COURT OF APPEAL FOR ONTARIO

DATE: 20000215

DOCKET: C32115

RE: ZELLAGATE HOLDINGS INC. (Plaintiff/Appellant) v.
FRED A. PLATT (Defendant/Respondent)

BEFORE: OSBORNE A.C.J.O., LASKIN and BORINS JJ.A.

COUNSEL: Victor L. Freidin, Q.C. and Emilio Bisceglia
For the appellant
J. Thomas Curry and Dean C. Novak
For the respondent

HEARD: February 3, 2000

On appeal from the order of Lederman J. dated April 22, 1999

E N D O R S E M E N T

[1] On the respondent’s motion under Rule 21.01(3)(d) to dismiss
the appellant’s action on the basis that it constituted an abuse
of process, the central issue was whether it was open to the
appellant to plead in its statement of claim that the respondent,
a lawyer who acted for the appellant in an earlier action,
breached the duty he owed to the appellant by not advancing a
claim for recission in that action. The motions judge, Lederman
J., agreed with the respondent that in the earlier action, an
action for damages by the appellant purchaser against the vendor
of a Kitchener strip mall and its principals, both the trial
judge and this court, in the appeal from the trial judgment,
found that the remedy of recission was not available to the
appellant.

[2] When the motions judge referred to the trial judgment and
this court’s judgment in the earlier action, he said:

Recission will not be granted where the representee
has affirmed the contract after having become aware
of any misrepresentations.” Rosenberg J. [the trial
judge in the earlier action] found as a fact on the
evidence (and not because of the plight of the
pleadings) that Zellagate would have closed the
transaction even if it had been aware of the
misrepresentations prior to closing. … Thus, even
if Zellagate, in this action, could establish a
breach of duty on the part of the solicitor [the
respondent] in not amendment the original claim to
include an alternative claim for recission, no damages
would have resulted in view of the Court of Appeal’s
conclusion that recission was not available after
Zellagate affirmed the contract.

[3] Having made the above findings, the motions judge struck out
the appellant’s statement of claim and dismissed its action on
the basis that the action constituted an abuse of process.

[4] We think that the motions judge was correct in holding that
this court’s judgment, based on the trial judge’s findings in the
earlier action, foreclosed the appellant from claiming that the
respondent breached the duty he owed to his client because he did
not advance a claim for recission in that action. We do not
accept the appellant’s submission that the issue of the
availability of recission was not directly before this court in
the appellant’s appeal from the trial judgment in the earlier
action. The issue of recission was squarely before this court
because, as part of its appeal the appellant sought to amend its
statement of claim to claim recission. We agree with the motions
judge that to permit the appellant to relitigate this issue would
constitute an abuse of process.

[5] But that, in our view, does not end the matter. We accept
the appellant’s submission that there were pleadings of
negligence in the appellant's statement of claim, separate and
apart from the pleading that the respondent breached his duty to
the appellant by failing to claim recission in the earlier
action. This submission was not argued before Lederman J.

[6] In paragraphs 14 and 19 of its amended statement of claim,
the appellant pleaded that the respondent was negligent in his
conduct of the action in light of the vendor’s position in the
earlier action that the appellant suffered no damages. For
example, in paragraph 14 of the appellant’s statement of claim in
the earlier action, the appellant pleaded:

… The defendant Platt knew Beechlawn intended to
prove at trial that the subject property was worth
as much or more than the purchase price paid by
Zellagate Holdings Inc. notwithstanding any
allegation of misrepresentation as to the state of
the tenancy. The defendant Platt knew or ought to
have known if that evidence was accepted by the
trial judge, little or no damages would be available
to Zellagate even if the court accepted that false
Acknowlegments were provided to Zellagate by
Beechlawn regarding the state of the tenancies.

(See also paragraph 19)

Conclusion

[7] In our view, the motions judge was right in concluding that
the appellant should not be permitted to relitigate the issue of
the availability of recission in its action against the
respondent. However, we do not think that the appellant’s action
should be dismissed.1 The appellant’s claims, other than those
claims related to the alleged failure of the respondent to claim
recission, should be allowed to proceed to trial.

[8] We would, therefore, allow the appeal in part and permit the
appellant, if it is so advised, to continue its action, but only
in respect of claims that do not concern the appellant’s claim
that the respondent breached its duty to the appellant by not
advancing a claim for recission.

[9] Since success was divided, we think that there should be no
costs of the appeal.

[^1]: Rule 31.01(3)(d) provides for the dismissal of an action as an
abuse of process of the court. Rule 25.11 permits the court to
strike out part of a pleading on the ground that the relevant
part of the pleading is an abuse of the process of the court. In
this case, Rule 25.11 was applicable since only those parts of
the appellant’s statement of claim that dealt with the
respondent’s failure to claim recission constituted an abuse of
the process of the court.