



COURT OF APPEAL FOR ONTARIO

CITATION: Arconti v. Fenton, 2020 ONCA 489

DATE: 20200731

DOCKET: C68005 & C68006

Huscroft, Zarnett and Coroza
    JJ.A.

DOCKET:
    C68005

BETWEEN

Luigino Arconti, Alexander
    Falvio Arconti, North American Financial Group Inc. and North American Capital
    Inc.

Plaintiffs (Appellants)

and

Scott Kennedy Fenton

Defendant (Respondent)

DOCKET:
    C68006

AND BETWEEN

Luigino Arconti, Alexander
    Falvio Arconti, North American Financial Group Inc. and North American Capital
    Inc.

Plaintiffs (Appellants)

and

Ian Ross Smith, Scott Fenton
    Professional Corporation and Fenton, Smith

Defendants (Respondents)

Glenroy Bastien, for the appellants

Sean Dewart & Mathieu Bélanger, for
    the respondents

Heard: July 24, 2020 by video conference

On appeal from the orders of Justice Frederick
    L. Myers of the Superior Court of Justice, dated January 27, 2020.

REASONS FOR DECISION

[1]

The appellants appeal from the motion judges
    decision to dismiss, under r. 21 of the
Rules of Civil Procedure
,
    R.R.O. 1990. Reg. 194, certain claims in their two actions against the
    respondents, and from his decision to order a mini-trial under r. 20.04(2.2) in
    respect of the claim that he did not dismiss.

[2]

The respondent, Ian Ross Smith, acted for the
    appellants in a proceeding before the Ontario Securities Commission (the OSC).
    In December 2013, after a twelve-day hearing, the OSC found (among other
    things) that the appellants had committed securities fraud. In September 2014,
    the OSC imposed lifetime trading bans and other prohibitions on the appellants
    capital market activities, ordered the appellants to disgorge certain amounts,
    and required them to pay financial penalties and costs.
[1]

[3]

The appellants appealed the OSCs decisions (both
    in respect of liability and penalty) to the Divisional Court. They advanced a
    number of grounds, including ineffective representation by counsel. The
    respondents were granted intervenor status and actively participated in the
    Divisional Court appeal, including providing evidence which disputed the
    appellants contentions about ineffective representation.

[4]

On January 5, 2018, the Divisional Court
    dismissed the appellants appeal: 2018 ONSC 136. With respect to the contention
    of ineffective representation by counsel, the court applied the test in
R.
    v. Archer
(2005), 202 C.C.C. (3d) 60 (C.A.).
[2]
After scrutinizing the
    appellants assertions, it held that the appellants had not established that any
    miscarriage of justice had occurred in the OSC proceedings: at para. 168.

[5]

Before the Divisional Court appeal was argued,
    the appellants commenced civil actions against the respondents. They sued Mr.
    Smith and his firm for solicitors negligence (CV-15-527178/C68006), and the
    respondent, Scott Kennedy Fenton, for negligently referring the appellants to
    Mr. Smith (CV-16-560369/C68005). These actions allege that the respondents
    negligence and breach of duty caused the appellants (i) the loss of an
    opportunity to settle the OSC proceeding without a finding of fraud and with
    limited fines, and (ii) the loss of potential defences and a fair hearing at
    the OSC, resulting in fines, penalties, disgorgement, and damage to their
    reputations. Both actions were stayed pending determination of the Divisional
    Court appeal.

[6]

After the Divisional Courts ruling, the
    respondents moved under r. 21 to dismiss the majority of the appellants civil claims
    on the basis that they were
res judicata
.
[3]
The respondents also moved
    under r. 20 in respect of one claimthat arising from the allegation that Mr.
    Smiths advice concerning settlement fell below the standard of care. For this
    claim, the respondents argued that, on the facts, it did not raise a genuine
    issue requiring a trial.

[7]

The motion judge dismissed the actions with
    respect to all issues apart from the defendants alleged negligence in failing
    to negotiate a resolution of the matter [before the] Ontario Securities Commission.
    He also ordered a mini-trial under r. 20.04(2.2) on the issue of the
    defendants alleged negligence in advising the plaintiffs about the resolution
    of the proceedings before the Ontario Securities Commission. He directed that
    he remain seized of the matter and that the parties schedule a case conference
    before him to consider the steps necessary for the mini-trial.

[8]

The motion judges rationale was that the appellants
    claims (other than those pertaining to alleged failures to advise about and
    negotiate a settlement) could not proceed because they were collateral attacks
    on the OSC decision, a decision that was upheld on appeal after the Divisional
    Court considered the appellants allegations of conflicts of interest and other
    matters they claimed amounted to ineffective representation by counsel. The
    motion judge held that the appellants were precluded by the doctrine of issue
    estoppel from advancing claims that the conduct of their lawyer had caused them
    to lose a hearing they deserved to win.

[9]

As noted, the respondents did not assert before
    the motion judge that the appellants claim about negligent settlement advice
    was barred by issue estoppel. Rather, they moved under r. 20 to dismiss that
    claim on the basis that it did not raise a genuine issue requiring a trial on
    the facts. The evidence on the r. 20 motion was conflicting and included expert
    evidence advancing different views. The motion judge declined to decide the
    issue on a paper record and directed a mini-trial under r. 20.04(2.2), the
    scope of which was to be decided after further submissions.

[10]

At the outset of this appeal, counsel for the
    appellants advised that he was instructed to withdraw a motion the appellants
    had filed to introduce fresh evidence and that the appellants now planned to
    ask the Divisional Court to reconsider its decision. He asked that this appeal
    be adjourned. We rejected the adjournment request. This appeal has been case
    managed. The motion to admit fresh evidence was filed after the deadline for
    doing so set by the Case Management Judge, and after the respondents had filed
    submissions responding to it. The need to bring this appeal to closure is
    strong.

[11]

On appeal, with respect to the claims that were
    dismissed, the appellants argue that the motion judges order and reasons are
    vague, creating confusion as to what claims may and may not be pursued; that he
    erred in applying this courts decision in

Harris v. Levine
,
    2014 ONCA 608, leave to appeal refd, [2014] S.C.C.A. No. 467; that he failed
    to appreciate that he had discretion not to apply issue estoppel; and that this
    is a proper case to exercise discretion to allow relitigation.

[12]

With respect to the order for a mini-trial under
    r. 20.04(2.2), the appellants argue that a mini-trial is an insufficient
    procedure to determine the matters in issue on the claim that was not
    dismissed.

[13]

We do not accept any of these arguments.

[14]

First, in our view, the motion judge correctly
    divided the appellants claims (as advanced by them) into two categories: (i)
    claims that essentially depended on showing that, but for the respondents
    conduct, they would have been acquitted by the OSC, and (ii) the claim that
    they did not receive proper advice about, and thus were deprived of, an
    opportunity to settle the OSC proceeding.

[15]

With respect to the claims in the first
    category, the motion judge correctly followed this courts decision in
Harris
.

This court held, in
Harris
, that a solicitors negligence claim
    that depends, for its success, on showing that the client would have been
    acquitted of a criminal charge but for the lawyers negligence, involves a
    collateral attack on the criminal adjudicative process, and is thus an abuse of
    process. The court specifically noted that abuse of process is a discretionary
    doctrine, but found that there was no reason in that case to interfere with the
    judges exercise of discretion to apply abuse of process to dismiss the action.

[16]

Although the motion judge did not expressly
    refer to his discretion, we do not agree that the motion judge overlooked its existencehe
    expressly cited
Harris
, which refers to the discretion. We interpret the
    motion judges reasons to mean that, with respect to the claims that depended
    on the appellants showing that they lost a proceeding at the OSC that they
    would have won but for the impugned conduct of the respondents, he was given no
    reason to exercise his discretion not to dismiss those claims. He referred to relevant
    factors in making that decision, including the fact that the claims involved a
    collateral attack on the result of the OSC proceeding and the Divisional Court
    appeal, and that any differences between a criminal proceeding and an OSC proceeding
    did not warrant permitting relitigation in light of the seriousness of securities
    fraud. These findings fully justify a refusal to exercise discretion to allow
    relitigation of the OSC and Divisional Court determinations:
Penner v.
    Niagara (Regional Police Services Board)
, 2013 SCC 19, [2013] 2 S.C.R.
    125, at para. 42;
Toronto (City) v. C.U.P.E.
,
Local 79
, 2003
    SCC 63, [2003] 3 S.C.R. 77, at para. 53.

[17]

The appellants argue that because the conduct of
    counsel is assessed on the
Archer
test when raised on an appeal from
    conviction, relitigation should be permitted in a solicitors negligence case.
    We reject that argument. A person who is concerned that ineffective representation
    by counsel has led to a wrongful conviction must pursue that issue by way of
    appeal from the conviction:
Folland v. Reardon
(2005), 74 O.R. (3d)
    688 (C.A.). When that has not been done, or when, as here, it is done
    unsuccessfully, the result is the same. The decision that cannot be
    collaterally attacked in a civil proceeding is the correctness of the conviction.
    A civil claim that depends on showing that the conviction would not have occurred
    but for the lawyers conduct is exactly that kind of improper collateral attack:
    see
Harris
, at paras. 5-8.

[18]

The appellants argument that it is unclear what
    use they may make of various complaints they want to advance against the
    respondents is unavailing. We see no lack of clarity. The motion judge stated
    in his reasons: [the] plaintiffs are precludedfrom making any further claims
    against [the] defendants based on the assertion that the defendants neglect,
    conflicts, and/or misconduct caused them to lose the hearing. That is what the
    appellants may not do, and it is perfectly consistent with the motion judges decision
    to dismiss certain claims. The motion judge distinguished what was precluded (and
    dismissed) from what remained[t]he issue regarding whether [the] defendants
    failed to advise [the] plaintiffs appropriately regarding settlement.

[19]

The motion judge rejected the respondents
    argument that, on the settlement issue, the appellants were barred from relying
    on admissions and other facts they asserted at the Divisional Court. He held
    that the estoppel did not extend to relying on such matters for the purposes of
    an issue that did not undermine the result at the OSC. As noted by the motion
    judge, the appellants assertion that they would have settled the OSC
    proceeding had they been properly advised did not suggest that the OSC decision
    was wrong. On the contrary, it suggested that the OSC decision was right, which
    was a new context for those assertions that did not challenge the result at
    the OSC or Divisional Court:
City of Toronto
, at para. 52.

[20]

The remaining issue of whether the appellants
    were deprived of an opportunity to settle is the subject of the r. 20 motion.
    As mentioned, the motion judge did not decide that motion. He ordered a
    mini-trial as part of the process to allow him to decide it. A mini-trial may
    be ordered when it allows the motion judge to reach a fair and just resolution
    of a r. 20 motion and is the proportionate course of action:
Hryniak v.
    Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 63.

[21]

There is no basis for any appeal to this court
    from the order for a mini-trial. The mini-trial has been directed as part of
    the process under r. 20 to allow the motion judge to fairly determine whether
    the r. 20 motion should succeed or fail. The motion judge has not yet made any
    determination about the scope of the mini-trial. Moreover, as evidence on a
    mini-trial may range from limited to extensive, it can hardly be maintained that
    the mere direction of a mini-trial has somehow permanently predetermined the
    appellants rights:
Hryniak
, at para. 63.

[22]

Accordingly, the motion for fresh evidence is
    dismissed as abandoned. The appeal is dismissed. The respondents are entitled
    to costs of the appeal fixed in the agreed upon amount of $12,000, inclusive of
    disbursements and applicable taxes.

Grant Huscroft J.A.

B. Zarnett J.A.

S. Coroza J.A.





[1]
Mr. Smith did not act for the appellants in the penalty phase of
    the OSC proceeding.



[2]
Under
    the
Archer

test, a person
    asserting ineffective assistance of counsel must establish: (i) the material
    facts they assert, (ii) incompetence of counsel measured on a reasonableness
    standard, and (iii) that a miscarriage of justice resulted. The court will
    consider miscarriage of justice first because, if none occurred, it is unnecessary
    to grade the performance of counsel:
Archer
,
    at paras. 119-121.



[3]
For the purposes of this appeal, it is unnecessary to distinguish among
    the related doctrines of
res judicata
,
    issue estoppel, and abuse of process, all of which were referred to.


