COURT FILE NO. 249/06
SUPERIOR COURT OF JUSTICE – DIVISIONAL COURT – ONTARIO
RE: TIMOTHY R. BRUNT (Appellant/Plaintiff)
v.
JONATHAN YEN and PETER ELDEN TUOVI (Responding Parties/Defendants)
BEFORE: Jennings, Molloy and Swinton, JJ.
COUNSEL: Benjamin Salsberg, for the Appellant
Bryan McPhadden, for the Responding Parties
HEARD: June 24, 2008, at Toronto
E N D O R S E M E N T
Introduction
1This is an appeal from the decision of Low J. dated April 18, 2006 in which, following a trial, she dismissed the plaintiff’s claim in its entirety.
Jurisdiction
2The plaintiff’s claim had originally been for $25,000 plus interest and costs. An appeal from the dismissal of a claim which together with interest exceeds $25,000 is not within the jurisdiction of the Divisional Court: Medis Health & Pharmaceutical Services Inc. v. Belrose (1994), 1994 413 (ON CA), 17 O.R. (3d) 265 (C.A.); Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, s. 19(1.1)(c). This Court raised the issue of jurisdiction with counsel at the outset of the hearing of the appeal. We are advised that at trial counsel for the plaintiff abandoned some claims for relief and limited his claim for recovery to three separate scenarios, none of which could exceed $9800 U.S. (approximately $14,000 Canadian at the time, and less than that at the time of the decision of Low J.) plus interest from March, 1998. The parties agree that the maximum of the plaintiff’s potential recovery, inclusive of interest, based on the modified position taken by the plaintiff at trial, was less than $25,000.00. On this basis, we are satisfied that we have jurisdiction to hear this appeal, as was conceded by both counsel before us.
Standard of Review
3The applicable standard of review is as set out in Housen v. Nikolaisen (2002), 2002 SCC 33, 211 D.L.R. (4th) 577 (S.C.C.). On a pure question of law, the trial judge is required to be correct. However, findings of fact are not to be reversed unless it can be established that the trial judge made a “palpable and overriding error”. In particular, findings of credibility made by a trial judge are entitled to considerable deference.
Analysis
4The trial judge found that the plaintiff forwarded a bank draft for $9800(U.S.) and a signed share subscription agreement for the purchase of 9800 shares in Pear Industries Corp (“Pear”) to the law firm of Yen and Tuovi, the solicitors for Pear. She rejected the testimony of the plaintiff that he had done this upon the instructions of a person at the law firm with whom he had spoken on the phone. She found the plaintiff’s testimony on this point to be “not credible” and provided reasons for reaching that conclusion. Those reasons are rational and supported by the evidence. There is no basis for interfering with that finding. The trial judge found that it was “far more likely” that the plaintiff was told to forward the funds to the law firm by Mr. Foo, his contact within Pear.
5The trial judge found on the facts that the plaintiff had never spoken to either of the defendants and did not communicate to them in any way that he was relying upon them to protect his interests. She found that there was no evidence that the defendants undertook to receive the funds subject to any conditions. These findings are unassailable.
6The trial judge correctly identified the legal basis for determining whether there was a relationship of sufficient proximity between the plaintiff and the defendants to give rise to a duty of care. She applied that law to the facts as she had found them and concluded that no such duty existed. In particular, she found that these defendants had no duty to hold the funds they had received in escrow until their client Pear had delivered the share certificates to the plaintiff. In coming to that conclusion, she distinguished this case from other case law in which solicitors had some connection to the opposing party and had put themselves in a position where they had been relied upon. I see no error in her analysis in that regard. Her decision is well-reasoned, correct in law, and supported by the evidence.
7In argument before this Court, Mr. Salsberg pointed to the following five factors that he submitted gave rise to a duty upon the defendant solicitors to either protect the plaintiff, or at least warn him that they were not protecting his interests:
(i) the plaintiff’s bank draft was made payable to the law firm rather than to Pear directly;
(ii) the defendants pleaded (at para 6 of their Statement of Defence) that they drafted the subscription agreement for Pears and had further agreed with Pear “to accept subscription proceeds on behalf of Pear from private placement subscribers and to forward such funds to Pear’s order.”
(iii) the plaintiff testified that he “took comfort” from the fact that he was paying his money to a law firm, rather than to a mere corporate entity;
(iv) the defendants knew or ought to have known that the plaintiff was not represented by counsel;
(v) Rule 5, Commentary No. 14 of the Rules of Professional Conduct of the Law Society of Canada requires a lawyer dealing with an unrepresented party to take care to see that the unrepresented person does not have the impression that the lawyer is protecting his interests.
8That argument is not without some logical force. However, on the particular facts of this case, I do not see these circumstances as being sufficient to give rise to a duty of care. Even if Rule 5 can be seen as creating a legal duty, as opposed to a moral or ethical duty, there was not sufficient evidence here to conclude that the defendant solicitors knew or ought to have known that the plaintiff was unrepresented by counsel. Further, there was no contact between the parties whatsoever. In this context, I do not believe the mere receipt of monies by the solicitors, when it was clear they were meant to be for the purchase of shares and for the benefit of their client, was sufficient to trigger a legal duty of care on those solicitors to act as escrow agent for the person who had sent the funds. In these circumstances, I see no error by the trial judge in failing to take into account the plaintiff’s assertion that he “took comfort” from the fact that he was sending the money to a law firm.
9That is not to say that I consider the law firm to have acted appropriately. As was pointed out by Mr. Salsberg, there does not appear to be any rational basis for having the bank draft payable to the law firm rather than Pears, other than to give the transaction an appearance of reliability and respectability. It is entirely unclear in this case why the law firm had agreed with its clients to essentially act as a clearing house for the payment of monies owing to their client. It is worth noting that the bank draft was payable directly to the law firm, and was not on its face payable “in trust”. It is not known what happened to the funds once they were received by the law firm. There was no oral discovery in this case because it proceeded under the Simplified Rules. Further, although obliged to file an affidavit of documents and to make documentary discovery prior to trial, the defendant solicitors did not do so, a matter about which the trial judge was justifiably critical. The defence elected not to call any evidence. Therefore, much of the history of this matter is simply not known. Notwithstanding this, the plaintiff elected to proceed to trial without the missing documentary disclosure and the solicitors were not called as witnesses by plaintiff’s counsel. Accordingly, while the default by the defendants cannot be condoned, the absence of critical evidence is at least in part the responsibility of the plaintiff as well.
10It is not surprising to me that the plaintiff in this case took some comfort in knowing that his money was being received by a law firm, rather than directly by principals of a company he did not know. The general public expects, and is entitled to expect, that a member of the Bar will act with the utmost honesty and integrity. In my opinion, most lawyers who received funds in this fashion would take care to ensure that the monies were not turned over to their client until the party entrusting the funds to them had received what they were entitled to receive. That does not mean there is a legal obligation to do that in every circumstance that might arise. However, lawyers must take care to ensure that the respect with which the profession is held is not tarnished by lawyers failing to act with the utmost of integrity. That said, I do not see this as a case where the lawyers involved crossed the line to such an extent that they are legally accountable to the person who provided them with funds for the breach of contract and/or fraud by their client.
Conclusion
11Accordingly, this appeal is dismissed. If costs cannot be agreed upon by the parties, brief written submissions may be addressed to the Court within 30 days.
MOLLOY J.
______________________________ JENNINGS J.
______________________________ SWINTON J.
Date: June 30, 2008