COBOURG COURT FILE NO.: CV-13-00037-00 DATE: 20190225 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Donald Jesse James and Elsie Maria James Plaintiffs – and – Janice James and Wesley Lawrance Defendants – and – John McGarrity Defendant (Moving Party)

Counsel: James Hunt, for the Plaintiffs No one appearing for the Defendants, Janice James and Wesley Lawrance Sean Dewart, for the Defendant (Moving Party), John McGarrity

HEARD: December 3, 2018

RULING ON SUMMARY JUDGMENT MOTION

DE SA J.

Overview

[1] The defendant/moving party, John McGarrity (“Mr. McGarrity or the “Moving Party”), brings a motion for summary judgment dismissing the plaintiffs’, Donald Jesse James (“Donald”) and Elsie Maria James (“Elsie”) (collectively, the “plaintiffs”) claim against him.

[2] The defendants Janice James and Wesley Lawrance are not parties to the motion.

[3] Mr. McGarrity is a lawyer who provided independent legal advice to the plaintiffs, Donald and Elsie. The advice pertained to an agreement to add the plaintiffs’ daughter, Janice James (“Janice”), on title to their farm property (the “Agreement”) in order to allow her to take advantage of government funding to invest in solar electricity.

[4] The Agreement, however, has had the effect of locking the plaintiffs into a situation which prevents them from selling or otherwise dealing with the property (the “Property”) because of a non-alienation clause that was inserted into the Agreement by Janice.

[5] The plaintiffs have brought an action to set aside the Agreement. They have added Mr. McGarrity to the action claiming that they never properly understood the terms of the Agreement.

[6] According to Mr. McGarrity, the plaintiffs’ regret at entering into the Agreement has been transposed into a misplaced claim of solicitor’s negligence against him. He asks the action be dismissed as against him.

[7] After reviewing the record, in my view, the action for solicitor’s negligence is inextricably tied to the main action and should not be dealt with separately. Accordingly, the motion for summary judgment is dismissed. My reasons are outlined below.

Summary of Facts

Background

[8] The plaintiffs are the owners of a property in Bailieboro, Ontario, comprising 64 acres of land which they purchased in 1965 and where they raised their six children. They initially did some cattle farming, but since the 1970s, they leased the land for farming livestock and grain crops while Donald pursued a career in sales.

[9] Among the plaintiffs’ children is the defendant, Janice, who married Wesley Lawrance (“Wesley”) in 2000. Around that time, they discussed with the plaintiffs the idea of farming the property themselves.

[10] Wesley moved to live on the farm with the plaintiffs in or around 2004, while Janice worked in insurance sales and returned there on weekends. Janice and Wesley began studying farming and taking courses, some of which Donald attended as well.

The Memo regarding the Bailieboro Property

[11] In or around March 2011, Donald and Wesley discussed the idea of solar panels for the farm. They wanted to take advantage of government financing available to build solar farms with the aim of generating revenue from solar electricity, under the Ontario government’s mircoFIT program. Their understanding was that in order to access the funding, Janice would have to be on title.

[12] The plaintiffs’ nephew, Philip Richardson, an accountant in Alberta, was named as the executor of the plaintiff’s will.

[13] On April 22, 2011, Mr. Richardson sent an e-mail to the plaintiffs, Janice and Wesley, attaching a seven page memo. In it, he outlined the understanding as to the intentions of the parties with respect to the Bailieboro Property moving forward (the “Proposal”). In the Proposal, the following details were referenced:

• The major non-financial asset in the estate of Donald and Elsie James (D&E) is their farm property at 22 BB Beach Road, Bailieboro, Ontario, K1L 1B0. It also serves as their principal residence.
• Title to the Bailieboro Property is currently in joint tenancy to D&E. It is their intent that the Bailieboro Property be maintained as a food source for the extended family, and to that end have set up their wills to have the Bailieboro Property pass to Janice James [Janice] free and clear, so that Janice James and Wesley Lawrance (J&W) can care for the Bailieboro Property for the family. J & W desire to honour D&E’s wishes and preserve the Bailieboro Property for the next generations.
• As part of their commitment to honour D & E’s wishes and to preserve the Bailieboro Property, J&W have invested considerable time, effort and expense already. One venture being pursued is to have solar panels installed to generate electricity that can be sold into the power grid. To accomplish this, Janice needs to borrow money, and the lender requires that the borrower be on title. Janice will be added on title as a joint tenant for this purpose.
• Lago Vista, the business established by J&W to make use of the Bailieboro Property, has no protection or recourse for the various improvements that they have already done to the Bailieboro Property. J & W have incurred significant costs for the land clearing that they have already done, for the fencing strung, and for the trees planted. As they are not the registered owners, title to such improvements vests in the registered owners (D&E] and any increase in value accrues to such owner. As they have no ownership , they are not able to claim Capital Cost Allowances for income tax purposes.
• Consideration should be given to legally ensuring that J&W are able to recoup at least a portion of the costs they have invested in the Bailieboro Property, in the event that something intervenes to prevent D&E accomplishing what they want: the property passing to Janice on the death of the survivor of D & E.
• If Janice fails to survive D & E, then her name would come off title, and the Bailieboro Property would become an asset of the estate. Subject to the specific provisions of the will, since Janice has predeceased, the provision transferring the Bailieboro Property to her would lapse, and the Bailieboro Property would then be part of the residue of the estate and distributed accordingly.
• If nothing is put in place to protect the interests of J & W, as to their investments in the Bailieboro Property, then all of the improvements done by them would not accrue to their estates.

[14] In an email dated April 25, 2011, Donald James wrote to Philip thanking him for all his work in drafting the Proposal. In addition, he outlined some specific details for clarification. In that email, he wrote:

On page 1 paragraph 3 our main intent for the farm is that it stay in the family (if there should be such a thing as a world famine the farm MIGHT be a food source for other members of the family but we would not want to indicate such a purpose) so the sentence.

It is their intent that the Bailieboro property should stay in the family. The ending of the line 4 we want to read (J&W) can care for the Bailieboro property.

Page 2 paragraph 3. To that end, they have requested that their nephew Phil Richardson (PJR) act as co-executor with Montreal Trust.

Your point about an agreement we will work to implement as soon as possible.

The Purported Agreement

[15] Janice engaged a lawyer, Phil Aldrich at LLF Lawyers (LLF), to draw up the Agreement adding Janice to the Property title as joint tenant. Donald James was not involved in the process of drawing up this agreement in any way. The instructions to LLF for the Agreement came from Janice.

[16] By the terms of the Agreement, dated April 29, 2011, the parties agreed to give a $450,000 mortgage over the property in favour of CIBC. The mortgage would secure two loan facilities:

(i) a $250,000 line of credit bearing interest at the prime rate plus 0.5 percent, which the plaintiffs would use to pay off the balance of their existing mortgage; and

(ii) a $200,000 fixed – rate loan, bearing interest at the rate of 3.94 percent per annum.

[17] The fixed-rate loan was for Janice’s use to develop the solar farm, and she was responsible for all payments and obligations.

[18] The Agreement also included the following terms:

a) Immediately prior to the registration of the new mortgage, the plaintiffs would convey the property so that title would be held by themselves and Janice as joint tenants (Article 1.02);

b) Donald agreed to maintain a life insurance policy naming Janice as the beneficiary in an amount sufficient to pay off the principal owing under the line of credit. Upon his death, Janice is to use the proceeds to pay out the line of credit in full. (Article 3.01); and

c) A non-alienation clause: The parties agreed that they would not sell, transfer, assign or convey their respective interests in the property without the express written consent of the other parties (Article 4.01).

Meeting for Independent Legal Advice

[19] On or about April 29, 2011, Mr. Aldrich, the LLF lawyer, called Mr. McGarrity and referred the plaintiffs to him, advising that they required independent legal advice in respect of the Agreement. Mr. Aldrich provided him with a number of documents including the Agreement, mortgage documentation and a certificate of independent legal advice. Mr. McGarrity was never given Philip Richardson’s memo. Nor was he retained to provide ILA in relation to anything but the terms of the Agreement.

[20] The plaintiffs attended at Mr. McGarrity’s office on May 3, 2011. They had not seen the Agreement prior to the meeting.

[21] On arriving at Mr. McGarrity’s office, his staff provided the plaintiffs each with a copy of the Agreement and related mortgage documentation and they were provided some time to read the documentation. In his evidence at discovery, Donald acknowledged that he read the Agreement, but he read it quickly. According to Donald, he never intended to transfer control of the Property over to Janice or Wesley, nor did he anticipate he would be giving her a “current” ownership interest in the Property. The nature of co-ownership was to be addressed at a later date. The plaintiff’s take the position that Mr. McGarrity also did not go over Article 4.01 (the non-alienation clause) which prevented them from dealing with the Property without Janice’s consent.

[22] Each Mr. McGarrity and Donald recalls the other being impatient during the meeting. Donald conceded that he was annoyed by the potential cost of having to see a lawyer of his own. When Mr. McGarrity went over various terms, he explained the effect of a joint tenancy was that if Janice were to die, title to the Property could pass to Wesley. When this was explained to Donald, he was confused.

[23] Both Donald and Elsie acknowledged that part of what they signed upon executing the agreement was Article 5, “Independent Legal Advice”. In addition, they signed a Certificate of Independent Legal Advice, acknowledging that they fully understood the nature and effect of the documentation they signed and did so voluntarily and independently of Janice and Wesley. While they signed this acknowledgement, they maintain that they never understood the potential consequences of what they were signing.

Letter from LLF Lawyers

[24] In a letter dated May 9, 2011, Phil Aldrich wrote to Donald, Elsie and Janice stating:

Title to the property was transferred to Donald Jesse James, Elsie Maria James and Janice Naomi James, as joint tenants. A copy of the registered Transfer is attached.

I confirm that holding the property as “joint tenants” generally has a right of survivorship although, if the property is used as a matrimonial home, in Janice’s case the joint tenancy would be automatically severed should she predecease her parents. I confirm you have advised that this is sufficient as it was intended that further estate planning and a co-ownership agreemen t may be completed in the near future.

Relations Break Down

[25] Relations between the plaintiffs and their daughter and son-in-law began to break down shortly after the Agreement was signed and Wesley began farming on the Property. In particular, the plaintiffs have been upset by changes on the Property, including the introduction of new livestock without their input. Interpersonal relations in turn have deteriorated. In an email dated October 20, 2011 from Donald to Janice, he wrote:

Your name was put on title as a courtesy in the event of our death and can be removed just as easily so I suggest your reconsider your threats. You speak of keeping your word and claim that I do not. You have not kept your promise regarding rent increases and you have not kept your promise respecting our private property. You have confiscated our garage for farm supplies. You built onto OUR house without authorization. You insist that the farm operation is yours which we do not dispute but Wesley keeps on arbitrarily using our lawn for equipment and posts etc. as well as the garage and you do not rent or have any right to do so. This is a hard letter for me to write and I am upset that our own daughter can write such a letter to us. After all, we own the farm and house. Where is there any sense from the attitude expressed in your letter that what we are trying to do is provide a blessing for you.

[26] In June of 2012, the plaintiffs retained William Lockington, a lawyer they knew from LLF, to sever the joint tenancy. They did not advise Janice and Wesley of the change.

[27] The plaintiffs have made requests of Janice to permit them to sell the Property to escape the “nightmare”, but Janice is relying on the non-alienation clause to prevent the sale. According to the plaintiffs, they are “trapped” in an agreement which they never understood by its terms to have these effects.

[28] In her discovery evidence, Janice confirmed that the Agreement was drafted with a view to preserving and protecting her interest in the Property.

Position of the Defendant/Moving Party

[29] The defendant/moving party, John McGarrity, asks that the court grant summary judgment and dismiss the action against him. Mr. McGarrity takes the position that he should not be held hostage to a dispute that has no real connection to him.

[30] According to Mr. McGarrity, he provided the plaintiffs with the appropriate advice and gave the necessary cautions. The decision to sign the Agreement was made by the plaintiffs with full knowledge of the risks. The fact that those risks came to fruition is not the fault of Mr. McGarrity. According to Mr. McGarrity, the plaintiffs’ regret at entering into the Agreement has been transposed into a misplaced claim of solicitor’s negligence against him.

Analysis

Is there a Genuine Issue Requiring a Trial?

[31] Pursuant to Rule 20.04(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the court shall grant summary judgment if it is satisfied there is no genuine issue requiring a trial. Animating the interpretation of 20.04(1) is Rule 1.04 which requires that the rule be liberally construed to secure the just, most expeditious and least expensive determination of a proceeding on its merits having regard to the complexity of the issues and the amounts involved.

[32] The judge in deciding whether to grant summary judgment must ask: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of trial? A trial is not required if the judge on the motion can 1) achieve a fair and just adjudication; 2) make the necessary findings of fact; 3) apply the law to those facts; and, 4) the motion is a proportionate, more expeditious and less expensive means to achieve a just result rather than going to trial. As the Supreme Court explained in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 SCR 87, at para. 50:

These principals are interconnected and all speak to whether summary judgment will provide a fair and just adjudication. When a summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. Similarly, a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute. It bears reiterating that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principals so as to resolve the dispute. [Emphasis added.]

[33] Rule 20.04(1) permits the court to assume that there will be no more evidence than what is contained in the record. The Rule permits for a qualitative assessment of the responding party’s position, and whether the responding party’s claim or defence has a real chance of success.

[34] At the same time, where there are competing issues among the defendants, it is inappropriate to permit a defendant’s motion for summary judgment to succeed. If there is a risk that the court may make findings of fact that could give rise to contradictory findings at trial on the remaining issues, a summary judgment would not be warranted.

[35] Interwoven issues of duty of care, breach and causation are better determined at a full trial. Gunraj v. Cyr, 2012 ONSC 1057 at para. 106; Thompson v. Kootenay Lake District Hospital at para. 7.

[36] In Butera v. Chown, Cairns LLP, 2017 ONCA 783, the court explained that caution must be used when considering whether to grant partial summary judgment. A court should consider whether (i) there is a risk of duplicative or inconsistent findings at trial and whether (ii) granting partial summary judgment is advisable in the context of the litigation as a whole. As the court noted at para. 34, “a motion for partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner.”

Application to the Facts of this Case

[37] In an action for solicitor’s negligence, a plaintiff must demonstrate that if properly advised, he or she would have acted in a different manner and would have avoided the damages suffered. See Rider v. Grant, 2015 ONSC 5456, 2015 CarswellOnt 14310 at para. 145; Marcus v. Cochrane, 2012 ONSC 146, 2012 CarswellOnt 1472. In Folland v. Reardon, at para. 61, Justice Doherty stated as follows:

“But for” factual causation has been employed in solicitor's negligence cases, particularly those where the plaintiff contends that he received negligent advice and would have acted differently had he received appropriate advice. In those cases, the plaintiff must show on the balance of probabilities that if properly advised, he would have proceeded in a manner that avoided the damages suffered or obtained the benefit lost as a result of the negligent advice: Polischuk v. Hagarty (1984), 49 O.R. (2d) 71 (C.A.), rev. (1983), 42 O.R. (2d) 417 (H.C.); Haag v. Marshall (1989), 39 B.C.L.R. (2d) 205 (C.A.); Major v. Buchanan, supra, at p. 514; Sykes v. Midland Bank Executor and Trustee Co., [1971] 1 Q.B. 113 (C.A.); Grant, Rothstein, Lawyers Professional Liability (2nd ed.) (Toronto: Butterworths, 1998) at 174-5. [emphasis added]

[38] Goodman J. (as he then was) also considered the duty to warn in Major v. Buchanan et al. (1975), 9 O.R. (2d) 491 at 514:

These two decisions, in my opinion, establish a principle mentioned only incidentally, if at all, in the other cases referred to me by counsel, namely, that a solicitor has the duty of warning a client of the risk involved in a course of action, contemplated by the client or by his solicitor on his behalf, and of exercising reasonable care and skill in advising him. If he fails to warn the client of the risk involved in the course of action and it appears probable that the client would not have taken the risk if he had been so warned, the solicitor will be liable. If he warns the client of the risk involved in the course of action, then he can only proceed to follow such course if the client instructs him so to do. If he fails to exercise reasonable care and skill in advising the client with respect to his risk and the client or solicitor on his behalf adopts a course of action which the client would probably not have taken or authorized if he had been properly advised, again, the solicitor will be liable if the client suffers a loss. [emphasis added]

[39] Having reviewed the record before me, there is clearly evidence indicating the plaintiffs would have acted differently had they been fully informed of the possible consequences of entering the Agreement.

[40] The plaintiffs maintain that they would not have signed the Agreement had they known they could lose complete control over the Property.

[41] When viewing the seven-page Proposal sent by Philip Richardson on April 22, 2011, it is clear that the Property was to be transferred to Janice strictly for the purpose of obtaining financing for the microFit program. The Proposal also supports that the plaintiffs never intended to give Janice control over the Property prior to their deaths.

[42] Donald accepted the Proposal as consistent with his intentions in the email of April 25, 2011. Yet, the Agreement differs significantly from the Proposal and was executed on April 29, 2011, only four days later. In my view, this raises clear concerns that the Agreement does not reflect the actual intention of the plaintiffs. The fact that Janice prepared the Agreement with the LLF lawyers in the absence of the plaintiffs only amplifies this concern.

[43] Janice had the non-alienation clause added to the Agreement without informing the plaintiffs. [1] And it seems that the plaintiffs may have not fully understood the significance of the provision, or how much it changed the nature of the agreement they were entering into.

[44] When read carefully, the Proposal indicates that Donald’s intention was to have Janice act as a trustee for the Property, not a beneficial owner. The Proposal specifically contemplates title returning to the estate when Janice passes. However, the Agreement seems significantly at odds with the Proposal in this regard. Clearly there was a change in the Agreement when it was reduced to writing, and the evidence indicates that the plaintiffs were not fully understanding the nature of the changes.

[45] The Agreement had the effect of giving substantial control to Janice and Wesley immediately. The non-alienation clause completely restricted the plaintiffs from dealing with the Property. In my view, this was not envisioned by the plaintiffs when they signed the Agreement. Nor is it clear that they fully appreciated this risk on the record before me.

[46] It may be that Mr. McGarrity was not given Philip Richardson’s Proposal to identify these differences, nor was he informed of the original understanding. Absent this context, it may be that the Agreement seemed entirely reasonable to Mr. McGarrity, particularly given that Donald indicated that he intended to leave the Property to Janice upon his death.

[47] It may also be that the terms of the Agreement were the only realistic way to have Janice and Wesley assume the risks associated with carrying the Property. Janice and Wesley sought to protect their interest/investment by ensuring that the Property remained within their control.

[48] However, the Agreement is quite different than Philip Richardson’s Proposal of April 22, 2011. Again, on the evidentiary record before me, it is not clear that Donald would have agreed to the terms of the Agreement had he fully understood them.

[49] In Geffen v. Goodman Estate, [1991] 2 S.C.R. 353, [1991] S.C.J. No. 53 at paras. 42-45, Wilson J. discussed the presumption of undue influence in the following passages from paras. 42-45:

What then must a plaintiff establish in order to trigger a presumption of undue influence? In my view, the inquiry should begin with an examination of the relationship between the parties. The first question to be addressed in all cases is whether the potential for domination inheres in the nature of the relationship itself. This test embraces those relationships which equity has already recognized as giving rise to the presumption, such as solicitor and client, parent and child, and guardian and ward, as well as other relationships of dependency which defy easy categorization.

Having established the requisite type of relationship to support the presumption, the next phase of the inquiry involves an examination of the nature of the transaction. ...

… in situations where consideration is not an issue, e.g., gifts and bequests, it seems to me quite inappropriate to put a plaintiff to the proof of undue disadvantage or benefit in the result. In these situations the concern of the court is that such acts of beneficence not be tainted. It is enough, therefore, to establish the presence of a dominant relationship.

Once the plaintiff has established that the circumstances are such as to trigger the application of the presumption, i.e., that apart from the details of the particular impugned transaction the nature of the relationship between the plaintiff and defendant was such that the potential for influence existed, the onus moves to the defendant to rebut it. As Lord Evershed M.R. stated in Zamet v. Hyman, supra, at p. 938, the plaintiff must be shown to have entered into the transaction as a result of his own "full, free and informed thought". Substantively, this may entail a showing that no actual influence was deployed in the particular transaction, that the plaintiff had independent advice, and so on. Additionally, I agree with those authors who suggest that the magnitude of the disadvantage or benefit is cogent evidence going to the issue of whether influence was exercised. [emphasises added]

[50] In my view, Janice’s relationship with her parents (a relationship of trust) may have caused her parents to sign the Agreement against their own interests. They were becoming more dependent in their lives, and looked to Janice to help them moving forward. Their trust in their daughter may have led them to enter the Agreement without properly understanding its effects. As explained in Lavin v. Lavin, [1882] O.J. No. 15 at para. 15.

Many Judges both in England and Ontario have said that prima facie a conveyance of all of a man’s property in his old age without power of revocation, and that is the case here, in consideration of a mere promise of maintenance is extremely improvident. I am quite satisfied that he did not entirely understand the effect of what he did and that their capacity and anxiety for relief, and his mental weakness combined to produce the transaction.

I do not wish to be understood in what I have said as censuring the solicitor. In the language of the eminent Judge who decided Chisholm v. Schroeder et al., 20 N.S.R. 9, Mr. Justice Thompson – I may say that I think he did not fully realize perhaps because he was not asked to do so, the effect the transaction would have upon the plaintiff’s future, left practically as he was at the mercy of the defendant and her husband; he was more the defendant’s than the plaintiff’s solicitor. I say this from the circumstances and because of the little done to guard the old man’s future from want and neglect.

The deed so far as the defendant is concerned cannot be permitted to stand. [emphasis added]

See also Madden v. McNeil et al., 1910 Carswell NS 77.

[51] I do not agree with the Moving Party that there is no basis for the plaintiffs’ claim. On the contrary, if the matter was before me on the merits, I would have likely set the Agreement aside.

[52] In my view, this is not an appropriate case for partial summary judgment. The issues raised in the solicitor’s negligence claim are too interwoven with the issues raised in the main action.

Disposition

[53] The motion for summary judgment is dismissed.

[54] I will accept costs submissions by the parties. The plaintiffs, Donald and Maria James, shall serve and file submissions for costs within three weeks of the release of this decision. The defendant/moving party, has one week thereafter to serve and file a response. Submissions are to be no more than two pages in length. There is no right for any reply submissions. Submissions are to be filed with the court.

Justice C.F. de Sa

Released: February 25, 2019

[1] The email correspondence from Philip Richardson specifically raised concerns that the current proposal did not add sufficient protection for the investments made by Janice.