



COURT OF APPEAL FOR ONTARIO

CITATION: Potis Holdings Ltd. v. The Law Society of Upper
    Canada, 2019 ONCA 618

DATE: 20190722

DOCKET: C66263

Hoy A.C.J.O.,
    Trotter and Jamal JJ.A.

BETWEEN

Potis Holdings Ltd. and
    Ullrich Stefan Vogel

Plaintiffs (Appellants)

and

The Law Society of Upper Canada
, Lawyers
    Professional Indemnity Company, Evans Sweeny Bordin LLP and Steven D. Gadbois

Defendants (
Respondent
)

Marc A. Munro, for the appellants

Antonios T. Antoniou and Frank C. Caruso, for the
    respondent

Heard: July 16, 2019

On appeal from the order of
    Justice Antonio Skarica of the Superior Court of Justice, dated November 14,
    2018.

Jamal J.A.:

INTRODUCTION

[1]

The appellants appeal the order of the motion judge striking out their
    statement of claim and amended statement of claim as against the respondent The
    Law Society of Upper Canada (now Law Society of Ontario) as disclosing no
    reasonable cause of action.

[2]

The appellants complained that their former
    lawyer, the respondent, Steven D. Gadbois,
had
    negligently represented them in a lawsuit against the City of Waterloo.
    Following the complaint,
Mr. Gadbois
    delivered his client file to the respondent law firm, Evans Sweeney Borden LLP,
    which was retained by the respondent Lawyers Professional Indemnity Company (LPIC)
    to represent Mr. Gadbois in relation to the professional indemnity claim.

[3]

The appellants action is premised on the Law Societys alleged practice
    of requiring or permitting lawyers facing potential negligence claims to
    provide a copy of the relevant client file to LPIC to allow it to evaluate and
    address the anticipated professional indemnity claim. The appellants say that
    this practice gives rise to a variety of civil causes of action against the Law
    Society.

THE PLEADINGS

[4]

The statement of claim and amended
    statement of claim plead that [t]he practice of the [Law] Society in requiring
    or permitting solicitors facing potential negligence claims to deliver their
    clients confidential property to LPIC and its solicitors was a violation of
    the confidential relationship required of lawyers with their clients at common
    law and by statute.
The amended statement of
    claim pleads that the Law Society is liable for breach of confidence,
    confidentiality, trust, privacy and solicitor-client privilege, as well as
    conversion and trespass to chattels.

[5]

Neither the statement of claim
    nor the amended statement of claim pleads that the Law Society engaged in any
    bad faith conduct, either generally with respect to the Law Societys alleged
    practice, or specifically with respect to the appellants.

[6]

The Law Societys statement of defence
    invokes a statutory immunity under s. 9 of the
Law Society Act
,
R.S.O. 1990, c. L.8, in
    respect of claims for damages arising from the execution of its statutory duties
    and powers.
It says that s. 9 broadly
    immunizes the Law Society, including its Treasurer, officers, benchers,
    employees, and other officials of the Law Society, from civil liability arising
    from the good faith performance of its statutory duties and powers.

THE MOTION TO STRIKE

[7]

After filing its statement of defence,
    the Law Society moved to strike
the
    appellants statement of claim as disclosing no reasonable cause of action. At
    the return of the motion, the appellants brought a cross-motion to amend the
    statement of claim  which as amended again included no allegations of bad
    faith  such that the motion was argued based on the amended statement of
    claim. The appellants also argued that the Law Society was required to obtain
    leave before bringing its motion because it had filed its statement of defence.

[8]

There was no evidence before the
    motion judge as to whether the Law Societys practice was as alleged, nor would
    such evidence be admissible on a motion to strike:
Rules of Civil
    Procedure
, R.R.O. 1990, Reg. 194, r.
    21.01(2)(b).

[9]

The motion judge found that s. 9 of
    the
Law Society Act

confers upon the Law Society a statutory immunity from
    claims for damages for actions taken in good faith pursuant to its statutory
    mandate to regulate the legal profession or the provision of legal services.
    Section 9 provides as follows:

No action or other
    proceedings for damages shall be instituted against the Treasurer or any
    bencher, official of the Society or person appointed in Convocation for any act
    done in good faith in the performance or intended performance of any duty or in
    the exercise or in the intended exercise of any power under this Act, a
    regulation, a by-law or a rule of practice and procedure, or for any neglect or
    default in the performance or exercise in good faith of any such duty or
    power.

[10]

The motion judge found that the
    appellants slim allegations in their pleadings did not include any claim of
    bad faith against the Law Society, and therefore struck out the pleadings as
    disclosing no reasonable cause of action, without leave to amend.

[11]

For the reasons that follow, I agree
    with the motion judges disposition. The appeal is therefore dismissed.

ISSUES

[12]

The appellants raise three issues on appeal:


1.

Did
    the motion judge err in hearing the Law Societys motion to strike after the
    Law Society had delivered its statement of defence?


2.

Did
    the motion judge err in striking out the statement of claim and amended
    statement of claim as against the Law Society?


3.

Did
    the motion judge err in refusing to grant leave to amend?

ANALYSIS



(1)

Did the motion judge err in
    hearing the Law Societys motion to strike after the Law Society had delivered
    its statement of defence?


[13]

The appellants assert that the motion judge erred in
    hearing the Law Societys motion to strike because the Law Society had not
    applied for leave to bring the motion after having filed its defence. They note
    that r. 2.02 of the
Rules of Civil Procedure

provides that a
    motion to attack a document for irregularity shall not be made, except with
    leave of the court, in circumstances where the moving party has taken any
    further step in the proceeding after obtaining knowledge of the irregularity.
    The appellants argue that a motion to strike a pleading is an attack on a
    document for irregularity,
and therefore
    required leave in this case,
as the Law
    Society had already taken a further step by delivering its defence. The
    appellants rely on
Bell v. Booth Centennial Healthcare Linen
    Services
,
2006
    CanLII 39029 (Ont. S.C.), at para. 6, in support of the proposition that the
    practice of bringing a motion to strike after delivering a defence should be
    discouraged.

[14]

I do not agree with the appellants submission.
While generally a defendant should move to strike a claim
    as disclosing no reasonable cause of action before filing a statement of
    defence, in some instances a defendant may bring such a motion without leave
    even after delivering a defence. One such instance is where it is obvious from
    the defendants pleading that the defendant takes issue with the sufficiency of
    the plaintiffs claim:
Arsenijevich v. Ontario (Provincial Police)
, 2019 ONCA 150, at para. 7.

[15]

That is the case here. The Law
    Societys statement of defence pleads the very deficiencies that were relied on
    in the motion to strike, namely, the Law Societys statutory immunity under s.
    9 of the
Law Society Act
.

[16]

Moreover, the motion
    judge proceeded to hear the Law Societys motion in the face of the appellants
    argument that the Law Society should have obtained leave. It was clear that the
    motion judge would have granted (or indeed effectively granted) leave. The motion
    judges determination to proceed was consistent with r. 1.04 of the
Rules of
    Civil Procedure
that the rules be liberally construed to secure the just,
    most expeditious and least expensive determination of every civil proceeding on
    its merits.

[17]

As such,
the motion judge did not err in hearing the motion to
    strike.


(2)

Did the motion judge err in striking
    out the statement of claim and amended statement of claim as against the Law
    Society?

[18]

The essential
    principles governing a motion to strike out a pleading under r. 21.01(1)(b) as
    disclosing no reasonable cause of action are well known. A pleading will be
    struck out if, assuming the facts pleaded to be true, it is plain and obvious
    that it discloses no reasonable cause action; that is, where it has no
    reasonable prospect of success:
R. v. Imperial Tobacco
, 2011 SCC 42, [2011] 3 S.C.R. 45, at
    para. 17;
Hunt v. Carey Canada Inc.
, [1990] 2 S.C.R. 959, at p. 980; and
McCreight v. Canada
    (Attorney General)
, 2013 ONCA 483, 116 O.R. (3d) 429, at
    para. 39.

[19]

It is also settled that the standard of
    review of a decision on a rule 21.01(1)(b) motion is correctness:

McCreight
, at para. 38.

[20]

The appellants
    raise two grounds to challenge the motion judges decision to strike out their
    pleadings.

[21]

First, the
    appellants contend that they were not required to plead bad faith to
    preemptively defeat the application of s. 9 of the
Law
    Society Act
, as good faith is a
    statutory defence to be pleaded by the Law Society. The appellants say that their
    claim was not required to anticipate defences that might be raised.

[22]

I do not agree
    with the appellants submission. This court has accepted that 
Hunt
does not preclude a court from striking
    out a claim on the basis that it discloses no cause of action because of the
    existence of an unanswerable defence:
Louie v. Lastman
(2002), 61 O.R. (3d) 459 (C.A.), at para.
    21.

[23]

Here, the
    unanswerable defence is that it is settled law that s. 9 of
the
    Law Society Act
provides the
    Law Society with statutory immunity from civil claims for damages for the
    exercise of statutory duties and powers made in good faith:
Edwards
    v. Law Society of Upper Canada
,
    2001 SCC 80, [2001] 3 S.C.R. 562, at paras. 14-17;
Robson v.
    Law Society of Upper Canada
,
    2017 ONCA 468, 26 Admin. L.R. (6th) 133, at paras. 4-7; and
Conway
    v. Law Society of Upper Canad
a
, 2016
    ONCA 72, 395 D.L.R. (4th) 100, at paras. 21-22.

[24]

While a claim
    against the Law Society alleging that it engaged in bad faith conduct may not be
    subject to the immunity provided by s. 9 of the
Law Society
    Act
, such a claim must still be
    pleaded with precision and with full particulars, as required by the
Rules
    of Civil Procedure
:
Conway
, at para. 39; r. 25.06(8).

[25]

Here, neither
    the statement of claim nor the amended statement of claim alleges that the Law
    Society engaged in any bad faith conduct. As such, there is no viable claim
    against the Law Society.

[26]

The appellants
    nevertheless assert that there is no authority for the proposition that s. 9
    applies to an intentional tort committed by the Law Society. They note that
Edwards
involved a claim for negligence;
Robson
involved a claim of negligent investigation;
    while in
Conway
this court granted leave to amend to permit a claim for misfeasance
    in public office to be pleaded against the Law Society because such a claim
    does not fall within the statutory immunity provided by s. 9. The appellants
    note that this court in
Conway
stated, at para. 22, that an absence of good faith or bad faith,
    involving malice or intent, is sufficient to ground a properly pleaded cause of
    action against the [Law Society].

[27]

I do not read
Conway
as supporting the appellants argument.
    The intent referred to is a malicious intent, which if pleaded would
    constitute bad faith and would therefore bring the impugned conduct outside the
    scope of s. 9. The court was not suggesting that the pleading of any
    intentional tort, even without a claim of bad faith, would necessarily fall
    outside s. 9.

[28]

None of the
    causes of action pleaded by the appellants  namely,
breach of confidence, confidentiality, trust, privacy and
    solicitor-client privilege, as well as conversion and trespass to chattels  involves
    bad faith as an essential element:
see e.g.
Jones v. Tsige
,
    2012 ONCA 32, 108 O.R. (3d) 241, at para. 71 (breach of privacy);
Lac
    Minerals Ltd. v. International Corona Resources Ltd
.
, [1989] 2
    S.C.R. 574, at p. 635 (breach of confidence);
373409 Alberta Ltd. (Receiver
    of) v. Bank of Montreal
, 2002 SCC 81, [2002] 4 S.C.R. 312, at para. 8
    (tort of conversion);
Ontario Consumers Home Services Inc. v. EnerCare Inc.
,
    2014 ONSC 4154, at paras. 50-53 (trespass to chattels);
Pritchard v.
    Ontario (Human Rights Commission)
, 2004 SCC 31, [2004] 1 S.C.R. 809, at
    paras. 14-21;
Canada (Privacy Commissioner) v. Blood Tribe Department of
    Health
, 2008 SCC 44, [2008] 2 S.C.R. 574, at para. 21 (solicitor-client
    privilege);
and
Mills v.
    Royal Bank
, 2012 ABCA 75, 524 A.R. 127, at para. 25 (breach of trust)
. As such, unlike
Conway
, it cannot be said that the pleadings implicitly allege bad
    faith so as to raise a tenable plea. As noted, there is no plea of bad faith
    against the Law Society at all, either in respect of the alleged practice or in
    respect of the appellants themselves.

[29]

Second, the
    appellants contend that the defence of good faith should not be determined on a
    motion to strike, as good faith is a question of fact requiring an evidentiary
    record.

[30]

I do not accept
    this submission. As the appellants pleadings do not allege any bad faith
    conduct by the Law Society, there is no need for an evidentiary hearing to
    determine the issue.

[31]

Accordingly, I
    conclude that the motion judge did not err in striking out the appellants
    pleadings as disclosing no reasonable cause of action.

(3)

Did the motion judge err in refusing
    leave to amend?

[32]

Lastly, the appellants
    assert that the motion judge, having granted the motion to strike, erred in
    refusing leave to amend the amended statement of claim. They say that because parties
    can amend pleadings as of right pursuant to r. 26.01, the motion judge erred in
    law by refusing leave to amend to cure any deficiencies.

[33]

I do not agree with this
    submission. A motion judges decision as to whether to grant leave to amend is
    discretionary and entitled to deference on appeal, absent palpable and
    overriding error of fact or error of law:
Conway
,
at
    para. 16. An appellate court should interfere only if the motion judge erred in
    principle or acted unreasonably in the exercise of his discretion: see
Grigonis
    v. Toronto Boardsailing Club
, 2010 ONCA
    651, at para. 5.

[34]

Here, the motion judge
    exercised his discretion to refuse leave to amend as the appellants had already
    twice pleaded no allegations of bad faith against the Law Society. His decision
    to refuse to afford a third opportunity to fashion a tenable plea was
    reasonable in the circumstances.

[35]

Nor did the motion judge
    err in law in refusing leave to amend. The appellants claim arises from the
    Law Societys alleged general practice of requiring client files to be provided
    to LPICs counsel; it does not arise from specific acts of bad faith directed at
    the appellants themselves. I have already found that, absent allegations of bad
    faith, the Law Society is protected by the statutory immunity in s. 9 of the
Law
    Society Act
. As such, there are no
    amendments that the appellants could make that might resuscitate their claim.

[36]

The motion judge was
    therefore entitled to refuse leave to amend.

DISPOSITION

[37]

For these reasons, the appeal is dismissed, with costs to the
    respondent Law Society in the amount of $
6,800
, inclusive of disbursements and taxes.

Released: July 22, 2019 A.H.

M. Jamal J.A.

I agree.
Alexandra Hoy A.C.J.O.

I agree. G.T. Trotter J.A.


