COURT FILE NO.: CV-05-0793
DATE: 2012-01-25
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF the Construction Lien Act,
R.S.O. 1990. C.C.30
B E T W E E N:
1621730 ONTARIO INC. o/a NORTHERN CONSTRUCTION AND MAINTENANCE,
Michael S. O’Neill, for the Plaintiff (Moving Party)
Plaintiff
- and -
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO and BOT CONSTRUCTION (ONTARIO) LIMITED,
No one appearing for the Defendant on the motion.
Nick Melchiorre, (Opposing the Motion) for David Jaggard, Towanda Timber Limited, Paula H. Jaggard and Dawson Road Mini Storage Inc.,
Peter Hollinger (Opposing the Motion) for Marcel Rene Dumoulin a.k.a. Marcel Joseph Dumoulin, Laila Dumoulin and 2022539 Ontario Inc. o/a Lad Consulting
Defendants
HEARD: January 19, 2012,
at Thunder Bay, Ontario
Mr. Justice D. C. Shaw
Decision On Motion
[1] This is a motion by the solicitors for the corporate plaintiff to be removed as solicitors of record.
[2] The plaintiff is owned by three individuals, in equal shares, - Messrs. Trembath, Jaggard and Dumoulin – through their respective numbered companies.
[3] At the time the action was commenced, the solicitors received instructions from Trembath who was the ostensible spokesman on behalf of the corporation. The statement of claim seeks payment for labour and materials supplied by the plaintiff to the defendant, Bot Construction (Ontario) Limited, with respect to a project for the construction of an extension of Highway 11/17.
[4] Shortly after the claim was issued, Bot Construction began a separate action alleging fraud and breach of fiduciary duty on the part of Dumoulin, who was the project manager, and conspiracy for fraud and breach of fiduciary duty by Jaggard, Trembath and Dumoulin. In addition to the three individuals, Bot Construction also named as defendants affiliated holding companies, the spouses of the three individuals, Towanda Timber Limited and Northern Fencing & Guardrail Contracting.
[5] Contemporaneously with the issuance of the claim by the solicitors on behalf of Northern Construction and Maintenance, a separate action was started on behalf of Northern Fencing & Guardrail Contracting. The claim was for work supplied by Northern Fencing & Guardrail Contracting at the direction of Trembath to Bot, unrelated to the joint venture of Northern Construction and Maintenance, involving Messrs. Trembath, Jaggard and Dumoulin.
[6] Bot obtained a comprehensive Mareva injunction which froze the personal and corporate assets of Messrs. Trembath, Jaggard and Dumoulin. The injunction has affected the abilities of the parties to finance both the prosecution of their respective claims and the defence of the Bot action.
[7] Northern Construction & Maintenance has no assets apart from the claim against Bot.
[8] The affidavit filed on behalf of the solicitors deposes to disagreement and lack of communication among Trembath, Jaggard and Dumoulin with respect to the responsibility that each party had in Northern Construction & Maintenance and in relation to each other. The affidavit deposes that Mr. Trembath has advised that the parties are suspicious of each other, are unwilling to meet and are not able to provide instructions to the solicitors in order to proceed on behalf of Northern Construction & Maintenance. Trembath advises that he has had to bear extensive personal liability as a result of guarantees for Northern Construction & Maintenance and that he has not been repaid by Northern Construction & Maintenance or paid by Jaggard or Towanda Timber Limited who purportedly owed significant monies to Northern Construction & Maintenance.
[9] The solicitors deposes that in addition to being unable to secure collaborative instructions from the parties, they have received no retainer from the plaintiff or from the individual owners for legal costs and future services. There has been disagreement among the parties in regard to the carriage and costs of the action.
[10] The solicitors depose that the discord, lack of communication, lack of instructions and the financial conflict between the parties have put the firm in a position where it cannot realistically proceed with the action.
[11] Further, the solicitors depose that the apparent conflict between the parties has created a conflict of interest in that the firm continues to represent Trembath in the claim of Northern Fencing & Guardrail Contracting against Bot.
[12] Trembath has recently been examined for discovery, for five days, on behalf of Northern Construction & Maintenance and on behalf of Northern Fencing & Guardrail Contracting. There are approximately 50 undertakings arising out of those discoveries. The solicitors have undertaken to attend to having those undertakings fulfilled even if they are removed from the record.
[13] A pre-trial has been set for May 31 and June 1, 2012, in accordance with a judicially ordered litigation timetable.
[14] Messrs. Jaggard and Dumoulin oppose the motion by the solicitors to be removed from the record. They take the position that there is no evidence of letters from the solicitors to Jaggard and Dumoulin, asking for instructions and not receiving them. They state that the original agreement for payment of costs was that the solicitors would wait until the action was completed. They point out that no bill has been sent. They acknowledge, however, that a retainer was requested by the solicitors in the latter half of 2011 and that it has not been paid.
[15] Messrs. Jaggard and Dumoulin submit that if the solicitors are required to remain on the record, it will result in little prejudice to the solicitors because they will still be representing Trembath in his personal capacity as well as through Northern Fencing & Guardrail Contracting, Trembath is the principal of Northern Fencing & Guardrail Contracting.
[16] Messrs. Jaggard and Dumoulin submit that there will be significant prejudice to Northern Construction & Maintenance and to the shareholders and to the other parties in all actions if the solicitors are allowed to get off the record. They submit that Northern Construction & Maintenance will have great difficulty in retaining other solicitors, given the stage that the action is at and given that the company has no financial resources to retain new counsel. They submit that if the solicitors are removed and Northern Construction does not obtain new counsel, the action will be dismissed, Northern Contracting will be put in bankruptcy and Bot will use this to its advantage in the remaining litigation against the other parties.
Decision
[17] I am granting the order requested, removing the solicitors as solicitors of record for the plaintiff, subject to the solicitors complying with their undertaking to arrange to have the undertakings given on the discovery of Mr. Trembath fulfilled.
[18] I have no reason to dispute the solicitors’ evidence that they are unable to obtain collaborative instructions from the three shareholders of the company. The fact that one of the shareholders supports the solicitors’ motion and two oppose it, is proof itself of the fact that the shareholders cannot agree.
[19] I also accept the solicitors’ evidence that they are in a conflict of interest position in relation, on the one hand, to their retainer by Trembath, personally, and in connection with his company, Northern Fencing & Guardrail Contracting, and, on the other hand, in their role as counsel for a closely held company, Northern Construction & Maintenance, two of whose shareholders do not share the same views as the third shareholder, Trembath. To continue to require the solicitors to act, would put them in an impossible position.
[20] It is also common ground that the solicitors are not being paid by the client, that the client has no assets, that the client has not paid the requested retainer and that the solicitors have no prospect of being paid unless the action realizes the necessary funds.
[21] This is highly complex litigation. Discoveries have taken close to 30 days. There are multiple parties. The trial will be lengthy. Trembath has no interest in having his solicitors participate in the entire trial. The solicitors have no reason to attend the entire trial. There is no basis to impose that burden on the solicitors.
[22] Messrs. Jaggard and Dumoulin, their companies and their spouses are represented by counsel. If, as the majority shareholders of Northern Construction & Maintenance, Messrs. Jaggard and Dumoulin are concerned that the company will be without representation if the solicitors are removed from the record, it is open to their own counsel to represent the company. Trembath has stated, through his solicitors, that he has no objection to this.
[23] I also take into consideration that this is not a situation where the solicitors are seeking to be relieved of their responsibilities on the eve of trial. The trial of this action is many months away. The solicitors have agreed to attend to the completion of Mr. Trembath’s undertakings. The timing of their motion, in the context of this agreement, is not improper. Although a litigation timetable has been ordered, there is ample time prior to the next step, the pre-trial conference on May 31 and June 1, 2012, for new counsel to be prepared to participate. I also note that this motion does not come as a surprise to Messrs. Jaggard and Dumoulin. The solicitors informed them prior to the agreement on a litigation timetable that, unless the solicitors were able to obtain instructions on the basis of a consensus among Messrs. Trembath, Jaggard and Dumoulin, and unless they received a retainer from Northern Construction & Maintenance, they would be bringing the within motion. The conditions were not met. The solicitors have proper grounds for the request to withdraw. The litigation timetable itself expressly contemplates such a motion.
[24] An order shall go, removing O’Neill Cresswell DeLorenzi Mendes as solicitors of record for the plaintiff, on the condition that the solicitors arrange for the completion of the undertakings given on the examination for discovery of Mr. Trembath. The form of the order shall comply with subrule 15.04(4), including the text of subrules 15.04(6) and (7).
[25] If costs of this motion are an issue, an appointment may be taken out with the Trial Co-ordinator within 20 days to speak to the matter.
The Hon. Mr. Justice D. C. Shaw
Released: January 25, 2012
COURT FILE NO.: CV-05-0793
DATE: 2012-01-25
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
1621730 ONTARIO INC. o/a NORTHERN CONSTRUCTION AND MAINTENANCE,
Plaintiff
- and –
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO and BOT CONSTRUCTION (ONTARIO) LIMITED,
Defendants
DECISION ON MOTION
Shaw J.
Released: January 25, 2012
/mls