The Investment Administration Solution Inc. v. Silver Gold Glatt & Grossman LLP et al.
The Investment Administration Solution Inc. v. Silver Gold Glatt & Grossman LLP et al. [Indexed as: Investment Administration Solution Inc. v. Silver Gold Glatt & Grossman LLP]
107 O.R. (3d) 795
2011 ONCA 658
Court of Appeal for Ontario,
Goudge, Juriansz and MacFarland JJ.A.
October 21, 2011
Limitations -- Discoverability -- Plaintiff suing defendant for unlawful interference with economic relations on basis that defendant was able to offer clients savings because of certain practices which allegedly contravened Rules of Professional Conduct of Institute of Chartered Accountants of Ontario ("ICAO") -- Plaintiff filing complaint with ICAO before commencing action -- Professional Conduct Committee not laying charges and closing complaint file with guidance and advice after finding that defendant may have breached rules -- Plaintiff appealing dismissal of action as statute-barred on basis that it could not have known that it had cause of action until Professional Conduct Committee's disposition -- Appeal dismissed -- Committee not finding that defendant had breached rules -- Committee's disposition not essential to claim and not restarting limitation period.
The plaintiff delivered third-party outsourcing solutions in fund accounting and record-keeping back-office services ("TPA services"). One of the plaintiff's clients did not renew its contract and instead retained the defendants because [page796] they promised "big cashflow savings". The respondents were able to provide such savings because they provided both accounting and TPA services bundled together. The plaintiff sued the defendants for unlawful interference with economic relations, alleging that the bundling of accounting and TPA services contravened the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario ("ICAO") and that that breach supplied the wrongful interference required by the tort. Before commencing the action, the plaintiff filed a complaint with ICAO. The Professional Conduct Committee closed the complaint file with guidance and advice. The defendants moved successfully for summary judgment dismissing the action as statute-barred. The plaintiff appealed, arguing that the limitations period did not begin to run until the Professional Conduct Committee found that there was a breach of the Rules.
Held, the appeal should be dismissed.
The Professional Conduct Committee did not, in fact, find that there was a breach of the Rules. In deciding not to lay charges and to close the file with guidance and advice, the most that it said was that there may have been a breach of the Rules. There was no formal determination that the defendant breached the Rules by the body with jurisdiction to make such a determination, the ICAO's Discipline Committee. The plaintiff's discovery that the investigative arm of ICAO formed the opinion that the defendant may have breached the Rules did not restart the limitation period. The plaintiff knew sufficient facts within the limitation period to lodge its complaint with the ICAO. The determination that the defendant's acts may have breached the Rules was not a material fact on which the claim was based.
APPEAL from the judgment of Matlow J. of the Superior Court of Justice dated February 7, 2011 dismissing an action as statute-barred.
Cases referred toLawless v. Anderson, [2011] O.J. No. 519, 2011 ONCA 102, 81 C.C.L.T. (3d) 220, 276 O.A.C. 75 Statutes referred to Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 5(1)(a)(iv) Statutory Powers Procedure Act, R.S.O. 1990, c. S.22 [as am.]
John P. Ormston, for appellant. Jonathan F. Lancaster, for respondents.
The judgment of the court was delivered by
JURIANSZ J.A.: -- Overview
[1] The appellant, Investment Administration Solutions Inc. ("IAS"), is appealing a decision of Matlow J. of the Superior Court of Justice dated February 7, 2011. The motion judge granted summary judgment dismissing IAS's action against the respondents, Silver Gold Glatt & Grosman LLP ("SGGG") and SGGG Fund Services Inc. ("SGGG Fund Services"). On October 30, 2009, [page797] IAS commenced an action against SGGG for inducement of breach of contract and unlawful interference with economic relations. The motion judge found that the facts pleaded did not allege inducement of a breach of contract and that, moreover, the action was barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.
[2] IAS delivers third-party outsourcing solutions in fund accounting and record-keeping back-office services. These are known as "TPA services". SGGG Fund Services is a competitor of the appellant. SGGG is a firm of chartered accountants in Toronto and two of its partners are founders and principals of SGGG Fund Services.
[3] The basis of IAS's action was that its former client, Quadrexx Asset Management Inc. ("Quadrexx"), discontinued using IAS's services and instead retained the respondents. On September 26, 2006, Quadrexx notified IAS that it would not be renewing its investment services agreement with IAS when it expired on December 31, 2006. After December 31, 2006, Quadrexx retained SGGG and SGGG Fund Services. Quadrexx switched service providers because the respondents promised "big cashflow savings". The respondents were able to provide such savings because they provided both accounting and TPA services bundled together. The premise of IAS's action was that SGGG's bundling of accounting services and TPA services contravened the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario ("ICAO").
[4] IAS filed a complaint with ICAO against SGGG on April 29, 2008. That complaint proceeded through several stages and eventually, on August 11, 2009, Division B of the Professional Conduct Committee closed the complaint file with guidance and advice saying in its reasons:
On reviewing all of the information gathered Division B was concerned that Ms. Grosman, in her role as a 'marketer' to potential clients of both SGGG and SGGG Fund Services Inc. ("FSI"), might have caused SGGG to be in breach of Rule 216. This concern centres on the fact that Ms. Grosman is, in effect, referring clients of SGGG to FSI by advising these clients of the existence of and the services provided by, FSI.
Because of the ownership interests of partners of SGGG in FSI, there is a direct benefit being received by the partners from the referral.
In the view of Division B, it is not appropriate for SGGG to permit Ms. Grosman to act as the marketer for SGGG and refer SGGG clients to FSI. Doing so jeopardizes the independence of the chartered accounting firm and, in the view of the committee, may result in a breach of Rule 216.
Nor may Ms. Grosman act as the marketer for FSI and refer clients of FSI to SGGG. FSI is a related business to SGGG within the meaning of Rule 407 and consequently Rule 216 applies to FSI. [page798]
The Committee notes, however, that Ms. Grosman, should she choose to act as the marketer for FSI, may also act as the marketer for SGGG to prospective clients who are not clients of FSI.
[5] IAS concedes that it has no claim for inducing breach of contract, because Quadrexx did not terminate the contract with IAS; rather, Quadrexx did not renew the contract at the end of its term. However, IAS submits it should have been allowed to proceed with a claim for interference with economic relations. It submits that SGGG's breach of the Rules of Professional Conduct supplies the wrongful interference required by the tort.
[6] SGGG and SGGG Fund Services submit that the claim is statute-barred because IAS instituted its action on October 30, 2009, which was more than three years after Quadrexx gave notice that it would be changing service providers. [0]IAS takes the position that the limitations period did not begin to run until the Professional Conduct Committee found on August 11, 2009 that SGGG breached the Rules. IAS submits that it did not know, and could not have known, that the respondents' bundled pricing scheme was unlawful until it received the reasons of Professional Conduct Committee.
[7] IAS's position on appeal is that there is a genuine issue for trial as to whether the claim for the tort of intentional interference with economic relations was discoverable before it received the reasons of Professional Conduct Committee. More specifically, IAS submits it is a genuine issue for trial whether it knew, before the disposition of the Professional Conduct Committee, that a proceeding would be an appropriate means of seeking a remedy within the meaning of s. 5(1)(a)(iv) of the Limitations Act, 2002.
[8] I would dismiss the appeal for the reasons that follow.
Analysis
[9] In my view, the record does not support the factual premise of IAS's argument, i.e., that SGGG was found to have breached the Rules. In its August 11, 2009 disposition of IAS's complaint, the Professional Conduct Committee did not, and could not, make such a finding. The committee made this clear in its correspondence with IAS.
[10] Upon its initial receipt of the complaint, the Professional Conduct Committee provided documentation to IAS explaining its role and procedures. The Professional Conduct Committee investigates written complaints received about ICAO members and may lay charges of professional misconduct against its members. When such charges are laid, a formal hearing is held in front of the ICAO's Discipline Committee in accordance with [page799] the provisions of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22 and the by-laws of the ICAO. The Discipline Committee, not the Professional Conduct Committee, decides whether the member is guilty or not guilty and determines the appropriate sanction. The documentation stated the following about the disposition of the Professional Conduct Committee:
The Professional Conduct Committee, after considering the information before it, may conclude:
-- the respondent did not breach the rules of professional conduct and the file should be closed;
-- a breach of the rules of professional conduct may have taken place but the method does not justify the laying and prosecuting of charges before the ICAO's Discipline Committee. In these cases, the professional conduct committee may provide guidance and advice to a member to assist the member in avoiding a similar situation in the future; or
-- a breach of the rules of professional conduct has taken place and charges should be laid.
[11] The reasons of the Professional Conduct Committee and its covering letter reflect its role and authority. The Professional Conduct Committee, in para. 24 of its reasons, "determined that it was appropriate in this case to close the file with guidance and advice". In para. 25, the committee explained that it "provides guidance in cases where it has been demonstrated that a member may have breached a rule of professional conduct" but the laying of charges is not warranted (emphasis in original). In para. 26, the committee stated that, in this case, "Ms. Grosman . . . might have caused SGGG to be in breach of Rule 216" (emphasis added). In its covering letter, the Professional Conduct Committee explained to IAS that it provided guidance and advice to SGGG "based on conclusions reached by the Committee in reliance on information that has not been tested in a formal, adjudicative process".
[12] In its August 11, 2009 report, Division B of the Professional Conduct Committee stated its view that "it is not appropriate for SGGG to permit Ms. Grosman to act as the marketer for SGGG and refer SGGG clients to FSI. Doing so jeopardizes the independence of the charted accounting firm and, in the view of the committee, may result in a breach of Rule 216." This expression of the Professional Committee's views must be understood in the context of ICAO's by-laws, which bestow the jurisdiction to make a finding that a member has actually breached the Rules on the Discipline Committee, not the Professional Conduct Committee. Here the Professional Conduct Committee decided not to lay charges against SGGG; instead, it [page800] decided to provide SGGG with guidance and advice and close the file. The most it could say, as it did say, is that there may have been a breach of the Rules. There has been no formal determi-nation that SGGG breached the Rules by the body with jurisdiction to make such a determination.
[13] I conclude that IAS's principal argument simply lacks a factual foundation.
[14] IAS argues that "it is inconsequential whether or not the ICAO issued full disciplinary prosecution of a definitive breach of the rules. All that is required is that IAS discovered something new in support of its cause of action." The "something new" that IAS discovered was that the investigative arm of ICAO formed the opinion that SGGG may have breached the Rules. This information was not required for IAS to know that a proceeding would be an appropriate means to seek to a remedy, as required by s. 5(1)(a)(iv) of the Limitations Act, 2002.
[15] The discovery of a new fact that might help the plaintiff's case does not restart the limitations period. As Rouleau J.A. put it in Lawless v. Anderson, [2011] O.J. No. 519, 2011 ONCA 102, 276 O.A.C. 75, at para. 23, the question to be posed is whether the prospective plaintiff knows enough facts on which to base its allegations. In this case, IAS knew sufficient facts to lodge its complaint against SGGG with the ICAO. It knew that Quadrexx decided not to renew its contract with IAS because the respondents were able to provide IAS with bundled services and concomitant savings, and it knew, or could have known, of the ICAO's Rules. The determination that SGGG's acts may have breached the Rules is not a material fact on which the claim is based. Learning of it was not essential for the claim. The material facts were the conduct of SGGG and the Rules, which IAS knew as of the end of 2006. The appeal must be dismissed.
[16] These reasons should not be read to suggest that a formal determination by the ICAO that SGGG breached the Rules by the Discipline Committee would be required to support the tort of intentional interference with economic relations, nor that a breach of Rules, in and of itself, would necessarily constitute the necessary "unlawful conduct" against the plaintiff required by the tort.
Conclusion
[17] I would dismiss the appeal and fix costs in favour of the respondent in the amount of $13,500, inclusive of disbursements and all applicable taxes.
Appeal dismissed.