Court File and Parties

COURT FILE NO.: CV-11-44063700A1 DATE: 20181223 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: myNext Corporation, Plaintiff AND: Pacific Mortgage Group Inc., Pacific NA Financial Group Inc., myNext Lending Corporation, Mortgage Architects Inc., myNext Mortgage Company Limited and Radius Financial Inc., Defendants

BEFORE: Darla A. Wilson J.

COUNSEL: Keith Geurts, counsel for the Moving Party law firm Clyde & Co Alex Haditaghi, in person, on behalf of the Defendants Matthew B. Lerner, counsel for the Plaintiff and as agent for the other parties

HEARD: December 20, 2018

Endorsement

[1] This action began as a claim on a promissory note in the sum of $600,000 plus interest, which was signed in March, 2010. The note was issued as part of a deal for the purchase of limited partnership units sold by the Plaintiff (“myNext”) to Pacific Mortgage Group (“Pacific”). The Plaintiff alleges the Defendant refused to pay the note and consequently, it issued this action. In response, Pacific launched a counterclaim alleging numerous undisclosed liabilities and misrepresentations made prior to the closing of the deal totalling $11 million.

[2] The counterclaim resulted in numerous additional parties being involved as defendants to the counterclaim. During the course of the litigation, Pacific admitted the promissory note was valid but it claimed a set off of the various liabilities such that nothing was owing on the note. The counterclaim alleges fraudulent and negligent misrepresentations against myNext and the other defendants to the counterclaim.

[3] The trial is scheduled to commence on January 28, 2019. I presided over the pretrial conference held October 10, 2018. In addition to counsel for the Plaintiff and for the defendants, there were four other sets of counsel in attendance representing the various defendants to the counterclaim. As the pretrial was not concluded on October 10, I fixed the date of November 27, 2018 to continue the pretrial conference before me.

[4] On the second attendance, Mr. Karayannides, the solicitor with carriage of the action on behalf of Pacific, was not in attendance; I was advised he was in India. The principal of Pacific, Mr. Haditaghi, was not present and I was advised he had to attend to an illness in his family. On that date, counsel agreed that since the validity of the promissory note was not in dispute, the counterclaim would proceed first at trial.

[5] I released an endorsement on November 27, 2018 dealing with various matters, including the fact that the counterclaim would proceed first at the trial. I also made an order for the examination for discovery of one of the defendants to the counterclaim, Robert Ord. I indicated that counsel could submit written materials on the issue of the costs of the pre-trial by December 7. I confirmed the trial date of January 28, 2019 and indicated I would deal with trial management issues if so requested.

[6] On December 7, I received the costs submissions of the parties. In his correspondence, Mr. Karayannides advised there had been a breakdown in the solicitor/client relationship such that he had asked Mr. Haditaghi to secure new counsel. I was asked by counsel for myNext to convene a trial management conference.

[7] On December 11, 2018 I received a motion record from the solicitors for Pacific requesting an order removing Clyde and Co Canada LLP (“Clyde & Co”) as counsel of record for Pacific. A teleconference took place on December 14, 2018. During this conference, Mr. Haditaghi indicated for the first time that the motion for the removal of Clyde and Co as his counsel was going to be opposed. As a result, I agreed to hear the motion on an urgent basis on a proper record and ordered Mr. Haditaghi to file responding materials.

[8] Mr. Haditaghi filed an affidavit sworn December 19, 2018. Mr. Lerner on behalf of the other parties filed the affidavit of Zachary Rosen sworn December 19, 2018. Mr. Karayannides filed a supplementary affidavit sworn December 20, 2018.

Positions of the Parties

[9] At the hearing of the motion, counsel for Clyde and Co. submitted that Mr. Haditaghi had failed to pay numerous invoices for services rendered and had failed to provide payment to prepare for and attend trial. In addition, it was submitted that it was clear the solicitor-client relationship had deteriorated to the point that Mr. Karayannides could no longer act for Pacific.

[10] In response, Mr. Haditaghi advised the court that he had made a payment to the firm on November 30 in the sum of $20,000 and the accounts were fairly current and any amount owing was less than $5,000. In his oral submissions, Mr. Haditaghi stated that he wished Mr. Karayannides to be his trial counsel and he denied that there had been any deterioration in the solicitor-client relationship. Furthermore, he submitted that if Mr. Karayannides were allowed to remove himself as counsel for Pacific, given the approaching trial date, he would be prejudiced.

[11] Mr. Lerner made submissions on behalf of myNext as well as on behalf of all of the defendants to the counterclaim. He argued if an order was made removing Mr. Karayannides as counsel for Pacific, the trial date must not be adjourned and should be marked peremptory, as it would be unfair to the other parties for the trial not to proceed as scheduled.

Analysis

[12] Rule 15.04 of the Rules of Civil Procedure sets out the requirements for a motion by a lawyer to be removed as counsel of record. In addition, the Law Society’s Rules of Professional Conduct provide further guidelines concerning such motions. It is clear that a lawyer may be removed as counsel of record where the client, after reasonable notice, has failed to provide a retainer or pay accounts or where there is a loss of confidence or breakdown in the relationship between the lawyer and client. The timing of the motion must be considered, as the client should not be placed in a position of peril by the motion.

[13] In the case before me, it is important to note that the principal of Pacific, Mr. Haditaghi, is a successful businessman, who is a sophisticated litigant who has been and continues to be involved in numerous pieces of litigation. He controls various companies and has retained a number of large law firms in Toronto to act on his behalf in different lawsuits. He is not a person who is a stranger to the legal process.

[14] I have carefully reviewed the evidence before me on this motion. I accept the evidence of Mr. Karayannides as detailed in his affidavits that he has experienced difficulty for the last number of months in obtaining instructions on this matter as well as in having his accounts paid. It is not necessary for the purposes of this motion to make specific reference to the various letters and emails sent by counsel in an effort to address the situation; it is sufficient to note that this problem has been ongoing since the early part of 2018, and became acute in the time leading up to the pretrial conference set for October 10, 2018.

[15] Following the initial pretrial, it was clear to Mr. Karayannides that it was unlikely the case would resolve short of trial and as a result, his requests to Mr. Haditaghi became more insistent that the outstanding accounts be paid and a retainer provided for preparation for trial.

[16] Those were reasonable requests, which were ignored. I am satisfied on the evidence that Mr. Haditaghi has known for months that his failure to pay the accounts from Clyde & Co has been a serious concern for Mr. Karayannides and that Mr. Haditaghi has failed to address this issue. Of particular importance is the request for a retainer for preparing for and attending trial, given the imminent trial date.

[17] There was a meeting between Mr. Karayannides and Mr. Haditaghi on December 3, 2018 during which there was a consent and draft order removing Clyde & Co as counsel of record for Pacific. There is a dispute between Mr. Karayannides and Mr. Haditaghi as to whether the latter agreed he would retain new counsel. In any event, the consent for removal of counsel from the record was not signed; Mr. Haditaghi was provided with the draft motion materials shortly thereafter.

[18] In his affidavit sworn December 19, 2018, Mr. Haditaghi acknowledges that Mr. Karayannides has acted for him on numerous lawsuits and he asserts that Mr. Karayannides has overcharged him for his services. He does not dispute that he owes Clyde & Co significant amounts of money on other files but he deposes that a $20,000 payment was made recently to bring the account on Pacific up to date.

[19] His affidavit fails to respond to the issue of Mr. Karayannides’s numerous requests for a retainer in order to commence preparation for trial. Mr. Haditaghi states that if Clyde & Co is removed as his counsel on this proceeding, he will “incur substantial and unnecessary legal costs associated with bringing replacement counsel “up to speed”. He does not state that he will be prejudiced by an order removing Mr. Karayannides as his lawyer in this lawsuit.

[20] In his supplementary affidavit sworn December 20, 2018, Mr. Karayannides confirms the difficulty in obtaining instructions from Mr. Haditaghi in the period following the initial pretrial on October 10. In an email to Mr. Haditaghi dated October 31, Mr. Karayannides made it clear that trial preparation needed to be undertaken on an urgent basis, and in particular, the issue of the expert report needed to be dealt with.

[21] I am satisfied on the evidence that Mr. Haditaghi has known about the urgent need to pay the accounts and to provide instructions to his counsel at least since the time leading up to the initial pretrial before me in October. He chose to ignore the communications from Mr. Karayannides and he failed to attend meetings that were arranged to deal with the situation. The fact that Clyde & Co is bringing this motion at the present time is not a surprise to him.

[22] While Mr. Haditaghi submitted to me at the hearing of the motion that he had confidence in Mr. Karayannides and he adamantly denied there has been a breakdown in the solicitor/client relationship, I do not accept this submission. It is abundantly clear on the evidence that for a number of months, Mr. Haditaghi has been uncooperative with his lawyer, has refused to follow the advice of Mr. Karayannides, has failed to attend meetings to discuss the lawsuit and has failed to pay accounts rendered in a timely fashion. He wishes to proceed to trial, which is his right, but he has failed to provide instructions as this matter has moved forward to trial.

[23] The nature of the interactions between Mr. Karayannides and Mr. Haditaghi since the time of the initial pretrial in October has led to the relationship between them being irretrievably broken: see R. v. Cunningham, 2010 SCC 10, [2010] 1 S.C.R. 331, and Chan v. Abdo, 2013 ONSC 7837. In these circumstances, I am persuaded it is impossible for Mr. Karayannides to continue to represent Pacific in this action.

[24] In coming to this conclusion, I am mindful of the fact that there is a trial date set for January 28, 2019. In his submissions to me at the case conference, Mr. Haditaghi advised that he wished the trial to proceed and was not requesting an adjournment of the trial date. At the hearing of the motion, he submitted that if Mr. Karayannides were permitted to remove himself as counsel, Mr. Haditaghi would have difficulty retaining new counsel for the trial.

[25] I do not accept this submission for several reasons. Mr. Haditaghi has known of the pending trial date for a long time; he has been made aware of the need to retain an expert, and to prepare for trial for more than 6 months and perhaps closer to a year.

[26] Furthermore, the evidence before me makes it clear that the timing of this motion is as a result of the assurances given to Mr. Karayannides by Mr. Haditaghi that instructions would be given and accounts paid. That did not occur, and the fact that the motion is being brought at this time is due to the promises made by Mr. Haditaghi and the reliance on them by Mr. Karayannides. It would be unfair to permit the client to use his own behaviour, which has led to the necessity of this motion, to deny the motion of removal of counsel and force Mr. Karayannides to continue to act in this claim. No prejudice will result to Pacific or to Mr. Haditaghi as a result of an order removing Clyde & Co as counsel for Pacific. Mr. Haditaghi, as I have noted, is a sophisticated litigant with access to a variety of counsel, some of whom act for him currently in other matters before the court.

[27] While it is clear that in the circumstances, Mr. Karayannides can no longer act for Pacific and cannot be trial counsel in this action, I must consider the possible consequences and effects of the order removing him as counsel on the other parties, the Defendants to the Counterclaim. They all wish to proceed to trial on January 28, to have an adjudication of the merits of Pacific’s counterclaim against them and they are entitled to rely on the trial proceeding on that date.

[28] An order shall issue removing Clyde & Co as counsel for Pacific in this action. The trial date of January 28, 2019 remains fixed. If any party wishes to bring a motion for an adjournment of the trial date, such motion is to be made before me on a proper record, on a date that is agreeable to counsel and to the court.

[29] I make the following orders:

1. The firm of Clyde & Co is hereby removed as counsel for the Defendants, and Plaintiff by counterclaim. The requirement for approval of the draft order is dispensed with. The order shall be submitted to me for signature.
2. Service of this order on the Defendants and Plaintiff by counterclaim (the clients) may be made by email and by delivering a copy to 333 Bay Street, Suite 501, Toronto, ON, M5H 2R2 and on counsel by email. Proof of service shall be filed with the court in accordance with Rule 15.04(5).
3. The Supplementary Affidavit of George Karayannides sworn December 20, 2018 shall be sealed pending the completion of the trial.
4. If any party wishes an adjournment of the fixed trial date, the motion is to be returnable before me, on a proper record, on a date to be determined.

Darla A. Wilson J. Date: December 23, 2018