COURT FILE NO.: CV-18-559172

DATE: 2018-05-25

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Brauti Thorning Zibarras LLP, Appellant/Plaintiff

AND:

Trung Nguyen, Respondent/Defendant

BEFORE: H. McArthur J.

COUNSEL: M. Gottlieb and J. Renihan appearing for the Appellant/Plaintiff

Trung Nguyen, appearing on his own behalf

HEARD: May 1, 2018

ENDORSEMENT

Introduction

[1] Brauti Thorning and Zibarras (“BTZ”) appeals an order of a Master in which he declined to strike out six paragraphs from the Statement of Defence and Counterclaim filed by Trung Nguyen. BTZ also appeals the order of the Master awarding costs in the amount of $1,750 to Mr. Nguyen.

[2] A number of grounds of appeal were advanced. For the purposes of these reasons, I will address only one ground as, in my view, it is dispositive. BTZ argues that the Master erred by failing to consider the key issue on the motion before him. I agree. The Master failed to consider whether the impugned paragraphs were relevant in light of the pleadings. A proper consideration of the evidence on the motion and the applicable law leads to the conclusion that the paragraphs are irrelevant and should have been struck pursuant to s. 25.11(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[3] I also agree that the Master erred by imposing costs against BTZ without canvassing submissions on costs. For the reasons set out below, I find that the appropriate remedy for this error is to allow Mr. Nguyen and BTZ to file written submissions on the issue of what costs should be awarded for the motion.

[4] At the outset, I propose to briefly outline the facts. I will then turn to my analysis and explain why I have determined that that appeal must succeed and the impugned paragraphs struck. I will next explain my reasoning with respect to the costs order of the Master.

Brief Outline of the Facts

[5] In the materials filed on the appeal, both sides provided a significant amount of information. In my view, it is not necessary to detail all of this information, and I will simply outline those facts relevant to the disposition of this appeal.

[6] BTZ is a law firm. Mr. Nguyen is a lawyer who joined the firm as a non-equity partner in 2008. When Mr. Nguyen joined the firm, he brought with him a client called Indcondo Building Corporation. BTZ agreed to act on a contingency basis for Indcondo. The agreement was that BTZ was entitled to 30% of any settlement or judgment. Mr. Nguyen was to receive 25% of the net contingency fee received by BTZ from the Indcondo file.

[7] The trial on the Indcondo matter commenced in May 2014. At the end of trial, Indcondo was awarded approximately $4 million. Indcondo, which had been seeking $20 million, appealed. In 2015, Mr. Nguyen left BTZ, and took the Indcondo appeal file with him. BTZ then sued Mr. Nguyen for breach of contract and breach of fiduciary duty. Mr. Nguyen counterclaimed, seeking the share of the contingency fee payment from the Indcondo litigation he would have received had he not left BTZ.

[8] In court materials, both sides agree that the contingency fee was amended at some point, although they disagree as to when.

[9] BTZ has taken different position regarding when the agreement was varied. In its initial Statement of Claim, BTZ alleged that throughout the Indcondo action, BTZ “met frequently with Nguyen to renegotiate the Original Split Fee Agreement to reflect the financial realities of the file.” In this claim, however, BTZ did not specify when any new agreement was reached.

[10] Later, in a motion before Belobaba J., BTZ filed an affidavit from Mr. Zibarras, in which he claimed that Mr. Nguyen agreed to vary the terms of the contingency fee agreement in May 2014, such that he would be entitled to 22.5% instead of the 25% he had originally agreed to.

[11] In its Amended Statement of Claim, however, BTZ pleads that the contingency fee agreement with Mr. Nguyen was last changed in January 2014, at which time Mr. Nguyen agreed to take only 22.5% for the contingency fee.

[12] Mr. Nguyen disputes that the contingency fee agreement was altered in either May 2014 or January 2014. He maintains the position that the contingency fee agreement was last changed in 2010.

[13] In his Statement of Defence and Counterclaim, Mr. Nguyen pleads that in May 2014, James Zibarras, a named partner in the firm, abused him. In paragraphs 68 to 73, Mr. Nguyen sets out the alleged abusive conduct, which ranged from insults and threats to verbal and physical attacks. Notably, Mr. Nguyen claims that on May 20, 2014, Mr. Zibarras struck him across the face with a set of documents, and that later he threw a set of documents at Mr. Nguyen’s face, striking him. Mr. Nguyen pleads that Mr. Zibarras’ abusive conduct was “intended to threaten, intimidate and pressure Nguyen into accepting a reduced share of any recovery under the Split Fee Agreement, so that Zibarras and BTZ could increase their shares.” In paragraph 74, Mr. Nguyen pleads the defences of “duress, undue influence and unconscionability.”

[14] BTZ brought a motion before the Master pursuant to s. 25.11(b) to strike out the paragraphs alleging abusive conduct by Mr. Zibarras, on the grounds that the paragraphs were irrelevant, and thus scandalous and vexatious. The Master dismissed the motion. In his reasons, he did not assess why the paragraphs alleging abuse in May 2014 were relevant, given that, according to the pleadings, the contingency fee agreement was last varied either in 2010 (Mr. Nguyen’s position), or, at the latest, January 2014 (BTZ’s position). Instead, he simply found that the paragraphs were relevant, without engaging in any analysis as to why.

Analysis

1) Issue One: Did the Master err in law by failing to consider the key issue on the motion before him?

[15] The failure to address the sole argument advanced by a party amounts to an error in law: West Van Inc. v. Daisley, 2014 ONCA 232, at para 15. Similarly, in my view the failure to address the main argument advanced by a party amounts to an error in law. Such an error was made by the Master in the present case. As a result, his decision is reviewable on a correctness standard.

[16] The key issue in the motion before the Master was the relevance of the paragraphs alleging abusive conduct against Mr. Zibarras. BTZ took the position that the contingency fee agreement had last been amended in January 2014. BTZ noted that while Mr. Nguyen took a different position, according to his pleadings the contingency fee agreement had last been amended in 2010. Thus, BTZ argued that any abusive conduct in May 2014 was irrelevant as it did not lead to any amendments to the contingency fee agreement.

[17] Unfortunately, the Master did not appear to appreciate that the relevance of the paragraphs was the main issue in the motion. Indeed, the Master noted that BTZ did not “argue strenuously that the matters raised are ‘irrelevant.” A review of the factum filed on the motion before the Master, however, does not support the Master’s comment. Paragraphs 1, 3, 17, 28, 29, 30, 34, 35 and 37 of the factum filed by BTZ on the motion clearly show that the key submission advanced by BTZ was that the impugned paragraphs were irrelevant. The Master erred in law by failing to analyze why the paragraphs alleging abusive conduct by Mr. Zibarras in May 2014 were relevant given that, based on the pleadings, the contingency fee agreement was not amended in response to such conduct.

[18] The Master’s error is somewhat understandable, given the shifting position of BTZ regarding when the contingency agreement was amended. As noted above, Mr. Zibarras swore an affidavit in which he deposed that Mr. Nguyen agreed to vary the contingency agreement in May 2014. If the agreement had been varied in May, then the allegations of abusive conduct by Mr. Zibarras in May would be relevant. But, in the pleadings, neither side claims that the agreement was varied in May. In particular, Mr. Nguyen does not say that he agreed to a reduced contingency fee in May. Thus, the issue before the Master was whether the paragraphs alleging abuse in May 2014 were relevant in light of the fact that, in the pleadings, the latest the agreement was varied was January 2014. He failed to consider this issue.

[19] Given the failure of the Master to consider the key argument advanced on the motion before him, this court must determine whether, as argued by BTZ, the paragraphs should be struck because they are irrelevant. In my view, a proper consideration of the pleadings leads to the conclusion that the impugned paragraphs are irrelevant.

[20] As noted in R. v. White, 2011 SCC 13, [2011] 1 S.C.R. 433, evidence is relevant if it has a tendency as a matter of logic, common sense and human experience to help resolve an issue at trial. In the present case, the allegations of abusive conduct by Mr. Zibarras do not assist in resolving the issues set out in the pleadings.

[21] Mr. Nguyen does not raise the alleged abusive conduct as a separate claim, indeed, he would be time barred from so doing. Instead, Mr. Nguyen pleads that the abuse in May was designed to intimidate him into accepting a reduced contingency fee. But, Mr. Nguyen is also steadfast in his position that the agreement was never varied past 2010. I agree with BTZ that evidence of duress or misconduct after the amendment of an agreement cannot give rise to a claim or defence: Zhu v. Li, 2008 BCSC 102, at para. 13; Adjey v. Chickery Holding LLC, 2017 ONSC 794, at paras. 55-56; 59. Thus, whether or not there was abuse in May is irrelevant to the issues to be determined.

[22] As a result, the appeal is allowed. Pursuant to s. 25.11(b), paragraphs 68-74 should be struck from the Statement of Defence and Counterclaim as they are irrelevant, and thus scandalous and vexatious: George v. Harris, [2000] O.J. No 1762 (S.C.), at para. 20.

[23] I turn now to consider whether the Master erred in awarding costs to Mr. Nguyen without receiving submissions as to costs.

2) Issue Two: Did the Master err in awarding costs to Mr. Nguyen without receiving submissions on costs?

[24] The Master awarded costs of $1,750 to Mr. Nguyen. BTZ argues that he erred in so doing as the Master made the costs award without having submissions from Mr. Nguyen demonstrating that he: i) devoted time and effort to do the work ordinarily done by a lawyer; and ii) as a result, incurred an opportunity cost by foregoing remunerative activity. I agree that the Master erred by failing to receive submissions on costs before making his cost award.

[25] BTZ also argues that Mr. Nguyen should be disentitled from costs because he failed to bring his costs outline to the hearing of the motion. This argument is somewhat ironic as BTZ failed to bring a cost outline to the hearing before me.

[26] In the circumstances, I find that Mr. Nguyen should be permitted to file written submissions on the costs issue, within 15 days. BTZ will be permitted to file responding costs submissions within 15 days thereafter. The written submissions shall not exceed three pages in length, excluding the costs outline. That said, both sides may be content that the $1,750 awarded by the Master should stand. I encourage the parties to see if they can reach an agreement. If not, then I will review the written submissions and determine what the appropriate costs award for the motion should be.

Costs on this Appeal

[27] I encourage the parties to see if they can agree on costs with respect to this appeal. If the parties are unable to agree on costs, BTZ shall serve and file with my office written costs submissions within 15 days. Mr. Nguyen shall serve and file with my office any responding costs submissions within 15 days thereafter. The written submission shall not exceed three pages in length, excluding the Costs Outline.

Justice Heather McArthur

Date: May 25, 2018