COURT OF APPEAL FOR ONTARIO
CITATION: Arconti v. Fenton, 2020 ONCA 489
DATE: 20200731
DOCKET: C68005 & C68006
Huscroft, Zarnett and Coroza JJ.A.
DOCKET: C68005
BETWEEN
Luigino Arconti, Alexander Falvio Arconti, North American Financial Group Inc. and North American Capital Inc.
Plaintiffs (Appellants)
and
Scott Kennedy Fenton
Defendant (Respondent)
DOCKET: C68006
AND BETWEEN
Luigino Arconti, Alexander Falvio Arconti, North American Financial Group Inc. and North American Capital Inc.
Plaintiffs (Appellants)
and
Ian Ross Smith, Scott Fenton Professional Corporation and Fenton, Smith
Defendants (Respondents)
Glenroy Bastien, for the appellants
Sean Dewart & Mathieu Bélanger, for the respondents
Heard: July 24, 2020 by video conference
On appeal from the orders of Justice Frederick L. Myers of the Superior Court of Justice, dated January 27, 2020.
REASONS FOR DECISION
[1] The appellants appeal from the motion judge’s decision to dismiss, under r. 21 of the Rules of Civil Procedure, R.R.O. 1990. Reg. 194, certain claims in their two actions against the respondents, and from his decision to order a mini-trial under r. 20.04(2.2) in respect of the claim that he did not dismiss.
[2] The respondent, Ian Ross Smith, acted for the appellants in a proceeding before the Ontario Securities Commission (the “OSC”). In December 2013, after a twelve-day hearing, the OSC found (among other things) that the appellants had committed securities fraud. In September 2014, the OSC imposed lifetime trading bans and other prohibitions on the appellants’ capital market activities, ordered the appellants to disgorge certain amounts, and required them to pay financial penalties and costs.[^1]
[3] The appellants appealed the OSC’s decisions (both in respect of liability and penalty) to the Divisional Court. They advanced a number of grounds, including ineffective representation by counsel. The respondents were granted intervenor status and actively participated in the Divisional Court appeal, including providing evidence which disputed the appellants’ contentions about ineffective representation.
[4] On January 5, 2018, the Divisional Court dismissed the appellants’ appeal: 2018 ONSC 136. With respect to the contention of ineffective representation by counsel, the court applied the test in R. v. Archer (2005), 2005 CanLII 36444 (ON CA), 202 C.C.C. (3d) 60 (C.A.).[^2] After scrutinizing the appellants’ assertions, it held that the appellants had not established that any miscarriage of justice had occurred in the OSC proceedings: at para. 168.
[5] Before the Divisional Court appeal was argued, the appellants commenced civil actions against the respondents. They sued Mr. Smith and his firm for solicitor’s negligence (CV-15-527178/C68006), and the respondent, Scott Kennedy Fenton, for negligently referring the appellants to Mr. Smith (CV-16-560369/C68005). These actions allege that the respondents’ negligence and breach of duty caused the appellants (i) the loss of an opportunity to settle the OSC proceeding without a finding of fraud and with limited fines, and (ii) the loss of potential defences and a fair hearing at the OSC, resulting in fines, penalties, disgorgement, and damage to their reputations. Both actions were stayed pending determination of the Divisional Court appeal.
[6] After the Divisional Court’s ruling, the respondents moved under r. 21 to dismiss the majority of the appellants’ civil claims on the basis that they were res judicata.[^3] The respondents also moved under r. 20 in respect of one claim—that arising from the allegation that Mr. Smith’s advice concerning settlement fell below the standard of care. For this claim, the respondents argued that, on the facts, it did not raise a genuine issue requiring a trial.
[7] The motion judge dismissed the actions with respect to all issues “apart from the defendants’ alleged negligence in failing to negotiate a resolution of the matter [before the] Ontario Securities Commission”. He also ordered a mini-trial under r. 20.04(2.2) “on the issue of the defendants’ alleged negligence in advising the plaintiffs about the resolution of the proceedings before the Ontario Securities Commission”. He directed that he remain seized of the matter and that the parties schedule a case conference before him to consider the steps necessary for the mini-trial.
[8] The motion judge’s rationale was that the appellants’ claims (other than those pertaining to alleged failures to advise about and negotiate a settlement) could not proceed because they were collateral attacks on the OSC decision, a decision that was upheld on appeal after the Divisional Court considered the appellants’ allegations of conflicts of interest and other matters they claimed amounted to ineffective representation by counsel. The motion judge held that the appellants were precluded by the doctrine of issue estoppel from advancing claims that the conduct of their lawyer had caused them to lose a hearing they deserved to win.
[9] As noted, the respondents did not assert before the motion judge that the appellants’ claim about negligent settlement advice was barred by issue estoppel. Rather, they moved under r. 20 to dismiss that claim on the basis that it did not raise a genuine issue requiring a trial on the facts. The evidence on the r. 20 motion was conflicting and included expert evidence advancing different views. The motion judge declined to decide the issue on a paper record and directed a mini-trial under r. 20.04(2.2), the scope of which was to be decided after further submissions.
[10] At the outset of this appeal, counsel for the appellants advised that he was instructed to withdraw a motion the appellants had filed to introduce fresh evidence and that the appellants now planned to ask the Divisional Court to reconsider its decision. He asked that this appeal be adjourned. We rejected the adjournment request. This appeal has been case managed. The motion to admit fresh evidence was filed after the deadline for doing so set by the Case Management Judge, and after the respondents had filed submissions responding to it. The need to bring this appeal to closure is strong.
[11] On appeal, with respect to the claims that were dismissed, the appellants argue that the motion judge’s order and reasons are vague, creating confusion as to what claims may and may not be pursued; that he erred in applying this court’s decision in Harris v. Levine, 2014 ONCA 608, leave to appeal ref’d, [2014] S.C.C.A. No. 467; that he failed to appreciate that he had discretion not to apply issue estoppel; and that this is a proper case to exercise discretion to allow relitigation.
[12] With respect to the order for a mini-trial under r. 20.04(2.2), the appellants argue that a mini-trial is an insufficient procedure to determine the matters in issue on the claim that was not dismissed.
[13] We do not accept any of these arguments.
[14] First, in our view, the motion judge correctly divided the appellants’ claims (as advanced by them) into two categories: (i) claims that essentially depended on showing that, but for the respondents’ conduct, they would have been acquitted by the OSC, and (ii) the claim that they did not receive proper advice about, and thus were deprived of, an opportunity to settle the OSC proceeding.
[15] With respect to the claims in the first category, the motion judge correctly followed this court’s decision in Harris. This court held, in Harris, that a solicitor’s negligence claim that depends, for its success, on showing that the client would have been acquitted of a criminal charge but for the lawyer’s negligence, involves a collateral attack on the criminal adjudicative process, and is thus an abuse of process. The court specifically noted that abuse of process is a discretionary doctrine, but found that there was no reason in that case to interfere with the judge’s exercise of discretion to apply abuse of process to dismiss the action.
[16] Although the motion judge did not expressly refer to his discretion, we do not agree that the motion judge overlooked its existence—he expressly cited Harris, which refers to the discretion. We interpret the motion judge’s reasons to mean that, with respect to the claims that depended on the appellants showing that they lost a proceeding at the OSC that they would have won but for the impugned conduct of the respondents, he was given no reason to exercise his discretion not to dismiss those claims. He referred to relevant factors in making that decision, including the fact that the claims involved a collateral attack on the result of the OSC proceeding and the Divisional Court appeal, and that any differences between a criminal proceeding and an OSC proceeding did not warrant permitting relitigation in light of the seriousness of securities fraud. These findings fully justify a refusal to exercise discretion to allow relitigation of the OSC and Divisional Court determinations: Penner v. Niagara (Regional Police Services Board), 2013 SCC 19, [2013] 2 S.C.R. 125, at para. 42; Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at para. 53.
[17] The appellants argue that because the conduct of counsel is assessed on the Archer test when raised on an appeal from conviction, relitigation should be permitted in a solicitor’s negligence case. We reject that argument. A person who is concerned that ineffective representation by counsel has led to a wrongful conviction must pursue that issue by way of appeal from the conviction: Folland v. Reardon (2005), 2005 CanLII 1403 (ON CA), 74 O.R. (3d) 688 (C.A.). When that has not been done, or when, as here, it is done unsuccessfully, the result is the same. The decision that cannot be collaterally attacked in a civil proceeding is the correctness of the conviction. A civil claim that depends on showing that the conviction would not have occurred but for the lawyer’s conduct is exactly that kind of improper collateral attack: see Harris, at paras. 5-8.
[18] The appellants’ argument that it is unclear what use they may make of various complaints they want to advance against the respondents is unavailing. We see no lack of clarity. The motion judge stated in his reasons: “[the] plaintiffs are precluded…from making any further claims against [the] defendants based on the assertion that the defendants’ neglect, conflicts, and/or misconduct caused them to lose the hearing.” That is what the appellants may not do, and it is perfectly consistent with the motion judge’s decision to dismiss certain claims. The motion judge distinguished what was precluded (and dismissed) from what ‘remained’—“[t]he issue regarding whether [the] defendants failed to advise [the] plaintiffs appropriately regarding settlement”.
[19] The motion judge rejected the respondents’ argument that, on the settlement issue, the appellants were barred from relying on “admissions and other facts” they asserted at the Divisional Court. He held that the estoppel did not extend to relying on such matters for the purposes of an issue that did not undermine the result at the OSC. As noted by the motion judge, the appellants’ assertion that they would have settled the OSC proceeding had they been properly advised did not suggest that the OSC decision was wrong. On the contrary, it suggested that the OSC decision was right, which was a “new context” for those assertions that did not challenge the result at the OSC or Divisional Court: City of Toronto, at para. 52.
[20] The ‘remaining’ issue of whether the appellants were deprived of an opportunity to settle is the subject of the r. 20 motion. As mentioned, the motion judge did not decide that motion. He ordered a mini-trial as part of the process to allow him to decide it. A mini-trial may be ordered when it allows the motion judge to reach a fair and just resolution of a r. 20 motion and is the proportionate course of action: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 63.
[21] There is no basis for any appeal to this court from the order for a mini-trial. The mini-trial has been directed as part of the process under r. 20 to allow the motion judge to fairly determine whether the r. 20 motion should succeed or fail. The motion judge has not yet made any determination about the scope of the mini-trial. Moreover, as evidence on a mini-trial may range from limited to extensive, it can hardly be maintained that the mere direction of a mini-trial has somehow permanently predetermined the appellants’ rights: Hryniak, at para. 63.
[22] Accordingly, the motion for fresh evidence is dismissed as abandoned. The appeal is dismissed. The respondents are entitled to costs of the appeal fixed in the agreed upon amount of $12,000, inclusive of disbursements and applicable taxes.
“Grant Huscroft J.A.”
“B. Zarnett J.A.”
“S. Coroza J.A.”
[^1]: Mr. Smith did not act for the appellants in the penalty phase of the OSC proceeding.
[^2]: Under the Archer test, a person asserting ineffective assistance of counsel must establish: (i) the material facts they assert, (ii) incompetence of counsel measured on a reasonableness standard, and (iii) that a miscarriage of justice resulted. The court will consider miscarriage of justice first because, if none occurred, it is unnecessary to grade the performance of counsel: Archer, at paras. 119-121.
[^3]: For the purposes of this appeal, it is unnecessary to distinguish among the related doctrines of res judicata, issue estoppel, and abuse of process, all of which were referred to.