Court File and Parties

COURT FILE NO.: CV-20-643016

DATE: 20220922

ONTARIO SUPERIOR COURT OF JUSTICE

RE: BLUECORE CAPITAL INC., Plaintiff

-and-

SERGIO GRILLONE, GRILLONE LAW FIRM, 1894931 ONTARIO LIMITED, GRILLONE, BEKIARIS LLP, GEORGE BEKIARIS, BEKIARIS LAW FIRM, LISA ROBERTA GATTO, KEVIN SCULLION, KEVIN J. SCULLION PROFESSIONAL CORPORATON, carrying on business as SCULLION LAW, TATIANA ARTURAOLA, VARINDER PUREWAL, also known as VIC PUREWAL and PUREWAL LAW, Defendants

AND BETWEEN:

SERGIO GRILLONE and GRILLONE LAW FIRM, Plaintiffs by Counterclaim

-and-

BLUECORE CAPITAL INC., BLUECORE PARTNERS INC., BLUECORE PARTNERS 4 INC., BLUECORE II PARTNERS INC., BLUECORE PARTNERS 3 INC., BLUECORE II CAPITAL INC., SEA SAE ADVISORY SERVICES INC., 94444244 CANADA INC., ANVIPE CAPITAL INC., CANOR FINANCIAL INC., CIVIS LAW LLP, FLAHERTY MCCARTHY LLP, KROEKER LAW PROFESSIONAL CORPORATION, PACEM NORTH CANADA INC., TODD J. MCCARTHY PROFESSIONAL CORPORATION, TODD J. MCCARTHY, JEFFREY KROEKER, TRUE BLUE CAPITAL INC., TULLIO A. D'ANGELA PROFESSIONAL CORPORATION and TULLIO A. D'ANGELA, Defendants by Counterclaim

BEFORE: F L Myers J

COUNSEL: Anton Tzanov,, for the Defendants by Counterclaim, Sea Sae Advisory Services Inc ., 94444244 Canada Inc ., and Pacem North Canada Inc.

M. Scott Martin and Jennifer L. Siemon, for the for the Defendants by Counterclaim, Civis Law LLP, Kroeker Law Professional Corporation, and Jeffrey Kroeker

Sergio Grillone, on his own behalf

HEARD: September 20,2022

ENDORSEMENT

[1] I heard motions to strike the counterclaim brought by two sets of defendants by counterclaim. On consent of Mr. Grillone, his counterclaim is dismissed as against Mr. Tzanov’s clients. Mr. Grillone also consents to an order dismissing the counterclaim against Kroeker Law Professional Corporation.

[2] Until he became ill, Mr. Grillone carried on a personal injury law practice. He acted principally for plaintiffs and was paid on a contingent fee basis. He needed financial support carrying disbursements.

[3] Bluecore Capital Inc. claims it loaned about $1.5 million to Mr. Grillone for his law practice. It sues for recovery of the debt.

[4] Mr. Grillone counterclaims against Bluecore for failing to take over and manage his practice while he was away ill. He also claims that Bluecore is liable to him for failing to disclose that one the members of its board of directors was a lawyer who acts mostly for insurance companies defending personal injury claims. Mr. Grillone views the other lawyer as an “adversary”.

[5] Mr. Kroeker is a director and officer of Bluecore. He also acted as counsel to the lender in negotiations with Mr. Grillone’s counsel Mr. Scullion. Mr. Grillone claims that Mr. Kroeker and his law firm Civis Law LLP are liable to him along with Bluecore.

[6] Mr. Kroeker submits that there is nothing pleaded in the counterclaim that can support a claim against him personally or as counsel for the creditor. I agree. Accordingly, the counterclaim is struck out as against them.

[7] The tougher issue is whether to grant leave to amend.

[8] Mr. Kroeker and his law firm have chosen their procedural route. Rather than defending and bringing on their defences on the merits, they move under Rule 21 to strike the counterclaim as disclosing no reasonable cause of action. The Court of Appeal has held that leave to amend must be granted unless it is not possible to plead a cause of action on the facts alleged. Conway v. The Law Society of Upper Canada, 2016 ONCA 72 at paras. 16 and 19. Even if I can look at the relevant documents as incorporated in the counterclaim as requested by Mr. Martin (with Mr. Grillone’s consent), they do not prevent Mr. Grillone from pleading a cause of action.

[9] Mr. Grillone was clear that at this stage he is not concerned with pleading a meritorious claim that will win the day. He submits that he has (or will) plead enough of a claim to be entitled to proceed. One can question the appropriateness of that position. It might be that Mr. Grillone is trying to delay recognition of his indebtedness so as to stave off the bankruptcy proceeding that is outstanding against him. But if that is the case, Mr. Kroeker has provided him a procedural paradigm in which he is technically able to do so. All that is in issue on this motion is whether the plaintiffs in the counterclaim have or can plead tenable cause(s) of action.

[10] Mr. Grillone will now take the education that Mr. Kroeker has so kindly given him on this motion and plead anew perhaps with greater precision and consequence.

[11] The difficulty for Mr. Kroeker is that one can almost always allege a tort absent a contractual bar. I can look at the contemporaneous correspondence and say that the claim looks weak and against the preponderance of probabilities of what appears to have been happening at the time, but that is not before me today. There has been no discovery and no evidence adduced beyond the few documents in the record. I cannot make findings of fact on a few disembodied emails to conclude that they preclude a plea of any and all causes of action.

[12] As mentioned above, there are two elements to the claim. First, Mr. Grillone says that from the date of the first loan discussions, well before his practice faltered, Bluecore ought to have disclosed the identity of its board member to him. He laments having unknowingly disclosed his finances to a defence lawyer who might be able to use knowledge of his financial embarrassment in settlement negotiations in cases in which they are “adversaries”. This rather personalizes the relationship among professional colleagues in a personal injury lawsuit. However, with the plaintiff’s lawyer being compensated from the proceeds of the lawsuit on a contingent fee basis, it would be naïve not to recognize that he has a personal stake or interest in the outcome and may then personalize the position of counsel opposite.

[13] The counterclaim uses the words “conspiracy” and “fraud” colloquially en passant. It does not allege either cause of action by setting out the constituent elements of either tort. It does not allege that the board member actually used any information improperly. In fact there is no allegation that the board member ever became privy to any information about Mr. Grillone’s practice before the time he became ill.

[14] Mr. Grillone’s oral submissions were premised upon the lender having a positive duty to disclose proactively the potential interest of its board member. I am unaware of such a duty at law. No legal basis for a positive duty to disclose is pleaded or referred to in Mr. Grillone’s material for this motion.

[15] Mr. Grillone pleads that the lender undertook fiduciary duties to him when he became ill. Nothing is pleaded to suggest that the lender owed Mr. Grillone fiduciary duties before then.

[16] The story continues that as Mr. Grillone became ill, the lender had discussions with Mr. Grillone and his counsel Mr. Scullion. The lender was represented in the discussion by Mr. Kroeker both perhaps as its operating mind and counsel.

[17] Mr Grillone pleads that the lender undertook to run his practice and to keep creditors paid so as to maximize recovery for all of them. He does not plead how that undertaking became binding. This is especially troubling because on the contemporaneous emails, it appears that what the lender offered was to have the previously mentioned adversary lawyer take over Mr. Grillone’s practice as locum tenens pursuant to a Power of Attorney to be granted by Mr. Grillone in an LSO approved form. At some point, another lawyer was put forward as the potential locum tenens rather than the adversary/undisclosed board member.

[18] Despite negotiations among Mr. Kroeker and Mr. Grillone’s counsel, Mr. Grillone did not sign a Power of Attorney. As he deferred signing, the lender threatened to go to court to have similar terms or a trusteeship under the LSO imposed on Mr. Grillone’s practice by the court.

[19] Mr. Grillone pleads that the lender’s threat to take enforcement proceedings was in fact an undertaking to implement the locum tenens to thereby take over Mr. Grillone’s practice and pay all of its creditors without Mr. Grillone signing a Power of Attorney. Mr. Grillone pleads that he relied on the undertaking of Bluecore to go to court and take over his practice to protect its value.

[20] Ultimately Bluecore chose not to go to court to seek the appointment of a receiver or an LSO trustee for Mr. Grillone’s practice. With no one in charge and no money, Mr. Grillone’s practice failed and Mr. Grillone signed it over to the LSO for trusteeship later.

[21] Mr. Grillone is suing Bluecore for not enforcing its debt against him to protect his business as “undertaken” and “represented” in the negotiations towards an agreement to appoint a locum tenens under a Power of Attorney.

[22] Mr. Grillone does not plead that an agreement was ever concluded. Perhaps that is because he never signed the Power of Attorney. Rather, he treats the word “undertaking” as conveying contractual or binding force.

[23] In addition, he treats an offer of future performance as a representation on which he purports to rely thereby obtaining binding force. But to sue for negligent or fraudulent misrepresentation, a representation must concern a statement of existing fact. An offer of future performance is the stuff of contracts. If not accepted, it is just an unaccepted offer.[^1]

[24] There is no basis pleaded for Mr. Kroeker or his law firm to have or to have had contractual, common law, or fiduciary duties to Mr. Grillone. The fact that Kroeker is quoted as the source of statements in negotiations among the lender and borrower does not per se give him liability. Neither does the bald allegation that the law firm is “directly or indirectly involved in the business and financial affairs of Bluecore”.

[25] Mr Grillone pleads:

94. The Defendants by counterclaim, but more specifically Kroeker, [and others], owed fiduciary duties to the Plaintiffs by Counterclaim. Sergio trusted and relied on Kroeker… to exercise the care, diligence and skill of reasonable lawyers and law firms in the circumstances. Sergio and GLF were vulnerable to, and at the mercy of the Defendants by Counterclaim at all material times but in particular from May 2019 to January 2020 when Sergio's medical leave was most acute in nature and they were fully aware of and took advantage of Sergio's vulnerable position. Accordingly, the Defendants by Counterclaim stood in a fiduciary relationship to the Plaintiffs by Counterclaim.

[26] The difficulty with this pleading is that nothing pleaded before this point provides a hint of how Mr. Kroeker or his firm could have acquired fiduciary duties to Mr. Grillone to exercise care as his lawyer or a lawyer owing him fiduciary duties. Facts alleging the requisites of a lawyer’s duty of care are not pleaded let alone a fiduciary duty. Mr. Kroeker was the principal, a director, and lawyer for the lender. Mr. Grillone had his own lawyer Mr. Scullion. A creditor threatening to enforce a debt is not exercising a discretionary authority over the debtor so as to require creditor to act solely in the interest of the debtor. None of Bluecore, Mr. Kroeker, or his law firm had the unilateral authority to appoint a receiver over Mr. Grillone’s business without a court order. Mr. Grillone remained free to participate and take whatever position he wanted in enforcement proceedings had any been brought by Bluecore at the time.

[27] Pleading a cause of action requires more than just the use of the magic words like, “fiduciary duty”. There must be a pleading of a concise and coherent set of facts which, if true, provides a basis for liability to be found at trial. There are no such facts pleaded as yet in relation to Mr. Kroeker personally or his firm.

[28] As there is no contract alleged, the duty of good faith performance of a contract cannot have been breached either.

[29] There are no facts currently pleaded against the law firm at all and no basis is provided for it to be liable.

[30] Mr. Grillone does not have an easy task to re-cast the claims against Mr. Kroeker and his firm. But there may be facts from which one could try to plead an agreement and torts in relation to how the debtor/creditor relationship played out. Whether Mr. Grillone can allege the types of facts that can make Mr. Kroeker liable either personally as a tortfeasor or as a lawyer owing a non-client a duty, remains to be seen. One would like to think that nothing will be pled that Mr. Grillone knows he cannot prove. Allegations of intentional torts and breaches of fiduciary duties against professionals are serious. As pleadings are protected from claims of defamation, there is always a risk that they can be mis-used to inflict harm.

[31] If Mr. Grillone cannot assert provable facts to continue to sue Mr. Kroeker and/or his firm, he should not do so. But, I cannot say that there are no tenable causes of action that can be brought against Mr. Kroeker and vicariously against his firm in the general circumstances described.

[32] I leave to the parties the determination of the precise order to strike out the claims against Mr. Kroeker and his firm. The facts involving Mr. Kroeker can remain in relation to the claims by and against others. It is the effort to hold Mr. Kroeker and his firm liable that are to be struck with leave to amend.

[33] Mr. Kroeker seeks costs of the motion on a partial indemnity basis of approximately $7,700 plus HST and disbursements. As I have not dismissed the lawsuit, I do not consider other costs incurred to date. I cannot tell which disbursements relate solely to this motion.

[34] Costs generally are awarded to the successful party. Here however, I cannot tell if Mr. Kroeker really succeeded. He may have just handed Mr. Grillone a delay and taught him to plead better. If he is able to do so, the motion may have been for naught. Or, Mr. Grillone may study potentially available causes of action more closely and decide that the facts that he is comfortable pleading cannot make out any of them or they are too far-fetched to plead in good faith. In that case, the action against Mr. Kroeker and his firm may be resolved and this motion will have been a complete success.

[35] In the circumstances, it is premature to assess whether Mr. Kroeker succeeded in doing anything other than adding costs and delay himself. This is a case where, despite Rule 57.03, it is fair and reasonable for the costs of this motion to be in the cause in the counterclaim as between Mr. Kroeker, Civis, and Mr. Grillone.

F L Myers

Date: September 22, 2022

[^1]: Queen v. Cognos Inc., 1993 CanLII 146 (SCC), [1993] 1 SCR 87. Sometimes, promises of future performance may include an impliocit representation that the maker truly intends to perform as promised. The current intention may be a statement of existing fact. But that is not pleaded here either. Datile Financial Corp. v. Royal Trust Corp. of Canada, 1991 CanLII 7310 (ON SC) rev'd on different grounds 1992 CanLII 7661 (ON CA).