COURT FILE NO.: CV-23-00001980-0000 DATE: 2024-11-05

SUPERIOR COURT OF JUSTICE – ONTARIO

491 Steeles Avenue East, Milton ON L9T 1Y6

RE:

Clinedale Property Group Ltd., Plaintiff

AND:

BeyRose Acquisitions Ltd., Ezra Rosenzweig, Josh Rosenzweig, Leslie Westreich, Railroad Towers Inc., Zev Zlotnick, Gardiner Roberts LLP, Defendants

BEFORE:

Justice Mills

COUNSEL:

Paul Fruitman, Melanie Zetusian, for the Plaintiff Jonathan Roth, for the Defendant, Leslie Westreich

HEARD:

October 28, 2024

ENDORSEMENT

[1] This litigation is in respect of a failed partnership formed to pursue a land development project in Brampton (the “Project”). There are several torts alleged against the defendants, all arising from allegations BeyRose Acquisitions Ltd. and its principals, brothers Josh and Ezra Rosenzweig, collectively the “BeyRose defendants”, misappropriated the Project with the knowing assistance of the other defendants, thereby depriving the plaintiff of its rightful interest.

[2] The defendant Leslie Westreich (“Westreich”) is the father-in-law of Ezra Rosenzweig and was the proposed guarantor for the financing of the land purchase. The plaintiff claims damages against Westreich for inducing breach of contract, knowing assistance, knowing receipt, and unlawful conduct conspiracy.

[3] Westreich brings a Rule 21 motion to strike the Statement of Claim as against him for disclosing no reasonable cause of action. He has failed to meet the very high bar required to strike a Statement of Claim at the pleadings stage. The motion is therefore dismissed.

[4] The law is well settled that a Statement of Claim should be struck out where, assuming the facts pleaded are true, it is plain and obvious the claim is certain to fail because it discloses no reasonable cause of action (Rule 21.01(1)(b) Rules of Civil Procedure; Hunt v. Carey Canada Inc., 1990 90 (SCC), [1990] 2 S.C.R. 959). It is a high threshold and a difficult test to meet.

[5] On a motion to strike, the defendant must demonstrate the claim has no possibility of success; the plaintiff is not required to establish the claim will succeed (Addison Chevrolet Buick GMC Ltd. v. General Motors of Canada Ltd., 2016 ONCA 324). If there is even a slim chance the claim might succeed, it should not be struck out. Only in the clearest of cases, where the court is satisfied that the case is beyond doubt, should the plaintiff be deprived of the opportunity to prove the claims asserted (Atlantic Steel Industries, Inc. v. Cigna Insurance Co. of Canada, 1997 12125 (ON SC), [1997] O.J. No. 1278, 33 O.R. (3d) 12 (ONCA)).

[6] A generous approach is to be taken, allowing novel but arguable claims to proceed to trial; hopeless claims however are to be eliminated to promote litigation efficiency in time and costs, and to reduce the strain on limited judicial resources (R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, at paras. 19-21).

[7] The pleadings must disclose a cause of action that is founded in law. The material facts pleaded, taken to be proven unless they are patently ridiculous or based on assumptions or speculative conclusions that are manifestly incapable of proof, must support a reasonable and recognizable cause of action with some chance of success (Robson v. Law Society of Upper Canada, 2016 ONSC 5579 at paras. 23-24; Miguna v. Ontario (Attorney General) (2005), 2005 46385 (ON CA), 262 D.L.R. (4th) 222 (ONCA) at para. 18).

[8] Westreich submits the plaintiff has failed to plead sufficient facts to support the torts advanced in the Statement of Claim, and the plaintiff is unable to establish the alleged causes of action as it relies on speculation, conjecture and assumptions that are unsupported by facts.

[9] In his oral and written submissions, Westreich appears to conflate this Rule 21 motion with a Rule 20 summary judgment motion. On this motion to strike, the plaintiff is not required to put its best foot forward with tangible evidence to support its claims. Indeed, there is to be no evidence considered on a motion to strike. The plaintiff need only plead the facts on which it relies. Those facts are then deemed to be true for the purposes of this motion. Of course, that would not be the case with a summary judgment motion.

[10] I am not satisfied that this action is certain to fail as against Westreich. It is neither plain nor obvious that when read generously, the plaintiff’s claims are doomed to fail. In my view, there is some chance of success of establishing that Westreich was an active participant in the events which led to the BeyRose defendants seizing the Project for their own benefit, at the exclusion of the plaintiff.

[11] In support of its allegations, the plaintiff relies on an email sent by Westreich on May 19, 2023, which purported to significantly alter the terms on which he was prepared to provide his guarantee just two business days prior to the anticipated closing. Whether the email was in fact sent as part of a coordinated effort by the BeyRose defendants to exclude the plaintiff from the Project is something that will ultimately need to be proven at trial. On this motion however, the allegation is to be taken as proven.

[12] The plaintiff’s interpretation of the email is sufficient to support the allegations that Westreich assisted and participated with the BeyRose defendants in an alleged unlawful conduct conspiracy to deprive the plaintiff of its investment opportunity in the Project. To the extent the plaintiff’s interpretation of the email is based on speculation, it is not manifestly incapable of being proven.

[13] The Statement of Claim provides sufficient detail respecting the email and its surrounding circumstances to permit Westreich to respond. A detailed level of specificity is not required at the pleadings stage as the allegations of a conspiracy will not generally be known to the plaintiff until after the discovery stage of a proceeding (Dale v. The Toronto Real Estate Board, 2012 ONSC 512, at para. 53).

[14] Westreich alleges he is being “lumped in” with the BeyRose defendants when he was simply a prospective guarantor. This is not accurate. The plaintiff makes direct allegations against Westreich which if proven at trial, will give rise to personal liability for inducing the BeyRose defendants to breach their contract with the plaintiff. Claims are also advanced against Westreich on a joint and several basis with the BeyRose defendants for knowing receipt and knowing assistance in a breach of trust. The Statement of Claim is sufficiently particularized with material facts to support the constituent elements of these alleged torts.

[15] The plaintiff has set out in detail the facts, taken as proven for the purpose of this motion, that give rise to a breach of contract and a breach of trust by the BeyRose defendants, and Westreich’s personal involvement in facilitating and participating in those breaches. He is not arm’s length to the matters in issue and to the allegations raised against the BeyRose defendants. He is accused of being intimately involved to support his family members in the alleged scheme to remove the plaintiff from the Project and the significant financial windfall expected on its completion. The claims against Westreich are neither frivolous nor vexatious, and they are not certain to fail.

[16] The interests of justice call for the claims made against Westreich to be determined on their merits. The degree to which he was involved, and the actions taken by him in allegedly facilitating the BeyRose defendants to breach their fiduciary and contractual duties owed to the plaintiff are integral to the damages the plaintiff claims to have suffered.

[17] There are proper claims advanced by the plaintiff and more than adequate material facts of the claims have been pleaded to allow Westreich to respond with a Statement of Defence. One shall be delivered within thirty days.

[18] Having been entirely successful, the plaintiff is entitled to its costs of the motion. Both parties filed Cost Outlines. The issues on the motion were of moderate complexity and importance. The number of hours billed by counsel are almost the same. Neither party took steps that were improper, nor did they unnecessarily lengthen the duration of the motion. Indeed, both counsel prepared thorough and comprehensive motion materials. Their oral submissions were excellent and directed only at the issues under consideration. For that, they have my gratitude, and they are to be commended for their efforts.

[19] There is however a significant difference in the partial indemnity costs being sought by the parties. The plaintiff’s partial indemnity costs exceed those of Westreich by more than $10,000. The difference is solely attributable to the billing rates charged by counsel. The question is whether this was in the reasonable contemplation of the unsuccessful party, as required by Rule 57.01(1).

[20] In 2005, the Civil Rules Committee issued guidelines as to the maximum billing rates when fixing partial indemnity costs. The partial indemnity billing rate for lawyers with 10-20 years experience was a maximum of $300 per hour. For lawyers with less than ten years experience, the rate is $225 per hour. The rates have not been reconsidered since 2005.

[21] Mr. Fruitman was called to the bar in 2006 and bills at an hourly rate of $975 ($585 on a partial indemnity basis). His associate, Ms. Zetusian was called in 2021 and her hourly rate is $550 ($330 partial indemnity). Mr. Roth, a 2013 call, bills at $525 per hour ($315 partial indemnity). None of the hourly rates of counsel are in line with the guidelines. This is not unusual, particularly in Toronto where the cost of legal services has increased significantly over the last twenty years. The guidelines are generally no longer considered appropriate when making cost orders.

[22] However, in the face of these guidelines it cannot have been within the reasonable contemplation of Westreich, as the unsuccessful party, that the partial indemnity costs of the plaintiff would be 50% higher than his own. It was however, within his contemplation that the fees charged would be as much as he was paying to his own counsel. Therefore, the partial indemnity costs of the plaintiff on this motion for Mr. Fruitman’s time shall be billed at $315 per hour for a total of $6,741. The plaintiff may also recover the costs of Ms. Zetusian, but at the reduced billing rate of $275 per hour for a total of $8,772.50. Therefore, the partial indemnity costs of the plaintiff are fixed at $15,513.50 plus HST, together with disbursements of $109.89. The costs shall be payable forthwith.

J.E. Mills J.

Released: November 5, 2024