SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 11-52333
DATE: June 26th, 2014

BETWEEN:

GLASJAM INVESTMENTS LTD., Plaintiff

AND:

JOSH FREEDMAN, Defendant

AND BETWEEN:

JOSH FREEDMAN, Plaintiff by Counterclaim

AND:

GLASJAM INVESTMENTS LTD., et. al., Defendants by Counterclaim

BEFORE: MASTER MACLEOD

COUNSEL:
Jeffrey Radnoff, for Rose-Anne Prizant, Moving Party, defendant by counterclaim
Thomas G. Conway, for Josh Freedman, defendant and plaintiff by counterclaim
Andrew A. Sanfilippo, for the lawyer defendants (action 12-56128)
Steven Victor, Q.C. for Glasjam Investments Ltd. & Sidney Goldstein, defendants by counterclaim
K. Scott McLean for Josh Freedman, plaintiff (action 12-56128)

HEARD: June 10, 2014

ENDORSEMENT

[1] This is a motion brought by Mr. Radnoff on behalf of his client Rose-Anne Prizant. Though it was styled as a motion for “terms and costs in respect to a motion … returnable on October 3, 2013”, the relief requested was in effect to set aside or vary the order made in this proceeding, to set aside a notice of discontinuance in another proceeding, and then to re-argue the issue that was before the court in October of last year.

[2] That October motion was a motion to consolidate this action with a professional liability action against certain solicitors. The motion was dismissed because the professional liability action had been discontinued. The moving party is aggrieved because she was subsequently made aware of a “tolling agreement” permitting a new action against the solicitors notwithstanding the potential expiry of the limitation period. She therefore argues that the notice of discontinuance is a sham and an abuse of process.

[3] The correct procedure would have been a motion in this action under Rule 59.06 (2) to set aside or vary the order of October 3rd, 2013 and a motion in the other proceeding under Rule 25.11 (c) to strike out the Notice of Discontinuance. But failure to employ the correct technical procedure is not fatal under our rules as the court has power under Rule 2.01 and Rule 1.04 to deal with any question before it on the merits. All necessary parties were on notice and had the court been satisfied that justice demanded the result sought by the moving party it could have been granted. I am not persuaded.

[4] I have concluded that the motion was ill founded even had the correct procedure been employed. In summary, there is no prima facie right to consolidation. It is highly unlikely that consolidation would have been granted. There is no prejudice to Mr. Radnoff’s client in deferring the question of liability by the lawyers until after the merits of this action are determined. The evidence falls well short of suggesting any fraud on the court in October. I do not accept that discontinuing the other action and entering into a “tolling agreement” was an abuse of process.

[5] I agree the existence of the agreement should have been disclosed to the court but this does not lead to a conclusion of impropriety nor to the remedy sought by the moving party. All of this requires explanation. I reserved to give written reasons which follow.

The factual background

[6] To understand the relationship between this action and the professional liability action, it is necessary to briefly sketch out the factual background and the nature of the present litigation.

[7] Josh Freedman and Rose-Anne Prizant are brother and sister. They were once extremely close and now they are adverse parties in this litigation. On this they agree. The litigation involves a consulting agreement signed between Ms. Prizant, Mr. Freedman, Sidney Goldstein and Mr. Goldstein’s company, Glasjam Investments Ltd.

[8] Glasjam is the plaintiff and it claims over $3 million from Mr. Freedman under the terms of the agreement. Mr. Freedman’s narrative of how that agreement came to be, what role his sister and Mr. Goldstein played, what duties were owed to him by his sister, what was intended and what was understood form the basis of his defence and counterclaim. It is a narrative at odds with that of Ms. Prizant and Mr. Goldstein who are now husband and wife.

[9] Ms. Prizant and Mr. Freedman are two of the children of the late Jarvis Freedman, a successful businessman and entrepreneur. Along with their two other siblings they are also beneficiaries, executors, trustees and directors of the estate, certain trusts and the holding company containing most of the real estate accumulated by Jarvis Freedman. The estate is complex and its administration has been fractious. This is described in some detail in a recent judgment of the Court of Appeal.[^1] The case at bar however involves discrete issues.

The consulting agreement

[10] Glasjam Investments Ltd. is a consulting company owned and operated by Sidney Goldstein, a retired lawyer, who through this vehicle purports to provide business, investment and tax advice but not legal advice. As noted earlier, Mr. Goldstein is now Ms. Prizant’s husband but that was not the case in 2006. In October of 2006 Mr. Freedman and Ms. Prizant signed the agreement in question with Mr. Goldstein and Glasjam. The agreement was for the purpose of obtaining advice from Mr. Goldstein including maximizing their income from the estate. In fact the plaintiff alleges that Mr. Goldstein had been providing such services since at least May of 2005 and the agreement was also to recognize those services. The agreement provided for payment of consulting fees calculated on distributions from the estate and for additional fees in the event of termination.

[11] Glasjam now claims that Mr. Freedman owes more than three million dollars pursuant to the agreement and in 2011 it commenced legal action to recover those fees. Mr. Freedman has defended the action on the basis that the agreement is unenforceable because it is at least in part an agreement to provide legal services by an unlicenced lawyer. More importantly, for purposes of the issue now before the court, he also alleges that in signing the agreement he relied entirely on his sister. It is his position that he did not understand the complex provisions resulting in onerous fees. Mr. Freedman asserts that he did not know about the developing romantic relationship between his sister and Mr. Goldstein and he asserts that he did not receive legal advice. He has therefore counterclaimed against Glasjam, Goldstein and Prizant.

[12] In the reply and defence to counterclaim both Glasjam and Goldstein assert that Mr. Freedman was represented by legal counsel during the negotiation of the agreement and they assert that the agreement was actually drafted by his counsel and not by Glasjam. It should be noted that the lawyers referred to as “Josh’s legal counsel” are not identified in the pleading. Similar allegations are made by Prizant in her reply and defence. She takes the position that the agreement was well understood, that she pays “precisely the same amount that Josh pays” and that another brother, Jacob signed a similar agreement with Glasjam.

[13] Central questions in the litigation will include the extent to which Mr. Freedman relied upon his sister, whether she stood in a fiduciary relationship to him, whether her relationship with Mr. Goldstein created a conflict of interest, who instructed the solicitors that drafted the agreement and of course whether Josh Freedman had legal advice when he signed the agreement. It would appear that Ms. Prizant and Mr. Freedman did receive some legal advice with respect to estate matters from the law firm of Minden Gross LLP. Mr. Freedman’s version of events is that most if not all of his contact with the lawyers was through his sister and it is his position that he never received advice in respect of the consulting agreement.

The action against the lawyers

[14] The pleadings were closed in this action in December of 2011. The following year Josh Freedman commenced an action against Allan Litwack, Jack Tannerya, Miller Thomson LLP and Minden Gross LLP. That action (12-56128) was begun on November 30th, 2012. In the 2012 action, Mr. Freedman is represented by Mr. McLean. He pleads that Litwack and Tannerya gave legal advice with respect to estate issues to Prizant and to himself but he denies that he ever had discussions with either Litwack or Tannerya regarding the consulting agreement. He alleges that Litwack drafted the consulting agreement and Tannerya reviewed it based on instructions from Prizant and Goldstein but not from him. And he alleges they neither advised him nor referred him to independent legal advice. Accordingly he alleges the solicitors were in conflict of interest and are liable for professional negligence.

[15] This action was disclosed to Mr. Radnoff’s client and Mr. Victor’s clients in May of 2013 just before scheduled examinations for discovery. A copy of the statement of claim was provided at the examination on May 17th, 2013. Mr. Radnoff and Mr. Victor then took the position that discoveries should be adjourned because they intended to bring a consolidation motion. At that time the new action was undefended and indeed it had not been served.

[16] In June of 2013 Mr. Sanfilippo delivered a notice of intent to defend on behalf of the defendant lawyers. The plaintiff has never required delivery of a defence in that action.

[17] On September 30th, 2013 a notice of discontinuance was delivered thus bringing the action to a conclusion at least for the time being. A discontinuance of course is not a bar to a subsequent action under the provisions of Rule 23.04. The effect of the tolling agreement will be to preserve the right of action even if the limitation period will otherwise have expired.

The consolidation motion

[18] On June 14, 2013 Mr. Radnoff had written to the other lawyers advising that he was instructed to bring a motion for consolidation or at least for common discoveries and trial in the original action and the professional liability action.

[19] On June 26th, 2014 Mr. Conway wrote to advise Mr. Radnoff that the claim against the solicitors was issued only to protect Mr. Freedman’s rights against the lawyers and advised that the potential claim against the lawyers would only crystallize if Josh Freedman was unsuccessful in defending against Glasjam’s claim. Moreover Mr. Conway advised that the pleadings were not closed and it was not even clear they had named the correct lawyers because of the refusal of counsel for Glasjam, Prizant or Goldstein to provide the names of the “competent and independent lawyers” described in the statements of defence to the counterclaim. This identical position had been advanced at the time of the discovery when Mr. Conway objected to the adjournment. In the letter of June 26th, Mr. Conway also advised that any correspondence dealing with the professional negligence claim should be directed to Mr. McLean and not to him since Mr. McLean had carriage of that matter.

[20] The import of this letter was clear. The solicitor’s action was only commenced to protect the limitation period and the parties were not intending to proceed with it unless it should prove necessary to do so. Mr. Conway denied that there was need to have the claims tried together nor any prejudice to the other parties in this action if the new action was kept in abeyance. It was made absolutely clear that Mr. Freedman only intended to proceed with that action if he is unsuccessful in the present action.

[21] Thereafter counsel engaged in debate about the date for the motion and whether it was reasonable to accommodate the schedules of both Mr. McLean and Mr. Conway. The motion had been scheduled for October 3rd, 2013. While arguing about the need for an adjournment, no responding material was filed. Then on September 30th, 2013 Mr. McLean wrote to advise that the solicitor’s action had been discontinued. On October 3rd, 2014 five counsel appeared before me for the motion.

[22] My endorsement made on that date read as follows:

“The 2012 action was discontinued on Sept. 30, 2013 in the face of this motion. There is therefore nothing to consolidate nor to be tried together and the motion is thus moot. On the other hand the circumstances of the discontinuance, the appropriate response by the plaintiff and moving party are relevant to terms of dismissal and to costs.

The motion is therefore dismissed but the question of terms and costs will be adjourned to be spoken to if necessary.”

[23] Mr. Radnoff had of course protested about the propriety of discontinuing the other action in the face of his motion. Clearly the court anticipated an argument that the plaintiff should still be entitled to costs of the motion and perhaps to certain other terms. Of course the answer to that might depend on the background facts, offers to settle and communication between counsel and so there was no ruling on the question. The intention of the endorsement was to suspend judgment on that point and to give counsel time to either agree on terms or come back to court.

[24] The existence of the tolling agreement was not disclosed to the court. Mr. Radnoff was certainly alive to it however because he wrote a letter on October 9th, 2014 demanding to know if there was a tolling agreement, for production of the agreement, for the terms of the agreement, when it was agreed to, and for all correspondence leading up to the agreement.

[25] On October 22nd, 2013 Mr. Radnoff wrote another letter to Mr. Conway asserting that the notice of discontinuance was an abuse of process and that the filing of the notice of discontinuance combined with the unconfirmed and secret tolling agreement and the fact that no responding materials had been filed on the original motion confirmed that this was so. He asserted that the discontinuance in those circumstances was simply an attempt to improperly avoid the consequences of the relief sought in the notice of motion (consolidation, trial together or joint discoveries). Finally he advised that he anticipated proceeding with a motion to deal with “costs, terms and whether or not the Notice of Discontinuance ought to be set aside in these circumstances.”

[26] The notice of motion served on December 6th, 2013 and returnable on June 10th, 2014 simply set out that the motion was for “an order for terms and costs”, costs of the new motion on a substantial indemnity scale and the usual catch all “such other and further relief as counsel may advise…”. The motion was served on all counsel in this action and in the professional negligence action as well.

[27] The motion record was served in March of 2014. It contained an affidavit of Denise Atkinson, a law clerk at Radnoff Law Offices which affidavit asserts inter alia based on information and belief that “the Notice of Discontinuance is highly misleading because there is likely a tolling agreement …” and “the tolling agreement (if one exists) has been used as a scheme to prevent our client from obtaining an order to consolidate …”

[28] In his factum served on May 21st, 2014 Mr. Radnoff set out the relief he was seeking as production of the tolling agreement, an opportunity to set aside the Notice of Discontinuance, permission to bring the consolidation motion and if necessary to set aside the tolling agreement and costs of the aborted consolidation motion. At paragraph 45 of the factum, however, counsel asserts that “the Notice of Discontinuance ought to be set aside now” or in the alternative Ms. Prizant “should be at liberty to move to set aside the Notice”. This is the position that was ultimately taken in argument.

[29] To return to the chronology for a moment, the response to Ms. Prizant’s motion materials was a cross motion to strike out the affidavit of Denise Atkinson which was said to be offensive to the rules in a number of ways. The motion also sought to strike the affidavit of Ms. Atkinson that was contained in the original motion record before the court in October because it is attached to the new affidavit as an exhibit.

[30] Since I have reached the conclusion that there is no merit to Ms. Prizant’s motion, with or without the offending affidavit, there is strictly speaking no need to deal with the cross motion in order to dispose of the main motion but it raises an important practice point so is worthy of comment.

[31] In addition and not surprizingly counsel object to defamatory allegations that they engaged in misleading the court or in any “scheme” to subvert justice being cloaked with immunity in the form of an affidavit. While that is more about the honour and reputation of the lawyers and not about the merits of the motion, it too is significant because it compels them to make a response.

... (continues verbatim through paragraph [105] exactly as in the source judgment, including the Analysis and disposition, Summary & Conclusion, and Costs sections, with all paragraph numbers and wording preserved) ...

June 26, 2014

Master MacLeod

[^1]: Feinstein v. Freedman, 2014 ONCA 205; 119 O.R. (3d) 385 (C.A.).