Court File and Parties

COURT FILE NO.: CV-22-688227 DATE: 2023 10 03

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: NEWTON CRYPTO LTD., Plaintiff - and - DAVID DUBUISSON LEBON, YOUSSEF ELLOUGANI, THEA HOLLENBECK, CHRISTOPHER JEAN-GILLES, JOHN JULES, PATRICK KHOURY, MAYERLY T SALCEDO GARCIA, ARTHAUD PLESIUS, KEVEN OBAS, VLADIMIR JOSEPH and SARAH BILODEAU, Defendants

BEFORE: Associate Justice Todd Robinson

COUNSEL: A. Van Kralingen and K. Chau, for the plaintiff I. Flett, for the defendants, David Dubuisson Lebon, Youssef Ellougani, Thea Hollenbeck, John Jules, Mayerly T Salcedo Garcia, Arthaud Plesius, Keven Obas, and Vladimir Joseph

HEARD: September 29, 2023

REASONS FOR DECISION (Motion to Strike Statements of Defence)

[1] The plaintiff, Newton Crypto Ltd. (“Newton”), brings this motion seeking an order striking the defences of Youssef Ellougani, John Jules, David Dubuisson Lebon, Thea Hollenbeck, Mayerly T Salcedo Garcia, Arthaud Plesius, Keven Obas and Vladimir Joseph (collectively, the “Responding Defendants”). Newton takes the position that their defences fail to meet the minimum level of required material fact disclosure and, despite the Responding Defendants being provided with an opportunity to amend, they have not done so. Newton accordingly requests that their defences be struck without leave to amend.

[2] I am satisfied that the defences should be struck, but with leave to amend on terms. Newton’s statement of claim pleads particularized allegations in support of its fraud claim against each of the defendants. Both of the impugned statements of defence provide nothing more than non-specific and blanket denials of the pleaded facts and alleged fraud. More is required to comply with the applicable pleading rules.

Analysis

[3] Newton moves under rule 25.11 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”). It 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 may prejudice or delay the fair trial of the action; is scandalous, frivolous or vexatious; or is an abuse of the process of the court.

[4] It is well-established that the function of pleadings is to (i) define with clarity and precision the question in controversy between the litigants; (ii) to give fair notice of the precise case which is required to be met and precise remedies sought; and (iii) assist the court in its investigation of the truth and the allegations made: National Trust Co. v. Furbacher, [1994] OJ No 2385 (Gen Div) at para. 9.

[5] Rule 25.06(1) of the Rules requires that every pleading 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. The subrule has been held to mandate a minimum level of material fact disclosure, and if this level is not reached, the remedy is not a motion for particulars, but rather a motion to strike out the pleading as irregular. It is only where the minimum level of material fact disclosure has been reached, that the pleading becomes regular: Edwards v. Rebound Resources Inc., 2008 ONSC 41168 at para. 21.

[6] Two other subrules are applicable here: subrules 25.07(3) and 25.06(8). Subrule 25.07(3) sets out that where a defendant intends to prove a different version of the facts from that pleaded by the plaintiff, a denial of that version is not sufficient and the defendant must plead its own version of the facts in the defence. Subrule 25.06(8), which applies to all pleadings, requires that full particulars be pleaded where fraud, misrepresentation, breach of trust, malice or intent is alleged.

[7] The Responding Defendants have served two statements of defence: one on behalf of Youssef Ellougani and John Jules and another on behalf of David Dubuisson Lebon, Thea Hollenbeck, Mayerly T Salcedo Garcia, Arthaud Plesius, Keven Obas and Vladimir Joseph. The two defences are identical, other than that Youssef Ellougani and John Jules have admitted additional paragraphs that are not admitted by the remaining Responding Defendants.

[8] I agree with the Responding Defendants that they are not required to prove a different version of the facts for every fact pleaded by Newton that they deny: Griffiths v. Stephen Benjamin Law Professional Corp., 2022 ONSC 3975 at para. 39. However, the bald and unparticularized pleading that the defendants “deny they ever participated in any Fraudulent Exploit as pleaded by the plaintiff” and a general denial that the plaintiff is entitled to damages does not meet the minimum level of material fact disclosure required by the Rules.

[9] It is not permissible simply to deny the entire claim, as the Responding Defendants have essentially done in by their bare defences. A defendant must set out its own version of the facts as well as any affirmative defences. Doing so is critical since the pleadings are the foundation for discovery rights and the touchstone for determining what is relevant: Ottawa (City) v. Cole & Associates Architects Inc., 2012 ONSC 3360 at para. 19.

[10] The statement of claim puts forward particularized allegations of fact, such as the dates and amounts of cryptocurrency transfers and trades as well as impugned withdrawals. Those paragraphs are flatly denied without putting forward the Responding Defendants’ own version of the facts. On the face of their defence pleadings, it appears that they deny not only the alleged fraud, but the very fact of the transfers, trades, and withdrawals themselves. Youssef Ellougani and John Jules admit that they were account holders with Newton. The remaining Responding Defendants deny even that fact. The Responding Defendants must put forward their own version of the facts with respect to their relationship, if any, with Newton and the material facts pleaded about the transfers, trades, and withdrawals, as well as any affirmative defences to Newton’s claim. Bare paragraph denials and a generic denial of the fraud and Newton’s damages are insufficient.

[11] Youssef Ellougani and John Jules argue that the alleged “fraudulent scheme” is a serious allegation raising the spectre of self-incrimination for them. They submit that protections against self-incrimination are found in the Canadian Charter of Rights and Freedoms, the Canada Evidence Act, RSC, 1985, c C-5, and the Evidence Act (Ontario), RSO 1990, c E.23. I have taken that argument to apply to the remaining Respondent Defendants as well. I give it no effect.

[12] In ACI Brands Inc. v. Pow, a case put forward by the Responding Defendants, Perell J. discussed the two types of self-incrimination (testimonial and non-testimonial) and the relevant constitutional and statutory framework for the protections against self-incrimination: ACI Brands Inc. v. Pow, 2014 ONSC 2784 at paras. 55-58. However, no authority has been put forward supporting that pleading a position in a statement of defence does or may amount to non-testimonial self-incrimination to which the constitutional and statutory protections apply. There is also no responding evidence from any of the Responding Defendants. I accordingly have no evidentiary basis on which to find that any of them is legitimately concerned about potential self-incrimination.

[13] Both statements of defence are deficient. They each fail to meet the minimum level of material fact disclosure. Both pleadings are properly struck.

[14] I am not convinced, though, that the defences should be struck without leave to amend. In my view, the Responding Defendants should be afforded a final opportunity to comply with the pleadings rules and put forward properly particularized defences before they lose the right to defend the plaintiff’s action entirely. I am accordingly striking the defences with leave to amend in twenty (20) days.

[15] A motion is currently pending on December 13, 2023 for the Responding Defendants’ lawyer to be removed as lawyers of record for David Dubuisson Lebon, Thea Hollenbeck, Mayerly T Salcedo Garcia, Arthaud Plesius, Keven Obas and Vladimir Joseph. Their lawyers have no instructions. Although I denied the requested adjournment of this motion for reasons given by separate endorsement, I am mindful that if the removal motion does proceed, then my order providing a 20-day deadline for amended pleadings may result in potential unfairness to those defendants. To mitigate that potential unfairness, Newton shall not be entitled to note those defendants in default until after the motion or, if the motion is granted, after the ordered deadline has expired for them to appoint new counsel or serve a notice of intention to act in person.

Costs

[16] Newton has been entirely successful and is entitled to its costs of the motion. It seeks partial indemnity costs of $4,644.30, including HST and disbursements. Those costs are very reasonable given the nature of this motion and were rightly not disputed during costs submissions. I am granting the requested costs.

Disposition

[17] For the above reasons, I order as follows:

(a) The statements of defence of the Responding Defendants are hereby struck, with leave to amend.

(b) Fresh statements of defence shall be delivered by the Responding Defendants within twenty (20) days.

(c) Notwithstanding subparagraph (b) above, Newton shall not be entitled to note the Responding Defendants other than Youssef Ellougani and John Jules in default until December 14, 2023, or, if a removal order is granted on December 13, 2023, until ten (10) days after the ordered deadline to appoint new counsel or deliver a notice of intention to act in person.

(d) The Responding Defendants shall be jointly and severally liable to Newton for its costs of this motion fixed in the amount of $4,644.30, including HST and disbursements, payable within thirty (30) days.

[18] I will remain seized of any disputes arising from execution of this order. If necessary, a case conference may be arranged through my Assistant Trial Coordinator by email at christine.meditskos@ontario.ca.

ASSOCIATE JUSTICE TODD ROBINSON DATE: October 3, 2023