Court File and Parties

COURT FILE NO.: CV-17-00588620 DATE: 20180523 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SARKIS KALFAYAN and JOSEPH CLARENCE LANDRY, Plaintiffs AND: AMANDA STANLEY and RYAN JOHN ATKINSON, Defendants

BEFORE: Dietrich J.

COUNSEL: Goldblatt, J., for the Defendant Ryan John Atkinson/Moving Party Hou, K., for the Plaintiffs/Responding Parties

HEARD: May 17, 2018

ENDORSEMENT

[1] The plaintiffs were mortgagees in the third position and the defendant Amanda Stanley was a mortgagee in the second position on real property municipally known as 65 Martindale Road in the City of Toronto, Ontario. The property was sold under power of sale by Ms. Stanley who was represented in the sale transaction by the defendant Ryan John Atkinson, a solicitor. Despite their entitlement to an accounting of the sale proceeds, the plaintiffs have not received such an accounting. They were simply told by Mr. Atkinson that no surplus sale proceeds remained to pay anything to them as mortgagees.

[2] The plaintiffs commenced an action against the defendants for damages for an improvident sale of the property and for an accounting of the sale proceeds.

[3] Mr. Atkinson seeks an order pursuant to rule 21.10 (1)(b) striking the plaintiffs’ claims as against him without leave to amend. Mr. Atkinson submits that both the claim against him in his capacity as a solicitor for the second mortgagee for damages for an alleged improvident sale of the property and the claim for an accounting of the sale proceeds cannot be sustained because they disclose no reasonable cause of action.

[4] To succeed, Mr. Atkinson must show that it is plain and obvious that each claim has no chance of success: Tireco Inc. v YHI (Canada) Inc., [2009] O.J. No. 4245, 181 A.C.W.S. (3d) 5 (Div. Ct.).

Claim re Improvident Sale

[5] Regarding the claim for damages for an improvident sale, at the hearing, counsel for the plaintiffs conceded that the pleadings are not clear and confirmed that it is not the intention of the plaintiffs to pursue a claim for damages for an improvident sale against Mr. Atkinson.

[6] As such, it is ordered that the Statement of Claim be amended by the plaintiffs as follows:

i) Re paragraph 1(a): “Defendant were” shall be replaced with “Defendant Amanda Stanley was”.

ii) Re paragraph 27: “Defendants” shall be replaced with “Defendant Amanda Stanley”; and “they” shall be replaced with “she” in subparagraphs (a) and (b).

iii) Re paragraph 29: “the Defendants’ actions and manner in dealing with this matter” shall be replaced with “the Defendant Amanda Stanley’s actions and manner in respect of the improvident sale”.

Claim for an Accounting of the Sale Proceeds

[7] Regarding the claim for an accounting of the sale proceeds, the plaintiffs acknowledge that solicitors do not owe duties outside the normal solicitor-client relationship. However, they submit that Mr. Atkinson had a duty to disburse the proceeds of sale honestly and to account to the plaintiffs in accordance with the Mortgages Act, R.S.O. 1990, c. M.40 as the “person receiving the same” as set out in s. 27. They also submit that implicit in the duty to disburse the funds honestly is a duty to account to all persons with an interest in the funds. The defendant argues that “person” in this context refers to the mortgagee and not the solicitor and relies on B2B Bank v. Hails, [2018] O.J. No. 2420 (C.A.) in support of that position.

[8] The plaintiffs also submit that the duties of solicitors can be expanded to non-clients where the circumstances demonstrate that the non-client reasonably relied on the solicitor to protect its economic interests and the solicitor knew or ought to have known of this reliance. They argue that such a duty is not onerous and would not put the solicitor in a conflict of interest. In such a case, if the solicitor disbursed the funds inappropriately, he would breach the duty he owed to his client and the duty owed to third parties who have an interest in the funds. In this case, Mr. Atkinson was aware of the plaintiffs’ interest in the sale proceeds from the Notice of Sale under Charge and would have known or ought to have known that the plaintiffs as subsequent encumbrancers would reasonably rely on him to disburse the proceeds of sale in accordance with the Mortgages Act and to properly account to all encumbrancers. Mr. Atkinson did report to the plaintiffs, qua mortgagees in the third position, that there were no surplus funds with which to pay them anything but he did not provide an accounting to support that result.

[9] The defendant argues that if the plaintiffs are seeking an accounting for the purposes of reviewing Mr. Atkinson’s invoices for legal services relating to the sale, then they should have brought an application pursuant to the Solicitors Act, R.S.O. 1990, c. S.15 for that purpose. The plaintiffs submit that it would be inefficient to bring both the within action and an application under the Solicitors Act. Instead, the plaintiffs chose the more expeditious route and included both claims in this action.

[10] While the plaintiffs’ arguments in support of their claims against Mr. Atkinson may be somewhat novel, I do not find that they are doomed to fail. Accordingly, I do not find that those claims should be struck from the statement of claim at this point in time. However, it is apparent that Mr. Atkinson has a fairly straightforward means or removing himself from this proceeding. If the accounting to which the plaintiffs are entitled pursuant to the Mortgages Act is provided to them within ten (10) days of this order, the plaintiffs’ claims against the defendant Mr. Atkinson shall be struck.

[11] Success was divided in this motion. Mr. Atkinson was successful in striking the claim against him with respect to the alleged improvident sale but unsuccessful, at this time, in striking the claim relating to a proper accounting of the sale proceeds. As such no costs shall be awarded to either party.

Dietrich J.

Date: May 23, 2018