the diversion of profits from Big Landto LFL. [84] The Plaintiffs did not provide any particulars as to the “others” who allegedly gained from the Defendants’ conduct.

There isnothing in the pleadings that would support an allegation of gain by others, and I order that the reference to gain by others is struck fromparagraph 21 of the Statement of Claim. [85] The general plea is that LFL gained by converting the assets of Big Land. As noted in the previous discussion of the action inconversion, there is a further express allegation that LFL sold the assets of Big Land and an implicit allegation that LFL retained theproceeds.

This would constitute a benefit to LFL that would support a restitutionary claim for unjust enrichment. [86] The alleged benefit to the individual Defendants is not as obvious. There is no explicit or implicit allegation that Deslauriersand Noël themselves kept the assets of Big Land or the proceeds from the sale of those assets. Rather, the allegation is that Deslauriersand Noël gained from their indirect shareholding in LFL.

The question whether on a pleadings motion an indirect benefit is sufficient tosupport a claim for unjust enrichment is answered by this excerpt from the Supreme Court of Canada decision in Pro-Sys: 87 In support of its first argument, Microsoft cites Peel (Regional Municipality) v. Canada, (SCC), [1992] 3 S.C.R.762 (S.C.C.). In Peel, McLachlin J. (as she then was) held, at p. 797, that "[t]he cases in which claims for unjust enrichment have beenmade out generally deal with benefits conferred directly and specifically on the defendant".

A claim in unjust enrichment must be basedon "more than an incidental blow-by. A secondary collateral benefit will not suffice. To permit recovery for incidental collateral benefitswould be to admit of the possibility that a plaintiff could recover twice — once from the person who is the immediate beneficiary of thepayment or benefit ..., and again from the person who reaped an incidental benefit" (Peel, at p. 797). The words of Peel themselveswould appear to foreclose the possibility of an indirect relationship between plaintiff and defendant. However, this does not resolve theissue.

First, it is not apparent that the benefit to Microsoft is an "incidental blow-by" or "collateral benefit". Second, Pro-Sys relies onAlberta Elders, which it says stands for the proposition that an unjust enrichment may be possible where the benefit was indirect and waspassed on by a third party. At this stage, I cannot conclude that it is plain and obvious that a claim in unjust enrichment will be made outonly where the relationship between the plaintiff and the defendant is direct. Corresponding Deprivation (which Plaintiffs?)

[ 87 ] The allegation in paragraph 21, repeated in the Reply to Demand for Particulars, is that the Defendants deprived Big Land of profits and of the value of its assets. The Plaintiffs did not expressly state the deprivation that the individual Plaintiffs allegedly suffered that underpinned the plea in unjust enrichment, and nor did the Defendants demand particulars of this alleged deprivation.

However, it is obvious from the allegations in other parts of the Statement of Claim that the Plaintiffs are pleading that they were deprived of dividends, or, read generously, the opportunity to receive dividends, from their shareholding in Big Land. [ 88 ] The alleged loss of assets and profits by Big Land would constitute a sufficient plea of deprivation; one that would exactly correspond to the gain by LFL, and correspond, although perhaps not perfectly, with the indirect gain by the individual Defendants. [ 89 ] It is not so clear that the individual Plaintiffs have sufficiently pleaded a deprivation that corresponds, even imperfectly, with the alleged gain by the Defendants.

Shelley and Lewis claim that their deprivation was the loss of dividends on their shares in Big Land. This is not only an indirect claim, but also a speculative one. A decision to declare dividends depends on many other factors than the availability of money in the corporate treasury. However, the parties did not present any authority in favour of, or contrary to, the proposition that an indirect loss of an opportunity can constitute a deprivation sufficient to support a plea for restitution.

I am not prepared to decide the question on a pleadings motion in the absence of authority that is either clear and binding, or doctrinally conclusive. [ 90 ] Therefore, I find that each of the Plaintiffs’ pleading in unjust enrichment against all of the Defendants has a sufficient prospect of success and will not be struck. OPPRESSION [ 91 ] During argument, the Plaintiffs conceded that Big Land is not asserting an oppression claim, and that Shelley and Lewis have no claim against Deslauriers.

The question that must be addressed is whether the oppression claim by Shelley and Lewis against LFL and Noël has sufficient prospect for success to survive the Defendants’ application. [ 92 ] The oppression remedy is a statutory remedy created by the Corporations Act : 371. Rectifying oppression 371(1) A complainant may apply to a court for an order under this section. 371(2) Where, upon an application under subsection (1), the court is satisfied that in respect of a corporation or an affiliate (

a) an act or omission of the corporation or an affiliate effects a result; (

b) the business or affairs of the corporation or an affiliate are or have been carried on or conducted in a manner; or (

c) the powers of the directors of the corporation or an affiliate are or have been exercised in a manner, that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of a security holder, creditor, director or officer, the court may make an order to rectify the matters complained of. 371(3) In connection with an application under this section, the court may make an interim or final order it thinks appropriate including (

a) an order restraining the conduct complained of; (

b) an order appointing a receiver or receiver-manager; (

c) an order to regulate a corporation's affairs by amending the articles or by-laws or creating or amending a unanimous shareholder agreement; (

d) an order directing an issue or exchange of securities; (

e) an order appointing directors in place of or in addition to all or some of the directors then in office; (

f) an order directing a corporation, or another person, to purchase securities of a security holder; (

g) an order directing a corporation, or another person, to pay to a security holder a part of the money paid by the security holder for securities; (

h) an order varying or setting aside a transaction or contract to which a corporation is a party and compensating the corporation or another party to the transaction or contract; (

i) an order requiring a corporation, within a time specified by the court, to produce to the court or an interested person financial statements in the form required by

section 258 or an accounting in another form that the court may determine; (

j) an order compensating an aggrieved person; (

k) an order directing rectification of the registers or other records of a corporation under

section 374;

(

l) an order liquidating and dissolving the corporation; (

m) an order directing an investigation under

Part XVII to be made; and (

n) an order requiring the trial of an issue. [93] The term “ complainant” is defined in

section 368 of the Corporations Act: 368.

Definitions In this Part (a) "action" means an action under this Act; and (b) "complainant" means (

i) a registered holder or beneficial owner, and a former registered holder or beneficial owner of a security of a corporation or an affiliate, (ii) a director or an officer or a former director or officer of a corporation or an affiliate, (iii) the registrar, or (iv) another person who, in the discretion of a court, is an appropriate person to make an application under this Part [94] The claim for oppression remedy is set out in the Statement of Claim: 26) Shelley and Lewis state that their reasonable expectations as shareholders and directors of Big Land have been breached by theDefendants, including their unreasonable action in diverting Big Land’s profits to LFL and consequently precluding the Third Defendantfrom declaring dividends and the unauthorized payment to LFL of excessive management fees and costs without the knowledge orauthorization of Shelley and Lewis or any of Big Land’s shareholders. 27) Shelley and Lewis state that the Defendants’ misappropriation of the funds of Big Land for their own purposes and benefit, in theabsence of consent, express or implied, of the other directors or shareholders of Big Land, forms the basis for a finding of oppressionpursuant to s. 371(2) of the Corporations Act. [95] The Defendants sought particulars of the breach of the reasonable expectations of Shelley and Lewis, and as to the Defendants’actions that breached those expectations.

The Plaintiffs replied that the Defendants breached the reasonable expectations of Shelley andLewis by: …inter alia, acting unreasonably in diverting BCL’s profits to LF, failing to declare dividends to Shelley and Lewis, and facilitatingpayment to LFL for excessive management fees and costs without the knowledge or authorization of Shelley and Lewis. And that the Defendants: …misappropriated funds by transferring, facilitating or approving a transfer of funds to LFL when there was no contractual or reasonablebasis to do so. [96] I will first address a preliminary point that was not raised by the Defendants.

Under section 371(2) of the Corporations Act, theoppression remedy is available on application to this Court, not through an action. As the parties did not address this issue, these reasonsought not be seen as deciding the question. It does seem to me that where an oppression remedy is sought in conjunction with otherforms of relief available by action then the failure to seek the remedy by application ought not be fatal to the claim. In any event, theissue in this case is one where form should not be allowed to prevail over substance: American Reserve Energy Corp. v. McDorman,2002 NFCA 57; Mangrove v.

Newfoundland & Labrador, 2009 NLTD 115. [97] Shelley and Lewis assert their claim for an oppression remedy against LFL. An oppression claim is directed toward rightingwrongs within the internal life of a corporation. LFL was not a shareholder of Big Land, but Shelley and Lewis allege that LFL was arecipient of funds misappropriated from Big Land and excessive management fees directed to it through the actions of Noël, a director ofBig Land.

There is authority that the statutory remedies for oppression can be applied against third party participants in the oppressiveaction or a third party who gains from the oppression: Waxman v. Waxman, (ON CA), 2004 CarswellOnt 1715, 44B.L.R. (3d) 165 (Ont. C.A.). In Holden v. Infolink Technologies Ltd., 2006 CarswellOnt 910, 146 A.C.W.S. (3d) 70 (Ont. Sup. Ct.

J.), adecision on a motion to strike an oppression claim against a third party law firm, Cumming, J. referred to Waxman for the followingpropositions: 45 In my view, for our purposes, put very simply, Waxman stands for the proposition that where oppression is found (by thewrongdoing defendant Chester Waxman) and other defendants have knowingly received benefits (Chester Waxman's sons, throughbonuses paid by the corporation) as a consequence of the oppression of the plaintiff (Morris Waxman) then a remedy against them foraccepting the benefits properly rectifies the oppressive actions (the sons being co-defendants to the action, although not shareholders ordirectors of the subject corporation.) See paras. 527,528, 538, 540-542,550,551,553-556 of the Court of Appeal decision.

Indeed, s.248(3) of the OBCA allows the ambit of a Court order for oppression to reach persons who are not themselves guilty of oppression butare simply in knowing receipt of benefits from the oppression.

[98] This statement of principles makes sense in light of the broad remedies available under section 371(3). The remedy in section371(3)(

h) expressly allows for remedial orders against third parties. [99] The more difficult question in this case is whether the factual allegations in the Plaintiffs’ pleadings invoke the circumstances inwhich a claim for an oppression remedy applies. [100] The statutory relief against oppression is a remedy for conduct that unfairly disregards or prejudices the interests of persons whohave no means within the internal governance of the corporation to rectify the unfairness or prejudice. In this case, Shelley and Lewisplead that together they controlled a majority of the shares of Big Land.

Unless the usual corporate governance rules were altered by theunanimous shareholders’ agreement (the existence of which is pleaded only generally), then they would have had the power to stop theactivity of which they complain, or remove Noël as director. [101] However, the Defendants did not present any authority on this application that established that a remedy for oppression is notavailable to the majority shareholders of the corporation. The definition of complainant in

section 368 of the Corporations Act includes asecurity holder and is not restricted to minority shareholders. I therefore, decline to find for the Defendants simply because the Plaintiffsclaiming the oppression remedy are the majority shareholders. [102] Yet, simply because the Defendants did not demonstrate that Shelley and Lewis are outside the ambit of the defined circle ofcomplainants does not mean that their claim for oppression should proceed. [103] The claim for an oppression remedy protects the interests of some shareholders that diverge from the interests of the shareholdersas a whole.

A shareholder claiming relief from oppression must plead that their interests that were unfairly disregarded are interests thatthey do not hold in common with the shareholders as a whole. Otherwise, the claim is really one that is for the corporation, and notindividual shareholders, to assert. [104] I note again that the unfairness alleged by Shelley and Lewis is that the Defendants misappropriated money from Big Land andthat Shelley and Lewis were consequently denied the opportunity to receive dividends from the company.

If Shelley and Lewis wereminority shareholders, then this would be a case where they might seek leave to begin a derivative action in the name of the corporation.

However, they control the corporation and Big Land joins with them as a Plaintiff in this action. [105] I previously referred to the decision of our Court of Appeal in NPV Management, which was also a decision on an application tostrike, for the propositions that the shareholders of a corporation cannot assert a claim in negligence for loss suffered by the corporation,and that a claim for lost share value or lost dividends is really a claim for loss suffered by the corporation.

The Court of Appeal in thatcase also determined that an oppression claim could not succeed: 67 Counsel has not provided any authority for the proposition that factual circumstances which do not support a personal action innegligence would nonetheless ground a personal action for oppression under

section 241 of the Act. I have concluded that the allegedrepresentations regarding the Daley Brothers/Conpak transaction would not provide a basis for a personal action for negligentmisrepresentation. The absence of some basis on which to determine that the oppression remedy should result in a different conclusionwhen applied to the same facts, leads inexorably to a determination that it is plain and obvious that the Statement of Claim does notground a personal action for oppression under

section 241 of the Act. 68 This conclusion is further supported by application of the proposition regarding derivative and personal actions that areinextricably interwoven. That is, the fact that the action for negligent misrepresentation is derivative, and not personal in nature, wouldpreclude a determination that an independent personal action could be taken based on oppression in respect of precisely the same factualcircumstances.

In such a case, a personal claim, assuming one exists, could not be separated from what is clearly a derivative claim innegligent misrepresentation. [106] The Court of Appeal cited with approval the following passage from the decision of Barry, J. as he then was, in Pappas v. AcanWindows Inc. (1991), (NL SC), 90 Nfld. & P.E.I.R. 126, 2 B.L.R. (2d) 180, (Nfld.

S.C.(T.D.)), as explaining therationale for the decision not to allow an oppression action to remedy a wrong done to the company and not to individual shareholders: 106 I do not accept, however, that what would normally be a derivative action may be justified simply because the sort of remedysought is available under the oppression remedy sections of The Corporations Act.

In my opinion, before a shareholder can place himselfwithin the oppression remedy sections of the Corporations Act, the shareholder must first pass the hurdle or meet the condition that, inthe words of Gomery J. in Sparling, "a finding of oppression or unfairness first opens the door to the exercise of the Court's jurisdiction."And I do not believe that oppression or unfairness can be established merely by showing that the corporation itself has been damaged,with consequential damage to the shareholder. In that sense, there will always be damage found to occur to shareholders.

To permit apersonal action under the oppression remedy sections of The Corporations Act in all such cases would be to eviscerate the derivativeaction sections of the Act. [107] There is some support in Ontario case law for the proposition that a case involving alleged misappropriation of funds by adirector or shareholder of a closely held corporation might fall into an area of overlap where there is room for a claim for consequentialloss to shareholders through both an action by the corporation and an oppression claim: see Malata Group (HK) Ltd. v. Jung, 2008ONCA 111; Rea v. Wildeboer, 2015 ONCA 373.

The instant case, however, is one where there is clearly no overlap. The oppressionclaims asserted by Shelley and Noël seek remedies for wrongs perpetrated on Big Land, and consequential losses (of dividends) thatwould have been suffered by all of the shareholders as a group. If the Plaintiffs prove the facts alleged and establish that they lostdividends they were entitled to receive, then LFA as the other shareholder would also have been entitled to those dividends.

ThePlaintiffs’ do not allege that the failure to pay them dividends treated them unfairly compared with other shareholders. [108] Therefore, I find that the oppression claims asserted by Shelley and Noël have no prospect of success and are struck.

CONCLUSION [ 109 ] In

summary, I find as follows:

a) The conversion actions by Shelley and Lewis are struck. The application to strike the conversion action by Big Land against all Defendants is dismissed. Big Land has leave to amend the Statement of Claim to include an allegation that it demanded return of property from the Defendants and that the Defendants refused. Big Land is ordered to provide particulars of the assets allegedly converted by the Defendants;

b) The negligence actions by Shelley and Lewis are struck. The application to strike the negligence actions by Big Land against LFL, and by Big Land against Noël and Deslauriers as employees and agents of LFL, is dismissed. Big Land has leave to amend the Statement of Claim to include an express allegation that the negligence of the Defendants caused the losses for which it claims. Big Land is ordered to provide particulars of the alleged agency relationship between LFL and each of Noël and Deslauriers;

c) The application to strike the actions in breach of contract by the individual Plaintiffs and against the individual Defendants is allowed;

d) The application to strike the unjust enrichment action is dismissed. The reference to gain by others is struck from paragraph 21 of the Statement of Claim; and

e) The application to strike the claims for oppression remedies under

section 371 of the Corporations Act is allowed. [ 110 ] For certainty, the actions that remain in this matter and can go forward are:

a) An action for conversion by Big Land against all Defendants;

b) An action for negligence by Big Land against LFL and against Noël and Deslauriers in their alleged capacities as employees and agents of LFL;

c) An action for breach of contract by Big Land against LFL; and

d) An unjust enrichment action by all Plaintiffs against each Defendant. COSTS [ 111 ] The Statement of Claim, even after the Plaintiffs provided particulars, is confusing and difficult to follow. It does not include clearly articulated causes of action. Indeed, the causes of action on which the Plaintiffs were relying were not clear until the Plaintiffs’ argument in response to the application to strike.

The Defendants were justified in bringing this application, especially considering they did so after first demanding particulars. [ 112 ] In the circumstances, therefore, although there was divided success on this application, the Defendants shall have their costs of the application, taxed as a single set of costs on Column III of the Rules of the Supreme Court, 1986 , S.N.L. 1986, c. 42, Sch. D . _____________________________ Daniel M. Boone Justice