Court File and Parties

Court File No.: CV-15-470 Date: 2016-10-06 Ontario Superior Court of Justice

Between: Man-Shield (NWO) Construction Inc., Plaintiff

And: Gisele Macdonald, 2353268 Ontario Inc., Allure Condominiums LP., Aikins, MacAulay & Thorvaldson LLP., Jonathan B. Kroft, Carrel + Partners and Johanna Maki, Defendants

Counsel: Dan Matson, for the Plaintiff (Responding Party) Laird Scrimshaw, for the Defendants Aikins, MacAulay & Thorvaldson and Jonathan B. Kroft (Moving Party)

Heard: July 11, 2016, at Thunder Bay, Ontario

Before: Regional Senior Justice D. C. Shaw

Decision On Motion

[1] The defendants, Aikins, MacAulay & Thorvaldson and Jonathan B. Kroft, bring a motion for summary judgment under Rule 20 of the Rules of Civil Procedure for an order dismissing the action as against them.

[2] The plaintiff responds that the summary judgment motion is premature and requests that it be stayed until after the examination for discovery of the defendant, Gisele Macdonald.

Background

[3] The plaintiff is a general contractor hired to construct two condominium buildings in Thunder Bay, the Allure Condominiums and the Aurora Condominiums.

[4] The defendant, 2353268 Ontario Inc. and Allure Condominiums LP own the land upon which Allure Condominiums was constructed by the plaintiff. Together they are referred to herein as the “Owner”.

[5] Ms. Macdonald is a director and officer of the Owner.

[6] The defendant, Carrel + Partners, is a law firm in Thunder Bay. The defendant, Johanna Maki, is a lawyer practicing with Carrel + Partners. Ms. Maki acted for the Owner in closing the condominium unit transactions.

[7] Aikins, MacAulay & Thorvaldson (“Aikins”) is a law firm in Winnipeg. Mr. Kroft is a partner with Aikins.

[8] During the course of construction of the two condominium buildings, disputes arose between the plaintiff and the Owner. The plaintiff registered liens under the Construction Lien Act, R.S.O. 1990, c. C.30 against title to the lands on which the condominium buildings were constructed.

[9] In January 2015, Aikins was retained by the Owner in the lien dispute. Mr. Kroft represented the Owner in the negotiation of a settlement agreement (the “Agreement”) to lift the construction lien against the Allure Condominiums registered by the plaintiff to enable pending condominium unit sales to close and the proceeds of sale to be distributed.

[10] The Owner was represented in the negotiations of the Agreement by Roderick W. Johansen of Johansen Law Firm.

[11] The terms of the Agreement to lift the lien were contained in a letter dated May 1, 2015 from Mr. Kroft to Mr. Johansen. The Agreement set out, among other items, a structure and particulars of how the proceeds of sale from the condominium units would be distributed to various parties involved. Paragraph 8(b) of the letter provided:

8. When the balance of the Proceeds are available to be released to Allure, Allure will pay them as follows: (b) The balance of the Proceeds, to a maximum of $2,100,000 plus HST will be paid in trust to Johansen Law Firm (the “Trust Fund”) to be held as security for the disputed MS claims to be held in trust and released only upon agreement of MS and the Owner or final order of an arbitrator or a court.

[12] On May 26, 2015, the plaintiff discharged its construction lien and certificate of action. The lien needed to be discharged prior to receiving the trust fund referred to in paragraph 8(b) of the Agreement because the lien was preventing the closing of the sale of the condominium units.

[13] In September 2015, Aikins received a Carrel + Partners LLP cheque in the amount of $1,007,202.11, payable to Mr. Johansen’s firm, in trust. Mr. Kroft forwarded this cheque to Mr. Johansen under cover of letter dated September 24, 2015.

[14] In October 2015, the plaintiff commenced the within action.

[15] The plaintiff alleges that there was a breach of trust under the Agreement. The plaintiff claims that the delivery of trust funds to the plaintiff’s lawyer, in the amount of $1,007,202.11, failed to satisfy what the plaintiff alleges was the Owner’s obligation to pay $2,100,000 plus HST under the Agreement.

[16] The plaintiff claims against Mr. Kroft and Aikins for breach of trust.

[17] Although a number of allegations are made in the statement of claim against Mr. Kroft and Aikins, on the hearing of the summary judgment motion counsel for the plaintiff narrowed the allegations to one. Acknowledging that Mr.ft and Aikins were not parties to the trust, counsel for the plaintiff advised that it was the position of the plaintiff that Mr. Kroft knowingly assisted in a dishonest and fraudulent act perpetrated by his client, the Owner.

The Law

[18] Rule 20.01 provides:

(3) A defendant may, after delivering a statement of defence, move with supporting affidavit material or other evidence for summary judgment dismissing all or part of the claim in the statement of claim.

[19] Rule 20.04 provides:

(2) The court shall grant summary judgment if, (a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or a defence.

[20] In Hryniak v. Mauldin, 2014 SCC 7, at paras 49 and 50, the Supreme Court of Canada set out the test for determining when there is no genuine issue requiring a trial:

[49] There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[50] These principles are interconnected and all speak to whether summary judgment will provide a fair and just adjudication. When a summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. Similarly, a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute. It bears reiterating that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute.

Affidavits Filed on Summary Judgment Motion

[21] In support of the summary judgment motion, Mr. Kroft filed an affidavit, sworn March 11, 2015.

[22] Mr. Kroft deposes that at all times the plaintiff was represented by Mr. Johansen, that all communications in respect of the matter were in the presence of or through Mr. Johansen, that at no time did he represent or advise the plaintiff or purport to represent or advise the plaintiff and at no time was Aikins party to the dispute or the Agreement.

[23] He further deposes:

8. At no time did I represent that I or my firm would be acting in connection with the real estate transactions or the receipt or disbursement of condominium sale proceeds. The Plaintiff was aware that the real estate transactions would be handled by Thunder Bay counsel as demonstrated by the specific reference to Thunder Bay counsel in paragraph 7 of the Agreement. My firm did receive a Carrel + Partners LLP cheque in the amount of $1,007,202.11, payable to Mr. Johansen’s firm in trust which was forwarded directly to Mr. Johansen on September 24, 2015. Aside from merely forwarding this cheque as part of the settlement reached, neither I nor my firm was ever in the possession of trust funds under the Agreement.

[24] In response to the affidavit, the plaintiff filed an affidavit sworn July 7, 2016 from Peter Belluz, the President of the plaintiff.

[25] As regards the claim against Mr. Kroft and Aikins, Mr. Belluz states:

27. Though the Respondents Kroft and Aikins assert that they were not in control of the trust funds, I am unaware at this time of what, if any, involvement they had in making the payments as outlined in paragraph 21 [i.e. funds advanced to Valiant Trust, debenture trustee]. I will not obtain this knowledge until Ms. Macdonald and Ms. Maki are examined subsequent to the Defendant Macdonald’s Statement of Defence being delivered.

28. Prior to the Honourable Court hearing this evidence, it is not possible to adjudicate the Kroft/Aikin position. Substantially more evidence of the role played by Kroft and Aikin will be made available subsequent to the examinations of Maki and Macdonald.

29. It is highly prejudicial to Man-Shield to here (sic) their motion prior to the examinations. We are requested to put our best foot forward as if no further evidence will be available at trial. More evidence is going to be available at trial as examinations have yet to take place. Furthermore, I am unaware of the position the Defendant Macdonald is going to take in this motion as her Statement of Defence has not been delivered. It is impossible to ascertain the evidence without the pleadings of one of the Defendants.

[26] The plaintiff does not submit that a trial is required. Rather, the plaintiff submits that it has yet to determine if a trial is required. The plaintiff asks that the summary judgment motion be stayed until after the discovery of Ms. Macdonald.

Discussion

[27] In my view, the summary judgment motion should not be stayed and summary judgment should be granted dismissing the action as against Aikins and Mr. Kroft. There is no genuine issue requiring a trial against those defendants.

[28] There is no evidence whatsoever that Aikins and Mr. Kroft, as counsel negotiating the settlement with counsel for the plaintiff, or in forwarding the Carrel + Partners’ cheque to Mr. Johansen, engaged in or assisted in any dishonest or fraudulent act or acted other than professionally and ethically. The plaintiff has failed to present any facts in support of its position. Its position does not, in my opinion, even rise to the level of speculation.

[29] The plaintiff, which filed Mr. Belluz’s affidavit opposing the motion, four days before the hearing, had Mr. Kroft’s affidavit for four months. Mr. Kroft’s affidavit clearly and concisely sets out his position and the position of Aikins. The plaintiff chose not to cross-examine Mr. Kroft, even if it was only to raise some concerns that would warrant an adjournment of the summary judgment motion to gather further evidence.

[30] As regards the submission that the hearing of the motion should await examination for discovery of Ms. Macdonald, the plaintiff has not required Ms. Macdonald to deliver a statement of defence despite the fact that the statement of claim was issued in October 2015. No defence was demanded, no discovery arranged, even though this summary judgment motion was served in March 2016. The plaintiff and Ms. Macdonald have been involved in several actions. Ms. Macdonald has been discovered at length in those other actions.

[31] Mr. Belluz, as President of the plaintiff, makes no allegations of wrongdoing against Aikins and Mr. Kroft. Rather, he deposes that he is “…unaware at this time of what, if any, involvement they [Aikins and Mr. Kroft] had….” The entire thrust of his affidavit is that the plaintiff needs more time to find out from Ms. Macdonald or Ms. Maki if they might know of any wrongdoing by Aikins and Mr. Kroft. Mr. Belluz does not raise any suspicious circumstances. He does not even make any allegations on the thin reed of information and belief of possible wrongdoing.

[32] There is nothing in the letter of September 24, 2015 from Mr. Kroft to Mr. Johansen that raises a suspicion of misconduct by Mr. Kroft. The one page letter sets out the amount of the proceeds from the closings of the condominium unit transactions, handled not by Mr. Kroft but by Ms. Maki and Carrel + Partners. It sets out to whom the proceeds were distributed by Carrel + Partners and encloses Carrel + Partners’ trust cheque. Mr. Kroft did not handle the trust funds. The cheque from Carrel + Partners was payable to Mr. Johansen’s law firm.

[33] Counsel for the plaintiff submits that Mr. Kroft did not expressly deny that he calculated the numbers set out in the September 24, 2015 letter. If this was truly a concern for the plaintiff, it could have cross-examined Mr. Kroft on the issue. It elected not to do so.

[34] Aikins and Mr. Kroft, acting in their professional capacity as counsel for the Owner, had no duty of care to Mr. Johansen’s client. Their duty of care was to their own client. This principle is applicable in litigation and in the commercial world. See Diamond Contracting Ltd. V. MacDearmid, at para. 3, Baypark Investments Inc. v. Royal Bank, at para 33.

[35] In his affidavit, Mr. Belluz states that the discharge of lien was only agreed to in consideration of the plaintiff receiving $2,100,000 plus HST, pursuant to paragraph 8(b) of the Agreement. In fact, paragraph 8(b) states:

(b) The balance of the Proceeds, to a maximum of $2,100,000 plus HST will be paid in trust to the Johansen Law Firm (the “Trust Fund”) to be held as security for the disputed MS claims to be held in trust and released only upon agreement of MS and the Owner or final order of an arbitrator or a court (emphasis added).

[36] As of the hearing of the summary judgment motion, two condominium units remained unsold. Once sold, the proceeds will be added to the amount of the trust fund. The trust fund is to be a “maximum” of $2,100,000, plus HST.

Conclusion

[37] Having determined that the summary judgment motion should not be stayed, and having concluded that there is no genuine issue requiring trial, Rule 20.04(2) provides that the court “shall” grant summary judgment.

[38] I therefore grant the summary judgment motion and dismiss the action as against Aikins and Mr. Kroft.

Costs

[39] Aikins and Mr. Kroft are entitled to their costs of the summary judgment motion. If the parties are unable to agree on costs, counsel shall, within 30 days, arrange to take out an appointment with the Trial Co-ordinator to speak to the issue.

_________ ”original signed by”_ ___ Regional Senior Justice D. C. Shaw

[40] Released: October 6, 2016