Court File and Parties

COURT FILE NO.: CV-21-00670772 DATE: 20240829 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

WILLIAM BUSS Plaintiff – and – RICHARD CLARKE Defendant

Counsel: Milton Davis and Hailey Abramsky, for the Plaintiff Marc Munro, for the Defendant

HEARD: August 23, 2024

C. STEVENSON J.

Reasons for Decision

[1] This is an appeal by the defendants (who were the moving parties) from that part of the Order of Associate Justice Jolley dated 14th June, 2023 which dismissed the defendants’ request to strike various paragraphs of the Statement of Claim issued October 22, 2021. As a general proposition, the impugned paragraphs relate to allegations of sexual assault in a different civil proceeding bearing court file # CV-21-003126.

[2] In her June 14, 2023 Order, Jolley A.J. struck other paragraphs in the claim which related to an allegedly malicious complaint to the Chartered Professional Accountants’ regulator. That part of her Order has not been appealed.

[3] This action relates to the plaintiff’s departure from the defendant limited partnership, which is an accounting firm. The plaintiff resigned from the limited partnership but claims he was not properly paid his share of profits and his capital account. There is no written partnership agreement.

[4] The defendant firm delivered a defence and counterclaim dated March 11, 2022 which consents to an accounting. The issues go beyond a mere accounting, however, because the plaintiff also claims damages for bad faith breach of the partnership agreement (para. 1(d)) and seeks a declaration that the acts of the defendants have been carried on in bad faith (para. 1(a)). No issue was raised at the appeal about the fact that the defendants have brought this motion/appeal even though they have delivered their statement of defence (which does say they reserved their right to bring a motion to strike the disputed paragraphs).

Claim for Bad Faith Contractual Performance

[5] The first issue on appeal is whether the Associate Justice erred when she failed to strike the paragraphs in the claim which relate to the allegations of bad faith and which refer, in particular, to an alleged sexual assault by the plaintiff on a firm employee, who is the daughter of another partner. That partner is also a defendant (Clarke). The theory of this part of the plaintiff’s case is that, as Jolly A.J. described at para.5 of her reasons, after the plaintiff resigned, the defendants refused to pay him what he was owed and embarked on a campaign to damage him. This campaign included, it is alleged, encouraging the defendant Clarke’s daughter to falsely accuse the plaintiff of sexual assault “for the purpose of causing him harm and escaping their obligations to him” (para. 7 of the Claim, quoted in para. 15 of the reasons).

[6] This allegation underlies the relief claimed in sub-paras. 1(a) and (d) which respectively ask for a declaration and damages arising from the defendants’ bad faith conduct. The claim for bad faith conduct originally referenced the (now struck) complaints to the regulator but that does not mean (as the appellants argued on this appeal) that the claims for relief for bad faith misconduct should also have been struck. This is because the pleaded particulars of bad faith conduct include the defendants’ encouragement to the partner’s daughter to make allegedly false accusations.

[7] Both sides acknowledge that Bhasin v. Hrynew 2014 SCC 71 is authority for the viability of claims alleging bad faith (or lack of good faith) contractual performance. Such a pleading is tenable. Therefore Jolley A.J. did not err when she stated at para. 20 of the reasons that the various paragraphs challenged support a claim for breach of a duty of good faith in the performance of the defendants’ contractual duties. Jolley A.J. said, and I agree, that there is a viable pleading concerning the defendants’ alleged bad faith dealings, even after striking the references to the regulatory complaint.

[8] The Associate Justice did not err, no matter what standard of review I apply to this appeal. As she stated, the impugned paragraphs are neither immaterial nor irrelevant. As pleaded, the claims relate to bad faith performance of an existing contract (the implied partnership agreement), not the negotiation of a potentially new agreement with respect to the terms of the plaintiff’s withdrawal from the firm (the departure negotiations) or the settlement of the litigation or potential litigation.

Settlement Privilege

[9] The second issue on appeal is whether the Associate Justice erred when she did not strike paras. 22-26 and 43 which make allegations about the departure negotiations (see section E. of the associate justice’s reasons). The defendants/appellants argue that the pleading of correspondence which involves negotiating a settlement is presumptively privileged and the correspondence is inadmissible. The Associate Justice noted, however, that no evidence had been filed to the effect that the intent of the parties in the correspondence was an attempt to settle. The Associate Justice accepted that in some circumstances the court can imply an intention that a communication not be disclosed, but there was no evidence or deemed facts here to warrant that implication (“deemed” only in the sense that the facts pleaded in the Claim are assumed to be true for the purposes of the motion and appeal).

[10] The terms proposed by both sides in their exchange of correspondence in respect of the departure negotiations are potentially relevant to understanding the terms which the court will ultimately have to impose with respect to a partner’s withdrawal from this partnership. The Associate Justice decided that the December 13, 2019 letter (email) referred to in para. 42 of the pleading (and others put in the motion record) were not presumptively privileged in the absence of affidavit evidence deposing that these were attempts to compromise or to avoid anticipated litigation (reasons para. 30). While that email was marked “without prejudice” and an earlier one was marked “private and confidential” they only state the parties’ positions but don’t obviously propose compromise or concessions. I see no error in the Associate Justice’s decision that these paragraphs should not be struck at the pleadings stage (see para. 36 of the reasons). This does not mean some part of the emails or letters referenced in para. 42 of the Claim or elsewhere may not be found later to be subject to settlement privilege; but neither the Associate Justice nor I decided that issue.

[11] Similarly, the potential issue of trial together of the two actions which is raised in the pleading, was not before Jolly A.J. because there was no rule 6.01 motion. Indeed, this issue was not argued on appeal, although it is referenced in the notice of appeal. That issue is for another day.

[12] The appeal is dismissed with costs of this appeal to the successful respondent/plaintiff. The respondent should make his submissions with respect to costs (not to exceed 3 pages in support of the bill of costs already filed) within 7 days of the date of these reasons. The appellants may make their costs submissions within 7 days thereafter.

Justice C. Stevenson Date: August 29, 2024