DATE: 20060925

DOCKET: C44174

COURT OF APPEAL FOR ONTARIO

RE:

DONALD S. BARTLETT and DONALD S. BARTLETT INVESTMENTS LTD. (Plaintiffs/Respondents/Respondents by way of Cross‑appeal) – and – DONALD S. BARTLETT JR. and BARTLETT MANAGEMENT CORPORATION LTD. (Defendants/Appellants/Respondents by way of Cross‑appeal)

AND RE:

DONALD S. BARTLETT JR. and BARTLETT MANAGEMENT CORPORATION LTD. (Plaintiffs by Counterclaim/Appellants/Respondents by way of Cross‑appeal) – and – DONALD S. BARTLETT JR. and DONALD BARTLETT INVESTMENT LTD. and ANDREW SZEMENYEI, SUZANNE GODIN and BITZ, SZEMENYEI, FERGUSON & MACKENZIE LAW FIRM and SZEMENYEI, KIRWIN, MACKENZIE LAW FIRM (Defendants by Counterclaim/Respondents/Appellants by way of Cross‑appeal)

BEFORE:

GILLESE, JURIANSZ and LAFORME JJ.A.

COUNSEL:

Alan B. Dryer

for the appellant

Raymond F. Leach

for the respondent

HEARD:

September 19, 2006

On appeal from the judgment of Justice Steven Rogin of the Superior Court of Justice dated August 24, 2005.

E N D O R S E M E N T

[1] This is an appeal from the order of Rogin J. dated August 24, 2005, by which he dismissed the appellants’ counterclaim.

[2] In their counterclaim, the appellants allege that the respondents, who are solicitors, were negligent in drafting certain loan documents and in releasing certain security documents held in escrow. The motion judge dismissed the counterclaim because he found the appellants were bound by a release they had executed in favour of the respondents. At para. 10 of the reasons, the motion judge observed “I can find no possible way that he can succeed in his claim against the lawyers because he signed the release.”

[3] We view the matter differently. While the release contained the usual general language releasing the solicitors from “any and all actions”, neither the preparation of the loan documents nor the release of the security documents were among the items of work specifically listed in the release. This is understandable as the release was executed in the context of a settlement of a dispute over legal fees in relation to other matters. Only those other matters are specifically referred to in the release.

[4] Mr. Szemenyei filed an affidavit in support of the motion to dismiss the counterclaim. In paragraph 23 of that affidavit, he deposes that “At the time of executing the full and final Release, Mr. Bartlett Jr. was fully aware of the problem between him and his father”. However, there is nothing in that affidavit to suggest that Mr. Bartlett Jr. had any knowledge that he had a potential claim in negligence against the respondents in relation to the preparation of the loan documentation or the release of the security documents. Indeed, there is no evidence to suggest that the facts underlying the claims of solicitor’s negligence were within the contemplation of the parties at the time the release was executed.

[5] In paragraphs 4 and 5 of the reasons, the motion judge appears to have recognized that a genuine issue for trial exists in relation to the release of the security documentation. He stated:

[4] In addition despite the fact that Barlett Jr. asked Mr. Szemenyei for the shares, Mr. Szemenyei released them to him. Mr. Szemenyei had been appointed the escrow agent by Bartlett Sr. and Jr. If he knew of the dispute between father and son he may have been negligent in releasing the shares without advising Bartlett Jr. of the consequences of giving the shares to Bartlett Sr., and the possible effect on Jr.’s security.

[5] Depending on when Mr. Szemenyei learned of the dispute, there is a possibility that he was negligent in not providing that advice.

[6] There is a conflict in the evidence regarding the factual matrix in which the release was negotiated and executed. In light of that conflict in the evidence, there is a genuine issue for trial in relation to the scope and operation of the release. In addition, the conflict in the evidence raises questions as to whether, even if the release is held to govern the matters covered by the counterclaim, the release was executed in circumstances of unconscionability such that it should be set aside. That, too, is a genuine issue for trial.

[7] The motion judge did not indicate the basis on which he made the order and dismissed the counterclaim. It appears that he was acting pursuant either to rule 20 (summary judgment) or to rule 21.01(3)(d) (frivolous and vexatious claims) of the Rules of Civil Procedure. As we have found that the counterclaim must proceed to trial, we need not address the difficulty created for meaningful appellate review where the basis for an order and the law that was applied cannot be determined even after reference to the full record, including the motion material.

[8] Accordingly, the appeal is allowed, the order below is set aside and the respondents’ motion is dismissed. The respondents’ cross-appeal is dismissed without prejudice to the respondents to bring a further motion before the Superior Court of Justice for a stay of the counterclaim until the main action and counterclaim have been finally determined. Costs to the appellants are fixed at $17,500, inclusive of disbursements and GST.

“E. E. Gillese J.A.”

“R. G. Juriansz J.A.”

“H. S. LaForme J.A.”