N.M. Davis Corporation Limited v. Ross et al. [Indexed as: N.M. Davis Corporation Ltd. v. Ross]
110 O.R. (3d) 196
2012 ONSC 1697
Ontario Superior Court of Justice,
Lederer J.
March 20, 2012
Corporations -- Piercing corporate veil -- Plaintiff lending money to R through R's corporation -- R Inc. failing to repay loan and plaintiff bringing action for breach of contract -- Summary judgment granted against R Inc. -- R and R Inc. interchangeable for purpose of loan -- Piercing of corporate veil and order for summary judgment against R personally being appropriate.
Damages -- Punitive damages -- Plaintiff lending money to defendant through its principal, D -- Defendant unable to repay loan and arranging to have D murdered -- Plaintiff bringing action for return of funds owed and for punitive damages -- Action not based on murder -- No separate or independent cause of action associated with breach of contract existing that justified award of punitive damages.
Professions -- Barristers and solicitors -- Conflict of interest -- Defendants aware for some time of circumstances that gave rise to alleged conflict of interest on part of counsel for plaintiff and bringing motion to have counsel removed two days before hearing of plaintiff's motion for summary judgment -- Court declining to adjourn summary judgment motion or to remove counsel for plaintiff -- No disqualifying conflict existing -- Defendants' intention to delay matter and to make it more difficult for plaintiff to have its motion heard.
Through its principal, D, the plaintiff loaned money to R through R's corporation, R Inc., to finance the purchase and renovation of properties in the Greater Toronto Area. R used the funds to make investments outside Ontario and to fund his lifestyle, misled D about the state of affairs and, when he was unable to repay the debt, arranged to have D murdered. R pleaded guilty to the murder. The plaintiff brought an action for the return of the funds it was owed and for punitive damages, and moved for summary judgment. Two days before the motion was to be heard, the defendants brought a motion to have counsel for the plaintiff removed on the basis of a disqualifying conflict of interest, as counsel's law firm had prepared the wills for R and his wife.
Held, the motion for summary judgment should be granted.
The circumstances did not give rise to a conflict of interest on the part of counsel for the plaintiff. Moreover, the prejudice to the plaintiff, at this stage of the proceeding, from being denied the solicitor of its choice outweighed the prejudice to the defendants if the solicitor continued to act for the plaintiff. Finally, the defendants had been aware of the circumstances giving rise to the alleged conflict for some time. It was reasonable to presume that the attempt to remove the plaintiff's solicitor at this stage was tactical, aimed at delay and directed to making it more difficult for the plaintiff to have its motion heard.
Based on R's admissions in the criminal proceedings, there was no genuine issue requiring a trial. Judgment should be granted against R Inc. R Inc. was, for all practical purposes, interchangeable with R. They were treated as indistinguishable for the purposes of the loan. It was appropriate to pierce the corporate veil and order judgment against R personally.
An award of punitive damages would not be appropriate. The purpose of punitive damages is retribution in respect of the wrong that is the foundation of the lawsuit. In this case, the wrong was not the murder but the breach of contract. There was no separate or independent cause of action associated with the breach of contract that justified an award of punitive damages.
MOTION by the plaintiff for summary judgment.
Junior Sirivar, for plaintiff (moving party). No one as counsel for the defendants; J. Santarossa, as agent.
Reasons for Decision
[1] LEDERER J.: -- This is a motion for summary judgment. Through its principal, Glen Davis, the plaintiff arranged for a loan to be made to the defendant, Marshall Ross, through his corporation, Rosshire Enterprises Inc. ("Rosshire"). There were terms attached to the loan. Marshall Ross did not comply with those terms. In time, it became apparent to him that he would not be able to pay back the money he had borrowed. His response was to arrange for the murder of Glen Davis. He was arrested, charged and pleaded guilty to the crime. By this motion, the plaintiff seeks the return of the funds it is owed and punitive damages.
[2] The defendants, John Doe and Jane Doe, are individuals who have not been identified and are not represented. They are other people said to have been involved in the murder of Glen Davis. Counsel for the plaintiff advised that, if the plaintiff is successful in obtaining summary judgment, the action against them will be discontinued.
[3] At the outset, Ms. J. Santarossa identified herself. She is a lawyer. She is one of the counsel acting for Marshall Ross in his criminal proceedings. Ms. Santarossa was careful to say that she, and her colleagues, had not been retained to act for Marshall Ross or Rosshire in this proceeding. Her only purpose was to advise the court that a motion had been served on behalf of Marshall Ross, acting on his own behalf, seeking to have counsel for the plaintiff removed on the basis that the firm, McCarthy Tetrault ("McCarthys"), was in a conflict of interest. Its lawyers had prepared the wills for both Marshall Ross and his wife. In the Notice of Motion, it is said that confidential information relating to Marshall Ross and his wife, which is relevant to their financial circumstances, had been disclosed to the firm. It is suggested that these financial circumstances are "potentially an important issue in the civil suit". While the Notice of Motion raised the prospect that the motion would be dealt with, in writing, on March 1, 2012 (the day it came before the court) it also proposed that it be heard sometime thereafter. In her submissions, Ms. Santarossa suggested that the motion for summary judgment be delayed until such time as the issue of the conflict could be dealt with either in writing or with Marshall Ross, in court, appearing on his own behalf.
[4] The fact that Marshall Ross has been convicted of a crime does not detract from his rights to appear or be represented in court. It also does not diminish his responsibility to follow the rules and the law that govern, organize and control participation in the processes of the court.
[5] Rule 37.07(6) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 requires that a motion be served seven days before it is to be heard. The Notice of Motion on which Marshall Ross relied is dated February 28, 2012. It recognized that the motion for summary judgment was to be heard on March 1, 2012 and was, itself, to be heard on that day. Consistent with these dates, counsel for the plaintiff advised that his firm (McCarthys) had received the Notice of Motion only two days before. The court has the authority and, in appropriate circumstances, will abridge the time within which a Notice of Motion is to be served (see rule 3.02 of the Rules of Civil Procedure). Is this case one of them? The record demonstrates that, on November 29, 2011, Madam Justice Low set March 1, 2012 as the date for the summary judgment motion to be heard. The material supporting the motion was served on Marshall Ross on the same day the endorsement of Madam Justice Low was made. The next day, counsel for the plaintiff wrote to Marshall Ross confirming March 1, 2012 as the date for the hearing of the motion for summary judgment. It attached a copy of the endorsement of Madam Justice Low, together with the timetable set by her honour for the delivery of materials leading up to the hearing of the motion. It advised that counsel was "eager to have the motion heard as soon as possible". Nonetheless, Marshall Ross waited until two days before the motion was to come to court before bringing his own motion to have counsel removed. It is not as if Marshall Ross was unaware of the situation. The Notice of Motion served on his behalf explains that the issue was raised on June 13, 2011, during a discovery process, carried out as part of the pre- trial proceedings in the criminal prosecution. The file representing the work done for Marshall Ross and his wife was produced. On November 11, 2011, counsel acting for Marshall Ross, in his criminal prosecution, spoke to counsel for the plaintiff. It was suggested that McCarthys was in a conflict of interest and a request made that this claim be brought to the attention of the court. The Notice of Motion reports that counsel for the plaintiff "would not confirm whether or not he would do this".
[6] In the proceeding before me, counsel for the plaintiff went on to make submissions dealing with the alleged conflict of interest. He pointed to the time that had passed, the steps taken to advance the litigation and the appearances made by counsel on behalf of the plaintiff without the issue of a conflict being raised.
[7] The Statement of Claim was served on June 5, 2009. A review of it makes clear that McCarthys was the firm acting on behalf of the plaintiff. Marshall Ross and Rosshire retained counsel. On July 3, 2009, a Notice of Intention to Defend was prepared and served on McCarthys.
[8] On August 28, 2009, counsel for Marshall Ross and Rosshire served a demand for particulars and a record in support of a motion for an order striking out the Statement of Claim, for particulars and transferring the action from Milton to Toronto. Initially, the motion was scheduled to be heard October 14, 2009. It was adjourned to January 19, 2010. On that day, the parties agreed as to how the demand for particulars should be dealt with. With the exception of whether the case should be transferred, the remainder of the motion was heard on January 19, 2010 and continued on February 16, 2010. No objection was taken as to the plaintiff being represented by McCarthys. On February 26, 2010, the judge who heard the motion released reasons dismissing the motion.
[9] On March 1, 2010, counsel appeared before the same judge. This time, the plaintiff consented to transferring the action to Toronto. On March 9, 2010, Marshall Ross and Rosshire served a Notice of Motion seeking leave to appeal the refusal of the judge to strike out the Statement of Claim. On March 19, 2011, Marshall Ross and Rosshire served a further Notice of Motion with respect to the motion decided within the reasons that had been issued on February 26, 2010. This one sought to vary the order that had been made (see rule 59.06). The two defendants wanted to fix the time by which their Statement of Defence was to be delivered and to obtain production of certain additional documents. On April 6, 2010, Marshall Ross and Rosshire brought another motion, this time to adjourn the motion for leave to appeal. The plaintiff consented to this request. On June 18, 2010, the parties appeared in court to argue the motion to vary and to settle the orders of February 26, 2010 and March 1, 2010. The orders were settled but, due to time constraints, the motion to vary could not be argued and was adjourned to August 20, 2010. It was adjourned again to October 6, 2010. It was heard on that day. The judge granted the defendant's request for the further production, but ordered them to serve a Statement of Defence within ten days of the plaintiffs producing certain additional documents. The motion for leave to appeal was heard by a judge of the Divisional Court. The motion was dismissed. On March 25, 2011, nearly two years after the Statement of Claim had been delivered, the Statement of Defence was served. Throughout all of this, the defendants were represented by counsel. There was not any suggestion that McCarthys was in a conflict of interest. On October 13, 2011, the lawyer who had been acting for Marshall Ross and Rosshire obtained an order removing his firm from the record.
[10] Counsel for the plaintiff submitted that, where a conflict is apparent, the party raising the issue cannot wait until it is tactically advantageous to have counsel removed. In this case, serving the Notice of Motion two days before a motion for summary judgment is akin to raising the question on the eve of trial. It is just too late.
[11] In our efforts to administer justice fairly, we are mindful that "[a] litigant should not be deprived of his or her choice of counsel without good cause" (see MacDonald Estate v. Martin, 1990 32 (SCC), [1990] 3 S.C.R. 1235, [1990] S.C.J. No. 41, at para. 13, as referred to in Kaiser (Re), [2011] O.J. No. 6223, 2011 ONCA 713, at para. 21). "The test is whether a fair-minded and reasonably informed member of the public would conclude that counsel's removal is necessary for the proper administration of justice" (as quoted in Kaiser v. Sobermen Inc., supra, at para. 21).
[12] The delay in bringing the motion weighs in favour of the plaintiff. The prejudice to the plaintiff, at this stage in the proceeding, being denied the solicitor of its choice, outweighs the prejudice to the defendants if the solicitor continues.
[13] Finally, given the timing of the service of the Notice of Motion and everything that was allowed to occur without reference to the prospect of a conflict of interest, it is reasonable to presume that the true reason for the attempt to remove McCarthys was tactical, aimed at delay and directed to making it more difficult for the plaintiff to have its motion heard.
[15] At the time the motion was argued, the decision as to whether the motion should be adjourned and whether counsel for the plaintiff should be removed on the basis that there was a conflict of interest was reserved. For the reasons reviewed herein, the motion should not be adjourned and counsel will not be removed.
[16] This having been determined, I now consider the motion for summary judgment.
[17] The fundamental basis for a motion for summary judgment is that there would be no purpose in allowing the matter to proceed to trial. The Rules of Civil Procedure set the primary standard. The court is to grant summary judgment where it is satisfied that there is no genuine issue requiring a trial (see rule 20.04(1)(b)).
[18] Marshall Ross was the sole director and shareholder of Rosshire. He admitted that he misused the loan funds and arranged for the murder of Glen Davis when he could not repay the debt. As of December 31, 2008, the balance of the loan stood at just under $2,700,000. All of this was admitted by Marshall Ross as part of his pleading guilty to the murder. In the circumstances, there is no genuine issue requiring a trial.
[19] I am prepared to order judgment in favour of the plaintiff against the defendant Rosshire.
[22] Rosshire was, for all practical purposes, interchangeable with Marshall Ross. They were treated as indistinguishable for the purposes of the loan. I am prepared to breach the corporate veil and order judgment against Marshall Ross personally.
[24] Accordingly, I award judgment against Rosshire and Marshall Ross personally
-- in the amount of $3,269,204.94;
-- plus prejudgment interest pursuant to the loan agreement;
-- plus post-judgment interest at the same rate.
[31] The purpose of punitive damages is retribution in respect of the wrong that is the foundation of the lawsuit. In this case, the wrong is the breach of contract, not the murder. There is no separate or independent cause of action associated with the breach of contract that justifies punitive damages.
[32] I will not order punitive damages in this case.
[33] Costs are awarded in the amount of $63,979.29.
Motion granted.