Executive summary: key legal and evidentiary issues

• Plaintiffs sought to strike portions of the defendants' response to civil claim (RTCC) under Rules 9-5(1)(b) and 9-5(1)(c) of the Supreme Court Civil Rules, alleging the pleadings were unnecessary, scandalous, frivolous, prejudicial, and embarrassing.

• Allegations centered on Mr. Isachsen's alleged breaches of contractual, fiduciary, statutory, and common law duties as sole director and officer of four companies owned by the deceased, Mr. Johansson, with damages claimed at approximately $7 million.

• Defendants argued the RTCC raised a bona fide defence by asserting Mr. Johansson maintained ultimate control over the companies and that his own tax evasion and deception caused the losses claimed.

• The Court applied the "plain and obvious" standard and found that most of the impugned pleadings were relevant and material to the respondents' defence, declining to strike them.

• Broad and sweeping language in paragraphs 7, 10, and 17 of the RTCC — such as references to "illegality," "bad acts…for decades," and "lifelong efforts to avoid paying taxes" — was struck with leave to amend by April 15, 2026.

• Costs were divided, with each party ordered to bear their own costs given the mixed outcome on the application.

The parties and background

Karl Johansson was a successful businessman who passed away on October 25, 2022, at the age of 95. Beginning around 2006, he conducted business dealings with Wolfgang Isachsen, a businessperson and real estate agent, relating to leases and the sale of properties owned by one or more of the companies controlled by Mr. Johansson. In 2017, Mr. Johansson appointed Mr. Isachsen as the sole director and officer of four companies (collectively, "the Companies"), a role Mr. Isachsen served in until May 2022. Mr. Isachsen is also a director of the defendant Wolf Consulting Inc. These companies were subsequently amalgamated into the plaintiff 1450119 B.C. Ltd.

The claim and alleged breaches

Doug Kavanagh, acting as executor of Mr. Johansson's estate and trustee of the Karl Johansson Alter Ego Trust (2022), along with 1450119 B.C. Ltd., filed a notice of civil claim on September 13, 2024, later amended on July 9, 2025. The plaintiffs alleged that Mr. Isachsen and Wolf Consulting breached contractual, fiduciary, statutory, and common law duties owed to the Companies. Specific allegations included failures to enter into lease agreements with tenants, maintain proper accounting records, obtain annual financial statements, declare and pay taxes on the disposition of a property, make an election under the Income Tax Act, and the creation and acceptance of a bonus payment from one of the Companies. In addition, the plaintiffs alleged unjust enrichment against Wolf Consulting in relation to the bonus payment. The plaintiffs sought damages of approximately $7 million, consisting of fines and interest for failure to file corporate tax returns and delay in filing Mr. Johansson's terminal tax return, a wrongful bonus payment to Wolf Consulting, and loss of capital dividend account balance. The plaintiffs also sought punitive damages for alleged malicious, oppressive, and high-handed conduct and flagrant disregard for the rights and well-being of the plaintiffs.

The defence and the response to civil claim

In the response to civil claim (RTCC) filed on November 28, 2024, Mr. Isachsen and Wolf Consulting denied the alleged breaches of duties. The RTCC pleaded that Mr. Isachsen at all times acted in the best interests of the Companies and did not create the financial mismanagement or tax problems complained of; rather, he "unknowingly walked into the deplorable state" of Mr. Johansson's and his companies' financial affairs. The respondents contended that Mr. Johansson was engaged in tax evasion long before, and during, Mr. Isachsen's involvement as sole director and officer of the Companies, and that Mr. Johansson maintained full control of the Companies and their real estate holdings even after stepping down as a director and officer. The RTCC also pleaded that Mr. Isachsen took steps to correct Mr. Johansson's financial mismanagement and to remediate matters including the tax problems; however, his efforts were "stymied by Johansson's deception and ultimate control." The RTCC further described business dealings between Mr. Johansson and Petra Capital Corp., including an alleged purchase receipt signed by Mr. Johansson on behalf of one of the Companies for over $1.5 million in gold from Petra, and that Mr. Johansson invested over $2.6 million in Petra, to demonstrate Mr. Johansson's ultimate control over company assets. Regarding the alleged wrongful bonus, the RTCC pleaded that it was the subject of a valid commission agreement regarding the sale of real estate.

The application to strike pleadings

The plaintiffs brought an application to strike portions of the RTCC under Rules 9-5(1)(b) and 9-5(1)(c) of the Supreme Court Civil Rules. They argued the RTCC relied heavily on inflammatory and disparaging statements and language meant to tarnish the reputation of Mr. Johansson, and that none of these statements were material to any defence that the respondents could bring. They also sought to strike paragraphs addressing the collection of rent payments from tenants (paras. 70, 73, and 74) on the basis that the corresponding allegations had been removed from the amended claim. Additionally, the plaintiffs targeted paragraphs 109–119 concerning the Petra Capital Corp. dealings, arguing they were irrelevant to any defence that Mr. Isachsen could bring regarding his obligations as a director of the Companies, and that the inclusion of these paragraphs served to act as a strawman that would require significant additional disclosure, additional avenues for discovery, and time for examination.

Legal framework

The Court considered Rule 9-5 of the Supreme Court Civil Rules, which permits striking of pleadings that disclose no reasonable claim or defence, are unnecessary, scandalous, frivolous, or vexatious, may prejudice, embarrass, or delay the fair trial, or constitute an abuse of process. The Court drew on several precedents including Willow v. Chong, Citizens for Foreign Aid Reform Inc. v. Canadian Jewish Congress, Huang v. Silvercorp Metals Inc., and Canadian Federation of Students v. Simon Fraser Student Society. The "plain and obvious" standard was applied to all branches of Rule 9-5, and the Court noted that pleadings are to be read generously and as a whole. Applications under Rules 9-5(1)(b) and 9-5(1)(c) are discretionary and determined by contextual and factual considerations.

The ruling and outcome

Justice Laurie found that, but for a narrow exception, it was not plain and obvious that the pleadings in the RTCC were unnecessary, scandalous, frivolous, vexatious, prejudicial, or embarrassing. The Court determined that the allegations regarding Mr. Johansson's mismanagement of the Companies, tax evasion practices, and "deception" of Mr. Isachsen and others during the material time were relevant and material to the respondents' defence. Although the Court acknowledged that more care could have been taken in articulating the pleadings, it was not persuaded that the allegations in the RTCC were a gratuitous attack on Mr. Johansson's reputation. The rent payment allegations and the Petra Capital Corp. dealings in paragraphs 109–119 were similarly found to be relevant and material to the defence. However, the Court struck limited portions of paragraphs 7, 10, and 17 of the RTCC that contained broad, sweeping language — such as references to Mr. Johansson being "engaged in illegality" and committing "bad acts…for decades" (para. 7), having "long been…intent on avoiding taxes" (para. 10), and engaging in "lifelong efforts to avoid paying taxes" (para. 17) — on the basis that such language was confusing, obscured the time period over which the relevant misconduct was alleged to have taken place, and appeared to encompass activities disconnected from the matters in issue. The respondents were granted leave to amend those paragraphs by April 15, 2026 inclusive, to clarify the nature and scope of their allegations against the deceased. As success on the application was divided, each party was ordered to bear their own costs. No specific monetary award was made in favour of either party on this interlocutory application.