 A few weeks ago I read a case from the Ontario Court of Appeal addressing a common-law rule that was new to my repertoire: the “Clubman’s Veto”.[1] I immediately pictured the Simpsons' Stonecutters sitting around drinking their ale and singing songs in their private clubhouse. However, what I learned was the “Clubman’s Veto” provides that with the approval of 100% of the members of an unincorporated association, the members can leave the association and take the property of the association with them. This can be a powerful tool for members in a voluntary association, especially if there is valuable property at stake, which was the case in Polish Alliance of Association of Toronto Limited v. The Polish Alliance of Canada.
The members of Branch 1-7 of the Polish Alliance of Canada, wished to leave the Alliance. While the Alliance itself was incorporated under the Corporations Act, RSO 1990, c. C.38, the Branch was not. The Branch members argued that the Clubman’s Veto allowed them to leave the Alliance and take the property held in trust for the members from time to time. What was the property they wished to take? The Branch’s clubhouse located on Lakeshore Boulevard in Toronto and worth approximately $50 million. The Alliance said no. After a lengthy trial, Meyer’s J. concluded that the Clubman’s Veto applied.[2] 100% of the Branch members had voted to leave the Alliance; therefore the members can leave and take the property of the unincorporated association with them. The Alliance appealed arguing that as the umbrella organization was incorporated the Clubman’s Veto did not apply. The Court of Appeal disagreed. While the Alliance was incorporated, the Branch was an unincorporated voluntary association. The Court noted that the “common law recognized the voluntary association not as a legal entity, but as nothing more than a complex of contracts between each member and every other member.” There was no legislation that gave the Branch a legal status that would displace this legal construct. The Appeal was dismissed. A quick search shows that the “Clubman’s Veto” rule has been applied in reported cases only seven times in the past three or four decades, and a couple of those cases are related to the dispute and parties to this case. While this is a common law rule that is not commonly applied, it may be a good idea for lawyers to tuck this rule in the back of their minds; you never know when you might represent some “clubmen” and it could come in handy. (And perhaps we can come up with a more inclusive term the next time it is used: Club Member’s Veto?) [1] Obviously, “clubman” is not an inclusive term and a new name for this common law rule may be appropriate. “Clubperson’s Veto” just doesn’t have the same sound to it though. “Club Member’s Veto”? A little better… [2] Citing Wawryzniak v. Jagiellicz (1998), 64 OR (2d) 81 (HCJ)
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This month, the Ontario Superior Court of Justice addressed the issue of whether the immunity our courts extend to witnesses from subsequent liability for their testimony in judicial proceedings extends to a suit against a party’s own expert witness.
Facts The plaintiffs in Paul v. Sasso[1] were shareholders in a company that owned and operated a hotel. They brought a claim against the company and its majority shareholder. The central issue dealt with the valuation of shares. While the plaintiffs had retained an expert, the plaintiffs also decided to provide their own “report” even though neither was a qualified assessor. The trial judge found their report to be “not helpful” and was a waste of the court’s time. Unfortunately, the plaintiffs’ expert made reference to various aspects of the plaintiffs’ “findings” in their “report”. This, the trial judge found, “brought [the plaintiffs’ expert’s] objectivity into serious question”.[2] In the end, the trial judge preferred the evidence of the defendant’s expert valuator. The plaintiffs subsequently sued their expert witness alleging that they were lay people and did not understand that their “report” would invalidate the testimony of their expert. They alleged that their expert was negligent and breached the terms of their engagement as well as the terms of the Canadian Uniform Standards of Professional Appraisal Practice in failing to provide an unbiased and professional technical review report. The expert brought a motion for summary judgment to dismiss the claim and sought an order granting his counterclaim against the plaintiffs for unpaid fees. Expert Witness Immunity Justice Dunphy granted the summary judgment motion in part and dismissed the negligence claim against the expert witness relying on the long held fundamental principle that witnesses and parties are entitled to absolute immunity from subsequent liability for their testimony in judicial proceedings, as the “proper administration of justice requires the full and free participation of witnesses unhindered by fear of retaliatory suits”.[3] Justice Dunphy concluded that there “was no reason why the privilege should be confined to adverse witnesses” and that the harm that could follow from allowing parties to pursue their own experts for alleged breaches was amply illustrated by the facts of this case.[4] The trial judge made a binding determination of the value of the shares and that determination had not been set aside on appeal. The plaintiffs’ case amounted to a de facto appeal of the decision as the damages sought were based on the value of the shares not found by the trial judge: "The trial judge had the issue of value before her and weighed the testimony of all of the witnesses. Her determinations bind the plaintiffs and cannot be questioned through the back door by a subsequent civil suit. The principle of finality strongly supports the application of the common law immunity in this case. The question of what the result would have been if [the expert] had been accepted as fully independent can neither be asked nor answered in another proceeding."[5] However, Justice Dunphy went on to find that this did not mean that the alleged breach of contract and duty were not available as a defence to the counterclaim for unpaid fees: "I am of the view that witness immunity can properly be used as a shield by [the expert] to avert liability on the plaintiff’s claim but cannot be used as a sword by [the expert] to preclude [the plaintiffs] from defending [the] counterclaim on the basis of the alleged breaches of contract and negligence."[emphasis added][6] It was not possible, however, to resolve the factual disputes necessary to dispose of the significant issues without a trial of the counterclaim. While the expert was successful in his summary judgment motion in dismissing the negligence claim against him, his motion for summary judgement against the plaintiffs for unpaid fees was dismissed and a trial was ordered. Conclusion For now it appears that expert witnesses are likely entitled to immunity from negligence claims brought by the very party that hired them. However, there do not appear to be any appellate decisions dealing with this question, and the law may be far from settled. As noted by the court in Robinson v. Corporation of the City of Ottawa: "There are no decisions of the Court of Appeal for Ontario, or any other Canadian court which has decided the issue of whether witness immunity should be extended to prevent a party from suing his or her own expert witness in negligence or for breach of contract, based on the opinion evidence given in a Court proceeding. Given the absence of any Canadian authority directly on point, I conclude that the law is unsettled on this issue."[emphasis added] [7] Unlike in Paul v. Sasso, the Court in Robinson determined that the issue of whether you could sue your own expert witness could not be determined on a summary judgment motion and a trial was ordered. However, no trial decision appears to be reported. Nevertheless, the law is settled in the United Kingdom. In the case of Jones v. Kaney, [2011] UKSC 13 the appellant sued his own expert for negligently signing a statement of matters agreed to with the expert instructed by the opposing side, resulting in a reduced settlement. The majority of the Supreme Court decided that expert witnesses are not immune from claims in tort or contract for matters connected with their participation in legal proceedings, though they remain entitled to absolute privilege in respect of claims in defamation. So far, this removal of expert witness immunity for a party’s own expert has not found its way to Canada. [1] 2016 ONSC 7488 (“Paul”) [2] Paul v. 1433295 Ontario Limited, 2013 ONSC 7002 (CanLII) at paras.55- 56 [3] Paul at para. 16, citing Reynolds v. Kingston (Police Services Board), 2007 ONCA 166 (CanLII) at para. 14 [4] Paul at paras.17-18 [5] Paul at para. 18 [6] Paul at para. 34 [7] Robinson v. Ottawa, 2009 CanLII 1660 (ONSC) at para. 53 The Supreme Court of Canada recently released a significant banking decision[1] dealing with personal financial information and its disclosure under Canada’s federal privacy law, the Personal Information Protection and Electronic Documents Act (PIPEDA).[2] In overturning the Ontario Court of Appeal decision, the Supreme Court of Canada interpreted the legislation in a way to balance individual privacy concerns with creditors' needs to collect personal information to enforce their legal rights.
Facts & Background The Royal Bank of Canada had a judgment against the Trangs who owned a property that they had mortgaged with Scotiabank. The Sheriff refused to sell the property without a mortgage discharge statement from Scotiabank. RBC tried to obtain this statement by examining the Trangs but they refused to attend for examination. Scotiabank also refused to release the statement arguing that PIPEDA precluded them from doing so. Scotiabank needed the Trangs' consent, which they did not have. RBC brought a motion for an order that Scotiabank produce the discharge statement. The motion judge dismissed the motion relying on the Court of Appeal's judgment of Citi Cards Canada Inc. v. Pleasance, 2011 ONCA 3 which had similar facts and held that none of the exceptions in PIPEDA regarding disclosure were available to RBC. RBC appealed. Court of Appeal In a 3-2 split decision, the Court of Appeal dismissed RBC's appeal, finding, among other things, that RBC had not (similar to Citi Cards) exhausted all of its options. RBC could have brought a motion under Rule 60.18(6)(a) of the Rules of Civil Procedure to have the court make an order for the examination of Scotiabank. Then, under Rules 34.10(2)(b) and (3) Scotiabank would be required to bring to the examination, and produce, the discharge statement. This would permit Scotiabank to disclose the mortgage discharge statement to RBC without the Trangs' consent and it would satisfy the exemption in s. 7(3)(c) of PIPEDA which authorizes an organization to disclose personal information without the individual's knowledge and consent if disclosure is required to comply with a court order or the rules of court relating to the production of records. The dissenting judges (Justices Hoy and Sharpe) would have allowed RBC's appeal, finding that the mortgage discharge statement should be disclosed as the Trangs' consent to the disclosure of the discharge statement could be implied. Schedule 1, s.4.3.6 of PIPEDA notes that consent for the purposes of the statute can be implied when the information is “less sensitive”. Disclosure of this mortgage discharge statement accorded with reasonable expectations of an individual in the Trangs’ position. The dissent would not have required RBC to bring another motion: Whether RBC purported to move under rule 60.18(6)(a) or simply asked the court for an order requiring the mortgagee to disclose the Statement is immaterial. In either case the relief sought is substantively identical. Requiring a further motion would not be just, and it certainly would not be expeditious.(para. 96) Supreme Court of Canada RBC appealed once again and was finally successful. Coté, J. writing on behalf of the Court, sided with the minority in the Court of Appeal decision. First, PIPEDA does not diminish the powers of the court to make orders relating to the production of documents. The motion judge, and majority of the Court of Appeal, erroneously concluded that the order sought by RBC did not constitute an “order made by a court” under s. 7(3)(c) of PIPEDA. They did so by relying on Citi Cards which the Supreme Court of Canada expressly overruled in this case. The motion judge had the power under the Rules of Civil Procedure or the inherent jurisdiction of the court to order disclosure. Secondly, the Trangs impliedly consented to disclosure in the circumstances of this case. The information at issue was less sensitive than other financial information. A reasonable mortgagor in the Trangs’ position would be aware that the financial details of their mortgage were publicly registered on title, and that default on the RBC debt could result in a judgment empowering the Sheriff to seize and sell the mortgaged property. A reasonable mortgagor would know that the outstanding mortgage balance would ultimately be provided to the Sheriff and that a judgment creditor has a legal right to obtain disclosure of the mortgage discharge statement. Coté J. concluded that “consent for the purpose of assisting a sheriff in executing a writ of seizure and sale was implicitly given at the time the mortgage was given”. However, it is not reasonable to expect a bank to disclose a mortgage discharge statement to a person with no legal interest in the property. Scotiabank was ordered to produce the mortgage discharge statement. Conclusion While PIPEDA plays an important role in protecting our privacy rights, the Supreme Court confirmed that these rights will be balanced with legitimate business concerns in trying to comply with the legislation in a practical way. This decision has considerable implications for third party lenders and creditors. However, it should be noted that the Supreme Court has only found implicit consent regarding this particular type of personal information (mortgage discharge statement) in this particular circumstance (seizure and sale proceedings). This case will provide guidance to other situations where it can be argued that “implied consent” has been provided. Sensitivity of the information, reasonable expectations of all involved, and the nature of the transaction must be considered. [1] Royal Bank of Canada v. Trang, 2016 SCC 50 [2] S.C. 2000, c.5 RBC v. Hussain: Is a Pre-Trial Judge Prohibited from Presiding Over a Summary Judgment Motion?8/23/2016 Most lawyers know that a judge who presides over a pre-trial conference is prohibited from presiding over the trial of the action or the hearing of an application. Generally, this is to protect any settlement discussions that may have taken place at the pre-trial. Or, as Carthy J.A. stated in Bell Canada v Olympia & York Developments Ltd. (1994), 17 OR (3d) 135(CA) at pp. 144-45 the prohibition also protects the integrity and usefulness of the pre-trial conference system:
Pre-trials were designed to provide the court with an opportunity to intervene with the experience and influence of its judges to persuade litigants to reach reasonable settlements or refine the issues. None of that would be possible without assurance to the litigants that they can speak freely, negotiate openly, and consider recommendations from a judge, all without concern that their positions in the litigation will be affected. It’s been unclear to some if this prohibition only stops pre-trial judges from then presiding over trials and hearings in the same matter, or whether it extended to subsequent summary judgment motions as well. This was the issue the Ontario Court of Appeal tackled in the recent case of RBC v. Hussain.[1] Specifically, whether, absent the written consent of the parties, do rules 50.09 and 50.10 of the Rules of Civil Procedure RRO 1990, Reg. 194 prohibit a judge who conducts a pre-trial conference from presiding on a summary judgment motion? The short answer: Yes. BACKGROUND FACTS The bank issued a statement of claim against the appellant based on amounts owing on various loan facilities. A judge conducted a pre-trial conference on December 1, 2014. Almost a full year later in November 2015 the same judge heard and granted the bank’s summary judgment motion and awarded the bank its full claim. The appellant appealed on several grounds but the main issue being whether the pre-trial judge was prohibited from hearing the motion. RULES 50.09 & 50.10(1) Subject to certain exceptions, rule 50.09 prohibits “communication” to a judge presiding on a hearing or motion “with respect to any statement made at a pre-trial conference”. Rule 50.10(1) prohibits a pre-trial judge from presiding “at the trial of the action or the hearing of the application, except with the written consent of all parties”. These Rules were last amended after the “Osborne Report” in 2010. The Osborne Report recognized that the Rules were aimed at the important purpose of protecting settlement discussions at pre-trial. However, the report also concluded that the parties should be able to consent to a pre-trial judge hearing the proceeding because of efficiencies (i.e. judge being familiar with facts, expertise, continuity etc.) Subsequently the Rules were amended to allow the parties to provide written consent to allow a pre-trial judge to also preside over the trial or hearing. APPEAL On appeal the bank acknowledged that the motion judge also presided over a pre-trial in the proceeding, but submitted that the judge was not prohibited from doing so as the situation did not “fall squarely” within the prohibition in the Rules. The bank argued that nothing was communicated to the motion judge about the pre-trial – rather he presided over it (so rule 59.09 did not apply) and the proceeding under the appeal was not a trial or application (so rule 59.10 did not apply). The bank also argued that the appeal should be dismissed as the appellant never raised this issue at the motion and that there was no miscarriage of justice because the bank had such a strong and overwhelming case. The Court of Appeal was not buying it and here’s why: Rule 50.09 reflects the intention that a judge hearing a motion in a proceeding be insulated from knowledge of statements made at a pre-trial conference: “It is designed to reassure litigants that any information revealed in the pre-trial will not be used against them at a hearing, in order to encourage a full and frank exploration of settlement prospects at an early stage of the proceeding”.[2] If the pre-trial judge is also hearing the motion, the judge is not “insulated” from what occurred at the pre-trial. Although neither rule 50.09 nor rule 50.10 contains language expressly prohibiting a pre-trial judge from presiding on a summary judgment motion, the rules are to be “liberally construed”. Particularly “with the expanded powers available to motion judges under the amended Rule 20, presiding on a summary judgment motion must be viewed as akin to presiding at a trial or the hearing of an application: see Hyrniak v. Mauldin, 2014 SCC 7 at paras. 36 and 45.”[3] Furthermore, while in a civil case failure to object to a procedural flaw at the motion would normally be given considerable weight on appeal, the Court found this was not a relevant consideration as Rules 50.09 and 50.10 prohibited the judge from hearing the motion. Also, the strength of the bank’s case had no relevance as well: “In all the circumstances, upholding the result in this case would sanction ignoring the Rules and undermine public confidence in the administration of justice.”[4] The appeal was granted and the summary judgment motion was set aside. CONCLUSION As the Court noted, this case highlights the need for parties to remind a judge who has been scheduled to dispose of an action or application on the merits that the judge previously presided at the pre-trial conference.[5] Then the judge is in a position to canvass if the parties will provide their written consent for him or her to also preside at the hearing or summary judgment motion as the case may be. [1] 2016 ONCA 637 [2] At para. 18 [3] At para. 19 [4] At para. 25 [5] At para. 24 In Maurice v. Alles,[1] the Ontario Court of Appeal confirmed that the two year limitation period under the Limitations Act, 2002[2] applies to oppression remedy claims under the Ontario Business Corporations Act,[3] including to claims of “ongoing” oppressive conduct.
However, the Court of Appeal set aside an order for summary judgment dismissing the oppression claim as being statute barred, as the motion judge failed to determine that a new discrete act of alleged oppressive conduct had occurred within the two-year period prior to the commencement of the claim. The Court also confirmed that summary judgement motions are not available in the context of an application, unless the application is converted to an action. The Dispute The facts involve siblings disagreeing over their interests in three family businesses. At a shareholders’ meeting on July 25, 2008 the siblings of the Appellant advised him of an upcoming sale of certain shares to an undisclosed third party. The Appellant opposed the transaction advising that any sale without unanimous consent would breach the unanimous shareholder agreement and that they should obtain a valuation, as the sale could adversely impact the value of his shareholding in one of the companies. The Appellant also requested certain information regarding the transaction. The siblings denied or ignored his requests and continued to do so long after the sale was completed.[4] On May 13, 2013 the siblings brought a motion for an order appointing a valuator to determine the fair value of the Appellant’s shares in one of the companies (he had previously sold his shares in the other two companies and offered his shares for sale in the third). The Appellant brought a cross-application claiming that his rights as a shareholder had been unfairly disregarded by the actions of his siblings. The siblings argued his oppression claims were statute barred. The Appellant argued that they were not barred as the oppression was ongoing. Justice Patillo found that the Appellant was aware of the facts giving rise to the oppression claims as of July 25, 2008 (the shareholders meeting), therefore the claims were statute barred.[5] Justice Patillo held that even if the oppression was ongoing, “such continuation does not operate to extend the limitation period beyond the time of two years from discovery.”[6] The siblings’ motion for summary judgment was granted and the cross-application was dismissed. Appeal: Summary Judgment Available in Applications? First, the Court addressed an issue that was not raised before the motion judge: is a motion for summary judgment available in the context of an application? After reviewing the wording of Rule 20, Justice Hourigan, on behalf of the Court concluded that a motion for summary judgment is not available on an application under Rule 14, unless, the application is converted into an action. However, he was not willing to interfere with the motion judge’s decision on this issue as in the circumstances of this case it was merely a procedural defect.[7] Limitation Period for Oppression Claims The appeal decision reviewed the division in case law regarding the applicability of the general two year limitation period under s.4 of the Limitations Act, 2002, to cases of ongoing oppression. In one line of cases the Courts had permitted claims commenced more than two years after discovery if there were ongoing fact situations of continuing oppressive conduct.[8] Another line held that the two year limitation period applied to ongoing oppressive conduct as the limitation period begins to run when the cause of action arises, not when it is remedied.[9] Justice Hourigan concluded that oppression remedy claims under the OBCA are subject to the two year limitation period. Special circumstances are not available to extend the limitation period. In the present case the potential oppressive conduct was twofold: first, the failure of the siblings to provide the Appellant with the requested information regarding the transaction, and the transaction itself could qualify as actionable if it adversely impacted the Appellant’s shareholding. The Appellant knew in 2008 that the sale was happening and that the siblings were not disclosing information. Therefore he had two years to commence a claim for non-disclosure. The continuous refusal to produce documents does not operate to extend the limitation period; limitation periods begin when the cause of action arises, not when it is remedied. Also, this was not a case of ongoing oppressive conduct as the sale was a singular event that occurred in 2008. Justice Hourigan warned: "Courts must be careful not to convert singular oppressive acts into ongoing oppression claims in an effort to extend limitation periods. To do so would create a special rule for oppression remedy claims."[10] However, the Court found another “discrete potentially oppressive act” occurred when the respondent siblings commenced their application on May 13, 2013 for an order appointing a valuator to determine the fair value of the appellant’s shares. In that application there was no reference to the circumstances surrounding the disposal of the shares and what impact it had on the value of the remaining shares. Nor was there any production of the documents requested. The siblings “were in effect seeking a valuation process and payout to the appellant that did not take into account their earlier alleged oppressive conduct.”[11] Justice Hourigan noted the importance of not conflating multiple acts of oppression into one continuous act: "A party that engages in a series of oppressive acts can always make the argument that it is all part of the same corporate malfeasance and that the limitation period begins to run with the discovery of the first oppressive act. In analyzing the conduct, courts must have regard to the remedial nature of the oppression remedy and the fact that any threatened or actual conduct that is oppressive, unfairly prejudicial to, or unfairly disregards the interests of any complainant can constitute a discrete claim of oppression. The oppression remedy section of the OBCA is drafted in the broadest possible terms to respond to the broadest range of corporate malfeasance. Where the motion judge erred was in failing to carefully scrutinize the respondents’ conduct to determine whether there were any discrete acts of oppression within the two-year prior to the commencement of the cross-application. In my view, the siblings committed a new act of alleged oppressive conduct when they brought their application and attempted to rely upon their previous alleged oppressive conduct as part of the share valuation."[12] The motion judge’s reasoning would have meant that where a party is alleged to have acted in an oppressive manner and no oppression remedy application is commenced as a consequence, then he or she would be free to take additional oppressive steps in furtherance of the initial oppressive conduct. That reasoning is contrary to the broad purposive interpretation that must be afforded this statutory cause of action. The Court set aside the order for summary judgment dismissing the oppression claims and directed the parties to proceed to trial. Conclusion This is a warning to all potential applicants in oppression remedy claims to be fully aware of the two year limitation period commencing on the date that the oppression first arises. However, the case also calls for parties to carefully scrutinize the facts and recognize that each potentially oppressive act is its own discrete act with its own limitation period. [1] 2016 ONCA 287 (“Maurice”). [2] S.O. 2002, c.24. [3] R.S.O 1990, c. B. 16 (“OBCA”). [4] Maurice at paras. 5-16. [5] 2015 ONSC 1671. [6] Maurice at para. 21. [7] Maurice at para. 2 and paras.24-35. [8] See Waxman v. Waxman (2004), 186 OAC 201 (CA), leave to appeal refused, [2004] SCCA No. 291 and Metcalfe v. Anobile, 2010 ONSC 5087. [9] See Fracassi v. Cascioli, 2011 ONSC 178, Reinhart v VIXS Systems Inc. 2011 ONSC 5349, Paul v 1433295 Ontario Limited 2013 ONSC 7002, rev’d on other grounds 2015 ONSC 3588, Sterling Waterhouse Inc. v LMC Endocrinology Centres (Toronto) Ltd., 2015 ONSC 3987 rev’d on other grounds 2015 ONCA 645, and Solar Harvest Co. v Dominion Citrus Ltd., 2015 ONSC 1315. [10] Maurice at para. 49. [11] Maurice at para. 50. [12] Maurice at paras. 52-53. It’s okay to be tactical in your litigation strategy. But when that strategy consists of “unacceptable litigation gamesmanship” litigants may be sanctioned with a costs award. In Candito v. Nmezi 2015 ONCA 793, Brown J.A. had strong words against counsel’s decision to strategically delay the settling of an order under appeal.
The Order In Ontario an appellant must “perfect” its appeal (in other words file all the relevant documents including an appeal book) within 30 days of filing his or her Notice of Appeal. The appeal book must contain a copy of the order being appealed from. While it is open to either party, usually counsel for the winning party prepares a draft order and sends it to all parties for approval as to form and content. Once that approval is obtained, the order may be signed and entered and can be included in the appeal book. In this case, the appellant sent a draft order to the respondent’s counsel for approval. There was no response. The deadline for perfection was missed and the respondent’s counsel opposed a request for extension of time to perfect the appeal. The appellant was forced to bring a motion to extend time. The Motion and Costs The parties ended up consenting to an order to extend the time to perfect the appeal and the respondent’s counsel eventually approved the draft order. Nevertheless, the appellant sought and was granted $5000.00 in partial indemnity costs for the motion it was forced to bring. Justice Brown, however, would have awarded full indemnity costs if he was not limited by the appellant’s request for partial. Justice Brown had this to say at paragraph 22: The unreasonableness in the events which transpired consisted solely in [the Respondent’s] failure to perform its obligation to settle an order subject to appeal in a timely fashion. For [the Respondent] to take the position that it would not settle the order under appeal until [the Appellant] had argued its motion to extend the time to perfect amounted to unacceptable litigation gamesmanship. It appears as though counsel was hoping to manoeuver the appellant into a position where it had to argue its merits of the appeal in order to get the extension of time. Justice Brown did not approve of this strategy: In my view, such unreasonable litigation tactics by [the Respondent] would have merited an award of full indemnity costs against it. However, [the Appellant] only requested partial indemnity costs, so I am limited by its request. (para.23) Refusing to settle the order ended up wasting both parties’ time and that of the Court’s. As Justice Brown noted “[c]ivil litigation in the public courts can only deliver timely and cost-effective justice if the parties perform certain basic procedural obligations.”(para.1) [*See an update on this topic below*]
Are you thinking of leaving your law firm for another? Do you know your professional obligations with respect to your clients and your firm? Recently a decision of the Ontario Superior Court of Justice [1] reviewed those obligations in the context of a dispute that arose after an associate left one personal injury law firm for another, taking some of her clients with her. The principal of the associate's former firm commenced a claim for $1.25 million in damages against the associate for "breaches of fiduciary duty, trust, good faith and / or loyalty" and as against the principal of her new firm for "knowing assistance" in the alleged breaches. Summary Judgment Motion The defendant principal of the new firm brought a summary judgment motion seeking to have the action against him dismissed on the basis that the plaintiff (the principal of the associate's former firm) failed to show (and could not show) "knowing assistance" in the associate's alleged breaches. Justice Gordon noted that solely for the purpose of the summary judgment motion, he assumed that the plaintiff had met the threshold of proving that the associate had breached "some duty" owed to the principal of her former firm. Whether she actually did or not, however, was "a matter for another day".[2] In his analysis of the legal issue, Justice Gordon reviewed certain guidelines provided by the Law Society of Upper Canada (dated 2009) concerning a lawyer's professional obligations when leaving a law firm. In summary, those guidelines provide that:
In this particular case, the plaintiff could only be successful in a claim in "knowing assistance" against the principal of the associate's new law firm if the following elements were met: a) there was a trust; b) the new principal had knowledge of the trust; c) the associate perpetrated a dishonest and fraudulent breach of trust; and d) the principal had actual knowledge of, or was wilfully blind to, and participated in the associate's dishonest and fraudulent breach of trust.[4] The defendant testified that he advised the associate that she must abide by the Law Society guidelines and specifically her duty to inform her clients. This evidence was uncontradicted. The Court noted that if there was "more or better evidence, it should have been tendered on this motion." Justice Gordon concluded that there was no evidence to support an allegation of "knowing assistance" either in the form of actual knowledge or wilful blindness: "Indeed the evidence is to the contrary. It was unchallenged that [the new principal] was well aware of the lawyer's duty to inform clients on leaving a firm and the manner in presenting the options for the client. . .On this evidentiary record, I conclude [the new principal] did all that was required."[5] The motion for summary judgment dismissing the action as against the new principal was granted. Do you know all of your professional obligations when leaving a law firm? It appears that the LSUC's guide referenced in this case "Leaving a Law or Legal Services Firm" (Dated 2009) is no longer available on its website. However, the guide "Closing Down Your Practice" also provides some useful tips. If you are interested in case summaries for your website or blog please contact me. [1] Robert Findlay Law Office Professional Corporation v. Werner et al 2015 ONSC 2955. [2] Ibid. at para. 12. [3] Ibid. at para. 15 & 23-27. [4] Ibid. at paras. 30. [5] Ibid. at para. 49. *UPDATE: In June 2017 the Law Society of Upper Canada amended the Rules of Professional Conduct to add a rule dealing with a lawyer's professional obligations when leaving a law firm, based in part on the Robert Findlay case discussed above. See my blog post on this new rule on the Flex Legal blog.* In Gaur v. Datta, 2015 ONCA 151 the Ontario Court of Appeal allowed an appeal from a Rule 21.01(1)(b) motion and set aside an order striking a claim for disclosing no reasonable cause of action. The Court noted that neither of the two alleged causes of action were made out in the statement of claim, however, read "generously" together with the particulars and documents incorporated by reference in the pleading, all required elements were disclosed.
The Parties and Allegations The appellant bought a claim against three individuals and a company at which the appellant had previously worked. Two of the individuals were directors of the company. The claim was grounded in defamation and intentional interference with economic relations. At the heart of the defamation claim were three emails sent to third parties containing defamatory words: two sent by one defendant, Dipti, and a third sent by a second defendant, Upti. A third defendant, Igne, did not send an email but was alleged to have "acted in concert" with the parties who sent the emails. The respondents agreed that the pleading sufficiently disclosed a defamation claim against Dipti, but argued it failed to disclose a claim as against Upti, Igne or the company. The motion judge ordered that the claim be struck as against Upti, Igne, and the company for failing to disclose a reasonable cause of action. As noted by the Court of Appeal, the motion judge "appears to have examined the emails as evidence, weighing the inferences that could be drawn from their contents and then concluding there was no allegation or fact to support the pleadings that the respondents acted 'in concert' with Dipti and that the respondents could not be held accountable for the [d]efamatory [w]ords in the Dipti emails."[para.19] The Court of Appeal noted that under a Rule 21.01(1)(b) motion (a motion to strike out a pleading for disclosing no reasonable cause of action) it must be "plain and obvious" that no reasonable cause of action has been disclosed and that the legal principles applicable are as follows: 1) No evidence is admissible; 2) Facts as pleaded are assumed to be true unless patently ridiculous or incapable of proof; 3) Particulars can be considered as part of the pleading; and 4) The Court is entitled to review the documents referred to in the pleadings.[para.5] The Court of Appeal agreed that the allegations that the respondents acted in concert with Dipti were "bald" and were conclusions of law, not supported by material fact in the pleading. However, the analysis needed to go further: the Court was required to turn to the particulars to see whether material facts were plead. Of note to the Court of Appeal was the fact that the respondents' counsel had made "a number of demands for particulars over the course of several months, which included increasingly more pointed requests for particulars as to how the respondents acted in concert". The appellants provided particulars which included additional material facts relevant to the respondents' participation in the publication of the emails. So, rather than examine the emails as evidence and weighing the inferences that could be drawn from them, a proper approach would have been to review "the emails to determine whether what was pleaded (as enhanced by the particulars) was 'patently ridiculous or incapable of proof'" [para.19]. The Court of Appeal concluded that the allegations in the particulars were capable of an interpretation that the respondents acted in concert with Dipti and that the facts as pleaded were neither "patently ridiculous nor incapable of proof".[para.20] As for the claim of intentional interference with economic relations, the Court of Appeal also agreed that the statement of claim did not address the essential elements of the tort. However, the Court concluded that "on a generous reading of the pleading together with the particulars" all elements of the tort were disclosed and the allegations made were neither incapable of proof nor patently ridiculous. [paras. 30 & 32] Rule 21 Motions - To Bring or Not to Bring? I am always a little wary of bringing a Rule 21 motion. As judges are reluctant to dismiss an action on its pleadings, it is a high hurdle to clear and if the claim is struck, leave to amend is usually allowed. Depending on how deficient the claim is, I have to wonder what you are gaining by bringing such a motion. Now the plaintiff has had a chance to make his or her pleading better, your client's money and time has been spent on a motion, and you are back at square one. Unless the claim is truly inadequate, you have to ask, based on the circumstances of the case, is it better to just keep the original pleading? At the very least the deficiencies should be made clear to the other side and amendments requested before a motion is brought. The case also provides a helpful overview of the elements of the torts of defamation and intentional interference with economic relations. The full decision can be found here: Gaur v. Datta 2015 ONCA 151. In French v. Chrysler Canada Inc., 2015 ONCA 104 the Ontario Court of Appeal examined the tort of nuisance and confirmed that you are out of luck if you want to bring a claim for nuisance emanating from your own backyard.
The Plaintiffs purchased land that was previously owned by Chrysler Canada Inc. and had, at one time, been used as a foundry and asbestos insulation producer. Before selling the land, Chrysler had decommissioned it. The Plaintiffs subsequently brought a claim in negligence for decommissioning the property and failing to remediate it, among other claims. Later, the Plaintiffs sought to amend the Statement of Claim by adding the tort of nuisance for the pollutants emanating from the land and interfering with the Plaintiffs' use and enjoyment of the land. The motion judge denied the amendment finding that there was no tenable claim in nuisance. The Plaintiffs appealed, arguing that the scope of the tort of nuisance has not been finally settled at common law and the claim should be allowed to proceed. The Court of Appeal disagreed and dismissed the appeal. One of the factors in deciding whether to amend a pleading under Rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 is whether the amendment would have been struck out if originally pleaded. Applying the analysis of Hunt v Carey Canada Inc., [1990] 2 S.C.R. 959 a claim will be struck if it has no reasonable chance of success, and the Court of Appeal concluded that such was the case with the current nuisance claim: "The appellants are effectively arguing that they should be entitled to seek to fundamentally change the law of nuisance. That would be a tenable position, if for example, the appellants sought to expand the tort to a new fact situation not before considered. However, the tort of nuisance has certain defined, long-standing characteristics, which courts have considered to be essential to the tort. In particular, the alleged nuisance must originate somewhere other than on the plaintiff's land. In this case, the appellants seek to establish the tort where the essential character is missing. Their claim has no reasonable chance of success." [emphasis added] [para. 8] The full decision can be found here. In 1250264 Ontario Inc. v. Pet Valu Canada Inc. 2015 ONCA 5 the Ontario Court of Appeal refused to grant an extension of time for the Appellant to file its Notice of Appeal and to perfect the appeal. The Appellant claimed it was late filing the Notice of Appeal due to an administrative error. Justice Pardu observed that the delay was short, there was an explanation provided for the delay, and there was no prejudice to the Respondent. However, Justice Pardu was also
"unable to find any scintilla suggesting that the appeal has merit. The affidavit filed in support of the motion to extend time is silent on the issue of the merits. The notice of appeal is so general I am unable to construct any basis for an arguable appeal from the motion judge's factual findings. Very little would be required to show that there is some basis for an appeal in these circumstances, but I can find nothing." (para.7) The Notice of Appeal stated the following grounds of appeal: 1. The court below made palpable and overriding errors of fact; 2. The court below made errors of mixed fact and law; 3. The court below made errors of law; and 4. Such further and other grounds as counsel may advise and this Honourable Court may permit. (para.5) The Motion to extend the time to file the Notice of Appeal was dismissed with costs to the Respondent. This case acts as a reminder to litigators to avoid the use of general or generic pleadings and that extensions of time to file Notices of Appeal will only be granted when the "justice of the case" requires that an extension be given. Also, it highlights the importance of diarizing appeal dates and double or triple checking your appeal material before filing it with the Court. |
 
  Erin C. Cowling is a former freelance lawyer, entrepreneur, business and career consultant, speaker, writer and CEO and Founder of Flex Legal Network Inc., a network of freelance lawyers.
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