Toronto-Dominion Bank v. Kopman et al. [Indexed as: Toronto-Dominion Bank v. Kopman]
2000 26986 (ON SCDC), 46 O.R. (3d) 773
[2000] O.J. No. 215
Court File No. 27/99
Ontario Superior Court of Justice
Divisional Court
O'Leary, Southey and MacFarland JJ.
January 31, 2000
Civil procedure -- Pleadings -- Striking out -- Bank bringing action for judgment on mortgages and action for declaration that transfer by mortgagor's husband of his interest in subject property to her constituting fraudulent conveyance -- Mortgagor counterclaiming pleading abuse of process and intentional infliction of mental suffering -- Mortgagor also seeking damages for breach of fiduciary duty -- Mortgagor not alleging that purpose of bank's actions was to coerce her in regard to something outside actions -- Claim for abuse of process and intentional infliction of mental suffering not properly pleaded -- Claims struck out -- Plea of breach of fiduciary duty allowed to stand.
The plaintiff bank brought an action for judgment on three mortgages it held on property registered in the sole name of the defendant EK. The bank brought a second action for a declaration that the transfer by SK to EK of his interest in the subject property was a fraudulent conveyance and void as against the bank and his other creditors. EK counterclaimed, pleading abuse of process and intentional infliction of mental suffering. She also claimed damages for breach of the bank's fiduciary duty to her. She claimed that the bank was trying to pressure her into a settlement of the claim on the first mortgage, that the bank knew that she was seriously ill and hoped that she would simply cave in, and that the action had caused her tremendous emotional distress, hampering her ability to battle cancer. The bank brought a motion under rule 21.02 of the Rules of Civil Procedure to strike the counterclaim as disclosing no reasonable cause of action. The motion was dismissed. The bank appealed.
Held, the appeal should be allowed in part.
Per O'Leary J. (MacFarland J. concurring): EK did not allege that the purpose of the bank's actions was to coerce her in regard to something outside the two actions. Neither did she allege an act or threat outside the action in furtherance of a collateral purpose. Accordingly, her claims for abuse of process and intentional infliction of mental suffering were not properly pleaded and should be struck out. While the bank did not move promptly to strike the pleading, there was no reason why the trial judge should be left to deal with a pleading that was a nullity in law. Accordingly, the delay was not a bar to a finding that the pleadings of abuse of process and intentional infliction of mental suffering disclosed no cause of action.
The plea of breach of fiduciary duty should be allowed to stand.
Per Southey J. (dissenting): It is not necessary that the textbook statement of the essential elements of the tort of abuse of process be found in the pleading. What is necessary are allegations of facts that are relied on as giving rise to those essential elements. There was a sufficient pleading of the tort of abuse of process in this case. The bank's motion should also be dismissed on the basis that it was not brought promptly.
APPEAL from a decision dismissing a motion to strike a counterclaim.
Cases referred to Ng v. Commercial Union, Ont. S.C., Catzman J. (unreported); Tsiopoulos v. Commercial Union Assurance Co. (1986), 1986 2531 (ON SC), 57 O.R. (2d) 117, 32 D.L.R. (4th) 614, 13 C.P.C. (2d) 279 (H.C.J.)
Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 21.01, 21.02
Authorities referred to Fleming, The Law of Torts, 4th ed. (1971), pp. 547-48
Glenn W. Ackerley, for appellant. Stephen M. Turk, for respondent, Elayne Kopman.
[1] O'LEARY J. (MACFARLAND J. concurring) (orally): -- We are dealing in this appeal with two actions. In the one action, the Toronto-Dominion Bank asks for judgment on three mortgages it holds on property now registered in the sole name of the defendant Elayne Kopman, now deceased. In that action the Bank asks as well that the court declare to be invalid the second mortgage on the property held in trust by certain named individuals, or a declaration as to the proper amount owing on that mortgage.
[2] In a second action the Bank asks for a declaration that the transfer by Stanley Kopman on July 3, 1990 to Elayne Kopman of his interest in the said property, was a fraudulent conveyance and void as against the Bank and other creditors of Stanley Kopman.
[3] The two actions relate to the same property and have been ordered tried together. For the purpose of the plea by Elayne Kopman of abuse of process, the two actions must be considered to be one action.
[4] As to the ingredients required for a valid plea of abuse of process I refer to Fleming, Law of Torts, 4th ed. (1971), pp. 547-48:
The gist of this tort lies . . . in the misuse of process, no matter how properly obtained, for any purpose other than that which it was designed to serve. (Rest. 682) It involves the notion that the proceedings were merely . . . to coerce the defendant in some way entirely outside the ambit of the legal claim upon which the court is asked to adjudicate. . . . The essential elements of abuse of process are first, a collateral and improper purpose such as extortion, and secondly, a definite act or threat, in furtherance of a purpose not legitimate in the use of the process. Some such overt conduct is essential, because there is clearly no liability when the defendant merely employs regular legal process to its proper conclusion, albeit with bad intentions.
It should be noted the last sentence of this quotation applies as well to the claim for intentional infliction of mental suffering.
[5] Accepting as true everything pleaded in the statement of defence and counterclaim of Elayne Kopman in the two actions, including the allegations that the plaintiff's mortgages were part of a scheme wherein she was provided little or no information or misinformation as to the dealings between the Bank and Stanley Kopman and the risks she was placing herself under; that her knowledge with respect to any Bank transactions was extremely limited; that the mortgages were arranged without regard for her interests; that the Bank was a fiduciary of hers; that she did not receive independent legal advice; that she was tricked by the Bank; that the third mortgage has been repaid in full; that the value of the property does not justify all the claims brought by the Bank; that by pressing ahead with additional claims the Bank is trying to pressure her into a settlement of the claim on the first mortgage; that the Bank has known of her serious illness and hopes she will simply cave in; that the action has caused her tremendous emotional distress hampering her ability to battle cancer -- all that does not support her counterclaim that the plaintiff is using the process of the court for an improper purpose or is abusing the court process.
[6] Elayne Kopman does not allege the actions against her or any part of them, is to coerce her in regard to something outside the two actions, but to coerce her by the piling on of claims to cave in to the claim on the first mortgage which is a part of the actions. Neither does she allege an act or threat outside the action in furtherance of the collateral purpose.
[7] Accordingly then her counterclaim for intentional infliction of mental suffering and for abuse of the court process by the piling on of claims cannot stand, for no such cause of action has been pleaded.
[8] Counsel for Elayne Kopman submits that even if abuse of process has not been properly pleaded, the pleading should be allowed to stand because the Bank did not move promptly to strike it out. The counterclaim which contains the pleading of abuse of process was delivered on January 21, 1998. The Bank did not move to strike it out until the day before a motion to require a better affidavit on production and to require answers to questions refused on discovery of the Bank was to be heard.
[9] Rule 21.02 reads: " A motion under rule 21.02 [to strike out a pleading on the ground that it discloses no reasonable cause of action] shall be made promptly and a failure to do so may be taken into account by the court in awarding costs."
[10] Counsel for Kopman concedes that the only prejudice Kopman has suffered by the delay in bringing the motion, is the costs incurred on the motion she brought for a better affidavit on production and to require questions be answered.
[11] Rule 21.02 seems to indicate that the penalty for failing to move promptly may in some cases be an award of costs to compensate for delay.
[12] In this case however there are reasons why the court should strike out the pleading of abuse of process and intentional infliction of mental injury. (1) There is no reason why the trial judge should be left to deal with a pleading of abuse of process that is a nullity in law. The same holds for the plea of intentional infliction of mental injury. (2) On the motion by Kopman to be heard by the master, the master should know whether or not he is dealing with a sound pleading of abuse of process. Indeed it is the position of counsel for Kopman that if abuse of process has been properly pleaded, he is entitled to production of documents and the answer to questions otherwise protected by solicitor-client or litigation privilege in an effort to find out the purpose or intention the Bank had in adding further causes of action to the original action on the first mortgage.
[13] It is in the interest of the court to avoid unnecessary time being spent by judges and masters on pleadings that are invalid, that is to say that raise no cause of action. Accordingly the matter of delay should not deter us from holding that the pleadings of abuse of process and intentional infliction of mental suffering disclose no cause of action.
[14] As for the claim by Elayne Kopman for general damages for breach of fiduciary duty owed her by the bank, neither counsel for the Bank nor counsel for Kopman were able to help us with any law as to whether or not if a claim for breach of fiduciary duty be established there can be an award of general damages. We are not content then to dispose of the issue as to whether or not such a claim can be made and allow the plea of breach of fiduciary duty to stand. The balance of the counterclaim is however struck out. This means of course that the appeal is allowed save for the plea relating to fiduciary duty and the claim for damages for breach of fiduciary duty.
[1] SOUTHEY J. (dissenting): -- I regret that I am unable to agree with the conclusion reached by my brother O'Leary J. on this appeal.
[2] As he points out, the motion is one under rule 21.01(1). It is well settled that on such a motion the facts as alleged in the attacked pleading must be taken as being correct with certain exceptions that are not applicable to the case at bar. I shall set out the allegations which to me are of particular significance in determining, not whether the counterclaimant has a valid counterclaim, but whether it is plain and obvious that the counterclaim must fail.
[3] Paragraphs 16, 32 and 33 of the amended statement of defence and counterclaim and cross-claim of the defendant Elayne Kopman read as follows:
With respect to the third mortgage, E. Kopman pleads and the fact is that she was clearly and simply tricked by the Bank. This mortgage, according to the Bank's own documentation was to be discharged. Further, E. Kopman pleads and the fact is that the loan with respect to this mortgage was paid in full in late August or early September of 1988, a fact which has been acknowledged by the Bank. Further E. Kopman pleads and the fact is that at no time did she ever consent to the mortgage remaining on her home in support for any of her husband Stanley's indebtedness to the Bank and she puts the Bank to the strict proof of their claim.
E. Kopman pleads and the fact is that the value of the property at the centre of the dispute does not justify all the claims brought by the Bank. E. Kopman further pleads that the Bank, by pressing ahead with additional claims as set out for the first time in the Amended Statement of Claim, in view of the value of the house and more importantly, in light of the Bank's own documentation and admissions contained therein, is trying to pressure her into a settlement of the First Mortgage action and as such is using the process of the court for an improper purpose or alternatively is abusing the court process.
E. Kopman pleads and the fact is that the Bank was made aware of her serious illness very shortly after she was diagnosed and very early on in the life of the action. E. Kopman further states that in light of her illness, the Bank is engaging in the litigation of the additional claims with the hope that someone in her condition will simply cave in to it.
[4] Unfortunately, Elayne Kopman died on January 10, last year. The appropriate steps to continue the action have been taken.
[5] In addition to the above paragraphs, O'Leary J. has summarized a number of allegations made by Elayne Kopman and recognizes, of course, that those allegations must all be regarded as factually correct.
[6] The respondent on the appeal relies on the fact that the plaintiff Bank in its pleading responded as follows to the allegations to which I have referred:
The Plaintiff says that the allegations contained in paragraphs 28-37 are frivolous, vexatious and are intended to embarrass the Plaintiff and hinder and impede the prosecution of the proceeding.
The Plaintiff says that it had prosecuted this action diligently, in good faith, and for a bona fide commercial purpose.
[7] With these pleadings, more particularly with the para. 10, the plaintiff put squarely in issue its bona fides in proceeding with the actions.
[8] The position taken on behalf of Ms. Kopman's estate on this appeal is that the actions, other than the proceedings brought by the Bank on the first mortgage, cannot possibly achieve any beneficial result from the standpoint of the Bank, and that the only purpose in bringing them was to pressure the defendant Elayne Kopman into making a settlement under pressure of the claim on the first mortgage.
[9] Mr. Turk relied on an unreported decision of Mr. Justice Catzman to which I would like to refer. The decision of Catzman J. is referred to in the reported decision of Henry J. in Tsiopoulos v. Commercial Union Assurance Co. (1986), 1986 2531 (ON SC), 57 O.R. (2d) 117 (H.C.J.). I quote from the decision of Henry J. at pp. 123-24:
Miss Samworth referred me to an unreported decision of Catzman J. in Ng v. Commercial Union Ass'ce Co. (S.C.O.), where in a similar proceeding the defendant (who was also Commercial Union Assurance Company), pleaded the tort of abuse by way of counterclaim. Catzman J. considered that he ought not to strike the counterclaim and in his endorsement said in part:
With respect to the claim for abuse of process, while I entertain some doubt on the point, I am not satisfied with the certainty that is required on a motion such as this that the counterclaim discloses no reasonable cause of action. The claim for fraud and attempted fraud is defective in the absence of any allegations of acts done or steps taken by the plaintiff by counterclaim as a result of the alleged acts of the plaintiff and what damages have been suffered by the plaintiff by counterclaim as a result thereof. Leave is granted to the plaintiff by counterclaim to amend the counterclaim in those respects within 10 days from the date of entry of this order failing which that portion of the counterclaim relating to the claim for fraud and attempted fraud will be struck out.
Paragraph 4 of the counterclaim or its equivalent if the plaintiff by counterclaim elects to amend as provided above, will be amended by the addition at the conclusion of that paragraph of the words "as hereinafter alleged". Costs of both motions in the cause in the counterclaim.
I have been shown the pleadings that were before Catzman J. and they are, if anything, stronger and more precise than the pleadings in the case at bar. The plaintiff pleads that the defendant insurer has harassed the plaintiff with respect to his claims and has arbitrarily withheld payment of the plaintiff's claims and has thereby acted towards the plaintiff in bad faith, and because of that conduct the plaintiff claims to be entitled to punitive damages. In his counterclaim, the insurer pleaded that the contract of insurance was one uberrimae fidae imposing a duty of utmost good faith on the parties; that the defendant by counterclaim is in breach of the obligations of good faith by virtue of the manner and method of advancing the claim; that the defendant by counterclaim attempted to defraud the plaintiff and attempted to induce payment of claims not properly payable by the plaintiff by counterclaim; that the defendant by counterclaim conspired to have the vehicle insured by the plaintiff by counterclaim stolen in order to present the claim forming the subject-matter of the statement of claim or conspired to create circumstances which it would appear to substantiate a bona fide claim under the policy; and that the defendant by counterclaim wilfully made false statements in the advancement of his claim for the purpose of inducing the plaintiff by counterclaim to pay moneys not properly payable.
The counterclaim also pleads that the plaintiff's statement of claim for harassment, breach of good faith, traumatic neuroses and emotional stress are not supported in fact and are made for the sole purpose of inducing and/or coercing the plaintiff by counterclaim into payment of a claim not properly payable; this the counterclaim pleads is an abuse of process as the allegations are made for a collateral and improper purpose not legitimate in the use of the process of court.
In those circumstances Catzman J. felt there was sufficient in doubt that the counterclaim should not be struck out.
In the case at bar, it is sufficient to say that I do not entertain any similar doubt because an important element of the tort is missing, that is, that the object of the plaintiff's pleading is to effect an improper purpose outside the scope of the action.
[10] Kiteley J. correctly stated the essential elements of the tort of abuse of process and held that a court might find that abuse of process had been made out in the circumstances of this case. I am not satisfied that she was wrong. It is not necessary that the text book statement of the essential elements of the tort be found in the pleading. What is necessary are allegations of the facts that are relied on as giving rise to those essential elements.
[11] In my respectful opinion there is a clear parallel between the situation in the Ng v. Commercial Union (Ont. S.C.) and that in the case at bar.
[12] I would dismiss the appeal from the decision of Kiteley J. on the first ground on which she relied, which is that there was a sufficient pleading of the tort of abuse of process. Kiteley J. based her decision on two grounds, the second being that there had been unacceptable delay by the plaintiff in bringing this motion to strike out the pleading in the counterclaim.
[13] O'Leary J. has quoted rule 21.02 which requires that a motion under rule 21.01 should be made promptly. In this case, the motion was not made promptly. It was not brought until the day before the Bank was going to be required to attend for an examination for discovery. It was brought long after the pleading in question had been delivered. The motion obviously was brought to avoid questioning and production of documents.
[14] While rule 21.02 provides that, where a motion is brought other than promptly, the court may take account of that fact in awarding costs, there may be merit in the proposition that, where the moving party's delay is egregious, the motion can be dismissed on that ground.
[15] The result of dismissing such a motion is not to decide the matter in favour of the party pleading, in this case the estate of Ms. Kopman, but simply to allow the matter to go on to trial. The trial judge will have an opportunity to make a decision after hearing the relevant evidence and full argument on the law. The matter can then proceed to the Court of Appeal with a complete record.
[16] I would dismiss the appeal on the second ground as well.
Appeal allowed in part.