COURT FILE NO.: CV-18-1048 DATE: 2020 06 01
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
HEALTH QUALITY INNOVATION COLLABORATIVE and CIRCLEMED INC. Evan Moore, for the Plaintiffs Plaintiffs
- and -
HUSSEIN HAMDANI, MICHELLE DEKENS, SIMPSON WIGLE LAW LLP, WILLIAM FRIEDMAN, MICHAEL HOCHBERG, and FRIEDMAN LAW PROFESSIONAL CORPORATION Defendants
Michael Kestenberg and Beverly C. Jusko, for the Defendants Simpson Wigle Law LLP, Hussein Hamdani and Michelle Dekens Brian Radnoff, for the Defendants Friedman Law Professional Corporation, William Friedman and Michael Hochberg
HEARD: December 10 and 11, 2019
Reasons for Judgment
Petersen J.
Overview
[1] The Plaintiffs, Health Quality Innovation Collaborative and Circlemed Inc., are information technology companies that operate in the healthcare sector in Ontario. The Defendants are law firms and lawyers who acted for the Plaintiffs in two separate but related matters. Simpson Wigle Law LLP, Hussein Hamdani and Michelle Dekens (the “SWL Defendants”) represented the Plaintiffs in a transaction involving the sale of substantially all the Plaintiffs’ business assets to a competitor in the industry. Friedman Law Professional Corporation, William Friedman and Michael Hochberg (the “FLPC Defendants”) represented the Plaintiffs in a subsequent arbitration proceeding against the buyer arising out of the same transaction.
[2] After the arbitration proceeding concluded, the Plaintiffs commenced an action against the Defendants claiming damages for professional negligence in the delivery of legal services. The Defendants have brought summary judgment motions seeking orders to dismiss the claims as against them.
[3] For the reasons set out below, I have concluded that both motions should be dismissed because (1) there are genuine issues requiring a trial of the claims against the FLPC Defendants and (2) it would be inadvisable, in the context of the litigation as a whole, to grant partial summary judgment in favour of only some of the Defendants.
Background Facts
Negotiations of the Commercial Sale Transaction
[4] The Plaintiffs were in the business of distributing and servicing a medical records software program called OSCAR. They sold the software to family doctors and entered into contracts to provide ongoing technical support to the customers who purchased it. The customer-support contracts were the Plaintiffs’ most valuable assets.
[5] In February 2015, the Plaintiffs entered into a Letter of Intent to sell OSCAR and its related assets to Trimara Corporation. Neeraj Jain, a principal of Circlemed, was authorized to negotiate the terms of sale on behalf of both Plaintiffs. After concluding the Letter of Intent, Mr. Jain engaged in preliminary negotiations of an Asset Purchase Agreement (APA) without counsel. The Plaintiffs then retained the SWL Defendants to represent them in ongoing negotiations with Trimara and to close the transaction.
[6] Trimara was represented by a lawyer named Michael Grantmyre. The SWL Defendants and Mr. Grantmyre had numerous discussions and prepared multiple drafts of the APA over several months. Mr. Jain also continued to have direct discussions with Trimara’s President, Kris Van Der Starren.
[7] Since the value of the Plaintiffs’ assets was largely dependent on the successful transfer of their clients to Trimara, the parties negotiated a complicated contractual mechanism by which the purchase price for the assets would be calculated and paid over time, based on revenues generated by customer-support contracts for various classifications of clients. The parties agreed to group clients into four classifications: Assigned Clients (i.e., Plaintiffs’ existing clients who assigned their customer-support contract to Trimara), Transitioned Clients (i.e., Plaintiffs’ existing clients who signed a new contract with Trimara), Pipeline Clients (i.e., potential clients who were in the Plaintiffs’ sales pipeline and who agreed to sign a three-year support contract with Trimara within 90 days of closing) and New Clients (i.e., other potential clients, not in the Plaintiffs’ sales pipeline, that the Plaintiffs referred to Trimara and who agreed to sign a three-year contract with Trimara within 90 days of closing).
[8] Under the APA, the purchase price would be calculated as a percentage of annual revenues generated by the different classifications of clients during the first six months after the closing date of the transaction. The APA provided that if a threshold amount of annual revenue was generated by Assigned Clients and Transitioned Clients within the first six months after closing, then the purchase price would be determined using a multiplier of revenues from those two classifications of clients. If the threshold was not met, then the purchase price would be calculated based only on a percentage of the actual revenues for each of the client classifications.
[9] The APA further provided that, once the purchase price was calculated, it would be paid in quarterly installments over a period of several years. The APA required Trimara to pay $150,000 into escrow on the date of closing as a deposit toward future instalments for the purchase price.
[10] The parties worried that some of the Plaintiffs’ existing clients might be reluctant to switch service-providers, so they agreed to a confidentiality period after the closing date, during which clients would initially not be notified of the fact that Trimara had assumed responsibility for providing technical customer support for the OSCAR software. The confidentiality period was agreed to be for two months following the date of closing.
[11] A total of eight versions of the APA were prepared by the parties and their counsel before the final version was executed. In the first seven versions, there was no requirement for existing clients to provide written consent for the assignment of their contracts to Trimara.
[12] The eighth version (“Version 8”) was the final version of the APA. It was prepared by Mr. Grantmyre (Trimara’s counsel). On May 19, 2015, it was sent directly by Mr. Grantmyre to Mr. Jain by email, without copying the SWL Defendants.
[13] Version 8 included the following provision at Schedule 3.6 and Schedule 4.6 of the APA:
Every Business Contract assigned pursuant to this Agreement will require the prior written consent of the customer that is a party to that agreement. The parties acknowledge and agree that the Sellers [Plaintiffs], as applicable, shall undertake to take all necessary actions to obtain the assignment of the Business Contracts that are purchased by the Buyer [Trimara] in accordance with the terms of this Agreement.
[14] This was a new provision that had not been included in any earlier versions of the APA or previously discussed by the parties or their counsel. The SWL Defendants had never seen it.
[15] Upon receipt of Version 8 of the APA, Mr. Jain sent the following email message to Mr. Van Der Starren:
Do the changes that Michael [Grantmyre] made to address us getting consent after closing affect who are considered Assigned Clients for the purpose of calculating the multiplier? I’m worried that now all clients need to have signed something like a new contract as opposed to have simply agreed to start paying you.
[16] Mr. Van Der Starren replied by email with the following message: “No, as long as we are receiving the money from the clients (from you or them), they count towards the multiple (sic)”. This message is referred to by the parties as the “Clarification Email”.
[17] After receiving the Clarification Email, Mr. Jain executed the APA on behalf of the Plaintiffs, without having it reviewed by the SWL Defendants. The next day, he advised the SWL Defendants that he had done so by sending Mr. Hamdani and Ms. Dekens the following email message:
Hi Hussein, I didn’t mention this in my previous e-mails but I have already signed the APA. I probably should have had you review it before signing but I felt the changes were minor and I really wanted it done yesterday. In case you see something that is a disaster, let me know and I will try to fix it with Kris [Van Der Starren]. The changes since you last saw it are: 1. Changes to the payment terms (allowing 18 quarters to pay plus increasing the interest rate after 16 quarters); 2. Since all contracts need consent to be assigned to Trimara and none of it will be done until after closing, Michael [Grantmyre] made some changes to reflect that. Attached are all the agreements including the redline and the final of the APA. Let me know where we go from here. I am guessing you will connect with Michael to plan the closing. Thanks Neeraj.
[18] Mr. Hamdani replied to Mr. Jain’s email message stating,
Oh wow. Ok thanks for letting us know. We will continue to work on the other documents and if there is time at the end, we will review the APA. However, there is not much that can change in an executed agreement and hopefully you are correct and the changes were minor and you are comfortable with it.
I am surprised Michael [Grantmyre] corresponded with you directly without cc’ing either Michelle [Dekens] or me. Technically, that is a violation of the Law Society rules. I will not report him, but I will mention it to him.
[19] The SWL Defendants received a copy of the executed Version 8 of the APA from Mr. Jain on May 21, 2015. They did not review it prior to the transaction closing on June 1, 2015. They did not check to confirm whether the changes made by Mr. Grantmyre to the previous draft were, in fact, minor. They did not contact Mr. Grantmyre to object to his conduct or to discuss the changes that he had made in the final version of the APA.
Events After Closing of the Transaction
[20] Upon closing, Trimara paid the requisite $150,000 deposit into escrow. The confidentiality period, during which clients could not be informed about the APA, was initially set to expire on August 1, 2015, but it was extended at Trimara’s request to October 1, 2015. In late September 2015, an amount of approximately $102,000 was paid to the Plaintiffs from the escrow fund as an advance payment by Trimara toward the purchase price. The purchase price was to be calculated based on revenues generated as of December 1, 2015. The first installment payment was due to be made by Trimara on March 31, 2016.
[21] After the expiry of the confidentiality period, the Plaintiffs did not take any steps to obtain written client consents to the assignment of customer-support contracts. The SWL Defendants did not, at any time (prior to or after the closing), bring the client consent provision in Schedules 3.6 and 4.6 of the APA to the Plaintiffs’ attention. The SWL Defendants did not explain to the Plaintiffs that they had a positive obligation under the APA to obtain written consents from their existing clients prior to December 1, 2015, in order for the clients to qualify as Assigned Clients in the calculation of the purchase price.
[22] None of the Plaintiffs’ former clients provided written consent to assign their customer-support contracts to Trimara by December 1, 2015. Trimara did not execute any new three-year customer-support contracts with the Plaintiffs’ former clients, former pipeline clients, or any new clients referred by the Plaintiffs.
[23] In March 2016, the Plaintiffs learned that Trimara had sold its assets to a competitor, KAI Innovations, in January 2016, including the OSCAR customer-support contracts. The Plaintiffs learned from the President of KAI that many of the Plaintiffs’ former clients had not been signed to contracts with Trimara but rather had been induced by Mr. Van Der Starren to sign new contracts with KAI. The Plaintiffs were also advised that Mr. Van Der Starren was paid personally by KAI for the customer-support contracts.
[24] Trimara did not make a payment toward the purchase price for the Plaintiffs’ assets at the end of March 2016. Several weeks later, the Plaintiffs found out that Trimara had no intention of making any installment payments under the APA. By letter dated May 16, 2016, Trimara’s counsel demanded that the Plaintiffs reimburse the pre-paid amount ($102,000) and sign a direction for the balance of the escrow funds to be released to Trimara. Trimara took the position that, since it had not signed any new customer-support contracts and none of the Plaintiffs’ former clients had provided written consent to the assignment of their existing contracts by the December 1, 2015 date, there were no revenues upon which the purchase price could be calculated under the terms of the APA.
Arbitration Proceeding
[25] The Plaintiffs disagreed with Trimara’s interpretation of the APA. They retained the FLPC Defendants to commence a proceeding against Trimara, pursuant to an arbitration clause in the APA.
[26] The FLPC Defendants drafted the Plaintiffs’ pleadings, which included claims for damages for breach of contract, breach of duty of good faith and unjust enrichment, as well as claims for punitive and exemplary damages. Trimara defended the arbitration and commenced a counterclaim against the Plaintiffs, seeking recovery of the money paid out of the escrow funds in September 2015.
[27] After the close of pleadings in the arbitration proceeding, the FLPC Defendants represented the Plaintiffs in two preliminary motions and an application. The APA provided for arbitration in either Ottawa or Toronto, depending on whether the parties’ dispute concerned a failure to pay or the calculation of the purchase price. The Plaintiffs took the position that Trimara had failed to pay and therefore the proper venue was Toronto. Trimara took the position that the dispute was over the quantum of the purchase price and therefore Ottawa was the proper venue. The Plaintiffs brought and lost an application in the Superior Court of Justice to have the court decide the location of the arbitration. They were ordered to pay Trimara $15,000 in costs as a result of this unsuccessful application. They also lost a subsequent motion before the arbitrator (who ruled that the arbitration would take place in Ottawa) and were ordered to pay Trimara an additional $8,500 in costs. Finally, the Plaintiffs lost a motion brought by Trimara before the arbitrator for security for costs and were ordered to pay $80,000 as security.
[28] The FLPC Defendants subsequently negotiated and recommended a settlement of the dispute with Trimara. The Plaintiffs agreed to settle the arbitration and signed a full and final release of all claims against Trimara and its principals.
[29] The Plaintiffs are unsatisfied with how the arbitration was handled and they view the terms of the settlement as improvident. From their perspective, they received only nominal consideration for their valuable business assets and incurred unnecessary legal expenses.
Plaintiffs’ Action and Defendants’ Positions
[30] In their Statement of Claim, the Plaintiffs plead that the SWL Defendants breached their duty of care as lawyers. Particulars of the alleged professional negligence include that the SWL Defendants failed to review the executed APA to ascertain whether any material revisions had been made; failed to ensure that the APA was drafted to reflect the Plaintiffs’ intentions and expectations; failed to challenge the validity of the executed APA based on the inappropriateness of the final version being sent directly to the Plaintiffs by Trimara’s counsel; failed to advise the Plaintiffs of their obligations under the APA; and failed to ensure that the Plaintiffs understood those obligations and the consequences of not complying with them.
[31] The Plaintiffs argue that, had the SWL Defendants warned them of the consequences of the client consent provision, they would have attempted to negotiate an amendment to the APA to reflect the parties’ true intentions, failing which they would have made every effort to obtain client consents prior to December 1, 2015, in order to maximize the purchase price. They submit that they suffered damages due to the SWL Defendants’ negligence because they were unaware of the requirement to obtain client consents and of the consequences of failing to do so.
[32] The SWL Defendants take the position that, in circumstances where the APA was signed by the Plaintiffs without their knowledge or approval, they had no duty to review the executed APA, to warn the Plaintiffs about the client consent provision, to explain the consequences of not obtaining client consents, or to attempt to negotiate an amendment to the APA. They argue that, once the APA was executed, it was final and binding on the Plaintiffs and there was nothing that could have been done to change it in any event. Moreover, they assert that the Plaintiffs were aware of and understood the consent provision in the APA. Consequently, they argue that even if they owed the Plaintiffs a duty of care, and even if their actions or omissions fell below the requisite standard of care, they cannot be held liable for negligence because they did not cause the Plaintiffs’ losses.
[33] The Plaintiffs’ allegations of negligence against the FLPC Defendants include the following particulars: that they failed to properly investigate the facts of the dispute with Trimara to determine all available causes of action; failed to claim oppression and seek an oppression remedy from Trimara; failed to claim negligent or fraudulent misrepresentation against Trimara or Mr. Van Der Starren based on the Clarification Email; failed to properly respond to Trimara’s security for costs motion; failed to make any effort to challenge the arbitrator’s jurisdiction based on an apprehension of bias against the Plaintiffs; and advised the Plaintiffs to agree to an improvident settlement without considering all proper heads of damages and without properly assessing the value of the Plaintiffs’ claims.
[34] The Plaintiffs maintain that, had they known about potential claims for fraudulent or negligent misrepresentation against Trimara, they would have pleaded them and could have used them as leverage to obtain a more favourable settlement. They argue that, had they pleaded oppression, they could have successfully defended against Trimara’s security for costs motion. They further take the position that had they known about potential claims, they could have pursued a claim against Mr. Van Der Starren personally and they would not have agreed to release Mr. Van Der Starren from all claims as part of the settlement with Trimara.
[35] The Plaintiffs claim that Mr. Friedman, the senior counsel at FLPC, delegated carriage of the file to junior associates who did not have sufficient experience or knowledge and failed to provide proper oversight of the associates’ work on the Plaintiffs’ file. The FLPC Defendants acknowledge that Mr. Friedman delegated the day-to-day carriage of the file to associates, but they assert that the associates were appropriately experienced, and Mr. Friedman properly supervised the work.
[36] The FLPC Defendants argue that the Plaintiffs were in a difficult bargaining position with Trimara because the Plaintiffs were aware of the client-consent provision in the APA yet failed to fulfill their obligations under the APA. They submit that they nevertheless achieved a favourable settlement for the Plaintiffs (despite the lack of bargaining leverage) and the Plaintiffs did not suffer any damages.
[37] The FLPC Defendants specifically deny all the allegations of negligence. In their Statement of Defence, they plead the following: they investigated the facts and brought all reasonable claims in the arbitration proceeding; there was no basis for the Plaintiffs to claim an oppression remedy or fraudulent or negligent misrepresentation; they properly responded to the security for costs motion; impecuniosity was not a defence the Plaintiffs could have successfully argued in that motion; there was no basis to successfully challenge the arbitrator for bias; and the settlement was not improvident. The FLPC Defendants take the position that they acted at all times in accordance with the Plaintiffs’ instructions and met or exceeded the standard of care of a reasonably competent lawyer.
Motions for Summary Judgment
Legal Framework for Analysis
[38] According to Rule 20.04(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, a summary judgment motion must be granted whenever there is no genuine issue requiring a trial. In the leading case of Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada held that:
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.
[39] The Supreme Court in Hryniak, at para. 66, articulated a two-step approach for deciding contested summary judgment motions under Rule 20.04(2)(a). First, the motion judge must determine whether there is a genuine issue requiring a trial based only on the evidence in the motion record before her. If she concludes that there is no genuine issue requiring a trial with respect to a claim or defence, then the second step is unnecessary and summary judgment must be granted. However, if there appears to be a genuine issue requiring a trial, the motion judge must then proceed to the second step and consider whether the need for a trial can be avoided by using the fact-finding powers set out in Rule 20.04(2.1).
[40] The fact-finding powers consist of weighing the evidence, evaluating the credibility of a deponent, and drawing any reasonable inference from the evidence. For the purpose of exercising any of these powers, a motion judge may, pursuant to Rule 20.04(2.2), conduct a “mini trial” by ordering the presentation of oral evidence by one or more parties. However, these powers may only be employed by the trial judge if it is not contrary to the interest of justice to do so: Rule 20.04(2.1).
[41] The Supreme Court in Hryniak, at para. 66, held that using the fact-finding powers will not be against the interest of justice if their use “will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.” Relevant considerations include the nature and complexity of the litigation, a comparison of the evidence that will be available at trial and on the motion, the opportunity to fairly evaluate the evidence, the proportional procedure considering the nature of the issues, as well as the nature and strength of the evidence: Hryniak, at paras. 58, 59 and 82; 2212886 Ontario Inc. v. Obsidian Group Inc., 2018 ONCA 670, at para. 36, leave to appeal refused, [2018] S.C.C.A. No. 391. The Supreme Court in Hryniak clarified, at para. 60, that,
The "interest of justice" inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice.
[42] Since Hryniak, the Court of Appeal for Ontario has repeatedly cautioned that, “while partial summary judgment has its place, it 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": Butera v. Chown, Cairns LLP, 2017 ONCA 783, 137 O.R. (3d) 561, at para. 34; Service Mold + Aerospace Inc. v. Khalaf, 2019 ONCA 369, 46 O.R. (3d) 135, at para. 14.
[43] Although summary judgment must be granted if there is no genuine issue requiring a trial, the decision to use the expanded fact-finding powers is discretionary. As the Supreme Court explained in Hryniak, at para. 68, “The discretionary nature of this power gives the judge some flexibility in deciding the appropriate course of action. This discretion can act as a safety valve in cases where the use of such powers would clearly be inappropriate.”
[44] In cases such as the one before me, which involve partial summary judgment motions, the principles that guide the exercise of the motion judge’s discretion are different and more complex than in cases involving summary judgment motions generally: Service Mold, at para. 14. This is because of the risks inherent in partial summary judgment, including the danger of inconsistent findings at trial made on a more complete record: Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, at para. 37; CIBC v. Deloitte & Touche, 2016 ONCA 922, 133 O.R. (3d) 561, at paras. 36-38; Butera, at paras. 29-33. These risks must be given careful consideration by motion judges when deciding whether partial summary judgment is advisable in the context of the litigation as a whole: Service Mold, at para. 14.
The FLPC Defendants’ Motion
[45] In any summary judgment motion, the moving party bears the onus of showing that there is no genuine issue requiring a trial. The FLPC Defendants submit that they have met this burden. They argue that the Plaintiffs’ claims against them may be grouped into three categories:
(a) Errors in judgment – by advising the Plaintiffs to bring an application regarding the arbitrator’s jurisdiction to hear the venue dispute and to contest motions about the venue location and Trimara’s request for security for costs; (b) Failure to plead causes of action – including fraudulent or negligent misrepresentation in respect of the Clarification Email (against Trimara and also Mr. Van Der Starren personally); and (c) Improvident settlement – by advising the Plaintiffs to settle with Trimara before obtaining relevant information and documentation from Trimara about the client-support contracts that it sold to KAI (to enable quantificaton of damages).
[46] The FLPC Defendants’ arguments with respect to these claims may be summarized as follows:
(a) any errors in judgment they may have made fell within the standard of care of a reasonably competent lawyer in the circumstances; (b) the FLPC Defendants could not have advanced a claim for negligent or fraudulent misrepresentation on behalf of the Plaintiffs because they did not have complete information from the Plaintiffs (in particular, the plaintiffs did not provide them with a copy of the Clarification Email); (c) negligent or fraudulent misrepresentation was not – and could not have been – pleaded because the Plaintiffs advised the FLPC Defendants that they were aware of the client consent provision in the APA and had agreed with Trimara to waive it; (d) the Plaintiffs were aware that there was missing information from Trimara about what transpired with KAI, but they nevertheless instructed the FLPC Defendants to proceed with settlement discussions; and (e) the settlement was not improvident.
[47] The FLPC Defendants have grouped the Plaintiffs’ claims into three categories to try to simplify and contain them, but the Plaintiffs’ claims against the FLPC Defendants are numerous and span the entire length of the retainer, beginning with the FLPC Defendants’ alleged failure to properly investigate the facts and plead all reasonable causes of action, through to their alleged negligence in advising the Plaintiffs to enter into an improvident settlement that extinguished the Plaintiffs’ ability to bring any further claims against Trimara or Mr. Van Der Starren personally. On the record before me, there appear to be genuine issues raised by the pleadings that require a trial. I am therefore obligated to consider whether a trial can be avoided by using the fact-finding powers set out in Rule 20.04(2.1) and (2.2).
[48] There is no doubt that a summary judgment process would be a more expeditious and less expensive means of arriving at an adjudication of the issues than a conventional trial, but I am not persuaded that it would be a fair process or that a just outcome could be reached. The evidentiary record is not adequate to give me confidence that I can make the necessary findings of fact to summarily and fairly resolve the multiple issues in dispute.
[49] A total of four lawyers at FLPC worked on the Plaintiffs’ file during the retainer, but only one of them submitted an affidavit in support of the summary judgment motion. That lawyer, the Defendant Michael Hochberg, did not join the FLPC firm until the end of June 2017, more than a year after the Plaintiffs retained the firm. Two other associates (not named as Defendants in the Plaintiffs’ action) had day-to-day carriage of the file before Mr. Hochberg’s arrival, but there is no evidence in the motion record from either of them. Mr. Hochberg has no personal knowledge of key facts relating to the initial investigation into the Plaintiffs’ matter or the analysis that influenced decisions relating to the drafting of the Plaintiffs’ pleadings. Furthermore, he confirmed, during his cross-examination, that he did not communicate directly with either of the other associates for the purpose of preparing his affidavit.
[50] The co-Defendant, William Friedman, is the only lawyer who was present and active on the file throughout the entire retainer. He was the partner overseeing the file, who made all material decisions with respect to client recommendations, yet the FLPC Defendants did not submit an affidavit sworn by him. The summary judgment motion was brought before examinations for discovery were conducted, so Mr. Friedman has not been examined in any capacity with respect to the Plaintiffs’ claims. The court therefore does not have the benefit of any evidence from the senior lawyer on the file, which is a significant deficiency in the motion record.
[51] Moreover, the motion record contains contradictory evidence on material issues in dispute, including (for example) whether the Plaintiffs provided the FLPC Defendants with a copy of the Clarification Email; whether the Plaintiffs were aware of and understood the import of the client-consent provision in the APA prior to December 1, 2015; whether the Plaintiffs advised the FLPC Defendants that they had entered into an agreement to waive the client-consent provision; and whether the FLPC Defendants advised the Plaintiffs that the arbitrator was likely biased against them and that they should therefore settle the dispute with Trimara and pursue the SWL Defendants for negligence instead.
[52] Some of the contradictions in the evidence arise from inconsistencies in a witness’s own statements, some arise from contradictions between different witnesses’ sworn statements, and some arise from conflicts with email correspondence in the record. In all instances, the contradictory evidence gives rise to credibility issues.
[53] For example, Mr. Hochberg deposed that FLPC did not recommend settling with Trimara due to the arbitrator being biased and did not advise the Plaintiffs to pursue a claim in negligence against the SWL Defendants instead. During his cross-examination, Mr. Hochberg testified that he did not ever discuss with Mr. Friedman the possibility that the arbitrator was biased. However, in his subsequent answers to undertakings, he furnished a copy of an internal email that he had sent to Mr. Friedman, in which he stated that the Plaintiffs were concerned that the arbitrator was being unfair to them and asked Mr. Friedman for his thoughts on the matter. Mr. Hochberg’s email to Mr. Friedman also discussed the possibility of the Plaintiffs settling with Trimara and proceeding with a negligence claim against the SWL Defendants instead. This documentary evidence gives rise to questions about Mr. Hochberg’s credibility, which need to be resolved in order to make necessary factual determinations.
[54] Other contradictions in the evidence give rise to serious questions about Mr. Jain’s credibility. For example, Mr. Jain denies knowing about the client consent provision in the APA prior to December 1, 2015. To challenge this denial, the FLPC Defendants rely on the Clarification Email and also on various email messages that Mr. Jain sent to the FLPC lawyers who drafted the Plaintiffs’ pleadings in the arbitration proceeding. Depending on how the messages are interpreted, some of them appear to support Mr. Jain’s position, whereas others appear to undermine his position. There is no evidence in the record about how the FLPC lawyers who had carriage of the file at the relevant time (not Mr. Hochberg) interpreted the correspondence from Mr. Jain.
[55] Mr. Hochberg and Mr. Jain were both cross-examined on their affidavits and the transcripts of their examinations are in the motion record. Those transcripts assist with the assessment of their credibility, but they are not sufficient to provide me with confidence in making factual determinations. Oral evidence is required in this case because the credibility issues are central to the Plaintiffs’ claims and the Defendants’ defences. As the Court of Appeal for Ontario has stated on more than one occasion, “The more important credibility disputes are to determining key issues, the harder it will be to fairly adjudicate those issues solely on a paper record”: Cook v. Joyce, 2017 ONCA 49, at para. 92; 2212886 Ontario Inc., at para. 40. Moreover, as the Court of Appeal stated in Baywood Homes, at para. 44:
Evidence by affidavit, prepared by a party's legal counsel, which may include voluminous exhibits, can obscure the affiant's authentic voice. This makes the motion judge's task of assessing credibility and reliability especially difficult in a summary judgment and mini-trial context. Great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all.
[56] Although I have the discretion pursuant to Rule 20.04(2.2) to order a “mini trial”, which would afford the court some oral evidence to assist with the determination of credibility issues while obviating the need for a full trial, that would not be an appropriate procedure in the circumstances of this case. The multiplicity and complexity of the credibility issues and their central role in the determination of the Plaintiffs’ claims are such that the quality of the evidence in the motion record is simply inadequate to make the requisite factual determinations. A conventional trial is required to give the court a full appreciation of all the relevant evidence and confidence in its ability to arrive at a fair and just result.
[57] For the above reasons, the FLPC Defendants’ summary judgment motion is dismissed.
The SWL Defendants’ Motion
[58] The SWL Defendants submit that this court can find, based only on the evidence in the motion record, that there is no genuine issue requiring a trial of the claims against them. If I were to accept this submission, it would result in a partial summary judgment in favour of the SWL Defendants, with the claims against the FLPC Defendants proceeding to trial. I have serious concerns about the advisability of adopting a summary judgment process to resolve the claims against the SWL Defendants when the related claims against the FLPC Defendants cannot be fairly decided without a trial.
[59] At the heart of the SWL Defendants’ motion is their assertion that the Plaintiffs were aware of and understood the import of the client consent provision in the APA prior to executing the APA and long before December 1, 2015 (the deadline for obtaining written client consents). The SWL Defendants argue that any failure on their part to advise the Plaintiffs of the existence of the client consent provision and to explain its consequences therefore could not have resulted in damage to the Plaintiffs, even if it constituted an omission that fell below the standard of a reasonably competent lawyer.
[60] The SWL Defendants’ arguments on this point are based on the same factual matrix as the FLPC Defendants’ arguments about not having cause to make a claim for negligent or fraudulent misrepresentation in the arbitration proceeding against Trimara. Both sets of Defendants challenge Mr. Jain’s credibility based on the same evidence, namely the Clarification Email and the Plaintiffs’ instructions and pleadings in the arbitration proceeding against Trimara. In these circumstances, the judge who tries the claims against the FLPC Defendants could have a different appreciation of the evidence and could arrive at a different conclusion than I, as a motion judge, might reach with respect to Mr. Jain’s credibility on this key issue. There is an obvious risk of inconsistent findings at trial, which renders the summary judgment process inadvisable in the context of the litigation as a whole.
[61] The SWL Defendants’ summary judgment motion is therefore dismissed.
Expert Evidence Issue
[62] There were submissions made by all parties in these motions on the issue of whether the moving parties or the Plaintiffs had a burden of adducing expert evidence about the standard of care owed by the Defendants. It is unnecessary for me to address those arguments because I have determined, for the reasons set out above, that the summary judgment process is not appropriate in the circumstances of this case.
Costs
[63] As the successful parties, the Plaintiffs are presumptively entitled to their costs of these motions. The parties are encouraged to negotiate a resolution on the issue of costs. If they are unable to reach agreement, the parties may make written submissions on costs and I will render a decision. The Plaintiffs shall deliver and file (by email) their costs submissions by no later than June 17, 2020. The Defendants shall deliver and file their responding costs submissions (by email) by no later than June 26, 2020. There will be no reply submissions unless requested by me. Submissions shall not exceed two written pages, excluding Costs Outlines and any Offers to Settle.
Petersen J.