



COURT OF APPEAL FOR ONTARIO

CITATION: D'Mello v. The Law Society of Upper
    Canada, 2014 ONCA 912

DATE: 20141222

DOCKET: C58892

Weiler, Feldman and Benotto JJ.A.

BETWEEN

Roy DMello

Plaintiff (Appellant)

and

The Law Society of Upper Canada and Stephen
    Alexander McClyment

Defendants (Respondents)

Roy DMello, acting in person

Brian MacLeod Rogers, for the respondents

Heard: December 9, 2014

On appeal from the order of Justice Dale F. Fitzpatrick
    of the Superior Court of Justice, dated March 17, 2014 and the costs order
    dated May 12, 2014.

Weiler
    J.A.:

A.

overview

[1]

The appellant is a lawyer whose practice involved acting for parties on
    real estate transactions.

[2]

As a result of complaints received from financial institutions in
    connection with mortgage frauds by a company called Canadian Conveyancing  a
    company for whose clients the appellant had agreed to act  the respondent Law
    Society of Upper Canada (the Law Society) initiated discipline proceedings
    against the appellant and assigned the respondent Stephen McClyment to
    investigate. During the course of the investigation, Mr. McClyment sent emails
    to two institutions that were victims of the fraud. The appellant alleges these
    emails were defamatory, and brought a defamation action against the
    respondents.

[3]

The respondents successfully brought a summary judgment motion to
    dismiss the action, relying primarily on the defence of absolute privilege. The
    appellant appeals the dismissal of his action on the basis that absolute
    privilege does not apply. He also seeks to appeal the costs order.

B.

FACTS

[4]

The material facts were not in dispute. The appellant operated his
    practice from his home office. To generate more business, he entered into an
    agreement with the company Canadian Conveyancing whereby he agreed to provide
    representation to lenders and clients the company would refer to him. The
    appellant gave the company his personal information and changed his office
    designation with the Law Society to an office location and phone number under
    the companys control.

[5]

The appellant never received any referrals and continued practising out
    of his home office. Canadian Conveyancing opened law firm accounts with the
    Bank of Montreal in the appellants name and processed several fraudulent real
    estate transactions with multiple financial institutions. The victim institutions
    lost a combined total of about $2.5 million as a result.

[6]

Some of the victim institutions complained to the Law Society, which launched
    an investigation on October 14, 2009. The Law Society then authorized disciplinary
    proceedings against the appellant on June 17, 2010.
[1]
At the direction of the Law Societys discipline counsel, Mr. McClyment sent
    emails to two of the victim institutions, Royal Bank of Canada and Scotiabank,
    on June 28, 2010, seeking their respective files for the discipline
    proceedings. Part of the emails stated:

[A]s an update I wish to confirm that the LSUC is prosecuting
    Dmello [
sic
] for professional [mis]conduct for the fact that he
    recklessly gave out his personal and professional ID to Canadian Conveyancing
    and also voluntarily changed his office location on the LSUC records without
    ever intending to practice at this location thereby causing a considerable loss
    to a number of lenders.

[7]

As a result of the emails, the appellant sued the Law Society for defamation,
    alleging malice. For purposes of the motion, these allegations were presumed to
    be true. The Law Society defended by claiming the common law defence of absolute
    privilege, a complete defence even for malice, and brought a motion for summary
    judgment. The motion judge agreed that absolute privilege applied and dismissed
    the action. He awarded costs of $5,000 against the appellant. In doing so, he
    noted that although the respondents were successful, the motion was complicated
    by a lack of Canadian legal precedent, and the appellants action would not
    likely have been brought had Mr. McClyment been more careful with his language
    in the two emails.

[8]

The appellant contends that there are two reasons why the defence of
    absolute privilege does not apply and thus why the motion judge erred in
    dismissing his action. First, he submits that the common law defence of
    absolute privilege has been superseded by the enactment of s. 9 of the
Law
    Society Act
, R.S.O. 1990, c. L.8 (the Act), which requires that the
    person performing a duty under the Act be acting in good faith. Second, he
    submits that, in the circumstances of this case, absolute privilege does not
    apply.

[9]

The appellant also contends the motion judge erred in awarding any costs
    against him because the factors the motion judge noted, as well as the disparity
    between the resources of the litigants, justified no costs.

[10]

For
    the reasons that follow, I would reject all three arguments and dismiss the
    appeal.

C.

the Common Law has not been Superseded by section 9 of the Act.

[11]

Section
    9 of the Act provides as follows:

9. 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.

[12]

The
    appellant submits that when an action in defamation is brought against the Law
    Society, the common law defence of absolute privilege does not apply because s.
    9 supersedes the common law. He submits that the purpose of s. 9 is to restrict
    the right of the Law Society to defend itself in an action for defamation by
    imposing a requirement that the Law Society be acting in good faith. The Law
    Societys position is that s. 9 does not oust or otherwise affect the defence
    of absolute privilege at common law.

[13]

I
    agree with the Law Societys position. The construction of statutes presumes
    that legislatures do not intend to interfere with the common law except insofar
    as the statute clearly and unambiguously does so. The effect of the presumption
    is to enhance the stability of the law by favouring certainty and fair notice
    over vague and inadvertent change that could otherwise result. See
Sullivan
    on the Construction of Statutes
, 6th ed., (Markham, Ont.: LexisNexis,
    2014), at pp. 504, 538-39; and
Evans v. Gonder
, 2010 ONCA 172, 54
    E.T.R. (3d) 193, at para. 40.

[14]

The
    common law presumption is applicable to this case, a case that is similar to
Schut
    v. Magee
, 2003 BCCA 417, 15 B.C.L.R. (4th) 250. There, the British Columbia
    Court of Appeal dealt with the question of whether the common law doctrine of
    absolute privilege in defamation actions was superseded by the defence of
    qualified privilege in actions for damages under the
Medical Practitioners
    Act
, R.S.B.C. 1996, c. 285. The court upheld the decision of the chambers
    judge, who held that the relevant provision in that statute was not a complete
    code and did not oust the common law by implication. The court acknowledged the
    contrary majority decision of the Alberta Court of Appeal in
Dechant v.
    Stevens
, 2001 ABCA 39, 281 A.R. 1, additional reasons at 2001 ABCA 81, 277
    A.R. 333, leave to appeal to S.C.C. refused, 2001 CarswellAlta 1211, 1212,
    which held that a somewhat similar statutory provision ousted the common law.
    However, the British Columbia Court of Appeal distinguished the Alberta case based
    on the specific wording in s. 112(2) of Albertas
Legal Professions Act
,
    S.A. 1990, c. L-9.1, concerning actions in defamation.
[2]
I agree with the conclusion of the British Columbia Court of Appeal.

[15]

Inasmuch
    as there is no express indication from the legislature that s. 9 of the Act is
    meant to be an exhaustive code, or meant to preclude resort to the common law
    in actions for defamation, the legislation should be read as supplementing the
    common law in two respects. First, with respect to
any action or proceeding
    for damages
, including an action for negligence or abuse of process, s. 9 extends
    the common law immunity from prosecution for those performing quasi-judicial
    functions to officials of the Law Society conducting an investigation while
    acting in good faith. Thus, s. 9 is a rights-granting measure and not, as the
    appellant contends here, a rights-limiting measure. Insofar as defamation
    actions are concerned, it does not detract from the common law defence of
    absolute privilege in respect of an action for defamation in any way.

[16]

Second,
    s. 9 also supplements the common law in actions where defamation is alleged. The
    common law defence of absolute privilege applies only if the alleged defamatory
    statement is related to the investigation.
If
    Mr. McClyment had made a defamatory statement that was unrelated to the
    investigation, that statement would not be protected by absolute privilege at
    common law. But it could still potentially be protected by s. 9 if it was done
    in good faith.

[17]

The appellant submits that it is in the public
    interest to protect persons whom officials of the Law Society have defamed with
    malice, and, accordingly, absolute privilege should not be available to these
    officials. There must be a balancing of the interests of the individual defamed
    with those of the Law Society.

[18]

The appellants submission overlooks the broader
    context of the legislation: the protection of members of the public in their
    dealings with lawyers. An official of the Law Society who is investigating a
    complaint about a lawyer is engaged in furthering the public interest in
    ensuring that lawyers maintain high standards of conduct and do not abuse their
    position. If such persons were not granted absolute privilege in defamation
    actions, their mere allegation of malice on the part of the lawyer being
    investigated could subject them and the Law Society to costly and lengthy
    litigation requiring them to justify why an investigation into a complaint was
    warranted. Such an approach would be inconsistent with the overarching goal of protecting
    the public through the responsive and timely investigation of complaints.

[19]

To summarize, the position put forward by the Law
    Society and accepted by the motion judge is correct. It accords with the
    principle of statutory construction that legislation is presumed not to change
    the common law unless it clearly and expressly does so. In this case, the
    legislation supplements the common law both when regard is had to the wide
    variety of damages actions to which s. 9 applies and its specific application
    in a defamation action where the circumstances are such that the requirements
    for absolute privilege are not met. The application of the presumption
harmonizes
    the common law and the legislation.
Finally, and
    most important, the application of the presumption is consistent with the overarching
    goal of the legislation as a whole, namely, the protection of the public in a
    timely manner.

D.

Absolute privilege protects the communications in issue in the
    circumstances

[20]

The
    appellant submits the circumstances for absolute privilege do not exist in this
    case because Mr. McClyment was giving information to the complainants as
    opposed to receiving information from a complainant.
Teskey v. Toronto
    Transit Commission
, 2003 CanLII 35190 (Ont. S.C.), holds that absolute
    privilege should be applied strictly, and must be necessary to the
    administration of justice on the facts of the case. Mr. McClyments update to
    the two banks was not necessary. Section 49.12(1)
[3]
of the Act requires that the information an investigator receives during the
    course of an investigation be kept confidential. The appellant asserts Mr.
    McClyment breached this requirement and was thus acting outside the scope of
    his duties. He was acting without legal justification. See e.g.
Roncarelli
    v. Duplessis
, [1959] S.C.R. 121. The circumstances for absolute privilege
    do not exist.

[21]

The
    appellant advanced the same arguments before the motion judge, who correctly
    rejected them. I agree with the motion judge that the privilege extends to
    communications made by, as well as to, investigators. See
Taylor v. Serious
    Fraud Office & Others
, [1999] 2 A.C. 177 (H.L.);
Hung v. Gardiner
,
    2003 BCCA 257, 13 B.C.L.R. (4th) 298, at para. 37; and
Hamouth v. Smart
    Video Technologies Inc.
, 2005 BCCA 172.

[22]

Although
    the words used to give the update must be presumed to be libellous, they
    provided the context or grounds for the request and, in that sense, were
    required in connection with a proceeding under the Act. In making this
    determination, the purpose of the communication as a whole must be considered
    as opposed to each phrase without context and in isolation. As found by the
    motion judge, the communications from Mr. McClyment were for the purpose of
    preparing evidence for discipline proceedings that existed at the time.

[23]

I
    also agree with the motion judge that in this case, Mr. McClyment was acting in
    his capacity as an investigator for the Law Society and was not acting outside
    the scope of his duties. Giving the information to the two banks was within the
    statutory exception found in s. 49.12(2)(b) of the Act as being required in
    connection with a proceeding under the Act,
[4]
and within s. 7(3)(d) of the
Personal Information Protection and Electronic
    Documents Act
, S.C. 2000, c. 5.
[5]

[24]

The
    circumstances of the communication here are protected by absolute privilege.

E.

the motion judge did not err in the exercise of his discretion to award
    costs

[25]

The
    appellant submits that, instead of awarding the $5000 in costs he did, the
    motion judge ought not to have awarded any costs, having regard to his findings
    that the case was complex, there was a paucity of judicial authority on the
    issue, and if Mr. McClyment had better chosen his words the action would likely
    not have been brought. The appellant also argues that, in addition to the
    above, the obvious disparity between the respective resources of the parties
    further precludes a costs award against him. If successful, the appellant was
    seeking costs of $23,334.50, and the respondent $37,862.80.

[26]

I
    am of the opinion that the motion judge properly took all relevant factors into
    account and made no error in principle in his award of costs.

F.

CONCLUSION and costs of the appeal

[27]

For
    the reasons given, I would dismiss the appeal.

[28]

The
    respondent seeks approximately $12,000 for costs of the appeal. Having regard
    to the costs award of the motion judge, I would fix costs in the amount of $5,000
    inclusive of disbursements and all applicable taxes.

Released: DEC 22, 2014

(KMW)                                                                     
    Karen M. Weiler J.A.

I agree K. Feldman J.A.

I agree M.L. Benotto J.A.





[1]
In March 2013, the Law Society decided not to go forward with the part of
    proceedings alleging professional misconduct on the basis that the appellant
    failed to be on his guard against becoming the tool or dupe of unscrupulous
    persons and thereby facilitating mortgage fraud. Certain other proceedings,
    however, remained extant.



[2]
Section 112(2) provides: No action for defamation may be founded on a
    communication regarding the conduct of a member or student-at-law if the
    communication is published to or by a person within any of the classes of
    persons enumerated in subsection (1) in good faith and in the course of any
    proceedings under this Act or the rules relating to that conduct.



[3]

Section
49.12(1)
reads: 
A bencher, officer, employee, agent or representative of the Society
    shall not disclose any information that comes to his or her knowledge as a
    result of an audit, investigation, review, search, seizure or proceeding under
    this Part.



[4]
Section 49.12(2) provides:
Subsection
    (1) does not prohibit,  (b) disclosure required in connection with a
    proceeding under this Act.



[5]

Section 7
    provides exceptions to the requirement that personal information be collected,
    used or disclosed only with consent of the individual. Section 7(3)(d)
    provides:

7(3) For the purpose of clause 4.3 of Schedule 1, and despite the note
    that accompanies that clause, an organization may disclose personal information
    without the knowledge or consent of the individual only if the disclosure is



(
d
) made on the initiative of the organization to an
    investigative body, a government institution or a part of a government
    institution and the organization

(i) has reasonable grounds to believe that the information relates
    to a breach of an agreement or a contravention of the laws of Canada, a
    province or a foreign jurisdiction that has been, is being or is about to be
    committed, or

(ii) suspects that the information relates to national security,
    the defence of Canada or the conduct of international affairs;




