Court File and Parties
COURT FILE NO.: CV-16-00550104 DATE: 20180705 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
ONTARIO PROFESSIONAL FIRE FIGHTER’S ASSOCIATION Plaintiff – and – PAUL ATKINSON, COLIN GRIEVE, PROFESSIONAL FIREFIGHTERS ADVOCATES INC., SHERWIN H. SHAPIRO, SHAPIRO LAWYERS PROFESSIONAL CORPORATION, FRANCES FURMANOV and FRANCES FURMANOV PARALEGAL SERVICES Defendants
Counsel: Rahool Agarwal and Andrew McCoomb for the Plaintiff John A. Campion and Anna Husa for the Defendants, Paul Atkinson, Colin Grieve and Professional Firefighters Advocates Inc. (“the Atkinson defendants”)
HEARD: June 25, 2018
Endorsement
DIAMOND J.:
Overview
[1] On June 25, 2018, as the Case Management Judge assigned to this proceeding, I heard what I have described in previous case conferences endorsements as the “trust funds motion.” The scope of that motion was set out in my Case Conference Endorsement released on February 15, 2018 as follows:
“An issue has recently arisen with respect to funds currently being held in trust by Gardiner, Roberts (solicitors for the defendants Paul Atkinson, Colin Grieve and Professional Firefighters Advocates Inc. – the “Atkinson defendants”), and in particular whether the parties had agreed that those funds be impressed with specific terms and obligations.
Gardiner Roberts wishes to release some or all of the funds in trust in accordance with its clients’ instructions, and has given notice to the parties of those intentions. The plaintiff opposes the release of any such funds on the basis that there were representations and admissions by the Atkinson defendants, and in turn an agreement between the parties, that the funds would remain in trust pending the disposition of this proceeding or further agreement between the parties.
A motion to determine whether the funds are held in trust pursuant to an agreement (and if so upon what terms) shall proceed before me on March 28, 2018 for a 90 minute hearing.”
[2] The plaintiff’s primary position on the trust funds motion was that the solicitors for the Atkinson defendants, and specifically Gavin Tighe (“Tighe”), gave an undertaking to the plaintiffs that certain funds would be held in trust pending the resolution of the matters at issue in this proceeding.
[3] During argument, counsel for the Atkinson defendants took the position that the issue I had framed for determination on the trust funds motion was whether there was an agreement between the parties to hold the subject funds in trust, and not whether a solicitor’s undertaking had been given. In response, I directed counsel to paragraph 45 of Tighe’s affidavit which specifically stated that his evidence on this motion was sworn “in connection with a motion to determine whether there was an agreement or undertaking to hold the Funds perpetually in trust on an unqualified basis pending the outcome of this action or whether the Funds can be released to the PFAI Defendants to pay costs awarded in this action and to pay legal fees.”
[4] Accordingly, argument proceeded on the primary issue of whether Tighe gave a formal undertaking to hold the funds in trust. At the conclusion of the hearing, I took my decision under reserve.
The Plaintiff’s Claim
[5] Paragraphs 9-13 of my Reasons for Decision released on March 5, 2018, reproduced below, set out a summary of the issues in this proceeding:
“In this proceeding, the plaintiff seeks recovery of $3,000,000.00, joint and severally against all defendants, for numerous causes of action: breach of fiduciary duty, breach of trust, false misrepresentation, conspiracy, inducing breach of contract, intentional interference with economic relations, unjust enrichment and passing off.
In summary, the plaintiff alleges that the defendants misappropriated funds that deceased firefighters’ family members intended to donate to the plaintiff. The subject funds were allegedly paid either (a) out of proceeds from Workplace Safety and Insurance Board (“WSIB”) awards granted as compensation for the premature deaths of those firefighters, or (b) for the purpose of assisting other families seeking WSIB benefits. These alleged voluntary donations were given to and/or earmarked for the plaintiff pursuant to Letters of Agreement signed by the family members, but not signed by the plaintiff.
The payments were ultimately to be used to fund the plaintiff’s Retiree’s Cancer Claim Fund (“the RCCF”). The plaintiff states that the RCCF was used to support the pursuit of retiree claims, as well as research, education and lobbying with respect to the recognition of occupational diseases for compensation purposes.
For his part, Shapiro is alleged to have provided the use of his trust account serving as the financial vehicle through which Atkinson and Grieve misappropriated the payments. It is further alleged that Shapiro allowed Atkinson and Grieve to use his status as a licensed lawyer to lend legitimacy to the scheme.
According to an investigation carried out by the plaintiff, the misappropriated donated funds were either provided by the families to Atkinson or Grieve directly, or pursuant to a signed direction in favour of Shapiro. The alleged scheme resulted in substantial funds intended for the plaintiff but directed to and received by the defendants.”
The Evidence on this Motion
[6] The plaintiff’s Statement of Claim was issued on April 1, 2016. Prior to the issuance of the Claim, preliminary discussions took place between counsel for the plaintiff and counsel for the Atkinson defendants. Tighe had taken carriage of this matter on behalf of the Atkinson defendants in early January 2016.
[7] In a letter dated January 7, 2016 to Michael Torrance (“Torrance”, a partner at Norton Rose Fulbright at the time), Tighe stated the following:
“Please also be advised that I have received funds in trust in connection with the WSIB claims pending a determination of entitlement thereto. We look forward to arranging protocol for an accounting of these funds.”
[8] In his affidavit sworn on this motion, Tighe gave evidence that as the plaintiff had alleged that the Atkinson defendants had committed fraud and misappropriation in connection with their handling of WSIB claims, the subject funds were placed in trust to counter suggestions that the Atkinson defendants had acted fraudulently and were seeking to abscond with funds.
[9] The Atkinson defendants paid the subject funds into trust on a voluntary basis with the hope that the parties would take a reasonable approach to deal with any potential dispute(s). As stated by Tighe:
“I had hoped that by advising Mr. Torrance of the fact that I had received money in trust, he would be persuaded to engage in a rational and businesslike approach to attempting to resolve this dispute without the need for escalating costs and advancing scandalous allegations.”
[10] There is no evidence filed on behalf of Torrance on this motion. I will have more to say about this lack of evidence hereinafter.
[11] On January 27, 2016, counsel for the plaintiff delivered a draft Statement of Claim for Tighe’s review. Tighe then prepared both a draft Statement of Defence and draft Third Party Claim on behalf of the Atkinson defendants.
[12] By letter dated February 3, 2016 to Rahool Agarwal (a partner at Norton Rose Fulbright with current carriage of this matter), Tighe enclosed the draft pleadings, and took the position that the Atkinson defendants would be bringing a pleadings motion and a motion dealing with the plaintiff’s alleged lack of standing (both those motions were heard by me as the Case Management Judge and determined in my Reasons for Decision released on March 5, 2018). At the end of his letter dated February 3, 2016, Tighe stated as follows:
“I can confirm that we continue to hold the disputed funds in trust for this matter as I had previously indicated to Mr. Torrance.”
[13] As set out in my Case Conference Endorsement released on February 28, 2018, on the deadline for filing material on this motion, the plaintiff served and filed a motion seeking a Mareva injunction, with alternative relief that the Atkinson defendants be precluded from removing or transferring the funds held in trust.
[14] Tighe was cross-examined on his affidavit. The bulk of Tighe’s evidence resulted in a series of questions refused and/or taken under advisement, all of which were the subject of my Endorsement released on June 11, 2018.
[15] The current amount of funds held in trust totals $366,494.54. No portion of those funds has been drawn upon to pay legal fees or outstanding costs awards to date. This motion was brought by the Atkinson defendants arising from their request for approval to withdraw some of the funds held in trust to pay outstanding legal fees and costs awards.
The Pleadings
[16] As stated, the plaintiff’s Statement of Claim was issued on April 1, 2016. The Atkinson defendants issued their Statement of Defence and Counterclaim on May 5, 2016.
[17] The following paragraphs are lifted straight from the Atkinson defendants’ pleading:
“97. As part of their withdrawal from the Occupational Disease Committee, prior to the institution of these proceedings and purely on a voluntary basis, these Defendants placed into a segregated lawyers' trust fund those monies to which the OPFFA may have an entitlement based on executed letters of agreement between the OPFFA and numerous WSIB claimants. This was done to the knowledge of the OPFFA and its counsel.
After segregating the funds, these Defendants then attempted to commence a dialogue in an effort to establish a protocol with the OPFFA in respect of same. At no time did these Defendants attempt to divert these funds which they had voluntarily placed in trust long before the commencement of these proceedings.
The OPFFA has no entitlement to any funds recovered on behalf of retiree and/or spousal claimants, with the possible exception of funds which the retired or spousal claimants may have agreed to pay to the OPFFA pursuant to letters of agreement, which funds as set out above, have been previously paid into and are currently held in a segregated trust account to the knowledge of the OPFFA and its counsel since prior to the issuance of the within claim. That issue is between the OPFFA and such claimants directly.
To the extent that this Honourable Court finds an entitlement on the part of the OPFFA to a portion of the funds recovered from the WSIB, however, then these Defendants are and always have been agreeable to pay same in accordance with this Honourable Court's direction and have, to the knowledge of the OPFFA, voluntarily segregated such funds in trust prior to the commencement of these proceedings. The OPFFA intentionally failed to mention this fact in its statement of claim in an effort to further the false and defamatory narrative it wished to be published in the media and have believed by firefighters. Such efforts were undertaken with malice by the defendants to the counterclaim.”
Position of the Parties
[18] The plaintiff’s position on this motion is threefold:
a) Tighe gave a solicitor’s undertaking to hold the subject funds in trust pending resolution of the dispute between the parties;
b) additionally and/or in the alternative, the Atkinson defendants are estopped from using the trust funds to pay any cost awards or legal fees; and
c) the trust funds are earmarked (as that term has been described by guidelines published by the Law Society of Ontario) and thus cannot be used for any other purpose other than what was stated in Tighe’s letters.
[19] The Atkinson defendants submit that, in the face of no responding evidence from Torrance, there was never any agreement between the parties or undertaking given by Tighe that the funds would be held for the benefit of this proceeding, and the Atkinson defendants’ voluntary placement of the funds into trust was part of a practical approach to resolving the dispute prior to the commencement of litigation.
Decision
[20] In my view, and for the reasons which follow, the funds are subject to an undertaken given on behalf of the Atkinson defendants to be held in trust pending the disposition of this proceeding.
[21] In Hudson v. Andros 2010 ONSC 3417, Justice Pierce was asked to determine whether a communication made on behalf of a solicitor amounted to a formal undertaking, and if so, whether the undertaking was one that the Court should enforce. In concluding that the communication was indeed an undertaking, Justice Pierce stated as follows:
“The nature of an undertaking is quoted by G.B. Smith in Professional Conduct for Canadian Lawyers (Toronto: Butterworths, 1989), at p. 203 as follows:
“An undertaking is the promise given by a solicitor through a written statement, a verbal communication or inferred from his acts, or any combination thereof, in reliance on which promise the recipient of the undertakings gives up to the solicitor or to another party, a document or right, or performs an act which that recipient would not have done were it not for the receipt of the promise from that solicitor.”
An undertaking binds the lawyer to do something that the circumstances of the pledge do not permit him or her to do immediately. It may be to supply documents, make inquiries, answer a question, discharge a mortgage, or act in a way promised in the undertaking. It is an exception to the general principle that a promise made without consideration is unenforceable. No particular form of words is required to form an undertaking.
The nature of an undertaking was described by the court in Bogoroch & Associates v. Sternberg (2007), 229 O.A.C. 284 (Div. Ct.), at para. 23 as follows:
“Solicitors' undertakings are matters of utmost good faith. They are traditionally given to expedite and facilitate the furtherance or conclusion of matters upon which solicitors are engaged on behalf of their clients. These efficiencies result in savings of lawyers' time that can be passed on to clients. Time is spent more efficiently and work is done more smoothly. Because of that, solicitors must be able to rely upon undertakings, which are promises given by one solicitor to another to do or refrain from doing an act.”
The court will enforce an undertaking given in the lawyer's professional capacity as part of its inherent jurisdiction to control its process. The undertaking is also enforceable in order to uphold the honour of the bar. While undertakings are typically exchanged by lawyers, I conclude that an undertaking given in the lawyer's professional capacity may be enforced by the court when it is given to a non-lawyer, in order to underscore the professionalism of the bar. However the court will not compel the performance of an undertaking simply because it is made by a lawyer in a non-professional context; see: Wilson v. Beatty (1885), 12 O.A.R. 253 (C.A.).”
[22] An undertaking does not require any consideration to be binding upon a lawyer or a party. Simple undertakings, such as those given by counsel at an examination for discovery or cross-examination, do not depend upon the party receiving the undertaking relying on it or altering its position as a result of receiving it. An undertaking is not a representation giving rise to an estoppel argument premised upon detrimental reliance. While the Atkinson defendants point to the lack of any evidence on the part of Torrance, in my view such evidence would only be relevant if I was being asked to find the presence of an agreement between counsel, or a finding of estoppel.
[23] Tighe’s statements in his two letters are clearly capable of being relied upon in any event. Those statements arose from a desire on the part of the Atkinson defendants to show that they did not commit the nefarious acts as alleged by the plaintiff, and that if the subject funds were in fact the property of the plaintiff, or at least traceable back to the plaintiff, then those funds would be paid to the plaintiff.
[24] Tighe’s statements were clear and unambiguous. The Atkinson defendants rely upon the sentence “we look forward to arranging protocol for an accounting of these funds” as a basis for arguing that absent such a protocol, any alleged undertaking was conditional at best. I disagree. At that stage, draft pleadings were already under way and the threat of legal proceedings was quite real. The Atkinson defendants knew that the plaintiff’s chosen “protocol” was litigation, and they were attempting to suggest alternative dispute resolution. It cannot lie in the mouths of the Atkinson defendants to suggest that the funds – which could in the end be the property of the plaintiff - would only remain in trust if the parties agreed to any other protocol but litigation.
[25] The issue of entitlement to the funds was, and remains, live and real. In their Statement of Defence and Counterclaim, the Atkinson defendants actually criticized the plaintiff for failing to mention their voluntary segregation of the funds into trust. Paragraph 118 of the Atkinson defendants’ Statement of Defence and Counterclaim clearly states that the funds will be paid out in accordance with the Court’s direction in the event the Court finds an entitlement on the part of the plaintiff to all or part of those funds. It was suggested by the plaintiff that paragraphs 98, 115 and 118 of the Atkinson defendants’ Statement of Defence and Counterclaim amount to formal admissions under Rule 51 of the Rules of Civil Procedure codifying and confirming Tighe’s undertaking. While that issue (ie. the presence of a formal admission) was not squarely before me to decide, I nonetheless find there to be merit to such an argument.
[26] The Atkinson defendants argue that the plaintiff’s request to schedule a Mareva injunction only arose in the face of the Atkinson defendants’ request for directions with respect to their desire to access the funds in trust, and as such “the late timing and urgent nature” of the plaintiff’s request “cast doubt on the bona fides of the plaintiff’s position.” In my view, as Tighe had undertook to hold the funds in trust pending determination of entitlement thereto, there was likely no need on the part of the plaintiff for injunctive relief as the funds would and did remain in trust. The request for a Mareva injunction was only advanced in the face of what the plaintiff saw as the Atkinson defendants resiling from their undertaking. While I understand that directions from the court were sought by the Atkinson defendants in an effort to be open and cautious, no court approval for the release of funds belonging to the Atkinson defendants would normally be required in the absence of those funds being subject to an undertaking.
[27] I thus find that pursuant to the undertaking given by Tighe, the subject funds are to remain in trust to the credit of this proceeding and to be paid out pending determination of entitlement thereto by either the Court or further agreement between the parties.
Costs
[28] As always, I would urge the parties to exert the necessary efforts to try and resolve the costs of this motion, including the costs of the refusals motion as per paragraph 16 of my Endorsement released on June 11, 2018.
[29] If those efforts prove unsuccessful, the parties may exchange written costs submissions, (totaling no more than 5 pages including a Costs Outline) in accordance with the following schedule:
a) the plaintiff shall serve and file its costs submissions within 10 business days after the release of this Endorsement; and
b) the Atkinson defendants shall thereafter have an additional 10 business days from the receipt of the plaintiff’s costs submissions to deliver their responding costs submissions.
Diamond J. Released: July 5, 2018