Sagon v. Royal Bk. (1992), 105 Sask.R. 133 (CA);
32 W.A.C. 133
MLB headnote and full text
Ted Sagon (plaintiff/appellant) v. The Royal Bank of Canada, Frank Sander, Raymond Lamontagne, David McKeague, and The Law Society of Saskatchewan (defendants/respondents) and Brent & Greenhorn, Audrey Brent, and Lynne Greenhorn (third parties/respondents) and Law Society of Saskatchewan, and Lawyers Concerned For Lawyers Inc. (fourth parties/respondents)
(Appeal No. 916)
Indexed As: Sagon v. Royal Bank of Canada et al.
Saskatchewan Court of Appeal
Cameron, Sherstobitoff and Jackson, JJ.A.
April 13, 1992.
Summary:
Sagon borrowed money from the Royal Bank. Subsequently, Royal commenced five actions involving foreclosure, etc. Sagon was represented by Brent. However, during certain negotiations concerning a compromise, Sagon was represented by Brent’s partner, Lamontagne. After some three weeks, Lamontagne ceased to represent Sagon and admitted himself for treatment for substance abuse. Shortly after, Lamontagne was suspended from practice. Brent represented Sagon from that point on. Brent was aware of Lamontagne’s problems. Some eleven months later, Sagon executed a compromise agreement with the Royal Bank. Brent certified that Sagon had received independent legal advice. Later, Sagon sued, inter alia, Lamontagne, the Royal Bank and its lawyer for, inter alia, an order setting aside the compromise agreement and for damages. Sagon submitted that at the time of the negotiations with Lamontagne, the Royal Bank and its lawyer (the chairman of the Law Society’s disciplinary committee) knew that Lamontagne was in trouble with the Royal Bank and the Law Society for misuse of trust funds. They were also aware of his substance abuse problem. They knew that Lamontagne was in a conflict of interest position because he was under pressure to resolve Sagon’s case. Sagon submitted that their decision to allow him to execute the compromise without informing him of Lamontagne’s problems constituted a breach of fiduciary duty and fraud. The defendants added Lamontagne’s law firm, Brent & Greenhorn, as a third party. The defendants also applied to have the action struck out on the ground it failed to disclose a cause of action and that it was frivolous, vexatious and an abuse of process.
The Saskatchewan Court of Queen’s Bench, in a decision not reported in this series of reports, struck out the statement of claim and awarded solicitor and client costs. Sagon appealed.
The Saskatchewan Court of Appeal dismissed the appeal and dismissed the action.
Practice – Topic 2230
Pleadings – Striking out pleadings – Grounds – Failure to disclose a cause of action or defence – The Saskatchewan Court of Appeal considered the nature of an application to strike a statement of claim as disclosing no cause of action – The court stated that “[i]n determining whether a claim should be struck as disclosing no reasonable cause of action, the test is whether, assuming the plaintiff proves everything alleged in his claim, there is nevertheless no reasonable chance of success, or to put it another way, no arguable case. The court should exercise its jurisdiction to strike on the ground only in plain and obvious cases and where the court is satisfied that the case is beyond doubt” – See paragraph 16.
Practice – Topic 2230
Pleadings – Striking out pleadings – Grounds – Failure to disclose a cause of action – Lamontagne represented Sagon in negotiations with the Royal Bank – Lamontagne, a substance abuser, was in difficulty with the Royal Bank for misuse of trust funds – The Royal was represented by the chairman of the Law Society’s disciplinary committee – After three weeks, Lamontagne withdrew and Sagon was represented by Brent, Lamontagne’s law partner – A year later Sagon executed a compromise agreement – Later, Sagon applied to have the compromise set aside on the ground the Royal Bank and its lawyer breached their fiduciary duty by failing to inform him of Lamontagne’s problems and the resulting conflict of interest – The defendants applied to have the statement of claim struck – The Saskatchewan Court of Appeal struck the action.
Practice – Topic 2231
Pleadings – Striking out pleadings – Grounds – False, frivolous or vexatious – – The Saskatchewan Court of Appeal stated that “[s]triking out an entire claim on the ground that it is frivolous, vexatious or an abuse of process of the court is based on an entirely different footing. Instead of considering merely the adequacy of the pleadings to support a reasonable cause of action, it may involve an assessment of the merits of the claim, and the motives of the plaintiff in bringing it. Evidence other than the pleadings is admissible. Success of such an application will normally result in dismissal of the action, with the result that the rule of res judicata will likely apply to any subsequent efforts to bring new actions based on the same facts.” – See paragraph 18.
Practice – Topic 2231
Pleadings – Striking out pleadings – Grounds – False, frivolous or vexatious – [See second
Practice – Topic 2230
].
Practice – Topic 2235
Pleadings – Striking out pleadings – Grounds – Evidence – Certain defendants applied to have a statement of claim struck out because of failure to disclose a reasonable cause of action – The Saskatchewan Court of Appeal stated that in considering an application to strike, “[t]he court may consider only the statement of claim, any particulars furnished pursuant to demand, and any document referred to in the claim upon which the plaintiff must rely to establish his case” – See paragraph 16.
Practice – Topic 2239
Pleadings – Striking out pleadings – Grounds – Abuse of process – [See second
Practice – Topic 2230
].
Practice – Topic 7470
Costs – Solicitor and client costs – Entitlement – Unproven allegation of fraud – Lamontagne represented Sagon in negotiations with the Royal Bank – Lamontagne, a substance abuser, was in difficulty with the Royal Bank for misuse of trust funds – The Royal was represented by the chairman of the Law Society’s disciplinary committee – After three weeks, Lamontagne withdrew and Sagon was represented by Brent, Lamontagne’s law partner – A year later Sagon executed a compromise agreement – Later, Sagon applied to have the compromise set aside on the ground the Royal Bank and its lawyer were guilty of fraud in that they conspired to pressure Lamontagne to encourage Sagon to settle – The Saskatchewan Court of Appeal dismissed Sagon’s action and awarded solicitor and client costs because of the unsubstantiated allegations of fraud – See paragraph 37.
Cases Noticed:
Marshall v. Saskatchewan, Petz and Adams (1983), 20 Sask.R. 309 (C.A.), refd to. [para. 16].
Attorney General of Canada v. Inuit Tapirisat – see Inuit Tapirisat of Canada and National Anti-Poverty Organization v. Attorney General of Canada.
Inuit Tapirisat of Canada and National Anti-Poverty Organization v. Attorney General of Canada, [1980] 2 S.C.R. 735; 33 N.R. 304, refd to. [para. 16].
Balacko v. Eaton’s of Canada Ltd. (1967), 60 W.W.R.(N.S.) 22 (Sask. Q.B.), refd to. [para. 16].
Lackmanec v. Hoffman and Wall (1982), 15 Sask.R. 1 (C.A.), refd to. [para. 16].
Derry v. Peek (1889), 14 App. Cas. 337 (H.L.), refd to. [para. 21].
Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465 (H.L.), refd to. [para. 21].
Canada Cement LaFarge Ltd. et al. v. British Columbia Lightweight Aggregate Ltd. et al., [1983] 1 S.C.R. 452; [1983] 6 W.W.R. 385; 47 N.R. 191; 21 B.L.R. 254; 24 C.C.L.T. 111; 72 C.P.R.(2d) 1; 145 D.L.R.(3d) 385, refd to. [para. 21].
Statutes Noticed:
Queen’s Bench Rules (Sask.) – see Rules of Court (Sask.), Queen’s Bench Rules.
Rules of Court (Sask.), Queen’s Bench Rules, rule 173 [para. 15].
Authors and Works Noticed:
Bullen and Leake, Precedents of Pleadings (12th Ed.), pp. 143 [para. 17]; 148-149 [para. 19].
Odgers, Pleadings and Practice (20th Ed.), pp. 153-154 [para. 18].
Counsel:
A. Kapoor and D. Brown, for the appellants;
G. Kuski, Q.C., for the Royal Bank and Frank Sander;
D. Plaxton, for David McKeague;
A. Snell, for the Law Society of Saskatchewan;
No one appeared for Brent and Greenhorn.
This appeal was heard on February 18, 1992, by Cameron, Sherstobitoff and Jackson, JJ.A., of the Saskatchewan Court of Appeal. The following decision was delivered for the court by Sherstobitoff, J.A., on April 13, 1992.
