Court File and Parties
Court File No.: CV-21-670772 Motion Heard: 20230509 Superior Court of Justice - Ontario
Re: William Charles Buss and W. Charles Buss Professional Corporation, Plaintiffs And: Richard Stephen Clarke, Richard Stephen Clarke Professional Corporation, Stephen Deeth, Stephen Deeth Professional Corporation, Edwin Kukurs, Edwin Kukurs Professional Corporation and Deeth & Co. LLP, Defendants
Before: Associate Justice Jolley
Counsel: Marc Munro, counsel for the moving party defendants Hailey Abramsky and Bree Pierce, counsel for the responding party plaintiffs
Heard: 9 May 2023, with additional submissions 23 May 2023
Reasons for Decision
1This action arises from the acrimonious departure of the plaintiff from the accounting partnership of Deeth & Co. LLP.
2The plaintiff has sued for an accounting, a declaration that the defendants’ conduct has been in breach of the partnership agreement and also oppressive to his interests, damages for bad faith in the alternative and a quantum meruit assessment of amounts due to him. Specifically, he seeks:
(a) A declaration that the acts or omissions of the Defendants are in breach of the partnership agreement described below and have been carried on in bad faith, in a manner that is oppressive, unfairly prejudicial, and that unfairly disregards Charlie's interests as a partner in Deeth & Co. LLP; (b) An accounting of the partnership income and profits of Deeth & Co. LLP for the period commencing January 1, 2019 to the present day; (c) A mandatory Order allocating to Charlie's capital account at Deeth & Co. LLP such amounts of income and capital as may be just and equitable together with an Order directing the payment of that capital account to Charlie; (d) In the alternative, damages for the bad faith breach of a partnership agreement in the amount of $1 million; (e) In addition thereto or in the further alternative, a quantum meruit assessment of the amounts due and owing to the Plaintiffs or either of them for work performed in the 2019 year and for payment of such amount as may be due and owing; (f) In the further alternative, a declaration that the Defendants have been unjustly enriched in the amount equal to the amounts found to have been wrongfully withheld from Charlie, and an order that the Defendants disgorge these amounts to Charlie; (g) Additional damages by way of compound interest in such amount as may be awarded to Charlie at such rate of interest as may be just; (h) An Order that this action be heard together with or immediately following the hearing of the action bearing Court File No. CV-21-000003126-0000; (i) The costs of this action on a substantial indemnity basis, plus all applicable taxes; and (j) Such further and other relief as this Honourable Court may deem just.
A. Overview of the Paragraphs in Issue
3The defendants seek an order pursuant to rule 25.11 striking out paragraphs 1(h), 7-10, 22-26, 29, 38, 39, 41-43 45-47 and 51-52 without leave to amend. They argue that, if permitted to remain, these paragraphs may prejudice or delay the fair trial of the action, are scandalous, frivolous or vexatious and are an abuse of the process of the court.
Paragraph 1(h)
4Paragraph 1(h) seeks an order that the action be heard together with or immediately following Clarke v. Buss, CV-21-003126, a civil assault action brought by Emily Clarke, the daughter of the defendant Richard Clarke (“Emily”) against the plaintiff.
Paragraphs 7-10
5The plaintiff alleges that, rather than accept his resignation and pay him what he was owed, the defendants embarked on a campaign to damage him. This included having Clarke’s daughter Emily falsely accuse the plaintiff of sexual assault and commence a civil action against him. He alleges the defendants filed a complaint against him with his regulator based on Emily’s assault allegations. The defendants have also withheld consulting fees he alleges he is owed on account of work that his wife did for the firm. He pleads that the action by Emily “is a thinly disguised attempt by the defendants to punish [him] for leaving Deeth and to deny him money that is due to him.” At the end of paragraph 10, the plaintiff pleads that “this action ought to be heard in conjunction with that action”.
Paragraphs 22-26
6In these paragraphs, which the plaintiff has headed “Negotiations with the Deeth Partners”, he sets out his offer to the firm (paragraph 22) and the firm’s response on the plaintiff’s departure (paragraph 23) and their subsequent proposals.
Paragraph 29
7This paragraph pleads that a few days before his proposed departure, Emily sent the plaintiff a letter raising what he describes as her “false allegations”.
Paragraphs 38, 39, 41-43
8The plaintiff details the statements by Richard Clarke to others about what Clarke described as the plaintiff’s assault of his daughter. It sets out Clarke’s position that this was a workplace issue and should result in the plaintiff losing his accounting designation and be criminally charged. The paragraphs further details the plaintiff’s demand for payment and the subsequent exchange of letters on departure terms.
Paragraphs 45-48
9These paragraphs outline the complaint made by the firm to CPA Ontario, the plaintiff’s regulatory body, based on his alleged sexual assault of Emily, the firm’s cessation of the plaintiff’s monthly draws and the dismissal of the complaint.
Paragraphs 51 and 52
10Paragraph 51 outlines the plaintiff’s various damages claims.
11Paragraph 52 proposes that this action and Emily Clarke v Buss be tried together.
B. Decision on the trial together paragraphs - Paragraphs 1(h) and 52
12The appropriate forum to challenge a request for trial together is at the time the plaintiff brings that motion seeking that relief, not by way of motion to strike these two paragraphs from the statement of claim. To accept the defendants’ position would in effect be to decide a motion for trial together that has not been and may not be brought. This portion of the motion is dismissed.
C. Decision on the reprisal and assault paragraphs – Paragraphs 7-10, 29, 38-39, 41-42
13These paragraphs allege that Emily’s sexual assault claim was brought as a reprisal for the plaintiff leaving the firm. Paragraphs 7-10, 29 and 38-39 detail the claim allegations made by Emily. Paragraph 41 speaks of the plaintiff’s continued assistance to the firm in the face of its non-payment and paragraph 42 references the defendants’ departure proposal, which would take into account damages to the firm from the plaintiff’s alleged malfeasance.
14The defendants argue that these paragraphs cannot have any relevance to the partnership dispute. Even if the plaintiff proves these assertions, they are immaterial and have no bearing on the relief he seeks.
15This position is contrary to the plaintiff’s claim for a declaration that the acts of the defendants “have been carried on in bad faith” (paragraph 1(a)) and his claim for damages for the bad faith breach of the partnership agreement in the amount of $1 million (paragraph 1(d)). He alleges that, instead of accepting his resignation, the defendants “encouraged untrue, manufactured and outrageous allegations of sexual assault by Richard [Clarke’s] daughter, Emily Clarke for the purpose of causing him harm and escaping their obligations to him (paragraph 7). He alleges that the defendants used the alleged “misconduct” to withhold payment of his capital account and facilitated Emily’s fabrication of the assault claim “in a bad faith effort to damage Charlie and to avoid paying him the money lawfully due to him” (paragraph 9).
16In their defence, the defendants plead that “the parties understood that in the absence of a written partnership agreement there needed to be good faith negotiations” on the plaintiff’s departure (paragraphs 4, 5 and 6).
17In discussing the negotiation of any payout to the plaintiff, the firm’s counsel noted that there had been “malfeasance” on the part of the plaintiff that had to be taken into account. This included not only his solicitation of the firm’s clients but also its exposure to liability for the plaintiff’s workplace misconduct while a member of the firm, the reference being to the plaintiff’s alleged assault of Emily. The letter concluded: “As you will appreciate, the entirety of the issues pertaining to Mr. Buss’ departure from the Firm must be addressed.” (I note that, while the letter is marked without prejudice, it was included in the defendants’ compendium as part of their motion materials.)
18Both parties have acknowledged their obligation to negotiate in good faith in their pleadings. The courts have awarded moral and punitive damages where that duty of good faith and fair dealing in the performance of a contract is breached (see, for instance, Bhasin v. Hrynew, 2014 SCC 71 and, in the employment context, Honda Canada Inc. v. Keays, 2008 SCC 39 and, more recently, Galea v. Walmart Canada Corp., 2017 ONSC 245).
19As noted in Andrin Hillsborough Limited v. Eliaszadeh, 2021 ONSC 3229, at paragraph 15,
“(iv) anything which can have any effect at all in determining the rights of the parties can be proved, and consequently can be pleaded, however, the court will not allow any fact to be alleged which is wholly immaterial and can have no effect on the result; [ ... ] (viii) a pleading should be read generously with the applicable principles in mind so as not to unfairly deny a party the benefit of the pleading and motions under Rule 25.11 should only be granted in the clearest of cases.”
20I find paragraphs 7-10, 29, 38-39 and 41-42 could, if proven, support a claim for a breach of the duty of good faith in the performance of the defendants’ contractual duties. Given the central issue of whether the parties acted in good faith in their departure negotiations with the plaintiff and the payment (or withholding) of his capital and related income, I am satisfied that the paragraphs in question are neither immaterial nor irrelevant. The motion to strike them is dismissed.
D. Decision relating to the complaint to CPA Ontario, paragraphs 9, 45-47 and 51
21The plaintiff alleges that the defendants used Emily’s assault allegation as the basis for filing a complaint against him with his regulator. Further, they stopped paying his monthly draws once the complaint was filed. He alleges that the claim was ultimately dismissed but also pleads that the complaint events are subject to the confidentiality provision of the Chartered Professional Accountants of Ontario Act, 2017, S.O. 2017, c.8, sch.3 (the “CPA Ontario Act”). In paragraph 47 of his statement of claim, he characterizes the complaint as “meritless” and argues in paragraph 51 that it, along with the defendants’ other conduct, caused him to suffer loss.
22The defendants argue that these allegations are immaterial to the plaintiff’s claims. Further, reference to the discipline complaint violates section 63 of the CPA Ontario Act. Section 63 provides that “No record of a proceeding under this Act or a predecessor Act and no document or thing prepared for or statement given at such a proceeding and no decision or order made in such a proceeding is admissible in any civil proceeding [with limited exceptions that are not applicable in this action].”
23The defendants argue that the plaintiff’s reference to the complaint and its alleged outcome (which they say is inaccurate) violates the CPA Ontario Act as well. Further, if the allegation that the complaint was meritless and dismissed is permitted to remain, the defendants will be unable to prove what actually happened, as they are prohibited from tendering any document from the hearing or referencing any order or decision made. Similarly, the plaintiff is unable to prove his allegation that the complaint was dismissed as he cannot refer to the CPA Ontario decision.
24I agree with the defendants that reference to the disciplinary complaint must be struck for two reasons. First, they are incapable of proof in light of the prohibitions of the CPA Ontario Act. The Court of Appeal in F.(M.) v S.(N.), 2000 CarswellOnt 2301 affirmed a decision to strike a counterclaim that claimed malicious prosecution related to recanted allegations of sexual assault that had formed the basis of a complaint to the College of Physicians and Surgeons of Ontario. The Court of Appeal observed, “If a paragraph in a party's pleading pleads facts that cannot be proved at trial or pleads documents that cannot be admitted at trial, that paragraph may be struck out on a motion.” Because the paragraphs in question in that case “plead the complaint and the sworn recantation, both documents prepared for College discipline proceedings and therefore inadmissible in this civil proceeding, [the motions judge] was correct in striking out those paragraphs.” The same rationale applies here. I find that the alleged facts pleaded are inadmissible as evidence pursuant to section 63 of the CPA Ontario Act and are therefore frivolous, vexatious, scandalous and an abuse of process.
25Second, to permit a party to be sued for advancing a complaint is contrary to the stated policy of encouraging the reporting of complaints without fear that the complaint could be used against the complainant later. While considering the similar provision of the Health Professions Procedural Code, Gans, J. in B. (J.L.) v. Dr. B. (E.J.) (1997), 13 C.P.C. (4th) 206 (Ont. Gen. Div.) held at paragraph 209:
“The Code is designed to encourage the reporting of alleged acts of sexual abuse (s. 1.1), to provide assistance to those subjected to the same, and to eradicate this conduct on the part of the profession. If the proceedings are not clothed with an aura of confidentiality throughout, even if terminated before a hearing and ultimate decision, in my view, the underlying policy of the Code would be thwarted.”
26Further, as noted in Sussman v. Eales (1986) 25 C.P.C. (2d) 7 at paragraph 1:
“In our view, the doctrine of immunity by reason of absolute privilege with respect to statements made in the course of proceedings before a statutory body, exercising disciplinary powers over a member with respect to unprofessional conduct, applies to statements made in a letter of complaint addressed to the Registrar of the Royal College of Dental Surgeons. It is a document incidental to the initiation of quasi-judicial proceedings, and it matters not that the Complaints Committee has investigatory powers which may or may not lead to a direction that the matter be referred to the Discipline Committee. A complainant in the respondent Eales' position should not be deterred by the fear of proceedings and "the vexation of defending actions".
27For these reasons, the second sentence of paragraph 9, paragraphs 45 and 47 and the reference to “their bad faith complaint to CPA Ontario” in paragraph 51 are hereby struck without leave to amend. Paragraph 46 is to be amended to plead that Deeth stopped the plaintiff’s monthly draws, but without reference to the CPA Ontario complaint.
E. Decision on the departure negotiations, paragraphs 22-26 and 43
28The claim alleges that the plaintiff tendered his notice of withdrawal from the partnership on 13 September 2019 and made a proposal for his departure. He alleges that the defendants knew his departure would cause them a loss of business, so they refused to pay him his capital account or “gracefully” accept his resignation. Instead, they began their campaign to damage his reputation through the complaint to his regulator and the civil sexual assault action commenced by Emily, both addressed above.
29The parties agree that there was no written partnership agreement. They also agree that they were required to negotiate the terms of their business divorce. The plaintiff alleges that his terms were reasonable and the defendants’ were not. On this motion, the defendants argue that “the pleading of correspondence exchanged for the purpose of negotiating a settlement is an abuse of process since the correspondence is privileged and thus inadmissible” and should be struck.
30While this might be the case, there is no evidence before me from the defendants to support this position. There is no affidavit deposing that these were attempts at compromise or to avoid anticipated litigation. The plaintiff has included in his motion record his first letter outlining his proposal on various transition matters. While it is marked “Private and Confidential”, it does not foreshadow litigation but ends: “While this letter contemplates some of the matters I foresee us needing to deal with, it is not an exhaustive list. As matters arise, we can discuss the best way to proceed. My intention with this is to make it as smooth and amicable as possible.”
31The response from the firm, on 30 September 2019, stated “your resignation as a partner effective October 31, 2019 … shall be on the following terms….” There is no mention in the letter of compromise or negotiation.
32It was not until 29 November 2019 that either side sent correspondence from counsel. On that date, plaintiff’s counsel sent a letter to the firm demanding payment of the plaintiff’s capital account. The letter was not marked without prejudice but concluded that if repayment was not made, the plaintiff would seek instructions to declare a dissolution of the partnership and to require repayment of his capital account. The response from the firm’s counsel dated 13 December 2019 stated: “As you know, our clients have been engaged in a series of amicable negotiations pertaining to the departure of Mr. Buss from the Firm for several months since the announcement of Mr. Buss’ unexpected and sudden departure from the Firm.”
33As noted by Sable Offshore Energy Inc. v. Ameron International Corp. 2013 CarswellNS 428, while the parties need not use the words “without prejudice to invoke settlement privilege “what matters is the intent of the parties to settle”. In this instance, no one has deposed that this was the intent of the correspondence. Without that evidence, it is equally plausible that the offer was the defendants’ statement or calculation of what it owed the plaintiff and not any attempt to settle. While it is open to the court to imply an intention that the communication not be disclosed, the court must have some basis for doing so and the lack of evidence in this instance makes it inappropriate, in my view, to imply that intention on this record.
34The defendants argue, in the alternative, that the negotiations were irrelevant. As there was no agreement in place, there was no duty to negotiate the plaintiff’s departure terms in good faith. Were the plaintiff successful in proving the defendants’ negotiating position was unreasonable, the finding would be irrelevant to the issues before the court, as the plaintiff would simply be awarded whatever partnership amount was due to him. The courts have long noted that there is no duty to negotiate in good faith, absent special circumstances, and that such a duty is “repugnant to the adversarial position of the parties when involved in negotiations” (Georgian Windpower Corp. v. Stelco Inc., 2012 ONSC 3759, citing the seminal decision of the House of Lords in Walford v. Miles [1992] 1 All E.R. 453).
35While the plaintiff does not disagree with that analysis, he argues that it misses the point. Here, the parties are not negotiating a new agreement. There is a contract between the parties, and Bhasin v. Hrynew, supra, has recognized that there is a duty of good faith in the performance of contractual duties. The plaintiff intends to argue at trial that the defendants breached their duty of good faith and consequently breached the partnership agreement by failing to negotiate his departure in good faith and, instead, making malicious allegations against him to avoid paying him what he was due and attempting to pressure him by withholding his payments. He argues that these withdrawal negotiations cannot be separated from the partnership agreement in place, albeit unwritten, and argues that they support the breach of contract claim.
36I find that these paragraphs should not be struck at this pleadings stage. The defendants may succeed at trial in arguing that these were separate negotiations and not part of the parties’ agreement, but it should be open to the plaintiff to argue that their partnership agreement included a duty of good faith to negotiate his departure terms, which the defendants breached.
F. Publication Ban
37The defendants sought a publication ban with respect to the issues concerning the complaint before CPA Ontario. As that portion of the pleading is struck, no such overall ban is required. However, the defendants’ unredacted supplementary motion record shall be sealed. The defendants are also directed to remove that unredacted supplementary motion record from Caselines. If other documents in Caselines, such as the various compendiums, contain that reference, they shall be removed as well.
G. Costs
38The defendants seeks $20,701.43 in partial indemnity costs of this motion. The plaintiff seeks $30,276.85. Given the mixed success on the motion, each party shall bear his or their own costs.
Associate Justice Jolley
Date: 14 June 2023