SUPERIOR COURT OF JUSTICE - ONTARIO

COMMERCIAL LIST

Court File No.: 12-09746-00CL
Date: 2013-11-19

RE: HARRY BIEBERSTEIN v. MARTIN KIRCHBERGER et al

COUNSEL:
Morris Manning, Q.C. and Fred Shuh for the plaintiff, responding party

Jonathan Rosenstein for the defendants in Schedule “A”, attached, moving parties

Aaron Postelnik for the defendant Henry Wilmot,(“Wilmot”) moving party

J. Teal for the defendant, Millard, Rouse & Roseburgh LLP, (“Millards”), moving party

John F. Evans for the defendant Stephen Frost (“Frost”), moving party

HEARD: October 22, 2013

BEFORE: MESBUR J.

The motions:

[1] The plaintiff launched this action against some thirty defendants about a year ago. Only nineteen have been served. The claim (which runs to 56 pages), makes broad and sweeping allegations of breach of contract, conversion, fraud, breach of fiduciary duty, civil conspiracy, (including the tort of unlawful conduct conspiracy), breach of trust and unjust enrichment. The plaintiff claims $10 million in damages for these allegedly tortious acts. He also makes additional claims for “money had and received” and for punitive damages.

[2] All but two[1] of the defendants who have been served move to strike the statement of claim as disclosing no reasonable cause of action against them. They move under rules 21 and 25. Simply put, they say the claim pleads nothing more than bald allegations and conclusions of law. They say it discloses no reasonable cause of action and it is therefore plain and obvious the claim cannot succeed. They suggest the claim should be struck with no right to amend.

[3] All the moving parties served demands for particulars on the plaintiff nearly a year ago. The plaintiff’s initial position, set out in correspondence around that time, was that no particulars would be provided. Plaintiff’s counsel demanded statements of defence. Some defendants have delivered statements of defence without prejudice to their rights arising out of these motions. These motions were originally scheduled to be heard some months ago. For a variety of reasons, they were adjourned to today.

[4] Although the plaintiff took the position no particulars would be provided, on October 16, just days before these motions were to be argued, his counsel delivered what is styled to be a responding motion record for these motions. What it contains is an affidavit from a legal assistant in Mr. Manning’s office, to which she attaches a document titled “Cumulative Reply to the Demand for Particulars of the defendants Henry Wilmot, Stephen Frost, Millard, Rouse & Roseburgh LLP, 487223 Ontario Limited, 1171852 Ontario Limited, Christine Frazer (also known as Christine Kirchberger)”.

[5] The document sets out the following, over some eight pages:

a) Material facts relied on by the plaintiff that are not in dispute;

b) Material facts re unjust enrichment, acting in concert, and deceit; and

c) Banking documents produced pursuant to the demand of the moving parties.

[6] The record then attaches some thirty seven documents, together with German translations of them.

[7] This “Cumulative Reply” does not cross-reference any of the particulars sought by each of the defendants, nor does it clearly reference which documents purport to respond to any particular request for a document.

[8] Mr. Rosenstein takes the position he needs some time, on behalf of his clients Martin Kirchberger and Christine Frazer (also known as Christine Kirchberger), whom I will refer to as “Martin” and “Christine”, to review the Cumulative Reply to determine whether it provides sufficient particulars for him to plead on their behalf, and, if so, to set a timetable to determine whether more particulars are required in order for them to plead.

[9] The other moving parties say the Cumulative Reply does not cure the pleadings’ defects in relation to its claims against them.

The legal framework:

[10] On a motion under rule 21, the facts as stated in the claim are presumed to be true. The test is whether, assuming the facts as pleaded have been proved, it is “plain and obvious” that the claim must fail. The claim should not be struck simply because it is novel. [2] The court must look at the pleading generously, as a whole. The fact that a pleading reveals an arguable, difficult or important point of law cannot justify striking the claim. Only if the action is certain to fail because it contains a radical defect should the relevant portions of a statement of claim be struck out.

[11] In Deep v. Ontario, [3] Spence J described the purpose of rule 21 as “to test whether a plaintiff’s allegations state a legally sufficient or substantively adequate claim.” He went on to say:

A claim will be found to be legally insufficient when either the allegations it contains do not give rise to a recognized cause of action or it fails to plead the necessary legal elements of an otherwise recognized cause of action.[4]

[12] The complaints against the claim here fall into the second category. There is no question the plaintiff pleads legally recognized causes of action. The issue is whether he has pleaded sufficient material facts to support them. Spence J pointed out that in order to survive this kind of rule 21 challenge, “a plaintiff must, at minimum, plead the basic elements of a recognized cause of action to which an entitlement to damages is claimed. The absence of a necessary element of the cause of action will constitute a radical defect, on the basis of which it is plain and obvious that the plaintiff cannot succeed.”[5]

[13] The rules also have specific requirements regarding pleadings. For the purposes of this motion, it is subrules 25.06(1), (2), and (8) that are most relevant. They read:

25.06 (1) Every pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence, but not the evidence by which those facts are to be proved.

(2) A party may raise any point of law in a pleading, but conclusions of law may be pleaded only if the material facts supporting them are pleaded

(8) Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred.

[14] Subrule 25.06(8) is of particular importance on these motions because the claim seeks, among other things, damages of $10 million for breach of contract, conversion, fraud, breach of fiduciary duty, civil conspiracy, (including the tort of unlawful conduct conspiracy), breach of trust and unjust enrichment. Thus, the pleading is required to have “full particulars” of these claims.

[15] Subrule 25.10 addresses situations where a party requires further particulars of a claim in order to plead. 25.10 provides that a party may demand particulars of an allegation in a pleading from the opposite party. If the opposite party fails to provide them within seven days, the court may order the demanded particulars to be provided.

[16] Thus, the plaintiff here must plead full particulars of his claims for fraud, conspiracy, breach of trust and breach of fiduciary duty. He must also plead sufficient facts to create the factual basis for all the elements of each of the claims he asserts. If he fails to do so, it will be “plain and obvious” the claim discloses no reasonable cause of action, and must be struck.

[17] If the claim is struck, the next question is whether the plaintiff should be granted leave to amend it, in order to attempt to cure the pleading defects in it.

The statement of claim and the attacks against it:

[18] The essence of the claim seems to be that a person named Gabriel Kirchberger borrowed money from a number of German financial institutions. He did not repay the debts he owed. The plaintiff purchased or had assigned to him, the German financial institutions’ rights to be repaid by Gabriel. The plaintiff has not been able to collect.

[19] In this action, the plaintiff suggests the defendants, some of whom seem to be related to Gabriel, some of whom are perhaps trusts he created, some of whom may be professional advisors to him, and some of whom are involved in some unknown unspecified manner to have conspired together in various ways to defeat the plaintiff’s right to be repaid.

[20] The claim is not a model of clarity. It is extremely difficult to follow. Given the numbers of parties and the number of claims for relief, it is extremely complex. That said, I am obliged to read the claim generously in order to decide whether it discloses and properly pleads the necessary factual foundation for the causes of action it pleads.

[21] The statement of claim runs to 56 pages. Given the number of defendants, it is not surprising the first six pages or so are taken up with the names and addresses of each of the defendants. The claim then goes on, until page 8, to provide certain definitions and “conventions” to be used in the claim.

[22] On pages 8 through 22, the plaintiff enumerates his claims against each of the defendants. He simply lists the claims and then describes the parties and some of their relationships to one another. This goes on for another twenty pages or so.

[23] On page 42 of the claim, the plaintiff begins to plead some of the facts to support his claims. He describes various loan transactions giving rise to the debts in question. There are eight loans that are stated to evidence borrowing.

[24] Finally, on page 47 of the claim, the plaintiff alleges that Martin and Christine stood in a fiduciary relationship to “the creditors”, as defined. He says that relationship arose “out of their promises to put the interests of the creditors ahead of their own and was based on their express or implied promise to repay the sums which were borrowed.”

[25] The plaintiff then goes on until paragraph 47 to allege breach of contract, breach of trust and conversion/civil conspiracy/tort of unlawful conduct conspiracy/unjust enrichment/constructive trust against Martin and Christine. He says they did so by refusing to pay the sums owing to the creditors, and “using funds that should have been paid to the creditors to directly or indirectly through the CECILE DEFENDANTS defendants or others acquire interest in real property.”

[26] The plaintiff then alleges that Martin and Christine and the Cecile defendants “committed a civil conspiracy and the tort of unlawful conduct conspiracy by conspiring together and acting in concert to hide the assets of Martin Kirchberger, Christine Kirchberger and Gabriel Kirchberger.”

Demand for Documents

[27] The defendants Martin and Christine requested copies of, or inspection of, the loan documents, since the documents were referred to in the pleading. The plaintiff refused to produce any until three days before the return of this motion when the plaintiff’s lawyer delivered the Cumulative Reply.

[28] Although the Cumulative Reply contains copies of 37 loan documents, none appears to be any of the loan documents referred to in the claim. In argument, Mr. Manning suggested that a close reading of some of the translations of the loan documents (which are all in German), would disclose these are indeed the loan documents referred to in the pleading.

[29] I find this submission astonishing. When a party asks to see a document referred to in a pleading, the proper response is to provide the document specifically requested. It is hardly responsive to say, in effect, “here are 37 documents, none of which appear to be the one(s) you requested. They actually are, or might be, what you want, but you must figure that out for yourself.”

[30] The plaintiff must deliver a proper response to the demand for production and inspection of the documents referred to in the pleading. He will do so within 14 days of the release of these reasons.

[31] This leads me to the specific claims that the defendants have said the plaintiff has failed to plead with particularity. It is easiest to address the complaints each of the defendants or defendant group that has moved against it. In doing so, I will also consider the Cumulative Reply of particulars the plaintiff delivered to the defendants the week before the motion was to be argued.

Martin Kirchberger and Christine Kirchberger

[32] Mr. Rosenstein takes the position that he has not yet had the opportunity to review the Cumulative Reply to determine whether he now has sufficient particulars to plead in relation to the claims against Martin and Christine. He suggests that he should be given a reasonable opportunity to review it, and to deliver a further demand for particulars if he feels they are necessary. If he does so, he suggests a fixed period of time for the plaintiff to deliver those particulars. In either case, he says there should be a timetable to complete these steps, and close the pleadings in terms of Martin and Christine.

[33] Mr. Manning does not really object to this approach. I have set out the details of my order in this regard in the “Disposition” section, below.

The remaining defendants represented by Mr. Rosenstein

[34] The remaining defendants represented by Mr. Rosenstein are either alleged to have been involved in a scheme to hide assets (Cathy Oden and Bernie Korfman in both his personal capacity and as trustee of the Kirchberger Family Trust), or are described as “beneficiaries” in the claim. There are no specific facts pleaded to support these conclusions. The statement of claim is essentially unintelligible as it relates to them. There is no way to discern exactly what they are alleged to have done, when they are alleged to have done it, how they are alleged to have done it, and why.

[35] As a result, I conclude the claim does not meet even the minimum requirement or fact pleading required. It must be struck. That said, this is not a case to deny the plaintiff the opportunity to amend the claim in order to plead properly. The claim will therefore be struck against the remaining defendants represented by Mr. Rosenstein, with leave to amend, as set out in the “Disposition” section, below.

Wilmot

[36] The claim finally begins to address the claim against Wilmot on page 41. It says he resides in the Province of Ontario, carries on business in Ontario, and incorporated the defendant 487223 Ontario Limited for the “improper purpose of aiding Gabriel Kirchberger, Martin Kirchberger and Christine Frazer (also known as Christine Kirchberger) to defeat the claims of their creditors which claims have been assigned to Harry Bieberstein.”

[37] The claim goes on to describe Wilmot as a beneficiary of both the Kirchberger Family Trust and the Kirchberger Fixed Income Trust. It says he has directly or indirectly received benefits from these trusts. It does not say what those benefits might be or how he received them.

[38] On page 50, the claim asserts that Wilmot is included in a list of persons with whom the Kirchbergers are alleged to have sought out as accomplices to act in concert with them for their mutual benefit in secreting their assets. It is unclear what Wilmot is to have done, or how he might have benefited from any actions of either the Kirchbergers or any of the others listed.

[39] Nothing else is alleged against Wilmot. I cannot discern what, exactly, Wilmot is alleged to have done, when he might have done it, and with whom. There are no facts pleaded from which any reasonable inference might be drawn to support any claim against Wilmot.

[40] I have no alternative but to strike the claim against Wilmot as disclosing no reasonable cause of action against him. I see no reason to prevent the plaintiff from attempting to amend the claim so it complies with the rules of pleading, and pleads sufficient facts to support the causes of action pleaded. He will therefore have leave to amend the claim against Wilmot.

Millards

[41] Millards is described in the claim as one of the “Cecile Defendants” who have “wrongfully benefited from funds misappropriated from the Berlin Hypo Bank, Dr. Rainer Adami and Gunnar Herter, which funds have been lawfully assigned to Harry Bieberstein.” The claim seeks $10 million in damages against Millards, as one of the Cecile defendants, for breach of contract, conversion, fraud, breach of fiduciary duty, civil conspiracy, including the tort of breach of trust, and unjust enrichment.

[42] There are no facts pleaded showing the existence of a contract. No facts are pleaded regarding funds Millards allegedly converted. There are no facts pleaded to support the claim of Millards owing a fiduciary duty to the plaintiff, nor any fact pleaded to support the allegation it has breached that duty.

[43] Although breach of trust is pleaded, no facts or particulars are provided concerning that alleged breach of trust. No facts are pleaded to say how or in what fashion Millards has been unjustly enriched. There are no facts or particulars pleaded regarding the “funds” Millards allegedly received.

[44] In paragraph 34 of the claim, the plaintiff alleges Millards is a limited liability partnership carrying on business in Ontario. It alleges Millards has directly or indirectly received benefits from the defendant, “Kirchberger Family Trust.” It also alleges Millards has directly or indirectly received benefits from the defendant, “Kirchberger Fixed Income Trust.” The claim provides no particulars of any kind concerning the benefits Millards allegedly received from either trust.

[45] The claim goes on to say, in paragraph 48, that Millards, as a Cecile Defendant, “committed a civil conspiracy of unlawful conduct conspiracy by conspiring together and acting in concert to hide the assets of Martin Kirchberger, Christine Kirchberger and Gabriel Kirchberger.” The plaintiff provided what purported to be a cumulative reply to Millards’ demand for particulars, among others, just three days before the motion. As I have said, this document is undifferentiated among defendants, and fails to set out clearly which demands it is responding to. Under the circumstances, I cannot conclude proper particulars have been provided. Neither I, nor Millards, have any reasonable way of determining whether particulars of conspiracy have been provided.

[46] The claim goes on to allege that Millards, as one of the Cecile defendants, acted in concert to unlawfully frustrate the creditors in Germany and to unlawfully frustrate the plaintiff’s collection of the debts by “acquiring $50 million of real estate in Ontario belonging to Harry Bieberstein.” The claim provides no material facts or particulars regarding any property Millards might have acquired, as alleged.

[47] Finally, the claim alleges in paragraph 56 that the Cecile defendants’ conversion of funds has resulted in them unjustly enriching themselves at the expense of the plaintiff. Again, there is no pleading of any material fact or particular regarding the alleged unjust enrichment of Millards.

[48] From all this I conclude the claim is so deficient it has failed to plead even the minimum fact requirement to sustain the pleading. It must be struck as disclosing no reasonable cause of action.

[49] Although Millards also suggests the claim should be struck with no right to amend, I am not persuaded it is reasonable to do so at this time. Accordingly, the plaintiff will have the right to amend, in accordance with the “Disposition” section, below.

Frost

[50] The claims against Frost are essentially the same as the claims against Millards, since Frost, too, is said to be one of the “Cecile defendants”.

[51] The claim contains no specifics of anything Frost is alleged to have done, or failed to have done. There are no specifics acts of any kind that Frost is alleged to have committed. The claim gives Frost no idea of how he might have benefited, or what he is alleged to have done. There is nothing specific of how, when, or why Frost might have obtained a benefit from the family trust. The pleading is vague and oblique – so much so that it does not even plead that Frost is apparently a lawyer.

[52] As a result, I can only conclude the claim against Frost contains only conclusions of law, without any material facts to support those conclusions. The claim must therefore be struck against Frost.

[53] Although Frost’s counsel also suggests there should be no right to amend, I am not persuaded. The plaintiff should be given an opportunity to deliver a meaningful pleading that sets out the material facts he relies on to support his claim. The pleading will therefore be struck, but with leave to amend.

Disposition:

Martin and Christine

[54] The motion to strike brought by Martin Kirchberger and Christine Frazer is adjourned on the following terms:

a) Within 30 days, their counsel will deliver any further demand for particulars they require;

b) Within 30 days of receiving such demand, the plaintiff will deliver a response to the demand. If the plaintiff fails to respond to the demand within this time frame, it will not be permitted to provide any further particulars after that date;

c) Martin and Christine will determine whether, in light of the totality of the particulars provided, they wish to proceed with this motion as it relates to them. If they do wish to proceed, they will arrange a 9:30 appointment the week of January 27, 2014 to schedule the return of the motion;

d) If the motion is to be returned, no further material may be filed other than the further demand for particulars delivered pursuant to sub-paragraph (a), above, and the response delivered pursuant to sub-paragraph (b), above;

e) If Martin and Christine do not deliver a further demand for particulars as contemplated by sub-paragraph (a), above, they will deliver their statement of defence by December 22, 2013. Plaintiff will then deliver his Reply by January 31, 2014.

The remaining defendants represented by Mr. Rosenstein

[55] The statement of claim is struck as against the remaining defendants represented by Mr. Rosenstein. The plaintiff shall have leave to amend. He will deliver a fresh as amended statement of claim within three weeks of the release of these reasons.

[56] Statement of defence to be delivered within 20 days of delivery of fresh as amended statement of claim.

[57] Reply, if any, within 10 days of delivery of statement of defence.

The defendant Wilmot

[58] The statement of claim is struck as against the defendant Wilmot. The plaintiff is granted leave to amend. He will deliver a fresh as amended statement of claim within three weeks of the release of these reasons.

[59] Wilmot’s statement of defence to be delivered within 20 days of delivery of fresh as amended statement of claim.

[60] Reply, if any, within 10 days of delivery of Wilmot statement of defence.

The defendant Millards

[61] The statement of claim is struck as against the defendant Millards. The plaintiff is granted leave to amend. He will deliver a fresh as amended statement of claim within three weeks of the release of these reasons.

[62] Millards’ statement of defence to be delivered within 20 days of delivery of fresh as amended statement of claim.

[63] Reply, if any, within 10 days of delivery of Millards’ statement of defence.

The defendant Frost

[64] The statement of claim is struck as against the defendant Frost. The plaintiff is granted leave to amend. He will deliver a fresh as amended statement of claim within three weeks of the release of these reasons.

[65] Frost’s statement of defence to be delivered within 20 days of delivery of fresh as amended statement of claim.

[66] Reply, if any, within 10 days of delivery of Frost’s statement of defence.

The requested documents

[67] Within 14 days of the release of these reasons, the plaintiff will deliver to the defendants copies of all the loan documents they have specifically requested. The production of the documents will be specifically tied to each request for documents so that it will be absolutely clear to each defendant which loan document relates to which reference to that document in the statement of claim.

The defendants who have not yet been served

[68] There are still eleven defendants who have not been served, even though the claim was issued over a year ago. Morawetz J commented in his endorsement of October 5, 2012 “A number of defendants have not yet been served…Plaintiffs [sic] are directed to provide to the defendants who are on record a report within 10 days, indicating which defendants have been served and whether they have retained counsel and a list of defendants who they intend to serve. Efforts should be made to expedite service on named defendants who have not to date been served”.

[69] That order was made more than a year ago. There are still numerous defendants who have not been served. The rules provide a claim must be served within six months after it was issued. The plaintiff is long out of time concerning these defendants. The plaintiff must therefore decide if he wishes to proceed against these defendants or not. If he does, they must be served with the Fresh as Amended Statement of Claim within three weeks of the release of these reasons. If he does not, the claim cannot proceed against them without leave.

Costs

[70] The moving party defendants have all enjoyed success on this motion. The fact the plaintiff finally delivered a response to their requests for particulars clearly shows the claim was deficient and motions were necessary. In my view, each is entitled to partial indemnity[6] costs as discussed at the conclusion of argument. Accordingly, the plaintiff will pay the costs of this motion as follows:

a) To Mr. Rosenstein’s clients, $4,000 all inclusive;

b) To Millards, $2,500 all inclusive;

c) To Wilmot, $2,500 all inclusive; and

d) To Frost, $2,500 all inclusive

MESBUR J.

Released: 20131119

[1] Namely the defendants Gerry Cecile in his personal capacity and as a trustee of the Kirchberger Family Trust and as trustee of the Kirchberger Fixed Income Trust and Gerry Cecile & Associates Inc.

[2] Hunt v. Carey Canada Inc. (1990) 1990 90 (SCC), 74 D.L.R. (4th) 321 (S.C.C.)

[3] 2004 CarswellOnt 2625 (S.C.J.)

[4] Ibid, paragraph 33

[5] Ibid, paragraph 34

[6] Although Mr. Rosenstein requested substantial indemnity costs, I am not persuaded this is one of the rare circumstances in which substantial indemnity costs are warranted.