ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-13-482577
DATE: 2014/07/07
BETWEEN:
Fraser Mason
Plaintiff
– and –
Jeffrey David Shatford, Tanya Crystal Walker and Walker Law Professional Corporation
Defendants
William A. Chalmers, for the Responding Party/Plaintiff
Jane E. Sirdevan, for the Moving Party/Defendants Tanya Crystal Walker and Walker Law Professional Corporation
Ivan Y. Lavrence, for the Moving Party/Defendant Jeffrey David Shatford
HEARD: April 23, 2014
A.J. O’MARRA J.:
[1] The defendants, Jeffrey Shatford (Shatford), Tanya Walker and Walker Law Professional Corporation (Walker and Walker Law) have brought a motion for an order to strike or dismiss the plaintiff’s statement of claim under Rule 21.01(1) (b) as disclosing no reasonable cause of action and/or under Rule 21.01(3) (d) of the Rules of Civil Procedure as an abuse of process.
[2] The plaintiff, Fraser Mason (Mason) commenced his action against Shatford and Walker seeking special damages, specifically legal fees for which he claims he will not be compensated as a result of proceedings initiated by Walker and Walker Law on behalf of Shatford “for the predominant purpose of furthering some indirect, collateral and improper objective, namely to force Fraser Mason to pay Shatford money in excess” of money to which Shatford was entitled.
[3] Further, Mason claims the defendants “took or made a definite act or threat in furtherance of the improper purpose, namely, the refusal to agree to the release of money from the net sale proceeds in excess” of the money to which Shatford was entitled and a “demand that Fraser Mason pay Shatford money in excess” of the money to which Shatford was entitled “in exchange for the release of that money”.
[4] In substance, Mason seeks damages against the defendants alleging they committed the tort of abuse of process by initiating legal process to force him to pay money to the defendant Shatford; he was not legally required to pay.
Rule 21.01 Motions
[5] Rule 21.01(1) (b) permits a defendant to move to strike out a claim on the grounds it discloses no cause of action. The test to be applied on a motion to strike is well settled. It must be plain and obvious that the claim discloses no reasonable cause of action however, if there is a chance that the plaintiff might succeed, then the plaintiff should not be driven from the judgment seat.
[6] Under Rule 21.01(1) (b) no evidence is admissible on the motion. Allegations of fact in the statement of claim are assumed to be true, unless blatantly ridiculous or incapable of proof. Allegations based on assumptions and speculations need not necessarily be taken as true. (See Region Plaza Inc. v. Hamilton-Wentworth (Regional Municipality), (1990) 1990 6761 (ON SC), 12 O.R. (3rd) 750 at para. 4; see also Hunt v. Carey, 1990 90 (SCC), [1990] 2 S.C.R. 959 at paras. 30-36).
[7] Neither the complexity of the issues, the novelty of the cause of action, or the potential of a strong defence is to prevent a party from proceeding with its case. The pleading should be read generously so as not to unfairly deprive a party of the benefit of the pleading.
Overview of the Proceedings
[8] This matter arises in the context of somewhat complex legal proceedings involving defaults judgment, writ of seizure and sale, a fraudulent conveyance claim, judgment creditor enforcement proceedings, and a power of sale.
[9] On June 6, 2012 Shatford obtained default judgment against J. Mason, the son of Fraser Mason for unpaid personal loans in the amount of $114,153.84, plus costs and post-judgment interest. J. Mason co-owned a matrimonial property with his spouse, Stephanie, situated in Whitchurch-Stouffville, Ontario on which Fraser Mason held a mortgage in the principal amount of $550,000.
[10] On June 6, 2012 a writ of seizure and sale was issued directing the Sheriff of York Region to seize and sell the real and personal property of J. Mason and to realize from the seizure and sale the default judgment.
[11] On June 22, 2012 Shatford with the assistance of counsel other than Walker (defendants) commenced an action against J. Mason, Stephanie Mason, Fraser Mason, and Sven Walker and Sonya Diesberger, potential buyers of the property, alleging that it was a fraudulent conveyance and fraudulent mortgage.
[12] After the potential sale was aborted, the fraud action commenced by Shatford was discontinued on September 17, 2012.
[13] Fraser Mason, as mortgagee commenced a power of sale action on the mortgage not defended by his son and scheduled to be heard in Toronto on December 12, 2012.
[14] Shatford, on November 22, 2012, brought a motion, returnable December 4, 2012 as judgment creditor for various orders, including an order for garnishment against J. Mason and enforcement of the writ of seizure and sale regarding the Whitchurch-Stouffville property. Fraser Mason, as mortgagee, although not a party was served and appeared on the motion.
[15] The matter was heard by Gilmore J. in Newmarket at which time Fraser Mason sought an adjournment of the matter. Shatford was prepared to consent to the adjournment but with a term that in the event the property was sold the net proceeds of sale should be paid into court in order to protect his judgment creditor’s rights pending the determination of priorities under the mortgage. Mason opposed any terms as being unnecessary.
[16] In her endorsement Gilmore J. stated the following:
Fraser Mason was served with his motion material pursuant to Rule 37.07. The judgment creditor is concerned that as a result of Fraser Mason’s stated intention to take possession of the subject property on December 17, 2012, their rights to enforce on their writ of seizure and sale may be affected. The judgment creditor states that there are many issues outstanding relating to the priority of Fraser Mason’s mortgage. They are ultimately seeking to bring a motion under Rule 60.08 and conduct cross-examinations regarding priority of the mortgage.
In order to protect the judgment creditor’s rights and pending the determination of priorities under the mortgage, the judgment creditor consents to the adjournment brought by Fraser Mason but with a term that in the event the home is sold, any proceeds of sale would be paid into court.
[17] The court granted the adjournment and ordered that the proceeds of sale of the subject property be paid into court for several reasons as set out in her endorsement.
• It was not an arms’ length mortgage as between Mason and his son.
• J. Mason had not defended the power of sale proceedings and there was a potential family law litigation between him and his spouse.
• There was concern that if the mortgage had been paid out to Fraser Mason not only might the judgment be unable to be executed but the spouse of J. Mason may receive no equalization payment.
• Although Fraser Mason was the original mortgagee at the time the property was purchased it had been subsequently assigned to the RBC. The mortgage was re-assigned to Fraser Mason after Shatford, the judgment creditor had obtained judgment and the writ of seizure was registered on the property.
• There were several outstanding related proceedings and “things about the previous transactions that simply do not make sense” to the court, such as Fraser Mason’s lawyer sending a discharge statement in relation to the sale of the property prior to the assignment of the mortgage from the RBC to him.
[18] Shatford’s enforcement proceeding was adjourned sine die.
[19] Tanya Walker of Walker Law only became Shatford’s lawyer of record from December 11, 2012 for the enforcement proceeding, taking over from his earlier lawyer, Hermie Abraham of Abraham Law.
[20] On January 9, 2013 the property was sold under power of sale to an arms’ length third party purchaser with a closing date of May 1, 2013. On February 8, 2013 the purchasers of the property accelerated the closing date to March 14, 2013. The property transaction closed on March 14, 2013 and on March 21, 2013 Fraser Mason complied with the order of Gilmore J. and paid into court the net proceeds of sale, $741,000.
[21] On April 2, 2013 Mason brought a motion for an order to vary the order of Gilmore J. that the money paid into court be paid out to him, except for $148,041.65, an amount calculated to be owed to the judgment creditor, Shatford. The matter could not proceed on April 2 because of insufficient time being allocated. The variance application was adjourned to the scheduling court on April 10, 2013 to be given a long motion date to be heard.
[22] On April 16, 2013 Mason obtained judgment on the mortgage on consent of Stephanie Mason, J. Mason having been noted in default, in the amount of $739,968.
[23] On June 4, 2013 Mason brought a costs motion in the amount of $15,556.53 for the fraudulent conveyance action discontinued September 17, 2012. Mullins J., who heard the matter, concluded the Shatford action alleging fraud had not met the bona fide cause of action test. However, she also considered that the conduct of the defendant (Mason) had served to prolong the proceedings and aggravate the expense. The defendant was awarded costs in the amount of $7,500 because success on the motion was divided.
[24] On June 12, 2013 Mason had commenced the within action issuing the statement of claim alleging abuse of process by the defendants.
[25] The Shatford enforcement motion had been scheduled to be heard by Mullins J. on July 11th, 2013. On that date argument was not completed and it was adjourned. It was later discontinued in August 2013.
Abuse of Process
[26] Fraser Mason’s claim against Shatford and Walker is founded on an alleged abuse of process. Swinton J. in Mauro v. Etobicoke (City), [1997] O.J. No. 3820 noted at para. 14 that the requirements necessary to establish an abuse of process are as follows:
…a plaintiff must plead that a process was initiated before a tribunal for an improper or collateral purpose, and that there was some overt act or threat, separate and distinct from the proceedings themselves, but related to the improper purpose (Dooley v. CN Weber Ltd. (1994), 1994 7300 (ON SC), 19 O.R. (3rd) 779 (Gen.Div.) at 790). This tort is quite narrow, as the courts do not wish to discourage the use of civil proceedings by readily subjecting a litigant to the risk of a tort action brought by an opposing party. Only when the legal process is abused – for example, by threatening a civil action for the purposes of extortion – does the cause of action use.
[27] In Metrick v. Deeb, 2003 804 (ON CA), [2003] O.J. No. 2221 at para. 3 the Ontario Court of Appeal quoting from Fleming on Torts, 4th ed. (1971) at p.548 stated:
The essential elements of abuse of process are: first, a collateral and improper purpose, such as extortion, and secondly, a distinct 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 [emphasis added].
[28] Henry J. in Tsiopoulos v. Commercial Union Assurance Co. (1986), 1986 2531 (ON SC), 57 O.R. (2nd) 117 at p. 119 observed that the cause of action arises when the processes of law are used for an ulterior or collateral purpose. There is a misuse of the court process to “coerce someone in some way entirely outside the ambit of the legal claim upon which the court is asked to adjudicate”.
[29] In Teledata Communications Inc. et al v. Westburne Industrial Enterprises Limited et al, 1990 6887 (ON SC), [1990] O.J. No. 27 (Ont.HCJ) Eberle J. observed that:
The brining of an action, even if factually groundless, together with wrongful motives for bringing the action, is not sufficient to constitute the tort of abuse of process. What lies at the heart of the cause of action is an act, or threat of an act, outside the ambit of the action. The essence of the action therefore is the use of legal process to gain an end which the legal process does not entitle the plaintiff to obtain.
[30] In this matter, the basis for the abuse of process claim against defendant Shatford is stated in para. 35 of the statement of claim:
Since December 7, 2012 the defendants have used the fact that the Gilmore J. judgment required the payment of the entirety of the net sale proceeds from the sale of the property into court, notwithstanding the fact that Shatford’s maximum claim to these sale proceeds was and is “capped at the Shatford judgment maximum amount, as leverage to try to force Fraser Mason to capitulate and pay Shatford money to which Shatford is not entitled from Fraser Mason”.
Enforcement Proceeding
[31] The defendant, Shatford sought and obtained an adjournment subject to the term as ordered by Gilmore J. that the net proceeds be paid into court to preserve the proceeds in order to be available for a determination of the various interests. Shatford’s attempt to collect money to which he was owed and had default judgment through use of the court process does not constitute an improper motive or purpose as required for the tort of abuse of process.
Settlement Offers
[32] The plaintiff suggests in the statement of claim that Shatford acted improperly because he offered to settle the enforcement motion on several occasions. Mason states in his statement of claim that before his application to vary the order of Gilmore J. “on March 25, 2013, Walker on behalf of Shatford agreed to settle Fraser Mason’s motion for an order that the sum of $550,000 of the net sale proceeds be paid out of court to Fraser Mason” and on April 3, 2013 Mason accepted Shatford’s offer to settle. However, Walker, on behalf of Shatford took the position that when the matter did not proceed on April 2, the offer to settle was not capable of being accepted.
[33] Mason contends that the offer to settle by Shatford on March 25, 2013 demonstrates that Shatford knew that he had no claim to at least $550,000 of the net proceeds of sale and that notwithstanding Mason’s rights as mortgagee the defendants continued to refuse to agree to the release to Fraser Mason the net sale proceeds above the maximum amount to which Shatford as judgment creditor was entitled.
[34] The settlement offers were made on a without prejudice basis.
[35] It is trite law a settlement offer cannot be referred to in court by a party as an “admission” the opposite party has no case, as it would offend the strong public policy in favour of encouraging settlement discussions. Abella J. observed in Sable Offshore Energy Inc. v. Ameron International Corp., 2013 SCC 37, [2013] 2 S.C.R. 623 at para. 13:
Settlement negotiations have long been protected by the common law rule that “without prejudice” communications made in the course of such negotiations are inadmissible (see David Vaver, “Without Prejudice Communications – Their Admissibility and Effect” (1974), 9 U.B.C. L. Rev. 85 at p. 88). The settlement privilege created by the “without prejudice” rule was based on the understanding that parties will be more likely to settle if they have confidence from the outset that their negotiations will not be disclosed.
[36] There is nothing in the statement of material facts with respect to the offers to settle that take them into an exception of the “without prejudice” class privilege. On that basis alone, the paragraphs in the statement of claim which seek to make use of discussions or offers to settle as material facts alleging improper motive or purpose are inadmissible and as such should be struck from the statement of claim.
Variation Application
[37] The defendant, Shatford was not required to consent to a variation of a lawful order made by Gilmore J. with respect to the net proceeds of sale being paid into court. Even assuming the offers and discussions were admissible and the proof of improper motives extant at the time they are not material facts of any overt act taken by Shatford apart from pursuing the litigation process to its conclusion. As noted by Eberle J. in Teledata Communications even if the action was factually groundless and there were wrongful motives for bringing the action that is still not sufficient to constitute a tort of abuse of process. The act or threat of an act must be outside the ambit of the action. In this instance, there is no overt act in the circumstances outside the ambit of the action in the statement of claim. On that basis alone, the statement of claim is deficient.
[38] Walker was acting as counsel of record at the time Mason sought a variation of Gilmore J.’s order. Opposition to the variance of Gilmore’s order does not constitute an improper purpose. Moreover, the variance application was initiated by the plaintiff.
[39] Walker did not owe any duty of care to Mason as the party opposite in litigation. In Lubarevic v. Nurgitz, [1996] O.J. No. 1457 G.D. Lane J. at para. 11 stated:
As solicitor’s duty “is to advance his client’s interests and not to protect those of the opposite party in the negotiations or dealings that he is engaged in”. A litigant’s refusal to agree to a variance or setting aside a court order lawfully made cannot constitute an abuse of process.
[40] Adverse parties are always in disagreement as to their rights and entitlements. If a refusal regardless of its merits constitutes an abuse of process then every litigant and his or her counsel could be subject to a claim of abuse of process by the opposite party. In this instance, even if the refusal was improper the plaintiff’s remedy would be to seek costs on the enforcement motion, which Mason is in fact seeking.
Walker and Walker Law
[41] Mason alleges that defendants Walker and Walker Law initiated the Shatford action for the predominant purpose of furthering some indirect, collateral and improper objective. Walker did not initiate Shatford’s action as a judgment creditor to enforce judgment against J. Mason. Walker was not retained as counsel until after the process was initiated.
[42] Mason’s statement of claim also adverts to the fraudulent conveyance action against him and others as part of the abusive conduct. However, the action was commenced and discontinued several months before Walker and Walker Law was retained. Mason’s claim that Walker initiated proceedings is incapable of proof.
Claim for Special Damages
[43] The plaintiff seeks special damages in the form of legal fees for which he claims he will not be compensated. If Mason seeks fees above that to which he has already been awarded by Mullins J. on the discontinued fraud action or yet to be awarded on the discontinued enforcement motion then his claim is an attack on the costs order already made and a separate action to which he has no right. Southin J.A. observed in Sanghera v. Thind, [1991] BCJ No. 766 (BCCA) that costs incurred by a plaintiff in a prior proceeding cannot constitute “special damages”, citing the principle expressed in Quartz Hill Mining Co. v. Eyre (1883), 11 QBD 674 (CA):
The bringing of an ordinary action is not as a natural or necessary consequence involve any injury to a man’s property, for this reason, that the only costs which the law recognizes, and for which it will compensate him, are the costs properly occurred in the action itself. For those the successful defendant will have been already compensated, so far as the law chooses to compensate him. If the judge refuses to give him costs, it is because he does not deserve them: if he deserves them, he will get them in the original action: if he does not deserve them, he ought not to get them in a subsequent action.
[44] Whatever costs Mason incurred with respect to the prior proceedings cannot support a claim for “special damages” and on that basis the statement of claim must be struck as disclosing no reasonable cause of action.
Collateral Attack on Previous Decisions
[45] A collateral attack is an attack made in proceedings other than those whose specific object is the reversal, variation or nullification of the order or judgment under attack. As Hackland J. noted in Baryluk v. Campbell, [2008] O.J. No. 4279 (SCJ) at para. 35, the case law is well settled that the bringing of subsequent action to determine issues already determined by a court of competent jurisdiction constitutes a vexatious proceeding and an abuse of process. Mason’s claim of abuse and special damages amount to a collateral attack on the decision of Gilmore J.’s order that the net sale proceeds be paid into court and Mullin J.’s cost order.
[46] Mason’s claim that Shatford’s refusal to consent to the variation of Gilmore J.’s order to force him to capitulate and pay Shatford money to which he was not entitled, implies Gilmore J.’s order was wrong and he knew it. However, Shatford was not required to consent, whether the decision was right or wrong. He was entitled to rely on the decision just as Mason was entitled to seek to vary or challenge it. Mason’s claim that any refusal to consent to the setting aside or variance of Gilmore J.’s order constitutes an abuse of process is a collateral attack on the order and is in itself an abuse of process.
[47] In terms of Masons claim for legal fees, Madam Justice Mullins considered and determined the question of costs with respect to the discontinued fraud action. The question of costs for the enforcement motion are within the jurisdiction of the court that hears Mason’s motions for costs as provided in the Courts of Justice Act s.131(1). Outside of those awards, Mason’s claim for special damages in the form of legal fees constitutes a collateral attack on the costs ordered by Mullins J. and any costs order made on the enforcement motion, and as such an abuse of process.
Conclusion
[48] In summary, the statement of claim alleging abuse of process against Shatford and Walker and Walker Law is struck as it is plain and obvious the claim fails to disclose a reasonable cause of action and the claim constitutes an abuse of process for the following reasons:
- The statement of claim fails to cite material facts that form the basis of a claim of an abuse of process.
- The pleadings do not support that the defendants initiated a process for an improper or collateral purpose.
- The pleadings do not contain material facts of the defendants committing an overt act separate and distinct from the proceedings themselves, but related to an improper purpose.
- The plaintiff’s claim for legal fees does not constitute special damages.
- The statement of claim constitutes an abuse of process as a collateral attack on the orders made by Gilmore J. and Mullins J.
[49] The statement of claim is struck as disclosing no reasonable cause of action and as an abuse of process.
[50] Costs are awarded to the defendants. If the parties are unable to agree between themselves as to the matter of costs, counsel may make written costs submissions no more than four pages in length, including a costs outline within 15 days of the release of this decision. The responding submission is to be made within 15 days thereafter.
A.J. O’Marra J.
Released: July 7, 2014
COURT FILE NO.: CV-13-482577
DATE: 2014/07/07
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Fraser Mason
Plaintiff
– and –
Jeffrey David Shatford, Tanya Crystal Walker and Walker Law Professional Corporation
Defendants
REASONS FOR JUDGMENT
A.J. O’Marra J.
Released: July 7, 2014