Docket: 1976 Franklin Land Development Ltd., Kevin Hope, Fay Hope, v. 621276 Saskatchewan Ltd., 2010 SKCA 154

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2010 SKCA 154 Date: 20101207 Between: Docket: 1976 Franklin Land Development Ltd., Kevin Hope, Fay Hope, and 621276 Saskatchewan Ltd. Appellants (Plaintiffs) - and - David Clements, Ross Clements, and Clements and Smith Barristers & Solicitors Respondents (Defendants) Coram: Vancise, Smith and Caldwell JJ.A. Counsel: Curtis Onishenko for the Appellants

Bruce Wirth for the Respondents Appeal: From: 2010 SKQB 272 Heard: December 7, 2010 Disposition: Appeal partially successful (orally) Written Reasons: December 21, 2010 By: The Honourable Mr. Justice Vancise In Concurrence: The Honourable Madam Justice Smith The Honourable Mr. Justice Caldwell Vancise J.A. I. Introduction [ 1 ] Kevin Hope, Fay Hope, Franklin Land Development Ltd., and 621276 Saskatchewan Ltd. (the appellants) appeal a decision of Mr.

Justice Acton wherein he struck the claims against the respondents (defendants), Ross Clements and Clements and Smith Barristers & Solicitors, for unjust enrichment and ordered better and further particulars of the appellants’ losses and the respondents’ enrichment. In addition, he also ordered: that the claim against Ross Clements for breach of a fiduciary duty to the appellants be struck; and, that the claim for aggravated and punitive damages be struck.

The appellants submit that the Chambers judge erred in law in so ordering. [ 2 ] This application arose in the context of an application for damages sought by the appellants against David Clements, Ross Clements, and Clements and Smith Barristers & Solicitors arising out of a land transaction involving the appellants, Kevin Hope, Fay Hope, 621276 Saskatchewan Ltd. (the Hope’s holding company), and Franklin Land Development Ltd.

The appellants allege that David Clements and Ross Clements, in their capacities as barristers and solicitors, owed a fiduciary obligation to them in connection with this transaction and that they breached that fiduciary duty and obligation by disclosing certain confidential information to the vendor and to the Rural Municipality of Parkdale. [ 3 ] The respondents brought an application by notice of motion pursuant to Rule 173(

a) of The Queen’s Bench Rules to strike out the portion of the statement of claim based upon an unjust enrichment and the appellants’ claim for aggravated damages. They also sought an order pursuant to Rules 173(

c) and (

e) striking out the statement of claim as against Clements and Smith Barristers & Solicitors and striking out the claim against Ross Clements alleging a breach of fiduciary responsibility and duty. Both the appellants and the respondents filed affidavits in support of their respective positions. [ 4 ] For the reasons set out below, we are all agreed that the Chambers judge erred in striking out the statement of claim against Ross Clements for a breach of a fiduciary duty and obligation owed to the appellants and the claim for punitive damages.

We are however agreed the Chambers judge committed no error, although not for the reasons given by him, in striking the claim against Clements and Smith Barristers & Solicitors, the claim for unjust enrichment. [ 5 ] These applications were brought pursuant to Rule 173 of The Queen’s Bench Rules which read as follows: 173 The Court may at any stage of an action order any pleading or any part thereof to be struck out, with or without leave to amend, on the ground that: (

a) it discloses no reasonable cause of action or defence, as the case may be; (

b) it is immaterial, redundant or unnecessarily prolix; (

c) it is scandalous, frivolous or vexatious; (

d) it may prejudice, embarrass or delay the fair trial of the action; (

e) it is otherwise an abuse of the process of the Court;

and may order the action to be stayed or dismissed or judgment to be entered accordingly or may grant such order as may be just. Unlessotherwise directed, the offending party shall pay double the costs to which the other party would otherwise be entitled. [6] The principles applicable to an application pursuant to Rules 173(a), (c), and (

e) were succinctly set out by this Court in Sagon v.Royal Bank of Canada (1992), (SK CA), 105 Sask. R. 133 (C.A.). The relevant portions are: [16] In determining whether a claim should be struck as disclosing no reasonable cause of action, the test is whether, assuming theappellant proves everything alleged in his claim, there is nevertheless no reasonable chance of success, or to put it another way, noarguable case. The court should exercise its jurisdiction to strike on this ground only in plain and obvious cases and where the court issatisfied that the case is beyond doubt: Marshall v.

Saskatchewan, Government of, Petz and Adams (1983), (SK CA),20 Sask. R. 309 (C.A.); The Attorney General of Canada v. Inuit Tapirisat, (SCC), [1980] 2 S.C.R. 735; 33 N.R. 304. The court may consider only the statement of claim, any particulars furnished pursuant to demand, and any document referred to in theclaim upon which the appellant must rely to establish his case: Balacko v. Eaton's of Canada Limited (1967), (SK KB),60 W.W.R. (N.S.) 22 (Sask. Q.B.); Lackmanec v. Hoffman and Wall (1982), (SK CA), 15 Sask.

R. 1 (C.A.). … [18] Striking out an entire claim on the ground that it is frivolous, vexatious or an abuse of process of the court is based on an entirelydifferent footing. Instead of considering merely the adequacy of the pleadings to support a reasonable cause of action, it may involve anassessment of the merits of the claim, and the motives of the appellant in bringing it. Evidence other than the pleadings is admissible.

Success on such an application will normally result in dismissal of the action, with the result that the rule of res judicata will likelyapply to any subsequent efforts to bring new actions based on the same facts. Odgers on Pleadings and Practice, 20th Ed. says at pp.153-154: “If, in all the circumstances of the case, it is obvious that the claim or defence is devoid of all merit or cannot possibly succeed, an ordermay be made. But it is a jurisdiction which ought to be very sparingly exercised, and only in very exceptional cases.

Its exercise wouldnot be justified merely because the story told in the pleadings is highly improbable, and one which it is difficult to believe could beproved.” (footnotes omitted) [19] Finally, a separate mention should be made of the power of the court to prevent abuse of its process, a power which is inherent aswell as conferred under rule 173. Bullen and Leake defines the power as follows at pp. 148-149: “The term 'abuse of the process of the court' is a term of great significance.

It connotes that the process of the court must be carried outproperly, honestly and in good faith; and it means that the court will not allow its function as a court of law to be misused but will in aproper case, prevent its machinery from being used as a means of vexation or oppression in the process of litigation.

It follows thatwhere an abuse of process has taken place, the intervention of the court by the stay or even dismissal of proceedings, 'although it shouldnot be lightly done, yet it may often be required by the very essence of justice to be done'. “The term 'abuse of process' is often used interchangeably with the terms 'frivolous' or 'vexatious' either separately or more usually inconjunction.” (footnotes omitted) [7] The Chambers judge, after setting out various cases which govern the principles for striking out pleadings, ordered as follows: [18] It is also accepted as noted in counsel’s brief on behalf of the applicants that the two corporate plaintiffs cannot be awardedaggravated damages because a corporation is incapable of suffering intangible injuries such as embarrassment, hurt feelings orhumiliation. [19] Applying the law as set forth herein to the portions of the statement of claim respecting unjust enrichment, those portions of thestatement of claim are struck as not disclosing a reasonable cause of action, the plaintiff having not set forth sufficient factual foundationfor the claim. [20] The aggravated and punitive damages have not been adequately pleaded.

By alleging a breach of fiduciary duty to the plaintiffsis not sufficient to prove that the actions of the defendants were high-handed and callous to allow for a claim of aggravated and punitivedamages. Any reference to a claim for aggravated and punitive damages in the statement of claim is struck. [21] With respect to claim (

c) against Clements & Smith Barristers & Solicitors, it is apparent from the material filed that this isneither a registered business name nor a partnership, and therefore not a legal entity. The claim against Clements & Smith Barristers &Solicitors shall be struck. [8] With respect to the claim against Ross Clements based upon a breach of a fiduciary duty and obligation owed by him to theappellants, the Chambers judge stated: [23] The court has reviewed the pleadings and affidavits before it.

The fact that Ross Clements is the son of David Clements andpractises law in association with his father and had some knowledge of the business venture is not sufficient legal or factual foundation toinclude him as a defendant in the within action. In substance this is an action by the plaintiffs against David Clements and should belimited to the actions of David Clements as legal counsel for Franklin Land Development Ltd. and business partner of the plaintiffs.

II. Analysis [ 9 ] After hearing counsel for the appellants and the respondents in connection with this matter, the appeal reduced itself essentially to whether or not the Chambers judge was correct in dismissing the claim against Ross Clements and in dismissing the claim for punitive damages. [ 10 ] The statement of claim alleges that the appellants relied on the respondents David Clements and Ross Clements’ expertise to protect their interests in the acquisition of the land in question.

They allege the respondent, Ross Clements, in breach of the fiduciary duty owed to the appellants, disclosed certain confidential information to the R.M. of Parkdale which compromised the appellants’ ability to rezone the land and that he divulged certain confidential information to the vendor which made it impossible for the appellants to renegotiate the agreement for sale, all of which resulted in loss to the appellants. [ 11 ] It is clear from a reading of the statement of claim that there are sufficient particulars in the statement of claim to found a claim based on a breach of a fiduciary duty owed by Ross Clements to the appellants. [ 12 ] The respondents however also contend that the claim against Ross Clements is vexatious and should be struck.

In dealing with the application to strike the claim based upon grounds that it is scandalous, frivolous or vexatious, the Chambers judge is entitled to look at the pleadings as well as all relevant supporting affidavits. From an examination of all the material, we are not satisfied that the action commenced against Ross Clements is vexatious.

On the evidence, it is clear that Ross Clements practiced in association with his father, that he gave certain advice from time to time in connection with land transactions, that he gave specific advice with respect to this transaction, and that he attended at the meeting with the R.M. of Parkdale in which it is alleged that certain confidential information was divulged. From this, it would appear that there was a relationship creating a fiduciary duty and obligation sufficient to found the action and no information on which we can conclude that the action was scandalous or vexatious.

His order to strike the action against Ross Clements is therefore set aside. III. Aggravated and Punitive Damages [ 13 ] The Chambers judge concluded that aggravated and punitive damages had not been adequately pleaded. He appears to have confused or equated aggravated and punitive damages in so finding. The appellants amended their statement of claim so as to not claim aggravated damages, a fact which appears to have been overlooked by the Chambers judge. The appellants specifically pled the action of the respondents were high-handed and callous.

It is clear that a claim for a breach of a fiduciary relationship can found a claim for punitive damages and therefore his finding that they had not been adequately pleaded is set aside. IV. Unjust Enrichment [ 14 ] The Chambers judge struck the claim for unjust enrichment on the basis that the appellants have not set forth sufficient and factual foundation. An examination of the statement of claim clearly supports such a finding. Unjust enrichment must be specifically pleaded and that was not done in this case.

The appellants rely on paras. 14 and 20 of the statement of claim but these paragraphs do not support the claim that there was a deprivation by David Clements of the appellants and the corresponding enrichment of David Clements. Even on the tortured attempt to bring the pleadings within the well established principles of unjust enrichment, the appellants fail. This ground is upheld. V.

Clements and Smith Barristers & Solicitors [ 15 ] During the course of the argument of this matter, counsel for the appellants conceded that they had not claimed damages against the partnership and this claim could not be sustained. We therefore uphold the striking out of the claim against Clements and Smith Barristers & Solicitors, although not for the reasons given by the Chambers judge. [ 16 ] Given the divided success in this matter, there will be no order as to costs.