COURT FILE NO.: CV-12-470399
MOTION HEARD: 20150428
REASONS RELEASED: 20150609
SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
Janet Nelson
Plaintiff
- and-
Affleck Greene McMurtry LLP
and Peter R.Green
Defendants
BEFORE: MASTER D. E. SHORT
COUNSEL:
Fiona Campbell Fax: (416) 360-5960
- for the Moving Defendants,
Jeffrey Silver Fax: (416) 225-6702
-for the Plaintiff
RELEASED: June 9, 2015
Reasons for Decision
I. Overview
[1] On this motion, the defendants Affleck Greene McMurtry LLP and Peter R.Green (collectively “AGM” )are seeking an order granting leave to issue a Third Party claim against Douglas Brent Hooton.
[2] For the purposes of this motion, I am treating the date of service of the statement of claim as December 28, 2012.
[3] By virtue of the provisions of the Limitations Act, 2002 there is a two-year window from the date of service of the statement of claim for party to bring a claim for contribution and indemnity against a third party.
[4] The parties attended on an urgent basis on December 22, 2014, seeking to obtain the order prior to the expiration of the two-year period. Unfortunately, in 2014, it had been determined that there would be no Masters sitting on motions during that week. Nevertheless I happened to be in the office that day and heard the parties’ submissions regarding their urgent situation.
[5] Ultimately, I determined to adjourn the matter to April 28, 2015, on the basis that any limitation period would be “tolled” pending the return and resolution of this motion. While, in order to permit the earliest available hearing, I indicated I was not seized of the matter, it nevertheless came before me on my Regular Motions list in late April.
[6] Counsel for the plaintiff confirmed that he was not relying on delay as a basis for opposing this motion. As I held in a decision released recently, Fimax Investments Group Ltd. v. Grossman, 2015 ONSC 1932, in my view, it would take an extraordinary situation to find that the full two-year period, for bringing a claim for for bringing a claim for indemnification as provided for in the Limitations Act 2002, was not available to a party.
[7] Here the parties have conducted examinations for discovery in the action, a mediation has been held, and subject to a pending motion to permit the amendment of the statement of claim to add a claim for punitive damages, the plaintiff is prepared to set the matter down for trial.
[8] I understand that the parties have agreed that the desired amendment may proceed. Thus, on consent and I have granted leave to the plaintiff to serve its amended claim.
[9] While such an amendment may arguably re-open the time for bringing, as of right, a third party claim by the defendant I have decided this case without considering that possible argument.
II. Nature of Dispute
[10] The plaintiff resides in Saskatchewan and retained the defendant law firm and in particular, its partner, Peter Green to act on her behalf with respect to an action commenced by the Royal Bank of Canada in 2009.
[11] The defendant law firm was also retained at that time to defend some of the other defendants in that action, including Datanet Wireless Inc., Douglas Brent Hooton and his numbered company. A joint statement of defence was deliveredby the firm on behalf of all defendants in the RBC action.
[12] Issues developed during the course of the litigation, and ultimately, on January 25, 2011 the moving defendants removed themselves as lawyers of record for the plaintiff herein and the other defendants. The basis relied upon, on the motion to be allowed off the record was at least in part based upon a non-payment of fees.
[13] The Statement of Claim filed in the present action further alleges:
“13. Affleck also moved on the grounds it could no longer obtain instructions from Hooton. It had been agreed that it was Hooton who would provide instructions. Affleck and Green breached their duty is to Janet in failing to advise her that Hooton was, purportedly, no longer providing instructions.
- Affleck and Green further breached their duties to Janet in not seeking instructions from her if indeed Hooton was no longer doing so.”
[14] Ultimately, the pleading concludes with this assertion;
- By reason of the incompetence, contractual breaches, breaches of fiduciary duties and negligence of the defendant, Janet has sustained and will continue to sustain substantial losses and damages with respect to the RBC action.[my emphasis]
[15] The defendants assert that once the mediation failed in the present action, it became apparent that they would have to bring Mr. Hooton into this action.
III. Proposed Third Party Claim
[16] The proposed third-party claim seeks, in part:
“(a) contribution, indemnity under sections 2 and 3 of the Negligence Act, RSO 1990, c. N.1, for any amounts which either of the defendants may be found to be responsible to the plaintiff;
(b) contribution indemnity under the common law and equity for amounts for any amounts which either of the defendants may be found to be responsible in the main action to be liable to the plaintiff.”
[17] The draft third-party claim also alleges that Mr. Hooton was authorized to provide instructions with respect to the RBC litigation:
“14. At the outset of AGM’s retainer in May 2010, Hooton and Nelson instructed AGM that Hooton would provide instructions to AGM on behalf of the four defendants, as they had done with prior counsel.
- At no time during AGM’s retainer did Nelson put any limits on Hooton’s authority to instruct AGM on her behalf. Accordingly, AGM communicated primarily with Hooton throughout the entire retainer, and sought instructions from him on behalf of the four defendants to the RBC action.
[18] In the defendants proposed third-party claim, they referred to their pleading in their Statement of Defence, wherein they denied “that they owed and/or breached any obligations to Nelson as alleged, or at all.”.
[19] The Defendants’ pleading goes on to assert:
“29. If, however, Nelson is found to have suffered any damages as a result of any conduct of AGM or Green, which is expressly denied, AGM and Green plead that such damages were caused or contributed by the negligence and breach of fiduciary duty owed by Hooton to Nelson…”
A number of grounds for this assertion are then outlined.
[20] Rule 29 deals in part with Third Party claims, and with respect to the availability of such claims, provides:
29.01 A defendant may commence a third party claim against any person who is not a party to the action and who,
(a) is or may be liable to the defendant for all or part of the plaintiff’s claim;
(b) is or may be liable to the defendant for an independent claim for damages or other relief arising out of,
(i) a transaction or occurrence or series of transactions or occurrences involved in the main action, or
(ii) a related transaction or occurrence or series of transactions or occurrences; or
(c) should be bound by the determination of an issue arising between the plaintiff and the defendant.
[21] Based on the moving parties’ assertions there would seem to be an arguable case for some extent of third party claim to be asserted in this case.
[22] The Rule then addresses when leave for bringing such a claim is required:
(1.2) A third party claim may be issued at any time with the plaintiff’s consent or with leave, which the court shall grant unless the plaintiff would be prejudiced thereby.
[23] The affidavit filed in opposition by a legal assistant in the office of plaintiff’s counsel asserts:
“It appears that the defendants have waited until the last minute to attempt to commence a third party action in order that the trial of this action against them be delayed.”
[24] Section 18 of the Limitations Act, 2002 allows 2 years to bring a proceeding for contribution and indemnity from the date of service of a claim. It seems to me that to abbreviate that period, by accepting an argument to dismiss the motion on the basis that it will unjustifiably delay the trial, would abrogate the clear entitlement provided by the statute.
IV. Restrictions on addition of Third Parties
[25] In Johnston v. Sheila Morrison Schools, 2012 ONSC 1322; 289 O.A.C. 177;20 C.P.C (7th) 103; the Divisional Appeal addressed restrictions on the addition of Third Party claims where claims were asserted relating to a specific entity’s conduct.
[26] In particular K.E. Swinton, S.E. Pepall, A.L. Harvison Young JJ. Held:
16 Furthermore, there can be no right to contribution and indemnity on account of a breach of fiduciary duties. Liability for breach of a fiduciary duty is not subject to apportionment. Accordingly, as a matter of law, the third party claim cannot be advanced. Also, as a matter of fairness, we would also note that the Respondents are not being asked to pay more than their proportionate share of the alleged losses.
[27] In this case the relevant portion of the paragraph 35 of the statement of claim quoted above indicates that by reason of “breaches of fiduciary duties and negligence of the defendant, Janet has sustained and will continue to sustain substantial losses and damages”.
[28] The fiduciary duty alleged is that owed to the plaintiff by her legal counsel. If there was such a breach it cannot be indemnified by others.
V. Rule 37: Failure to Serve Proposed Third Party
[29] One of the grounds in opposition raised by the plaintiff is the failure to serve Mr. Hooton with notice of this motion. Rule 37.07 (1) deals with service of notice of a motion such as this:
37.07 (1) The notice of motion shall be served on any party or other person who will be affected by the order sought, unless these rules provide otherwise.
[30] The Rule however continues with respect to that requirement:
Where Not Required
(2) Where the nature of the motion or the circumstances render service of the notice of motion impracticable or unnecessary, the court may make an order without notice. …
(4) Unless the court orders or these rules provide otherwise, an order made without notice to a party or other person affected by the order shall be served on the party or other person, together with a copy of the notice of motion and all affidavits and other documents
[31] I am satisfied that in the circumstances, it is appropriate to allow the third-party claim to proceed and am therefore waiving the requirement for service. I do not want the action to inordinately delayed by virtue of this addition. Inasmuch as no one seems to know where Mr. Hooton is at present, this addition may turn out to be merely a formality, in any event.
[32] On her examination for discovery, Mr. Hooton’s sister, the plaintiff, indicated she did not know where her brother was, but that she thought he might be in Calgary or Kelowna.
[33] It seems to me that the plaintiff who authorized Mr. Hooton to be the contact with the law firm is not a strong position to complain about his lack of accessibility.
[34] I am therefore directing that the third-party claim be issued once it has been amended to indicate that no indemnification no contribution or indemnity is being sought against Mr. Hooton for any fiduciary duty that was owed directly by the firm or Mr. Greene to Ms. Nelson.
VI. Disposition
[35] I have therefore determined that leave should be granted to the defendants to issue a Third-Party Claim against against Douglas Brent Hooton. That proposed pleading will be amended so as to not seek indemnity with respect to any alleged fiduciary duties owed by the Defendants.
[36] I am directing that service of the amended third-party claim may be affected by way of a publication in a local newspaper in each of the Calgary and Kelowna of a legal notice indicating that a proceeding has been commenced and that copies of the documents can be obtained from counsel on request. The third-party claim will deem be deemed to have been served 30 days following the last date of publication.
VII. Costs
[37] Mr Hooton did not participate in the hearing so I see no issue with respect to costs involving him.
[38] It seems to me that the success has been somewhat divided on this matter. The proposed pleading was not permitted to go forward in the form submittedThe plaintiff really has no standing to determine what elements of the third-party claim were to remain but clarified the pleading against her brother. On the other hand, I have rejected the raised by the plaintiff that adding the third party claim would somehow delay the main action.
[39] It would seem that my allowing the fresh claim for punitive damages might well have re-opened the pleading in any event.
[40] I am therefore fixing the costs on this motion, applying a degree of proportionality, at $3000 plus HST , payable in the cause of the main action.
E. 98. /DS __________________
Master D.E. Short