Court File and Parties

2017 ONSC 4060

COURT FILE NO.: 16-68014-A1

DATE: 2017/06/30

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SAINT LUKE LUTHERAN CHURCH, Plaintiff

AND:

DON McGREGOR and INVESTIA FINANCIAL SERVICES INC. o/a MONEY CONCEPTS, Defendants

AND

PIERRE CRONIER, DENIS POIRIER, MARGARET TANNAHILL-WADE, BRYAN J. KING, DAVID BICKEL, KIM HERWEYER, RON HERWEYER,MURRAY JOHNSON, GAIL DETLEFSEN, BARTON THOMAS BURRON, JOHN DOE #1-50, and JANE DOE #1-50, Third Parties

BEFORE: Valin J.

COUNSEL: John J. Jones, for the Defendant McGregor, Moving Party Stephen Cavanagh, for the Plaintiff, Responding Party

HEARD: June 29, 2017

ENDORSEMENT

[1] The plaintiff is a Lutheran Church in Ottawa. It has sued the defendants for damages and declaratory relief resulting from the embezzlement of funds by Barton Burron (“Burron”), a chartered accountant who was the plaintiff’s treasurer.

[2] The defendant Investia Financial Services Inc. (“Investia”) was the plaintiff’s financial or investment advisor. The defendant Don McGregor (“McGregor”) was an employee of Investia.

[3] Burron incorporated a company for the purpose of a real estate development in which he had a personal interest. Burron embezzled funds from the plaintiff to invest in that development. In a separate proceeding, the plaintiff recovered judgment against Burron in the amount of $600,000.

[4] In this action, the plaintiff’s claim is based on the allegation that, unknown to it, McGregor acquired a personal interest in Burron’s real estate development and that, in breach of a fiduciary and other duties, he failed to disclose that personal interest to the plaintiff during the period between 2009 and 2014. As McGregor’s employer, Investia is alleged to be responsible for the breach of duties owed to the plaintiff.

[5] McGregor and Investia have both defended the plaintiff’s claim, alleging that the plaintiff’s officials failed to exercise appropriate oversight over the plaintiff’s financial affairs and Burron’s activities.

[6] McGregor commenced a third party claim against nine persons said to have been church officials. Others who are not connected to the plaintiff have also been named as third parties. The third party claim seeks contribution and indemnity on a number of bases. Investia did not bring any third party proceedings.

[7] The third party claim as against the plaintiff’s officials was initially defended by counsel for the plaintiff, David Debenham (“Debenham”) from the firm of McMillan LLP.

[8] This is a motion by the defendant McGregor for an order disqualifying and removing McMillan LLP and Debenham as counsel for the plaintiff.

[9] Counsel for McGregor submits that that McMillan LLP and Debenham are in a conflict of interest as a result of which they cannot continue to act for the plaintiff. McGregor’s position is based on the allegation that, for a brief period, McMillan LLP and Debenham acted for the third parties who are alleged to have been church officials, that they received confidential and privileged information from the plaintiff, and that they might have used that information from the plaintiff to the prejudice of the third parties and vice versa.

[10] For the reasons that follow, the motion must fail.

[11] The plaintiff has not sued the third parties. The third parties have not defended the main action. It therefore cannot be said that the third parties are opposing parties to the plaintiff in the main action.

[12] McGregor does not allege that the plaintiff’s lawyers have ever received any information that was confidential or privileged to him.

[13] The third parties, with respect to whom the conflict of interest is alleged by McGregor to exist, do not support this motion. The defendant Investia has chosen not to participate in the motion.

[14] As soon as McGregor made the allegations of conflict of interest, the defence of the nine church officials named as third parties was taken over by another law firm. The most logical and reasonable inference to be drawn from that fact is that the decision to hire another firm was made out of an abundance of caution in the face of the allegations of conflict of interest.

[15] The affidavit filed in support of the amended notice of motion does not allege that the plaintiff’s lawyers have acquired or made improper use of any confidential or privileged information of McGregor, or of any other party. The affidavit contains no evidence that Debenham or McMillan LLP actually having a disqualifying conflict of interest.

[16] There is no evidence that McGregor has ever been a client of Debenham or McMillan LLP.

[17] The third parties have not been sued for damages. McGregor’s claim against them is for contribution and indemnity. A claim for contribution and indemnity under s. 1 of the Negligence Act is not a damage claim arising out of a tort, but instead is a statutory claim founded on principles of restitution and unjust enrichment.[^1]

[18] The motion is therefore dismissed.

[19] The notice of motion made numerous allegations of misconduct against Debenham and McMillan LLP. I find that the moving party has failed to support any of the allegations with evidence.

[20] Upon being served with the notice of motion, indicating that costs would be sought against them personally on a substantial indemnity basis, Debenham and McMillan LLP acted appropriately by engaging outside counsel to represent them on this motion. In the circumstances of this case, that is a cost that their client should not have to bear.

[21] The plaintiff is therefore entitled to its costs of this motion on a substantial indemnity basis. A costs award on that scale is justified where the moving party has alleged that Debenham and McMillian LLP had breach the Rules of Professional Conduct and failed to convince the court in that regard and where the moving party himself requested a costs award on that scale in the event he was successful.

[22] I note that counsel for the plaintiff, responding party filed a costs outline, which I find to be reasonable. Counsel for McGregor, the moving party did not file a costs outline.

[23] I have taken into account the facts enumerated under Rule 57, including the time spent, the result achieved, and the complexity of the matters, as well as the application of the principle of proportionality. I conclude that an award of costs in the amount of $13,250. Inclusive of disbursements and HST, would be a reasonable one in the circumstances, and I order the defendant McGregor to that amount to the plaintiff forthwirth.

Date Released: June 30, 2017

The Honourable Mr. Justice G. Valin

[^1]: Placzek v. Green, 2009 ONCA 83, para. 35 (Ont. C.A.).