Court File and Parties

COURT FILE NO.: CV-19-624832 DATE: 2020-01-23 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ADINA EREM ISENBERG, Plaintiff AND: GABRIEL EREM aka GABOR EICHLER, DANIEL EREM, SUSAN EREM, LIFESTYLES MAGAZINE USA, INC., A.T.E. PUBLISHING CO. LTD., PROAD INC., MARCER MANAGEMENT (INTERNATIONAL) LIMITED, E2 GLOBAL, LLC, E2 GLOBAL VENTURES, LLC, DME TRADING COMPANY, LLC and MEANINGFUL INFLUENCE, LLC, Defendants

BEFORE: Sossin J.

COUNSEL: Robert C. Taylor, Counsel for Plaintiff Peter-Paul E. Du Vernet, Counsel for the Defendants

HEARD: December 17, 2019

REASONS FOR JUDGMENT

Overview

[1] The issue in this motion is whether certain portions of a statement of claim should be struck.

[2] The plaintiff, Adina Erem Isenberg (“Adina”), brings this action against the personal defendants, her father (“Gabriel”), her mother (“Susan”) and her brother (“Daniel”), as well as against the corporate defendants, ATE Publishing Limited (“ATE”), Proad Inc. (“Proad”) and Marcer Management (International) Limited (“Marcer”) carrying on related businesses (the “Lifestyles business”), and corporate defendants incorporated in the U.S., owned and/or controlled by the personal defendants and funded by the Lifestyles business (the “Lifestyles funded companies”) (collectively, the “defendants”).

[3] Adina claims that she was promised that the Lifestyles business would be hers, and worked in the business for years relying on that promise. She alleges that Gabriel, in concert with Daniel, then reneged on that promise and removed her from the Lifestyles business.

[4] On August 1, 2019, Adina issued a statement of claim seeking damages and related relief against the defendants.

[5] On September 12, 2019, the defendants served their notice of motion.

[6] The defendants move to strike specific claims within the statement of claim, including an Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”) oppression claim, a conspiracy claim, a claim for breaches of the Ontario Human Rights Code, R.S.O. 1990, c. H.19 (the “OHRC”), and certain other inflammatory language within the statement of claim, under Rules 21 and 25 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules of Civil Procedure”).

[7] For the reasons that follow, this motion is granted, in part.

Analysis

[8] The issue to be addressed on this motion is whether portions of Adina’s claim, challenged by the defendants, should be struck under Rules 21.01 or 25.11?

[9] In order to determine whether the impugned portions of Adina’s claim should be struck, it is first necessary to set out the applicable provisions under the Rules of Civil Procedure.

[10] Rules 21.01 and 25.11 of the Rules of Civil Procedure provide:

RULE 21 Determination of an Issue Before Trial

Where Available

To Any Party on a Question of Law

21.01 (1) A party may move before a judge,

(a) for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs; or

(b) to strike out a pleading on the ground that it discloses no reasonable cause of action or defence,

and the judge may make an order or grant judgment accordingly. R.R.O. 1990, Reg. 194, r. 21.01 (1).

(2) No evidence is admissible on a motion,

(a) under clause (1) (a), except with leave of a judge or on consent of the parties;

(b) under clause (1) (b). R.R.O. 1990, Reg. 194, r. 21.01 (2).

To Defendant

(3) A defendant may move before a judge to have an action stayed or dismissed on the ground that,

Jurisdiction

(a) the court has no jurisdiction over the subject matter of the action;

Capacity

(b) the plaintiff is without legal capacity to commence or continue the action or the defendant does not have the legal capacity to be sued;

Another Proceeding Pending

(c) another proceeding is pending in Ontario or another jurisdiction between the same parties in respect of the same subject matter; or

Action Frivolous, Vexatious or Abuse of Process

(d) the action is frivolous or vexatious or is otherwise an abuse of the process of the court,

and the judge may make an order or grant judgment accordingly. R.R.O. 1990, Reg. 194, r. 21.01 (3).

25.11 The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,

(a) may prejudice or delay the fair trial of the action;

(b) is scandalous, frivolous or vexatious; or

(c) is an abuse of the process of the court. R.R.O. 1990, Reg. 194, r. 25.11.

[11] The test on a motion to dismiss an action under Rule 21 or strike pleadings under Rule 25 is whether it is plain and obvious that the pleading or claim cannot succeed; R. v. Imperial Tobacco, 2011 SCC 42, at para. 17.

[12] For purposes of this analysis, the motions judge must assume all facts alleged by the responding party’s pleadings are true, as long as they are not manifestly incapable of proof.

[13] Below, I address the various portions of the claim which the defendants seek to strike.

Should the Claim for an OBCA Oppression Remedy be Struck?

[14] In her statement of claim, Adina alleges she is entitled to an OBCA oppression remedy.

[15] The defendants submit that the pleadings do not meet the threshold for such a claim because she does not qualify as a “complainant” within the meaning of the OBCA, and that at least one of the corporate defendants is an OBCA corporation.

[16] Adina’s position is that, under the OBCA, she is a proper “complainant” as she has alleged that she was a former President of the Lifestyles business and a beneficial owner, and that she has been subject to oppressive conduct by the corporate defendants.

[17] Sections 245 and 248 of the OBCA, provide as follows:

245. In this Part,

“action” means an action under this Act; (“action”)

“complainant” means,

(a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates,

(b) a director or an officer or a former director or officer of a corporation or of any of its affiliates,

(c) any other person who, in the discretion of the court, is a proper person to make an application under this Part.

248. (1) A complainant and, in the case of an offering corporation, the Commission may apply to the court for an order under this section.

(2) Where, upon an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates,

(a) any act or omission of the corporation or any of its affiliates effects or threatens to effect a result;

(b) the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or

(c) the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of. (Emphasis added.)

[18] I find Adina’s claim of beneficial ownership is sufficient to make her eligible to be a “complainant” under the OBCA; Aly v. Halal Meat Inc. et al, 2013 ONSC 1313, at paras. 342-43.

[19] The defendants argue that as the pleadings allege oppression by all of the defendants rather than specifying a defendant which falls under the OBCA jurisdiction, the remedy sought under the OBCA cannot succeed.

[20] With respect to whether any of the defendant corporations fall under the jurisdiction of the OBCA, Adina argues that at this preliminary stage in the litigation, she does not yet know which if any companies may be held accountable under the OBCA. She submits that, “it’s premature to strike out any of the oppression remedy claims against any of the corporate Defendants until Adina has had an opportunity to determine the ownership of those corporations...” (Adina’s factum, at para. 62).

[21] Without pleading material facts to establish that any of the defendants are subject to the OBCA, however, the OBCA claim for oppression cannot succeed; 1523428 Ontario Inc. / JB&M Walker Ltd. v. TDL Group, 2018 ONSC 5886 at paras. 28 and 29.

[22] Therefore, I find that paragraphs 1(a) and 147 alleging the liability of the defendants under the OBCA oppression remedy will be struck.

[23] Adina is not precluded, however, from subsequently amending her pleadings to add a claim for oppression under the OBCA, should material facts emerge which could justify such a claim.

Should the Conspiracy Claim be Struck?

[24] Adina claims damages against Gabriel and Daniel for conspiracy.

[25] The defendants submit that Adina has not pleaded material facts to this conspiracy, including the alleged parties to the conspiracy, its purposes or the specific acts in furtherance of the conspiracy. The defendants characterize the claim for conspiracy as a “bald and unsubstantiated allegation” to which the defendants cannot respond.

[26] Adina responds that her pleadings meet the threshold of (1) an agreement between two or more parties to injure the plaintiff; acts in furtherance of the agreement and damage suffered by the plaintiff as a result, relying on Canada Cement LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd., [1983] 1 S.C.R. 452 at para. 33.

[27] Adina submits that paragraphs 21, 91 and 133 of the statement of claim together allege that Gabriel and Daniel agreed to act for the purpose of depriving Adina of her ownership interest in the Lifestyles business, and that she suffered harm as a consequence of this conduct, including the loss of her employment and ownership interest in the Lifestyles business.

[28] As Justice Perell held in EnerWorks Inc. v. Glenbarra Energy Solutions Inc., 2012 ONSC 414, at paras. 74-76:

[74] EnerWorks’ Statement of Claim pleads both kinds of conspiracy, and the major problems with its pleading is that it does not set forth with clarity and precision the overt acts done by each of the alleged conspirators in furtherance of the conspiracy and it does not adequately plead the unlawful acts of each individual Defendant.

[75] The latter problem is compounded because insofar as the unlawful acts are the fraudulent conveyances and fraudulent misrepresentations, for the reasons described above, those pleadings are deficient.

[76] I return to the point made above that each individual defendant is entitled to know the case they must meet. This is true for the conspiracy pleading because, although conspiracy is a tort committed by a group, the liability of each defendant arises because they individually participated as a member of the group. (Emphasis added.)

[29] The problem with Adina’s allegations with respect to conspiracy is that they are conclusory and do not specify the particular actions by specific individuals amounting in furtherance of the conspiracy. At paragraph 21, for example, Adina alleges that Daniel either “(a) induced Gabriel to breach his promises, or (b) conspired with Gabriel to deprive her of her interest in Lifestyles…”

[30] Pleadings cannot merely state that there was a conspiracy because parties conspired or an inducement because one party induced another; rather, pleadings must provide material facts as to how a party conspired with another or was induced to act; Robinson v. Medtronic Inc., 2010 ONSC 1739, at para. 19.

[31] Paragraph 91 similarly alleges that Gabriel and Daniel conspired to expel Adina from her employment and deny her ownership interest in Lifestyles, but not how this was done or the nature of the agreement underlying the alleged conspiracy.

[32] Specific damage much also be pleaded which flows from the alleged conspiracy. At paragraph 133 of her statement of claim, Adina states that she has not been able to return to employment at the Lifestyles business, but does not link this allegation to any agreement or act of Gabriel and Daniel.

[33] In their present form, it is plain and obvious that Adina’s allegations of conspiracy cannot succeed. Paragraphs 1(k) and 142 alleging liability for conspiracy therefore will be struck.

Should the Claim for Breaching the OHRC be Struck?

[34] Adina alleges that she was terminated from her employment at the Lifestyles business because of her gender and the fact that she has a serious illness.

[35] In paragraphs 91, 110, 112, 113 and 132, Adina argues her claim alleges discriminatory comments which caused her severe mental stress. Adina submits that these institutes breach sections 5(1) and 9 of the OHRC which protect people from discrimination in employment on the basis of gender and disability.

[36] The defendants argue that the pleadings refer to no specific section of the OHRC, and no specific conduct. They are merely conclusory allegations. For example, paragraph 152 states, “Adina claims that the behaviour and conduct of Gabriel, Daniel, Susan and the Lifestyle Companies breached the Ontario Human Rights Code.”

[37] The paragraphs referenced do not specify conduct that breached a particular aspect of the OHRC. Paragraph 91 alleges abusive treatment of Adina but not on grounds set out in the OHRC. Similarly, paragraphs 110-112 allege the cancellation of funding for health care treatment and verbal abuse. Paragraph 113 alleges that the abusive conduct of Daniel and Gabriel caused Adina to suffer severe mental distress and may have contributed to the worsening of Adina’s health. Paragraph 132 alleges callousness on the part of Gabriel in the face of Adina’s cancel diagnosis.

[38] None of these paragraphs plead specific conduct which breaches protected rights under the OHRC.

[39] In paragraph 1(q) of her statement of claim, Adina claims $100,000 against the individual defendants and the Lifestyle business for breaching the Code.

[40] In these circumstances, I find that it is plain and obvious that the allegations of a breach of the Ontario Human Rights Code, as currently pleaded, cannot succeed. Therefore, paragraphs 1(q), 147(n) and 152 will be struck.

Should Portions of the Claim which Refer to Mediation be Struck on Grounds of Privilege?

[41] The defendants argue that references to mediation between the parties in the statement of claim are part of a privileged process and should be struck.

[42] Adina submits that the references are to the fact of mediation, not to any privileged content of mediation.

[43] In Marshall et al. v. Ensil et al., at para. 21, Master MacLeod concluded:

[21] In my view specific evidence concerning the content of the mediation should be avoided if at all possible. Generally speaking, the courts should be reluctant to allow mediation and the conduct of mediation to become itself an issue in litigation. It will be rare that it is necessary to give a detailed account of what transpired in mediation in order to demonstrate to the court that the other party is making misuse of the process. In the case at bar, the parties could have proceeded to discovery and the plaintiffs could then have been asked on what facts they relied in support of the allegation. It would then have been apparent if there was anything other than the mediation upon which the plaintiff relied. [Footnote omitted]

[44] Therefore, while the fact that mediation was offered or contemplated may form part of the pleadings, the fact of any particular mediation, or its content, should not form part of the pleadings.

[45] In paragraph 101 and 102, Adina alleges that in April, 2016, she suggested a mediator be hired to resolve the family’s dispute, but that when the family met to discuss the possibility of mediation in May, 2016, the other family members were unwilling to proceed, and Gabriel grabbed Adina by the shoulder.

[46] These paragraphs do not refer to the fact of any particular mediation or its content and therefore need not be struck.

[47] In paragraph 108 of the claim, Adina alleges that shortly before her brother’s wedding, she once again offered to have the family’s disputes mediated, and that she would agree to mediation from any person her parents chose to assist. This paragraph also does not refer to any particular mediation and does not run afoul of the concern with respect to privileged content.

[48] In paragraph 109, however, Adina alleges that a particular mediator interviewed the family in April, 2017, and reached a conclusion with respect to the ownership of the Lifestyles business. This paragraph refers to a particular mediation and its content. This pleading could neither be substantiated nor challenged without evidence that likely would be inadmissible.

[49] For these reasons, I find paragraph 109 must be struck.

Should Passages of the Claim be Struck on the Basis of Inflammatory Language?

[50] The defendants challenge several passages in Adina’s statement of claim on the basis of inflammatory language. The defendants argue that terms “hijacked” in paragraph 79 and “looting” in paragraph 83 should be struck as scandalous.

[51] Adina argues that striking a pleading on this ground should only be done in the clearest of cases, and that where a pleading is relevant, it should not be struck even if it gives rise to prejudicial effect, relying on Quizno’s Canada Restaurant Corp. v. Kileel Developments Ltd., 2008 ONCA 644, at para. 23.

[52] Quizno’s discusses the importance of weighing a pleading’s probative value against its prejudicial effect. In this case, the issue is not with the material fact Adina seeks to plead but the word she has chosen to use in describing that fact.

[53] The term “looting” has a connotation strongly associated with violence. The Cambridge English Dictionary, for example, defines looting as the activity of stealing from shops during a violent event. This term appears to be added for colour alone, as other terms would more accurately describe the allegation that funds in the Lifestyle business intentionally were dissipated.

[54] With respect to “hijacking,” this term also has the effect of adding colour to the pleadings and is no doubt provocative. This term is part of a material and relevant allegation about how Adina lost control over the Lifestyles business. The Collins English Dictionary sets out that if you say that someone has hijacked something, you disapprove of the way in which they have taken control of it when they had no right to do so. It is no longer associated only with acts of violence.

[55] While the term “hijack” has been struck as scandalous from pleadings in other contexts (see, for example, Clifford v. Her Majesty the Queen et al, 2014 MBQB 192, at para. 30, when it was used in conjunction with “gang” and “thug”), I do not find the term crosses the line in this context, given that pleadings should be struck only in the clearest of cases; Wernikowski v. Firm of Kirkland, Murphy & Ain, at para. 12.

[56] Therefore, only the term “looting” will be struck from the statement of claim.

Conclusion on Rule 21 and 25 Motions

[57] For the reasons set out above, I find that the pleadings against the defendants for OBCA oppression remedies, conspiracy and for breaches of the OHRC will be struck as disclosing no reasonable cause of action under Rule 21.01(1)(b).

[58] Paragraph 109 of the statement of claim will be struck under Rule 25.11 as it relates to a privileged mediation.

[59] The term “looting” in paragraph 83 also will be struck under Rule 25.11 as inflammatory.

[60] The Ontario Court of Appeal has reiterated that, absent exceptional circumstances, leave to amend pleadings should generally be granted: Asghar v. Toronto Police Services Board, 2019 ONCA 479, at para. 9.

[61] I do not see a basis, however, to strike the impugned portions of Adina’s claim without leave to amend, except for paragraph 109 alleging the outcome of a specific mediation session.

Conclusion

[62] For the reasons set out above, the defendants’ motion to strike certain portions of Adina’s statement of claim is granted.

[63] Therefore, the following paragraphs are struck pursuant to Rules 21 and 25.11: paras. 1(a), 1(k), 1(q), 109, 142, 147 and 152, all with leave to amend.

[64] Additionally, the term “looting” from paragraph 83 is struck, with leave to amend.

[65] Finally, paragraph 109 is struck without leave to amend.

[66] The defendants have been successful in most though not all of the remedies sought in this motion. They are entitled to the costs of this motion, though as Adina submitted, the cost of this proceeding could have been reduced had the defendants pursued particulars rather than commencing this motion to strike portions of the claim.

[67] In these circumstances, Adina shall pay costs to the defendants in the amount of $7,500.00, all inclusive, within 30 days of this judgment.

Sossin J. Released: January 23, 2020