Court File and Parties

Court File No.: CV-19-3356-00 Date: 2021-01-05 Superior Court of Justice - Ontario

Re: 2212886 Ontario Inc., William Porteous and Kirsten Porteous v. Obsidian Group Inc., Obsidian Inc., and Gus Karamountzos

Before: Dennison J.

Counsel: Mr. Alfred S. Schorr, for the Plaintiff, Responding party Applicant Mr. Stuart R. Mackay, for the Respondent, Moving Party on the Motion

Endorsement

[1] The Defendants (Obsidian) seek the removal of the Plaintiffs’ counsel, Mr. Schorr. They submit that it is likely that Mr. Schorr will be a witness at the trial that is scheduled for May 2021. The key issue at trial is whether Mr. Grammenopoulos, an Obsidian representative, showed the Plaintiffs an earning projection before they signed the franchise agreement. Mr. Grammenopoulos denied this.

[2] The Plaintiffs intend to call Mr. Sharma as a witness at the trial. Mr. Sharma provided the Plaintiffs with an earning projection that he says Mr. Grammenopoulos showed him before he signed a franchise agreement. Mr. Sharma sued Obsidian. They settled that case. Mr. Schorr represented Mr. Sharma.

[3] The Defendants state that Mr. Schorr should be removed as counsel for the Plaintiffs. The Defendants submit that it is likely that Mr. Schorr will be called to testify about his role in assisting Mr. Sharma to provide documents and information to the Plaintiffs’ previous lawyer, Mr. MacKeigan. Shortly after Mr. Sharma provided documents to Mr. MacKeigan, the Plaintiffs retained Mr. Schorr as their counsel.

[4] The Defendants also seek a further and better affidavit of documents in relation to communications regarding how Mr. Sharma came to disclose the documents to Mr. MacKeigan. In particular, the Defendants seek any communications between Mr. Schorr and Mr. MacKeigan regarding the disclosure of the documents to Mr. MacKeigan and the attachments to the email that Mr. Sharma sent to Mr. MacKeigan. The Defendants also seek the other attachments that were contained in the email that Mr. Sharma sent to Mr. MacKeigan.

Background

[5] The Plaintiffs brought an action seeking rescission of a franchise. Their claim of rescission rests on an allegation that one of Obsidian’s representatives, Danny Grammenopoulos, showed the Plaintiffs a proforma earning projection in a meeting in 2010 before the Plaintiffs executed the franchise agreement.

[6] If Obsidian provided a proforma earnings projection prior to the execution of the franchise agreement, the provisions of the Arthur Wishard Act (Financial Disclosure) 2000, S.O. 2000, c. 3 would require Obsidian to include it in the franchise disclosure document, which it was not.

[7] The Plaintiffs state that Mr. Grammenopoulos showed them this projection. Mr. Grammenopoulos denies this.

[8] Summary judgment was granted in favour of the Plaintiffs on February 3, 2017. The Defendants appealed. On July 27, 2018, the Court of Appeal for Ontario granted the appeal, finding that it was not appropriate to grant summary judgment because the credibility of Mr. Grammenopoulos and the Plaintiffs regarding whether the franchisor provided earning projections at a meeting in 2010 could not be determined on a paper record.

[9] Mr. Sharma is another franchisee. He alleges that, in 2011, Mr. Grammenopoulos showed him a proforma earnings projection prior to Mr. Sharma executing a separate franchise agreement. Mr. Schorr represented Mr. Sharma in his lawsuit against Obsidian. That action settled. As part of the Settlement Agreement dated August 1, 2013, Mr. Sharma agreed not to disclose the details of the negotiations or the terms of the settlement.

[10] On August 26, 2020, the Plaintiffs indicated that they would call Mr. Sharma at trial.

[11] On October 20, 2020, the Plaintiffs served their pre-trial conference memorandum. Attached to that memorandum was an email exchange that included the following:

1. Email dated April 25, 2018 from Mr. Schorr to Mr. MacKeigan (the Plaintiffs’ former counsel) asking if he had received the Court of Appeal decision. Mr. MacKeigan responded the same day that he had not.

2. Email dated August 7, 2018 from Mr. Sharma to Mr. MacKeigan. The email states that Mr. Schorr represents Mr. Sharma in his action against Obsidian. Mr. Schorr provided Mr. Sharma with a copy of the Court of Appeal’s decision. Mr. Sharma read it and discussed it with Mr. Schorr. Mr. Sharma advised Mr. MacKeigan that he had material that would prove that Mr. Grammenopoulos provided financial information to the franchisees prior to them signing the franchise agreement. Mr. Sharma stated that he had two emails he was willing to share and that he was willing to be a witness. Mr. MacKeigan responded the same day saying he would be pleased to receive the information.

3. Mr. Sharma sent an email dated August 7, 2018 to Mr. MacKeigan. Mr. MacKeigan then sent an email to his staff forwarding Mr. Sharma’s email. Mr. MacKeigan’s email stated there were documents from “Rakes a former CJ franchisee”. The email contained several attachments. The only attachment that has been produced is the projected cash flow.

[12] Shortly, after Mr. Sharma provided the documents to Mr. MacKeigan, The Plaintiffs hired Mr. Schorr to represent them.

[13] In the Spring of 2019, Obsidian commenced an action against Mr. Sharma for damages claiming that Mr. Sharma breached the terms of his settlement agreement.

Position of the Parties

Defendants’ position

[14] The Defendants submit Mr. Sharma’s credibility is no less important than the credibility of Mr. Grammenopoulos and the Plaintiffs in this case.

[15] The email exchange that has been produced, suggests that Mr. Schorr and Mr. MacKeigan had other correspondence regarding this matter. If there was such correspondence, it has not been produced. Without these documents, the Plaintiffs submit that they cannot know the extent of Mr. Schorr’s involvement. The Defendants note that the timing of the disclosure suggests that Mr. Schorr wanted to ensure that the documents were contained in Mr. MacKeigan’s file before Mr. Schorr became the Plaintiffs counsel. This would circumvent any constraints that Mr. Schorr may have faced given the deemed undertaking rule and his representation of Mr. Sharma.

[16] The documents may also provide relevant evidence with respect to how and why Mr. Sharma disclosed the documents to Mr. MacKeigan. This is relevant to Mr. Sharma’s credibility and the weight to be given to his evidence.

[17] In addition, the Defendants seek production of the other documents that appear to be attached to Mr. Sharma’s email. Again, the Defendants submit that this is relevant to Mr. Sharma’s credibility.

[18] The Defendants submit that the Mr. Sharma breached the settlement agreement by disclosing underlying allegations that formed the basis of the negotiations between Mr. Sharma and Obsidian.

[19] The Defendants also seek to have Mr. Schorr removed as counsel of record. The Defendants will likely call Mr. Schorr to give evidence about how he assisted Mr. Sharma to get in contact with Mr. MacKeigan. The Defendants submit that Mr. Schorr’s evidence is a check against Mr. Sharma’s evidence. Calling Mr. Schorr is the only way to challenge Mr. Sharma’s evidence.

[20] The Defendants submits that they are permitted to present a picture to the court that a lawyer and client conspired together against Obsidian. This is relevant to the credibility and weight to be given to Mr. Sharma’s evidence.

Plaintiffs’ Position

[21] The Plaintiffs submit that it is premature to remove Mr. Schorr as counsel of record and that this should be left up to the trial judge if indeed the issue arises. Several things need to occur before the court could even contemplate hearing evidence of Mr. Schorr. First, Mr. Grammenopoulos would have to give the same evidence as before, that it was not his practise in 25 years to provide a proforma earning projection to prospective franchisees. Then, Mr. Grammenopoulos would have to be confronted with the fact that he allegedly provided a proforma earnings projection to Mr. Sharma. If he admits this, then there is no need to call Mr. Sharma. It is only if Mr. Grammenopoulos does not admit to providing this document that Mr. Sharma’s evidence is relevant. The Plaintiffs further submits that even if Mr. Sharma’s evidence has some relevance, it is not clear how Mr. Schorr’s evidence would have any relevance as he did not provide the documents to Mr. MacKeigan.

[22] The Plaintiffs submit that the documents that the Defendants seek are not relevant to an issue between the Plaintiffs and Obsidian and therefore are not documents that are required or ought to be produced.

Production of Documents

[23] Rule 30.02(2) of the Rules of Civil Procedure, R.S.O 1990, Reg. 194 states that the parties must produce for inspection “every document relevant to any matter in issue in an action that is in the possession, control or power of a party to the action”. Rule 30.06 states that a Court may order service of a further and better affidavit of documents if it is satisfied that “a relevant document in a party’s possession, control or power may have been omitted from the party’s affidavit of documents.”

[24] The Defendants submit that the documents sought are not relevant “to a matter in issue between the parties” because they relate to Mr. Sharma and not to anything that occurred between the Plaintiffs and Defendants. I find that this is too narrow a definition of relevancy. One must look at what the issues are in a particular case in determining what is relevant.

[25] I am satisfied that the attachments to the email that Mr. Sharma sent to Mr. MacKeigan on August 7, 2018 are relevant to a matter in issue in the action. The focus at this trial is whether the Plaintiffs were shown an earning projection before signing a franchise agreement. Mr. Grammenopoulos states that he did not show the Plaintiffs any earning projections. Mr. Sharma provided Mr. MacKeigan with an earning projection that Mr. Sharma says Mr. Grammenopoulos showed him when he was to become a franchisee. There were several other attachments to that email. These documents are relevant to an issue at trial because Mr. Sharma sent them to Mr. MacKeigan because Mr. Sharma believed they would assist the Plaintiffs. The Defendants are entitled to review those documents to see if they undermine Mr. Sharma’s evidence or his credibility. Moreover, the legitimacy of earning projections is likely to be an issue at trial. The other documents that Mr. Sharma is said to have sent to Mr. MacKeigan are relevant because they may assist in demonstrating whether or not the earning projection document is real.

[26] I am also ordering production of communications between Mr. Schorr and Mr. MacKeigan about the release of the Court of Appeal decision and Mr. Sharma providing documents to Mr. MacKeigan. These documents are relevant to the issue to explain the timeframe of how Mr. Sharma came to disclose the documents to Mr. MacKeigan, which in turn may have some relevancy to Mr. Sharma’s credibility.

Removal of Mr. Schorr as Counsel of Record

[27] There are three competing values that must be considered on a motion to remove counsel of record. As stated by Sopinka J. in MacDonald Estate v. Martin, 1990 CanLII 32 (SCC), [1990] 3 S.C.R. 1235, at p. 1243, the competing values are,

1. The maintenance of high standards of the legal profession and the integrity of our system of justice;

2. The right of a litigant to his or her counsel of choice and not to be deprived of this right without good cause; and

3. The desirability to permit mobility in the legal profession.

[28] The difficulties that can arise from counsel representing a party and appearing as a witness in the same matter were described by Gillese J. (as she then was in Urquhart v. Allen Estate, [1999] O.J. No. 4816 (S.C.), at paras. 27 and 28, as follows:

When counsel appears as a witness on a contentious matter, it causes two problems. First, it may result in a conflict of interest between counsel and his client. That conflict may be waived by the client, as indeed, was done in this case. The second problem relates to the administration of justice. The dual roles serve to create a conflict between counsel’s obligations of objectivity and detachment, which are owed to the court, and his obligations to his client to present evidence in as favourable a light as possible. This is a conflict that cannot be waived by the client as the conflict is between counsel and the court/justice system.

Counsel are independent officers of the court. The trial judge must be able to rely upon plaintiffs’ counsel for a high degree of objectivity. The overriding value, in these circumstances, is concern for the proper administration of justice. A distinction must be drawn between the role of counsel as an independent officer of the court and the role of a witness whose objectivity and credibility are subject to challenge. The dual roles that [counsel] intends to fulfill compromises the integrity of the system. As I can see no way to alter the process that respects the rights of both parties, fulfills the needs for due process and maintains regard for the dictates of the proper administration of justice, in these circumstances plaintiffs’ counsel cannot be permitted to continue. I note that even if I were to exercise my discretion and permit him to continue, procedural problems may very well arise. If they did so, it is likely that it would require me to abort the trial at that time. Such a course of events would result in more prejudice to the plaintiff than does dealing with the issue now.

[29] In Essa (Township) v. Guergis, 1993 CanLII 8756 (ON SCDC), [1993] O.J. No. 2581, the Divisional Court set out the following criteria at para. 48 that the Court should consider in a motion such as this one,

a) the stage of the proceedings;

b) the likelihood that the witness will be called;

c) the good faith (or otherwise) of the party making the application;

d) the significance of the evidence to be led;

e) the impact of removing counsel on the party's right to be represented by counsel of choice;

f) whether trial is by judge or jury;

g) the likelihood of a real conflict arising or that the evidence will be "tainted";

h) who will call the witness if, for example, there is a probability counsel will be in a position to cross-examine a favourable witness, a trial judge may rule to prevent that unfair advantage arising;

i) the connection or relationship between counsel, the prospective witness and the parties involved in the litigation.

[30] In considering these factors, Essa also notes that the Court should adopt a flexible approach considering all of the relevant factors: at para. 48.

[31] Turning first to the stage of the proceedings. This motion is brought at a late stage of the proceedings. The trial is set for May 2021. Numerous steps have already been taken. This factor favours dismissal of the action.

[32] I have also considered the good faith of the parties. I recognize the Defendants were aware that Mr. Sharma stated that Mr. Grammenopoulos provided proforma cashflow protection based on Mr. Sharma’s original lawsuit in 2011. However, I accept the Defendants’ submission that they were not aware of Mr. Schorr’s role in arranging for Mr. Sharma to contact the Plaintiffs’ then counsel Mr. MacKeigan until the pre-trial on October 20, 2020. This factor favours granting the motion.

[33] The next factor is the likelihood that Mr. Schorr will be called as a witness. Several events must take place before Mr. Schorr’s evidence even becomes remotely relevant. First, Mr. Grammenopoulos has to testify that he did not show any proforma earning projections to any potential franchisee. If Mr. Grammenopoulos denies this, then the proforma earning projections that Mr. Sharma says he received from Mr. Grammenopoulos would have to be shown to Mr. Grammenopoulos. If Mr. Grammenopoulos admits that he provided the document to Mr. Sharma, that ends the matter. If Mr. Grammenopoulos denies that he showed this document to Mr. Sharma, Mr. Sharma may be permitted to give evidence. The only reason to seek to call Mr. Schorr is to hope that he would contradict Mr. Sharma’s evidence in some way. It is not “likely” that Mr. Schorr would be called to testify or would be permitted to testify in this trial. This factor weighs in favour of dismissing the motion.

[34] Related to the likelihood that Mr. Schorr would testify is the significance of Mr. Schorr’s evidence. It is difficult to see how his evidence is relevant. This is not a situation where Mr. Schorr was present when Mr. Sharma alleges Mr. Grammenopoulos showed Mr. Sharma the documents and could assist in assessing the credibility of both Mr. Grammenopoulos and Mr. Sharma. Similarly, Mr. Schorr was not present or party to the sending of the documents to Mr. MacKeigan, so he has no evidence to offer as to whether the document is legitimate or not which seems to be an important issue in the case: see for example Mazinani v. Bindoo, 2013 ONSC 4744, at para. 34.

[35] Mr. Schorr’s evidence would also not assist in determining if the document is admissible at the trial. Regardless of whether Mr. Sharma provided the document in breach of the settlement agreement, the document is admissible: R. v. Doyle (1886), 12 O.R. 347; Hogan v. R., 1974 CanLII 185 (SCC), [1975] 2 S.C.R. 574. In addition, Mr. Schorr cannot give any evidence about any advice he provided to Mr. Sharma about providing the documents to Mr. MacKeigan because that information is protected by solicitor client privilege.

[36] The Defendants seek to call Mr. Schorr to challenge Mr. Sharma’s evidence with respect to how and why the documents were provided to Mr. MacKeigan, and to paint a picture that Mr. Schorr and his client conspired together against Obsidian. With respect, Mr. Schorr’s motivations for putting Mr. Sharma into contact with Mr. MacKeigan is not relevant to Mr. Sharma’s credibility. The only possible relevance that I can see to the evidence would be if Mr. Sharma testified that Mr. Schorr pressured him into providing the documents to Mr. MacKeigan when he did not want to. Given the email that Mr. Sharma sent to Mr. MacKeigan, this evidence seems unlikely. This factor weighs against granting the motion.

[37] The impact of the removal of counsel weighs strongly in favour of dismissal of this motion. The jurisprudence is clear that the importance of the choice of counsel is considerable. Mr. Schorr has been counsel on this matter since August 2018. He has considerable knowledge about the file. In saying this, I recognize that the issue in this trial is quite focused.

[38] This is a judge alone trial. I find that this supports dismissal of the motion. As stated in Essa, courts should “be reluctant to make what may be premature orders preventing solicitors from continuing to act”, and “[a]n application may be made to a trial judge when it is certain there is a problem.” In this case, Mr. Sharma’s evidence may not even be necessary. If Mr. Sharma’s evidence is not necessary, there is no need to call Mr. Schorr. Even if Mr. Sharma testifies, Mr. Schorr’s evidence may not be necessary or relevant.

[39] The Defendants assert that Mr. Schorr’s conflict arises from the fact that it is “likely” that the Defendants will call Mr. Schorr to give evidence. I agree with the Defendants’ submission that the timing of communications and disclosure suggests that Mr. Schorr facilitated the disclosure to Mr. MacKeigan so that Mr. Schorr would not be hampered by the deemed undertaking. There is however no breach of the rules that would put Mr. Schorr in a conflict for this behaviour that would result in his removal as counsel of record. The only potential conflict is the likelihood that Mr. Schorr is called as a witness. This factor does not weigh in favour of granting the motion given my view that it is not likely that Mr. Schorr will be called to testify.

[40] The Defendants intend to call Mr. Schorr. If Mr. Schorr testified, he would not be permitted to cross-examine himself and would have to be removed as counsel of record. This factor favours granting the motion.

[41] Finally, the connection between the witness to be called and the party is a neutral factor in this case.

Conclusion

[42] This is not a clear case that warrants the removal of counsel when all of the relevant factors are considered. It is premature to grant the motion at this time. It is not “likely” that Mr. Schorr will testify at this trial. Several things have to occur before this is even a remote possibility. In addition, the relevance of Mr. Schorr’s evidence is tenuous at best. The motion to have Mr. Schorr removed as counsel of record is dismissed. If, however, the affidavit of documents provides further information that demonstrates that Mr. Schorr’s evidence has relevance that could not fully be appreciated at the time of this motion, then the motion to remove Mr. Schorr may be revisited. Similarly, depending on how the evidence at trial unfolds this motion may have to be revisited.

[43] With respect to the documentation sought by the Defendants, I order that the Plaintiffs serve a further and better affidavit of documents by February 5, 2021, including:

1. Any emails or records of correspondents between Daniel J. MacKeigan and Alfred Schorr related to this matter prior to Mr. Schorr becoming counsel for the Plaintiffs;

2. All attachments to the email sent by Mr. Sharma to Mr. MacKeigan on August 7, 2018.

3. Any other emails and attachments that Mr. Sharma sent to Mr. MacKeigan.

Costs

[44] The parties are encouraged to work out the issue of costs between themselves given the divided success on this motion

[45] If the parties are unable to resolve the issue of costs, the Defendants shall serve and file written submissions of no more than two pages, double spaced, twelve-point font, not including relevant case law within ten days of receipt of this endorsement as well as a detailed bill of costs, if not already provided, and any offers to settle.

[46] The Plaintiffs may file a response consisting of written submissions of no more than two pages, double spaced, twelve-point font, not including the relevant case law within ten days receipt of the applicant’s submissions and a detailed bill of costs, if not already provided, and any offers to settle.

[47] The Defendant may file a one-page reply, double spaced, twelve-point font, within five days of receipt of the applicant’s submissions on costs.

Dennison J.

Date: January 5, 2021

Court File No.: CV-19-3356-00 Date: 2021-01-05 Superior Court of Justice - Ontario

Between: 2212886 Ontario Inc., William Porteous and Kirsten Porteous v. Obsidian Group Inc., Obsidian Inc., and Gus Karamountzos

Counsel: Mr. Alfred S. Schorr, for the Plaintiff, Responding party Applicant Mr. Stuart R. Mackay, for the Respondent, Moving Party on the Motion

Endorsement Dennison J.

Date: January 5, 2021