CITATION: Neilas (799 College St) Inc. v. Houston Engineering & Drafting Inc., 2015 ONSC 6168

DIVISIONAL COURT FILE NO.: 317/15

DATE: 20151008

SUPERIOR COURT OF JUSTICE – ONTARIO – DIVISIONAL COURT

RE: NEILAS (799 COLLEGE ST) INC. and SKYPOINT HI-RISE LTD. (Plaintiffs/Moving Parties)

and

HOUSTON ENGINEERING & DRAFTING INC., VN ENGINEERING & FACILITY PLANNERS INC., and HOUSTON THOMAS ENGIO (Defendants)

COUNSEL: Stephen M. Turk, for the Moving Parties

Morris A. Chochla, for the Defendants Houston Engineering & Drafting Inc. and Houston Thomas Engio

Nobody appearing for the Defendant VN Engineering & Facility Planners Inc.

HEARD: In Toronto, in writing

E N D O R S E M E N T

(Leave to Appeal to the Divisional Court)

MOLLOY J:

Introduction

[1] The plaintiffs seek leave to appeal to the Divisional Court from that portion of the Order of Whitaker J. dated June 4, 2015 removing Levine Sherkin Boussidan as counsel of record for the Plaintiffs.

[2] The delay in serving and filing the material for this motion is adequately explained in the material. Leave is granted for the late filing. I have considered the motion on its merits.

[3] Counsel for the defendants Houston Engineering & Drafting Inc. and Houston Thomas Engio advises that they take no position with respect to the disposition of the motion itself (other than with respect to costs), but he filed an affidavit providing background information. The remaining defendant (VN Engineering & Facility Planners Inc.) is not represented by counsel and has filed no material.

Factual Context

[4] The factual context in which this motion arises is sufficiently bizarre that it is necessary to set it out in some detail. Prior to the Order of the motion judge, the plaintiffs had been represented by Jeremy Sacks of the law firm Levine, Sherkin, Boussidan in respect of a construction litigation matter involving a condominium project. On June 4, 2015, Mr. Sacks appeared on behalf of the plaintiffs on a motion to have an Ontario Superior Court civil action heard together with a related construction lien action, and for an order extending the time to set the matter down for trial.

[5] The individual defendant, Houston Thomas Engio, is a principal of Houston Engineering & Drafting Inc. (“Houston Engineering”) and is also the controlling mind and sole shareholder of the defendant VN Engineering & Facility Planners Inc. (“VN Engineering”). Houston Engineering & Drafting Inc. and Mr. Engio personally are represented by the law firm Forbes, Chochla LLP. VN Engineering was previously represented by Affleck Greene McMurtry LLP, but that firm was removed as solicitors of record by Order of Master Muir dated May 20, 2014. Since then, VN Engineering has not appointed new counsel and no order has been made under Rule 15.01(1) of the Rules of Civil Procedure to have VN Engineering represented by someone other than a lawyer.

[6] Forbes, Chochla LLP., the solicitors for Houston Engineering and Mr. Engio, advised that they did not oppose the motion being brought by the plaintiffs. They did not appear in court on June 4, 2015. However, Mr. Engio did attend in person and spoke in opposition to the motion. In addition, Mr. Engio presented a Notice of Motion, not previously served, seeking (among other things) to remove the firm of Levine Sherkin Boussidan as solicitors of record for the plaintiffs. No affidavit evidence was filed in support of the Notice of Motion.

[7] Notwithstanding the absence of notice and the absence of evidence, the motion judge made a factual finding that there would be a “reasonable perception of bias” if the firm Levine Sherkin continued to act as counsel for the plaintiffs and he removed them as solicitors of record. The reasons of the motion judge are set out in his handwritten Endorsement, which states as follows in its entirety:

J. Sacks for the Plaintiff and H.T. Engio on his own behalf.

The Plaintiffs’ motion is granted and the construction lien will be heard with this action.

On the second point, there would be a reasonable perception of bias if the firm of Levine, Sherkin, etc. were to continue to act for the Plaintiffs in this matter given the fact that Mr. Levine had represented the Plaintiff [sic—likely meant the Defendant]. It is ordered that the law firm of Levine Sherkin is removed as solicitors of record for the Plaintiffs. Order accordingly. Mr. Sacks may prepare the order and [illegible] with the approval of [illegible] Defendants. No costs were sought and none ordered.

[8] The plaintiffs’ solicitors attempted to obtain a transcript of the proceedings before the motion judge. However, the court reporter would not provide the transcript, advising that the motion judge refused to consent to its release.

[9] In his affidavit filed in response to this motion for leave to appeal, Mr. Chochla takes the position that because his firm was the solicitor of record for Mr. Engio in his personal capacity, it was not possible for Mr. Engio to have appeared on his own behalf on the motion before Whitaker J. He further asserted that Mr. Engio was acting on behalf of VN Engineering only, and that the only proper respondent to the Notice of Motion for leave to appeal was VN Engineering.

[10] The Notice of Motion presented by Mr. Engio states that “the defendant Houston Thomas Engio will make a motion.” The relief sought included: (a) an order granting Mr. Engio leave to represent VN Engineering in the proceedings; (b) an order removing Levine Sherkin as solicitor of record for the plaintiffs; (c) an order that all information disclosed to Mr. Larry Levine by Mr. Engio and Mr. Balog be kept in confidence; and, (d) an order dismissing the action as against VN Engineering, Houston Engineering and Mr. Engio as an abuse of process. Under the grounds for the motion, it is stated that Mr. Levine represented Mr. Engio in regulatory proceedings before the Professional Engineers of Ontario which were still ongoing and which involved identical issues and facts to this action. The Notice of Motion states that the evidence relied upon was the affidavit of Mr. Engio “to be filed.” However, Mr. Sacks in his affidavit on this motion deposes that no such affidavit was ever filed.

[11] Mr. Sacks also states in his affidavit that if given an opportunity to present evidence, Mr. Levine will refute the allegations made by Mr. Engio with respect to any conflict of interest. Further, he states that the plaintiffs prefer to have Levin Sherkin Boussidan continue as their counsel in this matter because of the detailed knowledge and experience they have acquired in the matter, making this the fastest and most cost effective manner for the action to proceed to trial.

The Test for Granting Leave to Appeal

[12] The test for granting leave to appeal under Rule 62.02(4) is well-settled. It is recognized that leave should not be easily granted and that the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and in each case, both aspects of the two-part test must be met before leave may be granted.

[13] Under Rule 62.02(4)(a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court) and that it is in the opinion of the judge hearing the motion “desirable that leave to appeal be granted”. A “conflicting decision” must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: Comtrade Petroleum Inc. v. 490300 Ontario Ltd.¸(1992), 7 O.R. (3d) 542 (Div.Ct.).

[14] Under Rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the rder in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong; that aspect of the test is satisfied if the judge granting leave is satisfied that the correctness of the order is open to “very serious debate:” Nazari v. OTIP/RAEO Insurance Co., [2003] O.J. No. 3442 (S.C.J. per Then J.); Ash v. Lloyd’s Corp. (1992), 8 O.R. (3d) 282 (Gen Div., per Farley J.). In addition, the moving party must demonstrate matters of importance that go beyond the interest of the immediate parties and involve questions of general or public importance relevant to the development of the law and the administration of justice: Rankin v. McLeod Young Weir Ltd. (1986), 57 O.R. (2d) 569 (H.C.J. per Catzman J.); Greslik v. Ontario Legal Aid Plan (1988), 65 O.R. (2d) 110 (Div.Ct.).

Ruling

[15] The moving parties rely upon Rule 62.02(4)(b) and submit that there is reason to doubt the correctness of the Order made by the motion judge. I agree that this aspect of the test is met. Removing counsel off record, particularly at this late stage of the litigation, is a serious matter. The Order was made on the basis of a motion brought by a person acting on his own, even though that person was represented by counsel in the action. Further, the Order was made without notice to the plaintiffs and without any opportunity for them to respond. There was no evidence whatsoever before the court upon which the Order could have been based, and the Endorsement of the motion judge does not provide anything beyond bald conclusions of fact to show his reasoning. It is clear that such an order cannot be made without notice, without an opportunity to be heard and without evidence.

[16] I also find that this appeal raises an issue of fundamental importance going beyond the parties themselves. A finding of fact was made that a law firm was continuing to act in a matter where there was a “reasonable perception of bias.” That is an issue that relates directly to the administration of justice. The right to counsel of choice, and the basis upon which that right can be overridden, are also issues of importance to the administration of justice. Finally, based on the evidence I have before me, there would appear to have been a breach of natural justice and fundamental fairness that is sufficiently serious that the Order ought not to be permitted to stand without appellate review. I note that my conclusion in this regard is based entirely on the affidavit of former counsel for the plaintiffs. However, counsel attempted to obtain the transcript, but was stymied by the refusal of the motion judge to consent to its release. Although this fact is referred to in the plaintiffs’ motion material and is supported by the emails attached as exhibits, it is not specifically cited as a basis for granting leave to appeal. Notwithstanding this, I rely upon it as a further basis for granting leave. It seems to me that refusing to provide a transcript for an appearance in open court in which a court reporter did record the proceeding is an interference with the principle that our courts must be open and accessible. I note that I have seen this problem arise in other situations involving other judges. It is a practice that troubles me. I believe it is an issue warranting appellate consideration.

[17] Accordingly, leave to appeal is granted with respect to that aspect of the Order dealing with the removal of counsel off record.

Costs

[18] The plaintiffs seek costs. If the plaintiffs are successful on the appeal, they should also recover costs of the leave to appeal application fixed at $2984.05, bearing in mind that new counsel had to be retained and briefed in order to bring this motion.

[19] I agree with the submission of counsel for Houston Engineering that no costs should be ordered against it because it did not oppose the motion before Whitaker J. and also took no position on this motion for leave to appeal.

[20] However, I do not agree that Mr. Engio cannot be liable for costs in his personal capacity. His counsel argues that he is not personally liable because he did nothing in his personal capacity and acted only for VN Engineering. Mr. Engio has no standing to act for VN Engineering in the absence of a court order, which he did not obtain. Further, the Notice of Motion that he personally presented to the court at the time of the motion states clearly at the beginning that the motion is brought by Mr. Engio, and provides his name and address at the end of the Notice. The motion judge appears to have treated him as acting in his personal capacity as he began his Endorsement by referring to counsel before him as “H. T. Engio on his own behalf.” I also note that the Notice of Motion seeks relief not only for VN Engineering, but also for Houston Engineering and Mr. Engio personally. While he has no standing with respect to the corporate entity Houston Engineering, he must take responsibility personally for his own actions. I note that he filed no material denying the facts set out by the plaintiffs in support of their leave motion.

[21] Accordingly, if the plaintiffs are successful on appeal, Mr. Houston shall be personally responsible for the costs of this leave motion.

MOLLOY J.

Date: October 8, 2015