SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL LIST
RE: Elena Belovich and Alexandre Belovich, Plaintiffs
AND:
Elliot Steiner, Ellena Steiner, 1344272 Ontario Limited, O and L Developments Limited, Basis ‘A’ Development Corporation, 1460714 Ontario Limited, Elm Sheppard Inc., Elm Thornhill Woods Inc., 2079213 Ontario Limited, 14 Prince Arthur Avenue Limited, 3570 Brock Street North Limited, 1346046 Ontario Limited, 1346048 Ontario Limited, 1480031 Ontario Limited, Elm Davenport Residences Inc., Elm Ajax Residences Inc., Elm Ajax Plaza Inc., 1346181 Ontario Limited, 1460714 Ontario Limited, 1955 King Street Investments Limited, Elm Partners Rosedale Medical Hamilton Inc., Elm Capital Group Inc., Robert Cheung, Elm Kensington Residences Ltd., Larisa Goldovsky and Joseph Morano, Defendants
BEFORE: D. M. Brown J.
COUNSEL:
E. Bisceglia, for the Plaintiffs
D. Moore and K. Jones, for the Steiner Defendants
HEARD: Motion in writing: materials dated May 24, June 6 and 10, 2013
REASONS FOR DECISION
I. Motion for particulars
[1] This process-related interlocutory motion, in this old lawsuit, involves a contest between the immovable object of the plaintiffs - who take the position that they have provided adequate particulars of their claims – and the irresistible force of the moving defendants – who take the position that the plaintiffs have failed to plead some claims adequately.
[2] The defendants other than 1460714 Ontario Limited, 14 Prince Arthur Avenue Limited and Robert Cheung (the “Moving Defendants”) seek orders (i) striking out portions of two responses to demands for particulars delivered by the plaintiffs (January 15 and April 9, 2013), (ii) requiring the plaintiffs to deliver proper particulars of negligence allegations pleaded in paragraphs 60 and 62 of the Fresh as Amended Statement of Claim (the “Claim”) or, alternatively, (iii) an order striking out those two paragraphs.
[3] Before dealing with the issues on the motion, a bit of history about this action is required.
II. Procedural history of this old action
[4] Over five years ago, on April 3, 2008, the plaintiffs started this action. In that year Hoy J., as she then was, directed a trial of one of the issues – the Prince Arthur issue. When the action came before me on October 12, 2012 at a case conference, that trial of issues had not taken place. Consequently, I vacated that order and directed the plaintiffs to advise whether they intended this court to adjudicate only the Prince Arthur issue or all issues. The plaintiffs advised that they wished all issues adjudicated.
[5] On December 10, 2012, I approved a joint litigation/discovery plan which contemplated the exchange of any amended pleadings by the end of February, 2013, the furnishing of outstanding undertakings from prior examinations by early March, the completion of productions by the end of April and the holding of further discoveries between May and August, 2013. All pre-trial steps were to be completed by Thanksgiving, or so.
[6] I ordered that the next case conference be held on March 5, 2013. That did not occur because plaintiffs’ counsel was involved in another case. The parties came before me on May 16, 2013. From the information provided at that case conference, it was clear that the approved joint litigation/discovery plan was dead in the water – the defendants wished to bring a motion seeking particulars of the Claim.
[7] I directed a motion in writing. The parties filed their materials by the deadline, June 10, 2013. On May 16 I had also directed the booking of a case conference during the weeks of June 17 or 24, 2013. The parties did not book the ordered case conference until I wrote to them on June 14, 2013 requiring them to do so.
[8] From the correspondence of plaintiffs’ counsel in the motion materials, I understand that as of the middle of May the parties had not agreed on a schedule for examinations for discovery, although plaintiffs’ counsel had provided dates for the examination of his clients in August and had twice sought dates from defendants’ counsel for the examination of his clients. The defendants had not delivered their answers to undertakings given on the earlier Prince Arthur examinations. Also, plaintiffs’ counsel wanted to bring a motion seeking answers to refusals on examinations already held. No recent correspondence from defendants’ counsel was placed in the record before me. Consequently, I am not aware of what, if any, arrangements counsel have made for examinations for discovery.
III. Other aspects of the history of this dispute
[9] In the very broadest of terms, in this action the Beloviches seek a wide range of relief to recover the value of investments which they say they made together with the Steiners in the corporate defendants, the chief of which was 1344272 Ontario Limited, styled by the parties as “Girlco”.
[10] Litigation concerning those investments first started in 2006, in another proceeding: 06-CL-6604. Various orders were made in that proceeding, including one ordering that the accounting firm of Baratz, Judelman be given access to the books and records of most of the corporate defendants so that the firm could “investigate and audit all transactions entered into by Girlco and Basis “A” and the Subsidiaries from and after January 1, 2002 and to report its findings to the Applicants and Steiners by November 30, 2006.” The order also authorized Navigant Consulting, or some other firm, “to report upon the fair market value of Girlco and Basis “A” and the Subsidiaries including their underlying assets and to deliver its findings to the Applicants and the Steiners”.
[11] From the materials before me, the parties agreed that Baratz Judelman prepared 20 draft reports on the major transactions between December, 2006 and February, 2007. According to Elena Belovich, she and her husband took issue with the Baratz Reports. As a result, it appears that subsequently the Beloviches retained several other accountants to conduct their own reviews into the transactions in question: Jeff Ambrose; Deloitte & Touche and, in April, 2011, Crockatt & Associates. The latter prepared two reports dated October 3 and 4, 2012. Evidently the plaintiffs provided those reports to the defendants before the October 18, 2012 case conference. The reports expressed opinions on the amounts still outstanding from Girlco to Elena Belovich and the long term loans still outstanding from Girlco.
[12] The defendants’ motion for particulars must be assessed in light of that background.
IV. The portions of the pleading in dispute
[13] The Moving Defendants complain about the adequacy of paragraphs 60 and 62 of the Claim. Those paragraphs read as follows:
The Beloviches have invested funds in excess of $6,000,000 in Girlco, its subsidiaries and related entities since 1999. At all material time, Mrs. Steiner was negligent as she failed to adequately protect and secure the Beloviches’ interests as shareholders and/or lenders of Girlco, its subsidiaries and related entities, as a result of which the Beloviches have suffered substantial losses and damages, while the Steiners have been unjustly enriched.
The Beloviches trusted and relied on the Steiners to manage Girlco in a manner consistent with the best interests of the company and the Beloviches. At all material time, the Steiners negligently managed the affairs of Girlco, its subsidiaries and related companies, to the detriment of the Beloviches and to the sole benefit of the Steiners.
[14] By any standard, that was a bald pleading of negligence by the plaintiffs, lacking the particulars necessary to disclose the substance of their negligence claim. As I wrote recently in RuggedCom Inc. v. Hyams, 2013 ONSC 2545:
One of the functions of a statement of claim is to give the defendants notice of the specific claim against them: what they did wrong and what harm it caused to the plaintiff.
Paragraphs 60 and 62 of the Claim did not perform that function.
[15] The Moving Defendants sought particulars of the allegations in those paragraphs by a Demand for Particulars dated December 21, 2012. Specifically, in respect of paragraph 60 they asked for particulars of “the acts and/or omissions of Ellena Steiner alleged to have been negligent” and “the damages alleged to have been suffered by the Beloviches as a result”, and in respect of paragraph 62 they sought particulars of the “alleged negligent management of Girlco” and the other companies “including details sufficient to identify the specific acts or omissions claimed to have been negligent, the transaction(s) in question and the identities of the persons involved,” together with “the material facts relied upon in support of the claim that the Beloviches were harmed and the Steiners benefited as a result of the alleged negligence”.
[16] The plaintiffs provided a Response to Demand for Particulars dated January 15, 2013 which fleshed out their pleading in the two paragraphs, but which contained a degree of open-endedness by not closing the list of alleged acts of negligence. Counsel for the Moving Defendants sought more specificity by letter dated January 31, 2013, which resulted in an April 9, 2013 Supplementary Response to Demand for Particulars. The Supplementary Response provided a further two pages of particulars regarding paragraph 60 and 5.5 further pages regarding paragraph 62.
[17] The Moving Defendants remain unsatisfied. They object to language in both responses which “leave the door open” to further allegations, so to speak. For example, certain particulars are qualified by opening language which states that “they included but are not limited to” those particulars. Other responses referred to “Girlco and/or any Girlco related entity”, or “various entities”, or “various investments/projects/entities”.
[18] In their Supplementary Response to Demand for Particulars the plaintiffs stated:
The Plaintiffs do not have any further information with respect to the extent of negligence of Ellena Steiner at this time, and state such knowledge is in any event within personal knowledge of Ellena Steiner and can be further determined through discoveries.
[19] That position does not satisfy the Moving Defendants. Mr. Steiner deposed that the plaintiffs’ claims still use “vague, open-ended and undefined terms” and, as a result:
Mrs. Steiner and I are unable to respond to these allegations of negligence in a reasonable or intelligent way. Essential details necessary to identify the specific acts or omissions alleged against us in relation to specific transactions or events are lacking. In short, we cannot tell what it is that we are alleged to have done or not done in relation to specific transactions or events.
V. Analysis
[20] With respect, that overstates the situation. The initial pleading in paragraphs 60 and 62 of the Claim was wholly inadequate. However, through their two responses to demands for particulars the plaintiffs have provided a considerable amount of detail about their claims. Certainly enough detail to enable the Moving Defendants to plead back over in respect of the identified transactions or particulars and to move on to the discovery stage of this proceeding – and this case desperately needs to move on.
[21] As to the risk that the plaintiffs, by using open-ended language for some particulars, are leaving the door open to adding further transactions to their list of complaints, such a risk exists, but it can be easily managed in two ways:
(i) First, on the examinations for discovery of the plaintiffs the Moving Defendants need simply ask whether the plaintiffs intend to rely on any other transaction, act or omission in support of their claims set out in paragraphs 60 and 62. If the answer is “No”, that ends the matter. If the answer is “Yes”, then the obvious questions can be asked to obtain the details;
(ii) Second, if the plaintiffs attempt to hedge their bets by leaving the door open further discoveries, I will deal with that problem at the case conference following the examinations. And I will deal with it by informing the plaintiffs that they need “to fish or cut bait”. That is to say, I will give them 30 days to advise if they intend to rely on any further transaction, act or omission in support of that part of their pleading. If they provide no further particular, then the scope of their claim in respect of those paragraphs will be fixed for trial, and they will not be permitted to later raise any further claim. If they do provide further particulars, I will order a further examination for discovery with severe cost consequences to the plaintiffs for not providing the information during their initial discoveries (provided it was available to them at that time).
[22] In my view, such a disposition of this motion will get this action moving – and it must start moving – while at the same time providing the Moving Defendants with the comfort that by the end of the examinations for discoveries they will know everything about the case against them that the plaintiffs intend to adduce at trial.
[23] So, although I will not grant the orders sought by the Moving Defendants, I do so on the basis of the terms which I have set out in paragraph 21 above. Given that disposition of the motion, but in light of the complete inadequacy of the initial pleading by the plaintiffs of their allegations in paragraphs 60 and 62 of their Claim, I order that the costs of this motion be in the cause.
[24] As I stated in my email to counsel of June 14, 2013, “the December 10, 2012 timetable is already out the window”. Counsel failed to book the case conference which I had ordered on May 16, 2013, until I prompted them with my email of last week. That case conference is now booked. I expect counsel to come to that conference with a full agreement on the examinations for discovery and the completion of undertakings from the prior examinations.
D. M. Brown J.
Date: June 19, 2013