COURT FILE NO.: CV-12-0062-00 DATE: 2024-01-10
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Warren Hughes Plaintiff (responding party)
N. Melchiorre, for the Plaintiff (responding party)
- and -
Terry Dyck Defendant (moving party)
D. Zulianello, for the Defendant (moving party)
HEARD: via ZOOM, November 29, 2023, at Thunder Bay
Madam Justice H. M Pierce
Reasons on Motion for Summary Judgment
Introduction
[1] The defendant moves for summary judgment dismissing the plaintiff’s claim on the grounds that it is statute-barred by operation of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.
[2] For reasons that follow, the motion for summary judgment is dismissed.
The Legal Framework
Summary Judgment
[3] Rule 20.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, permits a party, after delivery of pleadings, to move for summary judgment. Rule 20.04(2)(a) provides that:
(2) The court shall grant summary judgment if,
(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.
[4] Rule 20.04(2.1) permits the court, when determining whether there is a genuine issue requiring a trial, to consider the evidence filed by the parties and to exercise the following powers unless it is in the interest of justice for such powers to be exercised only at a trial:
- Weighing the evidence.
- Evaluating the credibility of a deponent.
- Drawing any reasonable inference from the evidence.
[5] The seminal case for summary judgment motions is Hryniak v. Mauldin, 2014 SCC 7 [Hryniak]. At para. 49, the Supreme Court observed:
There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
[6] The Supreme Court in Hryniak directed the motion judge to first determine whether there is a genuine issue requiring trial based only on the evidence before them, without resorting to the fact-finding powers prescribed by Rule 20.04(2.1). At para. 66, the court stated: There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a).
[7] The Supreme Court next directed the motion judge to determine whether a trial can be avoided by resort to the special powers set out in the rule. At para. 66, the court stated, “Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.”
[8] The evidentiary burden is on the moving party to show that there is no genuine issue requiring a trial. Each side must put its “best foot forward” with respect to the evidence or lack of evidence, and the court is entitled to assume that the record contains all of the evidence that would be called at trial: Bhakhri v. Valentim, 2012 ONSC 281, para. 7.
The Limitations Act
[9] Section 4 of the Limitations Act, 2002, sets out the basic limitation for proceedings, and section 5 sets out the principles for discovery and the related presumption:
4 Basic Limitation Period
Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
Discovery
5(1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).
Presumption
5(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1)(a) on the day the act or omission on which the claim is based took place unless the contrary is proved.
[10] The Court of Appeal considered a summary judgment motion involving a limitation defence in Nasr Hospitality Services Inc. v. Intact Insurance, 2018 ONCA 725. At para. 35, the court summarized the findings of fact that the motion judge must be able to make based on the record before them:
(i) the date the plaintiff is presumed to know the matters listed in s. 5(1)(a)(i)-(iv) – namely, the day on which the act or omission on which the claim is based occurred;
(ii) the date actual knowledge under s. 5(1)(a), in the event the evidence proves the contrary of the presumptive date;
(iii) the s. 5(1)(b) objective knowledge date, based on the reasonable person with similar abilities and circumstances analysis; and
(iv) finally, which of the actual knowledge and objective knowledge dates is earlier, for that will be day [sic] on which the plaintiff discovered the claim for purposes of applying the basic limitation of two years.
The Allegations
[11] Mr. Hughes is the Plaintiff (responding party in this motion), and Mr. Dyck is the Respondent (moving party on this motion). The following allegations are recited in the parties’ factums.
[12] As of October 23, 2009, the parties were investment advisors and commissioned employees of Wellington West Capital Inc. (“Wellington”). Their industry was governed by the Investment Industry Regulatory Organization of Canada (“IIROC”).
[13] Each party maintained his own book of business, being a list of clients that each managed, with details pertinent to each client’s investment portfolio. Dyck was the more experienced advisor with the larger clientele.
[14] Early in 2009, Dyck became interested in an alternate business opportunity later known as IGY. To have sufficient time to pursue this opportunity, he needed to reduce his time commitment to his investment clients at Wellington. He recruited a more junior investment advisor, Hughes, and proposed that they combine their books of business. As part of their negotiation, Dyck gave Hughes documents detailing the clients he served and the investments each client held.
[15] They formalized their relationship in a Joint Advisory Agreement executed on October 23, 2009. At that time, both parties were still investment advisors and commissioned employees of Wellington. They agreed to combine their books of business, to share the duties and responsibilities as investment advisors, and to share the profits.
[16] As a condition of the agreement, Hughes paid Dyck $200,000 on closing for combining his managed assets. This payment gave Hughes a 40% interest in the joint undertaking while Dyck retained 60%.
[17] The Joint Advisory Agreement included these provisions:
i. Paragraph 12.01 (d) provided that the “Undertaking shall dissolve…upon the termination of the employment of either Party with Wellington West Inc.”
ii. Paragraph 8.03 provides that six months after the dissolution of the Undertaking (“Valuation Date”), the parties shall determine the percentage of the book of business that each party shall continue to maintain, and in the event either party has a percentage of the book of business in excess of their respective ratio, the party with the increased percentage shall pay the other an amount based on an agreed to formula.
[18] By December 15, 2009, Dyck was no longer a licensed investment advisor, although he continued in a consulting role. Consequently, Hughes became the broker of record for both the Dyck book of business and the Hughes book of business.
[19] On February 15, 2010, Wellington terminated Dyck’s employment and assigned his clients to Hughes as financial advisor. Around April 15, 2010, Hughes, Dyck and Wellington, through their respective counsel, attempted to reach a settlement relating to the Joint Advisory Agreement. Then, on May 26, 2010, Wellington terminated Hughes’ employment and assigned his clients from the joint book of business to other brokers.
The Positions of the Parties
[20] The moving party, Dyck, claims that the limitation period began to run presumptively on October 23, 2009, or alternatively, on or before early January 2010.
[21] Dyck argues that:
(a) Hughes began meeting with Dyck’s clients around October 23, 2009.
(b) By October 27, 2009, Hughes was aware that Dyck
(i) was involved in outside business (presumably without the approval of Wellington or the securities regulator, IIROC);
(ii) involved his Wellington clients in investing in his personal ventures without the approval of Wellington or the IIROC; and
(iii) had inappropriately exposed his Wellington clients to an unacceptable level of risk.
(c) By October 27, 2009, Hughes reported the foregoing problems to Wellington.
(d) By December 15, 2009, Hughes had full computer access to the records of Dyck’s clients.
(e) As of December 15, 2009, Hughes was the only remaining investment advisor for Dyck’s Wellington clients.
(f) By December 21, 2009, Hughes was aware that Wellington had not approved Dyck’s outside business activity which was problematic.
(g) In January 2010, Hughes made a whistleblower report to IIROC.
(h) Dyck’s employment with Wellington terminated on February 15, 2010, triggering the dissolution of the Joint Advisory Agreement.
[22] Dyck also argues that Hughes did not plead discoverability within the Limitations Act.
[23] Dyck issued an amended statement of claim against Hughes on February 14, 2012. In it, Dyck claimed damages of $460,000 for breach of the Joint Advisory Agreement, intentional interference with economic relations, and an injunction to direct Wellington’s commissions to Dyck.
[24] Unaware that Dyck’s claim had been issued, Hughes issued a claim against Dyck on February 15, 2012. In it, he claimed damages of $200,000 for breach of the Joint Advisory Agreement, negligent and fraudulent misrepresentation, and breach of fiduciary duty. It is this action that Dyck challenges on the summary judgment motion.
[25] Dyck served his statement of defence on or about April 27, 2012. In it, he pleaded that the Joint Advisory Agreement constitutes the entire agreement between the parties and addresses misrepresentation or fiduciary obligations to Hughes.
[26] Hughes submits that the earliest triggering event that started the limitation clock was the termination of Dyck’s employment on February 15, 2010, which had the effect of dissolving the Joint Advisory Agreement. This coincided with the issuance of Hughes claim against Dyck two years later, on February 15, 2012.
[27] It is noteworthy that the parties and their lawyers undertook discussions and proposed agreements into April 2010 to mitigate the losses from the Joint Advisory Agreement.
[28] Hughes argues, however, that he did not suffer any financial loss from Dyck’s termination because he was left as the sole financial advisor in control of Dyck’s clients until he was fired by Wellington on May 26, 2010.
[29] He also submits that the Joint Advisory Agreement provided for a 6-month valuation date (i.e., July 15, 2010) from the date of dissolution.
Discussion
[30] The parties functioned in a regulated, highly sophisticated investment environment with overlapping layers of employer control and regulatory oversight. Not surprisingly, each man has a different perception of the significance of their interactions and communications.
[31] The trial judge will be required to weigh evidence, make credibility findings and draw inferences about the nuances of the parties’ interactions, including the nature of their relationship, their communications, the substance and timing of representations made, access to documents, to clients, and other matters.
[32] In my view, the moving party (defendant) has not met its evidentiary burden to establish that there is no genuine issue requiring a trial. The defendant’s record requires the court to draw inferences that are not available in view of the conflicting evidence in the motion record.
[33] I conclude that on the record before me, and without considering mitigation attempts, the earliest date triggering Hughes’ claim was the date he was fired by Wellington, May 26, 2010. Until that time, Hughes did not suffer any financial loss from Dyck’s termination on February 15, 2010. In fact, he was financially advantaged by it, because Wellington assigned him Dyck’s clients, valued by the parties at 60% of the combined portfolio’s worth. The issuance of the amended statement of claim by Hughes on February 15, 2012, is well within this two-year limitation.
[34] If I am wrong in this conclusion, the termination of Dyck’s employment on February 15, 2010, could have alternatively triggered the limitation period running as it invoked the dissolution of the Joint Advisory Agreement. This dissolution coincided with the issuance of Hughes’ claim against Dyck two years later, on February 15, 2012. In either case, the statement of claim by Hughes was issued within the two-year limitation period.
[35] The summary judgment motion to dismiss the plaintiff’s action as being statute-barred is therefore dismissed.
[36] If the parties cannot agree on costs within 60 days of the release of these reasons, either party may apply to the trial coordinator for an appointment to argue costs, failing which costs will be deemed to be settled.
“original signed by”
The Hon. Madam Justice H.M. Pierce