Court File and Parties

Court File No.: 2596-15SR Date: 2017/07/14 Ontario Superior Court of Justice

Between:

Paulo Viana Dentistry Professional Corporation, Plaintiff – and – Anu Kapoor, Anu Kapoor Dentistry Professional Corporation, Steven Doubt and Dr. Steve Doubt Dentistry Professional Corporation, Defendants

Counsel: Andrew Camman and Susan Toth, for the Plaintiff David Williams, for the Defendants Anu Kapoor and Anu Kapoor Dentistry Professional Corporation Michael Cassone, for the Defendants Steven Doubt and Dr. Steve Doubt Dentistry Professional Corporation

Heard: May 24, 2017

Before: Grace J.

A. Introduction

[1] This action was commenced under the simplified procedure set forth in rule 76 of the Rules of Civil Procedure.

[2] It arises from disharmony among some of those practising dentistry under the banner White Oaks Dental Practice in London, Ontario (the “Clinic”). Those involved in the litigation are Dr. Paulo Viana, Dr. Anu Kapoor, Dr. Steven Doubt and their professional corporations.

[3] In its amended statement of claim Paulo Viana Dentistry Professional Corporation (“Vianaco”) seeks injunctive and declaratory relief, damages for breach of contract and punitive, exemplary and aggravated damages against Dr. Kapoor, Anu Kapoor Dentistry Professional Corporation (“Kapoorco” and collectively the “Kapoor defendants”), Dr. Doubt and Dr. Steve Doubt Dentistry Professional Corporation (“Doubtco” and collectively the “Doubt defendants”).

[4] An agreement dated July, 2013 between Vianaco and Doubtco on the one hand and Dr. Kapur [sic] on the other (the “Associate Agreement”) is at the center of the dispute. Vianaco terminated the arrangement. It maintains that Dr. Kapoor has continued to engage in the practice of dentistry at the Clinic despite the fact that she is not entitled to do so.

[5] Vianaco also alleges in its pleading that the Doubt defendants have maintained a professional relationship with Dr. Kapoor in breach of the Associate Agreement.

[6] The position of the Kapoor defendants is summarized in paragraph 15 of their statement of defence and counterclaim as follows:

The provisions of the agreement between Anu Kapoor and the Plaintiff on which the Plaintiff relies are unenforceable because they either do not apply to the circumstances of the purported termination…are in restraint of trade, or are otherwise unenforceable for reasons having to do with their temporal and geographical scope.

[7] Vianaco sought “summary judgment on all the claims in the Statement of Claim against Anu Kapoor and Anu Kapoor Dentistry Professional Corporation” in its notice of motion. During oral argument it became clear Vianaco presently pursues only some of the relief.

[8] No remedy is sought on this motion against the Doubt defendants.

[9] Vianaco filed a second motion seeking an inconsequential and non-controversial amendment to the amended statement of claim. It also asked for an order continuing the action under the ordinary procedure. I will deal with the motions in reverse order.

B. Motion to further Amend and to continue the proceeding under the ordinary procedure

[10] The proposed amendment is not contentious. It involves only the insertion of a middle initial currently missing from the description of Vianaco. Leave to further amend the statement of claim to the extent requested in the April 12, 2017 Simplified Procedure Motion Form is given.

[11] I turn to the request to continue the action under the ordinary procedure.

[12] Sometimes the rule 76 simplified procedure is mandatory: rules 76.02(1) and (2.1). This is not one of those situations. Even where not required, the procedure may be used in any other action subject to limited and inapplicable exceptions: rules 76.02(3) through (7) and 76.01(1).

[13] Initially counsel for the Kapoor defendants objected to the utilization of the simplified procedure because the plaintiff asks the court to grant an injunction.

[14] During argument, counsel for the Kapoor defendants acknowledged the breadth of rule 76.02(3). That subrule reads:

The procedure set out in this Rule may be used in any other action at the option of the plaintiff, subject to subrules (4) through (9).

[15] There is nothing in the rule which prevents a plaintiff from having resort to the simplified procedure because the relief sought includes something beyond the three things rule 76.02(1) specifically mentions: money, real property and personal property.

[16] The direction rule 1.04(1) contains warrants mention. It requires that:

These rules…be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

[17] Unquestionably some motions are more difficult to pursue in an action governed by the simplified procedure. Cross-examinations on affidavits are permitted if the action is subject to the ordinary procedure: rule 39.02. However, they are not permitted if rule 76 applies: rule 76.04(1) 2.

[18] While best suited to less complex matters, the simplified procedure is not confined to them. In fact, currently jury notices may be served in rule 76 actions. Conceptually, I am not aware of any reason why the simplified procedure cannot be invoked simply because an injunction is sought. No authority limiting the operation of the rule in such circumstances was produced.

[19] Ultimately, both counsel agreed there was no need to pursue this part of the motion any further. However, one complication remained. Cross-examinations on the affidavits filed on the summary judgment motion were conducted despite the prohibition rule 76.04 contains.

[20] The parties agreed the cross-examinations would be treated as oral examinations for discovery instead and the transcripts filed in accordance with rules 34.18(2) and 37.10(5) of the Rules of Civil Procedure. While unusual, this method of proceeding preserves the steps that were undertaken by the parties on consent. It also now constitutes a step rule 76.04(2) authorizes thereby avoiding duplication of effort and the attendant cost.

[21] I turn to Vianaco’s motion for summary judgment.

C. The Motion for Summary Judgment

i. The Position of and Evidence Relied on by Vianaco

[22] Vianaco asks that the court grant summary judgment declaring Dr. Kapoor to be in breach of the Associate Agreement.

[23] Doubtco and Vianaco were collectively described as the “Principal” in that contract. Dr. Kapoor was the “Associate”.

[24] Pursuant to its terms, Dr. Kapoor agreed to provide services to Vianaco and Doubtco as an independent practitioner for a one year term. If Dr. Kapoor continued to provide services thereafter, the provisions of the contract endured. In other words, unless terminated the agreement was automatically extended for an indefinite period.

[25] The days and times Dr. Kapoor was to render services to the two professional corporations was stipulated and later informally revised.

[26] Rights of termination with or without cause were conferred. Cause is not alleged. Vianaco relied on Article 2.20(b) instead. It reads:

[Doubtco] or [Vianaco] may terminate the association any time upon providing thirty (30) days prior written notice to the Associate…

[27] Thereafter:

…the Associate shall not enter any treatment…of a patient which may extend beyond the termination date without the express consent in writing of the Principal. [1]

[28] The Associate Agreement outlined other consequences of termination too. For example, article 2.21 provided in part that:

The Associate acknowledges that, at all times, she must work as an associate with both [Vianaco] and [Doubtco] concurrently and shall not work for either [Vianaco] or [Doubtco] without the consent of both [Vianaco] and [Doubtco]. This restriction shall survive the termination of this Agreement. [2] The Associate shall not be permitted to purchase any aspect of the practice of either [Vianaco] or [Doubtco] without the consent of both [Vianaco] and [Doubtco].

[29] Further, Dr. Kapoor agreed that she would not solicit patients or staff of the Clinic or practice dentistry within three kilometers of its premises for two years following the end of the relationship. [3]

[30] Dr. Viana deposed that after about two years he “realized that Dr. Kapoor was not a good fit for my practice” because “[h]er style and methods were not compatible” with his approach. On May 21, 2015, Dr. Viana sent an e-mail to Dr. Doubt concerning Dr. Kapoor and her spouse who was also then working at the Clinic. He said:

Hi Dr. doubt [sic]

I have decided to end my relationship with the Kapoor’s [sic]. I have not made them aware of this but I think it will not come as a surprise. I will advise you of the date early next week. I am not approving her staying in this office according to our agreement. I do believe long term this can work out for everyone, so everyone can have more certainty and control over there [sic] individual intentions. I would appreciate you keeping this confidential until written notice and intentions are made clear.

[31] Dr. Doubt thanked him for the “heads up” but said no more.

[32] For unexplained reasons, Vianaco did not send a notice to Dr. Kapoor until July 30, 2015. It invoked Article 2.20(b) of the Associate Agreement but extended the notice period until September 18, 2015. The letter advised Dr. Kapoor that the termination applied to services she provided to both Vianaco and Doubtco. A line for signature by Dr. Viana on behalf of Vianaco appeared at its base.

[33] Time passed. An August 31, 2015, e-mail from Dr. Viana ended the apparent silence. He asked Dr. Doubt to explain why Dr. Kapoor had been scheduled to see patients after September 18, 2015. After a short intervening exchange, Dr. Doubt sent a September 3, 2015 e-mail to Dr. Viana. In part he wrote:

Paulo

I’ve not received a reply from you to speak to you personally regarding the Kapoor question. Therefore I will do it by e-mail. Dr. Anu Kapoor will remain as my associate.

I’ve also talked to Dr. Bottner. He is agreeable to have an arbitrator in as well with legal counsel to sort out our differences and move on.

[34] That drew an almost immediate response promising the commencement of legal proceedings. Anger was undisguised in the subsequent exchange. Litigation became a virtual certainty.

[35] Correspondence between lawyers for Vianaco on the one hand and Dr. Kapoor on the other began to flow on September 16, 2015. Dr. Kapoor’s position was set forth in a September 29, 2015 letter sent by her counsel Earl Heiber. In part Mr. Heiber wrote:

Dr. Kapoor is not in breach of any valid and existing agreement.

Dr. Kapoor is practising as an Associate of Dr. Doubt. If your client has an issue with Dr. Doubt then I respectfully suggest that your client deal directly with Dr. Doubt.

[36] Although stated to have been provided “to ensure a smooth transition”, Dr. Doubt’s October 1, 2015 correspondence to Dr. Viana had the opposite effect. The author advised Dr. Viana that he had entered into an agreement to sell his shares in Doubtco and 1596092 Ontario Limited (“159”) to Kapoorco. In fact, a letter of intent had been executed on September 17, 2015, the day before the effective date in the termination notice. Not surprisingly, objection to the proposed transaction came swiftly. This action was commenced the following month. Nonetheless, Doubtco and Kapoorco entered into an agreement of purchase and sale on March 1, 2016.

[37] At one time it appeared that the various participants would appoint an arbitrator to resolve their issues. However, that process collapsed and this one gained traction.

[38] Dr. Kapoor has continued to practice dentistry at the Clinic in association with Dr. Doubt pending the outcome of this motion over Dr. Viana’s strong objection.

[39] Vianaco submits that Dr. Kapoor is in breach of the terms of the Associate Agreement. Its position is simple. Dr. Kapoor should have left the Clinic on September 18, 2015. She should not have been on the premises and should not have seen a single patient at any time thereafter. She should have relocated her practise to a location that was more than three kilometers away from the Clinic. Dr. Kapoor cannot, directly or indirectly, acquire the practice of Dr. Doubt and/or the shares of Doubtco or 159.

[40] During argument, counsel for the moving party conceded there is currently no evidentiary foundation for summary judgment on account of damages.

[41] Consequently, Vianaco asks the court to grant the relief requested in the amended statement of claim to the extent of:

a) A declaration that Dr. Kapoor has breached the terms of the Associate Agreement; and

b) A permanent injunction restraining Dr. Kapoor from continuing as an associate and/or from completing the proposed acquisitions of the shares of Doubtco and 159.

ii. The Position of and Evidence relied upon by the Kapoor defendants

[42] The Kapoor defendants ask that the motion be dismissed. They raise a preliminary point insofar as injunctive relief is concerned. Vianaco’s claim for injunctive relief was the subject of discussion between the parties’ lawyers at the end of the cross-examination of Dr. Viana. The following are the significant passages from the exchange:

Kapoor’s counsel: There will be no requests for an injunction at the return of this motion?

Viana’s counsel: There won’t be an, an ask for an injunction. There’ll be…a request for relief. If your client doesn’t want to abide by the order then we’d have to take something further…if you want I’ll amend it and I’ll take it out if that makes you more comfortable.

[43] The notice of motion was not amended. A review of the plaintiff’s factum revealed the reversal of position. Vianaco’s counsel conceded discomfort during his submissions. He explained that, in retrospect, the lawyers were speaking at cross-purposes: he thought they were speaking about an interlocutory injunction while the Kapoor defendant’s counsel believed the discussion related to the claim for a permanent injunction.

[44] In my view, there should have been no misunderstanding. The examination occurred in the context of this motion for summary judgment. While a claim to an interlocutory injunction was set forth in the amended statement of claim, the necessary motion was not brought.

[45] Instead, Vianaco filed this motion seeking a final order in accordance with the amended statement of claim. Paragraph 1 g asks for a permanent injunction. Counsel for the Kapoor defendants clearly – and fairly – understood that was the subject of his conversation with Vianaco’s lawyer. It is clear from the transcript that several questions were not posed because of the exchange to which I have referred. The Kapoor defendants would be prejudiced if Vianaco was permitted to reverse course. By the time the moving party’s factum was in hand, the evidence gathering phase of the summary judgment motion was complete.

[46] Furthermore, if granted, a permanent injunction would prevent the defendants from completing their agreement of purchase and sale. In a May 9, 2017 affidavit, Dr. Doubt deposed that he was prejudiced if Vianaco was allowed to change its position. While his stated understanding that the plaintiff was limited to a claim for damages under the simplified procedure is mistaken, I accept that he may have participated to a much greater degree had he known earlier that a permanent injunction would be sought.

[47] It would be unfair to allow Vianaco to pursue a permanent injunction at this time.

[48] That leaves me with the claim for a declaration that Dr. Kapoor has breached and is continuing to flout the terms of the Associate Agreement.

[49] The responding parties maintain that Dr. Viana is disingenuous in suggesting the July 30, 2015 notice had anything to do with the quality of Dr. Kapoor’s work or the manner in which she practised dentistry.

[50] In fact, Dr. Kapoor deposed that it was Dr. Viana who was “aggressive and abusive” and who “went out of his way to create a poisonous work environment” after she rejected a February, 2015 offer to work exclusively in his practice.

[51] Dr. Kapoor provided examples. I will mention some of them. She said that Dr. Viana became critical of Dr. Kapoor’s work after she declined his proposal. That had not happened before. Her son was an employee of the Clinic. Dr. Kapoor said Dr. Viana stopped delegating tasks to him. Her spouse Lalit had been retained by Dr. Viana too. His arrangement was terminated by another notice dated July 30, 2015.

[52] The Kapoor defendants also rely on the terms of the Associate Agreement. They pointed to a recital confirming that Vianaco and Doubtco had no authority to bind the other. Article 1.1 provided that the recitals were incorporated into and formed an integral part of the contract. Those provisions caused them to question Vianaco’s ability to prevent Dr. Kapoor from continuing to serve as Dr. Doubt’s associate.

[53] They also rely on affidavits of Drs. Doubt and Bottner sworn February 10 and 13, 2017 respectively.

[54] Dr. Doubt outlined why he believes Dr. Viana’s actions were unrelated to issues concerning Dr. Kapoor. His refusal to accept Dr. Viana’s offer to acquire Dr. Doubt’s practice and a desire to isolate Dr. Doubt was, in his view, the reason Vianaco terminated the Associate Agreement.

[55] Dr. Doubt acknowledged that he did not respond “on the merits” when first advised of Dr. Viana’s intention to exercise the right of termination the Associate Agreement conferred. He said he did not do so “as any communication on the merits with Dr. Viana would have triggered further aggression and outrageous accusations.” [4]

[56] Dr. Doubt provided a glowing review of Dr. Kapoor’s skills and professionalism. He said that his goal is to retire on the expiry of the existing lease of the premises occupied by the Clinic on October 31, 2017. He said this action is preventing him from doing so.

[57] While not a party to this action, Dr. Bottner has joined the fray and chosen sides. He described Dr. Kapoor as “a friendly and likeable person” who “is very good with patients”. He said he fully supports the proposed purchase of Dr. Doubt’s practice by her.

[58] As for Dr. Viana, Dr. Bottner said simply that he “will not speak with” and does not trust him.

[59] The Kapoor defendants also rely on another contract despite the fact they were not a party to it. Further, the other agreement was not mentioned in their statement of defence and counterclaim. Same was, however, referred to in and appended to Dr. Viana’s affidavit.

[60] Some context is important before turning to the terms of that document.

[61] Drs. Doubt and Bottner started practising dentistry together in 1983. The practice of a third dentist with whom they were associated was purchased by Dr. Viana in early 2004.

[62] The three dentists and their professional corporations, including Vianaco and Doubtco, entered in an agreement dated October 17, 2011. Counsel for the parties referred to the contract as a “Practice Agreement”. I will too.

[63] The Kapoor defendants maintain the Associate Agreement is not a stand-alone contract but must be read in conjunction with and is limited by a prior overarching agreement executed by Drs. Viana, Doubt and Bottner and their professional corporations.

[64] Some of the provisions of the Practice Agreement bear mention.

[65] Article 2.1 set forth its intention and purpose in these terms:

The Parties…each agree that the provisions of this Agreement shall hereafter govern and define their respective rights…interests, powers and obligations as between themselves with respect to…the conduct of their Individual Practices…it being the intent that to the greatest extent possible the practices of each of the Parties be separate and independent from the others.

[66] The phrase “Individual Practice” was defined in article 1.8 to mean:

…the individual practice of dentistry carried on by each of Bottner, Doubt and Viana…and includes the respective patients, charts, files and ledgers pertaining to each Individual Practice.

[67] Article 2.4 addressed present and future associate dentists as follows:

The Parties shall continue to be the employer of the existing associate dentists and the billings and expenses of existing associates will be divided equally among the Parties. No new associate dentists shall be hired or contracted without the Approval of the Parties. However, a Party is free to hire or contract with an associate dentist in connection with that Party’s Individual Practice and shall be responsible for all costs and shall be entitled to all revenues from such associate dentist.

[68] I pause to note that the Associate Agreement was executed by Drs. Viana and Doubt because her services were to be shared by their individual practices. Her responsibilities were not and did not extend to Dr. Bottner’s patients.

[69] Article 2.10 of the Practice Agreement recognized the practical reality of the parties’ arrangement and the potential impact of individual decisions on the practises of the other principals. The Kapoor defendants relied on the following portion:

Each of the Parties acknowledge that actions and decisions taken by him with respect to his Individual Practice may affect the other Parties. As a result, each of the Parties agrees that he will not take any action or make any decision in connection with his Individual Practice that will have a material adverse impact on another Party.

[70] The Practice Agreement contemplated the possibility that one or more of the parties would want to sell their practice one day. Generally speaking each principal was given the right to match the price and terms contained in a third party offer a selling dentist was willing to accept: Article 5.3. However, a right of first refusal did not arise if the proposed purchaser was a dentist who had been associated with the seller’s individual practice for at least eighteen months: Article 5.4 (a).

[71] Amendment or modification of the Practice Agreement required the “Approval of the Parties”: Article 8.1. That phrase was also used in Article 2.4 in the context of the retention of new associate dentists. The wording was defined. Unanimity was not required, despite the parties’ previously mentioned concern that the decision of one dentist might materially impact another. The approval in writing of at least two-thirds of the Parties constituted “Approval of the Parties”: Article 1.1.

iii. The Applicable Legal Principles

[72] The relevant portion of rule 20.04(2)(a) of the Rules of Civil Procedure provides as follows:

The court shall grant summary judgment if,

the court is satisfied that there is no genuine issue requiring a trial with respect to a claim…

[73] The motion judge is, of course, required to consider the evidence filed in order to make that determination and may weigh the evidence, evaluate the credibility of a deponent and draw reasonable inferences from the evidence “unless it is in the interest of justice for such powers to be exercised only at a trial”: rule 20.04(2.1).

[74] Such motions are now more commonplace than trials and the body of case law concerning summary judgment motions is growing at a steady rate. Hryniak v. Mauldin, 2014 SCC 14 (“Hryniak”) is the centrepiece.

[75] The applicable principles have been repeatedly summarized. At paras. 72 and 75 of Re Trotter Estate, 2014 ONCA 841 Benotto J.A. wrote:

In Hryniak, the Supreme Court established a two-step process that motion judges must follow on a summary judgment motion. First, a motion judge must determine – based only on the evidence before her – whether there is a genuine issue requiring a trial. If not, then summary judgment should be granted. There will be no genuine issue requiring a trial when the written record (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: Hryniak, at para. 49.

At this point, a motion judge may, at her discretion, move to step two of Hryniak, where she must consider whether a trial can be avoided using the powers granted under rules 20.04(2.1) and (2.2) to weigh the evidence, evaluate credibility, draw reasonable inferences and call oral evidence. These discretionary powers are presumptively available unless it is in the interest of justice to exercise them only at trial.

[76] Such motions may be brought even where the simplified procedure is invoked. However, they should be rarely pursued. As the Court of Appeal in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764 said at paras. 254 – 257:

We wish to emphasize a significant additional factor that must also be considered in the context of a simplified procedure action…[T]he Rule 76 is designed to get the parties to trial with a minimum of delay and costs. Thus, one of the key objectives of the simplified procedure rule is to limit the extent of pre-trial proceedings and to bring the parties to an early trial conducted pursuant to tailored rules. That is why discovery is restricted, cross-examination on affidavits and examination of witnesses on motions are not allowed, and the procedure at a summary trial is modified to reduce the length of the trial. No doubt, in appropriate cases, a motion for summary judgment in a Rule 76 action can be a useful tool to promote the efficient disposition of cases. However, it will often be the case that bringing a motion for summary judgment will conflict with the efficiency that can be achieved by simply following the abridged procedures in Rule 76.

When a judge is faced with a contested motion for summary judgment in a simplified procedure action that requires exercising the powers in rule 20.04(2.1), the judge will not only have to apply the full appreciation test, but will also need to assess whether entertaining the motion is consistent with the efficiency rationale reflected in the simplified procedures under Rule 76. We make two general observations that will inform this assessment.

First, summary judgment motions in simplified procedure actions should be discouraged where there is competing evidence from multiple witnesses, the evaluation of which would benefit from cross-examination, or where oral evidence is clearly needed to decide certain issues. Given that Rule 76 limits discoveries and prohibits cross-examination on affidavits and examinations of witnesses on motions, the test for granting summary judgment will generally not be met where there is significant conflicting evidence on issues confronting the motion judge. While the motion judge could order the hearing of limited oral evidence on the summary judgment motion under rule 20.04(2.2), in most cases where oral evidence is needed, the efficiency rationale reflected in the rule will indicate that the better course is to simply proceed to a speedy trial, whether an ordinary trial or a summary one: see rules 76.10(6) and 76.12.

Second, we are not saying that a motion for summary judgment should never be brought in a simplified procedure action. There will be cases where such a motion is appropriate and where the claim can be resolved by using the powers set out in rule 20.04 in a way that also serves the efficiency rationale in Rule 76. For example, in a document-driven case, or in a case where there is limited contested evidence, both the full appreciation test and the efficiency rationale may be served by granting summary judgment in a simplified procedure action.

[77] The “full appreciation test” was not adopted by the Supreme Court of Canada in Hryniak. However, the considerations outlined by the Court of Appeal continue to be applicable and important.

[78] Fundamentally, the motion judge must ask whether dispositive findings can be fairly and justly made without a trial. I return to Hryniak. At para. 50, Karakatsanis J. explained when it is appropriate to reach conclusions on the merits. She wrote:

…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.

[79] Procedural considerations were important too. At para. 60, Karakatsanis J. addressed the circumstances in which it would be in the interest of justice to postpone the exercise the powers to weigh evidence, evaluate credibility and draw reasonable inferences until trial:

The “interest of justice” inquiry…also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach.

[80] I turn to this case.

iv. Analysis and Decision

[81] Vianaco submits the result of the motion depends on nothing more than the clear and unambiguous wording contained in the Associate Agreement to which I have already referred. Dr. Kapoor’s arrangement was terminable at any time, for any reason by any of the signatories. Dr. Kapoor acknowledged as much when examined:

Q. Okay. So you didn’t think that Dr. Viana could terminate you because you didn’t meet his goals any longer?

A. Dr. Viana is the principal dentist. If he doesn’t like anyone he can…terminate me at any time.

[82] Given that fact and the exercise of the right of termination, Vianaco submits there is no genuine issue requiring a trial since the Associate Agreement clearly prohibited Dr. Kapoor from continuing the practise of dentistry at the Clinic after September 18, 2015. This, the plaintiff argues, is precisely the situation that is ripe for summary judgment notwithstanding the fact the action is governed by the simplified procedure. A dispositive finding can be made with confidence. The court need not have resort to the powers rule 20.04(2.1) confers. Summary judgment should follow.

[83] The Kapoor defendants argue that the matter is not nearly as simple or clear. They maintain that the Associate Agreement is subject to the terms of the Practice Agreement.

[84] As mentioned earlier, the parties agreed in Article 2.10 of the latter contract “not to take any action or make any decision in connection with his Individual Practice that will have a material adverse impact on another Party”. Vianaco’s decision affected Dr. Doubt’s practice.

[85] That argument is not persuasive. Article 2.4 of the Practice Agreement had already given each signatory the ability to retain an associate to work with them in their own practice. If exercised, the benefit and burden of the arrangement was to lie with the dentist retaining the associate dentist.

[86] The Associate Agreement involved two of three dentists. They agreed to share one associate. The financial benefits were enjoyed and the burdens borne by them. The arrangement did not impact the non-contracting dentist (Dr. Bottner) economically. Even if the Practice Agreement was an overarching document, the two contracts were not in conflict.

[87] The termination provisions were consistent too. The Practice Agreement did not limit the circumstances in which an associate contract pertaining to an individual practice could be terminated. Nor did the Associate Agreement.

[88] Furthermore, the Practice Agreement gave each dentist the freedom to contract with associates who would work in their individual practices only. That is what Dr. Viana and Dr. Doubt agreed to do, albeit on a shared basis. The Associate Agreement was in accordance with the permission granted by the Practice Agreement.

[89] Drs. Viana and Doubt agreed that either dentist could decide to end the arrangement, even though one of those individuals could not otherwise bind the other: Article 2.20(b). Absent consent of the dentist giving notice of termination, the decision to end the relationship by one, concluded Dr. Kapoor’s relationship with both dentists: Article 2.21.

[90] If the result of this motion was to rest only on a consideration and the construction of the two agreements, the declaration Vianaco seeks might well have been granted. However, the analysis does not end here.

[91] The Kapoor defendants rely on the principles set forth in Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494 (“Bhasin”). In that case, Harish Bhasin received notice of non-renewal of an enrolment director’s agreement from Canadian American Financial Corp. (“Can-Am”). In a subsequent action Mr. Bhasin alleged the parties’ agreement contained an implied term that Can-Am’s decision not to renew would be made in good faith.

[92] Writing on behalf of a unanimous court, Cromwell J. described two developments in the law of contracts. At para. 33 Cromwell J. wrote:

In my view, it is time to take two incremental steps in order to make the common law less unsettled and piecemeal, more coherent and more just. The first step is to acknowledge that good faith contractual performance is a general organizing principle of the common law of contract which underpins and informs the various rules in which the common law, in various situations and types of relationships, recognizes obligations of good faith contractual performance. The second is to recognize, as further manifestation of this organizing principle of good faith, that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations.

[93] This evolution in the law is consistent with existing societal standards. As Cromwell J. added at paras. 80-81:

Recognizing a duty of honesty in contract performance poses no risk to commercial certainty in the law of contract. A reasonable commercial person would expect, at least, that the other party to a contract would not be dishonest about his or her performance. The duty is also clear and easy to apply…A rule of honest performance in my view will promote, not detract from, certainty in commercial dealings.

Any interference by the duty of honest performance with freedom of contract is more theoretical than real. It will surely be rare that parties would wish to agree that they may be dishonest with each other in performing their contractual obligations.

[94] The duty of honesty in contractual performance is a limited one. Cromwell J. explained at paras. 70 and 73 of Bhasin:

The development of the principle of good faith must be clear not to fear into a form of ad hoc judicial moralism or “palm tree” justice. In particular, the organizing principle of good faith should not be used as a pretext for scrutinizing the motives of contracting parties.

[The duty] means simply that the parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract…

[95] In Bhasin the Supreme Court of Canada agreed with the trial judge’s conclusion that Can-Am breached the terms of the parties’ agreement by failing to act honestly with the other party when exercising the non-renewal clause. Damages were sought by the plaintiff and awarded.

[96] As stated before, the initial term of the Associate Agreement was one year. However, the agreement did not automatically end. Article 2.4 provided for the eventuality that occurred as follows:

The parties agree that if the Associate continues to work at the Practice as provided herein after the expiry of the Term without entering into any new written agreement, then all the provisions of this agreement shall continue in full force and effect.

[97] Thereafter, the Associate Agreement was to continue unless and until terminated in accordance with Article 2.20. Article 2.20(c) dealt with termination for cause and provided a non-exhaustive list of circumstances which fit within that category. Vianaco did not allege cause.

[98] Article 2.20(b) was the provision on which it relied. It stated:

[Doubtco] or [Vianaco] may terminate the association any time upon providing thirty (30) days prior written notice to the Associate. The Associate may terminate the association at any time upon providing sixty (60) days prior written notice to the Principal.

[99] The July 30, 2015 notice sent by Vianaco gave no reason for its decision to terminate the arrangement. Nor did the May 21, 2015 e-mail Dr. Viana sent to Dr. Doubt.

[100] As mentioned previously, reasons were given by Dr. Viana on this motion. In paragraph 11 of his January 12, 2017 e-mail, Dr. Viana deposed in part as follows:

Unfortunately, after almost 2 years, I realized that Dr. Kapoor was not a good fit for my practice. Her style and methods were not compatible with my practice.

[101] Dr. Kapoor denies that is so. She said she received recognition from Dr. Viana in December, 2014. In a January 20, 2015 e-mail sent to Dr. Kapoor and her spouse, Dr. Viana said in part:

I thank you very much and appreciate your kindness. I want you to reflect on this moment…you are kind and considerate people, and I appreciate that…I do appreciate you a lot as a family and people. I do look forward to helping you grow as dentists and fofill (“sic”) your full potential professionally and financially.

[102] She alleged the offer to work with Dr. Viana exclusively was made the following month and that the deterioration in their relationship coincided with her decision to decline it. Dr. Viana denied having made any such offer when examined for discovery on March 14, 2017. [5]

[103] Dr. Doubt suggested a connection between the July 30, 2015 notice and Dr. Viana’s failed attempt to acquire Dr. Doubt’s practice. An April 13, 2015 e-mail sent to Drs. Viana and Bottner was alleged to have increased tension. In part Dr. Doubt wrote:

Driving 14 hours home from North Carolina gives you lots of time to reflect.

It is undoubtedly in my mind now…to move on and begin the division of equity of the partnerships. Why now? First it was the insurance, now it’s the computers….it will be a steady progression. We know the 3 practices are different in styles and philosophies. The hard part is over…..as we have all decided to…go our separate ways.

[104] Dr. Doubt deposed that he was “not aware of any negative employment reviews or complaints with respect to Dr. Kapoor” before Dr. Viana’s May 21, 2015 e-mail. [6] Although not working directly with her, Dr. Bottner gave Dr. Kapoor a glowing review too.

[105] In my view, it is not appropriate to grant summary judgment for three reasons.

[106] Firstly, I am not satisfied the Associate Agreement could be terminated on a whim or capriciously. The common law duty of honest performance is relatively new. It applies to all contracts. The evidentiary record compiled by the Kapoor defendants calls into question whether Vianaco met its implied obligation.

[107] Vianaco did not reply to the allegations made by Drs. Kapoor, Doubt and Bottner although he took issue with them during his examination for discovery. The scope of the duty is, at this time, unclear. So, too, are the issues of the existence and consequences of a breach. In Bhasin damages were awarded. Dishonesty did not undo the exercise of the non-renewal clause. However, I am not certain the innocent party is confined to a remedy in damages, particularly where there is a third contracting party who has continued to utilize the services of the directly affected party despite the purported termination.

[108] Those issues are, in my view, genuine ones requiring a trial. As Cromwell J. explained in Bhasin, supra at para. 90:

It is not necessary in this case to define in general terms the limits of the implications of the organizing principle of good faith. This is because it is unclear to me how any broader duty would assist Mr. Bhasin here…

[109] It may be that this case is sufficiently nuanced or unique that it warrants the examination of the limits of the duty of honesty that was unnecessary in Bhasin.

[110] Second, this is a situation where it is in the interests of justice that the powers conferred by rule 20.04(2.1) be exercised only at trial. It is imperative that the judge hearing a summary judgment motion consider and “assess the advisability of the summary judgment process in the context of the litigation as a whole”: Baywood Homes Partnership v. Haditaghi (2014), 2014 ONCA 450, 120 O.R. (3d) 438 (C.A.) at para. 33.

[111] Vianaco seeks summary judgment against the Kapoor defendants only. No relief is sought against their co-defendants.

[112] Further, limited relief is sought on this motion. A declaration is only one of four principal remedies sought against the Kapoor defendants in the Amended Statement of Claim. The declaration is the only relief sought on this motion. The claims for two categories of damages and a permanent injunction are not being pursued presently and would have to be considered at a later time. The Kapoor defendants have asserted a counterclaim. The motion does not seek its dismissal.

[113] Granting summary judgment would not expedite the process. Issues would continue to abound. There would be risk of inconsistent findings. Steps, evidence and arguments would be duplicated. A contextual analysis leads to the conclusion that all of the matters in dispute should be determined in one, rather than a staged process.

[114] Third, this is a case where a written record simply cannot adequately replace oral testimony. As Lauwers J.A. wrote:

Great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all. [7]

[115] This is a case that is simply not appropriate, substantively or procedurally, for disposition by way of a motion for summary judgment. Findings cannot be made with confidence on the record assembled. Absent a resolution, a trial is required.

D. Conclusion, Directions and Costs

[116] For the reasons given, the motion for summary judgment is dismissed.

[117] Pursuant to rule 25.05(2), this court:

a. Orders that the affidavits of Drs. Viana, Kapoor and Doubt filed on the motion may be used at trial in the same manner as an examination for discovery;

b. Directs that a continuation of the examinations for discovery shall be permitted on any issue raised in the action that was not already covered, subject to a time limit of forty-five minutes per witness. The parties shall cooperate to ensure that all such examinations are completed by no later than October 20, 2017;

c. Orders the parties to comply with rule 76.03, if they have not already done so, by no later than September 22, 2017

d. Orders the parties to comply with rule 76.08 by no later than December 11, 2017, even if they have previously done so;

e. Orders the parties to comply with rule 76.09 by no later than January 19, 2018.

[118] Short cost submissions not exceeding seven pages each may be provided to the court through the trial coordination unit by no later than 4:30 p.m. on August 4, 2017 in the case of the Kapoor defendants and August 25, 2017 in the case of Vianaco. I have not mentioned the Doubt defendants because their counsel observed but did not participate in the motion.

“Justice A.D. Grace”

Justice A.D. Grace

Released: July 14, 2017

Footnotes

[1] This excerpt is drawn from article 2.20(d).

[2] While redundant, almost identical language was used in Article 2.25 in relation to Article 2 in its entirety.

[3] Article 2.17.

[4] The excerpt is drawn from para. 54 of Dr. Doubt’s February 10, 2017 affidavit.

[5] Pages 93-94, Questions 590-594.

[6] The excerpt is drawn from para. 55 of Dr. Doubt’s February 10, 2017 affidavit.

[7] Baywood Homes Partnership v. Haditaghi (2014), 2014 ONCA 450, 120 O.R. (3d) 438 (C.A.) at para. 44.