Court of Appeal for Ontario

Citation: 2019 ONCA 618

Date: July 22, 2019

Docket: C66263

Panel: Hoy A.C.J.O., Trotter and Jamal JJ.A.

Parties

Between

Potis Holdings Ltd. and Ullrich Stefan Vogel Plaintiffs (Appellants)

and

The Law Society of Upper Canada, Lawyers Professional Indemnity Company, Evans Sweeney Bordin LLP and Steven D. Gadbois Defendants (Respondent)

Counsel

For the Appellants: Marc A. Munro

For the Respondent: Antonios T. Antoniou and Frank C. Caruso

Hearing and Appeal

Heard: July 16, 2019

On appeal from: The order of Justice Antonio Skarica of the Superior Court of Justice, dated November 14, 2018.

Decision

Jamal J.A.:

INTRODUCTION

[1] The appellants appeal the order of the motion judge striking out their statement of claim and amended statement of claim as against the respondent The Law Society of Upper Canada (now Law Society of Ontario) as disclosing no reasonable cause of action.

[2] The appellants complained that their former lawyer, the respondent, Steven D. Gadbois, had negligently represented them in a lawsuit against the City of Waterloo. Following the complaint, Mr. Gadbois delivered his client file to the respondent law firm, Evans Sweeney Borden LLP, which was retained by the respondent Lawyers' Professional Indemnity Company ("LPIC") to represent Mr. Gadbois in relation to the professional indemnity claim.

[3] The appellants' action is premised on the Law Society's alleged practice of requiring or permitting lawyers facing potential negligence claims to provide a copy of the relevant client file to LPIC to allow it to evaluate and address the anticipated professional indemnity claim. The appellants say that this practice gives rise to a variety of civil causes of action against the Law Society.

THE PLEADINGS

[4] The statement of claim and amended statement of claim plead that "[t]he practice of the [Law] Society in requiring or permitting solicitors facing potential negligence claims to deliver their clients' confidential property to LPIC and its solicitors was a violation of the confidential relationship required of lawyers with their clients at common law and by statute." The amended statement of claim pleads that the Law Society is liable for "breach of confidence, confidentiality, trust, privacy and solicitor-client privilege, as well as conversion and trespass to chattels."

[5] Neither the statement of claim nor the amended statement of claim pleads that the Law Society engaged in any bad faith conduct, either generally with respect to the Law Society's alleged practice, or specifically with respect to the appellants.

[6] The Law Society's statement of defence invokes a statutory immunity under s. 9 of the Law Society Act, R.S.O. 1990, c. L.8, in respect of claims for damages arising from the execution of its statutory duties and powers. It says that s. 9 broadly immunizes the Law Society, including its Treasurer, officers, benchers, employees, and other officials of the Law Society, from civil liability arising from the good faith performance of its statutory duties and powers.

THE MOTION TO STRIKE

[7] After filing its statement of defence, the Law Society moved to strike the appellants' statement of claim as disclosing no reasonable cause of action. At the return of the motion, the appellants brought a cross-motion to amend the statement of claim – which as amended again included no allegations of bad faith – such that the motion was argued based on the amended statement of claim. The appellants also argued that the Law Society was required to obtain leave before bringing its motion because it had filed its statement of defence.

[8] There was no evidence before the motion judge as to whether the Law Society's practice was as alleged, nor would such evidence be admissible on a motion to strike: Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 21.01(2)(b).

[9] The motion judge found that s. 9 of the Law Society Act confers upon the Law Society a statutory immunity from claims for damages for actions taken in good faith pursuant to its statutory mandate to regulate the legal profession or the provision of legal services. Section 9 provides as follows:

No action or other proceedings for damages shall be instituted against the Treasurer or any bencher, official of the Society or person appointed in Convocation for any act done in good faith in the performance or intended performance of any duty or in the exercise or in the intended exercise of any power under this Act, a regulation, a by-law or a rule of practice and procedure, or for any neglect or default in the performance or exercise in good faith of any such duty or power.

[10] The motion judge found that the appellants' "slim allegations" in their pleadings did not include any claim of bad faith against the Law Society, and therefore struck out the pleadings as disclosing no reasonable cause of action, without leave to amend.

[11] For the reasons that follow, I agree with the motion judge's disposition. The appeal is therefore dismissed.

ISSUES

[12] The appellants raise three issues on appeal:

1. Did the motion judge err in hearing the Law Society's motion to strike after the Law Society had delivered its statement of defence?

2. Did the motion judge err in striking out the statement of claim and amended statement of claim as against the Law Society?

3. Did the motion judge err in refusing to grant leave to amend?

ANALYSIS

(1) Did the motion judge err in hearing the Law Society's motion to strike after the Law Society had delivered its statement of defence?

[13] The appellants assert that the motion judge erred in hearing the Law Society's motion to strike because the Law Society had not applied for leave to bring the motion after having filed its defence. They note that r. 2.02 of the Rules of Civil Procedure provides that a motion to attack a document for "irregularity shall not be made, except with leave of the court", in circumstances where "the moving party has taken any further step in the proceeding after obtaining knowledge of the irregularity." The appellants argue that a motion to strike a pleading is an attack on a document for irregularity, and therefore required leave in this case, as the Law Society had already taken a further step by delivering its defence. The appellants rely on Bell v. Booth Centennial Healthcare Linen Services, at para. 6, in support of the proposition that the practice of bringing a motion to strike after delivering a defence should be discouraged.

[14] I do not agree with the appellants' submission. While generally a defendant should move to strike a claim as disclosing no reasonable cause of action before filing a statement of defence, in some instances a defendant may bring such a motion without leave even after delivering a defence. One such instance is where it is obvious from the defendant's pleading that the defendant takes issue with the sufficiency of the plaintiff's claim: Arsenijevich v. Ontario (Provincial Police), 2019 ONCA 150, at para. 7.

[15] That is the case here. The Law Society's statement of defence pleads the very deficiencies that were relied on in the motion to strike, namely, the Law Society's statutory immunity under s. 9 of the Law Society Act.

[16] Moreover, the motion judge proceeded to hear the Law Society's motion in the face of the appellant's argument that the Law Society should have obtained leave. It was clear that the motion judge would have granted (or indeed effectively granted) leave. The motion judge's determination to proceed was consistent with r. 1.04 of the Rules of Civil Procedure that the rules "be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits."

[17] As such, the motion judge did not err in hearing the motion to strike.

(2) Did the motion judge err in striking out the statement of claim and amended statement of claim as against the Law Society?

[18] The essential principles governing a motion to strike out a pleading under r. 21.01(1)(b) as disclosing no reasonable cause of action are well known. A pleading will be struck out if, assuming the facts pleaded to be true, it is plain and obvious that it discloses no reasonable cause action; that is, where it has no reasonable prospect of success: R. v. Imperial Tobacco, 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 17; Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at p. 980; and McCreight v. Canada (Attorney General), 2013 ONCA 483, 116 O.R. (3d) 429, at para. 39.

[19] It is also settled that the standard of review of a decision on a rule 21.01(1)(b) motion is correctness: McCreight, at para. 38.

[20] The appellants raise two grounds to challenge the motion judge's decision to strike out their pleadings.

[21] First, the appellants contend that they were not required to plead bad faith to preemptively defeat the application of s. 9 of the Law Society Act, as good faith is a statutory defence to be pleaded by the Law Society. The appellants say that their claim was not required to anticipate defences that might be raised.

[22] I do not agree with the appellant's submission. This court has accepted that "[Hunt] does not preclude a court from striking out a claim on the basis that it discloses no cause of action because of the existence of an unanswerable defence": Louie v. Lastman (2002), 61 O.R. (3d) 459 (C.A.), at para. 21.

[23] Here, the unanswerable defence is that it is settled law that s. 9 of the Law Society Act provides the Law Society with statutory immunity from civil claims for damages for the exercise of statutory duties and powers made in good faith: Edwards v. Law Society of Upper Canada, 2001 SCC 80, [2001] 3 S.C.R. 562, at paras. 14-17; Robson v. Law Society of Upper Canada, 2017 ONCA 468, 26 Admin. L.R. (6th) 133, at paras. 4-7; and Conway v. Law Society of Upper Canada, 2016 ONCA 72, 395 D.L.R. (4th) 100, at paras. 21-22.

[24] While a claim against the Law Society alleging that it engaged in bad faith conduct may not be subject to the immunity provided by s. 9 of the Law Society Act, such a claim must still be pleaded with precision and with full particulars, as required by the Rules of Civil Procedure: Conway, at para. 39; r. 25.06(8).

[25] Here, neither the statement of claim nor the amended statement of claim alleges that the Law Society engaged in any bad faith conduct. As such, there is no viable claim against the Law Society.

[26] The appellants nevertheless assert that there is no authority for the proposition that s. 9 applies to an intentional tort committed by the Law Society. They note that Edwards involved a claim for negligence; Robson involved a claim of negligent investigation; while in Conway this court granted leave to amend to permit a claim for misfeasance in public office to be pleaded against the Law Society because such a claim does not fall within the statutory immunity provided by s. 9. The appellants note that this court in Conway stated, at para. 22, that "an absence of good faith or 'bad faith', involving malice or intent, is sufficient to ground a properly pleaded cause of action against the [Law Society]."

[27] I do not read Conway as supporting the appellants' argument. The "intent" referred to is a malicious intent, which if pleaded would constitute bad faith and would therefore bring the impugned conduct outside the scope of s. 9. The court was not suggesting that the pleading of any intentional tort, even without a claim of bad faith, would necessarily fall outside s. 9.

[28] None of the causes of action pleaded by the appellants – namely, "breach of confidence, confidentiality, trust, privacy and solicitor-client privilege, as well as conversion and trespass to chattels" – involves bad faith as an essential element: see e.g. Jones v. Tsige, 2012 ONCA 32, 108 O.R. (3d) 241, at para. 71 (breach of privacy); Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, at p. 635 (breach of confidence); 373409 Alberta Ltd. (Receiver of) v. Bank of Montreal, 2002 SCC 81, [2002] 4 S.C.R. 312, at para. 8 (tort of conversion); Ontario Consumers Home Services Inc. v. EnerCare Inc., 2014 ONSC 4154, at paras. 50-53 (trespass to chattels); Pritchard v. Ontario (Human Rights Commission), 2004 SCC 31, [2004] 1 S.C.R. 809, at paras. 14-21; Canada (Privacy Commissioner) v. Blood Tribe Department of Health, 2008 SCC 44, [2008] 2 S.C.R. 574, at para. 21 (solicitor-client privilege); and Mills v. Royal Bank, 2012 ABCA 75, 524 A.R. 127, at para. 25 (breach of trust). As such, unlike Conway, it cannot be said that the pleadings implicitly allege bad faith so as to raise a tenable plea. As noted, there is no plea of bad faith against the Law Society at all, either in respect of the alleged practice or in respect of the appellants themselves.

[29] Second, the appellants contend that the defence of good faith should not be determined on a motion to strike, as good faith is a question of fact requiring an evidentiary record.

[30] I do not accept this submission. As the appellants' pleadings do not allege any bad faith conduct by the Law Society, there is no need for an evidentiary hearing to determine the issue.

[31] Accordingly, I conclude that the motion judge did not err in striking out the appellants' pleadings as disclosing no reasonable cause of action.

(3) Did the motion judge err in refusing leave to amend?

[32] Lastly, the appellants assert that the motion judge, having granted the motion to strike, erred in refusing leave to amend the amended statement of claim. They say that because parties can amend pleadings as of right pursuant to r. 26.01, the motion judge erred in law by refusing leave to amend to cure any deficiencies.

[33] I do not agree with this submission. A motion judge's decision as to whether to grant leave to amend is discretionary and entitled to deference on appeal, absent palpable and overriding error of fact or error of law: Conway, at para. 16. An appellate court should interfere only if the motion judge erred in principle or acted unreasonably in the exercise of his discretion: see Grigonis v. Toronto Boardsailing Club, 2010 ONCA 651, at para. 5.

[34] Here, the motion judge exercised his discretion to refuse leave to amend as the appellants had already twice pleaded no allegations of bad faith against the Law Society. His decision to refuse to afford a third opportunity to fashion a tenable plea was reasonable in the circumstances.

[35] Nor did the motion judge err in law in refusing leave to amend. The appellants' claim arises from the Law Society's alleged general practice of requiring client files to be provided to LPIC's counsel; it does not arise from specific acts of bad faith directed at the appellants themselves. I have already found that, absent allegations of bad faith, the Law Society is protected by the statutory immunity in s. 9 of the Law Society Act. As such, there are no amendments that the appellants could make that might resuscitate their claim.

[36] The motion judge was therefore entitled to refuse leave to amend.

DISPOSITION

[37] For these reasons, the appeal is dismissed, with costs to the respondent Law Society in the amount of $6,800, inclusive of disbursements and taxes.

Released: July 22, 2019

"A.H."

"M. Jamal J.A."

"I agree. Alexandra Hoy A.C.J.O."

"I agree. G.T. Trotter J.A."