Sui v. Chitiz, 2022 ONSC 2989

minicounsel

Footnotes

I note that this version of the November 30, 1998 financial statement remained in draft form. The final audited financial statement for the same period, prepared by an accountant Sam S. Krishna on April 28, 1999, had values that were only marginally different than the draft sent to Mr. Sui by the summer of 1999. There appeared to only be a $4,000 difference in the accounts payable and the partner’s equity. All other amounts (AR, WIP, capital assets, trust fund liability) remained the same.
While Mr. Sui may have argued before the tax court that his dispute with the defendants revolved around determining his losses, the issue in this trial was clearly whether the defendants owed more income to Mr. Sui.
On re-examination, he corrected himself and indicated he was engaged in August of 2000. Although, this is still after the 1999 filing deadline.

COURT FILE NO.: CV-19-622271

DATE: 20220517

BETWEEN:

ERWIN SUI

Plaintiff

– and –

Daniel Chitiz, Manoj Pundit, Sumesh Paul Pathak and RISA SOKOLOFF

Defendants

Angela Assuras, for the Plaintiff

Hugh M. DesBrisay, for the Defendants

HEARD: June 14, 15, 16, 17, 18 and October 18, 2021

M. Sharma, J.

1This is my judgment following a 6-day summary trial heard in 2021. This proceeding commenced in 2001.

2The plaintiff, Mr. Erwin Sui, was a partner in a law firm with the defendants called Chitiz, Sui, Pundit, Pathak and Sokoloff (“CSPPS” or the “Partnership”). The Partnership was formed on May 1, 1998.

3In November or December 1999, Mr. Sui ceased being a partner. The date on which he was no longer a partner, and the circumstances around which he left the partnership are in dispute. There has been no formal dissolution of the partnership in Ontario, although it carried on under different names since 1999.

4Mr. Sui seeks various relief, including a declaration that the Partnership dissolved on December 31, 1998, an order directing an accounting and winding up of the affairs of the Partnership, payment of his entitlements upon dissolution, payment of third-party debt obligations, and damages for breach of fiduciary duty.

5The defendants argue that all the terms of the plaintiff’s withdrawal from the Partnership were agreed upon, including a division of assets and income of the Partnership, and therefore, he is not entitled to any relief. They argue that there was no breach of their fiduciary obligations, that they provided the plaintiff with all the requisite information required as partners or that the plaintiff had this information available to him, and that following his departure from the firm, the plaintiff’s conduct demonstrated that there was no on-going fiduciary duty. They pled the equitable doctrine of laches, but did not rely on it in their closing submissions.

A. PROCEDURAL HISTORY

6The procedural history of this case provides context to understand how a civil claim can take over 20 years to wend its way through the justice system to trial. It is relevant to the defendants’ argument that the plaintiff was dilatory in pursuing this claim for ulterior motives, namely, to stave off collection efforts for tax indebtedness by the Canada Revenue Agency. It also provides a cautionary tale to the profession of how seemingly modest delays can accumulate into decades of delay.

7The procedural history is set out in a decision of Associate Judge Abrams, dated March 26, 2018, from the defendants’ motion to dismiss for delay. This proceeding was commenced as an application but later converted to an action. My summary of its history is drawn primarily from Associate Judge Abram’s reasons. In my summary of the procedural history, I use the term applicant or plaintiff, and respondents or defendants, based on whether the matter was an application or action at the time.

8On December 20, 2001, the proceeding was commenced as an application. In March of 2002, the respondents delivered their responding application material.

9In April 2002, the respondents delivered a box of accounting documents. Cross-examinations, delivery of expert reports, and the hearing were all deferred, on consent, until a PC law disc with relevant financial information of the Partnership was delivered.

10From May 2002 to July 2002, there was a motion for productions, and some material was produced by the respondents, including the PC law disc.

11In November 2002, the applicant continued to request documents. The matter was then dormant until March 2004, when the applicant asked for copies of certain draw cheques and information about certain shares. In July 2004, the respondents inquired why certain information was sought. No motion for production was brought.

12There was again no activity for a further year until September of 2005, when the applicant delivered a settlement brief. The applicant did not follow-up or bring a motion for requested documents not yet produced, no cross-examinations were conducted, and no expert reports served.

13In August 2006, close to a year later, the applicant delivered a supplementary application record. One month later, he delivered a proposed Amended Notice of Application.

14On February 2, 2007, the respondents consented to the amendment on terms. On February 15, 2007, the applicant’s lawyer sought the availability of one of the respondents, Mr. Manoj Pundit, for cross-examinations. She also inquired about shares in two companies about which she first inquired in 2004.

15On March 7, 2007, a notice of examination for Mr. Pundit was served. Around this time, respondent’s counsel suggested that given the facts in dispute, it made sense to convert the application into an action, schedule examinations for discovery and a mediation. At first, the applicant did not agree.

16In September 2007, the respondents delivered a further affidavit; the applicant delivered a further reply affidavit, and cross-examinations were conducted in December 2007 and January 2008.

17In February 2008, counsel for the applicant admitted to having misplaced the PC law disc, delivered some six years earlier. When or how it was lost was unknown. In April 2008, the respondent delivered answers to undertakings, and consented to an Order for others.

18In June 2008, a second cross-examination of Mr. Pundit occurred.

19In January 2009, six months later, a settlement conference was held.

20In September 2009, applicant’s counsel took a maternity leave.

21In May 2010, applicant’s counsel suggested that the matter be converted from an application to an action, a suggestion the respondents had made three years prior in 2007.

22In April 2011, the applicant’s counsel served a draft Order to convert the application to an action. She also wrote the respondents’ accountant in respect of a 2006 email advising (for the first time in five years), that the wrong financial statements had been sent to them in 2006 for the applicant’s review.

23On July 22, 2011, the applicant brought a motion to convert the application to an action, which was granted. The parties were to complete examinations for discovery by October 31, 2011.

24On August 31, 2011, a Statement of Defence was served. On September 17, 2011, a Reply was served. By October 2011, documentary disclosure was complete.

25The plaintiff was examined for discovery in November 2011. Examinations were complete by January 2012.

26In April 2012, the plaintiff took the position that the PC law disc did not contain records it ought to have contained. This was 10 years after the disc was first produced.

27In June 2012, the plaintiff brought a motion to compel answers to undertakings from the January 2012 examinations. A motion date of April 3, 2013 was fixed.

28In July 2012, the plaintiff delivered an expert report. That report was based on partnership records delivered to plaintiff’s counsel in 2002.

29The April 3, 2013, discovery motion did not proceed as scheduled. This was because the plaintiff was delayed in serving a reply affidavit and the defendants wished to examine him on his affidavit. Part of the motion was heard; the balance was adjourned to a case conference on May 6, 2013. At the case conference, they discussed the lost PC law disc. The plaintiff was to be afforded access to his former partners’ computers within 60 days.

30On December 4, 2013, the discovery (undertakings) motion continued, but that motion had to be adjourned (due to illness) to July 22, 2014, and the court’s decision was released in September 2014.

31The litigation largely remained dormant for two years until August 2016, when the plaintiff served a valuator’s expert report.

32On August 29, 2016, the plaintiff served a trial record.

33The defendants’ motion to dismiss for delay was scheduled in November 2016, but not heard until May 2017.

34In her Reasons, Associate Judge Abrams rejected the assertion that the delay in this case was attributable to the defendants. After recounting the above and referencing the plaintiff’s exhibits on the motion to dismiss, she said, at para. 38:

What story do they tell? The Exhibits do not suggest to me, as is now posited on behalf of Mr. Sui, “years of delay and frustration attributable almost exclusively to the [d]efendants” …but they do provide context, nonetheless. And that context manifests no clear intention on the part of Mr. Sui to delay and does not demonstrate disdain or disrespect for court process – some failings on the part of Mr. Sui in addressing court Orders and some not insignificant periods of delay on his part notwithstanding.

35She continued:

I reject the notion that the defendants “constitute the principled reason why this case has progressed so slowly” (paragraph 1 of Mr. Sui’s factum). I cannot agree that there has been intransigence, unreasonableness and lack of cooperation on the part of the defendants, through their counsel. But I note that, until recently, there was no effective call to action on the part of the moving parties….

36On March 26, 2018, the Associate Justice declined to dismiss this action for delay. As part of her reasoning, she noted that this was a document-driven case, that in 2016 the plaintiff was ready for this action to be tried, and she could not conclude the delays were “intentional or contumelious, even if they have been repeated and, at times, lengthy.”

37What happened between 2018 and 2021? The defendants appealed the Associate Judge’s decision, but it was settled on October 25, 2018. The trial was scheduled to begin on April 29, 2019.

38On April 18, 2019, the trial was adjourned by the Court, and transferred from the Commercial List to the civil list.

39On January 28, 2020, it was assigned a trial date of April 20, 2020. Due to the COVID pandemic, the trial had to be further adjourned.

40The trial was scheduled before me the week of June 14, 2021, to proceed over five days. I conducted a pre-trial management call with the parties on June 11, 2021. Plaintiff’s counsel sought an adjournment of the trial citing a strong preference for the trial to proceed in person. For reasons given, I declined the adjournment, and the trial was heard virtually: see Sui v. Chitiz, 2021 ONSC 4259.

41The trial did not conclude in five days, as scheduled. A further day was reserved for closing arguments. The first date that could be made available was October 18, 2021.

42The workload of the Court and how evidence was presented made it difficult to release this Judgment sooner. The parties did not prepare a Joint Book of Documents. There were separate Chronologies. The plaintiff’s documents exceeded 13,000 pages in CaseLines. The defendants’ documents exceeded 2,000 pages. This added to the time required to complete this Judgment.

43I now turn to a summary of the facts.

B. SUMMARY OF FACTS

44Before 1998, the plaintiff, Mr. Sui, had worked in partnership with the defendant, Mr. Sumesh Paul Pathak. The firm, Sui & Pathak, had offices in Vancouver and Toronto. Mr. Sui had moved from Toronto to Vancouver, and he practiced from both offices. Mr. Pathak worked exclusively out of Toronto. Both practiced corporate and securities law.

45Before 1998, the defendants, Mr. Daniel Chitiz, Mr. Manoj Pundit, and Ms. Risa Sokoloff, had worked separately in partnership with each other as Chitiz, Pundit & Sokoloff (“CPS”). Mr. Chitiz was a litigator, Mr. Pundit was a corporate lawyer, and Ms. Sokoloff practiced part-time as a litigator. They had an office in Toronto.

46On May 1, 1998, the five lawyers decided to carry on a law practice together under a new partnership, CSPPS. Mr. Sui worked out of a Vancouver office, and the remaining partners worked out of Toronto. The Toronto office of Sui & Pathak closed. Its personnel moved to the Toronto office of CPS, which became the new CSPPS office in Toronto. There was no written partnership agreement executed among the partners.

47The defendants state that the expectation was that the partners would docket, bill and collect approximately the same, although Ms. Sokoloff would docket, bill, and collect approximately 60% of her partners because of her part-time status. Assuming none of the partners deviated materially from the agreed upon expectations, they would share profits based on the 5/23 ratio (or 3/23 ratio for Ms. Sokoloff). They say this was like the arrangement at the CPS firm before it became the new Partnership.

48All parties agree that profits from the Partnership would be shared as follows:

Partner

Percentage Share

(expressed as a fraction)

Erwin Sui

21.74%

5/23

Daniel Chitiz

21.74%

5/23

Manoj Pundit

21.74%

5/23

Paul Pathak

21.74%

5/23

Risa Sokoloff

13.04%

3/23

49Shortly after the Partnership was formed, Mr. Sui was involved in setting up the Partnership’s new Vancouver office. The defendants supported Mr. Sui having a new Vancouver office based on his assurance it would be profitable. On June 1, 1998, he entered into a 4-year lease with the landlord, Novam Management Ltd. (“Novam”), on behalf of the Partnership. Payments of rent were made by the Partnership. The lease was executed by Mr. Sui in his personal capacity because a holding company for the Partnership had not yet been created. When the holding company was established, the lease was assigned to it. Each partner executed an Indemnity under the lease for payment of rent. Mr. Sui was also involved in securing a sub-tenant for the new office to help defray some of the lease costs.

50Mr. Sui states that in the first three months of the Partnership, he was heavily involved in dealing with various administrative matters, including the Vancouver lease, integrating the computer systems of the two offices, addressing insurance issues, physically cleaning up the Toronto back-office, and arranging for administrative support staff. He stated that these administrative tasks were necessary and reduced his capacity to docket billable hours during these first few months. Thereafter, and by August 1998, Mr. Sui said his dockets and billings increased.

51Mr. Sui and the other partners would have regular meetings in the Toronto office.

52The defendants say that they expressed concern about Mr. Sui’s billables at the July 1998 Partnership meeting, and thereafter.

53One item of discussion, confirmed by Minutes of the Partnership by at least August 1998, was that each partner would docket a minimum of six hours per day. The defendants state that at the August partnership meeting, there was a discussion that Mr. Sui needed to do more in terms of his billable hours. Mr. Sui disputes this. At most, he says, there was a discussion that they would work towards docketing six hours per day. The memo from this August 18, 1998 meeting states: “Each partner is expected to docket 6 hours per day ...”

54The defendants state that by August 1998, the Partnership was in serious financial circumstances. According to them, the Toronto partners were maintaining their billings at reasonable levels, but Mr. Sui was not. The firm’s expenses were also more significant than expected, which included expenditures for the Vancouver rent (although rent was not due until mid-August 1998 for the Vancouver lease). Mr. Pundit further says that at the August 1998 Partnership meeting, Mr. Sui was told that in addition to meeting his billings quota, he needed to do more to build the Vancouver practice if that office was to be sustained.

55By October and November 1998, Mr. Sui had made many requests for accounting information, which he says were left unanswered. He says the accounting system in the Toronto office was significantly lacking and in disarray. As a result, he was often unprepared for Partnership meetings.

56There is a dispute as to whether, at the October 1998 Partnership meeting, the defendants had concluded and had advised Mr. Sui that the Vancouver office was not sustainable, and that Mr. Sui needed to return to Toronto to practice law. There is also a dispute about the sufficiency of Mr. Sui’s billings.

57Given the passage of time, Mr. Pundit admitted at trial that he does not have a current recollection of events from 1998. He relied upon an affidavit he swore in this proceeding on February 28, 2002, at which time he said his memory was fresher. From that affidavit, and his more recent May 26, 2021 affidavit, he stated:

a. There was a discussion at the August 1998 Partnership meeting that the docketed, billed and collected time emanating out of the Vancouver office did not justify having the expense of maintaining that office.

b. That Mr. Pathak had discussed with Mr. Sui in October 1998 that the four partners determined it was necessary to close the Vancouver office for financial reasons, and for Mr. Sui to return to practice in Toronto. Mr. Sui was considering this option.

c. That the partners met in November 1998, where they discussed that the Vancouver office had not become a viable self-sustaining practice, and that Mr. Sui had not attracted new Vancouver clients. Mr. Sui acknowledged this, but his wife wanted to remain in Vancouver. The partners attempted to persuade Mr. Sui to change his mind, but he confirmed that he wished to remain in Vancouver.

d. As a result, Mr. Pundit and Mr. Sui began negotiating Mr. Sui leaving the Partnership. He says there was an agreement reached that for financial purposes, Mr. Sui would cease being a partner as at November 30, 1998, but for administrative purposes, the cut-off date would be December 31, 1998.

58There was a further meeting held between Mr. Pathak, Mr. Pundit, and Mr. Sui in Toronto on January 15, 1999. It was at that meeting, the defendants say, that a final agreement was reached with respect to all outstanding matters regarding Mr. Sui’s departure from the Partnership. Mr. Pundit, on behalf of the remaining partners, put this agreement into writing and sent it to Mr. Sui on February 1, 1999. It was never signed.

59Mr. Sui says there was no discussion at the November 1998 meeting as to whether the Vancouver office had become self-sustaining or whether Mr. Sui had attracted new Vancouver clients. He also denies acknowledging that the numbers could not justify maintaining the Vancouver office. He further denies that an agreement was reached at the meeting on January 15, 1999.

60From Mr. Sui’s perspective, he suspects that the Partnership no longer wanted him, not that they no longer wanted the Vancouver office. He says he felt like he was expelled, and that he had no option but to dissolve the Partnership.

61Mr. Sui says he did not withdraw from the Partnership; he never gave notice of an intention to withdraw. He says, however, there was an agreement reached on or about November 27, 1998, that the Partnership would dissolve effective December 31, 1998.

62Mr. Sui also disputes that there was an agreement to have a financial cut off date of November 30, 1998, and an administrative cut of date of December 31, 1998. According to him, it made no sense to have two dissolution dates for a partnership.

63Some of the terms of the agreement regarding Mr. Sui’s withdrawal from the Partnership or the Partnership’s dissolution are in dispute. The parties agree that some terms were agreed upon. The critical matters in dispute are the dates upon which the financial cut-off would occur, and whether or not Mr. Sui would be entitled to an accounting and adjustments in the event the accounting revealed a shortfall.

64As such, he claims:

a. A declaration that the Partnership dissolved on December 31, 1998, and an order for the winding up of the Partnership;

b. An accounting and payment of his proportionate share of his entitlement to all Partnership capital, including the value of shares of R.W. Packaging Ltd. which Mr. Sui claims were a partnership asset;

c. Payment by the defendants of their proportionate share of liabilities arising under the Vancouver lease;

d. The return of 174,000 shares in Peabody Capital Partners Corp. (“Peabody”) of which Mr. Sui claims he had beneficial ownership, but which was held by the defendants as security for their potential indebtedness under the Vancouver lease, and damages for their retention; and

e. Damages for breach of fiduciary duty. The breaches relate to the failure of the defendants to produce financial statements and information of the Partnership to the plaintiff. The plaintiff claims that this resulted in him being unable to file his 1998 income tax returns on a timely basis, and in subsequent years, with resulting penalty and interest charges.

65Furthermore, he seeks interest, pursuant to s. 42 of the Partnerships Act, R.S.O. 1990, c. P.5, in the amount of 5 per cent per annum on the amount of his share of the Partnership assets.

C. ISSUES TO BE DETERMINED

66The central issues are summarized next, with only reference to the principal arguments made. Where necessary, I discuss further arguments within each issue in my analysis.

67Issue #1: Was the plaintiff expelled from the Partnership, or did he agree to leave the Partnership?

68Issue #2: If there was an agreement as purported by the defendants on January 15, 1999 settling all matters, then the plaintiff is not entitled to any further amounts representing a division of Partnership assets, nor is he entitled to any amounts that would have been payable by the defendants under the Vancouver lease. If there was no agreement, the plaintiff would be entitled to these amounts, an accounting would be necessary, and a determination of monies owed between the parties.

69Issue #3: Did the parties agree to a November 30, 1998 financial cut-off date as posited by the defendants, or did they agree to a December 31, 1998 financial cut-off date? This is relevant because the defendants distributed a draw among themselves in December 1998, without a draw being afforded to the plaintiff, nor was the plaintiff aware of this until some time after the purported settlement. Regardless of the date of the financial cut-off, was there a fiduciary duty to inform the plaintiff of the draws the defendants took in December?

70Issue #4: With respect to the Peabody shares, a determination is required as to whether the shares were a Partnership asset, or a personal asset of the plaintiff? If they were a Partnership asset, then the plaintiff’s entitlement depends on whether or not a final settlement was reached on January 15, 1999, resulting in no further adjustments being made or further payments to the plaintiff. If they were a personal asset, an analysis of the torts of conversion and detinue is required, as well as an assessment of damages. Since this claim was only included in the Amended Notice of Application in February 2007, eight years after the plaintiff’s departure from the Partnership, the defendants argue a limitations defence.

71Issue #5: The plaintiff seeks damages for breaches of the defendants’ fiduciary duties, including not allowing him to share equally in the Partnership’s capital (i.e., the December 1998 draws); failing to indemnify him in respect of debts and obligations of the Partnership (i.e., Vancouver lease obligations); for expelling him from the Partnership; for failing to act in good faith; and for failing to render accounts and financial statements (which he says resulted in significant income tax penalties and interest).

D. CREDIBILITY OF WITNESSES

72The key witnesses for whom credibility was critical was that of Mr. Sui, Mr. Pathak and Mr. Pundit. I offer an initial observation of their credibility.

73As this was a summary trial, all witnesses provided their evidence in chief by way of affidavit. I allowed each witness to give brief testimony in chief to become comfortable giving evidence before they were cross-examined.

74More than two decades passed between the events giving rise to this litigation and trial. This would impact the ability of any witness to recollect details of events. There was much documentary evidence. The exhibits exceeded 5,000 pages. While some testimony is corroborated by this documentary evidence, evidence of critical phone calls and meetings had no corroborating documentary evidence.

75Mr. Sui was careful with his testimony. At times, he became emotional, defensive, and clearly angry with the defendants and their treatment of him. He was able to recollect details of certain meetings with much specificity, despite the passage of time. While all litigants have motive to achieve a certain outcome at trial, I questioned whether that motive clouded Mr. Sui’s truthfulness or his recollection. I found some of his testimony improbable, and his explanations inconsistent with the pace at which this action was prosecuted.

76Mr. Pathak was more relaxed. He was, at one point, friends with Mr. Sui. Mr. Sui had been the best man at Mr. Pathak’s wedding. I was not persuaded that he offered evidence out of spite or self-interest. He offered testimony that I found to be credible and persuasive. On cross-examination, his testimony had an air of reality and was generally consistent with the documentary evidence, although inconsistent with respect to the treatment of shares in Peabody, which I discuss.

77Mr. Pundit, like Mr. Sui, was careful with his testimony. I found he was able to accurately recall general details of his perceptions and interactions with the plaintiff. He had certain specific recollections – notably of some meetings with Mr. Sui – when they were supported by documentary evidence. However, he often answered “I don’t recall” when asked specific questions about meetings or events for which the documentary evidence was non-existent or inconclusive. I carefully considered (a) whether his inability to recollect certain events was due to the specific nature of some of the questions posed or an unwillingness to be truthful, and (b) whether his ability to recollect other events was because there was documentary evidence supporting his recollection or because he was motivated to be untruthful.

78There was no basis upon which to doubt the credibility of any of the expert witnesses. While they had differing opinions, I was satisfied that they each provided testimony consistent with their duties as experts. I accepted with caution one position taken by the plaintiff’s business valuator, Ms. Marnie Silver, in relation to the treatment of bad debts of the Partnership. She assigned all the bad debt of the Partnership back to the Partnership as being funds received. The effect of this assumption was that more money would be credited to the plaintiff. She rationalized her approach as appropriate because of the plaintiff’s demands for proof of whether any of these funds were in fact collected, and because, in her view, the defendants were lawyers and had a duty to preserve documents. For reasons that I explain, this assumption is properly assessed by me as the trial judge and not by an expert witness.

79Mr. Sam Krishna was the Partnership’s accountant. He also gave evidence, and I similarly had no basis to question his credibility, although given the passage of time in this case, he also had difficulty recounting certain evidence.

E. ANALYSIS

Issue #1: Was Mr. Sui expelled from the Partnership, with or without sufficient reason, and was he invited to continue working from the Toronto office?

80There was much evidence in the parties’ affidavits and testimony on this issue. The parties disagree about whether the defendants had discussed with the plaintiff as early as August 1998 their concerns about his billings, the cost of maintaining the Vancouver office, and whether Mr. Sui had been invited to remain with the Partnership working from the Toronto office.

81In my view, nothing turns on the answers to these questions. Regardless of the reason, I am satisfied that by December 2, 1998, the plaintiff agreed to cease working in partnership with the defendants. This is evidenced by Mr. Sui’s email to Mr. Pundit on December 2, 1998, where he stated:

This is further to our telephone conversation last night. I have gone over the “to do” list with Barb for trying to accommodate a November 30, 1998 cut-off. I have also spoken with my accountant. It is going to be an administrative nightmare from my end to try to accommodate the earlier cut-off date. It will leave me in a significant lurch. Accordingly, I would like to stay with the December 31, 1998 termination dates as agreed to on Friday last week.

82On December 5, 1998, Mr. Pundit responded by email confirming his discussions with Mr. Sui as to when Mr. Sui would depart from the Partnership. With respect to the termination date, Mr. Pundit stated, “November 30, 1998 is only the date for clearing all financial issues and December 31^st is the official termination of the partnership as agreed in our telephone conversation on Tuesday evening.”

83Also in this email, Mr. Pundit asked for a list of Vancouver hard assets. Mr. Sui responded by email on December 9, 1998, providing a list of Vancouver fixtures and library listings, consistent with the purpose of leaving the Partnership. Mr. Sui’s evidence is that he provided a “ballpark” value of these assets.

84On January 12, 1999, Mr. Sui wrote a letter to Mr. Pundit, in response to Mr. Pundit’s email of December 5, 1998. The letter addresses the settlement arrangements with respect to his departure from the Partnership. Notably, Mr. Sui continues to assert a December 31, 1998 termination date for distribution of all assets and liabilities of the partnership, and not the November 30, 1998 financial cut-off date that Mr. Pundit asserted in his December 5, 1998 email, was agreed upon.

85On January 14, 1999, Mr. Sui wrote to Mr. Pundit confirming that he would be transferring the unbilled work-in-progress (“WIP”) for the files over which he was responsible. This was consistent with the terms of his departure from the Partnership that had been negotiated to date.

86On January 15, 1999, Mr. Sui met with Mr. Pundit and Mr. Pathak to discuss the final terms of his departure from the Partnership.

87On January 20, 1999, Mr. Sui caused to be registered a Notice of Dissolution of Partnership with the government of British Columbia, a copy of which was sent to Mr. Pundit by facsimile on January 28, 1999.

88I appreciate that Mr. Sui may not have liked leaving the Partnership and may have disagreed with the reasons for his departure as stated by the defendants, but the evidence is overwhelming that he accepted and agreed to leave the Partnership on terms that were the subject of the parties’ negotiations.

89Furthermore, I am satisfied from the testimony of Mr. Pundit and Mr. Pathak that prior to November 1998, the partners had expressed concerns to Mr. Sui about the viability of the Vancouver office, and that they had invited him to join them in the Toronto office, which offer Mr. Sui rejected. I am also satisfied, based on the evidence, that the defendants had legitimate concerns about the viability of the Vancouver office. There was a conflict between Mr. Sui and the remaining four partners with respect to the Vancouver office. It required a resolution. Objectively, there were at least three solutions: (a) Mr. Sui leaving the Partnership; (b) Mr. Sui joining the other partners in Toronto; or (c) the defendants agreeing to keep the Vancouver office open. Because the defendants did not agree to Mr. Sui’s preferred option, does not lead me to the conclusion that Mr. Sui was expelled. As stated, I am satisfied that they made him an offer to join them in Toronto, which he refused. This left one remaining option open, which was to leave the Partnership, and I find that this is the option Mr. Sui chose on his own accord.

90For these reasons, if it were necessary to determine whether Mr. Sui was expelled from the Partnership, I would conclude on a balance of probabilities that he was not.

Issue #2: Was there an agreement reached with respect to the terms of Mr. Sui’s departure, and if so, what were the terms?

91The defendants argue an agreement was reached at a meeting with Mr. Sui, Mr. Pundit and Mr. Pathak held on January 15, 1999, in full and final settlement of all issues between the plaintiff and the defendants. These terms were recorded in a note taken by Mr. Pundit and subsequently set out in a settlement agreement sent to Mr. Sui on February 1, 1999. They may be summarized as follows:

a. Computers and assets in Vancouver were to stay with Mr. Sui;

b. Computers and assets in Toronto were to remain with Chitiz, Pundit, Pathak, and Sokoloff (“CPPS”), except for:

i. 2 paintings in the boardroom

ii. Copies of precedents

iii. Books chosen by Mr. Sui and approved by Messrs. Pundit and Pathak

c. WIP and AR as at November 30, 1998 and thereafter to be kept by Mr. Sui on

files that Mr. Sui identified as his.

d. WIP and AR on all other files, plus all other assets, are to be retained by CPPS.

e. Mr. Sui was to keep a phone number, if he wished.

f. There would be no adjustments.

g. Mr. Sui and CPPS to be consistent in Revenue Canada elections before April 30, 1999.

h. Mr. Sui could use the mailing address of the Toronto CPPS office until January 30, 1999.

i. Mr. Sui would be responsible for the Vancouver office lease and equipment, or he could sublet/assign to a person acceptable to CPPS (i.e., Mr. Sui to indemnify CPPS with respect to all liabilities from Vancouver office; CPPS to indemnify Mr. Sui with respect to all liabilities from the Toronto office).

92Mr. Sui argues there was no final agreement reached with respect to the terms of his departure. He denies a settlement was reached on January 15, 1999, because he had not yet seen the financial statements as at December 31, 1998. He argues that, at all times, he was seeking his proportionate share of all of the assets and liabilities of the Partnership as at December 31, 1998.

93From Mr. Sui’s perspective, he wanted the following, as set out in a letter from him dated January 12, 1999:

a. Mr. Sui would be assigned all accounts receivable (“AR”) and work-in-progress (“WIP”) from files for which he was the responsible lawyer.

b. Mr. Sui would be entitled to keep all assets in Vancouver, and there was an agreement with respect to other hard assets in the Toronto office (computers, copies of electronic files; phone numbers; precedents; two paintings; duplicate library material)

c. If there is a shortfall in terms of his total entitlement, a cash payout is acceptable. Alternatively, if the total assets he is claiming exceed his proportion after taking into account any liabilities, he would reduce his asset allocation as required.

94Mr. Sui’s affidavit and oral testimony was that there was no agreement reached at the January 15, 1999 meeting. However, on cross-examination, Mr. Sui testified that there was an agreement with respect to:

a. Computers in Vancouver were to stay in Vancouver, and computers in Toronto were to stay in Toronto;

b. Two paintings in Toronto were to go to Mr. Sui;

c. Copies of precedents in Toronto were to be provided to Mr. Sui;

d. Books in Toronto chosen by Mr. Sui were to be provided to him;

e. As of November 30, 1998 and thereafter, WIP and AR on Mr. Sui’s files were to be retained by Mr. Sui; WIP and AR on all other files to be retained by the defendants;

f. All other assets were to be retained by the defendants;

g. A certain phone number was to be kept by Mr. Sui, if he wanted it;

h. The parties were to be consistent in Revenue Canada elections before April 30, 1999 (while Mr. Sui could not recall whether this was agreed to at the January 15, 1999 meeting, he acknowledged he did ask for this in his January 12, 1999 letter to Mr. Pundit); and

i. Mr. Sui was to continue to use a mailing address in Toronto until January 30, 1999.

95Areas where Mr. Sui disputes an agreement was reached was: (1) the reference to “no adjustments” reflected in Mr. Pundit’s notes from January 15, 1999, and (2) that Mr. Sui would be solely responsible for payment on the Vancouver lease. Mr. Sui states that there was no agreement for him to indemnify the Toronto defendants with respect to the Vancouver office.

96On January 29, 1999, Mr. Sui sent a letter to Mr. Pundit identifying the books from the Toronto office that he would like to take. He also indicated that a staff person would be there “this Saturday” to physically move the files, and that he would also be removing the two paintings and the publications.

97On January 29, 1999, Mr. Sui sent a further letter to Mr. Pundit attaching file transfer forms signed by clients directing the books, records, files and trust monies in the files of the Partnership, over which Mr. Sui was responsible, to be transferred to Mr. Sui.

98On February 1, 1999, Mr. Pundit sent Mr. Sui a draft Settlement Agreement by email reflecting the agreement that was purportedly reached on January 15, 1999. The covering email stated:

Dear Erwin,

Please find attached the agreement dealing with your withdrawal from the partnership. The attached document reflects the agreement which we reached in the meeting between you, Paul and myself on January 15, 1999.

Please execute it and forward it back to me by fax. I will then attach the schedules and get Dan, Risa and Paul to review and execute it assuming it’s O.K. with them.

Just a note – nobody will be filing a notice of dissolution in Ontario since as you and I have agreed this is not a dissolution but a withdrawal by you from the partnership.

Thanks.

Manoj.

99On February 19, 1999, Mr. Sui responded by email. It read:

Dear Manoj,

Thank you for re-sending the settlement agreement. I wish to clarify a comment made by you in [your] covering note. I have not agreed to a withdrawal from the partnership as opposed to a dissolution yet. When I met with you in January, I advised you that I was certainly interested in seeing whether there were advantages for both of us to follow this route. I expect to be seeking some professional advice on the structure of the settlement in the near future and will reply to you in due course.

Regards,

Erwin

100On cross-examination, Mr. Sui acknowledged that there was nothing in his email which took issue with any of the substantive terms of the settlement agreement; only that he was going to seek professional advice with respect to whether the settlement was structured as a withdrawal from the Partnership, or a dissolution.

101For the next two and a half months, Mr. Sui had not communicated further with the defendants. By this time, all WIP and AR had already been transferred to Mr. Sui, as well as files, furniture and equipment consistent with the purported January 15, 1999 agreement.

102On May 5, 1999, Mr. Sui sent a 6-page letter to the defendants. He said that he has now had an opportunity to review the settlement agreement and to consult with a number of people. He states that the proposal is neither fair nor reasonable, and as such, he had no intention of executing it. In the letter, he states that he did agree to a December 31, 1998 termination date for all purposes including accounting. He complained that the defendants insisted on a November 30, 1998 final date for accounting purposes and a December 31, 1998 administrative termination date to deny him an opportunity to draws or billings up to December 31, 1998. However, he admitted that he had kept AR from files over which he had carriage during the month of December 1998.

103In his May 5, 1999 letter, Mr. Sui acknowledged that he agreed with a proposal made by Mr. Pundit that rather than have the partnership pay Mr. Sui out, certain AR over which he was the principal lawyer would be assigned to Mr. Sui. He would also be entitled to retain furniture and equipment in Vancouver. He also acknowledged an agreement whereby his interest in Peabody would be held by the defendants as security for the guarantee on the office space in Vancouver, although he says he was forced into this arrangement.

104The tone of the letter can fairly be described as angry. He refers to the defendants or their actions as “evil”, “evil incarnate”, “callous” and “selfish”. He believed that the defendants forced him to assume what he believed to be a disproportionate share of partnership liabilities. He said he should not be expected to sign the settlement agreement without having access to financial information from the Partnership. He remained willing to settle, but he wanted financial statements for November 30, 1998 and December 31, 1998, closing financial statements for the new partnership, CPPS, his proportionate share of securities received by the Partnership (such as R.W. Packaging Ltd.), and the delivery of his interest in Peabody. If his demands were not received within 7 days, he intended to commence legal proceedings and would ask Revenue Canada to conduct an audit of the Partnership, the new partnership, CPPS, and each of the defendants individually.

105On May 14, 1999, the defendants delivered a 5-page letter responding to the allegations in Mr. Sui’s letter. This letter explained the defendants’ view that the Vancouver office had to close because it was causing the Partnership to lose money; that they had invited Mr. Sui to stay with the Partnership in Toronto but he declined to accept that offer; that Mr. Sui’s billings in the first few months were insufficient and that he had spent too much time on administrative matters; that at a meeting in January 1999, Mr. Sui, Mr. Pundit and Mr. Pathak had met and agreed upon the terms of Mr. Sui’s withdrawal from the Partnership; and that they had made efforts to contact him and to send him the financial statements since, but their messages were ignored. The letter concluded by accusing Mr. Sui of having acted in bad faith by having taken all of his WIP and AR, by being unwilling to have any meaningful dialogue with them, and then by being unwilling to execute the settlement agreement.

106The letter said it enclosed financial statements which the defendants had been trying to forward to him for some time. On cross-examination, Mr. Sui said financial statements were not attached to this letter, and that the ones ending on November 30, 1998, that appeared in evidence, were not received by him until some time later which he believed was in the summer of 1999. He admitted he did not write back to the defendants to state that the financial statements were not enclosed with their letter.

107I am satisfied, on a balance of probabilities, that an agreement was reached with Mr. Sui to settle the affairs of the Partnership on the terms as reflected in the notes of Mr. Pundit from the January 15, 1999 meeting and the draft settlement agreement delivered to Mr. Sui on February 1, 1999.

108First, on cross-examination, when asked about the settlement agreement, Mr. Sui testified that there was no agreement reached relieving the defendants of liability for lease payments on the Vancouver office, although he testified that he was not expected to contribute to the rent or have any continuing liability for the Toronto office. This makes no commercial sense in terms of the parties’ separation and is inconsistent with how the parties were operating as of January 1999.

109By January 1999, Mr. Sui acknowledged he would no longer be working with the defendants as a partner, and that his intention was to retain the Vancouver office for his own practice. He paid the Vancouver lease on his own as of January 1999. He did so without contribution from the defendants. Mr. Sui agreed that the defendants did not call on Mr. Sui to pay his 5/23 portion of rent on the Toronto office. In April 1999, Mr. Sui abandoned the Vancouver lease. His evidence is that he did not advise the defendants when he did so. All of this suggests that Mr. Sui assumed the Vancouver lease as his sole responsibility, and the defendants assumed all responsibility for the Toronto office.

110To accept Mr. Sui’s evidence would suggest that he would continue to obtain the benefits of the Partnership’s continued liability with respect to the Vancouver lease despite the parties no longer being partners, and that he would not be subject to any liabilities of the Partnership with respect to the Toronto office. His evidence on this issue appeared tailored for a favourable conclusion to be drawn, rather than a recounting of what had been agreed upon. His version of events was improbable.

111I have considered that in January of 1999, when Mr. Sui sought to sublet some of the Vancouver office, the defendants were involved in deciding whether it would be an open listing or a 30-day exclusive listing. But I do not draw the inference that this was because the defendants were of the view that the lease remained a continuing Partnership liability. Rather, it was a liability of each partner only because of the Indemnity Agreement that kept each partner on the hook in the event Mr. Sui defaulted on his obligation to the Vancouver landlord. The evidence shows the defendants were concerned about their on-going personal liability under the lease after Mr. Sui left the Partnership, and generally about the Vancouver lease cost when Mr. Sui was in the Partnership. For this reason, they sought security from Mr. Sui by holding the Peabody shares. In my view, this is not evidence that the defendants accepted the Vancouver lease as a continuing liability of the defendants.

112Second, Mr. Sui’s position with respect to the defendant’s liability for the Vancouver lease shifted through this litigation. His initial Notice of Application issued on December 20, 2001, did not seek relief for amounts owed with respect to the Vancouver lease. He swore an affidavit in support of his application on December 19, 2001, where he stated, “Liability relating to the lease of the premises of CSPPS located in Vancouver, B.C. has been settled such that there is no outstanding claim at present.” However, the Notice of Application was amended on February 12, 2007, to include a claim for contribution and indemnity in respect of third-party debts owed to the Vancouver landlord, Novam. Given these shifting positions by the plaintiff, I question the reliability of Mr. Sui’s evidence as to what agreements were reached with the defendants.

113Third, Mr. Sui did not dispute that a meeting happened with Mr. Pundit and Mr. Pathak on January 15, 1999. However, he offered no explanation in his own evidence of what transpired at that critical meeting, other than a rejection that there was an agreement reached. It was only on cross-examination that he conceded to certain items having been agreed upon at that meeting, but not others. Mr. Sui’s email correspondence on February 19, 1999, following this meeting and after receipt of the settlement agreement on February 1, 1999, did not challenge the terms of the settlement agreement, only that Mr. Sui would be seeking advice on whether the structure of the settlement would be better characterized as a withdrawal or dissolution of the Partnership.

114The defendants’ evidence with respect to the January 15, 1999 meeting came from Mr. Pundit and Mr. Pathak. Their respective evidence was consistent in terms what was agreed upon at the meeting. I am mindful that they had motive to be consistent in their evidence. Plaintiff’s counsel argued that it is questionable that they had specific recollections of that meeting, but in their cross-examinations, could not recall many other matters on which they testified, notably a meeting on November 27, 1998, when it is not disputed there was a meeting and discussion about Mr. Sui leaving the Partnership. I do not see this as a legitimate basis upon which to attack their recollection of what transpired at the meeting on January 15, 1999.

115First, there had been a passage of 22 years which would make specific recollection of events difficult for most people. Second, they would have been familiar with the notes taken by Mr. Pundit at this meeting and the settlement agreement drafted and sent to Mr. Sui on February 1, 1999. These documents would have provided a basis to refresh their memories about the meeting on January 15, 1999. Third, as I explain, the actions of the parties support the conclusion that an agreement was reached on January 15, 1999.

116I have considered that Mr. Pundit’s notes from the January 15, 1999 meeting could have been fabricated for self-serving reasons. However, the content of those notes was then converted into a written settlement agreement sent to Mr. Sui about two weeks later on February 1, 1999, years before this litigation commenced, which suggests that the notes were not fabricated after the fact and that the contents of the settlement agreement accurately reflected the parties’ intentions at the January 15, 1999 meeting.

117The surrounding circumstances and other documentary evidence also support the conclusion that the terms of the written separation agreement were agreed to by Mr. Sui. Mr. Sui acknowledged in correspondence to the Vancouver realtor on January 20, 1999 that the defendants were his “ex-partners”. He formally dissolved the partnership in British Columbia, and he started his own firm under the name Sui & Co. effective January 1, 1999. He accepted WIP and AR on files in which he was the responsible lawyer, consistent with the agreement. There was communication back and forth about assets he would be retaining and assets from the Toronto office he wanted to take, also consistent with the agreement. He paid the Vancouver lease himself, and he did not contribute to the Toronto lease costs.

118Mr. Sui’s actions following January 15, 1999, on a balance of probabilities, suggest that he was dissatisfied with the agreement he reached, and he chose to place the blame on his former partners. His May 5, 1999 letter, as noted, was an attack on his former partners. He ignored efforts by his former partners, notably, Ms. Sokoloff, to resolve their dispute at meetings she had requested. When he terminated his lease with the Vancouver landlord, he failed to advise the defendants, knowing that they would have indemnity obligations.

119Furthermore, I cannot conclude that the agreement the defendants say was reached would lead to a commercial absurdity. It can readily be seen as a reasonable and fair settlement agreement with a quid pro quo for what was exchanged. WIP and AR of the firm, along with other hard assets, were handed to Mr. Sui, in exchange for the law firm’s capital which had only seven months of operation. He was relieved of further liabilities with respect to the law firm, and the defendants were relieved of further liabilities with respect to the Vancouver office.

120The agreement was reasonable, providing immediate certainty to the parties in contrast to the future uncertainty of prolonged negotiations, valuations, and potential litigation. These are among the commercially sound reasons why people settle disputes. For this reason, I am not persuaded by Mr. Sui’s conclusion that he was unable to settle this matter without complete financial records and a valuation of the Partnership’s assets. Many individuals settle disputes relying on the best available information without full or formal valuations undertaken because the cost of that work often exceeds the benefits of a prompt settlement and avoids the uncertainty of a delayed settlement.

121I have also considered whether the defendants were financially motivated to unilaterally impose a termination date of November 30, 1998 for accounting purposes rather than December 31, 1998, because the evidence revealed that they distributed among themselves a cash draw from the Partnership in December 1998 totalling $147,000 which did not include a draw for Mr. Sui.

122However, I am mindful that under the terms of the separation, Mr. Sui was entitled to receive the complete value of the WIP and AR for clients for whom he was the responsible lawyer through to November 30, 1998, as well as all WIP for the month of December 1998. According to the joint expert summary, the value of the AR received by Mr. Sui was $66,600, and the value of the WIP was not conclusively determined but it was in between $54,923 and $83,776. Therefore, while Mr. Sui did not receive a draw in December, he received significant valuable consideration for the separation, and it would not be unreasonable to conclude that some of that consideration would be an appropriate draw for him.

123In any event, I am not satisfied that Mr. Sui would have been entitled to the same draw as his partners. They had no partnership agreement and there was evidence at trial that partners would only share in a draw based on their respective performance. Mr. Sui did not dispute that at least for the initial months of the Partnership, he was heavily involved in setting up the Vancouver office and he had limited billings during this period as a result. In his letter to Mr. Pundit, dated January 12, 1999, he acknowledged that his overall billings were lower than the firm average. Therefore, I cannot conclude that Mr. Sui would have been entitled to the same draw as the other partners.

124Finally, the parties had a practice of operating based on oral agreements. There was no written partnership agreement. As such, it is not unreasonable in this case to enforce the oral agreement with respect to the parties’ separation which the defendants say was reached on January 15, 1999.

125For these reasons, I conclude that the separation agreement sent by Mr. Pundit to Mr. Sui on February 1, 1999, reflecting the oral agreement reached with respect to Mr. Sui’s departure from the partnership on January 15, 1999, is binding on Mr. Sui. Therefore, he is not entitled to further adjustments, nor are the defendants liable for amounts Mr. Sui incurred in relation to the Vancouver lease.

The Expert Reports Valuing Mr. Sui’s Entitlement

126Because I found that the parties reached an agreement to settle all financial affairs as between them on January 15, 1999, without further adjustment and without the defendants being responsible for the Vancouver lease, it is not necessary for me to assess the expert evidence valuating Mr. Sui’s entitlement. However, for appeal purposes, I provide brief reasons setting out my assessment of this evidence.

127The plaintiff’s business valuator, Ms. Marnie Silver, provided three expert reports and testified at trial. Ms. Silver’s reports were dated August 11, 2016, August 6, 2019, and January 31, 2020.

128The defendants’ business valuator, Mr. Neil Maisel, provided an expert report and he also testified. Mr. Maisel’s report was dated December 2, 2019.

129Prior to trial, Ms. Silver and Mr. Maisel met to discuss three areas where the experts had different views, namely: (a) the value of the Partnership’s accounts receivables that were transferred to Mr. Sui; (b) the value of the work in progress that was transferred to the plaintiff; and (c) the treatment of the provision for bad debt or doubtful debts in the Partnership’s financial statements. Together, they prepared a joint expert statement on these issues, dated April 7, 2021.

130The plaintiff’s expert, Ms. Silver, concluded that if the valuation date was November 30, 1998, Mr. Sui was owed $84,000 (comprised of $41,932 in capital, and $37,965 for reimbursement of expenses relating to the Vancouver lease). If the valuation date was December 31, 1998, Mr. Sui was owed $98,000 (comprised of $55,772 in capital and $37,965 for Vancouver lease expenses).

131The defendant’s expert, Mr. Maisel, provided two scenarios for valuing Mr. Sui’s entitlement with valuation dates of November 30 and December 31, 1998. Under scenario 1, Mr. Maisel assumed many of the assumptions made by Ms. Silver. He concluded that the amounts owed to Mr. Sui were $44,000 or $58,000 as of November 30 and December 31, 1998, respectively. Under scenario 2, Mr. Maisel made different assumptions, resulting in Mr. Sui owing the defendants $10,000 or $11,000, as of November 30 and December 31, 1998, respectively. The notable assumption was the treatment of bad debt, which I discuss. Mr. Maisel also did not factor in the Vancouver lease expenses after December 1998, as he understood Mr. Sui was no longer a partner and was responsible for those payments himself for his new law practice.

132I prefer the approach relied upon by Mr. Maisel over that of Ms. Silver for the following reasons.

133First, Ms. Silver valued the amount of WIP that Mr. Sui collected as $54,923. However, Mr. Sui swore an affidavit on August 15, 2006 (para. 50) in which he indicated the value of the WIP to be $83,776. This amount was also included in Mr. Sui’s Request to Admit Facts (para. 8) dated February 6, 2008. In my view, the plaintiff should be bound by numbers he has relied upon in his own evidence and in his Request to Admit.

134Second, the Partnership wrote off $121,302 of bad debt as of November 30, 1998, and an additional $67,139 in bad debt as of December 31, 1998, totalling $188,441. One of the bad debts written off was an invoice to the new firm of CPPS, dated November 30, 1998, in the amount of $59,021. Both experts agreed that this amount should be removed as bad debt. I agree with that conclusion.

135After removing the $59,021, this resulted in remaining bad debt of $129,420. In the plaintiff’s expert report, Ms. Silver deducted the entire amount of bad debt from her calculations. In Mr. Maisel’s report, he also adjusted all bad debt in his scenario 1. However, in scenario 2, he continued to attribute some of the bad debt in the amount of $62,281 as of November 30, 1998, and the full amount of $129,420 as of December 31, 1998. A pro rata portion was then assigned to each partner, including Mr. Sui.

136In my view, it is inevitable that a law firm will have some bad debt that cannot be recovered. The partners in this law firm had only operated for less than a year and there was no historical basis to estimate what proportion of bad debt was reasonable for this law firm. However, it was Mr. Maisel’s opinion, that bad debt representing between 5% to 10% of revenue was not unreasonable for a small firm. I agree. For these reasons, it was not reasonable to assume, as Ms. Silver did in her calculations, that all bad debt was collected.

137Finally, Ms. Silver’s calculations also included amounts owing by the defendants to Mr. Sui for the Vancouver lease in the amount of $37,965. For reasons given, I cannot conclude that there was an agreement for the defendants to have continued liability with respect to the Vancouver lease as of January 1, 1999. This is a further reason why I would discount Ms. Silver’s calculation of amounts owing.

What is the effect of the parties’ January 15, 1999 agreement on other claims Mr. Sui has made?

a. Dissolution, an Accounting and Winding-up

138Mr. Sui seeks an Order for dissolution, an accounting and winding-up of the Partnership. Given my finding that, on a balance of probabilities, the parties finally settled the terms of Mr. Sui’s departure from the Partnership, it is not necessary for me to make an Order for an accounting or winding-up of the affairs of the Partnership. Those matters were finally settled based on their January 15, 1999 agreement.

139However, I am not satisfied that there was a meeting of minds on whether Mr. Sui’s departure would be a withdrawal from or a dissolution of the Partnership. Mr. Pundit’s notes from the January 15, 1999 meeting are titled “Dissolution of Chitiz Sui”. In Mr. Pundit’s email to Mr. Sui on February 1, 1999, he described it as a withdrawal by Mr. Sui. In Mr. Sui’s reply on February 19, 1999, he expressly stated he had not yet agreed to his departure being a withdrawal as opposed to a dissolution.

140I invited parties to make submissions on whether an Order for dissolution was still being sought. I asked because after Mr. Sui’s departure, the defendants continued to function as a partnership under the name CPPS. Given the passage of 22 years, CPPS no longer exists. The defendants are no longer practicing law together, except for Mr. Chitiz and Mr. Pathak. The Partnership was never registered in Ontario as a partnership. For these reasons, the defendants’ position is that nothing substantive turns on whether the Partnership is dissolved. They further state that the order should not be granted since the plaintiff has no interest in the CPPS firm in which he was not a partner.

141Plaintiff’s counsel argued that a declaration of dissolution is still required because there was no Notice of Dissolution filed in Ontario and the Court must determine the date of dissolution. She argued that once the partnership ended, the operations are confined to the steps necessary to achieve orderly winding-up of the affairs of the Partnership, which would not affect the post-1998 operation of the partnership. She says once it is dissolved, the Partnership is at an end and there is no incarnation that could be impacted.

142I cannot conclude that an Order for dissolution is required. First, as stated by Mr. Sui in his December 19, 2001 affidavit, “[a]s the partnership was not registered in Ontario there was no need to file a Notice of Dissolution in Ontario.” Second, a declaration of dissolution is not needed to fix a date of dissolution or to finally settle the affairs of the Partnership. That was settled among the parties on January 15, 1999, with the parties no longer operating in partnership for any purpose as of December 31, 1998. And finally, I was not given a satisfactory legal reason why such a declaration is necessary some 22 years later. I accept that under the Partnerships Act and common law, courts can declare partnerships dissolved and fix the dissolution date, but I see no legal reason for such an order in this case.

b. Liability re: Vancouver Lease

143Mr. Sui’s claim for indemnity and contribution with respect to the Vancouver lease is dismissed. The oral agreement reached on January 15, 1999 addresses this issue, as does paragraph 5 of the separation agreement which states that Mr. Sui will indemnify and hold the defendants harmless with respect to all obligations with respect to the Vancouver office.

Issue #3: Was the financial cut-off date for the Partnership November 30, 1998 or December 31, 1998?

144I have recounted the evidence with respect to the parties’ position as to when the financial cut-off date was to occur. In my view, it is only relevant to make this determination for the purpose of assessing whether the defendants breached their fiduciary obligation by not disclosing the combined total of draws of $147,000 the defendants received in December 1998.

145I am satisfied based on the correspondence exchanged between Mr. Sui and Mr. Pathak on December 2, 1998 and December 5, 1998 that there was an initial agreement by Mr. Sui to have a financial cut-off date of November 30, 1998. I acknowledge that he promptly advised Mr. Pathak on December 2, 1998 that it would be “an administrative nightmare from my end to try to accommodate the earlier cut-off date.” Mr. Pathak, in reply on December 5, 1998, stated “November 30, 1998 is only the date for clearing all financial issues and December 31^st is the official termination of the partnership as agreed in our telephone conversation on Tuesday evening.”

146While there appears to have been an initial agreement by Mr. Sui as to November 30, 1998, there was a period of uncertainty about what the financial cut-off date would be. However, by January 15, 1999, the date of the financial cut-off was irrelevant. All that was relevant was how they would finally settle matters as of that date. And as I found, an agreement was reached with respect to all financial issues.

147In the context of the breach of fiduciary claim, the financial cut-off date has become relevant to determine whether the defendants ought to have disclosed the draws that they took in December 1998.

148In my view, the defendants had a duty to disclose the draws that they took in December 1998, consistent with their obligations of utmost good faith and loyalty to the plaintiff, even though they understood there was a financial cut-off date of November 30, 1998. There is no dispute that Mr. Sui would still be involved, in some capacity, as a partner until December 31, 1998. Mr. Pathak, acknowledged, the “official termination” of the Partnership would not be until December 31. In my view, the defendants should be held accountable to the duties partners owe to one other during the remaining month of the Partnership. Having said that, the defendants’ failure to disclose the draws, in my view, does not vitiate the settlement agreement that was reached on January 15, 1999. I have outlined the several reasons why I am satisfied the settlement agreement was reached, notably the certainty it provided to the parties and the fact that Mr. Maisel’s evidence shows Mr. Sui was not treated unfairly, financially, in the settlement. To vitiate the agreement, due to the defendants’ breach of their obligations as fiduciary, would be disproportionate to the breach itself, especially given the inordinate passage of time as this litigation wended its way to trial. Instead, and consistent with the obligations expected among partners, the appropriate remedy is damages which I discuss in Issue #5.

149For these reasons, I decline to make a finding on whether or not the financial cut-off date was November 30, 1998 or December 31, 1998.

Issue #4: The Peabody Shares – Are they a Partnership or personal asset? The torts of conversion and detinue, and assessment of damages

150The plaintiff seeks an order for the return of 174,000 shares in Peabody he states he beneficially owned, and damages for the detention of these shares, which were converted by the defendants, in an amount to be determined by the court. The plaintiff states the defendants are liable either in detinue or conversion.

151Alternatively, the plaintiff argues that because Mr. Sui was required to post his shares in Peabody as security for his performance of the Vancouver lease, they are inextricably linked to the Partnership and as such are the proper subject-matter for the defendants’ duty to account under the Partnerships Act and at common law.

152There is no reference to the Peabody shares in Mr. Pundit’s meeting notes of January 15, 1999, nor was there any evidence of them being discussed at this meeting. If they were a personal asset of Mr. Sui that were held by the defendants, then in my view, Mr. Sui’s claim for their return would not be extinguished by the January 15, 1999 agreement. However, if they were a Partnership asset, then Mr. Sui’s claim for their return would be extinguished by the January 15, 1999 agreement because the agreement was that there would be no further adjustments and the Peabody shares were not assigned to Mr. Sui as part of their settlement.

153For the following reasons, I am satisfied on a balance of probabilities that the Peabody shares constituted a personal asset and not a Partnership asset. Therefore, to the extent Mr. Sui had a beneficial interest in them, his claim must be assessed.

154The evidence was consistent in terms of how the Peabody shares were created, but inconsistent in terms of whether Mr. Sui was a beneficial owner of them. There was also a Request to Admit in relation to these shares. The defendants assert a limitations defence, arguing that the plaintiff’s claim for the “return” of Peabody shares was not included within the Amended Notice of Application until February 12, 2007 – eight years after the plaintiff left the Partnership. The defendants further assert that if the court finds the shares were issued to the plaintiff, the plaintiff is not entitled to their return because they were being held as security for the Vancouver lease on which the plaintiff defaulted. As a result, the defendants paid $5,000 to settle the Vancouver landlord’s claim against them.

155I begin by explaining the creation of the Peabody Shares.

156According to Mr. Sui, he and Mr. Pathak developed and successfully used a model in the past that allowed an existing private company to obtain public status under the Ontario Securities Act, R.S.O. 1990, c. S.5, without having to file a prospectus. The procedure involved preparing an alternative offering document known as a securities exchange take over bid circular (“SETOB”) which did not require as much disclosure as a prospectus, was much more cost effective, and was generally processed very quickly by the Ontario Securities Commission. The result was that the company filing the SETOB would become public. By becoming a public company through a SETOB, the shareholders of the former private company would be able to sell their shares freely and usually at values much higher than if they tried to sell their shares while the company was still private.

157Before a SETOB could be effected, two things needed to be in place:

a. A private company with a modest amount of cash (the “Offeror”), which did not need to have an operating business; and

b. Another private company with a small operating business whose existing shareholders would be the target for a share exchange with the Offeror.

158The parties largely agree on how the Peabody shares were created. A client or contact of Mr. Pathak’s, Rakash Nayar, owned a company called Flowcell Dynamics Inc. (“Flowcell”). In October 1998, Mr. Nayar wanted Flowcell to become part of a public company. Mr. Pathak proposed the SETOB process.

159At the time, Mr. Chitiz, Mr. Pundit and Ms. Sokoloff owned shares in Peabody. Mr. Pathak suggested to Mr. Nayar that Flowcell use Peabody for the SETOB. Peabody would file the SETOB and become public. Flowcell shareholders would then respond to the offering by exchanging their Flowcell shares for shares in Peabody on a 1:1000 basis. Mr. Nayar agreed.

160To use Peabody as the Offeror, a capital injection was required of $50,000 into Peabody before the SETOB became effected. Mr. Sui approached one of his clients, Aspen Investments Inc., to invest in Peabody in exchange for shares in Peabody. Aspen agreed.

161According to Mr. Pathak, Mr. Nayar offered to Mr. Pathak that the latter could participate by acquiring a small minority shareholding in Peabody, the public company that would emerge from the SETOB. Mr. Nayar also agreed that Mr. Pathak could invite members of his family, partners in the Partnership, and their family members to participate in the SETOB transaction and receive shares in Peabody. It was in Mr. Nayar’s interest to have multiple shareholders when Peabody became public.

162Mr. Pathak states that the Peabody shares were not a Partnership asset. His partners and their families had an opportunity to participate in the public company, but the opportunity was not offered in exchange for legal services. He says the firm rendered accounts for the legal services for taking Flowcell public, which became part of firm revenue.

163He further states that Mr. Chitiz, Mr. Pundit and Ms. Sokoloff already held shares in Peabody in their personal capacities. Mr. Sui does not dispute this. For others who were to become shareholders, including Mr. Pathak and Mr. Sui, they would need to be issued shares of Flowcell so that they could then be exchanged for shares of Peabody as part of the SETOB transaction.

164The parties disagree on whether Mr. Sui, and his wife, were issued shares.

165The offer under the SETOB was issued December 15, 1998 and was open for acceptance by Flowcell shareholders until January 7, 1999. The SETOB required the shareholders of Flowcell who wished to accept Peabody’s offer to deposit their shares with the Partnership until the offer period expired, which would then be exchanged for shares of Peabody.

166Teresa Chung-Wong prepared an affidavit for this trial. She served as the law clerk for the Partnership until January 31, 1999 and was hired by Mr. Sui thereafter. She was responsible for preparing corporate records for the Partnership’s clients, including maintaining the corporate and share registers. In her affidavit, she states she was instructed by Mr. Pathak to organize and prepare corporate documents for Flowcell and Peabody. This included preparing the register of shareholders.

167Attached to Ms. Chung-Wong’s affidavit is an unsigned Resolution of the Director of Flowcell, Mr. Nayar, dated September 16, 1997, identifying Mr. Sui, and his wife, Elizabeth Donnelly, as having 87 common shares in Flowcell. According to Mr. Sui, he was advised by Ms. Chung-Wong that she was instructed to reflect that Mr. Sui, Mr, Pathak and their relatives were to have been shareholders of Flowcell since September 16, 1997. Ms. Chung-Wong’s affidavit does not speak to this fact.

168Based on the terms of the SETOB, Mr. Sui and his wife would, therefore, have been entitled to receive 87,000 shares of Peabody for an aggregate of 174,000 shares. Attached to Mr. Sui’s affidavit is a Peabody share register showing that Mr. Sui and his wife were each issued 87,000 shares, along with a screen shot of his file server showing the date the ledger was modified as January 18, 1999. The register shows shares were also issued to Mr. Chitiz, Ms. Sokoloff, Mr. Pundit, some of their family members, and Aspen Investments.

169Mr. Pathak’s evidence was that Mr. Sui and his wife were not issued shares as had been originally contemplated because, by the time this transaction closed in January 1999, Mr. Sui was not in the Partnership. He explains that the documents appended to Mr. Sui’s affidavit were draft documents and do not accurately reflect the actual issuance of Peabody shares in January 1999 in exchange for Flowcell shares. Because he acted on the transaction, he states he can confirm that neither Mr. Sui nor his wife acquired shares of Flowcell.

170I reject Mr. Pathak’s evidence on this issue for several reasons.

171First, Mr. Pathak’s own evidence is that it was in Mr. Nayar’s interest to have multiple shareholders when Peabody became public. As a result, nothing turns on whether Mr. Sui was a partner at the time the Flowcell shares were exchanged for Peabody shares. There were other shareholders, notably family members of the defendants, who were not part of the Partnership.

172Second, by January 15, 1999, according to the defendants, the parties appeared to have resolved the terms of Mr. Sui’s withdrawal from the Partnership. Therefore, there would have been no animosity against Mr. Sui that would preclude him and his wife from the transaction. Mr. Pathak’s evidence is that it was in Mr. Nayar’s interest to have multiple shareholders in Peabody.

173Third, on February 6, 2008, the plaintiff served a Request to Admit on the defendants. Included in the list was a Request to Admit all exhibits to the supplementary affidavit of Mr. Sui sworn August 15, 2008. Attached at Exhibit N to Mr. Sui’s affidavit is the Register of Shareholders to Peabody showing Mr. Sui and his wife each holding 87,000 common shares. On February 26, 2008, the defendant’s lawyer at the time, Mr. David Shiller, delivered a response that admitted the facts contained in the share registry.

174Fourth, if Mr. Sui (and his wife) did not own the shares in Peabody, there would be no reason for the defendants to hold the shares as security for Mr. Sui’s payment obligations under the Vancouver lease. In Ms. Sokoloff’s letter to Mr. Sui, dated May 14, 1999, she acknowledged that Mr. Sui had provided his shares in Peabody as security for Mr. Sui’s obligations under the Vancouver lease.

175Therefore, I find that Mr. Sui and his wife had a beneficial interest in 174,000 Peabody shares as of January 18, 1999.

176I am also satisfied that the Peabody shares were not a Partnership asset, but a personal asset of shareholders. Mr. Sui’s Amended Notice of Application claims that he was the beneficial owner of the shares.

What is the tort?

177The Amended Notice of Application seeks the return of the Peabody shares and damages for the detention of the shares. During oral argument, plaintiff’s counsel argued the torts of detinue and conversion.

178The torts of detinue and conversion overlap but are separate torts. Detinue arises when a person is wrongfully in possession of chattel over which another person has a possessory interest, and despite demands for its return, the person with the chattel refuses to return it. With conversion, the chattel is sold or otherwise disposed of with the intent of denying the plaintiff’s title and cannot be returned.

179In Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, 1996 CanLII 149 (SCC), [1996] 3 S.C.R. 727, at p. 746, the Supreme Court defined the tort of conversion as follows:

The tort of conversion involves the wrongful interference with the goods of another such as taking, using or destroying these goods in a manner inconsistent with the owner’s right of possession. The tort is one of strict liability, and accordingly, it is no defence that the wrongful act was committed in all innocence.

180Conversion is a single act. The cause of action accrues at the date of the conversion: see G.H.L. Fridman, The Law of Torts in Canada, 4th ed (Toronto: Carswell, 2020).

181The tort of detinue is described by Janet M. Ames in L.N. Klar et al, Remedies in Tort, (Toronto: Thomson Reuters, 2022) at § 4.11 as follows:

Detinue consists of the wrongful refusal to deliver up a chattel to the person entitled to it. In an action for detinue, the plaintiff must show a demand for the return of the specific property and an unqualified refusal by the defendant to deliver it up.

182J.M. Ames sets out the elements of the tort of conversion and detinue, at § 4.7:

The following elements are essential in an action for conversion or detinue: i) the property must be specific personal property; ii) the plaintiff must have a possessory interest in the chattel; and iii) the defendant must commit an intentional and wrongful act in respect of the chattel.

In an action for conversion, the wrongful act may take the form of any intentional dealing or interference with the chattel inconsistent with the rights of the person entitled to its possession. In an action for detinue the wrongful act consists of the wrongful withholding of the chattel.

Does the plaintiff have a valid claim in conversion or detinue against the defendants?

183In my view, the plaintiff does have a claim of conversion against the defendants with respect to the Peabody shares.

184There is an admission by the defendants in Ms. Sokoloff’s letter of May 14, 1999, that the Peabody shares were being held by the defendants as security for Mr. Sui’s Vancouver lease obligations. Share certificates have been the subject matter of an action for conversion in other cases: see Dominion Securities Ltd. v. Glazerman, [1984] M.J. No. 67(M.B.C.A.).

185According to a memo prepared by Ms. Chung-Wong, dated March 2, 2005, which was attached to her affidavit for this trial, the plaintiff’s shares and his wife’s shares were converted by the defendants on December 2, 2002, based on an information circular dated December 2, 2002, which did not show Mr. Sui or his wife owning any common shares as of that date. The information circular was not adduced into evidence. The defendants did not adduce evidence to show a different date on which the shares in Peabody were converted. This is not surprising, given that the defendants took the position that Mr. Sui and his wife never had the shares.

186I make the following factual conclusions which support the plaintiff’s claim for conversion:

a. Mr. Sui held a possessory interest in 87,000 Peabody shares. On behalf of his wife, Mr. Sui also held a beneficial interest in a further 87,000 Peabody shares.

The defendants argued that Mr. Sui’s wife, Elizabeth Donnelly, is not a plaintiff in this action, and therefore, there can be no damages awarded for her 87,000 shares. I am satisfied that Mr. Sui was the beneficial owner of the combined shares in his name and those in the name of his wife.

The defendants have admitted that family members of the partners were invited to become owners of Peabody shares, and Mr. Sui’s evidence was that he and his wife each owned 87,000 shares. I am satisfied that there was an explicit intention by Mr. Nayar to extend the benefits of the Peabody SETOB transaction to family members of the partners, and that option was duly exercised by Mr. Sui on his and his wife’s behalf. As such, I am satisfied that Mr. Sui is entitled to pursue an action in tort on behalf of his wife, who was the third-party beneficiary of the Peabody SETOB transaction: see Gilani v. BMO Investments Inc., 2021 ONSC 3589, at para. 174.

To hold otherwise, would mean that the defendants retained only Mr. Sui’s Peabody shares as security for the Vancouver lease and the shares of his wife either vanished or were retained by the defendants without legal entitlement. Both scenarios are absurd. They fail to properly account for the Peabody shares and result in a windfall for the defendants, or other third parties who acquired the shares, without legal justification.

b. The defendants, who exercised control over the Peabody shares, disposed of Mr. Sui’s interest in the Peabody shares, denying his title or other beneficial interest in the shares. The only evidence I have is that they were disposed of on or before December 2, 2002, according to the affidavit of Ms. Chung-Wong.

c. The defendants’ disposition of the shares interfered with the plaintiff’s possessory rights in them.

The defendants had control of the shares. If they did not, then they could not hold them as security as a guarantee for Mr. Sui’s Vancouver lease obligations.

The defendants state that any interest Mr. Sui had in the Peabody shares was forfeited when he abandoned the Vancouver office in April 1999, defaulted on the lease payments and failed to honour his indemnity obligations to the defendants. The defendants were not saved harmless, in breach of Mr. Sui’s indemnity guarantee, and they were required to make a $5,000 payment to settle the Vancouver landlord’s claim.

I accept that the defendants are entitled to be indemnified in the amount of $5,000 for their contribution towards the settlement of the dispute with the Vancouver landlord. However, there was no evidence of an oral or written agreement establishing that Mr. Sui would forfeit the entire value of the Peabody shares should he fail to keep the defendants harmless. In the absence of such an agreement, the forfeiture would have penal consequences that bear no relation to the loss suffered by the defendants: see Peachtree II Associates – Dallas L.P. v. 857486 Ontario Ltd. (2005), 2005 CanLII 23216 (ON CA), 76 O.R. (3d) 362 (C.A.), at paras. 22-25. Therefore, I cannot conclude that the defendants are entitled to retain the full value of the Peabody shares.

If I am wrong, and there was an agreement that the full value of the Peabody shares would be forfeited, I would grant discretionary relief from forfeiture. I am satisfied that the forfeiture of the Peabody shares in an amount exceeding the defendants’ loss would constitute a penalty, out of proportion to the $5,000 loss incurred by the defendants. The defendants claim time and expense in negotiating the settlement with the Vancouver landlord, but they have not quantified that loss in their evidence. Accordingly, I decline to grant the defendants credit for such expenses.

I am also satisfied that it would be unconscionable for the defendants to retain the full value of the Peabody shares. The defendants, and Mr. Pathak as the solicitor on the Peabody transaction, had control and influence over the disposition of the Peabody shares. This is confirmed by Ms. Sokoloff’s May 14, 1999 letter. There was an unequal bargaining position as between the plaintiff, who was trying to set up his own Vancouver office and required the Vancouver office space, and the defendants, who had no need for the Vancouver office yet who exercised control over the Peabody shares. This inequality in bargaining power matched with a corresponding penalty, in my view, would justify granting relief from forfeiture in these circumstances: see Birch v. Union of Taxation Employees, Local 70030 (2008), 2008 ONCA 809, 93 O.R. (3d) 1 (C.A.), at para. 45.

For these reasons, I find that the disposition of the plaintiff’s interest in the Peabody shares around December 2, 2002 was an interference with the plaintiff’s beneficial interest in the shares. The tort is one of strict liability, and it matters not whether this wrongful act was done in all innocence: Boma Manufacturing, at p. 746.

187For these reasons, I find that the plaintiff has a claim in conversion for the Peabody shares.

188The cause of action in conversion arises at the time of conversion. As stated, the only evidence as to the date of conversion of the plaintiff’s interest in the Peabody shares was on December 2, 2002. The Amended Notice of Application was issued on February 12, 2007. Therefore, I find that the Amended Notice of Application was issued within the six-year limitation period in force at the time. It is not statute barred.

189The plaintiff also seeks damages for the detention of the shares by the defendants under the tort of detinue.

190Since the nature of damages in conversion and detinue are similar, and because I have found that the shares were converted and no longer in the possession of the defendants, it is not necessary for me to address the tort of detinue. Provided the measure of damages I grant for the tort of conversion captures the value of the shares at the date of conversion, plus consequential damages representing the lost opportunity to dispose of the shares at a higher price prior to the end of trial, any award for the tort of detinue would be duplicative and represent a windfall for the plaintiff.

What are the damages?

191The general rule is that damages in a conversion action are assessed as the value of the chattel at the time of conversion: see BMW Canada Inc. (Alphera Financial Services Canada) v. Mirzai, 2018 ONSC 180, at para. 26. This would mean damages should be assessed based on the price of the Peabody shares on December 2, 2002.

192In Asamera Oil Corporation Ltd. v. Sea Oil & General Corporation et al., 1978 CanLII 16 (SCC), [1979] 1 S.C.R. 633, at pp. 652-653, the Supreme Court of Canada described the principles of damages for conversion and detinue involving shares as follows:

In conversion, the measure of damages has been said to be the value of the shares at the date of conversion, and in addition, consequential damages represented by the loss of the opportunity to dispose of the shares at the highest price attained prior to the end of trial. (Vide McNeil v. Fultz et al. per Duff J. at p. 205; The Queen in right of Alberta v. Arnold, per Spence J. at p. 230.) I am aware of course that these cases were for the most part dealing with the wrongful refusal of a person under the liability of a trustee to deliver property to a beneficiary, but on principle the result would be the same in simple cases of conversion. (Vide McGregor on Damages (13th ed. 1972) at p. 671.)

In detinue, the measure of damages has been said to be the value of the shares at the end of the trial, and in addition, damages for the detention. The value of the shares at the end of the trial must be awarded on the basis that the action in detinue is, in fact, a quasi-proprietary action for return of the plaintiff’s goods. If that cannot be done, then the clearest approximation of the plaintiff’s loss is the value of those goods when they would have been recovered, that is, at the end of trial. In addition, an award must compensate the plaintiff for damages flowing from the wrongful detention of his property, which it seems must be assessed on the basis of the highest value of the goods between the date at which the plaintiff ought to have recovered possession and the end of trial.

193Based on this authority, the plaintiff argues damages should be based on the highest value of the shares in Peabody (or its successors, namely Richview Resources Inc., Maple Gold Resources Limited, and Cadillac Ventures Holdings Inc.) which was offered by Richview Resources Limited at $0.75/share on July 28, 2005.

194However, the Court in Asamera Oil Corp. also considered the dissent reasoning of Spence J. in R. v. Arnold, 1970 CanLII 174 (SCC), [1971] S.C.R. 209, 14 D.L.R. (3d) 574, endorsed by Martland J. for the majority, in relation to the damages recoverable upon a failure to return securities, and the obligation on a plaintiff to mitigate damages. Spence J. in Arnold stated, at p. 591:

Surely a plaintiff whose securities have been converted, cannot wait to issue process for their recovery or damages for the conversion until just before the period of limitation lapses, then be entitled to claim damages fixed at the highest value of those securities within the six-year limitation term.

195Relying on Spence J.’s reasoning, the Court in Asamera Oil Corp. held, at p. 664:

There may, as already discussed, be instances where mitigation will not require a plaintiff to incur the significant risk and expense of purchasing replacement property, but in any case the plaintiff must crystallize his claim either by replacement acquisition or in some circumstances by prompt litigation expeditiously prosecuted which will enable the court to establish the damage with reference to the mitigative measures imposed by law.

196Having considered these authorities, and the facts of this case, I find it would be inappropriate to award damages based on the highest value of the shares recorded on July 28, 2005.

197As noted at the outset of this Judgment, this proceeding commenced in 2001 arising from a dispute from late 1998 and early 1999. Between 2001 and 2007, the plaintiff waited to amend his pleadings to claim damages for the tort of conversion and detinue, which was after the highest price for the shares was recorded. It then took over two decades to get to trial. There was evidence of fluctuation in the price of the shares during this period - from $0.1721 on January 14, 1999, to a high of $0.75 on July 28, 2005, then prices declining and hovering around $0.40/share through 2006 - before the amendment to the pleading was made, and then falling even further and fluctuating thereafter.

198These facts give rise to the caution against fixing damages at the highest share price as set out in Asamera Oil Corp. and Arnold.

199In determining the appropriate date for the assessment of damages, the court must have regard to what is fair in the circumstances and be governed by the simple notion of fairness: see Akelius Canada Ltd. v. 2436196 Ontario Inc., 2022 ONCA 259, at para. 23.

200Several valuation dates, in my view, are relevant for the purpose of calculating damages.

201The first is March 9, 2001, when the defendants paid $5,000 to the Vancouver landlord. On this date, the value of the Peabody shares should have been assessed and returned to the plaintiff, less $5,000 for the defendants’ loss with respect to their settlement with the Vancouver landlord. There is no evidence of what the share price was on this date. The closest date for which evidence was provided was January 14, 1999, when the shares were purchased at $0.1721/share.

202The second valuation date is December 2, 2002, the date on which I found the shares were converted. Again, there is no evidence of what the share price would have been on this date.

203The third is July 28, 2005, when the shares were priced the highest at $0.75/share.

204The fourth piece of evidence is the memo from Ms. Chung-Wong, dated March 12, 2012, attached to her affidavit sworn April 7, 2021, which describes the major corporate transactions of Peabody’s successors between 2004 and 2011. It shows share prices fluctuating between $0.03 to $0.75. I have also reviewed the Daily Trading Summaries of Richview Resources Inc. from December 2005 to June 2006 showing unit prices shifting between $0.28 to $0.45. The Daily Trading Summaries from Cadillac Ventures Inc. from April 2017 to April 2021 showed the prices plummeted and never exceeding $0.04/share.

205Trial judges are obliged to apply the correct legal principles and do the best they can on the evidence, short of failing to analyze the evidence at all or simply guessing: see Livent Inc. v. Deloitte & Touche, 2016 ONCA 11, 128 O.R. (3d) 225, at para. 388.

206I find that the best evidence of the value of the Peabody shares on the date of the defendants’ settlement with the Vancouver landlord and on the date of conversion is the price of the share at the time it was purchased in January 14, 1999, namely $0.1721/share. Given the 174,000 shares in which the plaintiff had a beneficial interest, this results in total share value of $29,945.40. $5,000 of that was owed to the defendants, resulting in $24,945.40 owing to the plaintiff at that time.

207To assess Mr. Sui’s consequential damages represented by the lost opportunity to dispose of the shares up to the point of trial, I assume that Mr. Sui would have reinvested those funds back into Peabody shares on the date of settlement with the Vancouver landlord. With $24,945.40, he would have been able to purchase 144,947 shares at the same share price of $0.1721/share. For the moment, I ignore the transaction costs associated with the disposition and acquisition of the shares.

208I then assign a value to the gains he would have acquired from these shares up to the point of trial. In doing so, I have fixed a unit sale price at $0.45/share. While admittedly an assumption, valuing these shares at $0.45 is reasonable in my view. It reflects a price that is below the one-time anomalous high of $0.75/share in 2005 but is consistent with the typical share price around the same time as evidenced by the Daily Trading Summaries in 2005/06. It does not reward as opportunistic the delay in Mr. Sui adding this claim to his pleadings just before the limitation period expired, and his delays in prosecuting this action. At the same time, it buffers and does not penalize the plaintiff given the very modest value of the shares today. Finally, it accounts for transaction fees.

209Accordingly, I fix damages payable by the defendants, jointly and severally, to the plaintiff, for the tort of conversion of the Peabody shares in the amount of $65,226.15, which represents 144,947 shares at $0.45/share.

210Prejudgment interest, at rates fixed under the Courts of Justice Act, R.S.O. 1990, c. C.43, is to be applied on this amount as of January 1, 2006. I have selected this date since I have assessed Mr. Sui’s consequential damages based on a share price in the 2005/06 period, and pursuant to my authority under s. 130 of the Courts of Justice Act.

211I decline to award interest under s. 42 of the Partnerships Act. As I found earlier, the shares were a personal asset and not a Partnership asset.

RW Packaging Shares

212The plaintiff argues that in 1998, a client of the Partnership, R.W. Packaging Ltd. (“R.W. Packaging”), provided shares and options to the Partnership. It is the plaintiff’s position that since securities law requires the options be placed in the name of an individual and not in the name of a partnership, the options were put in the Mr. Pundit’s name. Mr. Pundit was a director of R.W. Packaging at the time the options were issued. It is the plaintiff’s belief that the options were exercised in 1999, at which point the shares could have been sold for $0.55 per share.

213Mr. Pundit, in his affidavit, acknowledged that he held options in R.W. Packaging for the Partnership which he had acquired in July 1998. He states, to his recollection, they had little to no value at November/December 1998. He further states that those options were not requested by Mr. Sui in their settlement discussions, and according to the terms of their settlement reached on January 15, 1999, they were not to be distributed or transferred to Mr. Sui.

214Given my previous finding that the agreement reached on January 15, 1999 represented the settlement with respect to all firm assets, and that Mr. Sui is not entitled to further adjustments, I dismiss this aspect of the plaintiff’s claim.

Issue #5: Breach of fiduciary duties and assessment of damages

215It is settled law that partners are fiduciaries among themselves. Utmost good faith is owed from every member of a partnership towards every other member: see Tim Ludwig Professional Corp. v. BDO Canada LLP, 2017 ONCA 292, 137 O.R. (3d) 570, at para. 33. Equitable principles hold fiduciaries to a strict standard of conduct, encompassing duties of loyalty, utmost good faith and avoidance of conflict of duty and self-interest: see Rochwerg v. Truster (2002), 2002 CanLII 41715 (ON CA), 58 O.R. (3d) 687 (C.A.), at para. 36.

216The plaintiff relies upon authority for the limited fiduciary duties former partners owe to one another. They consist essentially of the duty to ensure that ongoing transactions are completed, and the assets of the partnership are realized for the benefit of all partners. A partner who takes partnership property for his or her own benefit following dissolution is liable to account to his or her partners: see Wright v. Van Gaalen, Van Gaalen v. Wright, 2011 BCSC 707, at para. 87; Blue Line Hockey Acquisition Co., Inc. v. Orca Bay Hockey Limited Partnership, 2008 BCSC 27, at para. 116, aff’d 2009 BCCA 34, leave to appeal to S.C.C. dismissed, [2009] S.C.C.A. No. 176.

217The plaintiff claimed damages for breach of fiduciary duty in an amount to be determined by this Court in his February 2007 Amended Notice of Application. He alleged the defendants breached their fiduciary duty, among other things, by failing to provide the plaintiff with information of all things affecting the partnership; by failing to distribute to the full-time partners income and draws equally; by failing to provide a full and complete accounting of the Partnership’s affairs; and by failing to act in good faith.

218The plaintiff relies upon the Partnerships Act, namely:

a. The duty of a partner to render true accounts and full information of all things affecting the partnership to any partner or the partner’s legal representatives (s. 28).

b. The duty to account to the firm for any benefit derived by the partner without the consent of the other partners from any transaction concerning the partnership or from any use by the partner of the partnership property, name or business connection (s. 29(1)).

219He also relies on common law authority for the proposition that a failure to disclose important financial information to a partner, in addition to being a statutory breach, will be a breach of fiduciary and common law obligations: see Merklinger v. Jantree No. 3 Ltd. Partnership, [2004] O.J. No. 5997, (S.C.), at paras. 104-107, 166, 170, and 172-176; Rochwerg, at paras. 23, 72, and 94.

220In assessing damages for breaches of fiduciary duties, the proper approach is restitutionary – the plaintiff is entitled to be put in as good a position as he would have been had the breach not occurred: see Hodgkinson v. Simms, 1994 CanLII 70 (SCC), [1994] 3 S.C.R. 377, at p. 440.

221Damages may also consider the goal of deterrence. Fiduciary relief is equitable in nature and discretionary. It is designed to address not only fairness between the parties, but also the public concern about the maintenance of the fiduciary relationships: see Mady Development Corp. v. Rossetto, 2012 ONCA 31, 344 D.L.R. (4th) 706, at paras. 18-19. Through deterrence, the law is able to monitor a given relationship society views as socially useful while avoiding the necessity of formal regulation that may tend to hamper its social utility. Deterrence encourages those who owe fiduciary duties not to take risks inconsistent with those duties and where a restitutionary order would not be effective: Hodgkinson, at pp. 453-454.

Damages for expelling Mr. Sui from the Partnership

222For reasons already given, I do not find that the defendants expelled Mr. Sui from the Partnership. I am satisfied that the defendants gave Mr. Sui an option to continue with the firm in Toronto, which option he rejected. He then agreed to leave the Partnership. In my view, there is no basis to award damages for his alleged expulsion from the Partnership.

Failure to disclose draws

223It is not disputed that the defendants took a draw in December 1998 and did not inform the plaintiff. For reasons already given, this failure to disclose does not vitiate the settlement that was reached on January 15, 1999, but it does give rise to a breach of the defendants’ fiduciary obligations.

224In my view, there is no restitutionary goal achieved by imposing damages for this breach. I am satisfied that the plaintiff was not prejudiced by the non-disclosure of the draws at the time the settlement agreement was reached, and because the evidence of the defendants’ business valuator showed Mr. Sui did not suffer losses under the terms of their January 15 agreement. Therefore, I do not find this breach caused the plaintiff damages.

225However, I am satisfied that it added to the animosity and suspicion of the plaintiff and fuelled this litigation. It was inconsistent with the defendants’ obligation of utmost good faith. Even if the financial cut-off date was November 30, 1998, the parties remained partners until December 31, 1998, and this information ought to have been disclosed in a timely manner consistent with the fiduciary obligations among partners. In my view, an award of damages with the goal of deterrence is justified, appropriate and necessary in this case.

226I have considered whether the claim for damages for breach of fiduciary duties, included within the Amended Notice of Application issued February 12, 2007, is statute barred under the six-year limitation period in place at the time. In my view, it is not. The facts giving rise to the relief in the applicant’s original Notice of Application and supporting affidavit are connected to the claim for damages for breach of fiduciary duties. A new head of damages arising out of the same factual situation does not create a new cause of action: see Rundell v Laslavic et al, 2016 ONSC 8059, at paras. 27-29.

227I award damages to the plaintiff in the amount of $50,000 payable jointly and severally by the defendants for their failure to disclose December 1998 draws to the plaintiff. I decline to award prejudgment interest on this amount. Under s. 128(4)(a) of the Courts of Justice Act, prejudgment interest shall not be awarded on exemplary or punitive damages. Courts have declined to award damages purely for deterrence which is functionally similar to exemplary or punitive damages: see Brazeau v. Attorney General (Canada), 2019 ONSC 3426, at paras. 24- 25. If I am wrong, I would disallow prejudgment interest under s. 130(1) of the Courts of Justice Act given the plaintiff’s delay in prosecuting this proceeding.

Failure to disclose Financial Information

228There are generally two areas where the plaintiff says the defendants failed to disclose financial information, which I address in turn.

a. Failure to disclose Financial Statements for Income Tax Purposes

229The plaintiff asserts that the defendants failed to provide him with the Partnership’s final financial statements in a timely manner for the period ending on November 30, 1998 and December 31, 1998. He argues that these financial statements were relevant and crucial to his ability to file his income tax returns, which the defendants knew. As a result, he was unable to file his 1998 income tax returns. The plaintiff had not filed income tax returns in a timely way from 1998 to 2017, resulting in significant penalty and interest charges, for which he looks to the defendants for restitution. There was expert evidence as to whether Mr. Sui ought to have filed his income tax returns on the best available information he had, or whether it was proper for him to not file those returns until final financial statements were delivered to him.

230He asks the Court, in awarding damages arising from the defendants’ breach of their fiduciary obligation to disclose financial statements, to fix damages in an amount that would allow the plaintiff to recover tax penalties and interest levied against him, as well as associated legal and accounting fees.

231I am not satisfied that the defendants failed to disclose financial statements as at November 30, 1998 in breach of their fiduciary obligations. I am satisfied they delivered draft financial statements as at November 30, 1998 on a timely basis and made several efforts to have them delivered to the plaintiff. The final financial statements as at November 30, 1998, delivered later, only had minor differences.

232On December 12, 1998 and May 5, 1999, the plaintiff asked for a copy of the financial statements for the Partnership as at November 30, 1998. In his May 5, 1999 letter, he also asked for financial statements as at December 31, 1998.

233In Ms. Sokoloff’s reply letter of May 14, 1999, she referenced Mr. Sui’s refusal to return messages with respect to his desire for the delivery of financial statements. In that letter, Ms. Sokoloff indicated that she had enclosed the financial statements that the defendants had been trying to forward to Mr. Sui “but which for some reason [Mr. Sui] apparently did not wish to receive.”

234On cross-examination, Mr. Sui testified that the financial statements were not enclosed with this letter. He also testified that he did not write to Ms. Sokoloff to state that the financial statements were not there and to request same.

235Given the importance of the financial statements to Mr. Sui, I am left questioning why he did not immediately respond to the defendants’ letter of May 14, 1999, when he discovered that the financial statements were not included. Mr. Pundit’s evidence is that he attempted to contact Mr. Sui after his May 5, 1999 letter, but Mr. Sui did not respond to his phone calls or messages. On May 27, 1999, Ms. Sokoloff tried calling Mr. Sui and sent Mr. Sui a further email asking to meet to settle their dispute and “get it all over and done with.” There is no evidence of him responding to any of this. Mr. Sui, on cross-examination, stated he did not recall receiving Ms. Sokoloff’s email. I find this unlikely. The email address was the same email address he used in other communications with the defendants.

236Mr. Sui testified that the November 30, 1998 financial statements were sent to him at some point in the summer of 1999, which is what he had advised Revenue Canada in a January 29, 2001 letter.

237Mr. Sui’s first response to Ms. Sokoloff with respect to the financial statements was in a memo dated August 31, 1999, where he begins “I have finally had a chance to review the draft financial statements for CSP as at November 30, 1998…”

238When the financial statements¹ were received, and Mr. Sui wrote to Ms. Sokoloff on August 31, 1999, the evidence shows that Mr. Sui’s next step was to seek further information about those financial statements, which he did not do until two years later on August 3, 2001 when he asked again for the same information.

239Mr. Sui gave evidence to explain his delay. He testified that from December 1998 to May of 1999, he was very busy setting up his new practice in Vancouver, plus a location in Toronto. He had family commitments. He was trying to get his billings going. He was travelling a lot and for him, it was “a question of survival.” He also had to meet people to get advice on how to respond to the defendants. Then, after he abandoned the Vancouver lease, he was faced with litigation from the landlord. He said he did not pursue this matter after September 1999 because he needed to complete that litigation before he could turn his mind to this dispute with the defendants. Mr. Sui ultimately reached a settlement with the landlord in March 2001. The defendants also reached a settlement with the landlord in March 2001. His next correspondence to deal with his dispute with the defendants was August 31, 2001, where he requested a breakdown of net income and drawings allocated to him in November 30, 1998.

240I accept that the plaintiff may have been very busy. However, I find it difficult to reconcile the thrust of his evidence – that it was critical he obtain financial statements to settle this dispute and deal with his tax issues – with his delay and refusal to take the defendants up on their offers to meet with him to resolve this. Mr. Sui’s action, and more particularly, lack of action raises doubts with respect to his motives in this litigation, and his credibility. I note the findings of my judicial colleague, Associate Justice Abrams, who found that there were “not insignificant periods of delay” by the plaintiff in this action, and her rejection of “the notion that the defendants ‘constitute the principled reason why this case has progressed so slowly.’”

241I also do not accept that his failure to deal with this issue, and his resulting inability to file his 1998 tax return can be legitimately explained by his “busy-ness”. Many individuals have busy lives, but this is not an excuse not to comply with one’s tax obligations under the Income Tax Act, R.S.C., 1985, c. 1 (5th Supp.).

242The plaintiff asserts that the only way upon which he could compel production of the final financial statements was by launching this proceeding in December 2001, which resulted in the defendants delivering final financial statements as at November 30, 1998 on January 16, 2002. I reject this assertion. It fails to explain the more than two year delay on the part of Mr. Sui to turn his mind to the draft financial statements provided to him at least by the summer of 1999, and most likely, by May 14, 1999. Moreover, the final version of the November 30, 1998 financial statement delivered on January 16, 2002 had values that were only marginally different than the draft sent to Mr. Sui by the summer of 1999. Therefore, I cannot conclude that the defendants breached their fiduciary obligation to disclose the November 30, 1998 financial statement in a timely manner. To the extent there was any delay, there was acquiescence on the part of the plaintiff.

243With respect to the final financial statements as at December 31, 1998, the plaintiff argues they were not provided to him on a timely basis. The evidence shows that they were sent to Mr. Sui’s counsel on January 9, 2006.

244I appreciate the defendants’ perspective that the December 31, 1998 financial statements were not relevant to Mr. Sui. They understood a financial cut-off date of November 30, 1998 governed, and the parties were operating separately in the month of December, working on their own files, billing on their own files, and collecting fees on their files. Moreover, the evidence of Mr. Krishna, the Partnership’s accountant, was that the December 31, 1998 financial statement was prepared for the purposes of determining the net revenue of the four defendants for the 1998 tax year. It was prepared by working backwards from the draws the plaintiff had taken and the estimated value of assets assigned and transferred to him. They were not necessary for the plaintiff to file his 1998 tax return.

245However, in my view, the parties remained partners until December 31, 1998. The obligation among partners is of utmost good faith and in my view continued so long as they were partners, which continued until December 31, 1998, even if only for administrative purposes. In the same manner that I found the delay in disclosing draws taken by the defendants in December added to suspicion and distrust, I am satisfied that the delay in delivering the December 31, 1998 financial statements had a similar effect inconsistent with a fiduciary’s obligations.

246I cannot conclude, however, that the failure to deliver financial statements on a timely basis caused Mr. Sui to incur the significant tax liability which he has and seeks to foist on the defendants. For this reason, restitutionary damages are not appropriate. I discuss this issue next.

247I decline to award further damages with the goal of deterrence for the defendants’ delay in delivering the December 31, 1998 financial statements. I have already awarded $50,000 in damages, grounded in deterrence, for the defendants’ delay in disclosing the draws they took for the month of December. A message of deterrence around the importance of disclosure among fiduciaries has already been made.

Restitutionary Damages from Delay in Delivering Financial Statements

248The plaintiff states that his accountant, David Joe, reviewed the financial statements as at November 30, 1998, and found there were inconsistencies to be resolved. Mr. Joe advised Mr. Sui not to file his income tax return for 1998. His concerns were set out in a report, dated March 12, 2002.

249The plaintiff states that he was also advised by an individual at Canada Custom and Revenue Agency (CCRA, now Canada Revenue Agency or CRA), Robert Aimssah, not to file his 1998 tax return or for subsequent years until he was able to submit his 1998 tax return. Mr. Sui states he understood that if he filed tax returns for subsequent tax years, he would have to file adjustments thereafter when the 1998 tax return was finally filed.

250Mr. Sui’s evidence was that the defendants knew that Mr. Sui would have difficulty filing tax returns for subsequent years without correct financial statements being provided to him. This was because, if Mr. Sui filed for subsequent years, his income reserves from 1995 of $62,173.14 would be deemed to have collapsed and would disproportionately increase his income for the 1999 tax year.

251On cross-examination, Mr. Sui was taken to the November 30, 1998 financial statements. He acknowledged that the financial statement for the period from May 1, 1998 to November 30, 1998, showed each partner’s capital contributions, net income, and drawings. He also acknowledged that for the month of December 1998, he would have been able to determine what his WIP and AR would have been since he actually received these amounts consistent with the parties’ agreement.

252Based on the evidence, I find that Mr. Sui had sufficient information to complete his 1998 income tax return by at least the summer of 1999. He knew the amounts of the draws taken, the value of AR that were assigned to him when he left the partnership, the value of the WIP, and the value of the Partnership assets assigned to him (furniture, computers, etc.). While some of these amounts may not have been known with precision, I am satisfied that he would have been capable of making reasonable approximations based on the best information he had. Before I turn to whether he should have filed a return with information that may have been incorrect, I briefly describe some facts around his tax payments and filings.

Facts Relating to Mr. Sui’s tax payments and filings

253Some of these facts are identified in a decision of Justice Little of the Tax Court, Sui v. The Queen, 2011 TCC 342. Others are taken from evidence at trial.

254Mr. Sui did not file his 1998 tax return by its due date in June 1999. Mr. Sui testified that he couldn’t recall if he made quarterly tax installments for the 1998 taxation year. In my view, given my concerns about his credibility, it is more probable that he did not.

255The Minister of National Revenue (“Minister”) requested that Mr. Sui file his 1998 and 1999 tax returns by January 18, 2000. Mr. Sui advised the Minister he could not file his 1998 and 1999 returns because he was unable to ascertain his losses from the Partnership allocated to him. The Minister requested that his 1999 tax return be filed, and that it would be possible to adjust his 1999 tax return once his 1998 losses had been determined.²

256On June 29, 2000, Mr. Sui spoke with a CCRA representative and agreed to file his 1998 and 1999 tax returns by July 31, 2000

257Notwithstanding that agreement, Mr. Sui filed his 1999 return in October 2000.

258On March 19, 2001, the Minister reassessed Mr. Sui’s return for the 1999 taxation year and determined that $59,810.44 was payable. Because no return was filed for 1998, his 1995 income reserve of $62,173.14 was deemed to have collapsed and could not be used to offset his income in 1999.

259However, on July 23, 2001, a representative of the Minister advised that once the 1998 return was filed, an amendment to the 1999 return could be requested.

260In 2008, a new representative of the Minister was assigned, who requested that Mr. Sui file all outstanding returns.

261By March 2009, Mr. Sui filed tax returns for 2000, 2001, 2002 and 2003.

262In September 2009, the Minister accepted Mr. Sui’s tax returns for the 2000 to 2003 taxation years and assessed the 1998 and 2004 to 2007 taxation years without tax returns.

263At issue before Justice Little was whether Mr. Sui could file a Notice of Appeal for the 1999 taxation year. Justice Little held he could not, because it was not possible to extend the time to initiate an appeal.

264In either 2014 or 2015, Mr. Sui eventually filed his 1998 tax return.

265As of February 20, 2017, CRA issued to Mr. Sui a Requirement to Pay forthwith $1,132,368.03 in tax liability. Mr. Sui’s testimony was that he has not paid interest on his tax liability from 2000 to 2017, nor the penalties. A more recent statement from the CRA, dated March 12, 2020, shows that the amount outstanding is now $1,029,554.91, and that Mr. Sui failed to pay taxes in every year from 2000 to 2017.

Should Mr. Sui have filed his 1998 income tax returns, if he held the view that the information from the financial statements was not correct?

266Mr. Sui’s accountant, Mr. Joe, advised Mr. Sui not to file his 1998 tax return. In his March 12, 2002 report to Mr. Sui, he identified inconsistencies in the financial statements, and had Mr. Sui’s 1998 income tax return relied on that information, it would have resulted in erroneous information in his return. Those inconsistencies were:

(a) equity of $174,502 being allocated to Mr. Sui, rather than the $160,911 allotted to the other full-time partners (a difference of $13,591);

(b) in the reconciliation of net income, $174,502 is allocated to Mr. Sui, but the other full-time partners are assigned $92,450 (a difference of $82,502);

(c) a large partner draw was assigned to Mr. Sui in the amount of $194,132 (while others received approx. $35,000 to $40,000) which Mr. Joe seemed to accept could account for the WIP and AR Mr. Sui received, although Mr. Sui was advised to get the working papers to verify the accuracy of these numbers; and

(d) an explanation was sought for a minor $5,000 variation in draws among the other partners.

Given these inconsistencies, he advised it would be prudent to wait for resolution of the inconsistencies before filing his 1998 tax return.

267Considering Mr. Joe’s concerns, should Mr. Sui have filed his 1998 income tax return with the best available information he had, or was it reasonable for him not to?

268Mr. Joe testified. He is a chartered accountant with 40 years experience. He confirmed the advice he gave to Mr. Sui about not filing his 1998 tax return until the discrepancies were addressed.

269On cross-examination, Mr. Joe acknowledged that he was first engaged by Mr. Sui in 2001 in this matter, after the filing deadline for the 1998 and 1999 tax returns had passed.³ He also acknowledged that, if the parties had reached an agreement with respect to Mr. Sui receiving an unequal assignment of AR, furniture and equipment, that could have explained the higher allocation of draws to Mr. Sui. He also testified that Mr. Sui did not give him information about the AR and WIP that he received. He further testified that a prudent taxpayer, even if they do not file their tax returns on time, should still pay quarterly tax payments on time.

270Brook Scarr, a further expert retained by the plaintiff, gave evidence by way of affidavit and a report. Mr. Scarr is a chartered professional accountant specializing in tax and financial management, with over 30 years experience in tax planning and compliance. Like Mr. Joe, Mr. Scarr opined that it would be reasonable and prudent for a taxpayer in Mr. Sui’s circumstances to not file a personal income tax until he is certain of the income he is subject to taxation on.

271In Mr. Scarr’s report, he offered the following reasons for his opinion. There are penalties to which a taxpayer is liable when filing an incorrect tax return. It is a serious offence to file a false return. A taxpayer is liable to serious penalties for such actions as making representations that are incorrect, false statements, omissions, repeated failures to report income, and misrepresentation out of neglect, carelessness or willful default or committing of a fraud.

272He also offered negative consequences of filing an incorrect return, including the difficulty of amending a tax return subsequently, having the integrity of the taxpayer called into question, and the triggering of various timelines.

273On cross-examination, Mr. Scarr agreed that it would be reasonable for a taxpayer to make quarterly payments of their taxes on amounts that they believed to be correct. He agreed that if a taxpayer has an estimate of their tax liability, and depending on their level of certainty, they ought to pay. However, he noted the concern that the CRA can apply payments to prior year’s balances, and not in the manner the payor intended. He stated he would not advise a taxpayer not to make a payment that they are obliged to make. He also explained that his opinion was specific to this case. If the inconsistency in income was a small amount, a taxpayer should file. If it was a significant amount, it was more likely that a taxpayer would not file. He said it would depend on the circumstances and is a judgment call.

274He also confirmed that the CRA would need to be satisfied that there was wilful neglect or misrepresentation by the taxpayer for the taxpayer to be subject to serious penalties. It would be more difficult for the CRA to impose those penalties if the tax return contained an honest mistake. The fact that a chartered accountant prepared financial statements on which an income tax return was based would not be dispositive.

275The defendants also called a tax expert, Alexandra Spinner, who provided an expert report and who testified. Ms. Spinner is also a chartered accountant and provides advice on personal and corporate tax compliance. She is a consultant in matters involving allegations of negligence in tax related matters.

276Ms. Spinner’s evidence was that Mr. Sui had an obligation to file based on the best available information. Even when the information is not complete, a taxpayer still has an obligation to file on time under the Income Tax Act (ITA). She notes that Mr. Sui, after filing his 1998 return, could have (a) filed an objection under s. 165(1) of the ITA to ensure his return could be amended, (b) filed an Adjustment Request under s. 152(4.2) of the ITA; or (c) sought a waiver of any interest charges on the 1998 return.

277She testified about the concerns raised by Mr. Scarr about the obligation to file information honestly and the consequences of not doing so. She stated that in circumstances where a taxpayer has engaged in gross negligence or wilful neglect, then it is possible for the CRA to impose significant penalties, but in her experience, this was not a regular occurrence. She stated that if Mr. Sui did not file a tax return, he could have nonetheless made installment payments based on an estimate of what he owed. If the amount he owed was higher, he would only be levied interest and penalties in relation to the portion in excess of what was paid. She stated that penalties only apply if there is an underpayment and an assessment of gross negligence. She distinguished between filing a return fraudulently, which could attract significant consequences, versus filing a return incorrectly, which would not.

278In my view, Mr. Sui ought to have filed a 1998 tax return with the best available information he had available to him from the November 30, 1998 financial statements, and his own information of income he received in December 1998. He should have done so on a timely basis. I prefer the expert evidence of Ms. Spinner over that of Mr. Scarr on this issue. Mr. Scarr admitted that the decision not to remit a tax return was a “judgment call”. I may be prepared to accept that it is prudent and reasonable for a taxpayer not to remit a tax return for a brief period when significant amounts of income are uncertain. However, in these circumstances, when several years passed, part of the “judgment call” referenced by Mr. Scarr must be a consideration of the accumulation of significant interest and penalty charges when tax returns are not filed, and which accrue with each year. In Mr. Sui’s case, those charges exceeded $1.3M.

279Moreover, as I found, I am satisfied Mr. Sui had sufficient information to determine his income for the purposes of filing his 1998 return, even if it was subject to subsequent corrections. He knew that more income was being attributed to him than the other partners because he was solely collecting WIP and AR on files over which he was responsible, even if he disputed the final numbers. Furthermore, and in any event, it was incumbent on Mr. Sui, in my view, to make tax installment payments based on what he believed was his income to mitigate interest and penalty charges. It would be manifestly unfair and unjust to pass on these avoidable costs to the defendants.

280For the reasons given, I am not satisfied that any breach of the defendants’ fiduciary obligations to Mr. Sui around the timely disclosure of financial statements caused Mr. Sui to incur the significant interest and penalties imposed by the CRA. The losses Mr. Sui incurred were not caused by the defendants, and I decline to award equitable compensation for them: see Southwind v. Canada, 2021 SCC 28, [2021] S.C.J. No. 28, at para. 73.

281Similarly, I would not grant equitable compensation for Mr. Sui’s legal and accounting fees. As I have found, Mr. Sui had sufficient information to file his 1998 tax return, and if some information was incorrect, there were opportunities available to him to correct or amend his 1998 return. Equity does not support granting Mr. Sui these costs, given his own delays in dealing with this issue with the defendants, and after he rebuffed their reasonable and frequent attempts to resolve this with him.

b. Failure to provide other financial information

282The plaintiff states that the defendants failed to produce financial information, notably the working papers relied upon by the Partnership’s accountant that led to the financial statements being prepared. The plaintiff states those working papers were not disclosed until part way through this trial. They were relevant for the purpose of determining what bad debt was in fact collected by the Partnership, and to determine whether the capital Mr. Sui received was equitable. The failure to produce this information in a timely manner, the plaintiff argues, was a breach of the defendants’ fiduciary obligations.

283The disclosure of this information was relevant for the purposes of the determining whether further adjustments were owed to Mr. Sui, but I have already concluded that the parties agreed to settle their affairs at the January 15, 1999 meeting without further adjustments. Nonetheless, I still consider whether the defendants’ conduct was in breach of their fiduciary duties.

284For the following reasons, I am satisfied that the defendants exercised reasonable efforts to produce relevant financial information to the plaintiff in a timely manner. If there were delays, partial responsibility rests on the shoulders of the plaintiff or his counsel.

285The defendants produced a PC law disc to the plaintiff in 2002 with relevant financial information of the Partnership. That disc was lost by plaintiff’s counsel six years later in 2008. Then, four years later, in 2012, the plaintiff took the position that the PC law disc did not contain information it ought to have contained. This was 13 years after this dispute arose between the parties. Then, 17 years after this dispute first arose, in 2016, the plaintiff’s expert produced her first report in which she assigned all the bad debt as having been collected by the defendants.

286I accept that litigants, especially lawyers who worked as partners together, have a duty to retain and disclose relevant records. However, it would appear that the treatment of the bad debt did not become a live issue in this case until 17 years after this dispute first arose.

287The Partnership’s accountant, Mr. Sam Krishna, provided evidence at trial. He prepared the November 30, 1998 financial statements for the Partnership, as well as a December 31, 1998 financial statement. After he prepared these financial statements, he merged his accounting practice with BDO Dunwoody LLP (“BDO”), and he became a partner at BDO and his files became the property of BDO. Mr. Krishna retired from BDO as of April 30, 2004.

288In early 2002, there was much correspondence exchanged between the parties’ counsel wherein the plaintiff was seeking access to accounting documents. Many documents were made available for inspection on February 25, 2002. By that time – three years after the events giving rise to this litigation – some were not immediately available as explained by the defendant’s bookkeeper in a memo shared with plaintiff’s counsel. On March 12, 2002, the defendants’ counsel advised that the defendants did not have some requested documents in hard copy, but that the same accounting information was contained in various computer reports and journals in the PC law database, and the plaintiff was provided with an opportunity to inspect them. In addition, the defendants offered to have the plaintiff and his own consultant inspect the source data.

289On March 13, 2002, parties appeared before Greer J. where she ordered, among other things, the defendants to ask their accountant, Mr. Krishna, to provide his working notes and papers used in the preparation of the financial statements.

290Following the appearance before Greer J., on May 16, 2002, Ms. Kim McArthur of BDO provided answers to some questions raised by the plaintiff’s accountant, Mr. David Joe, regarding the Partnership’s financial statement. On July 11, 2002, Mr. Krishna discovered further supporting documents for his journal entries that he shared with Ms. McArthur.

291The evidence before me suggests that this issue next arose 14 years later. On September 27, 2016, November 8, 2016, and January 4, 2017, plaintiff’s counsel again requested access to BDO’s files relating to Mr. Krishna’s preparation of financial statements.

292Based on this history, the fact that the BDO working papers belonged to BDO and that the defendants made efforts to have them available and inspected by the plaintiff in 2002, I am satisfied that the defendants exercised reasonable efforts to provide financial disclosure prior to trial proportionate to the issues in this case. I cannot conclude they breached their fiduciary obligations on this issue.

F. CONCLUSION

293For the reasons given, I order the defendants, jointly and severally, to pay to the plaintiff:

294Damages for the tort of conversion in the amount of $65,226.15. Prejudgment interest, at rates fixed under the Courts of Justice Act, is to be applied to this amount as of January 1, 2006.

295Damages for breach of fiduciary duties, in the amount of $50,000, on which no prejudgment interest shall be payable.

296Postjudgment interest is granted at rates prescribed under the Courts of Justice Act.

G. COSTS

297Parties are encouraged to agree on an appropriate cost award. If costs are not resolved, the parties may make cost submissions not exceeding five pages, attaching any necessary and relevant documents. The plaintiff shall deliver his cost submissions within 14 days. The defendants shall deliver their cost submissions 14 days thereafter. As there was mixed success at trial, I do not invite the parties to make reply submissions.

Justice M. Sharma

Released: May 17, 2022

COURT FILE NO.: CV-19-622271

DATE: 20220517

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ERWIN SUI

Plaintiff

– and –

Daniel Chitiz, Manoj Pundit, Sumesh Paul Pathak and RISA SOKOLOFF

Defendants

REASONS FOR JUDGMENT

Mohan D. Sharma J.

Released: May 17, 2022

Footnotes

I note that this version of the November 30, 1998 financial statement remained in draft form. The final audited financial statement for the same period, prepared by an accountant Sam S. Krishna on April 28, 1999, had values that were only marginally different than the draft sent to Mr. Sui by the summer of 1999. There appeared to only be a $4,000 difference in the accounts payable and the partner’s equity. All other amounts (AR, WIP, capital assets, trust fund liability) remained the same.
While Mr. Sui may have argued before the tax court that his dispute with the defendants revolved around determining his losses, the issue in this trial was clearly whether the defendants owed more income to Mr. Sui.
On re-examination, he corrected himself and indicated he was engaged in August of 2000. Although, this is still after the 1999 filing deadline.

A. PROCEDURAL HISTORY

B. SUMMARY OF FACTS

C. ISSUES TO BE DETERMINED

D. CREDIBILITY OF WITNESSES

E. ANALYSIS

Issue #1: Was Mr. Sui expelled from the Partnership, with or without sufficient reason, and was he invited to continue working from the Toronto office?

Issue #2: Was there an agreement reached with respect to the terms of Mr. Sui’s departure, and if so, what were the terms?

The Expert Reports Valuing Mr. Sui’s Entitlement

What is the effect of the parties’ January 15, 1999 agreement on other claims Mr. Sui has made?

a. Dissolution, an Accounting and Winding-up

b. Liability re: Vancouver Lease

Issue #3: Was the financial cut-off date for the Partnership November 30, 1998 or December 31, 1998?

Issue #4: The Peabody Shares – Are they a Partnership or personal asset? The torts of conversion and detinue, and assessment of damages

What is the tort?

Does the plaintiff have a valid claim in conversion or detinue against the defendants?

What are the damages?

RW Packaging Shares

Issue #5: Breach of fiduciary duties and assessment of damages

Damages for expelling Mr. Sui from the Partnership

Failure to disclose draws

Failure to disclose Financial Information

a. Failure to disclose Financial Statements for Income Tax Purposes

Restitutionary Damages from Delay in Delivering Financial Statements

Facts Relating to Mr. Sui’s tax payments and filings

Should Mr. Sui have filed his 1998 income tax returns, if he held the view that the information from the financial statements was not correct?

b. Failure to provide other financial information

F. CONCLUSION

G. COSTS

Footnotes

A. PROCEDURAL HISTORY

B. SUMMARY OF FACTS

C. ISSUES TO BE DETERMINED

D. CREDIBILITY OF WITNESSES

E. ANALYSIS

Issue #1: Was Mr. Sui expelled from the Partnership, with or without sufficient reason, and was he invited to continue working from the Toronto office?

Issue #2: Was there an agreement reached with respect to the terms of Mr. Sui’s departure, and if so, what were the terms?

The Expert Reports Valuing Mr. Sui’s Entitlement

What is the effect of the parties’ January 15, 1999 agreement on other claims Mr. Sui has made?

a. Dissolution, an Accounting and Winding-up

b. Liability re: Vancouver Lease

Issue #3: Was the financial cut-off date for the Partnership November 30, 1998 or December 31, 1998?

Issue #4: The Peabody Shares – Are they a Partnership or personal asset? The torts of conversion and detinue, and assessment of damages

What is the tort?

Does the plaintiff have a valid claim in conversion or detinue against the defendants?

What are the damages?

RW Packaging Shares

Issue #5: Breach of fiduciary duties and assessment of damages

Damages for expelling Mr. Sui from the Partnership

Failure to disclose draws

Failure to disclose Financial Information

a. Failure to disclose Financial Statements for Income Tax Purposes

Restitutionary Damages from Delay in Delivering Financial Statements

Facts Relating to Mr. Sui’s tax payments and filings

Should Mr. Sui have filed his 1998 income tax returns, if he held the view that the information from the financial statements was not correct?

b. Failure to provide other financial information

F. CONCLUSION

G. COSTS

Footnotes

Cited By (1 case)

Sui v Chtiz , 2022 ONSC 5024

Cited By (1 case)

Sui v Chtiz , 2022 ONSC 5024