CITATION: Karas v. Ontario, 2013 ONSC 6053

COURT FILE NO.: 04-CV-277144-CM3

DATE: 20130926

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: GEORGE KARAS, a.k.a. GEORGE KARAHALIOS, TED LAMPRAKOS, a.k.a. TERIS LAMPRAKOS, LISA KARAS, a.k.a. LIZA KARAS, a.k.a. LISA KARAHALIOS, a.k.a. LISA MOSTEFAOUL, a.k.a. LEEZA KARAHALIOS, a.k.a. LEEZA MOSTEFAOUI, JAMES KARAS, MOHAMMED MOSTEFAOUI, MARTHA KARAS, SOULA LAMPRAKOS and ROULA LAMPRAKOS, Plaintiffs

AND:

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, ATTORNEY GENERAL FOR ONTARIO, LAWYERS’ PROFESSIONAL INDEMNITY COMPANY a.k.a. LAWPRO, WEIR & FOULDS LLP a.k.a. WEIRFOULDS LLP, GARY CAPLAN, GARDINER ROBERTS, GARDINER ROBERTS LLP, WILLIAM O’HARA, LINDA ROBINSON, JOPE LUCAS, NEIL BROWN a.k.a. NEILL BROWN, KING-REED & ASSOCIATES LTD a.k.a. KING-REED & ASSOCIATES LIMITED, BRIAN KING, VAUGHAN O’TOOLE and NICK TSOUKALIS, Defendants

BEFORE: D.L. Corbett J.

COUNSEL: Terry Corsianos for the Plaintiffs

Fatema Dada for the Defendant, Her Majesty the Queen in Right of Ontario, Attorney General of Ontario, Joe Lucas and Neil Brown

Katherine Aukema for the Defendant, King-Reed & Associates Ltd., Brian King and Vaughan O’Toole

J. Brian Casey and Christina Doria for the Defendant, Lawyers’ Profesional Indemnity Company, WeirFoulds LLP, Gary Caplan, Gardiner Roberts LLP, William O’Hara and Linda Robertson

HEARD: November 5, 2012

ENDORSEMENT

D.L. CORBETT J.

[1] This is a pleadings motion, and a motion to strike specific causes of action from the statement of claim.

Pleadings Issues

[2] The first eight paragraphs of the plaintiffs’ factum capture this motion:

1. The defendants move to strike either the complete claim or portions thereof under rules 21, 25.06 and 25.11. They say it is prolix, repetitive, argumentative, and replete with evidence, and irrelevant and/or prejudicial facts. They say it is scandalous , frivolous and is an abuse of process. They say that the entire claim or paragraphs thereof that pertain to a related judgment in an underlying proceeding, should be struck out.

2. The defendants also take the position that the facts that preceded the trial of the underlying action are not material to this action, which, as set out below, is not the case. The plaintiffs (other than the FLA plaintiffs) were maliciously and fraudulently charged with serious criminal charges (conspiracy, arson and fraud), which were subsequently withdrawn before the trial of the underlying action. The fraudulent criminal charges were clearly motivated by LawPRO, its lawyers and private investigator in an attempt to gain a civil advantage in the underlying action, where LawPRO unsuccessfully tried to recover the settlement funds that it paid in a solicitor’s negligence action, wherein LawPRO defended by falsely, and without any proof, accused the plaintiffs of conspiracy, arson and fraud.

3. Given that the charges were laid, and in fact withdrawn before the trial of the underlying action, the facts relating to their causes of action in this proceeding (i.e. the conduct of the defendants in causing the fraudulent charges to be laid) are highly relevant to the causes of action asserted in this action for inter alia negligence investigation, malicious prosecution and abuse of process.

4. The factors are set out in the amended fresh as amended statement of claim….

5. LawPRO also takes the position that LawPRO and its lawyers cannot be sued for negligent investigation as the investigation was conducted by LawPRO’s private investigators. The plaintiffs have previously advised counsel for the LawPRO defendants that it will withdraw the claim of negligent and malicious investigation against the LawPRO. They will also withdraw the claim of negligent and malicious investigation against the law firms and lawyers who represented LawPRO in the underlying action (the lawyers and law firms set out in the style of cause as party defendants).

6. In any event, LawPRO is vicariously liable for the conduct of its private investigators, who conducted the investigation that led to the arrests – consequently, LawPRO will be held responsible for the negligent investigation, if the trial judge holds that the investigation was negligent.

Nature of this Action

7. This action documents the appalling, unethical and illegal conduct of the defendants – educated, professional and privileged individuals: senior executives and employees of The Lawyers Professional Indemnity Company (“LawPRO”), senior members of the Ontario Bar, LawPRO’s private investigation firm King-Reed & Associates Ltd. and its investigators and a senior OPP officer, all of whom thought they could act above the law.

8. These highly educated, well-paid professionals used their positions of privilege, extensive legal knowledge and skill to send innocent people to jail and to perpetuate what can only be described as a debacle of monumental proportions. They did so aggressively and illegally (and without any remorse), only to attempt to recover the settlement proceeds of a solicitor’s negligence action, which LawPRO had settled in 2000.

9. The plaintiffs are hard-working, middle class, new Canadians who have suffered unbelievable loss. They and their families have been waiting for 20 years to put this horrific ordeal behind them. One of the owners is 80 years old, and is in poor health from the extreme stress caused by the defendants’ misconduct. He and his wife survive on CPP, and can now only afford to live in his daughter’s basement, having lost their home to pay Eddie Greenspan to defend himself, his son and daughter (who were also charged) against the fraudulent criminal charges laid against them. The other owner cannot seem to keep a minimum wage job after the trauma that the defendants put him through. The balance of the plaintiffs are either unemployed or work in minimum wage jobs. (all emphasis in the original)

[3] This passage mirrors many of the problems in the statement of claim. The general thrust of the claim is clear: the plaintiffs sue over their alleged wrongful prosecution for arson, conspiracy and fraud. It is not clear whether they also sue over the wrongful resort to civil process by some of the defendants.

[4] Pleadings describe legal claims and set out allegations, with sufficient particularity to enable the defendants and the court to understand what the claim is all about. Pleadings do not include all the evidence. Nor should pleadings contain argument. Distinguishing among allegations, evidence and argument is not always easy, and parties should be given some latitude. Motions court is not a high school composition class, and the court will not intervene unless violations of the pleadings rules could affect the conduct of the lawsuit.

[5] In this case, the problems with the statement of claim are so extensive as to require a complete re-write. For the reasons that follow the statement of claim is struck out, with leave to amend within sixty days.

[6] In redrafting the statement of claim, the plaintiffs should bear in mind:

(a) First, the legal allegations against each defendant should be set out clearly, and the elements of each of these causes of action described. This is crucial. Each defendant should understand which causes of action are being asserted against it. In the passage from the factum quoted above, the plaintiffs first seem to say that they do not assert claims of negligent and malicious investigation against LawPRO or its lawyers and their law firms (para. 5). Then it asserts that it will make these allegations against LawPRO because it is vicariously liable for the alleged negligence of a firm of private investigators that it hired (para. 6). Then in para. 113(a), at the end of the factum, the plaintiffs seek leave to amend their claim to delete allegations of negligent and malicious investigation as against LawPRO, its staff and lawyers and the law firms representing it. Then in oral argument the plaintiffs changed their position and advised that their concession on this point was in error. This will not do. It should be crystal clear, for each party, and for the court, what causes of action are being alleged against which defendants.

(b) Second, the plaintiffs should provide particulars of what they allege that each defendant did that establishes each element of each cause of action alleged against that defendant. Note that the previous sentence has three “eaches”. The statement of claim must be precise and particular. Particularity is not achieved by pleading sweeping conclusions. For example, alleging that this is all a “debacle of monumental proportions” is devoid of legal content. There is no cause of action for “perpetuating a debacle”. There is no legal significance whether a “debacle” is “monumental” or some other size.

(c) Third, most of the adjectives and adverbs in the claim should be deleted. A few have legal significance; they must stay. If the plaintiffs want more for stylistic and narrative purposes, a few moderate words would not offend. Exorbitant use of modifying language means that the wrong noun or verb has been chosen. It also suggests that the pleading is sliding into argument.

[7] The court will not re-draft the statement of claim for the plaintiffs. I understand that the plaintiffs are self-represented. And I understand that they are not sophisticated in legal affairs and say that they have limited means. However, they are pursuing complex litigation, and will have to do it properly if they wish to proceed.

Background of the Claim

[8] The plaintiffs argue that the defendants take the position that the background history of the case cannot be pleaded. That is not so. Some background is necessary to place the claim in context. However, in pleading background facts, the plaintiffs should restrict themselves to facts that are relevant to the case they are bringing now. They should be able to explain how the pleaded facts relate to the legal allegations in this case. And “background” should be concise and summarized at the outset.

[9] Based on the statement of claim, the background appears to be as follows:

(a) The plaintiffs divide into two groups. The primary plaintiffs owned a pizzeria in Orillia, Ontario. The secondary plaintiffs are family members of the primary plaintiffs and assert claims solely on that basis. When I refer to the “plaintiffs” in this summary, I mean only the primary plaintiffs.

(b) In 1992 the pizzeria burned down.

(c) The plaintiffs’ insurer would not pay, alleging that the plaintiffs had the restaurant burned down themselves.

(d) The plaintiffs retained counsel to sue for the insurance proceeds.

(e) The plaintiffs’ lawyer, Shields, missed the limitations period against the insurance company. And so the plaintiffs could not recover because of the negligence of their own lawyer.

(f) So they sued their lawyer, Shields.

(g) Shields was insured by LawPRO. Shields was the defendant in the case, but it was LawPRO that ran the defence and retained and paid counsel.

(h) LawPRO defended on the basis that the plaintiffs’ insurer had been correct: the fire was arson at the behest of the plaintiffs. Even if Shields had sued on time, the plaintiffs would have lost. And so the plaintiffs lost nothing as a result of Shields’ failure to start their lawsuit on time.

(i) The lawsuit between the plaintiffs and Shields continued to 2000, and then it settled a month before trial. LawPRO paid $800,000 on behalf of Shields to settle the claim. The parties exchanged releases and the case was dismissed without costs.

(j) Soon after, LawPRO learned new information. A man named Nick Tsoukalis came forward. He said that everything had been a big conspiracy to defraud LawPRO. The fire had been arson. He knew because he had been part of it.

(k) LawPRO believed that it had been duped. It interviewed Tsoukalis under oath. It could not promise Tsoukalis immunity from prosecution if the matter became a police case, but it hired and paid senior defence counsel for him – ostensibly to protect his interests – after obtaining a statement from him under oath.

(l) Armed with Tsoukalis’ statement, LawPRO went to court, without notice to the plaintiffs, to obtain an injunction to secure the settlement proceeds. LawPRO also commenced a lawsuit against the plaintiffs, seeking to recover the settlement funds and additional damages. And LawPRO went to the police.

(m) The police arrested and charged the plaintiffs based on the information received from LawPRO.

(n) Tsoukalis was lying all along. There never was a conspiracy. There never was arson. There was no fraud.

(o) Tsoukalis was not believable, given his history.

(p) The plaintiffs raised these concerns with LawPRO and with the police, but the civil and criminal proceedings continued despite their protests.

(q) The plaintiffs counterclaimed against LawPRO, alleging abuse of process and related claims.

(r) The criminal proceedings were resolved in January 2004, roughly 14 months after they started. The Crown withdrew the charges on the basis that there was no reasonable prospect of a conviction.

(s) The civil proceedings, including the counterclaim, went to trial before J.E. Ferguson J. in 2007. J.E. Ferguson J. dismissed both the claim and the counterclaim. Fifteen years after the fire, the case was finally over.

(t) The plaintiffs were broken by this protracted process. They were broken financially by the costs of defending the criminal proceedings. And they were broken psychologically by the stress of legal proceedings that had been hanging over their heads for a decade and a half.

[10] This summary is based on my reading of the statement of claim. These are not findings of fact as to what happened. There may be additional facts that should be included. There may be some facts included that are not necessary. My purpose is to show that “background” or “contextual” facts can be set out concisely, in perhaps two or three pages. The statement of claim runs on for 279 paragraphs over 63 pages and is prolix and unfocused.

The Basis of the Claims

[11] A proper statement of claim is not a long tale of woe coupled with a claim for money. The background explains the context in which the claims arise. With that background in mind, the statement of claim must set out the specific bases of the claim. For example:

(1) The plaintiffs claim damages arising from their wrongful arrest and prosecution on criminal charges; and

(2) The plaintiffs claim damages for the wrongful investigation that led to the criminal charges; and

(3) The secondary plaintiffs claim damages under the Family Law Act arising from the loss of guidance, care and companionship of the primary plaintiffs as a result of (1) and (2).

[12] The plaintiffs may also be claiming for damages arising from the civil action commenced by LawPRO. It is not clear from the statement of claim whether this is so. There is a claim for damages for “abuse of process” (para. 1(iii)), and it may be that this is for the civil proceedings. If there are claims based on the wrongful prosecution of civil proceedings, those allegations must be set out clearly.

The Causes of Action

A. Identifying the Causes of Action

[13] In paragraph 1, the plaintiffs seek damages for the following causes of action:

(i) malicious prosecution (para. 1(i));

(ii) abuse of process (para. 1(iii));

(iii) malicious and/or negligent investigation (para. (para. 1(iv))

(iv) intentional infliction of nervous shock, mental anguish and harm (para. 1(v));

(v) conspiracy to injure (para.1(vi));

(vi) infringement of Charter rights (para. 2(a));

(vii) malfeasance of public office (para. 2(b)); and

(viii) false imprisonment (para. 2(c)).

Items (i) to (v) are alleged against all defendants. Items (vi) to (viii) are alleged against two police officers and Her Majesty the Queen in the Right of Ontario (the “Crown”).

[14] The plaintiffs may not seek relief in the statement of claim against persons who are not parties to the action. Thus the requests for orders against Mark Sandler, N.S. Polygraph Services and Nelson Scharger in subparagraphs 1(xi) and (xii) are struck out without leave to amend, without prejudice to any subsequent motion or claim that may be brought against those persons.

[15] The requests for declarations concerning solicitor-client privilege and litigation privilege set out in paragraphs 1(xiii) and (xiv) are not properly part of the statement of claim and are struck out without leave to amend. These are not causes of action. These should be raised, if at all, on motions, if those issues become relevant to a step in this proceeding.

B. Alleging and Particularizing the Elements of the Causes of Action

[16] In a case of this complexity, it is necessary, but not sufficient, to state the causes of action in paragraph 1 of the statement of claim. The plaintiffs also need to set out the elements of each cause of action, what lawyers refer to as “the test”. And then they must particularize those elements for each defendant against whom that claim is asserted. So, for example, the elements of malicious prosecution are:

(i) criminal proceedings must have been instituted by the defendant against the plaintiff;

(ii) those proceedings must have been concluded favourably to the plaintiff;

(iii) there must have been a lack of reasonable and probable cause for the defendant’s conduct; and

(iv) there must have been an improper purpose underlying the defendant’s conduct, not an honest belief in guilt.[^1]

[17] There were criminal proceedings against the plaintiffs, and they were resolved in the plaintiffs favour. That much should not be controversial. But it still must be pleaded. What may be less clear, at least in respect to some of the defendants, is whether they “instituted” the legal proceedings. The plaintiffs must particularize the basis on which they say each defendant is alleged to have “instituted” the prosecution. Similarly, the plaintiffs must particularize the basis on which they say each defendant lacked reasonable and probable cause, and was motivated by an improper purpose.

[18] Claims in negligence have particular requirements that must be observed. They are material in this case. They include (a) a duty owed from the defendant to the plaintiff; (b) a standard of care applying to the defendant; and (c) a breach of the standard of care resulting in a breach of duty. It is not clear from the pleadings what duties are alleged to be owed by defendants to the plaintiffs. It is not clear what standard of care is alleged to exist for each defendant. And it is not clear what each defendant did that was a breach of the standard of care. These must be set out with precision. There is good reason to suppose, for example, that the standard of care expected of a private investigator, a police officer, a private insurer, and a lawyer, may all be different. And there may be public policy reasons negating the existence of a duty owed by the defendants’ lawyers to the plaintiffs.

[19] The so-called constitutional torts must be pleaded with greater care. For example, the defendant police officers did not have a constitutional duty to the plaintiffs to “ensure that justice is done” or to “exercise judgment and discretion” or to “exercise fairness, moderation and dignity” (subparagraphs 190(l), (m), and (t)). It would be nice if police officers did these things, but these are not constitutional duties, the breach of which will lead to an action in damages. As another example, it is not true that “the principles of fundamental justice” (in section 7 of the Charter) include the right “not to be subjected to unlawful, malicious, willful or negligent conduct by the police and Crown Attorneys”. The use of the word “or” is a problem here. There is no claim for police or Crown Attorneys acting “willfully”. And clearly not every “illegality” in a prosecution could found a constitutional tort. Malicious conduct that is legal conduct would not likely be a basis for a claim. And on the current state of the law, police and Crown Attorneys are not liable for “mere negligence”. I do not decide the availability of these causes of action here. Some of these propositions might be considered trite, and others controversial. In either case, the plaintiffs must be precise about these alleged causes of action. Where they plead an established constitutional tort, they should plead its elements, its “test”. Where they are pleading a constitutional tort not previously recognized in our law, they should do so with care and precision, and set out clearly the test they say applies.

[20] The plaintiffs should also bear in mind the language of the constitutional provisions on which they rely for their tort claims. Section 7 is the right to “life, liberty and security of the person”. These rights circumscribe the guarantee of treatment “in accordance with the principles of fundamental judgment”. So it is hard to see how there could be a right to be free from negligent or malicious investigation, under this section, if the investigation did not deprive the plaintiffs of their life, liberty, or security of the person. Again, the point here is not to decide these issues, but to explain that the pleading does not clearly set out the legal basis of the alleged constitutional torts.

[21] Some words on the nature of particularization: it does not mean a long list of generalizations. It means concrete specifics. So, for example, when the plaintiffs particularize the alleged violations of constitutional rights:

(a) The allegation that the police officers “failed to conduct appropriate research in regard to the evidence” is of little assistance. What “research” did the officers not conduct that they should have conducted?

(b) The allegation that the officers “failed to pay due regard to the evidence which was not favourable to the laying of criminal charges” is of similarly little assistance. What is the “evidence” the officers should have “paid due regard to” that they did not?

(c) Likewise with the allegation that the officers “ignored overwhelming evidence of the plaintiffs’… innocence”? What is the evidence that the officers had that they are alleged to have ignored?

Again, these are examples, not a complete list. The fact that the plaintiff has provided a list from (a) to (gg) of alleged violations of constitutional rights does not mean it is adequately particularized. What are the precise things they are complaining about?

General Drafting Issues

[22] I would have thought that this claim could be set out in detail in 20-25 pages. It may take longer. There is no page limit. But excess verbiage should be cut out. Argument should be eliminated. Repetition should be eschewed, except where necessary to particularize overlapping claims. Part of the challenge of drafting a claim in a case like this one is to minimize repetition while being thorough, clear and particular.

[23] As I have said, it is not for the court to draft, or redraft, the statement of claim. On the other hand, it is only fair to the plaintiffs that they be told the kind of things that the court considers unacceptable. What follows illustrates general principles.

[24] There is a lot of immaterial detail in the statement of claim. Paragraphs 33 to 39 sets out the names and roles of various LawPRO employees. None of these employees is a defendant. Why is this pleaded? Why does it matter what the chain of command was within the company? These facts may all go into evidence at trial, but that does not make them material to the statement of claim. At most, one paragraph ought to suffice to list employees of LawPRO and allege that their employer is vicariously liable for their conduct. Similar considerations apply to the lawyers and law firms that acted for LawPRO. A simple allegation that they were LawPRO’s counsel and acted as agents for LawPRO should suffice.

[25] Different considerations apply where the plaintiffs allege that LawPRO is vicariously liable for a person whose relationship with LawPRO would not seem to give rise to that liability. So, for example, it is appropriate for the plaintiffs to plead in detail why they allege that Mark Sandler, a lawyer allegedly hired to act for Mr Tsoukalis, was, in fact, an agent of LawPRO. Common sense and context should be a guide to how much detail is required.

[26] As another example, paragraphs 45, 46 and 48 plead the interests of the plaintiffs in the pizzeria. It is confusing and full of unnecessary detail. I would have thought it would be sufficient to plead that plaintiffs 1, 2 and 3 (whoever they may be) beneficially owned the pizzeria on the date of the fire. If more is needed then there should be something in the pleading that explains why this matters for the purposes of this case. Another example is reflected in the title of proceedings. Why is Leeza Karahalios listed under five aliases? If this was a debt action against her, and the many names under which she has traded was relevant for registering security, I could see it. But is this really necessary in this case? Certainly there is no need to name LawPRO and WeirFoulds LLP under two different trade names.

[27] Some allegations are irrelevant and could lead the case off into time-consuming tangents. For example, in paragraph 71, the plaintiffs attack the conduct of LawPRO in obtaining a without notice injunction back in 2000. The times to challenge that injunction were (a) on its return after the plaintiffs were given notice of it (a failure of full and frank disclosure is a basis for dissolving the injunction) and at trial (where the court may grant a remedy if it turns out that the injunction ought not to have been granted in the first place). That is, the propriety of the disclosure is to be addressed in the proceeding in which the injunction was obtained, not in a fresh lawsuit after the fact. And it was. J.E. Ferguson directed a reference before the Master to fix damages payable by LawPRO in accordance with the undertaking as to damages that LawPRO gave when it obtained the injunction.

[28] Paragraph 62 illustrates several drafting issues:

LawPRO relied on the same circumstantial case that Wellington plead in its defence (sic), but neither LawPRO nor O’Hara conducted no real independent investigation (sic), and they never obtained Wellington’s file, which contained its investigator’s investigation report of the arson (which was made contemporaneously with the fire in December 1992) and various witness statements. At the settlement conference of the Squires Action, the Honourable Justice Nordheimer told LawPRO that its “circumstantial” case would never convince a trial judge that “the owners did it”, and he told LawPRO that it should offer $750,000 to settle the Squires Action.

At the risk of seeming facetious, identifying errors here reminds me of one of those puzzles where one is asked to find all the hidden cats. Or all the “Waldos”. The more one looks, the more one sees. Yet one is sure that there must be more to be found. The first sentence is run-on.

[29] It jumps from topic to topic. It has a double negative, prosaic for starting with “neither” and “nor”. The word “but” should signify a shift in meaning, but there is no shift. It is good that the investigator prepared an “investigation report” rather than some other type of report. It does not seem good that the investigator prepared his report “contemporaneously with the fire”: was the investigator, a latter-day Nero, fiddling while the pizzeria burned?

[30] All that said, bad though this sentence is, it conveys the meaning that seems intended. Which leads to the question: why is it here at all? It is far too detailed to be “background”. Is O’Hara being sued for negligent investigation of the case that was settled in 2000? Why does it matter that LawPRO did not obtain Wellington’s file? On what basis would LawPRO have been able to obtain it? Why would Wellington just hand it over? And what is the legal significance of these points? Even assuming that LawPRO’s investigation prior to the 2000 settlement was frail (if this is the point), the parties settled the case in September 2000. Why do prior events matter?

[31] Then there is the second sentence of the paragraph. Why is the substance of a settlement conference pleaded? Settlement conferences are without prejudice. The case settled on terms close to those apparently recommended by Nordheimer J. But no one is disputing the terms of that settlement. Not only is this sentence improper; it is irrelevant.

[32] There are related concerns respecting the judgment of J.E. Ferguson J. in the prior civil proceedings. The meaning and effect of that judgment may be relevant to claims against LawPRO. However, most of the parties in this case were not parties in the proceedings before J.E. Ferguson J. Her Honour’s findings do not bind those defendants. So, for example, Her Honour’s findings about the investigation conducted by King-Reed cannot be pleaded against King-Reed in this proceeding.

[33] To coin a phrase from paragraph 1 of the plaintiffs’ factum, quoted above at paragraph 2 of this decision, the statement of claim is “prolix, repetitive, argumentative, and replete with evidence and/or prejudicial facts… [i]t is scandalous, friviolous and… an abuse of process”. This colourful terminology is not the excessive use of language which I have criticized in this decision. These words are the legal tests by which pleadings are judged under Rules 25.06 and 25.11.

[34] The essential allegations in this case are not complicated. However, the many legal claims against many different defendants renders the task of pleading difficult. It is a task for a lawyer, ideally one experienced in complex civil litigation. It is for the plaintiffs to decide how to accomplish this task, but they may find it difficult if they do not obtain appropriate professional advice. Ordinarily I permit 30 days to amend a statement of claim. Given all of the circumstances, I accord the plaintiffs sixty days within which to amend their statement of claim.

[35] This will be the third round of amendments. I expect the claim will be largely re-written and significantly restructured. It will be less readable if it contains underlining throughout to show the amendments. The redrafted statement of claim shall be delivered “fresh”, without any underlining, and shall be entitled “Fresh Thrice Amended Statement of Claim”.

C. Rule 21 Motions to Strike Causes of Action

Negligent Investigation

[36] Several defendants move to strike allegations of “negligent investigation” without leave to amend. They take this position on the basis that the tort alleged either (a) does not exist under Ontario law; or (b) cannot arise against them because they owed no duty of care to the plaintiffs. I decline to strike these allegations without leave to amend at this time.

[37] First, it is clear from recent Ontario Court of Appeal jurisdiction that there may be a tort of negligent investigation.[^2] It may exist for professional investigators. It is less clear whether it exists for firms like insurers which are in the business of conducting or managing investigations, even where they are not professional investigators, per se, and even where they obtain assistance from professional investigation firms. I conclude that the existence and ambit of a duty of care in these circumstances is unclear. Particularly given the comments of J.E. Ferguson J. to the effect that she was leaving these issues to this case, I am not inclined to dismiss them summarily now.

Claims Arising From the Prior Civil Proceedings

[38] The plaintiffs allege that the defendants wrongfully instigated criminal proceedings against the defendants to further their goals of recovering the $800,000 settlement funds. This is the “improper purpose” they allege in their allegations of malicious prosecution. They are entitled to plead particulars of these allegations.

[39] The plaintiffs also sue for “abuse of process”. It is not clear to me whether they intend to seek remedies for the defendants’ conduct in relation to the prior civil proceedings. In those proceedings they counterclaimed for breach of contract, abuse of process and punitive damages. The counterclaim was dismissed by J.E. Ferguson J., but the effect of that dismissal may be a matter of debate. In paragraph 183 of Her Honour’s reasons, she found:

I note that I did not receive defence closing submissions with respect to their claim of breach of contract (the settlement agreement) and abuse of process. Those claims are more appropriately left to be dealt with in their action as plaintiff which has been stayed. It may be that this was recognized by counsel as this trial progressed and that is why specific submissions were not received on this point.

[40] In paragraph 63, Her Honour held:

In any event, L.P.I.C.’s conduct is better dealt with in the defendants’ action against L.P.I.C. and others, which action has been stayed pending determination of this matter.

[41] On the other hand, Her Honour also held at paragraphs 85 and 88:

To justify an award of punitive damages, it is necessary to find that L.P.I.C. acted maliciously in breaching the settlement order and by bringing this motion. I do not find malicious conduct on the part of L.P.I.C. As a result, punitive damages are not justified.

I am, however, dismayed over L.P.I.C.’s sloppy and inadequate investigation. That, however, is a matter left to another day and another court. Alternatively, even if I found egregious behavior on L.P.I.C.’s part, which I do not, there is no fiduciary relationship between L.P.I.C. and the defendants. As a result, there is no duty of good faith. Further, I do not find that L.P.I.C.’s conduct was malicious or callous. I do not believe that L.P.I.C. needs to be punished and deterred as a result of its actions.

[42] The “defendants’ action against L.P.I.C.” which had been stayed at the time of the trial before J.E. Ferguson J. is the proceeding now before me.

[43] It is not clear to me precisely what claims, if any, are asserted in this proceeding on the basis of wrongful recourse to civil proceedings. There may be none: perhaps the plaintiffs are only relying on the civil proceedings for their evidence of malice in their claims concerning the criminal proceedings. Or perhaps there are claims based on the civil proceedings. Until these are pleaded with particularity, it is not possible to determine if they have been decided already by the judgment of J.E. Ferguson J. If there is uncertainty respecting the effect of that judgment on these proceedings, that would be a matter for the trial judge in these proceedings. I am not prepared to strike any part of the claim without leave to amend on the basis that it has already been decided by J.E. Fergsuon J.

Scheduling

[44] I am seized of any motions concerning the propriety of the fresh thrice amended statement of claim. If any defendant wishes to bring such a motion, it shall be initiated within thirty days of delivery of the fresh thrice amended statement of claim. The parties shall arrange the date for the motion through my assistant. The scheduling should be complete by December 31, 2013, and the return date should be no later than January 31, 2014.

[45] There should be a schedule of other steps in this case, to move it along (something upon which all parties seem to be agree). The parties shall agree on a schedule among themselves and counsel for LawPRO shall advise me of the terms of their agreement by October 31, 2013, failing which counsel for LawPRO shall schedule a conference call with me no later than November 30, 2013 to settle the schedule.

Costs

[46] Success has been divided. The defendants have prevailed on the pleadings points, and the plaintiffs have prevailed on the Rule 21 motions to strike without leave to amend. On balance, there shall be no order as to costs, unless there are offers to settle that are material to the costs issue. If any party seeks costs on the basis of the effect of an offer to settle, they shall make written submissions to me within 21 days. Any party adverse in interest to the party claiming costs may respond within 14 days thereafter. There shall be no reply or oral submissions unless I direct otherwise.

[47] I regret the delay in delivering this decision. I have been on an extended medical absence following a heart attack in August 2012, a premature return to work in October to December 2012, and I have not yet been able to resume work full-time. Hence the delay.

D.L. Corbett J.

Date: September 26, 2013

CITATION: Karas v. Ontario, 2013 ONSC 6053

COURT FILE NO.: 04-CV-277144-CM3

DATE: 20130926

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

GEORGE KARAS, a.k.a. GEORGE KARAHALIOS, TED LAMPRAKOS, a.k.a. TERIS LAMPRAKOS, LISA KARAS, a.k.a. LIZA KARAS, a.k.a. LISA KARAHALIOS, a.k.a. LISA MOSTEFAOUL, a.k.a. LEEZA KARAHALIOS, a.k.a. LEEZA MOSTEFAOUI, JAMES KARAS, MOHAMMED MOSTEFAOUI, MARTHA KARAS, SOULA LAMPRAKOS and ROULA LAMPRAKOS,

Plaintiffs

AND:

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, ATTORNEY GENERAL FOR ONTARIO, LAWYERS’ PROFESSIONAL INDEMNITY COMPANY a.k.a. LAWPRO, WEIR & FOULDS LLP a.k.a. WEIRFOULDS LLP, GARY CAPLAN, GARDINER ROBERTS, GARDINER ROBERTS LLP, WILLIAM O’HARA, LINDA ROBINSON, JOPE LUCAS, NEIL BROWN a.k.a. NEILL BROWN, KING-REED & ASSOCIATES LTD a.k.a. KING-REED & ASSOCIATES LIMITED, BRIAN KING, VAUGHAN O’TOOLE and NICK TSOUKALIS

Defendants

ENDORSEMENT

D.L. Corbett J.

Released: September 26, 2013

[^1]: Allen M. Linden and Bruce Feldthusen, Canadian Tort Law (4th ed., 2011), at p.54.

[^2]: Mohammed v. Goodship, 2009 ONCA 320. See also Correira v. Canac Kitchens, 2008 ONCA 506.