COURT OF APPEAL FOR ONTARIO

CITATION: 790668 Ontario Inc. v. D'Andrea Management Inc., 2015 ONCA 557

DATE: 20150729

DOCKET: C59051

MacFarland, Lauwers and Huscroft JJ.A.

BETWEEN

790668 Ontario Inc., Frezza Management Inc., Elio Frezza, Gina D’Andre-Vozza, Donna D’Andrea Hogan, Onorio Frezza, Tara Frezza, Julia Frezza and Michael Frezza

Plaintiffs

and

D’Andrea Management Inc., Daney D’Andrea, D’Andrea Developments Inc., Rick D’Andrea, 1317539 Ontario Inc., 1476335 Ontario Inc., 1052534 Ontario Limited, Aldo Rotondi, Jose Nunes, 1536962 Ontario Ltd., St. Willibrord Community Credit Union Limited, Now Operating as Libro Financial Group, Siskind Cromarty Ivey & Dowler LLP and Fausto Boniferro

Defendants

(Appellants and Respondents)

John B. Laskin, for the appellant D’Andrea Management Inc.

Edward Babin, for the appellants Daney D’Andrea and 1317539 Ontario Inc.

John H. McNair and Mavis J. Butkus, for the respondents Siskind Cromarty Ivey Dowler LLP and Fausto Boniferro

Heard: June 19, 2015

On appeal from the order of Justice Helen A. Rady of the Superior Court of Justice, dated June 9, 2014, with reasons reported at 2014 ONSC 3312, and her decision on costs, dated December 9, 2014.

Lauwers J.A.:

[1] D’Andrea Management Inc. (DMI) appeals from the motion judge’s decision granting summary judgment to Siskind Cromarty Ivey & Dowler LLP (Siskinds) and Fausto Boniferro, and dismissing the third party claim against them. DMI on its own behalf, and Daney D’Andrea, and 1317539 Ontario Inc. together, also seek leave to appeal the associated cost order.

[2] For the reasons set out below, I would dismiss the appeal, grant leave to appeal the cost order, and allow the cost appeal in part.

A. THE BACKGROUND

[3] The reasons of the motion judge lay out at length the complex family and corporate relationships giving rise to the action. She was appointed as the case management judge under rule 37.15 in 2007. Her deep familiarity with the case is evident in her exhaustive reasons.

[4] The minority shareholders of DMI in this consolidated action are Peter Frezza, Onorio Frezza, Brenda Frezza Management Inc., Elio Frezza, Gina D’Andrea-Vozza, Donna D’Andrea-Hogan, Tara Frezza, Julia Frezza and Michael Frezza. The minority shareholders have been engaged in litigation with DMI and D’Andrea over the assets of DMI since about 2000. Mr. Boniferro is a partner of Siskinds. Until the third party action was started against Mr. Boniferro and Siskinds in November 2002, they acted for the minority shareholders.

B. The Main Appeal

[5] The appellants argue that the motion judge erred in two ways. First, she failed to find that the pleading alleged conspiracy against Mr. Boniferro and Siskinds. Second, she failed to take an appropriately holistic view of the action in dismissing the third party claim against the respondents, and failed to give effect to the principles laid down in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, as explicated by this court in Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, and Hamilton (City) v. Thier and Curran Architects Inc., 2015 ONCA 64. For the reasons set out below, I would reject both grounds of appeal.

(1) The pleading does not allege conspiracy.

[6] Counsel urged the court to read the pleading generously in light of the principles in Normart Management Ltd. v West Hill Redevelopment Co. (1998), 1998 CanLII 2447 (ON CA), 37 O.R. (3d) 97 (C.A.). The motion judge noted, at para. 71, that the appellants

… have known for many years that Mr. Boniferro and Siskinds take the position that conspiracy is not pleaded against them. As already noted, I have expressed my doubts in the past about whether it is alleged that Mr. Boniferro participated in a conspiracy. Notwithstanding this, the responding parties have not sought to amend their pleading.

[7] The motion judge considered the arguments of the appellants and made the following finding, at paras. 79- 80:

I have concluded that conspiracy is not pleaded at all or is not properly pleaded against Mr. Boniferro for several reasons. First, no damages for conspiracy are sought against him in paragraphs (i) and (iv) of the prayer for relief. The only damages sought against Mr. Boniferro are for $500,000 for breach of authority, breach of fiduciary duty and negligence and for contribution and indemnity for payments that may be found owing to 1476335 Ontario Inc. in the main action.

At paragraph 37, the damages estimated to arise from the conspiracy are said to be approximately $2 million. It is inconceivable that damages for conspiracy would not be claimed from Mr. Boniferro if it were really considered that he was a co-conspirator. I am not persuaded that the use of the generic term "and others" is sufficient to include Mr. Boniferro. He had been named as a party and it seems to me that if he were believed to be involved in the conspiracy, the pleading would have said so. Rather, I read the pleadings as having been carefully drafted such that the conspiracy allegations are not aimed at nor include Mr. Boniferro. The reference to "others" must mean individuals unknown to the parties pleading or who are not parties.

[8] The motion judge’s conclusions are not unreasonable. They flow from the text of the pleading and from the history of the litigation. She previously expressed doubts about the adequacy of the conspiracy pleading in her endorsement dated March 1, 2012, at para. 11. Her point was underlined by Heeney R.S.J. in his refusal to grant leave to appeal on May 30, 2013: 2013 ONSC 3188, at paras. 40-41. In the circumstances, I would decline to interfere.

(2) Summary judgment was appropriate in the context of the action, taken as a whole.

[9] The appellants argue that the motion judge failed to give effect to the reasoning of this court in Baywood, at paras. 35-37, according to which a motion judge is required to assess a motion for summary judgment in the context of the litigation as a whole. The appellants argue that the language of this court at para. 37 is apt:

In the complex situation in this case, it is therefore entirely possible that the trial judge who hears the trial of the issue on the validity of the promissory notes will develop a fuller appreciation of the relationships and the transactional context than the motions judge. That could force a trial decision on the promissory notes that would be implicitly inconsistent with the motions judge's finding that the Third Release is fully valid and effective, even though the parties would be bound by that finding. The process, in this context, risks inconsistent findings and substantive injustice.

[10] The appellants argue that Mr. Boniferro’s actions were intertwined with what others were doing, and that the third parties were effectively acting through Mr. Boniferro. The trial judge, they say, would have a better understanding and appreciation than the motion judge as to how best to legally characterize Mr. Boniferro’s actions.

[11] The appellants point out that although this court noted in Hamilton, at para. 18, that summary judgment can be available in the case of third party claims, the court was cautious, citing the reasoning in Bongiardina v. York, (Regional Municipality) (2000), 2000 CanLII 5408 (ON CA), 49 O.R. (3d) 641 (C.A.), where the court said, at para. 15:

There might well be cases in which it would be inappropriate to bring a motion for summary judgment in respect of a third party claim. For example, if the third party claim could not be resolved without detailed knowledge of the factual circumstances that gave rise to the main action, a motion for summary judgment would be premature.

As the motion judge observed, at para. 81, “the core allegation in this part of the pleading [addressing the conspiracy claim] is that Mr. Boniferro advised the responding parties that the August 29, 2001 shareholders’ meeting had been improperly convened, that he intimidated DMI to adjourn that meeting, and that DMI and its shareholders were relying upon him.”

[12] The motion judge then set out to consider these allegations. After analyzing the transcript evidence carefully, she observed, at para. 85, “It is difficult to know precisely what Daney D'Andrea is saying but it appears to me that he concedes that Mr. Boniferro was correct that the meeting was not properly called.” The motion judge added, at para. 87, that the transcript of the shareholders’ meeting does not “reveal any overt or explicit evidence of intimidation or any kind of bullying tactics. Mr. Boniferro communicated his clients’ position in the matter of fact way.”

[13] The critical findings of the motion judge about the meeting are set out at paras. 88- 89:

[Mr. Boniferro] identified the parties for whom he was acting and why the meeting was not properly convened. He read a transcript of Mr. DaRe's voicemail message to him. Importantly, Mr. DaRe, who acted for DMI and its majority shareholders, agreed with Mr. Boniferro.

The evidence falls far short of establishing that DMI and its majority shareholders reasonably relied on Mr. Boniferro or that this is a triable issue. They had their own solicitor. The parties were involved in litigation with one another and Mr. Boniferro's firm was acting for those adverse in interest to DMI. The meeting was properly adjourned for reasons unrelated to the competing offer of settlement.

[14] The motion judge, at para. 94, relied on the elementary legal principle that a lawyer owes no duty of care to a non-client, with exceptions that are not applicable here.

[15] The motion judge’s conclusion on the duty of care of Mr. Boniferro and Siskinds is set out at paras. 97- 98:

In this case, the parties were opponents in ongoing litigation between them. The responding parties were represented by their own solicitor. In the circumstances, Mr. Boniferro owed no duty of care to the responding parties. In retrospect, perhaps it would have been wiser had Mr. Boniferro not attended the meeting or if he had withdrawn after he made his initial comments about the propriety of the meeting. However, an error in judgment is not negligence and cannot found liability: Brenner v. Gregory, 1972 CanLII 420 (ON SC), [1973] 1 O.R. 252 (H.C.J.).

Moreover, there is no genuine issue for trial respecting reliance. The responding parties did not reasonably rely on Mr. Boniferro. At the risk of repetition, they were aware that Mr. Boniferro and his firm represented their opponents in litigation. They had their own solicitor. A review of the transcript of the shareholders' meeting reveals that the parties discussed the offers to purchase in the informal way suggested by Mr. Boniferro and apparently as contemplated by Mr. DaRe.

[16] The motion judge went on to conclude, at para. 99, that Mr. Boniferro owed no fiduciary duty to the responding parties. She added, at para. 103, that assuming the tort of breach of authority exists, “there is no evidence that the responding parties conferred any authority on Mr. Boniferro.” Her view, to the contrary, was that “Mr. Boniferro was acting in accordance with his clients’ instructions.”

[17] The trial judge then turned her mind to the complaints about Mr. Boniferro’s conduct with respect to the first mortgagee, Libro Financial Group. The allegation was that Mr. Boniferro had abused privileged information and breached a trust by disclosing it to Libro, thereby causing Libro to refuse to extend the mortgage. The motion judge observed, at para.116, that any privilege belonged to Mr. Boniferro’s clients and not to the appellants. She concluded, at para. 119, “With respect to the allegation that Mr. Boniferro’s actions were tantamount to breach of trust, … Mr. DaRe confirmed that there is no allegation that a trust existed and therefore, no breach of trust.”

[18] The motion judge’s finding that Mr. Boniferro and Siskinds were at all times acting as counsel to their clients, the minority shareholders, and that they did nothing actionable from the perspective of the appellants, is well-explained and fully supported by the evidence she reviewed. She is owed deference and I would see no reason to interfere.

C. THE Cost APPEAL

[19] In her cost order, the motion judge ordered DMI, Daney D’Andrea and 1317539 Ontario Inc. to pay the respondents a total of $179,445.38, consisting of partial indemnity costs fixed at $150,000, disbursements of $12,525.17 and taxes of $16,920.21.

[20] The appellants argue that the motion judge made three errors in principle and was plainly wrong in making the cost order. First, the motion judge failed to give any or sufficient weight to the losing party’s reasonable expectations as to costs. She awarded substantially more than the 60 per cent of the actual rate (amounting to $210 per hour) that the third parties had obtained on a previous partial indemnity costs award, on which they based their reasonable expectations.

[21] The motion judge noted, at para 6, that the LawPro hourly rates were “roughly two thirds of those charged by lawyers practising in this area with comparable experience.” She declined, at para. 7 to apply a “double discount”, and, at para. 10, awarded partial indemnity costs in the full amount of the actual rates charged by counsel to LawPro. In doing so she relied on Mantella v. Mantella,[2006] O.J. No. 2085 (S.C.), at para. 7, and on Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041, [2013] O.J. No. 717 (Div. Ct.), at para. 13, in which the courts awarded partial indemnity costs in an amount to up to the party's actual costs.

[22] In Wasserman, Arsenault Ltd. v. Sone, 2002 CanLII 45099 (ON CA), 38 C.B.R. (4th) 119, [2002] O.J. No. 3772 (C.A.) at para. 3-5 and in Boucher v. Public Accountants Council for the Province of Ontario, (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634 (C.A.) at para. 36, this court said that it is an error in principle to award partial indemnity costs that amount to substantial/full indemnity. See also Kim v. Rezai, 2015 ONSC 3140, where the successful defendant sought full indemnity, as explained at para 25: “given the low hourly rates charged by the Defendant's counsel.” Justice Faieta refused to follow Mantella and Geographic Resources in light of this court’s decisions.

[23] In my view, it was an error in principle for the motion judge to award partial indemnity costs in the full amount of the actual costs paid. While a court has discretion to determine the size of the discount to a party’s actual costs when awarding partial indemnity costs, with due consideration of the factors set out in rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, I am unable to see, on the facts in this record, a basis to depart from the ordinary rule of thumb that partial indemnity costs should be about one-third less than substantial indemnity costs.

[24] Second, the appellants complain that the motion judge failed to give any consideration to offers to settle made by DMI and other respondents that would have removed the third parties from the action without the need to proceed with the summary judgment motion. The motion judge adverted to the offers to settle, at para. 2, but determined, at para. 5, that: “there is no justification for awarding costs on a scale other than a partial indemnity scale. In my view, none of the “offers” referred to by counsel were reasonable in the context.” The motion judge did not err in declining to take them into account.

[25] Third, Daney D’Andrea argues that the motion judge erred in holding DMI, 1317539 Ontario Inc. and Daney D’Andrea jointly and severally liable for the costs. The motion judge made a pertinent observation about this argument at para. 18:

I cannot accept Mr. Daney D’Andrea’s assertion that he has been in a large measure a bystander to the proceedings. He suggests that he did not oppose the relief sought. However, he filed material on the motion, adopting Mr. Corbett’s position and opposition to the motion, although he did not appear at the hearing. He has attended from time to time during these proceedings and has taken an active role.

[26] As a case management judge with five years of experience with the parties and the matters in issue, the motion judge was in the best position to make this assessment, which is eminently reasonable. I see no error in principle.

[27] The applicability of Mantella and Geographic Resources is an issue of general importance. I would accordingly grant leave to appeal the motion judge’s cost award, but I would amend it in only one particular: I would apply a discount of one third against the actual hourly rate charged to the third parties’ counsel in fixing partial indemnity costs.

D. DISPOSITION

[28] I would dismiss the main appeal. I would allow, in part, the costs appeal and reduce the costs award by one third. In light of the mixed outcome, I would require the appellants to pay $20,000 inclusive of disbursements and HST for partial indemnity costs to the respondents in respect of the appeals. The appellants are jointly and severally responsible to pay this award.

Released: July 29, 2015 “PL” “P. Lauwers J.A.”

“I agree J. MacFarland J.A.”

“I agree Grant Huscroft J.A.”