Flirty Girl Fitness Inc. v. Hottie Body Boutique Inc., 2017 ONSC 4969
CITATION: Flirty Girl Fitness Inc. v. Hottie Body Boutique Inc., 2017 ONSC 4969
COURT FILE NO.: CV-15-528272
DATE: 20170822
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FLIRTY GIRL FITNESS INC.
Plaintiff
– and –
HOTTIE BODY BOUTIQUE INC., GARDINER ROBERTS LLP, DAVID EPSTEIN, MICHELLE EPSTEIN and KRISTA KNEE
Defendants
Christopher Stienburg for the Plaintiff
Sean Dewart and Rebecca Glass for the Defendants David Epstein and Gardiner Roberts LLP
Aaron Franks for the Defendants Michelle Epstein and Hottie Body Boutique Inc.
HEARD: August 21, 2017
PERELL, J.
ADDENDUM
[1] This is an addendum to my Reasons for Decision on a summary judgment motion brought by Flirty Girl Fitness Inc. The Reasons are reported as Flirty Girl Fitness Inc. v. Hottie Body Boutique Inc., 2017 ONSC 4158.
[2] As explained in the Reasons for Decision, Flirty Girl Fitness, whose sole director is Kerry Knee, sued Krista Knee, who is Kerry’s sister and a co-owner of Flirty Girl Fitness, Hottie Body Boutique Inc., Michelle Epstein, David Epstein, and Gardiner Roberts LLP.
[3] Flirty Girl Fitness sued all of the Defendants for conspiracy to dispossess it of all its assets and convert them to their own use; i.e., it sued for the tort of conversion. Further, Flirty Girl Fitness sued Krista, Mr. Epstein, and Gardiner Roberts LLP for breach of their respective fiduciary duties owed to it. It sued Mr. Epstein and his law firm for professional negligence. Flirty Girl Fitness claimed damages of $180,440.15 plus punitive damages.
[4] The professional negligence claim against Mr. Epstein and his law firm is set out in paragraph 41 of the Statement of Claim as follows:
- [Mr. Epstein’s] actions, described herein constitute solicitor’s negligence. He owed a professional duty of care at all times to [Flirty Girl Fitness]. By incorporating, financing, and owning a corporate entity that became, with his assistance, the repository of misappropriated assets belonging to his client, he breached his professional and fiduciary duty as lawyer for that client. He was in breach of the firm’s retainer by [Flirty Girl Fitness]. Gardiner Roberts is liable for his actions.
[5] It may be noted that the pleading of professional negligence equates the alleged breach of fiduciary duty with professional negligence. There is nothing in the Statement of Claim that raises an issue about the standard of care in providing professional services. There is, for instance, nothing in the pleading that suggests that apart from the alleged breach of fiduciary duty that Mr. Epstein negligently drafted the documentation or failed to perform any services associated with the contract between Flirty Girl Fitness and Hottie Body Boutique. I shall return to this observation below.
[6] Flirty Girl Fitness brought a partial summary judgment motion for liability to be followed by an assessment of damages. It purported to reserve its claim for professional negligence against Mr. Epstein and his law firm until after a determination of whether or not there had been a contract between Flirty Girl Fitness and Hottie Body Boutique. Without bringing cross-motions for summary judgment, the Defendants sought a summary judgment dismissing all of Flirty Girl Fitness’s claims.
[7] I dismissed Flirty Girl Fitness’s motion and rather dismissed its action against all of the Defendants.
[8] In dismissing the action, I found as a fact that there was no conversion of assets, no breach of fiduciary duty, no professional damages, and no damages.
[9] Rather, I found as a fact that Flirty Girl Fitness had entered into an agreement to sell some of its assets and property to Hottie Body Boutique. The agreement was a very favorable transaction for Flirty Girl Fitness and the consideration paid by Hottie Body Boutique was an overpayment for the consideration it received from entering into the agreement.
[10] There was no conversion of assets; rather, there was an enforceable agreement that was partially, but not fully, implemented. I found that both parties breached the agreement and, practically speaking, they had abandoned their unperformed promises without disturbing the performed part of the bargain.
[11] With respect to Mr. Epstein, I found as a fact that while Mr. Epstein had a fiduciary relationship with Flirty Girl Fitness, he did not breach his fiduciary duties and he did not take advantage of his position or profit at the expense of Flirty Girl Fitness. I found as a fact that the sale of assets to Hottie Body Boutique was fair and better than could be achieved by an agreement with a third-party. Flirty Girl Fitness did not prove any professional negligence by Mr. Epstein.
[12] After the release of my Reasons for Decision, I received a letter from Flirty Girl Fitness’s counsel seeking clarification of two points. The letter stated:
Dear Justice Perell:
Further to the release of Your Honour's Reasons for Decision of July 7, the plaintiff is considering its options for an appeal and asks for clarification of the following two points:
- Whether you have dismissed the plaintiff's claim against David Epstein and Gardiner Roberts LLP for professional negligence.
The plaintiff claimed damages for professional negligence of these defendants in its statement of claim. The parties were agreed and our factum made clear that the plaintiff was not seeking summary judgment on the issue of liability for professional negligence of these defendants.
As stated in our factum, the claim for professional negligence only arises if there was, in fact, an agreement between the plaintiff and the corporate defendant. Your Honour made a finding that an agreement existed; however, Your Honour's reasons do not address the issue of the remaining issue of professional negligence. It should be recalled that the motion was for partial summary judgment only.
- Whether you have determined that the plaintiff is not entitled to the $60,000 purchase price.
Your Honour has made findings that the corporate defendant agreed to pay the plaintiff $60,000.00 and that this $60,000.00 was never paid to the plaintiff. This allows the inference that the plaintiff is therefore entitled to receive $60,000.00 from the corporate defendant. This issue was canvassed during oral submissions, but is not addressed in Your Honour's reasons. On the findings made by Your Honour, the plaintiff wishes to pursue recovery of the purchase price.
The plaintiff respectfully requests Your Honour's clarification of these two issues.
[13] I responded to the letter by advising the parties that the points should be dealt with by argument at a hearing based on the current record.
[14] I asked my assistant to schedule a resumption of the hearing, and the parties, save for Krista Knee, appeared before me on August 21, 2017.
[15] Flirty Girl Fitness’s counsel argued that it had reserved the issue of professional negligence and that there had been no argument at the hearing about this point and, therefore, his client should have the opportunity to lead evidence on this point. He further argued that although his client had not pleaded breach of contract, having regard to my finding that there was a contract and that it had been breached by Hottie Body Boutique’s failure to pay the $60,000, his client should be granted leave to amend and there should be a judgment against Hottie Body Boutique in favour of Flirty Girl Fitness for $60,000.
[16] Mr. Epstein and Gardiner Roberts’ counsel responded that while the court had the jurisdiction to reopen the hearing, it ought not to exercise that jurisdiction in the circumstances of this case. He said that the issue of professional negligence had been before the court and having regard to the narrow way the professional negligence claim had been pleaded in paragraph 41 of the Statement of Claim and to the findings of fact already made, there was no basis for reopening the hearing. He submitted further that if the Plaintiff sought to amend its Statement of Claim to plead different particulars of negligence, the amendment should not be granted because Mr. Epstein and Gardiner Roberts would be prejudiced in a way that could not be redressed by an adjournment and costs.
[17] Hottie Body Boutique’s lawyer responded and adopted the submissions of Mr. Epstein’s counsel. He submitted that it was too late for Flirty Girl Fitness, which had pleaded that there was no contract, to amend its Statement of Claim to plead in the alternative that there was a breach of contract. Further, having regard to my findings that the contract had been abandoned by both parties, he submitted that I had already disposed of any breach of contract claims.
[18] With this background, I shall respond to the two points raised by Flirty Girl Fitness. For the following reasons, my conclusions are: (1) Flirty Girl Fitness’s professional negligence claim against David Epstein and Gardiner Roberts LLP is dismissed; and (2) Flirty Girl Fitness is not entitled to the $60,000.
[19] First, I shall address the second point. Apart from the circumstance that an amendment to the Statement of Claim would be required to advance a claim for breach of contract, my findings of fact foreclose the success of any such claim. I have found as a fact that the contract was breached and abandoned by both parties.
[20] When a contract has been abandoned or repudiated by both parties, it is unenforceable. The doctrine of contractual abandonment has been explained as the circumstance that the parties’ conduct leads to a necessary inference of an implicit agreement to abandon the contract. Alternatively the doctrine has been explained on the basis of an estoppel arising because the conduct of one party justifies the other relying on it and acting on the understanding that the contract is over. See Paul Wilson & Co. A/S v. Partenreederei Hannah Blumenthal, [1983] 1 All E.R. 43 (H.L.); André & Cie S.A. v. Marine Transocean, [1981] 2 All E.R. 993 (C.A.); Collin v. Duke of Westminister, [1985] Q.B. 581 (C.A.); Allied Marine Tpt. Ltd. v. Vale do Rio Doce Navegacao SA, [1985] 2 All E.R. 796 (C.A.).
[21] Alternatively, Flirty Girl Fitness’s breach of contract claim is foreclosed based on the trite proposition that a party who repudiates a contract cannot sue to enforce it.
[22] Turning to Mr. Epstein and the professional negligence claim, Flirty Girl Fitness is incorrect in submitting that the parties had agreed that the professional negligence claim was not before the court. All of the Defendants in their factums responding to the Flirty Girl Fitness’s summary judgment motion requested that Flirty Girl Fitness’s respective claims against them be dismissed - in their entirety - and, as explained in my Reasons for Decision, it is possible to grant a responding party to a summary judgment motion a dispositive decision without a formal cross-motion for a summary judgment.
[23] As noted above, Flirty Girl Fitness pleaded its professional negligence claim as equivalent to its breach of fiduciary duty claim, and it did not plead any other particulars of professional negligence. My findings of fact were that there was no breach of fiduciary duty and that, in any event, there was no damage occasioned by any misconduct. Mr. Epstein’s conduct helped and did not harm Flirty Girl Fitness. It follows from these findings that with the failure of the breach of fiduciary duty claim, the professional negligence claim also failed. It was for these reasons that I dismissed the claims against Mr. Epstein and his firm in their entirety.
[24] Also as I explained during the hearing of the motion, there is no necessary equivalence between a solicitor’s breach of fiduciary duty claim and professional negligence. Depending on the factual circumstances, these different causes of action may be concurrent, but they are not the same thing. Professional negligence focuses on competence while a breach of fiduciary duty claim focuses on ethical duties and a connotation of disloyalty and, in the worst cases, the denotation of dishonesty.
[25] The problem for Flirty Girl Fitness’s professional negligence claim is that professional negligence is not necessarily a breach of fiduciary duty and vice versa. The distinction I am drawing was noted by Justice Southin in Girardet v. Crease & Co. (1987), 1987 CanLII 160 (BC SC), 11 B.C.L.R. (2d) 361 (S.C.) at p. 362 and by Justices Sopinka and La Forest in Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 CanLII 34 (SCC), [1989] 2 S.C.R. 574, at pp. 596-98, 647. In Girardet, Justice Southin said that it was a perversion of words to say that carelessness was a breach of fiduciary duty. In Varcoe v. Sterling (1992), 1992 CanLII 7478 (ON SC), 7 O.R. (3d) 204 (Gen. Div.) at p. 229; affd. (1993), 1992 CanLII 7730 (ON CA), 10 O.R. (3d) 574 (C.A.), Justice Keenan, put it simply: "But not every wrong done by a fiduciary is a breach of that duty. It must be a wrong which is a betrayal of that trust component of the relationship." In the immediate case, Flirty Girl Fitness pleaded a case of disloyalty and the claim failed, and it did not plead a professional negligence claim of carelessness or incompetence.
[26] For the above reasons, I shall not be reopening the summary judgment motion and the Defendants should take out an order dismissing Flirty Girl Fitness’s action.
Perell, J.
Released: August 22, 2017
CITATION: Flirty Girl Fitness Inc. v. Hottie Body Boutique Inc., 2017 ONSC 4969
COURT FILE NO.: CV-15-528272
DATE: 20170822
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FLIRTY GIRL FITNESS INC.
Plaintiff
– and –
HOTTIE BODY BOUTIQUE INC., GARDINER ROBERTS LLP, DAVID EPSTEIN, MICHELLE EPSTEIN and KRISTA KNEE
Defendants
ADDENDUM
PERELL J.
Released: August 22, 2017