1578838 Ontario Inc. v. Canadian Equity Builders

CITATION: 2014 ONSC 989

COURT FILE NO.: 50810/08
and CV-09-376981

DATE: 2014-02-12

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1578838 Ontario Inc. v. Canadian Equity Builders [50810/08]; Canadian Equity Builders v. 157838 Ontario Inc. [CV-09-376981]; 1578838 Ontario Inc. v. Martens Lingard [3163/11]; 1578838 Ontario Inc. v. Bank of Nova Scotia [1616/10]

BEFORE: Mr Justice Ramsay

COUNSEL: Mr Graydon Sheppard for 1578838 Ontario Inc.; Mr R. Hettiarachchi for Canadian Equity Builders; Mr Paul R. Sweeny for Martens Lingard; Mr Jed Blackburn for Bank of Nova Scotia and Scotia Mortgage Corporation

HEARD: 2014-02-12

ENDORSEMENT

[1] I decided a number of motions with reasons to follow. These are they.

[2] The numbered company (“157”) agreed to sell and Canadian Equity Builders (“CEB”) agreed to purchase real property in Welland. CEB was going to develop it as a condominium. The transaction did not close. The numbered company sued CEB. CEB sued the numbered company. The numbered company also sued its lawyers, Martens Lingard, and its mortgagee, the Bank of Nova Scotia.

157’s motion to amend the statement of claim

[3] In its claim against CEB, 157 asks for $300,000 in damages. It wants to amend the claim to ask for $1.5 million, based on the same facts as plead. I see no prejudice in amending the claim at this point. I do not accept CEB’s contention that a statutory limitation would apply to such an amendment.

157’s motion to consolidate its action against CEB with CEB’s action against it

[4] As Mr Sheppard points out, the two actions are mirror images of each other. They should proceed together with one party as plaintiff and the other as defendant (plaintiff by counterclaim.) CEB submits that I should let the trial judge decide. I do not think that the trial judge would be in a better position to decide this preliminary procedural issue. It would be in the interest of all parties and the administration of justice for everyone to know before the trial how it is going to proceed. As to who should be plaintiff and who should be defendant, the circumstances do not indicate either way. Ultimately the advantage of being plaintiff is overestimated. The numbered company was the first to sue. That seems a fair enough reason to let it be the plaintiff and CEB the defendant.

[5] The consolidation will not cause additional expense to CEB. It will not be required or entitled to examine further for discovery, except to ask questions related to the amended quantum of damages. This would be the case whether the actions are consolidated or not.

[6] The action by 157 against its lawyers should follow the action between 157 and CEB. In the action against the lawyers, 157 will have to prove its loss. The result of the main action will determine that issue to a great extent.

CEB’s motion to compel the non-party lawyers to be examined

[7] CEB submits that 157 has made the conduct of its lawyers an issue and that CEB accordingly should be able to examine them. In support of this examination it asks for a declaration that solicitor client privilege has been waived with respect to the purchase transaction. In my view, the motion cannot succeed.

[8] CEB has not made all reasonable efforts to obtain the information through other means. It should have drafted specific questions and asked 157 whether it would waive the privilege with respect to them. Instead, its lawyer asked 157 to consent to an order for examination of the lawyers and a waiver of privilege as to “the purchase transaction.” Rule 31.10 does not entitle CEB to proceed this way: Kerr v. McLeod, [2002] O.J. No. 788 (Div. Ct).

[9] That is sufficient to dispose of the motion adversely to CEB. But I wish to add that at this point I doubt that the information sought would be relevant or that solicitor client privilege has been waived with respect to the transaction in general.

[10] The lawyers were examined for discovery as defendants. By mistake and in contravention of the implied undertaking rule, the transcripts were given to CEB’s lawyer. (He has agreed to give them back.) Some answers given are argued to contradict 157’s position. CEB submits that it should be entitled to examine the lawyers on the following:

a. the effects, if any, of the lawyers’ alleged negligence and BNS’s withholding of consent on the failure of the transaction to close,

b. which party to the agreement was responsible for getting the BNS to consent to the transfer and

c. whether failure to get municipal approval for condominium status terminated the contract.

[11] Essentially, CEB wants to ask for legal opinions. These opinions are not information or matters of fact.

[12] CEB also submits that solicitor client privilege is waived when a party makes advice from a solicitor an issue or pleads that it acted in good faith because of such advice. In the actions between 157 and CEB, 157 says that the transaction failed to close because CEB failed to get condominium approval from the municipality and that 157 bore no responsibility for that failure. In its action against its lawyers, 157 pleads that the lawyers failed to tender, returned the deposit without authorization, failed to prosecute its action against CEB and failed to defend CEB’s action. In its action against BNS, 157 says that BNS acted unreasonably in withholding consent to the transfer. I do not accept CEB’s contention that any of this makes 157’s understanding of the law relevant to the action between CEB and 157. Nor do I think that it amounts to a claim of good faith by 157. The complaints of 157 against its lawyer and its bank are not defences to CEB’s claim.

[13] The issue between 157 and CEB will turn on the interpretation of the paragraph entitled “Closing” in the schedule to the agreement of purchase and sale, which reads:

The closing of this transaction shall be the earlier of the set closing, or 30 days but not later than October 30th, 2008 after receipt, of final approval of the Condominium Status from the city, and separate pin #’s are received by the Buyer. The Buyer shall have the right to extend the closing of the transaction by a further thirty days, based on a delay of the condominium registration by the city, upon giving ten days written notice. The buyer will provide a further deposit of One Hundred Thousand dollars ($100,000) to Sellers Agent in trust on any such extension if caused by the Buyer. The buyer will be responsible for all costs related to obtaining condominium registration with the city. The Seller will cooperate with the buyer to sign any paperwork or applications needed by the city throughout this process.

[14] At the trial, 157 will have to call its lawyer or lawyers to prove the agreement and the alleged breach. He or they will be open to cross-examination about conduct of their client that sheds light on the factual matrix. By itself that does not necessarily import waiver of solicitor client privilege or entitle CEB to know what 157 told its lawyers and what advice they gave and what opinions they held.

[15] In the result I granted 157’s motion to consolidate the actions and its motion for leave to amend the statement of claim and denied CEB’s motion to order examination of the non-party lawyers. I made other procedural orders on consent and dealt with costs séance tenante.

J.A. Ramsay J.

Date: 2014-02-12