CITATION: Kirby v. Grolmus, 2016 ONSC 7426

COURT FILE NO.: 13-43587

DATE: 2016-11-30

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: ELSBETH KIRBY, Plaintiff

AND:

RICHARD HERBERT GROLMUS, Defendant

BEFORE: The Honourable Mr. Justice C.S. Glithero

COUNSEL: R.T. Anderson, for the Plaintiff

Richard A. Wellenreiter and

J. Little, for the Defendant

HEARD: November 24, 2016

RULING ON MOTION TO STRIKE PLEADINGS

Introduction

[1] There were two motions before me. The first to be filed was a motion by the plaintiff for an order compelling the defendant to provide further and better answers to undertakings and refusals on his examination for discovery. The second motion in terms of time of commencement is one brought by the defendant for an order striking out certain paragraphs of the statement of claim, and one paragraph of the reply to an amended defence. While the parties couldn’t agree on which motion should proceed first, I ruled that the motion to strike would go first as in my judgment there was a better chance that the ruling on that motion might impact on the undertakings/refusals motion. Accordingly, this ruling deals only with the motion to strike pleadings but the other motion had to be mentioned as the timing of the motions is relevant to the submissions I have heard.

Summary of Factual Background

[2] Erna Grolmus died on January 21, 2013. The plaintiff is her daughter and the defendant is her son. Another child predeceased her.

[3] The deceased left a Will dated September 10, 2008 in which she named her son, the defendant, as her estate trustee and her sole beneficiary.

[4] On August 1, 2008 the deceased executed a Power of Attorney in favour of the defendant.

[5] On November 20, 2007 the deceased had executed an earlier Will naming the plaintiff as her trustee and the plaintiff and defendant as her beneficiaries (effectively, as the third child predeceased the testator). On the same date, the deceased executed a Power of Attorney in favour of the plaintiff.

[6] These proceedings, commenced directly by statement of claim, seek a declaration that the 2008 Will is invalid by reason of testamentary incapacity and undue influence by the defendant and a setting aside of the Power of Attorney in favour of the defendant. It further seeks declarations that the 2007 Will is the only valid Will, and that the 2007 Power of Attorney in favour of the plaintiff is the only valid Power of Attorney.

[7] Resulting from those claims, the plaintiff seeks an accounting and disgorgement of approximately $600,000 alleged to be improperly taken by the defendant from the deceased, together with some 19 additional claims, including claims for general, special, punitive, exemplary and aggravated damages, together with other related relief.

[8] The statement of claim was issued October 10, 2013 and appears that pleadings had been exchanged, and amended, and that examinations for discovery were held on December 4 and 5, 2014.

[9] The plaintiff’s motion for further and better answers to the undertaking and refusals arising from the discovery of the defendant on December 4, 2014 commenced by notice of motion dated August 19, 2016.

[10] The defendant’s motion to strike portions of the plaintiff’s pleadings was made by notice of motion dated September 19, 2016.

The Impugned Pleadings

[11] The impugned provisions of the statement of claim, aside from those dealing with specific money items, are those seeking declarations of invalidity of any Will subsequent to the 2007 Will, and any Power of Attorney subsequent to the 2007 Power of Attorney, and an order setting aside any documents signed by the deceased between August 1, 2008 and the date of her death.

[12] The other paragraphs sought to be struck are those which plead factual allegations relating to alleged wrongdoing concerning specific monetary items, and specific allegations of wrongdoing by the defendant concerning undue influence, lack of capacity on the part of the plaintiff.

[13] As well, the defendant seeks to strike paragraph 7 of the reply to the amended statement of defence which alleges that the defendant moved the deceased back to Ontario in August of 2011 against her wishes.

Rule 21 Motions

[14] Rule 21.01(1) permits a motion to have a question of law raised by the pleadings determined if that may dispose of some or all of the action, or substantially shorten the trial. It also permits a motion to strike out a pleading as disclosing no reasonable cause of action.

[15] Subsection (2) provides that on such a motion no evidence is admissible on the motion. The allegations in the pleadings are deemed to be true for the purposes of the motion.

[16] Subsection (3) permits a motion to have an action stayed or dismissed on the basis that the plaintiff has no legal capacity to commence or continue the action. It also permits a motion to have an action stayed or dismissed on the basis that it is frivolous, vexatious, or an abuse of the court process.

[17] Rule 21.02 provides that the motion under 21.01 must be made promptly and that a failure to do so may be taken into account in the award of costs.

Position of the Moving Party

[18] The defendant submits that the plaintiff has no standing and no cause of action as against the defendant personally in respect of the financial claims advanced in the statement of claim. No tort, no breach of contract, and no breach of fiduciary duty are pleaded. The defendant’s position is that the only relationship between the parties, at the relevant times, is that of brother and sister. As the plaintiff is not a beneficiary under the 2008 Will, and as the defendant had no fiduciary duty towards her, she has no standing to claim an accounting.

[19] The defendant says that the only claims for which the plaintiff has standing are those relating to the validity of the 2008 Will, and Power of Attorney and that until and unless the plaintiff succeeds on those issues, she has no standing to seek an accounting or disgorgement of the funds allegedly taken improperly by the defendant. Similarly, in respect of alleged wrongdoing by the defendant prior to the death of the deceased, the defendant submits that the plaintiff has no standing to challenge the impugned financial transactions as the defendant had no fiduciary duty towards the plaintiff, and no contractual or tortious wrong is pleaded.

[20] The defendant submits that part of the plaintiff’s claim relates to an accounting for and disgorgement of a loan in the amount of $50,000 made in 2005. The defendant says that is irrelevant to the issue of the validity of the 2008 Will or Power of Attorney, and that accordingly the claim as well as the supporting allegations in the statement of claim should all be struck as the pleading discloses no reasonable cause of action in respect of those claims, and because the plaintiff has no legal capacity or standing to make such claims and that such claims are frivolous or vexatious. The statement of claim alleges the loan was secured by a mortgage on the deceased’s home, which the deceased was paying off in the amount of $500 per month, at a time that she was 77 years old and limited to government pension income, as a result of which the plaintiff alleges her mother to be unable to purchase food and other necessities.

[21] The statement of claim also alleges that in the years preceding the 2008 Will, the defendant improperly took from his mother cash advances to himself, or to his family, paid professional fees for himself, and paid taxes for himself and his wife from his mother’s monies.

[22] The plaintiff pleads that after the 2008 Will was executed, that the defendant wrongly cashed a GIC for $10,000 held in the name of the deceased, that he transferred her pension in the amount of $1,529.85 per month to himself. It also alleges he changed the beneficiaries of her life insurance policies to himself, and that he wrongly sold the deceased’s home in Calgary and transferred the net proceeds of the sale in the approximate amount of $260,000 to a joint account for himself and his mother.

[23] The plaintiff alleges that the defendant did all these things without notice to her, and that he moved his mother from Alberta to Ontario shortly before the execution of the impugned 2008 Will and Power of Attorney.

[24] The defendant submits that the nature of the complaint in the plaintiff’s statement of claim is enhanced or furthered in the plaintiff’s factum by the use of such terms as “coercing” and “misappropriating”, which the defendant says are beyond the specific allegations in the statement of claim.

[25] The defendant contends that many of the refusals and undertakings giving rise to the second motion related to these financial claims, and that as the plaintiff has no standing to advance the financial claims, a striking out of the offensive provisions will result in a saving of costs and expedite the trial of the real issue, which is the validity of the 2008 Will and Power of Attorney.

[26] The defendant’s position is that the impugned paragraphs of the statement of claim ought to be struck so as to expedite the trial of the determination of the validity of the 2008 Will and Power of Attorney as unless and until the plaintiff succeeds on those issues, she has no right to an accounting or disgorgement of funds.

[27] The defendant says that to permit the plaintiff to maintain these financial claims, which are untenable by reason of lack of standing, would only serve to prejudice and delay the timely trial of the validity of the Will issue and accordingly amount to an abuse of the court’s process.

[28] By way of answer to the plaintiff’s complaint that this motion to strike is too late, by reason of not being made promptly as required under Rule 21.02, counsel for the defendant relies on Williams Beauty Products v. State Farm Fire and Casualty Co., 2001 CarswellOnt. 1219 where it was held that the rule means that delay in bringing the Rule 21 motion is to be a factor to be considered in costs, but that there remains a discretion as to whether or not the motion to strike proceeding should be allowed to proceed. The discretion is to be exercised in all the circumstances of the case. The defendant’s position is that if the impugned paragraphs of the pleading do not raise a cause of action, then it is appropriate to strike the pleading regardless of the stage at which the issue arises, and relies on Nelson v. Ford Motor Co. of Canada, 2000 CarswellOnt. 874 at paras. 7-9.

[29] Also cited by the defendant however is Fleet Street Financial Corp. v. Levison, 2003 CarswellOnt. 373 where at paras. 18-25 the court differentiated between Rule 21 motions which seeked to strike out parts of a claim only, as compared to such motions, which if successful, would be determinative of the action. In that case, the court saw fit to dismiss the motion to strike by reason of a delay found to be unreasonable in all the circumstances of the case, but also on the ground that the motion would not be dispositive of the action. The court was of the view that the elements of the cause of action were sufficiently pleaded even if the pleading was not an example of clarity nor well particularized.

[30] The defendant submits that only a person with a vested or contingent financial interest in an estate has the right to an accounting and relies on Re: Estate of Evanoff, (2009), 2009 44701 (ON SC), 98 O.R. (3d) 251 at para. 32. However, on my reading of that case, it was a claim for an accounting by a creditor of one of the beneficiaries, rather than a claim by the beneficiary himself.

[31] The defendant submits that the defendant was not in a fiduciary position with respect to the plaintiff as she failed to meet the three step test enunciated in Frame v. Smith, 1987 74 (SCC), [1987] 2 S.C.R. 99 at p.136. He acknowledges that he had the scope for the exercise of a discretion or power, but that it has not been shown that could be exercised as the plaintiff was not a beneficiary nor had she any “peculiar vulnerability” to the exercise of the power or discretion.

[32] The defendant relies on Larsen v. Larsen, 2004 BCSC 284 at paras. 24-25 as authority for the proposition that the claim of a beneficiary who feels to have been wronged is a claim against the trustee of the estate, and not a claim against the other beneficiary of the estate, and relies on the fact here that the defendant is sued in his personal capacity only. However, apparently there has been no effort to probate the Will and in addition, several of the financial claims relate to actions of the defendant prior to the death of the deceased.

[33] The defendant further alleges that any claims for an accounting ought to be made under Rule 74 of the Rules of Civil Procedure and ought to have been commenced by way of a notice of application, in which directions of the court would be sought. In a case of this nature, no doubt an application under Rule 74 would have resulted in directions concerning the pleadings and discoveries, so it would most likely result in the parties being in the same situation they are now where the action was commenced by statement of claim directly.

The Position of the Plaintiff

[34] The plaintiff submits that this motion to strike is brought far too late in the proceedings, as the pleadings have been completed, with amendments, and discoveries having been held. The plaintiff relies on Hill v. Hamilton-Wentworth Regional Police Services Board (2003), 2003 26760 (ON SC), 64 O.R. (3d) 28 where in fact at paras. 45 and 46 the court found the delay in that case to be such as to justify a dismissal of the motion to stay, as well as a motion to compel answers to undertakings and refusals. But if one continues reading the case, the motions were also dismissed following the reasoning of the Fleet Street Financial Corp. v. Levisen case (supra), where the distinction was drawn between such motions, which if successful would terminate the action, as opposed to those brought in circumstances where the action would continue in any event.

[35] The plaintiff’s position is that given that the action would proceed to determine the validity of the 2008 Will and Power of Attorney, the Fleet and the Hill reasoning ought to apply as this action would proceed whether the motion to strike succeeds or not.

[36] The plaintiff also points to the fact that the motion to strike was brought a month after the motion to compel answers to undertakings and refusals, and hence the plaintiff says it is nothing more than a retaliatory strike on the part of the defendant.

[37] The plaintiff acknowledges there is no express pleading of breach of fiduciary duty, but says that the facts pleaded give rise to such a duty. The plaintiff claims to qualify under the three step analysis developed in the Frame case (supra). There, albeit in dissent, one parent was found to be owed a fiduciary duty by the other. The dissenting judgment found the non-custodial parent to be vulnerable within the third of the three part test. The plaintiff points to paragraph 28 of the statement of claim which alleges that the 2008 Will was kept a secret from her, and that she has been refused a copy of the Will and hence argues that the plaintiff is vulnerable within the Frame three step analysis.

[38] The plaintiff relies on the portion of para. 9 of the decision in Cominco Ltd. v. Westinghouse Canada Limited, 1979 489 (BC CA), [1979] B.C.J.No. 1963 as authority for the proposition that in terms of the proper scope of discovery, there ought not to be a fine scrutiny of the pleadings. The plaintiff also relies on the Nelson decision (supra) where at para. 9 it was held that in relation to a Rule 21 motion the court is to accept the facts as alleged in the statement of claim as proven, but also that the court is to read the statement of claim generously and “with allowance for any inadequacies that it may reveal through drafting deficiencies”.

[39] The position of the plaintiff is that the pleadings in the statement of claim do in fact give rise to a fiduciary relationship. With respect to financial dealings prior to the death of the deceased, the plaintiff relies on Lagoski v. Shano, 2007 CarswellOnt. 7781 where the Divisional Court held that one child had standing to challenge the transfer of property by a parent to another parent and sibling on the ground of lack of capacity and undue influence. It was held there that the child would have standing as a result of her prospective pecuniary interest if she could have the conveyances set aside on the basis of the parent’s lack of capacity or undue influence. This was despite the fact that the child afforded standing was not a beneficiary under the parent’s Will. The plaintiff further relies on McLaughlin v. McLaughlin, 2015 CarswellOnt. 7998, a case involving an objection to issuance of the certificate of appointment of estate trustee. There the court found that aside from the clear cases where a claimant is a named beneficiary, others can be found to have an interest if there is sufficient evidence of a genuine interest, or evidence capable of supporting an inference of a genuine interest in the outcome.

[40] I would add that under Rule 75.01, and Rule 75.06, “any person appearing to have a financial interest in an estate” may bring an application for directions to have a Will proved.

[41] The plaintiff also points to Montgomery v. Scholl-Plough Canada Inc. (1989), 1989 4045 (ON SC), 70 O.R. (2^nd) 385 where a Rule 21 motion to strike out part of a plaintiff’s claim was dismissed where it was obvious that the balance of the claim was going to proceed to trial in any event.

[42] The plaintiff also points to the Court of Appeal decision in Hanson v. Bank of Nova Scotia (1994), 1994 573 (ON CA), 19 O.R. (3d) 142 where in the second last paragraph the court stated the threshold for sustaining a pleading is not a high one, and further held that the categories of relationships which give to fiduciary duties are not closed.

[43] As a fallback position, the plaintiff submits that if I were to be otherwise inclined to strike out the impugned paragraphs of the statement of claim that the appropriate relief here would be to grant a right to amend to the plaintiff. That would be within the power to make an order under the concluding phrase in 21.01(1) or (3). The plaintiff points to p.122 of the Frame decision, where it was held that “the power to strike is to be exercised sparingly and only when there is no doubt that no cause of action exists … it is also well established that “a pleading should not be struck out unless it is incurable by a proposed amendment””. Reference is made to Flow Films v. Global Wealth Trade Corp., 2011 ONSC 1185 as an example of where a motion judge struck out various paragraphs of a statement of claim but with leave to amend them.

Discussion

[44] Having regard to the submissions of counsel, and to the authorities relied upon by each of them, and having regard to the circumstances which arise in this case, and to the stage to which the action has already proceeded, in my opinion it is inappropriate to strike the impugned portions pleadings as disclosing no cause of action.

[45] I take into account the following factors:

(i) the motion to strike is brought 3 years after the action commenced and after pleadings had been exchanged and amended, and after discoveries of each side had been completed subject to the outstanding motion for undertakings and refusals;

(ii) moreover, it appears to have been in the nature of a retaliatory strike given that the motion to strike was delivered one month after the motion to compel answers;

(iii) if granted, the motion to strike would not terminate the action as it would admittedly proceed on the issue of the validity of the 2008 Will and Power of Attorney;

(iv) as has been held in authorities cited, the categories of relationships giving rise to fiduciary obligations is not closed; and

(v) Rule 75, which arguable ought to govern and control this type of case, standing is granted to anyone “who appears to have a financial interest”.

[46] Aside from what has been argued, it seems to me that the evidence available in support of the impugned paragraphs in the statement of claim would in any event be admissible at trial in relation to the validity of the 2008 documents, and in relation to the claims for financial mismanagement of the deceased’s affairs between 2005 and 2008. All those transactions and alleged wrongdoings are premised on allegations of lack of testamentary capacity or undue influence.

[47] Aside from what has been argued, it seems to me that the evidence available in support of the impugned paragraphs in the statement of claim would in any event be admissible at trial in relation to the validity of the 2008 documents, and in relation to the claims for financial mismanagement of the deceased’s affairs between 2005 and 2008. All those transactions and alleged wrongdoings are premised on allegations of lack of testamentary capacity or undue influence, which lies at the heart of the attack on the 2008 documents..

[48] It seems to me that evidence of secrecy on the part of the defendant is relevant to such claims. Similarly, so is evidence of the detriment to the interests of the deceased arising out of such transactions. Similarly relevant is evidence as to the improbability or unlikelihood of such financial actions being taken by a person of sound mind and free of undue influence.

[49] Given the financial interest of the plaintiff under the 2007 Will, and her interest in the size of the estate to be divided under that Will, and given the effect on the size of the estate of the transactions alleged to have been improperly done between 2005 and 2008, I am of the opinion that the plaintiff has sufficient interest or at least the appearance of an interest such as to give her standing to move forward with all aspects of the claim.

[50] It would be unfortunate to have amendments made to the statement of claim such as would prompt further amendments to other pleadings and arguments as to the necessity for further discoveries. If thought advisable by the plaintiff, it may be appropriate to amend the statement of claim by simply pleading near the end that by reason of all the circumstances previously pleaded, the plaintiff and the defendant stood in a fiduciary relationship. If the plaintiff sees fit to make such amendment, leave is granted and similarly the defendant would have leave to amend so as to deny that any relationship exists.

[51] For these reasons, the motion to strike is dismissed, subject to the leave to make the limited amendments indicated above.

Costs

[52] The other motion to compel answers to undertakings and refusals did not proceed as the motion to strike took most of the day. The parties indicated that they would be arranging a date through the trial coordinator for the motion to compel answers to undertakings and refusals, and it has now been set to be heard by me tomorrow.

[53] In light of the size of the estate as compared to the costs of litigation, I encourage counsel to agree on the issue of costs. If they cannot do so, then unless the following is varied as part of tomorrow’s outcome, then written submissions may be made. Those of the plaintiff are to be delivered within 30 days of the release of these reasons, with the responding written submissions by the defendant within 30 days thereafter. Such submissions are not to exceed 5 typewritten pages, exclusive of bills of costs, copies of relevant offers to settle, and relevant authorities. Such submissions are to be forwarded to my chambers at the courthouse, 7^th Floor, 85 Frederick Street, Kitchener, Ontario, N2H 0A7.

[54] In the event that no submissions are received within the above time frames, or within such extensions as may be sought and granted, the issue of costs will be deemed to have been decided as between the parties and there will be no further order in that regard.

C.S. Glithero J.

Date: November 30, 2016