CITATION: The Estate of Henry Goldentuler v. Crosbie, et al 2016 ONSC 989
NEWMARKET COURT FILE NO.: CV-07-083322-00
DATE: 20160208
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
The Estate of Henry Goldentuler Plaintiff
– and –
Robert Crosbie, Olga Leyenson, Mark Koskie, Gail Yattavong, and KLC Law Firm (Corporation) Defendants
Edward Goldentuler, for the Plaintiff
John Campbell, for Mark Elkin PC (proposed party)
HEARD: January 14, 2016
DECISION ON MOTION
SUTHERLAND J.:
Introduction
[1] Mark Elkin (“Elkin”), the former solicitor for the defendants Robert Crosbie, Olga Leyensen, Mark Koskie, Gail Yattavong, and KLC Law Firm Corporation (the “Defendants”), brings a motion requesting:
(a) leave to intervene as an added party in this action for the purposes of participating in the hearing for assessment of damages; and
(b) an order that the plaintiff, The Estate of Henry Goldentuler (the “Plaintiff”) provide Elkin, at Elkin’s expense, with copies of all documents and expert reports in relation to the damage claim.
Background
[2] Elkin acted as the lawyer for the Defendants in this action.
[3] The claim of the Plaintiff is essentially for damages on the basis of the Defendants’ removing approximately 120 client files from the late Henry Goldentuler’s law firm (“the firm”). The Plaintiff alleges that the Defendants were employees of the firm either as a secretarial assistant or paralegal. The Plaintiff also alleges that the Defendants incorporated a company, the defendant KLC Law Firm Corporation (“KLC”), with the intention to specifically represent the clients of the Defendants which said clients were taken from the law firm. During the course of this proceeding, there were various orders made against the Defendants.
[4] In some of those interim orders, costs were awarded against the Defendants.
[5] An order of Boyko J. dated May 10, 2007, ordered the Defendants to pay the Plaintiff $4,500 in costs. An order of DiTomaso J. dated September 27, 2007, ordered the Defendants to pay $8,500 to the Plaintiff.
[6] The Plaintiff then brought a motion to strike the statement of defence and counter-claim of the Defendants for failing to pay the costs awards of Boyko J. and DiTomaso J. This motion was adjourned to November 27, 2007 as Elkin was in another court. On November 28, 2007 the matter came before Boyko J. Her Honour adjourned the motion to January 2, 2008 based on the representations of Elkin that the Defendants were attempting to refinance that would allow the Defendants’ to pay the outstanding costs awards. Boyko J. then made a further costs award in the amount of $500.
[7] On January 8, 2008, this matter came in front of Ferguson J. Elkin was not present. After Ferguson J made an endorsement, Ms. Nitchke from Elkin’s office attended at 10:35 am requesting an adjournment because Elkin was “under the weather”. Ferguson declined to change her original endorsement and struck the pleading of the Defendants.
[8] The Defendants filed an appeal on January 17, 2008. On May 13, 2008, this matter came in front of Blair J.A. who made a security for cost order of the appeal in the amount of $12,000 and further ordered that the transcripts of the hearing before Boyko J. and Ferguson J. had to be ordered and filed by the Defendants. On April 9, 2008, the appeal was dismissed by the Registrar of the Court of Appeal. The Defendants brought a motion then to set aside the administrative dismissal and on April 22, 2008, Sharp J.A. granted an order setting aside the dismissal order of April 9, 2008.
[9] On September 24, 2008, the Registrar of the Court of Appeal sent a notice of intention to dismiss the appeal if said appeal is not perfected by January 15, 2009. On January 23, 2009, the appeal of the Defendants was dismissed by the Registrar.
[10] It seems that the action stayed dormant for approximately two and a half years. In the interim, Henry Goldentuler passed away on October 2, 2008.
[11] An order to continue was taken out on April 30, 2010. The Plaintiff’s motion for default judgment then came before Edwards J. on May 24 and 25, 2011.
[12] Edwards J. allowed an adjournment requested by the Defendants to allow the Defendants to bring a motion seeking an order to set aside or vary the order of Ferguson J. Edwards J. stayed seized of this matter and on December 1, 2011, he heard the motion brought by the Defendants to set aside the order of Ferguson J.
[13] On February 7, 2012, Edwards J. released his decision and set aside the order of Ferguson J. and allowed the defendants to file the statement of defence and counterclaim as previously filed and said filing to take place within thirty days of the order.
[14] The order of Edwards J. then was appealed to the Divisional Court. The appeal was heard on March 4, 2014. In a decision released on November 12, 2014, the Divisional Court allowed the appeal and set aside the order of Edwards J. The Divisional Court then restored the decision of Ferguson J. and the statement of defence and counterclaim of the Defendants’ was struck.
[15] Leave to appeal to the Court of Appeal was sought by the Defendants. On April 27, 2015 the Court of Appeal refused leave and ordered costs against the Defendants in the amount of $1,500 inclusive of taxes and disbursements.
[16] The Plaintiff then brought a motion to obtain judgment against the Defendants on an undefended basis.
[17] On November 18, 2015, this matter was heard in front of Minden J. In His Honour’s endorsement he found that, the Plaintiff was not in a position to proceed with the default hearing and that further documentation and information is required. Minden J. also stated that: “counsel to appear on behalf of the plaintiffs as Mr. Goldentuler will be the main witness” for the Plaintiff in this default hearing. On November 30, 2015, Elkin served upon the Plaintiff his motion requesting that he intervene as an added party to the undefended trial proceedings dealing with assessment of damages.
Legal principles
[18] Rule 13.01(1) of the Rules of Civil Procedure[^1] states:
Leave to Intervene as Added Party
13.01(1) A person who is not a party to a proceeding may move for leave to intervene as an added party if the person claims,
(a) an interest in the subject matter of the proceeding;
(b) that the person may be adversely affected by a judgment in the proceeding; or
(c) that there exists between the person and one or more of the parties to the proceeding a question of law or fact in common with one or more of the questions in issue in the proceeding.
[19] The counsel for the Plaintiff and the counsel for Elkin both agree that according to Rule 13.01 of the Rules of Civil Procedure, the court must determine:
(a) Whether a person requesting to intervene as an added party satisfies one of the three claims set out in the rule. Namely, whether:
(i) The person has an interest in the subject matter of the proceeding;
(ii) That the person may be adversely affected by a judgment in the proceeding;
(iii) That there exists between the person and one or more of the parties in the proceeding a question of law of fact in common with one or more of the questions at issue in the proceeding.
[20] If the court determines that the party wishing to intervene falls within one of the three conditions set out in Rule 13.01, then the court must turn to Rule 13.01(2) and consider, whether the intervention will unduly delay or prejudice the determination of the rights of the parties to this proceeding. If the court finds that the intervention will not unduly delay or prejudice, the court may add the party requesting to be intervened as a party to the proceeding and make such order as is just.
[21] Both the Plaintiff and Elkin agree and rely on the decision in Beardon v. Lee[^2], namely para. 12, which states:
Having concluded that one of the preconditions to intervention has been met, I must then determine whether I should exercise my discretion in favour of Dr. Crosby. In exercising my discretion I should consider the case, the issues which arise, and the likelihood of Dr. Crosby being able to a make a useful contribution to the resolution of the motion without causing injustice to the immediate parties: Peel (Regional Municipality) v. Great Atlantic & Pacific Co. of Canada. I should also consider the express factors set in Rule 13.01(2) namely, whether the intervention will unduly delay or prejudice the determination of the rights of the parties to the proceeding.
[22] Both parties agree that the conditions set out in Rule 13.01 are disjunctive and not conjunctive; that is, only one of the conditions must be met.[^3]
Default Judgment
[23] Rule 19 of the Rules of Civil Procedure deals with a proceeding without a trial, “Default Proceedings”.
[24] Rule 19.02 sets out the consequences of a party being noted in default. Rule 19.02(1)(a) states that a defendant who has been noted in default is deemed to admit the truth of all allegations of fact made in the statement of claim.
[25] Rule 19.06 sets out the obligation that the plaintiff is not entitled to judgment on a motion for judgment or at trial solely on the basis of facts alleged in the statement of claim that are deemed admitted unless the facts entitle the plaintiff to judgment.
[26] On hearing a motion for judgment or a trial for judgment, the court has a duty to both parties. This is part of the court’s duty in the administration of justice. As Strathy J. stated in Hamidreza Salimijazi v. Yosef Pakjou[^4], at para. 34:
Having reviewed the authorities, it seems to me that a judge hearing a motion for judgment under rule 19.05(1) or presiding at a trial ordered under rule 19.05(3) has a duty to both parties, even though the defendant is not present. That duty is part of the court’s duty in the administration of justice. The duty to the plaintiff is to dispense expeditious and cost-efficient justice where the defendant has ignored the court process. The duty to the absent defendant and to the public is to ensure that justice is indeed done and that manifestly unsustainable claims are not mechanically processed. Rule 19.06 codifies this obligation by requiring the judge to make certain that the facts pleaded do indeed entitle the plaintiff to judgment. It seems to me, as well, that where the plaintiff sees fit to adduce evidence going to liability, and that the evidence establishes that part or all of the plaintiff’s claims cannot succeed, justice is not served by granting judgment, simply because the defendant has failed to defend. ….
[27] These sentiments are echoed by the decision of Mr. Justice Brown, as he then was, in Elekta Ltd. v. Rodkin[^5], where Brown J. stated, at para. 14:
[14] Accordingly, on a motion for default judgment the inquiry undertaken by the court is the following:
(i) What deemed admissions of fact flow from the facts pleaded in the Statement of Claim?
(ii) Do those deemed admissions of fact entitle the plaintiffs, as a matter of law, to judgment on the claim?
(iii) If they do not, has the plaintiff adduced admissible evidence which, when combined with the deemed admissions, entitles it to judgment on the pleaded claim?
Position of Elkin
[28] It is the submission of Elkin that a default proceeding is a “proceeding” as contemplated in Rule 13.01 of the Rules of Civil Procedure. Elkin further submits that with respect to the facts of this case, the conditions set out in Rule 13.01(a) and (b) have been met.
[29] It is the position of Elkin that in an undefended trial, the Plaintiff has not to only prove liability but must also prove damages. In the default hearing concerning damages, whatever damages the court finds payable by the Defendants in this action, he submits, will be applied as damages for which Elkin may be responsible in the action commenced by the Defendants against Elkin. Accordingly, Elkin submits that any judgment by the court in the default proceeding will have an adverse effect on Elkin in the action commenced by the Defendants against Elkin. Thus, Elkin submits that he has an interest in the subject matter in the default proceedings, namely, the assessment of damages against the Defendants. Even though, at this point, there is no indication on what damages the Defendants in this action are claiming against Elkin, he submits that Rule 13.01(b) indicates that the intervenor “may” be adversely affected by a judgment. There is no obligation on the part of Elkin that there is certainty that Elkin will be responsible for any damages ascertained by the court in the default proceedings will be attributed to Elkin in the Defendants’ action against Elkin. It is just that there is likelihood that such is the case.
[30] Elkin further submits that the court should exercise its discretion to allow Elkin to intervene in the default proceedings dealing only with the issue of assessment of damages and that such an intervention will not unduly delay the proceeding or prejudice the determination of the rights of the Defendants in the proceeding. Elkin further submits that the court may impose any condition(s) it deems appropriate or just with respect to the scope of Elkin’s intervention in the default proceedings. In support of his position, Elkin submits that there are cases where lawyers have been granted leave to intervene as parties. Elkin directs the court to decisions of Trempe v. Reybroek[^6]; Rare Charitable Research Reserve v. Jan Chaplin[^7]; and, Finlayson v. GMAC Leaseco Ltd.[^8].
[31] Accordingly, it is therefore Elkin’s submission that his request for intervention falls within two of the conditions required in Rule 13.01(1) of the Rules of Civil Procedure and with regard to Rule 13.01(2), the intervention of Elkin will not unduly delay or prejudice the rights of the Plaintiff and that Elkin should be added as a party to the proceeding for the limited purpose of the assessment of damages.
Position of the Plaintiff
[32] The Plaintiff does not disagree that the default proceeding is a “proceeding” as required in Rule 13.01(1).
[33] The Plaintiff takes issue that Elkin falls within the two conditions relied upon, namely Rule 13.01(1)(a) and (b). The Plaintiff submits that Elkin does not have an interest in the subject matter of the proceeding, and, if Elkin is adversely affected by any judgment concerning damages, the adverse effect is a direct result of the conduct and actions of Elkin.
[34] In support of the Plaintiff’s submission that Elkin does not have an interest in the proceeding, the Plaintiff relies on the decision in Finlayson v. GMAC Leaseco Ltd.[^9]
[35] It is the submission of the Plaintiff that Elkin does not have an interest in the subject matter of the proceeding but simply has an interest in the outcome of the action, namely the assessment of damages.
[36] Furthermore, the Plaintiff states that Elkin has failed to lead evidence to indicate to the court how the assessment of damages will adversely affect him. In addition, the Plaintiff submits that Elkin finds himself in this current situation due to Elkin’s repeated neglect and misconduct.
[37] The Plaintiff relies on the decision of Mallory v. Werkmann Estate[^10] where the Court of Appeal states, at paras. 36 and 37:
[36] RSA’s real complaint is that it will be affected by the trial judge’s finding that the appellant had insurance coverage. However, RSA has not established how it will be adversely affected by a finding of fact in a proceeding to which it was not a party. Although the judgment had still not been taken out when the parties appeared before me, I am not satisfied that RSA will be adversely affected by the judgment in the proceeding. Therefore, it has not met the test for intervention.
[37] Second, even if the finding could adversely affect RSA’s interests, RSA is partly to blame for the situation it finds itself in.
[38] The Plaintiff therefore submits that the situation the Elkin finds himself in is due directly because of Elkin’s actions. Elkin could have requested intervention at the Divisional Court for the Court’s determination if Edwards J. had jurisdiction to set aside the order of Ferguson J.; however, Elkin decided not to. In effect, it is the Plaintiff’s submission that it is too late in the day for Elkin to now attempt to obtain intervention in the default proceeding dealing with the assessment of damages.
Analysis
Rule 13.01(1)(a)
[39] The nature of this action is the seeking of damages by the Plaintiff against the Defendants for allegedly removing 120 client files from the firm.
[40] Upon reviewing the statement of claim in this action, there are no allegations against Elkin. There is no allegation in the statement of claim that, either directly or indirectly, affects Elkin. There is only an allegation put forth in the statement of claim that Elkin provided legal advice or was acting as the lawyer for the Defendants during their time as employment with the law firm of the late Mr. Goldentuler or during the time which the Defendants created KLC Law Firm (Corporation) and started doing business through that entity.
[41] Accordingly, the factual matrix of this action is significantly distinguishable from the cases provided by Elkin to support Elkin’s contention that he should intervene in the default proceedings and be added as a party.
[42] The case of Trempe[^11] deals with an action commenced for damages due to the plaintiffs’ daughter being attacked and killed by the defendant’s dog. Minutes of Settlement were reached at a private mediation. There is a term in the Minutes of Settlement, namely, an undertaking by the male defendant to “move out of York Region”. Settlement funds were provided to the solicitor for the plaintiffs in trust, but the male defendant refused to move out of York Region. The plaintiffs brought a motion for judgment in accordance with the Minutes of Settlement. The defendants took the position that the term in the Minutes of Settlement is unenforceable because the counsel acting for the male defendants did not have actual or ostensible authority to make that agreement and further, the Minutes of Settlement was unenforceable because it was vague and uncertain. Thus, the issue in the Trempe decision directly affected the solicitor for the Plaintiffs, that is, dealing with the solicitor’s advice to the Plaintiffs and the drafting on the minutes of settlement.
[43] A further decision provided by Elkin is Rare Charitable Research[^12]. The factual basis of this decision was that the two counsel and their respective law firms were added as parties to intervene in two applications due to the fact that the two lawyers and their respective law firms provided legal advice concerning the transfer of lands to a charity which was the subject matter of the litigation on two applications. Again, the two solicitors were directly involved with the subject matter of the litigation, that is, the transfer of significant tracts of land to a charity, Rare Charitable Research Reserve and the legal advice given on that transfer of lands.
[44] The third case which Elkin relies upon is Finlayson[^13]. The factual matrix of Finlayson is somewhat similar to this case. In Finlayson, the defendants brought a motion for determination of an issue before trial; that is, whether the plaintiffs’ claims were barred by the two-year limitation period in the Highway Traffic Act, R.S.O. 1990, c. H.8. G. The plaintiffs’ former counsel brought a motion for leave to intervene as an added party in the defendants’ motion. The plaintiffs’ former counsel was counsel for the plaintiffs during the time the two-year limitation period expired. Accordingly, there are claims of negligence against the plaintiffs’ former counsel for missing the limitation date. However, in Finlayson, J.W. Quinn J. found that plaintiffs’ former counsel does not fall within Rule 13.01(1)(a) of the Rules of Civil Procedure in that plaintiffs’ former counsel did not have an “interest in the subject matter of the proceeding”. The subject matter being whether or not the action is barred. His Honour distinguished between an interest in the outcome of the proceeding as opposed to the subject matter of the proceeding. I find the reasoning of J.W. Quinn J. compelling.
[45] In this matter which is now before me, the proceeding itself deals with damages arising from the defendants allegedly removing approximately 120 client files from the former law firm of the late Henry Goldentuler. Elkin has no interest in the subject matter of this proceeding. There is no evidence before me that Elkin was involved in the removal of the client files or provided advice that concerns the Defendants liability in removing the client files. Elkin is counsel acting for the Defendants once the action was commenced. Elkin’s interest is not in the subject matter of the proceeding per se but with respect to the default proceedings and the assessment of damages. Elkin’s interest is in the outcome, the quantum of the damages and not the subject matter of the proceeding.
[46] Further, I am not convinced that Elkin can provide useful contribution to the resolution of the default hearing. The court already has a duty to both the plaintiff and the defendants to review the deemed admissions of facts and the evidence led at the default hearing to ensure that “justice is indeed done.”[^14] I do not see how Elkin can be a useful contributor to the Court.
[47] I therefore find that Elkin does not fall within the gambit of Rule 13.01(1)(a) of the Rules of Civil Procedure in that Elkin does not have an interest in the proceeding.
Rule 13.01(1)(b)
[48] Is Elkin a person that “may be adversely affected by a judgment in the proceeding”? Given that the Rule indicates “may”, Elkin does not provide evidence to show that there is a certainty that he will be adversely affected by a judgment proceeding. Elkin needs to show a possibility that he may be adversely affected by a judgment in the proceeding. Oxford Dictionary[^15] defines adverse as “preventing success or development; harmful; unfavourable”.
[49] In reviewing the material on this motion, I am not convinced that Elkin has provided evidence to show that he would be adversely affected by the assessment of damages in the default hearing.
[50] The cases reviewed, as outlined above, deal with solicitors who are being added as parties due to the court having to make a finding in the proceeding of the solicitors’ negligence and/or breach of duty of care. No such finding is required or necessary in the default hearing in assessing the damages of the Plaintiff.
[51] No evidence has been provided by Elkin to indicate to this court how an assessment of damages in the proceeding would adversely affect him in the proceeding commenced by the Defendants against him.
[52] In the Defendants’ proceeding, the court can make a determination of the allegation of negligence and breach of duty of care against Elkin. This action will not affect that determination by the court.
[53] Furthermore, the court in the Defendants’ action can quantify the Defendants’ claim for damages against Elkin. That can be done independently of the assessment of damages in this action. Moreover, in reviewing the statement of claim of the Defendants’ action, in the relief claimed, the Defendants are requesting damages from Elkin in the amount of $300,000. This action was commenced on August 22, 2012. In contrast, in this action, which was commenced on March 15, 2007, the Plaintiff is claiming damages of $1,000,000. The Defendants knew the quantum of damages being claimed by the Plaintiff in their action long before they commenced their action against Elkin. Thus, given the difference of figures, it lends the court to believe that whatever damages are being claimed by the Plaintiff in this action are not directly being utilized by the Defendants’ in their action. If that was the case, one would suspect that the damages being claimed by the Defendants in their action would also be $1,000,000.
[54] Accordingly, I do not find, and I am not convinced by Elkin’s counsel that Elkin will be adversely affected by the findings determined by this court at the Defendants default hearing. Elkin has not clearly shown that he falls within the conditions set out in Rule 13.01(1)(b) of the Rules of Civil Procedure.
Rule 13.01(2)
[55] Rule 13.01(2) is a gate-keeping provision which provides the court with discretion to determine, even though a party may fall within one of the conditions in Rule 13.01(1), the court can still determine whether intervention is to be granted by examining if the granting of the intervention will “… unduly delay or prejudice the determination of the rights of the parties to the proceeding …”.
[56] Even though I have found that Elkin does not fall within the conditions in Rule 13.01(1), even if I am wrong, subrule (2) provides the court with its overriding gate-keeping responsibility.
[57] To allow Elkin to intervene as a third party to the proceedings, I find, will unduly complicate the default proceedings and, thus, take away from the purpose of a default proceeding, that is, an efficient process for the court to assess damages. This would unduly delay the determination of the rights of the Plaintiff. To allow Elkin to ask questions, cross-examine the witnesses of the Plaintiff with respect to the assessment of damages and, perhaps even, file their own expert report to contradict the amount claimed by the Plaintiff, I find would distort the purpose of the default proceedings.
[58] Furthermore, I find that if the court allows Elkin to intervene in the default proceedings, it would prejudice the termination of the rights of the Plaintiff. By allowing Elkin the right to intervene, would, indirectly, give the Defendants the right to question the Plaintiff’s witnesses on the assessment for damages when the Defendants’ right to do so has been taken away by the Ontario Court of Appeal, the Divisional Court of Ontario and this court. In effect, by allowing Elkin to intervene as an added party, would indirectly allow the Defendants to participate through the back door which the Court of Appeal, the Divisional Court and this court have prevented through the front door.
[59] If I would have found that Elkin had satisfied one of the two conditions under Rule 13.01(1), I would exercise my discretion and not order Elkin the right to intervene and be added as a party to the default proceedings due to the fact that allowing Elkin to intervene would unduly delay the determination of rights of the Plaintiff; and furthermore, would prejudice the determination of rights of the Plaintiff by allowing the Defendants, indirectly, to take part in the default hearing when the Court of Appeal, the Divisional Court and this court have found that the Defendants have no right to take part in the proceeding.
Order
[60] On the basis of the reasons given, I dismiss the motion of Elkin to intervene and be added as a third party.
Costs
[61] If the parties cannot agree on costs, the Plaintiff to serve and file its submission of costs within fourteen days from the date of this decision, and Elkin will have fourteen days thereafter to serve and file his submissions. The submissions to be no more than three pages double-spaced, exclusive of any bill of costs, case law and offers to settle. Submissions to be filed with the court. If no submissions for costs are received, an order will be made granting no costs.
Justice P.W. Sutherland
Released: February 8, 2016
[^1]: R.R.O. 1990, Reg. 194 [^2]: 2005 CanLII 15470 (ONSC) [^3]: Ibid, p. 4. [^4]: 2009 ONSC 17354 [^5]: 2012 ONSC 2062 [^6]: 2002 ONSC 49410 [^7]: 2007 ONSC 57083 [^8]: 2007 ONSC 4317 [^9]: supra [^10]: 2015 ONCA 71 [^11]: supra, footnote 6 [^12]: supra, footnote 7 [^13]: supra, footnote 9 [^14]: Hamidreza, supra. [^15]: Oxford Canadian Dictionary of Current English, Oxford University Press Canada, 2005