Kawa v. 1Plus 12 Corporation, 2022 ONSC 6527

COURT FILE NO.: CV-21-00665673

DATE: 20221121

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: DOMINIK KAWA, Plaintiff

AND:

1PLUS12 CORPORATION, GLENN ESTRABILLO, MOHAMMED JIWANI, JAMES DESTEPHANIS, JONATHANE RICCI, XAFIRA LAW PROFESSIONAL CORPORATION, ELIEZER KARP a.k.a. ELI KARP, DJD PROFESSIONAL CORPORATION, LANDMARK WORLDWIDE LLC, ESPO CONSULTING INC., ESPO PROPERTIES MI INC. (USA), LAYA MANAGEMENT CORPORATION, LAYA HOLDINGS INC., ARASH MISSAGHI, LAYLA ALIZADEH, WORLD CORPORATION INC., CANADA CAPITAL CORPORATION, CANADA INVESTMENT CORPORATION, CROWN CAPITAL CORPORATION, WORLD PROPERTIES CORPORATION, TROY WILSON, 2496050 ONTARIO CORP. o/a A13MG, AURUM MORTGAGE INVESTMENT CORPORATION FUND, AURUM CAPITAL CORPORATION, 2424884 ONTARIO CORP. o/a CURAH CAPITAL CORPORATION, ABRAXAS CORPORATION, ABRAXAS VIII CORP., 1PLUS12 INTERNATIONAL DEVELOPMENT BELIZE LTD., OXFORD CONDO CORPORATION LTD., AGORAPYTH X CORPORATION, ARCHEX CORPORATION, Defendants

BEFORE: Justice A.P. Ramsay

COUNSEL: Tim Gleason, for the Defendants/Moving Parties, Eliezer Karp and DJD Law Corporation

Justin H. Nasseri, Eric Brousseau, and Gordon Vance, for the Plaintiff

Hilary Book and Lia Boritz, for the Defendants, 1Plus12 Corporation, Glenn Estrabillo, Mohammed Jiwani, James DeStephanis, Espo Consulting Inc., Laya Holdings Inc., 2496050 Ontario Corp. o/a Curah Capital Corporation, Espo Properties M1 Inc. (USA), Laya Management Corporation, Abraxas Corporation, Abraxas VIII Corp., 1Plus12 International Development Belize Ltd., Oxford Condo Corporation, Agorapyth X Corporation and Archex Corporation

James Zibarras, for the Defendants, Layla Alizadeh, World Corporation, Canada Capital Corporation, Canada Investment Corporation, Crown Capital Corporation, World Properties Corporation and Troy Wilson

Brian Shiller, for the Defendants, Jonathane Ricci, Xafira Law Professional Corporation and 2496050 Ontario Corp. o/a A13M

HEARD: July 21, 2022

ENDORSEMENT

Nature of the Motion

[1] There are three sets of motions to strike the plaintiff’s Statement of Claim before the court.

[2] The defendants, Jonathane Ricci, Xafira Law Professional Corporation, and 2496050 Ontario Corp. o/a A13MG (“the Ricci defendants”), move for an order striking the statement of claim in its entirety, without leave to amend, and an order permanently staying or dismissing the claim against Ricci and Xafira Law Professional Corporation on the basis that the statement of claim fails to disclose a reasonable cause of action against any of them pursuant to Rules 21.01(1)(b), 21.01(3)(d), 25.06(8), and 25.11 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[3] In its Amended Notice of Motion, the Ricci defendants move to also dismiss the action against 2496050 Ontario Corp. o/a A13MG and Xafira Law Professional Corporation (the defendant Ricci is missing) and seeks to strike those paragraphs of the Fresh As Amended Statement of Claim as set out at schedule “A” to the Notice of Motion of the 1PLUS12 defendants (described below); and further seeks an order striking the affidavit of Dominik Kawa, sworn May 13, 2022.

[4] The defendants, 1Plus12 Corporation (“1Plus12”), Glenn Estrabillo, Mohammed Jiwani, James Destephanis, Aurum Mortgage Investment Corporation Fund, Aurum Capital Corporation, 2424884 Ontario Corp. o/a Curah Capital Corporation, Atlas Capital Corporation (2013), Southshore Broadcasting Inc., Abraxas Corporation, Abraxas VIII Corp., 1Plus12 International Development Belize Ltd., Oxford Condo Corporation Ltd., Agorapyth X Corporation and Archex Corporation, move for an order striking the statement of claim in its entirety against Aurum Mortgage Investment Corporation Fund, Aurum Capital Corporation, 2424884 Ontario Corp. o/a Curah Capital Corporation, Atlas Capital Corporation (2013), Southshore Broadcasting Inc., Abraxas Corporation, Abraxas VIII Corp., 1Plus12 International Development Belize Ltd., Oxford Condo Corporation Ltd., Agorapyth X Corporation and Archex Corporation (collectively, the “Curah Defendants”), without leave to amend and an order striking the parts of the statement of claim indicated in Schedule “A” to these defendants’ Notice of Motion, without leave to amend, pursuant to rr. 21.01(1)(b) and 25.11.

[5] The defendants Eliezer Karp a.k.a. Eli Karp and DJD Law Professional Corporation (“the Karp defendants”) move to strike the plaintiff’s statement of claim, as against them, pursuant to r. 21.01(1)(b) on the basis that it does not disclose a cause of action against them. The Karp defendants also seek an order striking out the affidavit of the plaintiff, sworn on May 13, 2022, as it contains no relevant admissible evidence, and is scandalous and vexatious.

[6] The Karp defendants are a law firm in Toronto, established in 2016. Eli Karp is an Ontario lawyer and is the principal of the Karp defendants. The Karp defendants are the lawyers for 1PLUS12.

[7] The plaintiff opposes these motions, seeing them as merely tactical and an effort to delay. The plaintiff argues that some defendants are seeking to be removed from the action under r. 21.01(1)(b), even though the causes of action against them are properly pleaded and, although perhaps novel, are well-founded at law.

[8] The original Statement of Claim was issued on July 15, 2021. It was amended, pursuant to an order of Sugunasiri J. dated April 11, 2022, following a case conference. At a previous case conference before Sharma J. on December 8, 2021, the plaintiff was given a deadline to amend the pleadings. It does not appear that was done. It is not clear from the volume of materials filed, whether the amendments to the Fresh As Amended Statement of Claim have already been made, and if so, whether they are opposed by any party.

Background

[9] The plaintiff, Dominik Kawa, was one of the founders, a director, and the Chief Officer of 1PLUS12, which is an Ontario corporation created in 2013 by the plaintiff and others to deliver “wealth accumulation workshops” and operate as an investment or social club. The plaintiff’s primary claim is that he worked for 1PLUS12 and was not paid as agreed. The contract was allegedly made in 2013, and the breach occurred continuously from 2013 to 2019. He commenced this action against thirty different defendants for damages for negligence, negligent or fraudulent misrepresentation, and breach of contract, among other things. The plaintiff also commenced an action against 1Plus12’s legal counsel, its principals, related corporations, and individuals/entities who allegedly received funds from 1Plus12.

[10] The plaintiff alleges that 1Plus12 is a Ponzi scheme set up to defraud its investors and lawyers. The plaintiff submits that 1Plus12, and its being represented by certain lawyers and their firms, reassured him of its legitimacy. Most of the defendants are strangers to each other.

[11] The plaintiff has now abandoned the action against the defendants, Sajida Jiwani and Amal Hasan, from whom he was seeking an accounting of funds received by them. These defendants will be pursuing relief in the form of an order from the court declaring the action dismissed or discontinued and costs.

[12] In the Amended Statement of Claim, the plaintiff seeks damages against the defendants 1PLUS12 Corporation, Glenn Estrabillo, Mohammed Jiwani, James DeStephanis, Jonathane Ricci, Oxford Condo Corporation Ltd., and 1PLUS12 International Development Belize Ltd. for negligent and/or fraudulent misrepresentation, breach of contract, breach of fiduciary duty, and oppression and, in the alternative, damages for unjust enrichment or on a quantum meruit basis. The plaintiff also seeks aggravated, exemplary and/or punitive damages against these defendants. These defendants seek to strike the claim for breach of fiduciary duty.

[13] The plaintiff seeks damages from the defendants, Xafira Law Professional Corporation, Eli Karp, DJD Law Professional Corporation, and Landmark Worldwide LLC, for negligence, negligent and/or fraudulent misrepresentation and deceit, as well as aggravated, exemplary and/or punitive damages.

[14] The defendants ESPO Consulting Inc., ESPO Properties MI Inc. (USA), Laya Management Corporation, and Laya Holdings Inc. are also sued for negligent and/or fraudulent misrepresentation and breach of contract as well as damages for unjust enrichment or on a quantum meruit basis.

[15] The plaintiff claims against all the other defendants, seeking an order requiring each defendant to account for all funds traceable to funds advanced by 1PLUS12’s investors and requiring each defendant “to disgorge any amounts improperly received by them and that are owing to Kawa.”

[16] For the reasons below, I make the following order:

i) The affidavit of Dominik Kawa is struck. This is a pleadings motion, and although affidavit evidence is permitted under r. 21.01(3)(d) and 25.11, a pleadings motion, even where the defendants rely on r. 25.11 or 21.01(3)(d), is not a determination on the merits. The plaintiff submits that the affidavit was provided in response to the Karp defendants’ rule 25.11 motion, which the plaintiff noted appears largely to have been abandoned. Regardless, this is not a r. 20 summary judgment motion. In any event, the allegations of Ricci’s practicing law while suspended by the Law Society of Ontario is not relevant to the motion to strike nor the recitation of information in the affidavit.

ii) The motion to strike the claim as against the Ricci defendants is dismissed, save for those portions of the Fresh as Amended Statement of Claim in paragraph v), below.

iii) The motion to strike the claim as against the Karp defendants is dismissed, save for those portions of the Fresh as Amended Statement of Claim in paragraph v), below.

iv) The claims against the investors[1] are struck, without leave to amend.

v) The challenged paragraphs, as highlighted (underlined below) in the Fresh as Amended Statement of Claim annexed as Schedule “A” to 1Plus12’s Notice of Motion, shall be struck, except for the following:

a) paragraph 1(a) –“breach of fiduciary duty”

b) Paragraph 117

c) Paragraph 118

vi) The affidavit of the plaintiff on this pleadings motion is struck. Aside from containing irrelevant evidence, given the nature of the challenge to the pleadings, it is not relevant.

Claims Against the Ricci Defendants

[17] Under r. 21.01(1)(b), a party may move for a determination, before trial, to strike out a pleading on the ground that it discloses no reasonable cause of action.

[18] Rule 21.01(3)(d) provides as follows:

(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.

[19] Pursuant to subrule 21.01(2)(b), no evidence is admissible on a motion under clause (1)(b).

[20] The test to be applied on a rule 21.01(1)(b) motion is also set out in Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at p. 980 – that is, “assuming that the facts as stated in the statement of claim can be proved, is it ‘plain and obvious’ that the plaintiff’s statement of claim discloses no reasonable cause of action”. The jurisprudence establishes that the test is whether, assuming the facts as stated can be proved, and reading the pleading generously with allowances for drafting deficiencies, it is “plain and obvious” that an action or a claim within the action will not succeed: see Hunt, at pp. 979-80; Wellington v. Ontario, 2011 ONCA 274, 105 O.R. (3d) 81, at para. 14, leave to appeal refused, [2011] S.C.C.A. No. 258; Grand River Enterprises Six Nations Ltd. v. Attorney General (Canada), 2017 ONCA 526, at paras. 15-16.

[21] The test under rule 21.01(1)(a) (which governs a determination of a question of law before trial and is not being relied upon by the Ricci defendants) is the same as under rule 21.01(1)(b), as noted by the Court of Appeal in Beaudoin Estate v. Campbellford Memorial Hospital, 2021 ONCA 57, 154 O.R. (3d) 587 at para. 14:

i. The test under r. 21.01(1)(a) is whether the determination of the issue of law is ‘plain and obvious’, which is the same test that applies under r. 21.01(1)(b) for whether the pleading should be struck because it discloses no reasonable cause of action or defence: Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 68 O.R. (3d) 457 (C.A.), at para. 37; Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 4th ed. (Toronto: LexisNexis Canada, 2020), at para. 6.168.

ii. The facts pleaded in the statement of claim are assumed to be true, unless they are patently ridiculous or manifestly incapable of proof: Paton Estate v. Ontario Lottery and Gaming Corp. (2016), 131 O.R. (3d) 273, [2016] O.J. No. 3031, 2016 ONCA 458, at para. 12.

iii. The statement of claim should be read as generously as possible to accommodate any drafting inadequacies in the pleading. If the claim has some chance of success, it should be permitted to proceed: R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45, [2011] S.C.J. No. 42, 2011 SCC 42, at paras. 17-22.

[22] The threshold to strike a pleading for failure to disclose a cause of action is very high under r. 21.01(1)(b).

[23] The term “cause of action” has been used to mean a factual matrix, on the one hand, and as the legal basis for relief, on the other. As noted by Lauwers J., as he then was, in 1309489 Ontario Inc. v. BMO Bank of Montreal, et al, 2011 ONSC 5505, 107 O.R. (3d) 384, at para. 21, the trend in the case law “favours the broader, factually oriented approach to the meaning of ‘cause of action’ in interpreting and applying rule 26.01”. For this proposition, Lauwers J. cites Fitzpatrick Estate v. Medtronic Inc. (1996), 137 D.L.R. (4th) 262, at para. 22 (Ont. C.J.); Gladstone v. Canadian National Transportation Ltd. (2009), 252 O.A.C. 117, at paras. 37-40, 44 (Div. Ct.); and Rausch v. Pickering (City), 2010 ONSC 2393, at paras. 38-42.

[24] In Kaynes, v. BP p.l.c., 2021 ONCA 36, 456 D.L.R. (4th) 247, at para. 46, Feldman J.A. commented:

[T]he contents of a proper initiating pleading asserting a claim for a remedy contemplated by the rule will include the legal elements to support a claim, i.e., a cause of action.

[25] Striking pleadings under this rule serves to weed “out the hopeless claims and [ensure] that those that have some chance of success go on to trial”: see R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 19.

[26] A pleading in a statement of claim will be deficient where it fails to plead the material facts required to sustain a particular cause of action: see Apotex Inc. v. Eli Lilly and Co., 2015 ONCA 305, 125 O.R. (3d) 561, at para. 21, leave to appeal refused, [2015] S.C.C.A. No. 291.

[27] Neither side has set out the constituent elements for the various causes of actions being advanced by the plaintiff against the Ricci defendants.

[28] And, while the statement of claim is not an opportunity to tell “the full story” as the plaintiff alleges in his pleading, if the allegations against the Ricci defendants are presumed to be true, it is not plain and obvious to the court, on a pleadings motion at this stage, that the plaintiff will not succeed against these defendants for negligence, or negligent and/or fraudulent misrepresentation.

[29] The court must consider whether the deficiency can be addressed through an amendment to the pleading: see Tran v. University of Western Ontario, 2015 ONCA 295, at paras. 26-27.

[30] Rule 25.11 provides that:

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.

[31] The claim against Jonathane Ricci is for negligent and/or fraudulent misrepresentation, breach of contract, breach of fiduciary duty, oppression and negligence. In the alternative, Kawa seeks damages on a quantum meruit basis against Ricci. At paragraph 13 of his Statement of Claim, the plaintiff alleges that Ricci “…became heavily involved in 1PLUS12’s deals, legal structure and finances”.

[32] The plaintiff also alleges that: “Ricci went on to become one of 1PLUS12’s directing minds.” This allegation is repeated in paragraph 22 of the Amended Statement of Claim. At paragraph 26 of the pleading, the plaintiff also alleges that Ricci is “the beneficial owner of most companies within the 1PLUS12 group of corporations, including those to which Kawa is entitled to one-quarter of the profits.”

[33] And, at paragraph 27 of the Amended Statement of Claim, the plaintiff alleges that “Xafira Law Professional Corporation was, at all material times, a professional corporation owned by Ricci. Xafira Law performed work on behalf of 1PLUS12.” There are several companies which the plaintiff alleges Ricci is associated with, as registered agent, president, or otherwise. The plaintiff is claiming compensation in the form of a salary and profit sharing, among other relief.

[34] The Ricci defendants submit that the plaintiff is not able to maintain a claim against them for unpaid salary and unreimbursed expenses, quantum meruit damages for work done, and a profit share. Ricci, the individual lawyer, appears to be sued both in his capacity as a lawyer and non-lawyer. The pleading is replete with allegations of negligent and fraudulent conduct by Ricci and his firm (Xafira). By virtue of the proposed striking of certain paragraphs of the Fresh as Amended Statement of Claim, some of the more scandalous and irrelevant paragraphs against the Ricci defendants are being struck, but the Ricci defendants have provided the court with no authority to support their position that the claim should be entirely struck either as disclosing no cause of action against them, or, after the further amendments are made (e.g., the allegation that, by acting for 1PLUS12, they imparted an air of legitimacy to investors).

[35] The Ricci defendants argue that Xafira owed no duty of care to the plaintiff. In my view, this would invite the court to consider the facts and the law, though ultimately the question of whether a duty of care exists is a question of law. The plaintiff was one of the founders of 1Plus12. Xafira acted for 1Plus12. The allegations in the claim are presumed to be true. The merits of the defence therefore cannot be determined on this pleadings motion.

[36] The Ricci defendants also maintain that the action against 2496050 Ontario Corp. o/a A13MG should be struck as it is untenable at law. They submit that the claims against A13MG for unpaid salary and unreimbursed expenses, quantum meruit damages for work done, and a profit share, cannot be asserted against them.

[37] The plaintiff alleges in the Statement of Claim that Ricci is the sole director of A13MG, and does allege that it is one of the corporate vehicles of 1PLUS12’s fraud. The plaintiff also alleges that A13MG is a subsidiary of 1PLUS12. Again, a pleadings motion is not a motion for summary judgment or a motion to determine the merits. On the pleadings before me, it is not “plain and obvious” that the plaintiff’s action against A13MG cannot succeed.

[38] While evidence is admissible under r. 21.01(3)(d), none was filed by the defendant. The test is, “is it plain and obvious that the action cannot succeed?”: Prete v. Ontario (Attorney-General) (1993), 16 O.R. (3d) 161 (C.A.).

[39] In my view, it is not plain and obvious that the claims against Ricci and the Xafira Law firm cannot succeed. Additionally, r. 21.03(1) requires that a factum be filed on a r. 21.01 motion setting out the facts and the law. Although a factum was filed by the Ricci defendants, no law is being relied upon.

[40] On the pleadings before me, without any law from the Ricci defendants, and on a generous reading of the Fresh as Amended Statement of Claim, it is far from clear that the action against the Ricci defendants is frivolous, vexatious or is otherwise an abuse of the court.

Claims Against the Karp Defendants

[41] The allegations against the defendants Eli Karp and DJD Law Professional Corporation are set out in paragraphs 28, 32, and 124-128 of the Fresh as Amended Statement of Claim. On the presumption that the allegations in the Statement of Claim are presumed to be true, the Karp defendants’ motion must also fail.

[42] The plaintiff claims against the defendant Karp and DJD Law for negligence and negligent and/or fraudulent misrepresentation. The plaintiff pleads that he was in a solicitor-client relationship with Karp and DJD Law from in or around 2016 onwards. The plaintiff further pleads that the defendant Karp “has also made negligent and/or fraudulent misrepresentations to Kawa – with whom he was in a solicitor-client relationship - about 1PLUS12 activities, upon which Kawa relied to his detriment”.

[43] It is trite to say that pleadings force litigants to disclose the essential facts that they are relying on to maintain a claim or defense.

[44] Rule 1.04 (1) provides that “These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.”

[45] Rule 25.06 (1) provides that: “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.”

[46] In my view, if there is an allegation of the existence of a solicitor and client relationship, the inference is that the lawyer may have acted for the plaintiff. Whether this was, in fact, the case, the existence of any retainer, the scope of the retainer (which ought to be pleaded), and whether any duty was owed by the Karp defendants to the plaintiff, are not issues that can be determined on a motion under r. 21.01(1)(b). Read generously, the pleading is deficient.

[47] In Duryea v. Kaufman (1910), 21 O.L.R. 165 (H.C.J.), Riddell stated at p. 168:

No pleading can be said to be embarrassing if it alleges only facts which may be proved — the opposite party may be perplexed, astonished, startled, confused, troubled, annoyed, taken aback, and worried by such a pleading — but in a legal sense he cannot be "embarrassed." But no pleading should set out a fact which would not be allowed to be proved — that is embarrassing: Stratford Gas Co. v. Gordon (1892), 14 P.R. 407; Heugh v. Chamberlain (1877), 25 W.R. 742; Knowles v. Roberts (1888), 38 Ch. D. 263. Even if a pleading set out a fact that is not necessary to be proved still, if it can be proved the pleading will not be embarrassing. Anything which can have any effect at all in determining the rights of the parties can be proved, and consequently can be pleaded — but the Court will not allow any fact to be alleged which is wholly immaterial and can have no effect upon the result: Rock v. Purssell (1887), 84 L.T.J. 45.

1Plus12 and Schedule “A”

[48] Amendments that may ultimately be struck ought not to be granted, then, keeping in mind the object of subrule 1.04(1).

[49] A pleading that is embarrassing may be struck out: see Dalex Co. v. Schwartz Levisky Feldman (1994), 19 O.R. (3d) 463 (C.J.).

[50] Any pleading that contains irrelevant or superfluous allegations that cannot affect the outcome of an action is scandalous, frivolous or vexatious, and should be struck out: see F. (M.) v. Dr. Sutherland (2000), 134 O.A.C. 117, at para. 67 (C.A.); Carney Timber Company, Inc. v. Pabedinskas, 2008 63163, at para. 16 (Ont. S.C.).

[51] The jurisprudence establishes that a court “will not allow any fact to be alleged which is wholly immaterial and can have no effect upon the result”: Duryea, at p. 168, cited in F.(M.), at para. 71; Huachangda Canada Holdings Inc. v. Solcz Group Inc., 2019 ONCA 649, 147 O.R. (3d) 644, at para. 15.

[52] Examples of the irrelevant pleadings include the following paragraphs in the Fresh As Amended Statement of Claim:

7. However, despite introducing Estrabillo to Jiwani, despite being a co-founder of 1PLUS12, and despite his close relationship with Estrabillo, Kawa has never received the compensation he is owed. Instead, when Kawa began to suspect the true nature of 1PLUS12’s activities and ask questions, Estrabillo, Jiwani and others stonewalled and ostracized him. Unwilling to be part of what he now realized was a fraudulent enterprise, Kawa left the organization.

8. Kawa’s years of work for 1PLUS12 have left him penniless and in debt. Moreover, they have also tarnished his reputation and made it nearly impossible for him to find a job. Estrabillo, Jiwani and others have actively contributed to the ongoing destruction of Kawa’s reputation.

9. In 2014, Jiwani identified a promising opportunity in Belize: an unfinished condominium development called the Sands Villas Condos was in foreclosure. 1PLUS12 acquired 15 of the 20 units using capital raised by 1PLUS12’s investors. In late 2014, at Jiwani’s urging, Kawa moved to Belize to oversee construction on the Sands Villas project.

10. From 2014 onwards, Kawa had less and less insight into 1PLUS12’s operations and finances. He also had decreasing insight and input into deals that 1PLUS12 was pitching to existing and potential investors. He did not have access to 1PLUS12’s accounts or financial records and did not participate in most decision-making. He was sporadically copied on emails.

11. The Council promised Kawa a construction budget averaging $100,000 USD per month for the renovations, which were expected to last for two years. Nothing close to this amount ever came through. In a good month, Kawa received $10,000. In other months, he received nothing and had to borrow from family and friends to make ends meet. This made little sense to Kawa since he understood that investors had advanced millions of dollars to 1PLUS12 to invest, including for the Sands Villas project, and that 1PLUS12 promised investors the project would be completed on time and on budget.

12. By 2019, Kawa was deeply concerned with the increasing number of red flags. He pressed The Council for answers. Estrabillo, Jiwani, DeStephanis, and Ricci obfuscated, evaded, and lied.

13. 1PLUS12 Corporation is an Ontario corporation. Glenn Estrabillo is presently its sole officer and director. It was created in 2013 to operate 1PLUS12’s workshops and seminars on character development, real estate investing and financial independence strategies. It was founded by Kawa, Estrabillo, and Jiwani. However, at all material times, 1PLUS12’s directing minds have been Estrabillo, Jiwani, DeStephanis, and Ricci. These individuals have operated 1PLUS12 and its corporate subsidiaries for the benefit of themselves and their associates such as Arash Missaghi, who has received more than $10 million in 1PLUS12 investor funds, and to Kawa’s exclusion.

14. Glenn Estrabillo is an Ontario resident who spends considerable time in Belize. He is the Chief Executive Officer, a co-founder, and the public face of 1PLUS12. Estrabillo advertises himself as a professional engineer who was able to retire twice from his six-figure occupation through successfully investing in real estate. Through his work with 1PLUS12, he promised the same result for 1PLUS12’s investors in the Axiom Experience. [Emphasis added].

[53] In George v. Harris, [2000] O.J. No. 1762, Epstein J., as she then was, explained the meaning of “scandalous”, “frivolous” or “vexatious” in the context of rule 25.11 stating, at para. 20:

The next step is to consider the meaning of ‘scandalous’, ‘frivolous’ or ‘vexatious’. There have been a number of descriptions provided in the multitude of authorities decided under this or similar rules. It is clear that a document that demonstrates a complete absence of material facts will be declared to be frivolous and vexatious. Similarly, portions of a pleading that are irrelevant, argumentative or inserted for colour, or that constitute bare allegations should be struck out as scandalous. The same applies to a document that contains only argument and includes unfounded and inflammatory attacks on the integrity of a party, and speculative, unsupported allegations of defamation. In such a case the offending statements will be struck out as being scandalous and vexatious. In addition, documents that are replete with conclusions, expressions of opinion, provide no indication whether information is based on personal knowledge or information and belief, and contain many irrelevant matters, will be rejected in their entirety.

[54] The Statement of Claim also pleads criminal charges. There are similar allegations throughout referencing commission of crimes by various parties. For example, at para. 29, the plaintiff alleges that:

29. Arash Missaghi is an individual who resides in Ontario. He and corporations he controls are the direct or indirect recipients of over $10 million in funds advanced by 1PLUS12’s investors. Missaghi has been found liable for civil fraud in the United States and is awaiting trial on criminal fraud charges in Canada. He has been an undischarged bankrupt since 2000. He is also a friend and acquaintance of Jiwani and Ricci. He is the mastermind behind most of 1PLUS’s investment schemes, having introduced Jiwani to virtually all of the land- or mortgage-based deals that 1PLUS12 pitched to its investors over the years.

b) Accomplices to 1PLUS12’s fraud and/or recipients of 1PLUS12 funds [Emphasis Added].

[55] A party may plead a criminal charge or a criminal conviction in a civil matter if it is relevant.

[56] Pleading a criminal charge or conviction may be determined to be scandalous, frivolous or vexatious if it is not material.

[57] Even where a criminal charge or conviction is material, the court may still weigh its probative value and prejudicial effect.

[58] The jurisprudence places no real distinction between criminal charges and criminal convictions at the pleadings stage.

[59] A pleading that is embarrassing may be struck out: see Dalex Co.

[60] A pleading of an arrest and conviction on a criminal charge is “scandalous” and should be struck out, where the pleading is not relevant to the action.

[61] Any pleading that contains irrelevant or superfluous allegations that cannot affect the outcome of an action is scandalous, frivolous, or vexatious, and should be struck out: F.(M.), at para. 67; Carney Timber Company, at para. 16.

[62] In Robinson v. Robinson, [1942] O.W.N. 410, at paras. 2-3 and 5 (H.C.J.), the court stated: “The allegation of anything ... which charges some person with a crime not necessary to be shown in the cause” is scandalous.

[63] The jurisprudence establishes that a court “will not allow any fact to be alleged which is wholly immaterial and can have no effect in the result”: Duryea, at p. 168, cited in F. (M.), at para. 71; Huachangda, at para. 15.

[64] Where the commission of a crime is not relevant to the proof of the claim or defence, pleading that a party was convicted of a criminal offence is a scandalous pleading that will be struck out: Jevco Insurance Company v. Pacific Assessment Centre Inc., 2014 ONSC 2244, 120 O.R. (3d) 43, at para. 93; Robinson. And, where the commission of a civil wrong is alleged, pleading that the opponent would be convicted of a Criminal Code offence is a scandalous pleading that should be struck out: Jevco, at para. 93; Regin Properties Ltd. v. Logics Inc. (1994), 33 C.P.C. (3d) 87 at para. 17 (Master); Morgan v. Tumosa, [1963] 1 O.R. 550 (Master).

[65] I am not prepared to strike the claim for breach of fiduciary duty. The plaintiff’s pleading on the pleadings motion, law deficient though it may be, is presumed to be true. The plaintiff is seeking relief under the oppression remedy and is seeking other equitable relief. Whether a fiduciary relationship existed cannot be determined on a pleadings motion given the allegations in the statement of claim. The existence of such a relationship may depend on such factors as trust and confidence: Hodgkinson v. Simms, [1994] 3 S.C.R. 377, at para. 35.

[66] In the result, having reviewed the 1Plus12 defendants’ proposed amendments to the pleading, and having regard to the rules on pleading material facts, and the jurisprudence, the proposed amendments make eminent sense, save for the exceptions above.

Claims against the investors

[67] As for the claims against the investors, aside from unduly complicating an already complex lawsuit, in my view, the plaintiff was not an investor and has no standing. In any event, these claims are improperly joined, and even if they were not, the joinder of these claims would prejudice or delay the fair trial of the action.

[68] The jurisprudence recognizes that novel claims that might represent an incremental development in the law should be allowed to proceed to trial: Imperial Tobacco, at para. 21; Das v. George Weston Ltd., 2018 ONCA 1053, 43 E.T.R. (4th) 173, at para. 73; see also R. v. Salituro, [1991] 3 S.C.R. 654, at p. 670; Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 4th ed (Toronto: Lexis Nexis). However, the Supreme Court of Canada has indicated that a claim will not survive an application to strike simply because it is novel. Claims, including novel claims, which are doomed to fail should be disposed of at an early stage in the proceedings. The Supreme Court of Canada has stated “If a court would not recognize a novel claim when the facts as pleaded are taken to be true, the claim is plainly doomed to fail and should be struck”: Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, 447 D.L.R. (4th) 543, at para. 19.

[69] In this case, the plaintiff is not an investor. The plaintiff’s sweat labour, as he alleges in the affidavit the parties seek to strike, does not make him an investor. The plaintiff therefore has no standing to advance claims on behalf of the investors. Where a plaintiff seeks to advance claims on behalf of non-parties, the plaintiff lacks standing and those claims must be dismissed: Rousay v. Rousay et al., 2013 ONSC 4280, 89 E.T.R. (3d) 316, at para. 27; The Polish National Catholic Church of Canada v. Polish National Catholic Church and Anthony A. Mikovsky, 2014 ONSC 4501, at paras. 33-34. The claims on behalf of the investors do not represent incremental development in the law with some real prospect of success: Atlantic Lottery, at paras. 19 and 35. Simply put, the plaintiff has no standing. The claims are doomed to fail.

[70] In the plaintiff’s factum, counsel states that: “the misrepresentations alleged as against Karp and DJD Law also include that they allowed a lawyer’s trust account to be used for 1PLUS12’s fraudulent activities and they employed a disbarred lawyer. These misrepresentations were ongoing and repeated”. The subsequent paragraph states:

63. There does not appear to be a direct Canadian analogue to this case, but there is some similarity to Doe 43C v. Diocese of New Ulm, a case involving sexual abuse of children by a priest. The parishioners argued that the diocese’s act of allowing a priest to continue to serve as a pastor and have unsupervised access to children amounted to an affirmative representation that the priest was safe to be around. The Court rejected this argument, however it did so because nondisclosure only constitutes fraud where there is a legal or equitable obligation to communicate facts to a particular person who is entitled to that information.

The factum does not set out the elements of the cause of action which it is asking the court to recognize. The plaintiff relies on a decision out of Minnesota: Doe 43C v. Diocese of New Ulm, 787 N.W.2d 680 *, 2010 Minn. App. LEXIS 136, at pp. 6-7, and indicates in the footnote that “Similar principles have been established in Canadian law: see Nir Oil Ltd. v. Bodrug, 1985 ABCA 123, at para.31” though the passage the court is directed to is a quote from a text, Kerr on Fraud and Mistake, 7th ed., p. 46, on misrepresentation.

Costs

[71] If the parties cannot agree on costs, they may submit costs submissions, in writing, limited to 4 pages, double space, exclusive of a Costs Outline, to Ms. Diamante at Polly.Diamante@ontario.ca, within 30 days of the release of these Reasons.

Justice A.P. Ramsay

Date: November 21, 2022

[1] Aurum Mortgage Investment Corporation Fund, Aurum Capital Corporation, 2424884 Ontario Corp. o/a Curah Capital Corporation, Atlas Capital Corporation (2013), Southshore Broadcasting Inc., Abraxas Corporation, Abraxas VIII Corp., 1Plus12 International Development Belize Ltd., Oxford Condo Corporation Ltd., Agorapyth X Corporation and Archex Corporation