Court File and Parties

COURT FILE NO.: CV-13-473306-0000 MOTIONS HEARD: 20180820 REASONS RELEASED: 20181203 SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

WENDY SOKOLOFF PROFESSIONAL CORPORATION Plaintiff

- and-

WAYDE MAHONEY. KEVIN MAHONEY, CAROL MAHONEY and JOSEPH FALCONERI Defendants

BEFORE: MASTER D. E. SHORT

COUNSEL: Stanley Razenberg, for the Plaintiff Alissa Goldberg, for Defendants

REASONS RELEASED: December 3, 2018

Reasons for Judgment re Trial Counsel

1 The trial process in Canada is one of the cornerstones of our constitutional democracy. It is essential to the maintenance of a civilized society. Trials are the primary mechanism whereby disputes are resolved in a just, peaceful, and orderly way.

2 To achieve their purpose, it is essential that trials be conducted in a civilized manner. Trials marked by strife, belligerent behaviour, unwarranted personal attacks, and other forms of disruptive and discourteous conduct are antithetical to the peaceful and orderly resolution of disputes we strive to achieve.

3 By the same token, trials are not -- nor are they meant to be -- tea parties. A lawyer's duty to act with civility does not exist in a vacuum. Rather, it exists in concert with a series of professional obligations that both constrain and compel a lawyer's behaviour. Care must be taken to ensure that free expression, resolute advocacy and the right of an accused to make full answer and defence are not sacrificed at the altar of civility.

M.J. MOLDAVER J. Groia v. Law Society of Upper Canada, 2018 SCC 27

I. Background

[1] Persons injured in Ontario motor vehicle accidents, who seek compensation for their injuries face a daunting challenge. They will need skilled legal counsel to properly advance their claims, while generally not having sufficient funds to pay their lawyer.

[2] We are fortunate that some counsel are willing to wait for their compensation until the case is resolved and moreover are willing to risk a lack of success at trial, by advising clients with phrases such as, “we don’t get paid until you get paid”.

[3] This is such a case, except the client got paid over one million dollars in early 2010 and their original counsel has yet to receive any payment for the plaintiff firm’s professional services. I therefore turn to a partial history of this matter with a view to assessing how this case differs from “the peaceful and orderly resolution of disputes we strive to achieve.”

[4] Pursuant to the endorsement of Justice Firestone, dated March 19, 2018, a trial of this action is scheduled to commence on April 15, 2019, and a pre-trial is scheduled for January 10, 2019.

[5] The defendant Wayde Mahoney (“Wayde”)was injured in a motor vehicle accident that occurred on July 31 2005 . In March 2006 he retained the plaintiff’s law firm to pursue claims, arising out of the accident and surrounding events, on his behalf. As well the Sokoloff firm advanced statutory accident benefit claims together with claims pursuant to the Family Law Act, R.S.O. 1990, c. F.3 of Ontario on his family’s behalf.

[6] A detailed Retainer Agreement was executed between Wayde (and his family) and the plaintiff firm at the commencement of their relationship.

[7] In addition, the plaintiff firm defended a proceeding brought against Wayde with respect to property damages claims arising out of the accident in which he was involved.

[8] Amongst other things the Sokoloff firm also assisted the injured client in obtaining appropriate treatment and therapies in order to support his recovery and related claims.

[9] In about July of 2009, the Mahoneys with their counsel from the Sokoloff firm, participated in a private mediation involving the defendants in the original motor vehicle action, regarding his personal injury tort claims, in the hope of resolving their claims for damages.

[10] The case was not settled at that time. Counsel and the Mahoneys agreed that the sum offered was inadequate. It appears that Wayde was not satisfied with the strategy and approach of his counsel with respect to the outcome of the ADR process at that stage.

[11] A few months later, in about November 2009, the Mahoneys determined to seek new counsel.

[12] Now before me is a motion, brought by the plaintiff in the present action, the Sokoloff firm, seeking an Order removing the Defendant, Joseph Falconeri, and his law firm, Falconeri Munro Tucci LLP, as the lawyers of record for the co-defendants, Wayde Mahoney, Kevin Mahoney and Carol Mahoney, in this action seeking claimed legal fees owing and punitive damages.

II. 2009 Change of Counsel

[13] The Mahoneys, after consulting various other potential representatives, decided to change their counsel in the tort action to the defendant herein, Joseph Falconeri.

[14] His law firm were retained by the Mahoney defendants. Mr Falconeri then sought to obtain the existing litigation files, that had been assembled by the Sokoloff firm.

[15] Mr Falconeri’s first letter dated November 5, 2009 to Ms. Sokoloff read in part:

…. After a very lengthy meeting with this family, I am convinced that it is their wish to pursue their claims with new counsel. As you know I do endeavor to preserve the retainers of existing counsel as much as possible . In this case, it is clear that the Mahoney’s have chosen to change counsel. As such, I enclose an executed direction from the Mahoney family.[my emphasis]

[16] The letter goes on to state:

Would you be so kind as to provide Falconeri Monro Tucci LLP with your entire file. I would also ask that you stop all direct communications with the Mahoneys.

We, of course, will pay your reasonable disbursements and we undertake to protect your account from any settlement or Judgment subject to my clients’ right to an assessment .”.[my emphasis]

[17] As well, just prior to the above letter, Ms Sokoloff sent a letter referring Wayde to potential firms that might be interested in taking over this file.

[18] Her email of October 29, 2009, with my emphasis added, read in part:

I would be pleased for Mr Falconieri [sic] to come see the file here at my office

He hasn't called me yet but when he does I will accommodate his schedule as best as I can.

Have you mentioned to him what the disbursements are?

I received a phone message from Wayde today saying he is going to pick up the file on Friday

I’m sure you must have told him that I cannot release the file without my disbursements being paid and an undertaking to pay my fees as agreed upon or assessed.

Perhaps you can let him know that Mr Falconieri [sic] will be coming here.

[19] Within half an hour of the above transmission the defendant Wayde Mahoney, sent an email wherein he undertook to pay the plaintiff’s account in strong but clear terms;. By way of an email dated October 29, 2009, Mr. Mahoney confirmed:

“… im coming at the end of next week and I will get my file!! we will protect ur file and when my case settles you will be payed !!!! …. the money that is owed to you will be protected till I settle my case!” [sic]

[20] Having received the Defendants’ respective undertakings, the plaintiff firm released its files to Mr. Falconeri. These undertakings were never withdrawn.

III. The Accident Case Settlement

[21] On or about January 5, 2010 , about two months following the termination of the plaintiff services, the defendant Falconeri negotiated a settlement with the Mahoneys’ claims on a full and final basis. At the time the case settled, the Sokoloff firm had had carriage of the file for approximately 3 and a half years whereas Mr. Falconeri had carriage of the file for only a few weeks.

[22] Ms.Sokoloff filed an affidavit in support of this motion seeking removal of Falconeri’s firm as lawyers of record for these defendants. She asserts:

“I personally believe that Mr. Falconeri and his firm …made hundreds of thousands of dollars in legal fees, largely comprised of work done by my firm. To date, they have paid my firm nothing at all in legal fees for 3 ½ years of work we did.”

[23] On February 1, 2013 the Sokoloff firm commenced the present action inter alia to enforce the undertakings with regard to payment given by the defendants in this action.

[24] It appears that now, more than eight years from the settlement, no payment whatsoever on account of the plaintiff firm’s fees has been made. Part of the delay flowed from what were then outstanding allegations of negligence made in a 2010 action against the Sokoloff firm, with respect to its handling of this file.

IV. Tort Action Against Plaintiff Firm

[25] A month after the settlement was negotiated, on February 8, 2010 , the Mahoney Defendants, commenced an action as against the Plaintiff alleging professional negligence. Mr. Falconeri and his firm, Falconeri Munro Tucci LLP, were counsel of record for the Mahoney Defendants in the negligence claim against Sokoloff Lawyers. (the “Negligence Claim”)

[26] Upon receipt of the Negligence Claim, by letter dated March 15th, 2010, the Plaintiff wrote to Mr. Falconeri advising that it had involved LawPro to respond to the Negligence Claim. In this same letter, the Plaintiff confirmed that it was seeking fees in the amount of approximately $75,000 for services rendered to the Mahoney Defendants.

[27] Ultimately the Plaintiff firm, through its LawPro counsel, brought a motion for summary judgment seeking a dismissal of the Negligence Claim against it as defendant, on the basis that it disclosed no reasonable cause of action. The summary judgment motion was heard by Justice Belobaba, who by Order dated October 30th, 2014 , granted summary judgment in favour of the Plaintiff, and dismissed the Negligence Claim.

[28] Justice Belobaba’s brief handwritten endorsement outlining his reasons for granting summary judgment [“SJ”], dismissing the action read, in part:

“defendant law firm motion for summary judgment is granted. The action is dismissed. …

1. The core key reason for granting SJ… is that Ps have put forward NO EVIDENCE (other than bald assertions…. (absolutely no evidence of amounts entitled to and not paid). Ps did not put their best foot forward.”

[29] I also note that in dealing with the issue of costs of the motion, Justice Belobaba observes, with the emphasis in the original:

“Had [counsel] pressed for substantial indemnity , I would have been open to this submission.”

[30] The defendants then appealed that 2014 decision.

[31] His summary judgment was then upheld by the Ontario Court of Appeal. by way of a decision, dated May 15, 2015.

[32] The panel consisting of K.M. Weiler, E.A. Cronk and S.E. Pepall JJ.A., delivered oral reasons found in Mahoney v. Sokoloff, 2015 ONCA 390. The brief transcribed endorsement read:

1 The appellants appeal from the summary judgment granted by Belobaba J. of the Superior Court of Justice dated October 30, 2014. The motion judge held that the "core reason" for granting summary judgment was the appellants' failure to put forward any evidence of losses or damages sustained in respect of i) the proposed claims of Wayde Mahoney's brothers, Sean and Morgan, for damages under the Family Law Act, R.S.O. 1990, c. F.3 (the "FLA") for their loss of Wayde's care, guidance and companionship due to his injuries; and ii) the respondents' delayed application on behalf of Wayde Mahoney for benefits under the catastrophic impairment designation. The appellants submit that there are genuine issues requiring a trial on both matters and that summary judgment, therefore, should have been denied.

2 We see no genuine issue for trial pertaining to the appellants' alleged losses on the second ground. It is undisputed that the action was eventually settled for the amount of $1.4 million. The benefits available under the catastrophic impairment designation were retroactive with compound interest. In these circumstances, and absent any evidence from them to the contrary, the appellants failed to demonstrate that they suffered any damages as a result of the respondents' alleged delay in applying for the appropriate catastrophic designation that were not fully compensated for under the settlement.

3 We reach a similar conclusion concerning the suggested FLA claims of Wayde Mahoney's brothers. The appellants complain that, in their summary judgment materials, the respondents failed to challenge specifically the appellants' FLA-based claims for damages. In these circumstances, they say, they were not obliged to lead evidence of these damages on the summary judgment motion.

4 We disagree.

5 The appellants' submission, in our view, misses the point. Apart from the matter of the respondents' explanation for not advancing these FLA claims from the outset, the appellants were obliged in responding to the motion for summary judgment to put their best foot forward in respect of all their claims and to lead some evidence of the foundation for the brothers' claimed losses under the FLA. They did not do so. As a result, on this record, the motion judge did not err in concluding that no genuine issue for trial arose regarding these claims. [my emphasis]

6 Accordingly, the appeal is dismissed. ….”

[33] While it would be reasonable to anticipate the fee issued would then have been resolved, that did not turn out to be the case. Instead the defendant’s brought another motion this time within the present action.

V. Limitations Act Challenge

[34] Thus the resolution of the plaintiff’s action was again delayed by virtue of a motion brought by the Falconeri firm asserting that the 2013 action to enforce his and his clients’ undertakings was statute barred.

[35] Once again, Justice Belobaba addressed a dispute between the parties on another motion for summary judgment now brought by the defendants in this action.

[36] In his reasons, dated October 30, 2014 he concluded that the question of whether the limitation period had expired required a trial on the issue of discoverability, and that it was not appropriate to determine the matter by way of motion.

[37] Following his decision dismissing the defendants’ motion, they sought leave to appeal to the Divisional Court.

[38] Justice Wilson delivered reasons denying leave. She concluded that neither of the conjunctive requirements of Rule 62.02(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (a) or (b) has been met. “There are no conflicting decisions on this issue, and it is not desirable that leave to appeal be granted. There is no reason to doubt the correctness of the decision made, and the appeal does not raise issues of importance.”

3 Clearly judgment should not be granted in favour of the Defendants dismissing this action, although I am not sure that this matter requires a trial. It appears the essential facts disclosed in the motion record are undisputed. Applying the robust fact finding powers defined by the Supreme Court in Hryniak v. Mauldin, 2014 SCC 7 , [2014] 1 S.C.R. 87 and the principles of proportionality it appears that analysis would justify the conclusion that there is no valid limitation defence.

[39] Her Honour notes:

“11 At no time did Falconeri advise that he would not respect his clear undertaking to pay the Plaintiff's account, subject to the defendants' right to an assessment. It is the Plaintiff's position that:

“At all material times, neither Falconeri or Wayde said that they would not be paying my account. I verily believe that the Defendants are estopped from reneging on their promise and invoking a limitation period defence”.

“In addition, I verily believe that it was reasonable to rely upon the undertaking of a fellow solicitor, as the requirements of a Solicitor to uphold said undertaking is codified in the Rules of Professional Conduct of the Law Society of Upper Canada.”

[40] In her “Conclusions”, Justice Wilson makes these helpful observations:

14 The Supreme Court has summarized the elements of promissory estoppel as: "The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position." (Maracle v. Travellers Indemnity Co. of Canada , [1991] 2 S.C.R. 50 at paragraph 13 )

15 There is also clear case law that a solicitor's undertaking as well as a client's undertaking is enforceable, can be relied upon, and stops the clock running for the purpose of a limitation defence unless revoked. In Tembec Industries Inc. v. Lumberman's Underwriting Alliance , 52 O.R. (3d) 334, [2001] O.J. No. 72 at paras 21-22 , Ground J. held that an undertaking to pay a specified amount in damages gives rise to promissory estoppel where the recipient of the undertaking relied on it. Such reliance is expressly contemplated by a solicitor who gives an undertaking, as Wilton-Siegel J. held in Bogoroch & Associates v. Sternberg at para 38 .

16 There were clear undertakings in writing given by the Defendants' counsel, as well as the personal defendant Wayde Mahoney to protect the Plaintiff's account, and the defendants at no time advised the Plaintiff that the undertaking was revoked. The Plaintiff is entitled to rely on a solicitor's undertaking, as well as the undertaking of a client. Promissory estoppel can operate as an answer to a limitation defence if the plaintiff can make out all of the requisite elements (Montcap Financial Corp. v. Schyven, 2011 ONSC 4030 , [2011] O.J. No. 2919 at paragraph 28 ; Tembec Industries Inc. v. Lumberman's Underwriting Alliance , 52 O.R. (3d) 334, [2001] O.J. No. 72 at paragraphs 21-22 ).

[41] Following this decision it appears that there was no significant change in the Defendants’ position.

VI. Trial Approaches

[42] Thus, in July of 2018, Wendy Sokoloff swore a 14 page affidavit in support of this motion seeking, in part, an Order removing the Defendant, Joseph Falconeri, and his law firm, Falconeri Munro Tucci LLP, as the lawyers of record for the Mahoney defendants. Much of her evidence does not appear to have been challenged. I note particularly the relevance of the following extracts:

“ 27. I do verily believe that Mr. Falconeri has an actual, or perceived, conflict of interest such that it would be inappropriate for him and/or his law firm to continue to represent the Mahoney Defendants.

28. At the Examination for Discovery of Kevin Mahoney held on April 3, 2018, the Plaintiff learned for the first time that Mr. Falconeri entered into an agreement with the Mahoney Defendants that Mr. Falconeri /his firm would pay for any amounts found owing to Sokoloff Lawyers from the fees Mr. Falconeri/his firm collected. Mr. Mahoney testified at his Examination for Discovery as follows:

131 Q. Okay, and from your understanding, who would be paying Sokoloff Lawyers' fee account? Would it be something that you and Wayde would have to pay for out of the settlement of the proceeds or something that Mr. Falconeri would have to pay for?

A.. Mr. Falconeri.

29. On April 3, 2018, at the Examination for Discovery of Kevin Mahoney, the Plaintiff also learned for the first time that Mr. Falconeri personally paid at least half of the costs awarded to Sokoloff Lawyers by Justice Belobaba and the Ontario Court of Appeal surrounding the dismissal of the negligence claim. Mr. Kevin Mahoney testified as follows:

30. Q. So your evidence is that the $20,000 was paid by you and not Mr. Falconeri?

A. Well we shared in the cost.

228. Q. Okay. And what percentage was shared in the cost?

A. I believe Joe [Falconeri] paid 20 [thousand dollars].

Mr. Mahoney then testified that he had paid approximately $15 or $20 thousand dollars, but then his counsel refused to allow him to answer whether or not Mr. Falconeri or the Falconeri firm reimbursed Mr. Mahoney for that portion of the costs payment.”

[43] Dealing with a later event, Ms. Sokoloff deposes:

30. In addition, in or about December of 2016, I personally received a phone call from Mr. Sean Mahoney. He was upset because LawPro had registered a garnishment against him for the costs awarded to me/LawPro arising from the meritless negligence claim that was commenced in which Sean was named a Plaintiff. Sean informed me that he had neither retained Mr. Falconeri or his firm, Falconeri Munro Tucci LLP, nor, instructed Mr. Falconeri to commence the claim against me and that Mr. Falconeri and his firm acted without Sean's instructions. Understandably, Sean was upset to have learned that the action was commenced without his knowledge or agreement, and that there was an outstanding costs award against him. [my emphasis]

[44] The Plaintiff's claim seeks payment of punitive damages on the basis that the negligence lawsuit was initiated in bad faith in an effort to bully the Plaintiff into walking away from its legitimate fee account. The Amended Statement of Claim further alleges that Mr. Falconeri and his law firm have done this in the past to other lawyers.

[45] The Sokoloff affidavit continues:

“In undertaking a Westlaw search, I came across the case of Craig v. Riocan Real Estate Investment Trust, 2015 ONSC 307 , where the facts are strikingly similar to the facts in our case, and where Mr. Falconeri and his firm, Falconeri Munro Tucci LLP, took over a file from another lawyer and in response to an account presented by the lawyer for work done to the date of the takeover, issued a lawsuit against that lawyer alleging negligence. …. My lawyer asked Mr. Falconeri questions about this at his Examination for Discovery, but those questions were refused.”

[46] Justice J.A. Ramsay’s reasons in Craig, were delivered in 2015, while the present matter was winding through various appeal processes. Those reasons commence with this description:

“1. The plaintiff moved for an extension of time within which to apply for leave to appeal the order of Tucker J. dated November 19, 2014. That order settled the terms of a previous order of Maddalena J., [which] froze some $41,000 or so of settlement funds negotiated for the plaintiffs by their new lawyer, Falconeri Munro Tucci LLP ("Falconeri Munro"), directed the assessment of fees to proceed, and placed a charge on the settlement funds in the amount of the assessed fees. The charge secures money owed to the plaintiff's former lawyers, Elkin Injury Law ("Elkin"), for fees, I dismissed the motion in open court with reasons to follow. These are they. [my emphasis]

[47] Justice Ramsay deals with the unpaid fee issues at the conclusion of his reasons:

“16. Finally, the affidavit of Mr Elkin and the supporting documents show a pattern of stalling on the part of the plaintiffs and their lawyer, in the face of the lawyer's undertaking to protect Elkin's account. It is disturbing that Falconeri Munro did not advise Elkin in a timely way that the slip and fall had been settled, that they agreed to represent the plaintiffs on the solicitor's negligence action in the face of their undertaking to protect the account and that they did not cooperate in settling Maddalena J.'s order, I doubt the bona fides of the proposed appeal. It strikes me as another stalling tactic. This, too, is a factor to be considered. [my emphasis]

17. Having considered these factors I decided that the justice of the case required the extension to be denied.

VII. Peaceful and Orderly Resolution of Disputes

[48] I now turn to my evaluation of the justice of the present case. My approach is guided by recent guidance from the Supreme Court of Canada as set out in the preface to these reasons and these particular portions of Rule 1.04 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194:

General Principle

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

Proportionality

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

Matters Not Provided For

(2) Where matters are not provided for in these rules, the practice shall be determined by analogy to them.

[49] While this matter was under reserve, the December 2018 LEXPERT magazine (dealing with Litigation Lawyers) included an article commenting on the Supreme Court of Canada’s decision in the decision quoted at the outset of these reasons, Groia v. Law Society of Upper Canada, 2018 SCC 27 , [2018] S.C.J. No. 27; 424 D.L.R. (4th) 443; 2018 CarswellOnt 8700 .What the Supreme Court did not do, however was provide an ultimate definition of “civility”.

[50] The Advocates’ Society was granted intervener status in that case. In the LEXPERT article their counsel is quoted as observing:

Advocates' Society at all levels of the Groia case, had hoped it would. “We argued for a broader standard of what constituted civil conduct and we urged the court to find a national standard, from which the national practicing Bar could take guidance,” he says. “But they chose not to do that.”

The SCC did address the question to some degree. In its ruling, it noted that, “To achieve their purpose, it is essential that trials be conducted in a civilized manner. Trials marked by strife, belligerent, behaviour, unwarranted personal attacks, and other forms of disruptive and discourteous conduct are antithetical to the peaceful and orderly resolution of disputes we strive to achieve.”

[51] Based upon the course of this litigation following the 2015 personal injury settlement, in my view it is arguable that the defence has been, at least, overzealous. The ultimate resolution of the issues raised by the plaintiff are clearly for the trial judge. For present purposes my review of past actions by the defendant and his firm, leads me to a conclusion that the plaintiff ought to succeed on this portion of its motion.

[52] In coming to that conclusion I also considered the contents of the plaintiff’s Amended pleading.

VIII. The Amended Statement of Claim

[53] It is my understanding that the original Sokoloff Retainer Agreement contemplated that, if the client elected to change lawyers at a future point in time, the client would be responsible for payment for the services provided based on a reasonable hourly rate calculation.

[54] Thus, the plaintiff firm originally only sued for sum based on time spent on the plaintiffs’ behalf dealing with available accident benefits, together with acquiring and preparing the necessary evidence to support the eventual settlement discussions and trial.

[55] The pleading was subsequently amended on Sept. 26, 2016 to add claims relating to the defendants’ conduct.

[56] In part the pleading asserts:

20. At no time prior to the settlement of this action did the Defendant call or write to the Plaintiff in respect of the fee account nor did he ever advise that the matter had settled.

21. On March 15, 2010, the Plaintiff wrote to Falconeri advising that it had become aware that the matter had come to a settlement and that her fee account would likely be more than$ 75,000.

22. The Plaintiff received no response from Falconeri and no payment was made in respect of the Plaintiff's fee account.

23. In February 2012, the Plaintiff sent Mr. Falconeri and the Mahoney's an account for fees and for services rendered in the amount of $ 92,886.

24. The Plaintiff claims against the Defendants for its fees and the accrued interest on its fees which were rightfully owned to the Plaintiff. To date, none of the Defendants have paid the Plaintiffs outstanding account, or requested an assessment of the Plaintiffs account.

25. The Plaintiff has attempted writing various letters to the Defendants. The Defendants have been uncooperative, irrational and have left the Plaintiff no other choice but to bring the within action.

26. By failing to write to advise the Plaintiff that the Mahoney' s claim had been settled, by failing to respond to the Plaintiffs March 15, 2010 letter and by failing to write to the Plaintiff to ask for her fee account, the Defendants acted in a high handed and capricious manner. The Defendants have shown a callous disregard and complete lack of regard towards the Plaintiff, all of which warrants an award of aggravated, and punitive damages.

[57] It is further asserted in the Amended Claim:

31. The Plaintiff pleads that the Defendants concealed the fact that the Mahoney claims had settled in an effort to avoid paying the Plaintiffs legitimate fee account.

32. The Plaintiff pleads that such conduct was in flagrant contravention of the undertakings given, and the Defendant, Falconeri's professional and ethical obligations as a lawyer member of the Law Society of Upper Canada.

33. The Plaintiff pleads that in an effort to get the Mahoneys to retain Falconeri, Falconeri promised to indemnify them and hold them harmless from any and all fees owing to the Plaintiff. In doing so, Falconeri had an interest in not paying the Plaintiff's fee account, as it would result in direct financial gain to himself. …

34. The Plaintiff pleads that the above course of action was spearheaded by the Defendant, Falconeri. In the alternative, the Plaintiff pleads that the Defendants conspired with one another to engage in this conduct in an effort to avoid or delay the payment of the Plaintiff's legitimate fee account.

35. The Plaintiff pleads that the Defendants' conduct was wanton and egregious, deserving of an award of punitive damages.

[58] It is against these allegations and my view of the potential elements of a trial in this case, I turn to a consideration of the applicable case law.

IX. The Most Important and Compelling Value

[59] While this matter was pending, my colleague Master McGraw addressed a case in November of 2017 where the removal of counsel of record was sought.

[60] In Chernukhina v. Gurevich, 2018 ONSC 330 Master McGraw did not order the removal of counsel but set out in detail the tests to be applied. I am therefore not reproducing his full analysis as set out in paragraphs 28 to 48 of his reasons.

[61] While I have come to a different conclusion, based upon the facts before me, I accept and adopt his most helpful synopsis of the proper approach to such challenges.

[62] At paragraph 13 of 1298781 Ontario Inc. et al v. Levine et al., 2013 ONSC 2894 , [2013] O.J. No. 2263 Master McAfee, citing the leading case of MacDonald Estate v. Martin , [1990] 3 S.C.R. 1235, stated that the principal issue on a removal of lawyer motion is the balancing of 3 competing values:

i.) the maintenance of high standards of the legal profession and the integrity of our system of justice;

ii.) the right of a litigant to its choice of counsel, which he or she should not be deprived of without good cause; and

iii.) the desirability to permit mobility in the legal profession.

The most important and compelling value is the integrity of our system of justice ( MacDonald Estate at para. 58 ; Levine at para. 15).

[63] In Mazinani v. Bindoo, 2013 ONSC 4744 in which, at paragraphs 60-61, Master Glustein (as he then was) comprehensively summarized the principles applicable on a motion to remove a lawyer of record who may be a witness at trial:

"60 I adopt the following principles as the applicable law on a motion to remove a lawyer of record who may be a witness at trial:

i.) The court has inherent jurisdiction to remove a lawyer from the record who has a conflict of interest. The inherent jurisdiction "stems from the fact that lawyers are officers of the court and their conduct in legal proceedings which may affect the administration of justice is subject to this supervisory jurisdiction" (MacDonald Estate v. Martin (" MacDonald Estate "), at para. 18 );

ii.) The inherent jurisdiction extends to removing a lawyer who may be a witness in a case in which the lawyer acts as counsel (Ontario Realty Corp v. P. Gabriele & Sons Limited et al (" Ontario Realty "), at para. 16 );

iii.) The court on a motion to remove a lawyer of record who may be a witness at trial must consider "(a) the maintenance of high standards of the legal profession and the integrity of our system of justice and (b) the right of a litigant to its choice of counsel, which he or she should not be deprived of without good cause" ( Ontario Realty , at para. 17 , citing MacDonald Estate , at para. 13 );

iv.) The test to be applied on a motion to remove a lawyer from the record who may be a witness is whether a fair-minded reasonably informed member of the public would conclude that the proper administration of justice requires the removal of the lawyer. This determination is objective, fact-specific and based on an examination of all factors in the case (Karas v. Ontario, 2011 ONSC 5181 (" Karas ") at para. 26 ; Ontario Realty , at para. 20 );

v.) The court's concern of a lawyer appearing as a witness is that (i) there may be a conflict of interest between the lawyer and client and (ii) the administration of justice can be impaired by a conflict between the lawyer's obligations of objectivity and detachment which are owed to the court and the lawyer's obligation to his or her client to present evidence in as favourable a light as possible;

vi.) The integrity of a lawyer's role as an advocate is also undermined if the lawyer was a witness to a critical meeting;

vii.) Rule 4.02(2) of the Rules of Professional Conduct of the Law Society of Upper Canada provides that "Subject to any contrary provisions of the law or the discretion of the tribunal before which a lawyer is appearing, a lawyer who appears as advocate shall not testify before the tribunal unless permitted to do so by the rules of court or the rules of procedure of the tribunal, or unless the matter is purely formal or uncontroverted";

viii.) The commentary to Rule 4.02(2) sets out the concern that a lawyer who puts personal beliefs into issue acts contrary to the lawyer's role as an objective advocate and puts the lawyer's credibility at issue. The commentary provides:

“A lawyer should not express personal opinions or beliefs or assert as a fact anything that is properly subject to legal proof, cross-examination or challenge. The lawyer should not in effect appear as an unsworn witness or put the lawyer's own credibility in issue. The lawyer who is a necessary witness should testify and entrust the conduct of the case to another lawyer”.

ix.) Rules of Professional Conduct are not binding on a court, but are persuasive as an important statement of public policy ( MacDonald Estate , at paras. 16 and 18 ; Karas , at para. 29 );

x.) Courts should be reluctant to make what may be premature orders preventing lawyers from continuing to act. If the evidence does not necessarily have to come from the lawyer and may be obtained through admissions or documentary productions, a removal order will be premature (Essa (Township) v. Guergis; Membery v. Hill (" Essa "), at para. 43 ; Lesniowski v. H.B. Group Insurance Management Ltd. (" Lesniowski "), at para. 15 );

xi.) If there is some doubt or "merely a potential" that a lawyer will be called as a witness at trial, the courts should be more generous in allowing the lawyer to remain on the record and deferring the matter until after discoveries or leaving the matter to the trial judge (George S. Szeto Investments Ltd. et al v. Ott (" George S. Szeto "), at para. 13);

xii.) "In view of the expense of litigation and the enormous waste of time and money and the substantial delay which can result from an order removing solicitors, courts should only do so in clear cases" ( Essa , at para. 43 );

xiii.) "[A] court should be slow to interfere with the litigant's right to choose his or her counsel. ... When a litigant is deprived of the services of a lawyer whom she has chosen, there will be some hardship imposed on her. The imposition of such hardship can only be justified if it is done to prevent the imposition of a more serious injustice. It follows that the removal of counsel should be only to relieve the risk of real mischief and not a mere perception of mischief" (Urquhart v. Urquhart at para. 19 );

xiv) Certainty that a lawyer will be called as a witness is not required. Rather, the court must consider the likelihood of the lawyer being called as a witness ( Ontario Realty , at para. 33 );

xv.) "It is not sufficient for a moving party to suggest opposing counsel is a potential witness or allege only that he or she might provide material evidence. Rather, it must be established that there is a real basis to believe counsel can likely, or probably, provide material evidence" (Graham v. Ontario (" Graham "), at para. 35 ; Ontario Realty , at paras. 34-35 );

xvi.) "While courts have acknowledged that the freedom to choose counsel is an important interest to protect, it is not an absolute right. The right to be represented by counsel of choice can be outweighed when the administration of justice would be detrimentally affected" ( Karas , at para. 45 ; George S. Szeto , at para. 21; Urquhart , at paras. 21 and 28); and

xvii.) The court should approach a motion to remove a lawyer of record who may be a witness at trial by following a flexible approach and consider each case on its own merits ( Essa , at para. 48 ).

[64] In my view the present situation is a “clear case”. In coming to that conclusion I have carefully weighed the applicability of these criteria in the circumstances of the present case, together with particular submissions by counsel for both sides.

X. Parties’ Submissions:

[65] The Plaintiff submits that Joseph Falconeri and Falconeri Munro Tucci LLP ought to be removed as solicitors of record for the Mahoneys on the grounds that there is a conflict or potential conflict in their interests.

[66] In response the Defendants’ counsel submits, in part :

20. It is important to first note that the Defendant Joseph Falconeri is not the lawyer of record for this action, and that the lawyer of record is Bryan Rumble, a partner with Falconeri Munro Tucci LLP.

21. It is respectfully submitted that the law with respect to removal of a lawyer of record relates only where that lawyer is a potential witness to the action. The Plaintiff has made no allegations that Mr. Rumble or any other lawyer with Falconeri Munro Tucci LLP, aside from the Defendant Joseph Falconeri, is a witness to this action. The Plaintiff has failed to establish any basis under law by which Falconeri Munro Tucci LLP ought to be removed as solicitors of record for the Mahoney Defendants.

22. There is no suggestion that the Defendant Joseph Falconeri cannot be called as a witness as a result of being represented by Falconeri Munro Tucci LLP.

23. Furthermore, the suggestion that the Defendant Joseph Falconeri cannot be represented by Falconeri Munro Tucci LLP is also without merit. It is incongruous that the Plaintiff can on the one hand assert that Mr. Falconeri cannot be represented by a firm he works with, when the Plaintiff firm is representing itself as well. A defendant has the right to select his or her own counsel, and the Plaintiff's motion does nothing but interfere with this right on baseless grounds

[67] Dealing with the issues of champerty and maintenance it is submitted:

30. A defendant to a proceeding is entitled to assume the costs of the defence to said proceeding; an agreement to this effect cannot be said to be champerty. Funding litigation to which a party is a named defendant cannot be said to be maintenance for an improper purpose.

31. If there was an indemnity agreement, which again is not admitted, it could not be said that that agreement is "assistance ... without justification or excuse." Further it cannot be said that such an agreement was for the purpose of “officious intermeddling” or “stirring up strife”.

McIntyre Estate v. Ontario (Attorney General), at para 27 .

32. Furthermore, as Defendants to the within matter, there are no proceeds to be sharing in.

33. It is respectfully submitted that the Plaintiff's pleadings with regards to champerty are entirely without merit, and the suggestion that this is grounds to move to have Falconeri Munro Tucci LLP removed as solicitor of record for the Mahoney Defendants ought to be given no weight.

[68] With respect I disagree. The evidence to date suggests that there was, at best, a misunderstanding of the authourity given to Mr. Falconeri by the Mahoneys and their respective possible liabilities to the plaintiff firm.

[69] I find these submissions contained in Ms. Sokoloff’s sworn affidavit in support of this motion, more persuasive:

32. The claim further alleges that Mr. Falconeri engaged in the torts of champerty and maintenance by:

a. Agreeing to indemnify the Mahoneys and hold them harmless in respect of the Plaintiff's fee account;

b. Commencing and funding the negligence action; and,

c. Funding the Mahoneys' defence of this claim.

33. I do verily believe that the Defendant, Mr. Falconeri, will be a witness at the trial of this action. Given his involvement in the events leading up to this claim, and given his involvement in the facts surrounding the claim for punitive damages, his evidence will be necessary to address these controversial matters at trial.

34. Mr. Falconeri is the managing partner of his firm, Falconeri Munro Tucci LLP, and his firm is presently counsel of record for the Mahoney Defendants. Given Mr. Falconeri's/his firm's involvement in the facts giving rise to this claim, and given Mr. Falconeri's undertaking to pay the fees found owing to Sokoloff Lawyers and given that Mr. Falconeri paid at least half of the costs awarded to the Plaintiff in relation to the negligence lawsuit, I do verily believe that there is a perceived or actual conflict of interest in having Mr. Falconeri/his firm continue represent the Mahoney Defendants in this litigation.

[70] There is no responding affidavit from Mr. Falconeri. Instead and co-incidently, counsel for the moving plaintiffs on the motion decided against them in Craig, filed the sole responding affidavit in the present case.

[71] A portion of that affidavit which related to the present motion read in part:

Removal of Solicitor of Record

12. The Defendant Joseph Falconeri is not the lawyer of record. The lawyer of record is Bryan Rumble, a partner with Falconeri Munro Tucci LLP.

13. I do verily believe that there is no conflict of interest that arises such that Falconeri Munro Tucci LLP should be removed as solicitors of record for the Mahoney Defendants.

14. I do verily believe the Plaintiff has failed to tender any evidence to suggest that it is reasonable to remove Falconeri Munro Tucci LLP as solicitors of record for the Mahoney Defendants in this matter.

15. I do verily believe that Joseph Falconeri is a named Defendant to this action.

16. During the examination for discovery of Kevin Mahoney he expressed dissatisfaction with the services of Wendy Sokoloff, the principle of the Plaintiff. At questions 68- 73 he said: [transcript extracts omitted]

17. During the examination for discovery of the Defendant Wayde Mahoney, he also expressed dissatisfaction with the services of Wendy Sokoloff, the principle of Sokoloff Lawyers: [transcript extracts omitted]

[72] The affidavit continues:

18. I am further advised by review of the transcripts of the Defendants, and I do verily believe that there is not sufficient evidence to establish the existence of an indemnity agreement between the parties.

[73] It is difficult to compute the layers of hearsay generated by a review of transcripts in support of what is never stated to be a non-existent document. In any event, once again to paraphrase the Court of Appeal in an earlier motion between the parties, the respondents were obliged in responding to this motion to put their best foot forward in respect of all their claims. They did not do so.

[74] Thus, in my view the quoted paragraph 18 does not deny the existence of the alleged indemnity agreement (or assert its non-existence). However, counsel’s affidavit continues (with my emphasis throughout):

“Evidence of the Defendant Joseph Falconeri”

19. I am advised by review of the transcripts and do verily believe that at no time did the Defendant Joseph Falconeri advise that he had entered into an indemnity agreement with the Mahoney Defendants. I do further verily believe that at question 145, page 52 of the transcript the Defendant Joseph Falconeri was asked this question, and the question was refused on the basis of privilege.

20. At question 145, page 52 of the transcript of the discovery of the Defendant Joseph Falconeri, counsel for the Plaintiff Mr. Razenberg indicated that the suggestion that there was an indemnity agreement with the Mahoney Defendants was specifically pled by the Plaintiff.

21. At question 202, page 68 of the transcript from the Defendant Joseph Falconeri's discovery, counsel requested an undertaking to produce “documents or agreements or instructions evidencing any indemnity agreement or undertaking, as between Mr. Falconeri, the Falconeri firm, and the Mahoneys.” This was also refused on the grounds of privilege, without any acknowledgment on the part of the Defendant Joseph Falconeri that any such documents exist .

[75] In my view simply answering that he is unwilling to state or acknowledge whether or not such an agreement exists does not amount to a meaningful denial or refutation of the existence of such an agreement. The affidavit continues setting out what the witness was prepared to specifically deny:

22. I am advised by review of the transcript and do verily believe that I specifically indicated that we would not particularize client documents over which we claimed privilege for the specific purpose of maintaining solicitor-client privilege.

23. At no time during the discovery did the Defendant Joseph Falconeri waive privilege as it relates to the solicitor-client relationship with the Mahoney Defendants, I am advised by review of the transcript that the Defendant Joseph Falconeri specifically denied that any privilege had been waived as a result of the within lawsuit.

[76] In my view the position of the Mahoney defendants could potentially be impacted if such a document existed (or did not exist).

XII. Disposition

[77] I am not satisfied that the position of the Mahoney defendants will “appear” to be independently defended in their best interests, if their present counsel relationship continues.

[78] I am therefore directing that Falconeri Munro TucciLLP be removed as counsel for the defendants Wayde Mahoney, Kevin Mahoney and Carol Mahoney.

[79] This may present practical consequences, but inasmuch as they have received the lion’s share of the proceeds from the original negligence action, I am satisfied that they will be in a position to seek new independent counsel

[80] Clearly portions of the evidence put before me suggest that there is at least a possibility that one or more of the Mahoneys may be in a position to seek indemnification, if that is seen to be appropriate. . I anticipate that such new representation may well be able to negotiate a basis for their removal from this action.

[81] One of the difficulties to be faced in a case such as is that there is no specific applicable rule dealing with the filing obligations when counsel is removed over their objection.

[82] I am therefore suggesting, relying upon Rule 1.04(2) that the parties adapt Rule 15.03 and Rule 15.04(8) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 mutatis mutandis to advise the court and parties as matters of future representation are clarified.

[83] As to costs I have determined to award costs to the moving party for the entire motion including the presently determined element, as against the defendants on a partial indemnity basis. Given the proximity of the trial in this case I have determined to defer to the trial judge with respect to a quantum which may combined or set off against any future costs awards.

Released: December 3, 2018 Master D. E. Short DS/ R252