Court File and Parties
Court File No.: CV-21-00662198-0000 and CV-21-662198-00A1 Date: 2024-10-08 Ontario Superior Court of Justice
Between: Park Lawn Corporation, Plaintiff And: Kahu Capital Partners Ltd., Benedict Cheng and Alexander Zivic, Defendants
And Between: Kahu Capital Partners Ltd., Plaintiff by Counterclaim And: Park Lawn Corporation and J. Bradley Green, Defendants by Counterclaim
Counsel: N. Shaheen and A. Sahai, for the Plaintiff/Defendants by Counterclaim J. Groia and C. Parsons, for the Defendants/Plaintiff by Counterclaim
Heard: August 16, 2024
Before: Parghi J.
Reasons for Decision
1The Defendants Kahu Capital Partners Ltd., Benedict Cheng, and Alexander Zivic (together, the “Kahu Defendants”) move to dismiss the action against them on the basis that it is an abuse of process under Rule 21.01(3)(d) of the Rules of Civil Procedure, R.R.O. 1990, Reg 194. They say the action is an improper attempt to re-litigate issues from an action previously commenced by the Plaintiff, Park Lawn Corporation (“Park Lawn”), against another defendant and now settled.
2For the reasons below, the motion is denied. The action is not an abuse of process.
Background
3The Plaintiff Park Lawn is a funeral, cremation, and cemetery provider. The Defendant by Counterclaim Bradley Green is the current Chief Executive Officer of Park Lawn.
4The Defendant Kahu Capital Partners Ltd. (“Kahu”) is an investment management firm. The Defendant Mr. Cheng is an economist and business strategist with Kahu and the Defendant Mr. Zivic is its Chief Executive Officer and Chief Investment Officer. Kahu provided Park Lawn with consulting and investment management services in respect of certain trust funds held by Park Lawn.
5In June 2020, Park Lawn commenced an action against the former Chief Executive Officer and board chair of Park Lawn, Andrew Clark, for breach of contract, breach of confidence, breach of fiduciary duty, unjust enrichment, and violation of his non-compete and non-solicitation obligations (the “Previous Action”). Park Lawn alleged that Mr. Clark used Park Lawn’s trust funds for his own benefit and the benefit of his friends and family and became chair of the board of directors of a competitor of Park Lawn immediately after his departure from Park Lawn in March 2020.
6The Previous Action settled in January 2021 without any admission of liability. The release entered into upon settlement permitted the Plaintiffs to commence future actions against other defendants related to the subject matter of the release, including the precise subject matter of the Previous Action, so long as any such future actions were limited to the several liability of the new defendants. It provided in relevant part:
AND FOR THE SAID CONSIDERATION, with the exception of PLC maintaining the Existing Litigation on the terms set out above, the Parties agree not to institute, maintain or assert, either directly or indirectly, whether in Canada or elsewhere, any claim, action, suit, cause of action, demand, application, complaint, or legal proceedings (“New Claims”) against any other person, firm, partnership, business, corporation or entity who or which might claim contribution from, or be indemnified by, any Party, under the provisions of any statute or otherwise in respect of any cause, matter, fact, circumstance, event or thing which is the subject matter of this Release, unless the Party instituting, maintaining, or asserting such New Claims specifies that their New Claims are strictly limited to those defendants’ several liability attributable solely to their conduct and relative degree of fault, and excludes any claims or amounts for which any party in the New Claims could make a claim against PLC or Clark for contribution and indemnity, damages, interest, costs or any other amounts. At the request of the Party that is not instituting any New Claim, the Party that is instituting, maintaining, or asserting such New Claims shall include in their complaint, claim or other pleading an express limitation on the scope of the New Claims consistent with the contents of this paragraph.
7After the minutes of settlement and release were executed in respect of the Previous Action, a consent dismissal was obtained.
8Park Lawn commenced this action in May 2021, seeking damages against the Kahu Defendants for their alleged knowing assistance in Mr. Clark’s breach of his fiduciary duty to Park Lawn, or, alternatively, an accounting or disgorgement of any profits obtained as a result of that knowing assistance.
9The Statement of Claim in this action was amended to expressly limit Park Lawn’s claims against the Kahu Defendants to their several liability, as required by the release from the Previous Action. As amended, the Statement of Claim pleads:
Park Lawn’s claims against the defendants is strictly limited to the several liability attributable solely to the defendants’ conduct, and the defendants’ relative degrees of fault, and excludes any claims or amounts for which any party could make a claim against Andrew Clark for contribution and indemnity, damages, interest, costs or any other amounts.
10The Kahu Defendants defended this action in July 2021. Kahu delivered a Counterclaim against Park Lawn, to which it joined Mr. Green as Co-defendant by Counterclaim. The Counterclaim involved allegations of defamation against Park Lawn and Mr. Green, who subsequently brought an anti-SLAPP motion, without success. As that motion is not relevant for the purposes of this motion, I need not address it further.
11The Kahu Defendants commenced a third party claim against Mr. Clark for contribution and indemnity in August 2021. Mr. Clark pleads in his defence to the third party claim that the Kahu Defendants have acted improperly by pursuing the third party claim against him in the face of the release from the Previous Action.
12The Kahu Defendants now move to dismiss this action on the basis that it is an abuse of process under Rule 21.01(3)(d), which provides that a defendant may move to have an action stayed or dismissed on the ground that “the action is frivolous or vexatious or is otherwise an abuse of the process of the court.” The Kahu Defendants brought this motion in May 2023, two years after the action was commenced and well after they defended it.
The Abuse of Process Claim
13A party moving under Rule 21.01(3)(d) must meet a “heavy onus” (Dosen v. Meloche Monnex Financial Services Inc. (Security National Insurance Company), 2021 ONCA 141, 457 D.L.R. (4th) 530, at para. 27, citing Simone Estate v. Cheifetz (2005), 201 O.A.C. 120 at paras. 24-25). The court will strike out a claim on the basis that it is an abuse of the process of the court only “in the clearest cases and where it is plain and obvious that the case cannot succeed” (Baradaran v. Alexanian, 2016 ONCA 533, at para. 15).
14The Court of Appeal for Ontario in Canam Enterprises Inc. v. Coles (2000), 51 O.R. (3d) 481 (C.A.), rev’d on other grounds 2002 SCC 63, [2002] 3 S.C.R. 307 described abuse of process as a “discretionary principle that is not limited by any set number of categories. It is an intangible principle that is used to bar proceedings that are inconsistent with the objectives of public policy” (at para. 31). The Supreme Court of Canada has identified the following policy considerations as underlying the abuse of process doctrine: enabling an end to litigation, preventing parties from being “twice vexed by the same cause,” preserving the courts’ and the litigants’ resources, upholding the integrity of the legal system by avoiding inconsistent results, and protecting the principal of finality in the interest of the proper administration of justice (Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at paras. 37-38).
15Although the Kahu Defendants refer to the doctrine of res judicata in this motion, they do so only to juxtapose it to the more expansive concept of abuse of process. They do not assert that res judicata applies to this action. As such, I will not consider it at length. I will, however, observe briefly that neither branch of the doctrine of res judicata – cause of action estoppel or issue estoppel – could reasonably be said to apply in this case. For example, cause of action estoppel requires that the parties to the second action be the same as or in privy with the parties to the prior action (The Catalyst Group Inc. v. VimpelCom Ltd., 2019 ONCA 354, 145 O.R. (3d) 759, at para. 51, leave to appeal refused, [2019] S.C.C.A. No. 284; Canam Enterprises, at para. 21). Issue estoppel likewise requires that the parties to the two actions be the same (Toronto (City), at para. 23). However, the parties to the Previous Action and the current action are not the same. The Kahu Defendants were not parties to the Previous Action. Only Mr. Clark was. The Kahu Defendants are not privies of Mr. Clark.
16Recognizing that res judicata does not apply here, the Kahu Defendants make a broader abuse of process argument and submit that the doctrine of abuse of process is flexible and can be engaged when the strict requirements of res judicata are not made out, but where an action would violate the principles of judicial economy, consistency, finality, and the administration of justice (402 Mulock Investments Inc. v. Wheelhouse Coatings Inc., 2022 ONCA 718, at para. 19).
17There are three bases on which the Kahu Defendants allege abuse of process. I consider each of these arguments below.
Whether Park Lawn should have named the Kahu Defendants in the Previous Action
18The Kahu Defendants state that Park Lawn could and should have named them as defendants in the Previous Action, and that their failure to do so and to instead start a fresh action against them effectively “re-litigates” the matter and is an abuse of process. The Kahu Defendants rely on Canam Enterprises, in which the Court of Appeal for Ontario held that the doctrine of abuse of process “can be relied upon by persons who were not parties to the previous litigation but who claim that if they were going to be sued they should have been sued in the previous litigation” (at para. 31). The Kahu Defendants submit that Kahu “is specifically named and pleaded throughout the allegations” in the Statement of Claim in the Previous Action, and that Kahu was thus “obviously known to Park Lawn at the time.”
19Respectfully, I do not read the Statement of Claim in the Previous Action in the way the Kahu Defendants do. That Statement of Claim made only two references to Kahu. Both were minor. One such reference involved the allegation that Mr. Clark improperly caused Park Lawn to loan money to Kahu and other companies as “alternative investments”. The second reference involved the allegation that Mr. Clark wrongfully concealed his involvement on the board of Kahu. Notably, the Statement of Claim did not allege any wrongdoing on the part of Kahu. It did not refer to Mr. Cheng or Mr. Zivic at all, let alone to suggest that they knew of or participated in any breach of fiduciary duty by Mr. Clark. Nothing about it suggests that Park Lawn was aware of, but chose to ignore, the Kahu Defendants’ involvement.
20Nor am I able to accept the Kahu Defendants’ submission that the facts and causes of action in the Previous Action and this action are intricately linked. As noted above, the Statement of Claim in the Previous Action is focused on Mr. Clark. It refers only briefly to Kahu, and only in relation to Mr. Clark’s alleged wrongdoing. While the Statement of Claim in this action addresses alleged breaches of fiduciary duty by Mr. Clark, the allegations that it sets forth relate in large part to alleged wrongdoing by the Kahu Defendants. These allegations are detailed. They involve each of Kahu, Mr. Chang, and Mr. Zivic. None of these allegations were pleaded or at issue in the Previous Action.
21Nor is there evidence before me to support the Kahu Defendants’ claim that Park Lawn “was aware of the facts underlying the cause of action against” them when it initiated the Previous Action, but “nonetheless chose not to name them”. Nothing in the record demonstrates that Park Lawn knew about any alleged misconduct by the Kahu Defendants at the time it commenced the Previous Action or at any time prior to settling it. The Kahu Defendants suggest that Park Lawn should tender evidence to show that it did not have such knowledge. I disagree. If the Kahu Defendants wish to demonstrate an abuse of process on the part of Park Lawn, it is for them to show, based on the record, that Park Lawn knew or ought to have known, before settling the Previous Action, of the facts underlying the current action. They have not done so.
22The Kahu Defendants further state that the same evidence would be needed in both the Previous Action and this action, and that this action is by implication abusive. I do not consider this argument applicable, given that the Previous Action has settled and will therefore not be tried. Even if it were applicable, however, I would not accept it. The tort of knowing assistance requires there to have been a breach of a fiduciary duty. Evidence in the two actions might have overlapped to the extent that such a breach needs to be demonstrated in this action. However, additional evidence will also be required in this action that would not have been required in the Previous Action, including evidence as to the knowledge of each of the Kahu Defendants of Mr. Clark’s fiduciary relationship, the knowledge of each of them of his alleged fraudulent and dishonest conduct, and the participation in or assistance with that conduct by each of them.
23Finally, I find that the case law relied on by the Kahu Defendants on this issue does not assist them.
24The first case the Kahu Defendants rely on is Andre Gravelle v. Ontario, 2012 ONSC 5149. In Gravelle, the plaintiff first commenced an action against the provincial Crown for malicious prosecution. That action settled. The same plaintiff then commenced a second action for malicious prosecution against several defendants, including the provincial Crown and two Ontario Provincial Police officers who were not named in the first action.
25The court dismissed the second action as against the Crown and the two officers based on abuse of process. It accepted that the second action was “based on essentially identical facts” as the first action (at paras. 149-150). Those facts related to the conduct of the two officers, who were employees of the Crown and for whom the Crown was vicariously liable. The Crown had settled the first action, which contained identical allegations to the second action. As a consequence, the settlement of the first action was directly binding on the second action against the Crown and two officers. The court dismissed the second action against the Crown and two officers as an abuse of process, holding that “the policies underlying the abuse of process doctrine are also offended, as they are in this case, when plaintiffs seek to re-litigate matters that have already been settled” (at para. 190). It allowed the second action to proceed against the remaining defendants (at para. 191).
26In my view, Gravelle is not analogous to this case. In Gravelle, both actions pleaded essentially identical facts and the new defendants in the second action – the two officers – were the same as, or the employees of, the defendant in the first action, which was now settled. But in this case, the parties to the Previous action and this action are different. The pleaded facts in the two actions are different. There is no suggestion that the Kahu Defendants are employees or agents of Mr. Clark or that he is otherwise vicariously liable for them. If anything, the position of the Kahu Defendants is analogous to that of the defendants in the second Gravelle action other than the Crown and two officers, against whom the court allowed the action to continue.
27The Kahu Defendants also rely on Maynes v. Allen-Vanguard Technologies Inc. (Med-Eng Systems Inc.), 2011 ONCA 125. In that case, the plaintiffs tried to add parties to their first action under Rule 26.02(b) of the Rules of Civil Procedure but were unsuccessful. They then commenced a second action against the defendants to the first action and the additional parties that they had tried, without success, to add to the first action.
28The court dismissed the second action as an abuse of process, holding that it circumvented “the express procedural requirement in rule 26.02(c) that leave of the court be obtained to add a non-consenting party to the proceedings after pleadings have closed” (at para. 39).
29Maynes does not assist the Kahu Defendants. Unlike the plaintiffs in Maynes, Park Lawn could not have sought to add the Kahu Defendants to the Previous Action under Rule 26.02(c). This is because, by the time they commenced this action, the Previous Action was settled. There was no existing action to which they could have sought to add the Kahu Defendants. As discussed above, there is no evidence to suggest, nor do the pleadings support, that Park Lawn was aware of but ignored the Kahu Defendants’ involvement at the time they commenced the Previous Action, or at any time before they settled it.
30Finally, I note that, even if Park Lawn had named the Kahu Defendants in the Previous Action, it would always have been open to Park Lawn to settle the Previous Action as against Mr. Clark alone, on the basis of a Pierringer agreement, and to then pursue the remainder of the action against the Kahu Defendants. Had it done so, the parties would have been left in the same position that they are in today. Indeed, the settlement of the Previous Action is somewhat like a Pierringer settlement, in that it severs the joint and several liability as between Mr. Clark and the Kahu Defendants. In my view, this underscores that this action is not an abuse of process.
31Additionally, because the Kahu Defendants have commenced a third party claim against Mr. Clark, they have maintained their rights to documentary production and examinations for discovery from him. This will give them the same fact finding and discovery rights that they would have had if they had been named in the same action. There is thus no prejudice to them from being named in this action rather than the Previous Action. Moreover, because they may only be found severally liable in this action, they will be better off than they would have been had they been named in the Previous Action, in which, in the absence of a Pierringer settlement by Mr. Clark, they could have been found jointly and severally liable. In this action, they may only be found severally liable.
32I therefore do not accept the claim that the Kahu Defendants could and should have been added to the Previous Action and that this action thereby amounts to abusive “re-litigation”.
Whether this action is barred by the settlement of the Previous Action
33The Kahu Defendants assert that the settlement of the Previous Action, and the express terms of the release from the Previous Action, bar this action. They state that, as a matter of law, they may only be found jointly and severally liable for knowing assistance, together with Mr. Clark, whom they are alleged to have assisted. They could therefore only be found liable for knowing assistance in an action that also names Mr. Clark as a defendant. However, Mr. Clark has now settled the Previous Action, which named him as a defendant, and the release from the Previous Action bars future claims for joint liability. As such, by settling the Previous Action, Park Lawn abandoned the right to pursue a knowing assistance claim against them. The settlement of the Previous Action is fatal to this action.
34In support of their position, the Kahu Defendants note that there are no cases in which knowing assistants have been found to be only severally liable and not also jointly liable. Indeed, many of the cases on knowing assistance have found both joint and several liability (see e.g. Doherty v. Doherty, 2023 ONSC 1536, at para. 81, aff’d on other grounds 2023 ONCA 763; Enbridge Gas v. Michael Marinaccio et al, 2011 ONSC 2313, at para. 26, aff’d on other grounds 2012 ONCA 650; DBDC Spadina Ltd. v. Walton, 2018 ONCA 60, at para. 129; rev’d on other grounds 2019 SCC 30).
35In my view, however, this is not a bar to the action. The case law does allow for, and indeed expressly contemplates, findings of several liability alone in cases of knowing assistance.
36In taking this view, I am informed by the decision of the Court of Appeal for Ontario in Extreme Venture Partners Fund I LP v. Varma, 2021 ONCA 853, which involved corporate malfeasance including breach of fiduciary duty and knowing assistance. At trial, the knowing assistants and the faithless fiduciaries were found to be jointly and severally liable for damages and disgorgement of profits. The knowing assistants appealed on the finding of joint and several liability for the disgorgement order. Their position was that they should only be severally liable – that is, liable only for the disgorgement of the profits that they had actually received – because otherwise the liability imposed on them would be the same liability imposed on the faithless fiduciary themselves, which was not equitable.
37On appeal, Hourigan J.A., writing for the Court, rejected this argument. He held that the court should determine the appropriate approach to liability in knowing assistance claims on a case-by-case basis. Joint and several liability was appropriate in the case before him. However, there might be circumstances in which a knowing assistant should have their liability limited to several liability only. The courts should be given the remedial flexibility to make such findings (at para. 89):
I do not purport to establish a rule that liability should always be joint and several between the faithless fiduciary and the knowing assistant. There may be circumstances where a different order should be made. Courts should be given sufficient flexibility to fashion a fair remedy in the circumstances of the particular case.
38Hourigan J.A. went on to hold that, on the facts before him, joint and several liability was appropriate. The appellants were “active participants in the core wrongful conduct and were its primary beneficiaries” (at para. 7). As such, he determined, there was “no equitable reason why their liability should be limited” to several liability alone (at para. 7).
39Thus, the Court in Extreme Venture established that there is no hard and fast rule to deciding the approach to liability for knowing assistance, and that the courts are, and should remain, free to determine the best approach in each case based on the facts before them. As Hourigan J.A. acknowledged, this approach need not result in a finding of joint and several liability.
40I note that, in Extreme Venture, the issue on appeal was the finding of joint and several liability with respect to disgorgement, and not with respect to the damages award. In this action, Park Lawn seeks both disgorgement and damages. The Kahu Defendants submit that Hourigan J.A.’s reasoning about the need for remedial flexibility and the importance of case-by-case determinations is limited to the remedy of disgorgement for knowing assistance and would not apply to the issue of damages. Accordingly, they say, to the extent that Extreme Venture contemplates a possibility of several liability alone for knowing assistance, it does so only with respect to disgorgement and not with respect to damages. In my view, whether and to what extent Extreme Ventures applies to the damages claim is an open issue, and not one that is appropriate for me to decide at this stage, in the context of a motion to strike.
41I am accordingly of the view that a finding of several liability alone will be available to the judge who ultimately hears this action. That judge will be able to notionally apportion fault among each of the Kahu Defendants and any other tortfeasors, including non-parties, such that the Kahu Defendants are found only severally liable, and only for their portion of fault (see e.g. Taylor v. Canada (Minister of Health) (2009), 2009 ONCA 487, 95 O.R. (3d) 561(C.A.)). Nothing prevents this claim from being adjudicated on that basis. I am therefore unable to accept the Kahu Defendants’ argument, particularly in the context of a motion to strike, that by law they cannot be found to be only severally liable.
Whether the settlement of the Previous Action was a judicial determination of the issues in this action
42Finally, the Kahu Defendants claim that the settlement of the Previous Action, and the ensuing dismissal order from the court, represented a judicial determination of the issues in this action, rendering this action an abuse of process. They say that the issues related to knowing assistance have “already been determined with finality in” the Previous Action and there is a risk of inconsistent findings should this action proceed to trial.
43I am unable to agree with this submission.
44I agree with the Kahu Defendants that a consent dismissal, like the one in the Previous Action, may, in some cases, constitute a final judicial determination and form part of the basis for a finding of abuse of process. Put differently, the fact that the Previous Action resulted in a consent dismissal rather than an adjudicative finding of the court does not, in itself, preclude an abuse of process claim (see e.g. Gammie v. Town of South Bruce Peninsula, 2014 ONSC 6209; Constantinos v. Papadopolous, 2018 ONSC 3248, aff’d 2019 ONCA 773).
45However, the consent dismissal does not, on its own, give rise to abuse of process. Such a finding would be inconsistent with judicial authority and would eviscerate the meaning of the doctrine of abuse of process. In Gammie, as the Kahu Defendants note, an abuse of process claim was found where an earlier action had resulted in a consent dismissal. Importantly, however, the court based its finding of abuse of process not on the sheer fact of the prior consent dismissal, but on the fact that the complaints or causes of action raised in the second action could have been raised in the first action (at para 58). The court took the same approach in Constantinos, on which the Kahu Defendants also rely (at para. 12). In this case, as discussed above, I have not accepted the argument that Park Lawn could have named the Kahu Defendants in the Previous Action. The presence of a prior consent dismissal therefore does not assist the Kahu Defendants in their abuse of process claim.
Conclusion
46Accordingly, I dismiss the motion. The action is not an abuse of process.
Costs
47In exercising my discretion to fix costs under s. 131 of the Courts of Justice Act, R.S.O. 1990, c C.43, I may consider the factors enumerated in Rule 57.01 of the Rules of Civil Procedure. These include the result achieved, the amounts claimed and recovered, the complexity and importance of the issues in the proceeding, the principle of indemnity, the reasonable expectations of the unsuccessful party, and any other matter relevant to costs.
48In the recent case of Apotex Inc. v. Eli Lilly Canada Inc., 2022 ONCA 587, the Court of Appeal for Ontario restated the general principles to be applied when courts exercise their discretion to award costs. The Court held that, when assessing costs, a court is to undertake a critical examination of the relevant factors, as applied to the costs claimed, and then “step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable” (at para. 60). The overarching objective is to fix an amount for costs that is objectively reasonable, fair, and proportionate for the unsuccessful party to pay in the circumstances of the case, rather than to fix an amount based on the actual costs incurred by the successful litigant.
49Applying these principles here, I note that Park Lawn was entirely successful in the motion. It had to do considerable work to address the various arguments advanced by the Kahu Defendants. The work was prudently allocated among the team members, with senior-most counsel playing a very limited role. The work done was of great assistance to me. These are all factors that support granting them their costs.
50Park Lawn claims $33,747.37 in costs for the motion, on a partial indemnity basis, inclusive of HST and disbursements. Park Lawn spent approximately the same number of hours as the Kahu Defendants did, although because its counsel’s hourly rates are higher, its overall fees are higher than those of the Kahu Defendants. I do not consider its counsel’s hourly rates to be unduly high.
51Stepping back and viewing the matter as a whole, I consider it appropriate for Park Lawn to recover these costs. I order the Kahu Defendants to pay Park Lawn their costs in the amount of $33,747.37, inclusive of HST and disbursements, within 30 days.
Parghi J.
Released: October 8, 2024