Court File and Parties
COURT FILE NO.: 16-71091 DATE: 20190509 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
PODOGAETAM HOLDINGS INC. Plaintiff – and – STEPHANE LANGLOIS, CHRISTIAN PILON, PIERRE CHARRON and CHARRO LANGLOIS LLP, SOPHIE ANNE CHARRON, LANGLOIS PROFESSIONAL CORPORATION AND STEPHANE LANGLOIS FAMILY TRUST Defendants
Counsel: William Hunter/Patrick Simon, for the Plaintiff Colin R. Dubeau, for the Defendants, Christian Pilon, Pierre Charron and Charron Langlois LLP Steve Cavanaugh, for the Defendant, Stephane Langlois
HEARD: April 23, 2019
REASONS FOR decision
Beaudoin J.
1The Plaintiff, Podogaetam Holdings Inc. (Podogaetam), brings this motion for partial summary judgment against two Defendants. The Plaintiff seeks a finding that the Defendant, Stephane Langlois (“Langlois”), breached his contract with the Plaintiff resulting in damages of $120,000 plus interest and costs.
2The Plaintiff originally sought a finding that the Defendant, Pierre Charron (“Charron”), was negligent and breached the fiduciary duties owed to the Plaintiff resulting in damages of $120,000 plus interest and costs.
3At the outset, Podogaetam advised that it would not be seeking a finding in negligence against Charron having regard to the contested evidence and the credibility issues before the court.
4I was further advised that the Defendant, Langlois, was not disputing the claim with respect to the breach of contract, and so judgment is entered against him on that basis only. The other claims against Langlois will continue.
5The Plaintiff also agreed to a dismissal of all of the claims as against the Defendant, Christian Pilon. Accordingly, all claims against this Defendant are hereby dismissed.
6This action is one of a number of matters being cased-managed by Justice Roger. All of these claims arise out of allegations that Stephane Langlois defrauded a large number of the clients of Charron Langlois LLP. Langlois has not defended the action and he is believed to be residing in the Dominican Republic with the misappropriated funds.
Background
7Podogaetam is a holding company. Paul Cuerrier (Cuerrier) is its president, sole director and shareholder. Cuerrier has limited formal education. His highest level of education is grade nine. Notwithstanding his modest educational background, he has owned and operated an insulation company for most of his working life and it appears to have been successful.
8Cuerrier was on the Board of the Caisse Populaire Trillium for six years; and as such, he would have been involved in the approval of financing. He is a partner in a large real estate syndicate that has developed and operated several retirement homes in Eastern Ontario. Podogeatam has engaged in the private lending of approximately $3.8 million.
9Pierre Charron (Charron) is a lawyer running a legal practice in the City of Clarence Rockland. In 2008, Pierre sold his sole practitioner firm to Langlois for $350,010 through a vendor take back financial arrangement where Langlois only paid $10 upfront to Charron with the remainder left owing to Charron to this day.
10In 2010, Charron bought back into Charron Langlois for a 33% ownership of the law firm. He paid $250,000 through his professional corporation. Charron only remained a partner for approximately one year when he then sold his shares to Langlois for $250,000. This amount was instead added to the $350,000 already owing to Charron. As of August 31, 2016, Langlois owed Charron $499,262.60.
The Loan
11Cuerrier first approached Charron in 2011 to assist him in “papering” a loan between Podogaetam and a local plumber. Since then, and from time to time, Charron would call Cuerrier and advise him of clients who needed loans and, on other occasions, Cuerrier would contact Charron. Cuerrier would be the private lender through Podogaetam. It is agreed that there were some 14 or 15 private loan transactions where Charron would have acted on behalf of Podogaetam and Cuerrier.
12In September 2013, Langlois approached Cuerrier seeking a loan of $120,000 to ensure Charron Langlois LLP’s continuing operations. By then, Cuerrier says that he had a good rapport with Charron and he trusted the Charron Langlois Law firm. Cuerrier agreed to lend the money to Langlois. He then asked Charron to draft the various loan documents needed to effect, or “paper” the loan.
13Podogaetam loaned Langlois $120,000 for a term of two years. The principal amount would bear interest at 15% calculated monthly, not in advance. The interest was payable by way of monthly interest only payments in the amount of $1500. The principal became payable on October 1, 2015.
14On or about September 28, 2015, Langlois sought to extend the promissory note until April 1, 2016. Langlois drafted a one-page Notice of Agreement to renew the promissory note. Cuerrier agreed to renew the note. Charron was not involved in that transaction.
15On or about August 26, 2016, Cuerrier was advised by Charron to seek counsel as Langlois had taken monies from the trust account, apparently without authorization, and was being suspended and removed from the law firm. Podogaetam stopped receiving monthly payments on the loan at that time and has never received the principal amount loaned to Langlois nor any interest payment since that time.
16In June 2012, Charron was contacted by the Caisse Populaire in Rockland. He was infromed that Charron Langlois LLP was bouncing approximately 200 NSF cheques per year. Charron alerted Christian Pilon in an internal memorandum dated June 7, 2013. In that memorandum, he disclosed that Charron Langlois had serious cash flow issues and it had doubled its indebtedness with Charron being a main creditor, with approximately $500,000 owing to him.
17Charron admitted that he never advised Cuerrier about the issues identified in the internal memorandum to his partner prior to documenting the loan. He also admitted that he never advised Cuerrier that Langlois was personally indebted to him for approximately $500,000 and had never paid what he owed to him from the vendor take-back loan.
18Charron agrees that he had a fiduciary obligation towards Cuerrier. Nevertheless, Charron asserts that he advised Cuerrier, before preparing the loan documentation, that Langlois was a poor credit risk; that Cuerrier should obtain security for the loan; that Charron was in a conflict of interest in preparing the note, and that Cuerrier should obtain independent legal advice. He repeated those concerns when Cuerrier attended his office to sign the loan documentation. Cuerrier signed an Acknowledgment which states:
(2) We hereby acknowledge and confirm, having been advised by our solicitor, Pierre R. Charron who practices his profession as a lawyer in association with the law firm being Charron Langlois, LLP, barristers and solicitors located in the city of Clarence Rockland, in the County of Russell and province of Ontario, that Stephane J. Langlois in his personal capacity is:
(a) one of the principal partners and owners of the law being Charron Langlois, LLP, barristers and solicitors in which Pierre R. Charron on practices law as an associate;
(3) We further hereby acknowledge and confirm that we have been advised by Pierre F, Charron that, as we intend that Podogeatam Holdings Inc. obtain no further security for the repayment obligations under the loan other than the promissory note and the Guarantee….. The only recourse, which Podogaetam Holdings Inc. shall have Easter proceed with a lawsuit in order to obtain payment of such outstanding sums pursuant to the Loan, Promissory Note and Guarantee.
(4) We the undersigned further acknowledge and confirm that Pierre R. Charron has advised us that it is not in our best interests to obtain no further security for the obligations under the Loan other than the Promissory note and Guarantee.
(5) We further recognize and acknowledge that Pierre R. Charron did also advise us that it would be in the undersigned’s best interests to receive the benefit independent legal advice from a lawyer from a firm other than Charron Langlois, LLP …. Notwithstanding this advice, we, each of the undersigned, hereby confirms that we have waived our right independent legal advice in the matter of the loan…
(6) Pierre R. Charron has explained in detail can we understand each of our respective rights and obligations under the loan, promissory note in guarantee, the nature of the loan, promissory note and guarantee and the consequences and possible consequences of the loan…..
19According to Charron, despite these warnings, Cuerrier told him that he was “a big boy” and insisted on proceeding with the loan to Langlois.
20In his affidavit in support of this motion, Cuerrier swore:
I wish Mr. Pilon or Mr. Charron would have told me the degree of debt faced by Stephane Langlois LLP. I also wish they would’ve told me how much was owed to them personally by Stephane Langlois. I truly counted on them to provide me with this information so that I could make an enlightened decision to loan $120,000 of my hard earned money to Mr. Langlois. I was not provided with any information alerts and warnings.
The Issues on this Motion
- What must be established in seeking damages of a breach of fiduciary duty?
- Is this an appropriate case for partial summary judgment?
The Law
A breach of fiduciary duty
21In deciding a prior motion for summary judgment against Langlois in another case-managed proceeding, (Chretien v. Langlois, 17-71274 unreported), Justice Roger relied on Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534, where the Supreme Court of Canada found that fiduciary obligations can arise out of a solicitor-client relationship. In Chretien, Justice Roger held that Langlois had breached his fiduciary duty by telling Chretien not to seek independent legal advice and by not advising him of the extent of his indebtedness and the resulting high risk of default. The only issue before Justice Roger was the level of causation that was required in order to establish damages resulting from a breach of fiduciary duty.
22From his review of the Canson decision, Justice Roger concluded that a plaintiff will not be required to act in a reasonable and prudent manner as might be required in a claim of negligence or breach of contract, but that losses stemming from a plaintiff’s unreasonable actions will be barred.
23In the end, Justice Roger accepted Chretien’s uncontradicted evidence that he would not have loaned the money to Langlois had he known about the degree of Langlois’ indebtedness.
24In Hodgkinson v. Simms, [1994] 3 S.C.R. 377, the Supreme Court discussed the legal concept of fiduciary obligations in the context of an investment advisor/client relationship and stressed the importance of the element of reliance in a fiduciary relationship and said this at para. 26:
At the same time, however, it is only by having regard to the often subtle differences between these causes of action that civil liability will be commensurate with civil responsibility. For instance, the fiduciary duty is different in important respects from the ordinary duty of care. … However, while both negligent misrepresentation and breach of fiduciary duty arise in reliance-based relationships, the presence of loyalty, trust, and confidence distinguishes the fiduciary relationship from a relationship that simply gives rise to tortious liability. Thus, while a fiduciary obligation carries with it a duty of skill and competence, the special elements of trust, loyalty, and confidentiality that obtain in a fiduciary relationship give rise to a corresponding duty of loyalty. [Internal citations omitted – Emphasis added]
25In Galambos v. Perez, 2009 SCC 48, [2009] 3 S.C.R. 247, the Supreme Court of Canada recognized that while distinct relationships may give rise to a fiduciary duty, “a breach of any duty by a fiduciary is not necessarily a breach of fiduciary duty. 1 ” In that case, the lower court found that the plaintiff, who had made cash advances to a law firm, had not relied on any information from the law firm when deciding to advance the money. The lower court concluded that there was no basis for a finding of negligence or breach of fiduciary duty on the part of the lawyer. The Supreme Court upheld the findings of the trial judge.
26In Rose v. Melanson, [1999] O.J. No. 512, the defendant lawyer, who acted for both the borrower and lender on a transaction, was found not to have breached his fiduciary duty to the lender. The court found that the plaintiff would have proceeded with the loan even if the lawyer had disclosed all of the information he had about the borrower’s circumstances. Furthermore, the court found that the plaintiff would have proceeded with the loan, even if the lawyer had declined to act for her.
27On appeal in Rose v. Melanson; the Court said this at paras. 13 and 14:
13 The trial judge also found that the respondent did not place himself in a position of conflict of interest with the appellant, and that he did not breach any fiduciary duty that he might have owed her. In so concluding, she made a firm finding that the appellant did not place any reliance whatsoever on the respondent in respect of the wider transaction and on that basis alone, the breach of fiduciary duty claim could not succeed. Manifestly, that finding was open to the trial judge and we see no reason for interfering with it.
14 The evidence at trial included that of the respondent expressing to the appellant that he had serious concerns about her participating in the loan transaction, and that he could not vouch for the security. The trial judge found that the appellant rebuffed the respondent's concerns and made it clear she did not want to have anything to do with the wider transaction.
28In Upper Valley Dodge Chrysler Ltd. v. Cronier Estate, the trial judge found no breach of fiduciary duty where a lender visited the law firm simply to “paper a transaction” and had agreed on the terms of the transaction before they sought legal advice. This finding was upheld by the Ontario Court of Appeal (Upper Valley Dodge Chrysler Ltd. v. Cronier Estate).
Summary Judgment
29The test for summary judgment is succinctly set out in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at paras. 49 to 51:
49 There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
50 These principles 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 principles so as to resolve the dispute.
51 Often, concerns about credibility or clarification of the evidence can be addressed by calling oral evidence on the motion itself. However, there may be cases where, given the nature of the issues and the evidence required, the judge cannot make the necessary findings of fact, or apply the legal principles to reach a just and fair determination.
Disposition
30The Plaintiff has failed its onus of establishing that there is no genuine issue requiring a trial. There are live issues of credibility and the evidence, which is extensive and conflicting, cannot be resolved on the record before me. Moreover, the Plaintiff is seeking partial summary judgment and the breach of fiduciary duty issue cannot be easily bifurcated from the remaining action.
31In this case, there is conflicting evidence with respect to the circumstances surrounding the “papering” of the loan, Cuerrier’s review of the Acknowledgement with Charron, and Cuerrier’s reliance on Charron in advancing the funds.
32There are genuine issues of credibility that cannot be resolved by calling oral evidence on the motion itself. Cuerrier has provided five different versions of how the loan to Langlois was negotiated:
In an application for a grant from the compensation fund made to the Law Society of Upper Canada, Cuerrier wrote:
In September 2013, in light of my long-standing relationship with him, Stephane asked me for a loan of $120,000. He prepared all of the paperwork.
In an affidavit to support the amendment to the Statement of Claim sworn on March 15, 2017, Cuerrier swears at paragraph 4:
, Pierre Charron reviewed the documents, which are the subject of this legal action,
A letter from his counsel dated June 8, 2017 states:
With respect to the Acknowledgement allegedly signed by Mr. Cuerrier, he does not recognize this document, nor does he admit to signing it.
In his affidavit in support of the motion, Mr. Cuerrier admits to signing various loan and security agreements and that he was provided with a stack of documents including the Acknowledgement and that he and Charron did not discuss their content but instead discussed what was happening in the local community.
In Cuerrier’s cross-examination, he admitted it was his signature on the acknowledgement and that he and Charron talked about it, but he didn’t remember much about that meeting. 2
33More significantly, Cuerrier admitted that he had verbally negotiated the terms of the loan with Langlois before he met with Charron 3. Specifically, Cuerrier and Langlois had agreed on the interest rate and the payment terms of the loan, including that there would be no security of the loan. Cuerrier visited Charron after the terms of the loan had been negotiated and agreed. There is no evidence that Cuerrier entered into a conditional agreement with Langlois. Cuerrier later renewed the promissory note with Langlois in order to extend the loan and did so without Charron’s involvement.
34Finally, unlike Chretien, Cuerrier does not state he would not have advanced the loan if he had known about the NSF cheques or the degree of Langlois’ personal indebtedness to Charron. He simply states he would have made an “enlightened decision”. When presented with Cuerrier’s conflicting versions, that vague statement is insufficient to establish that Cuerrier relied on Charron before verbally agreeing to and, subsequently advancing the funds to Langlois.
35Charron’s evidence has been consistent. He warned Cuerrier that Langlois was a poor credit risk; he advised him to get security for the loan and he recommended that Cuerrier get independent legal advice because Charron was in a conflict of interest. This version is corroborated by the acknowledgement signed by Cuerrier on behalf of his company.
36Finally, this motion for partial summary judgment would not provide a proportionate, more expeditious and less expensive means to achieve a just result as the Court of Appeal recently cautioned in Butera v. Chown, Cairns LLP, 2017 ONCA 783 at para. 34:
34 When bringing a motion for partial summary judgment, the moving party should consider these factors in assessing whether the motion is advisable in the context of the litigation as a whole. 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. Such an approach is consistent with the objectives described by the Supreme Court in Hryniak and with the direction that the Rules be liberally construed to secure the just, most expeditious, and least expensive determination of every civil proceeding on its merits.
37The issue of whether Charron breached his fiduciary duty cannot be readily bifurcated from the issue of whether he negligently performed his professional responsibilities because the issues arise from the same facts. Any final determination made on a motion for summary judgment runs the risk of inconsistent findings. Moreover, there are still the issues of Podogaetam’s claim in negligence against Langlois and the matter of Charron’s cross-claim against Langlois.
38For these reasons, the Plaintiff’s motion for summary judgment is dismissed. The parties may make their brief submissions as to costs within twenty days of the release of this decision.
Mr. Justice Robert N. Beaudoin
Released: May 9, 2019