COURT FILE NO.: CV-19-620388

DATE: 2021 09 21

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ALEXEY KONDRATIEV, Plaintiff

- and -

MICHAEL D. WRIGHT and CAVALLUZZO SHILTON MCINTYRE CORNISH LLP, Defendants

BEFORE: Associate Justice Todd Robinson

PARTIES: A. Kondratiev, in person (moving party)

COUNSEL: M. Giugaru, for the defendants

HEARD: June 24, 2021 (by videoconference)

REASONS FOR DECISION

[1] Alexey Kondratiev seeks leave to amend his statement of claim to plead additional allegations of negligence against his former lawyers, Michael D. Wright and Cavalluzzo Shilton McIntyre Cornish LLP, add Genevieve Cantin (another lawyer at the defendant law firm when it acted for Mr. Kondratiev) as a new defendant, continue this action in the ordinary procedure, and increase his damages claim from $100,000 to $100,000,000. The defendants previously acted for Mr. Kondratiev in claims arising from alleged infringement of intellectual property rights. They oppose the majority of the proposed amendments.

[2] There are four issues to be decided on this motion:

(a) whether the proposed amendments disclose a reasonable cause of action against the existing defendants, which involves assessing:

(i) whether the proposed amendments plead a new cause of action and, if so, whether that cause of action is now statute-barred pursuant to the Limitations Act, 2002, SO 2002, c 24, Sched B;

(ii) whether the proposed amendments are frivolous and vexatious; and

(iii) whether the proposed amendments have a reasonable chance of success;

(b) whether a reasonable cause of action against Genevieve Cantin is supported by the proposed amended statement of claim; and

(c) whether the proposed increased damages quantum is reasonable and provable.

[3] I have determined there is a triable issue on whether Mr. Kondratiev’s new claim is statute-barred and that there is a sufficiently reasonable cause of action against the existing defendants to allow the new claim to proceed, including the increased quantum. I am accordingly granting leave to amend the statement of claim as against the existing defendants. However, I find no reasonable cause of action against Genevieve Cantin, so am denying leave to add her as a defendant.

Analysis

Nature of opposed amendments

[4] The current claim against the existing defendants arises from alleged negligence in their handling of Mr. Kondratiev’s action against Oleg Boyko in Court File No. CV-15-537434 (the “Boyko Action”). The defendants are alleged to have negligently prepared the statement of claim, leading to it being struck without leave to amend. A subsequent appeal to the Court of Appeal permitted only one paragraph of the claim to continue.

[5] The Boyko Action is related to a prior action brought by Arcadia Participacoes Ltda (“Arcadia”) against Mr. Kondratiev and his corporation, Smart Games Canada, Inc., in Court File No. CV-08-354560 (the “Arcadia Action”). In that action, Arcadia alleges breaches of agreements by Mr. Kondratiev and Smart Games Canada, Inc. relating to electronic bingo games over which Arcadia claims exclusive rights and ownership. Arcadia claims that certain intellectual property created by Mr. Kondratiev and his company is the property of Arcadia. Mr. Kondratiev and his company counterclaimed for $10 million in damages, claiming ownership of the intellectual property in the bingo machines.

[6] Cavalluzzo Shilton McIntyre Cornish LLP was initially retained by Mr. Kondratiev to defend the Arcadia Action in 2014. Michael Wright was lead counsel for Mr. Kondratiev. The Boyko Action was subsequently commenced in 2015. As it currently stands, this action pleads only negligence in handling the Boyko Action.

[7] Mr. Kondratiev’s affidavit evidence is that, in January 2018, he learned that Cadillac Jack, Inc. (one of the corporate defendants by counterclaim in the Arcadia Action) had been sold. His evidence and pleading allegation is that he instructed the defendants to bring a motion to add the purchaser, AGS, LLC, as a defendant by counterclaim, consolidate the Arcadia Action and the Boyko Action, and amend the claim to $100 million. His evidence is also that, as of January 2018, Genevieve Cantin was actively working on both the Arcadia Action and the Boyko Action.

[8] In January 2019, Master Josefo (as he was then titled) directed that a final timetable be fixed in the Arcadia Action for all steps leading to set down for trial. The parties in that action were directed to agree on a timetable or book a further hearing. A hearing ultimately proceeded on May 8, 2019, at which time Master Josefo fixed a peremptory deadline for Mr. Kondratiev to serve his motion record to amend the Arcadia Action by May 31, 2019, among other steps.

[9] The defendants’ position is that a breakdown in the solicitor-client relationship occurred during that period. The motion record was not served, the circumstances of which are disputed between Mr. Kondratiev and the defendants. Mr. Kondratiev alleges that the defendants’ failure to serve the motion record “eliminated any chances to amend the Arcadia Action”, including his chance to sue Oleg Boyko and Cadillac Jack, Inc.’s successors in interest, AGS, LLC and PlayAGS, Inc. (seemingly a successor to AGS, LLC).

[10] Mr. Kondratiev’s requested amendments dealing with additional allegations about the Boyko Action are unopposed. New allegations of negligence about the defendants’ handling of the Arcadia Action, the addition of Genevieve Cantin as a defendant, and the increased claim quantum are opposed.

Is a reasonable cause of action pleaded against the existing defendants?

[11] My authority to grant the requested amendments is found in Rules 26.01 and 5.04(2) of the Rules of Civil Procedure, RRO 1990, Reg 194. Rule 26.01 is drafted with mandatory language, providing that the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. Rule 5.04(2) is drafted with similar language, but is permissive rather than mandatory, providing that the court may add a party on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

[12] Proposed amendments should not be allowed if the amendments lead to non-compensable prejudice, if they are scandalous, frivolous or vexatious, or if they fail to disclose a reasonable cause of action: Klassen v Beausoleil, 2019 ONCA 407, at para. 25.

[13] The defendants make three arguments for why the opposed amendments do not disclose a reasonable cause of action against the existing defendants, as follows:

(a) the allegations constitute a new cause of action that is statute-barred;

(b) the allegations are frivolous and vexatious; and

(c) there is no merit to the proposed additional grounds of liability and thereby no reasonable chance of success.

[14] With respect to whether a new cause of action is being pleaded, I agree with the defendants that the new allegations are a new cause of action. The statement of claim as it stands does not support any claim for negligence in the existing defendants’ handling of the Arcadia Action. The opposed amendments are a separate factual situation on which Mr. Kondratiev relies to support a new basis for liability.

[15] Expiry of a limitation period is one form of non-compensable prejudice. Case law clearly supports the defendants’ position that a party cannot circumvent operation of a limitation period by amending their pleading to add a new claim after the relevant limitation period has expired: Klassen v Beausoleil, supra at para. 26. However, in my view, whether Mr. Kondratiev’s proposed additional claim is now statute-barred is a triable issue.

[16] There are four elements to discoverability as set out in s. 5(1) of the Limitations Act, 2002. A claim is discovered when a person knows, or reasonably ought to know, (i) that the injury, loss or damage had occurred, (ii) that the injury, loss or damage was caused by or contributed to by an act or omission, (iii) that the act or omission was that of the person against whom the claim is made, and (iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.

[17] Notwithstanding the earnest arguments of defendants’ counsel, there is a sufficient evidentiary basis for Mr. Kondratiev to argue that his claim is not statute-barred under s. 5(1) of the Limitations Act, 2002. In particular, it is arguable that Mr. Kondratiev lost the right to seek amendment to his counterclaim in the Arcadia Action when the peremptory deadline to bring an amendment motion lapsed. The existing defendants were Mr. Kondratiev’s counsel of record at the time. There is evidence supporting Mr. Kondratiev’s position that he gave instructions to bring the motion. Although there is a dispute about why the motion was not brought and the nature of the solicitor-client relationship at the time, the existing defendants could be held responsible for missing the deadline. Mr. Kondratiev’s claim for prejudicing his right to amend his counterclaim in the Arcadia Action could be found not to have accrued until that point.

[18] The defendants argue that Mr. Kondratiev knew the underlying claim he wanted to advance was already statute-barred. That argument conflates the limitations defence of the defendants in this action with a potential limitations defence in the underlying action. Whether Mr. Kondratiev’s claim against his lawyers is statute-barred is a separate assessment from whether the underlying claim against the proposed new defendants by counterclaim in the Arcadia Action was statute-barred. The latter has no bearing on whether the proposed claim in this action has been brought in time. It is only a defence on the merits in this action, namely an argument that even if the defendants were responsible for missing the deadline fixed by Master Josefo, no actual loss was suffered because the claim was already statute-barred.

[19] The defendants further rely on paragraph 29 of the proposed amended statement of claim as an admission of discoverability. It states as follows:

29. The Plaintiff pleads that the Defendants’ negligence and breach of contract was not discovered or reasonably discoverable until the Court of Appeal for Ontario decision published on June 1, 2017 as part of the Boyko Action.

[20] In my view, this is not an admission regarding the Arcadia Action. The underlined portion is the proposed amendment to that paragraph (currently paragraph 20 of the statement of claim). In context of the draft amended pleading as a whole, paragraph 29 refers to discoverability of negligence in handling the Boyko Action, not the Arcadia Action. Notably, paragraph 15 of the proposed amended statement of claim specifically identifies missing the May 31, 2019 deadline as having “completely eliminated any chances to amend the Arcadia claim.”

[21] With respect to whether the proposed amendments are frivolous or vexatious, the case law put before me does not address the requirements for finding a pleading to be frivolous or vexatious. Nevertheless, the law on those points is settled. For a pleading to be frivolous, it must lack a legal basis or legal merit, or must refer to something that is not serious or not reasonably purposeful. To be vexatious, the pleading must be instituted without reasonable grounds, such as being instituted maliciously and without good cause: Thelwell v. Elaschuk, 2020 ONSC 340 at para. 60.

[22] I do not agree with the defendants that the proposed amendments are frivolous or vexatious. The defendants argue that Mr. Kondratiev has demonstrated “a pattern of vexatiousness, abuse of process, and waste of judicial resources” and that the evidence supports that the defendants discharged their professional duties and obligations. In my view, the record before me is insufficient for either finding. In any event, what I must assess is whether the proposed pleading is itself frivolous or vexatious. I find no basis to hold that Mr. Kondratiev’s proposed claims about the Arcadia Action clearly lack legal basis or legal merit or that the claims are being brought without reasonable grounds.

[23] With respect to merits and the chances of success, the defendants’ arguments may well be accepted by a trial judge. However, it is not plain and obvious from the materials filed that Mr. Kondratiev’s proposed claims cannot succeed.

[24] Nearly 300 pages of responding affidavit evidence and documents have been filed by the defendants in opposing this motion. Mr. Kondratiev correctly points out that the defendants’ responding materials, served by email, were formally short-served. Although Mr. Kondratiev did not seek an adjournment to file reply materials, he repeatedly made submissions to the effect that the merits of his claim are for another day, and not this motion. That position is not unreasonable, particularly as a self-represented litigant. The defendants nevertheless argued that I should consider their evidence in assessing whether there is a reasonable cause of action.

[25] There may be circumstances in which it is appropriate to delve into merits and likelihood of success when assessing an opposed pleadings amendment motion. This is not such a case. The evidence as tendered by the defendants is not appropriate for it.

[26] The responding affidavit is that of a lawyer with the law firm representing the defendants in this action. It is neither an affidavit from Michael Wright nor from anyone else directly involved in representing Mr. Kondratiev in the underlying actions. The evidence is sworn on information and belief from review of documents, such as emails, letters, and notes to file, all of which have been tendered for the truth of their contents. There is no indication of any discussion with a person having direct knowledge. Since the lawyer did not author the documents or the communications contained in them, her evidence about them is at least double hearsay.

[27] Circumstances around the advice sought and given and how duties owed to Mr. Kondratiev were purportedly discharged are not clear on the record before me. In my view, to accept the defendants’ position that their responding evidence supports a finding that there is no basis for liability first requires me to conduct an assessment akin to a summary judgment motion, but based entirely on hearsay evidence. On this record, it would involve exercising powers that cannot be used by an associate judge hearing a summary judgment motion, namely weighing evidence, evaluating credibility, and drawing inferences from the evidence. As set out in Rule 20.04(2.1), those powers are only available to a judge. If powers necessary to find in favour of the defendants would not be available to me in deciding a summary judgment motion, they cannot properly be available to me in deciding this pleadings amendment motion.

[28] The volume of documentary evidence tendered by the defendants only underscores the number of triable issues that will bear directly on determinations of liability and damages. One is the circumstances surrounding the amendment motion in the Arcadia Action, including Mr. Kondratiev’s knowledge and instructions to the defendants, advice given by the defendants, and whether steps taken by the defendants were in accordance with their instructions and their duties to Mr. Kondratiev. The other is the advice given (or that ought to have been given) regarding both the sale of Cadillac Jack, Inc. to AGS, LLC and the purpose and viability of claiming against either or both of AGS, LLC and PlayAGS, Inc. Documents tendered on this motion suggest that the sale may have been known to both Mr. Kondratiev and the defendants sometime in 2015-2016.

[29] Determining both of those matters (among other issues) require a more fulsome and complete evidentiary record than the one before me. They cannot fairly be decided on hearsay evidence, but rather require direct evidence from Mr. Kondratiev and Michael Wright, if not other representatives of the defendant law firm. There must also be a reasonable opportunity for Mr. Kondratiev to cross-examine the defendants’ affiants or witnesses.

[30] For these reasons, in my view, the pleaded allegations regarding the Arcadia Action support a sufficiently reasonable cause of action against the existing defendants that is neither frivolous nor vexatious and is not clearly statute-barred.

Is a reasonable cause of action pleaded against Genevieve Cantin?

[31] The situation is different with the proposed addition of Genevieve Cantin. The addition of a party under Rule 5.04(2) is discretionary. I have determined that leave to add Ms. Cantin should be denied for two reasons:

(a) the claims against her regarding the Boyko Action are clearly statute-barred; and

(b) the proposed amended statement of claim does not disclose a reasonable cause of action against her.

[32] As already discussed, Mr. Kondratiev pleads at paragraph 20 of his statement of claim and paragraph 29 of his proposed amended statement of claim that the claim against his former lawyers arising from the Boyko Action was discoverable by June 1, 2017, when the Court of Appeal substantially upheld the order striking the Boyko Action without leave to amend. The record before me supports direct involvement by Genevieve Cantin in both the motion to strike and subsequent appeal. Notably, Ms. Cantin is listed as co-counsel in both the reasons for the motion to strike the Boyko Action and the Court of Appeal’s subsequent decision on the appeal.

[33] It is clear that Mr. Kondratiev knew (but certainly ought to have known) that Ms. Cantin was involved in handling the Boyko Action by no later than the Court of Appeal’s decision on June 1, 2017. I am satisfied that the requirements of s. 5 of the Limitations Act, 2002 were met by no later than that date. Accordingly, any claim against Ms. Cantin for negligence in handling the Boyko Action was statute-barred long before this amendment motion was brought.

[34] With respect to allegations of negligence, no reasonable cause of action has been pleaded against Genevieve Cantin in respect of either the Boyko Action or the Arcadia Action. Ms. Cantin is mentioned in only three paragraphs of the proposed amended statement of claim: paragraphs 6, 9, and 24. Ms. Cantin is pleaded to have assisted and supported Michael Wright in representing Mr. Kondratiev, with her name appearing on court documents, and that she “further advised” and “regularly directly corresponded” with Mr. Kondratiev. No particulars of her role are pleaded and no specific acts or omissions are attributed to her (albeit that Ms. Cantin, if added, would be captured in the allegations made against all defendants).

[35] Mr. Kondratiev’s affidavit evidence is that Ms. Cantin made “some procedural mistakes” in the Arcadia Action leading up to the January 2019 hearing before Master Josefo. Nothing specific is outlined. There is no evidence before me on what she did or did not do. There is nothing supporting that Ms. Cantin was responsible for strategic or other advice given to Mr. Kondratiev or that she provided any advice to him. Some evidence has been included in the responding materials, but the emails from Ms. Cantin do not appear particularly substantive in nature. The substantive communications with Mr. Kondratiev on strategy and advice all appear to have been with Michael Wright.

[36] I am not satisfied that Genevieve Cantin is a proper or necessary party. While there is no doubt that she worked on both the Boyko Action and the Arcadia Action, she appears to have acted solely as an associate providing support to Michael Wright. The signed retainer agreement is between Mr. Kondratiev and Cavalluzzo Shilton McIntyre Cornish LLP, and it only specifically names Mr. Wright. There is no evidence that Ms. Cantin had a role in strategic decisions or legal advice relied upon by Mr. Kondratiev. I accept the defendants’ argument that the law firm would be vicariously liable for Ms. Cantin’s acts or omissions. In my view, there is nothing supporting a separate basis of liability for Ms. Cantin from the defendant law firm.

[37] In these circumstances, I am exercising my discretion to deny leave to add Genevieve Cantin as a defendant.

Is the proposed amended claim quantum reasonable and provable?

[38] With respect to the claim quantum, Mr. Kondratiev argues that he lost the opportunity to pursue his claim for $100 million by counterclaim in the Arcadia Action through the negligence of the defendants. The defendants argue that the $100 million claim was nothing more than a strategic claim to force Oleg Boyko to disclose the existence of the claim in IPO filings for PlayAGS, Inc., that it has no bearing on the value of the Arcadia Action, and that Mr. Kondratiev has no reasonable prospect of obtaining judgment for that amount at trial.

[39] The defendants may be correct that Mr. Kondratiev cannot prove $100 million in damages, but there is insufficient evidence before me to say that he clearly cannot. I have been provided with no evidence supporting that Mr. Kondratiev cannot demonstrate $100 million in profits from unauthorized use of the intellectual property that he claims he owns. Also, no case law has been provided addressing damages awards in similar intellectual property disputes.

[40] There is also no evidence of non-compensable prejudice to the defendants from allowing the claim for $100 million to proceed. Mr. Kondratiev wishes to pursue those damages and to have his claim continue in the ordinary procedure. Since costs of a proceeding are always within the discretion of the court, there may be cost consequences should Mr. Kondratiev fail to prove entitlement to damages in that amount. For example, Rule 76.13 provides express costs consequences if Mr. Kondratiev is ultimately unable to prove damages above the monetary limit of the simplified procedure.

Disposition

[41] I accordingly grant leave for Mr. Kondratiev to continue this action in the ordinary procedure and amend his statement of claim in the form appended as Exhibit C to his affidavit filed in support of this motion, except for those paragraphs pleading allegations against Genevieve Cantin and the addition of Genevieve Cantin to the title of proceedings. The motion is dismissed insofar as the relief seeking to add Genevieve Cantin as a defendant.

[42] A draft order was not submitted, but to avoid disputes over finalization of a formal order, I have signed an appropriate form of order.

Costs

[43] Mr. Kondratiev has been substantially successful on his motion. I was advised at the hearing that no offers to settle had been exchanged. In my view, Mr. Kondratiev is presumptively entitled to his costs of this motion, subject to the restrictions on costs available to self-represented litigants recently set out by the Court of Appeal in Girao v. Cunningham, 2021 ONCA 18. In that decision, the Court of Appeal confirmed that costs should only be awarded to self-represented parties who demonstrate that they devoted time and effort to do the work ordinarily done by a lawyer retained to conduct the litigation and, as a result, incurred an opportunity cost by foregoing remunerative activity.

[44] I encourage the parties to settle costs. If they cannot, then written costs submissions may be exchanged. Mr. Kondratiev shall serve any costs submissions within fourteen (14) days. The defendants shall serve their responding costs submissions within fourteen (14) days of being served with Mr. Kondratiev’s costs submissions. There shall be no reply costs submissions. Costs submissions shall not exceed four (4) pages, excluding costs outlines and any case law. They shall be filed by email directly with my Assistant Trial Coordinator, Christine Meditskos, with proof of service.

[45] Unless costs submissions are exchanged and filed in accordance with the above, the parties shall be deemed to have agreed on costs.

ASSOCIATE JUSTICE TODD ROBINSON

DATE: September 21, 2021