Luhning v Hnatyshyn, 2021 SKCA 121

Court of Appeal for Saskatchewan Docket: CACV3775 Citation: Luhning v Hnatyshyn , 2021 SKCA 121 Date: 2021-09-09 Between: Shelly Ann Luhning Appellant (Plaintiff) And David Hnatyshyn Respondent (Defendant) Before: Leurer, Barrington-Foote and Kalmakoff JJ.A. Disposition: Appeal dismissed Written reasons by: The Honourable Mr. Justice Leurer In concurrence: The Honourable Mr. Justice Barrington-Foote The Honourable Mr. Justice Kalmakoff On appeal from: 2021 SKQB 17 , Saskatoon Appeal heard: June 11, 2021 Counsel: Stuart Busse, Q.C., for the Appellant Karen Prisciak, Q.C., for the Respondent Leurer J.A. I.

INTRODUCTION [ 1 ] Shelly Ann Luhning appeals against an order of a Court of Queen’s Bench judge sitting in Chambers striking her statement of claim against David Hnatyshyn: Luhning v Hnatyshyn , 2021 SKQB 17 [ Chambers Decision ]. I have concluded that Ms. Luhning’s appeal must be dismissed. My reasons follow. II. BACKGROUND [ 2 ] Ms. Luhning’s claim arises out of a shareholder dispute. She, along with Janice Hiebert, owned all the shares of a corporation. Acting in accordance with a buy/sell arrangement contained in a unanimous shareholder agreement, Ms. Hiebert agreed to purchase Ms.

Luhning’s shares for $150,000, with the deal to close on September 15, 2016 [contract]. However, a disagreement arose when Ms. Hiebert insisted that Ms. Luhning also agree to be bound by a non-competition agreement that would prevent her from competing with the company after control of the corporation passed to Ms. Hiebert [restrictive covenant]. Ms. Luhning took the position that this was not required under the terms of the contract. [ 3 ] Mr. Hnatyshyn, a Saskatchewan lawyer, represented Ms. Hiebert in these matters. On September 7, 2016, he forwarded the purchase price for the shares to Ms.

Luhning’s lawyer, subject to a trust condition that the funds were not to be released unless Ms. Luhning agreed to be bound by the restrictive covenant. Ms. Luhning’s lawyer did not accept the trust condition. As a result, the share sale did not close. [ 4 ] On September 16, 2016, Ms. Luhning issued a statement of claim against Ms. Hiebert alleging a breach of the contract. Ms. Luhning and Ms. Hiebert later resolved the issues in that lawsuit and it was discontinued.

The terms of settlement are not in evidence in this action nor are they referenced in any pleadings. [ 5 ] On September 14, 2018 – that is, one day shy of the second anniversary of when the share sale should have closed – Ms. Luhning issued a second statement of claim seeking damages due to the collapse of the share sale arrangement. She named as defendants both Ms. Hiebert and Mr. Hnatyshyn. The statement of claim alleges that the defendants “did conspire to induce [Ms. Luhning] to believe in a situation that was not in compliance with their intention and ultimate course of action”, that Mr.

Hnatyshyn “did counsel [Ms. Hiebert] to breach her contract to purchase the company shares” and that the “actions of the Defendants are unlawful conduct in that their actions caused injury to the legal rights of the Plaintiff as it resulted in a breach of contract to purchase the company shares by the Defendant Hiebert, and a breach of the duty of fair dealing in a commercial transaction”. The assertion that Mr.

Hnatyshyn’s actions were unlawful is based on the suggestion that the rules governing the professional conduct of Saskatchewan lawyers prohibited him from sending the purchase monies under a trust condition that was (so it is alleged) inconsistent with the terms of the contract. [ 6 ] Ms. Luhning and Ms. Hiebert settled this second lawsuit, and a notice of discontinuance of the claim against Ms. Hiebert was filed on September 25, 2020. The terms of this settlement are also not in evidence nor are they referenced in any pleadings. [ 7 ] Mr.

Hnatyshyn’s statement of defence pleads, among other defences, that he did not owe a duty of any sort to Ms. Luhning because he was acting on behalf of Ms. Hiebert throughout. He also asserts that Ms. Luhning’s claim is statute barred by The Limitations Act , SS 2004, c L-16.1 [ Limitations Act ]. [ 8 ] Mr. Hnatyshyn subsequently served a notice of application seeking an order that the statement of claim be struck pursuant to

Rule 7-9(2)(

a) of The Queen’s Bench Rules [Rules], as disclosing no reasonable cause of action, Rule 7-9(2)(b), for being frivolous,vexatious or scandalous, and Rule 7-9(2)(e), for being an abuse of process. III. THE CHAMBERS DECISION [9] The Chambers judge concluded that Ms. Luhning’s causes of action against Mr. Hnatyshyn, if she had any, arose onSeptember 7, 2016, when Mr. Hnatyshyn imposed the trust condition requiring her to enter into the restrictive covenant to receive thepurchase price of the shares. This meant that “Ms. Luhning had two years from that date to launch her action against Mr.

Hnatyshyn” andher failure to do so meant it was time-barred (Chambers Decision at para 22). Because Ms. Luhning had knowledge of the facts thatresulted in the statement of claim being time-barred, the Chambers judge concluded that it should be struck as an abuse of process. [10] The Chambers judge also held that, in any event, the statement of claim did not disclose a reasonable cause of action. He foundthat the claim “does not adequately plead the required elements of a conspiracy claim and thus discloses no cause of action in conspiracy”(at para 39).

He stated that he was “unaware of any extant tort for ‘counselling a breach of contract’” and therefore “treated this pleadingat its highest, which would be an ill-worded allegation of the tort of intentionally inducing a breach of contract” (at para 43). In relation tothis, he found that the tort “contemplates a three-party wrongful transaction and here, there are really only two parties because of thenature of Mr. Hnatyshyn’s solicitor-client relationship with Ms. Hiebert”. In this regard, he noted that the statement of claim asserted onlythat Mr. Hnatyshyn was Ms.

Hiebert’s lawyer and, thus, there was “no allegation in the statement of claim that Mr. Hnatyshyn was anindependent actor, interfering with the contractual relations of the plaintiff and the main defendant by unlawful means” (at para 48). Hefound that there was “also no pleading of intention, that is, that Mr. Hnatyshyn imposed the trust condition with the express independentintention of causing a breach of the Luhning/Hiebert contract” (at para 50). In relation to the third theory of liability advanced byMs.

Luhning – that the imposition of the trust condition was unlawful and actionable because it violated the rules of the Law Society ofSaskatchewan – he held that Ms. Luhning “conflates the role of this Court with that of the regulator” and, “[i]f there is a complaint as toMr. Hnatyshyn breaching his professional responsibilities, then that complaint is dealt with by the Law Society” (at para 52). [11] Finally, the Chambers judge turned to Mr.

Hnatyshyn’s request to strike the statement of claim on the ground that it lacks anybasis in fact and, for this additional reason, should be struck pursuant to either Rule 7-9(2)(

b) or 7-9(2)(e). He noted that, in consideringthese bases to strike the statement of claim, he was “not limited to the pleadings but may look to the affidavits filed” (at para 58, citingSagon v Royal Bank of Canada (1992), (SK CA), 105 Sask R 133 (CA)). After dealing with several evidentiary issues,he concluded that “there is no evidence of conspiracy between a solicitor and his client” (at para 65) and that the “same analysis holds truefor the remaining two grounds, that of counselling a breach of contract and the putatively ‘unlawful’ tendering of a trust condition” (atpara 68).

He described the situation as being “really a dispute about the dealings between plaintiff and [Ms. Hiebert] and not the lawyer”(at para 69). IV. ISSUES [12] In my view, the outcome of Ms. Luhning’s appeal is dictated by the answers to two questions, as follows: (

a) Did the Chambers judge err in concluding that Ms. Luhning’s claim was time-barred? (

b) Did the Chambers judge err in determining that the statement of claim did not disclose a reasonable cause of action? V. ANALYSIS A. Did the Chambers judge err in concluding that Ms. Luhning’s claim wastime-barred? [13] The Chambers judge struck the statement of claim as an abuse of process because he found that Ms. Luhning had knowledge ofall the facts that would cause her claim to be statute barred. In doing this, he relied on this Court’s decision in Walker v Mitchell, 2020SKCA 127 at paras 24–​27, [2021] 4 WWR 555, as well as other authorities. Ms. Luhning takes no issue with the appropriateness of theChambers judge invoking Rule 7-9(2)(

e) to decide the limitations issue. Her contention is that he erred in finding that her right to suearose prior to September 15, 2016. [14] The Chambers judge’s determination that the claim against Mr. Hnatyshyn was out of time stood on his conclusion that Ms.Luhning’s causes of action, if any, arose when her own lawyer rejected the trust condition under which the purchase price of the shareshad been sent by Mr. Hnatyshyn. His view was that, at this point, Ms.

Luhning knew or ought to have known that “the share sale [was] injeopardy and any damage she would sustain began as of that date” (Chambers Decision at para 22). [15] Ms. Luhning asserts that this analysis contains a legal error. The substance of her submission is that her right to sue Mr.Hnatyshyn is tied directly to the alleged breach of the contract between herself and Ms. Hiebert. She states that the trust condition “couldhave been withdrawn at any time up to the end of the closing date of September 15, 2016”.

She maintains that, as she did not accept Ms.Hiebert’s actions as a repudiation of the contract, the contract remained alive until the scheduled closing date had passed. She asserts,therefore, that it was only on September 15, 2016 that she suffered damages and a cause of action against Mr. Hnatyshyn arose. [16] Ms. Luhning’s statement of claim is not a model of a clear pleading. Nonetheless, in oral argument in this Court, her counseladvised that Ms. Luhning intended to plead causes of action in conspiracy and inducing breach of contract.

Both causes of action dependon the existence of damages caused by a defendant’s wrongdoing: Lewis N. Klar, Remedies in Tort, loose-leaf (2021-Rel 1) vol 1(Toronto: Thomson Reuters, 2021) at 3-36 and 8-30 [Remedies in Tort]. In this case, the damages alleged to have been suffered by Ms.

Luhning are all associated with Ms. Hiebert’s breach of contract. In essence, Ms. Luhning alleges that all that occurred prior to September15, 2016, was an anticipatory breach of contract by Ms. Hiebert, and that her damages flowed from the later breach of contract. In thisregard, the statement of claim pleads: 18. Except for the unlawful conduct of the Defendants the sale transaction would have been completed as planned as the purchase moneywas forwarded but was conditional upon the trust condition related to the restrictive covenant. 19.

The Plaintiff has not been receiving any of the income from the company in the interim and has not had the use of the sale money andhas suffered economic harm in excess of the sum of $250,000. 20.

The Plaintiff has suffered significant emotional distress and stress related to not receiving the purchase money nor any income from thecompany in the interim since the agreed closing date. [17] For the purposes of determining when the cause of action has accrued for an anticipatory breach of contract, “time will eitherrun from the date on which the repudiation is accepted or from the date called for in the contract for performance of its conditions”(Graeme Mew, Debra Rolph & Daniel Zacks, The Law of Limitations, 3d ed (Toronto: LexisNexis, 2016) at §9.26).

This rule is expressedin Hole v Hole, 2016 ABCA 34, 393 DLR (4th) 708, leave to appeal to SCC refused, , as follows: [61] Anticipatory breach of contract occurs when one party to the contract repudiates his contractual obligations before they fall due:Ali v O-Two Medical Technologies Inc, 2013 ONCA 733 at para 22, 118 OR (3d) 321.

As this Court has previously noted, it is trite lawthat the innocent party need not accept the wrongdoer’s repudiation: Pedersen v Soyka, 2014 ABCA 179 at para 21, 99 Alta LR (5th) 139.The innocent party can refuse to accept the repudiation and the contract will continue in full force and effect: Guarantee Co of NorthAmerica v Gordon Capital Corp, (SCC), [1999] 3 SCR 423 at para 40, 178 DLR (4th) 1.

An election by the innocentparty to accept the repudiation must be clearly and unequivocally communicated to the repudiating party; if not, the contract continues infull force: Ali at para 24; Brown v Belleville (City), 2013 ONCA 148 at paras 53-54, 114 OR (3d) 561. (Emphasis added) [18] More recently, Gillese J.A. made the same point in Fram Elgin Mills 90 Inc. v Romandale Farms Limited, 2021 ONCA 201: [259] An anticipatory breach does not, in itself, terminate the contract. Once the offending party shows its intention not to be bound bythe contract, the innocent party has a choice.

The innocent party may accept the breach and elect to sue immediately for damages, inwhich case the innocent party must “clearly and unequivocally” accept the repudiation to terminate the contract. Alternatively, theinnocent party may choose to treat the contract as subsisting, continue to press for performance, and bring the action only when thepromised performance fails to materialize. However, by choosing the latter option, the innocent party is bound to accept performance ifthe repudiating party decides to carry out its obligations: Ali, at para. 24. (Emphasis added) [19] In this case, Ms.

Luhning did not accept Ms. Hiebert’s alleged anticipatory breach of contract. Ms. Luhning held open thepossibility that the sale might close. She only sued after the scheduled date for closing had passed, by initiating the first claim against Ms.Hiebert alone on September 16, 2016, and then later by commencing the second action against both Ms. Hiebert and Mr. Hnatyshyn onSeptember 14, 2018. It follows from this that Ms. Luhning’s right to sue Ms. Hiebert, based in her claims of a conspiracy and inducementof breach of contract, arose on September 15, 2016, when the share sale transaction failed to close.

As such, the Chambers judge erred inconcluding that the claim was time-barred. It should not have been struck for that reason. [20] It is not hard to see how the Chambers judge was led to the opposite conclusion. At several junctures in his reasoning, theChambers judge explained the difficulty that he had in understanding the statement of claim. I experienced the same difficulty. TheChambers judge noted that Ms. Luhning asserted that “the imposition of this trust condition was an independent operative cause of lossand damage to [her]” (at para 18).

He then described her argument “that the cause of action did not arise until the closing date of this deal”as “difficult to understand” (at para 19). He was left, as is this Court, with explanations from Ms. Luhning’s counsel as to the nature of hertheory of liability. [21] Ms. Luhning may have decided to characterize her claim against Mr. Hnatyshyn as only arising when the share sale transactionfailed to close to avoid the operation of the Limitations Act. However, as I will next explain, Ms.

Luhning’s theory of liability is relevant tothe question as to whether her statement of claim discloses a reasonable cause of action against Mr. Hnatyshyn. B. Did the Chambers judge err in determining that the statement of claim didnot disclose a reasonable cause of action? [22] The Chambers judge held, as the second basis for striking Ms. Luhning’s statement of claim, that it failed to disclose areasonable cause of action. [23] Ms. Luhning does not challenge the general approach that the Chambers judge took in analyzing the sufficiency of herpleading.

She maintains nonetheless that the necessary elements of the two causes of action she asserts, conspiracy and inducing breach ofcontract, were adequately pleaded. For his part, Mr. Hnatyshyn defends every aspect of the Chambers judge’s reasoning. He also says thata lawyer in his position can never owe a duty to a person, such as Ms. Luhning, who is adverse in interest to the lawyer’s client. Hefurther argues that he did not breach his professional responsibilities and, in any event, liability for a civil wrong can not be attached to abreach of those responsibilities.

While these positions were taken forcefully, neither side to this debate plumbed to any degree the nuancesthat would need to be explored to provide a satisfactory answer to these, and associated, questions. [24] I see a much more basic reason why the statement of claim does not disclose a reasonable cause of action. It relates to Ms.Luhning’s theory of liability and the requirement that, in relation to causes of action that depend on the proof of damages, the plaintiff

must not only plead (and later prove) facts to support the conclusion that the defendant acted wrongly, but also that the defendant’sallegedly wrongful act caused the damage for which the plaintiff sues: Casbohm v Winacott Spring Western Star Trucks, 2021 SKCA 21at para 79, [2021] 4 WWR 506, leave to appeal to SCC refused, . This requirement invites a careful scrutiny ofMs. Luhning’s theory of liability. [25] To plead a cause of action in conspiracy, the plaintiff must allege damages that are causally related to the actions takenpursuant to the agreement among the defendants. In this regard, Remedies in Tort states (at 3-36):

Chapter 3 - Conspiracy 5. Damage §21 The tort of conspiracy is an action on the case; accordingly, damages must be proven. Damage, as opposed to the agreement itself, isthe gist of a civil action for conspiracy. The damage must be causally related to the acts taken pursuant to the agreement among thedefendants. (Footnotes omitted) [26] In this case, I see no facts that would support a conclusion that the damages claimed by Ms. Luhning were caused by any actiontaken pursuant to the alleged conspiracy. Ms. Luhning’s conspiracy claim is contained in the following two paragraphs of her statement ofclaim: 11.

The Defendants did conspire to induce the Plaintiff to believe in a situation that was not in compliance with their intention and ultimatecourse of action. 12.

The Defendants had planned to attempt to sell the Defendant Hiebert’s shares to the Plaintiff without any restrictive covenant but inthe event that the Plaintiff elected to sell her shares, then the Defendants would impose a trust condition that would make the DefendantHiebert’s purchase of the shares more advantages [sic] because of the restrictive covenant that was imposed by the use of the trustconditions. [27] These pleadings do not associate any damages with the conspiracy Ms. Luhning alleges. I begin by noting that she has nocomplaint with the terms of the contract.

She therefore does not say that she was harmed by being induced to enter it by reason of thealleged conspiracy. This renders irrelevant whether, as she alleges in paragraph 11 of the statement of claim, she was induced “to believein a situation that was not in compliance with their intention and ultimate course of action”. I add that, while there may have been a laterdisagreement as to what the contract required, there was no uncertainty as to what Ms. Hiebert needed in order for the share sale to close. [28] This leaves the allegation contained in paragraph 12 of the statement of claim. In this Court, Ms.

Luhning’s counsel was quiteclear that Ms. Luhning’s allegation is that Mr. Hnatyshyn caused her damage because of the trust condition requiring that, before herlawyer could release the sales proceeds to her, she must accept the restrictive covenant. However, this did not cause her loss.Ms. Luhning’s lawyer was free to reject the trust condition and insist that Ms. Hiebert abide by the contract – which he did. The damagesfor which Ms. Luhning claims are, therefore, not related to the trust condition under which the monies were sent. Instead, the damagesflow from the non-payment by Ms.

Hiebert in accordance with the contract. [29] I would reach a similar conclusion with respect to Ms. Luhning’s claim for inducing breach of contract. There must be space forprofessional advisors to counsel their clients. For this reason, some courts have drawn a distinction between advice-giving andinducement. (See, generally, Remedies in Tort at 8-23.) Leaving this aside, there is no allegation that the trust condition – or, for thatmatter, the advice of Mr. Hnatyshyn – was the cause of Ms. Hiebert not paying the purchase price. In the latter regard, there is no pleadingthat Ms.

Hiebert was prepared to pay the purchase price without Ms. Luhning agreeing to the restrictive covenant. I would add, forcompleteness, that Ms. Luhning also does not allege that Mr. Hnatyshyn was a guarantor of Ms. Hiebert’s performance of the contract. Hewas, after all, simply Ms. Hiebert’s lawyer, acting for her in connection with the transaction. [30] In short, if Ms. Luhning has suffered a loss, it was not because of any action on Mr. Hnatyshyn’s part, but because Ms. Hiebertdid not pay the purchase price. Ms. Luhning effectively conceded this argument. Her counsel acknowledged that Mr.

Hnatyshyn wouldhave committed no actionable wrong if, rather than sending the purchase monies under trust conditions that required Ms. Luhning toexecute the restrictive covenant, he had simply communicated that Ms. Hiebert was unprepared to close the share sale unless Ms. Luhningagreed to a non-competition agreement. It was said to be the imposition of the trust condition itself that constituted improper conduct.However, this appeal does not turn on whether Mr. Hnatyshyn’s actions were wrongful in the sense that they breached the Rules.

Thedecisive issue is whether the statement of claim pleads facts that would, if true, constitute the elements of a cause of action. [31] In conclusion, the statement of claim fails to plead facts that would allow for a conclusion that damages were caused by Mr.Hnatyshyn’s allegedly wrongful actions. It therefore does not plead a cause of action. This finding renders it unnecessary for me tocomment on other aspects of the Chambers judge’s reasons, including whether the statement of claim should also have been struck as anabuse of process pursuant to Rule 7-9(2)(e). [32] In her notice of appeal, Ms.

Luhning asked for leave to amend her statement of claim if this Court concluded it was defective.While amendments to pleadings are sometimes granted to cure defects in pleadings (for example, to comport with evidence), I would notdo so in this case for two reasons. First, Ms. Luhning did not identify the specific changes she would request. Second, based on Ms.Luhning’s theory of liability, there is no amendment that I can see that could cure the pleading defect. Not only is there no pleading thatMs.

Hiebert was prepared to pay the purchase price without receiving the benefit of the restrictive covenant, her actions disclose that shewas not. The monies were sent by Mr. Hnatyshyn under trust conditions that were not acceptable to Ms. Luhning. Her recourse was toreject the trust condition – which occurred – and insist on the payment of the monies – which also was done. There is simply nothing onthe record to suggest that there is a pleading open to Ms. Luhning that would cure the fundamental defect that exists in the statement ofclaim.

VI. CONCLUSION [ 33 ] For the reasons I have given, I would dismiss Ms. Luhning’s appeal. Mr. Hnatyshyn is entitled to costs against her, in the usual way. “Leurer J.A” Leurer J.A. I concur. “Barrington-Foote J.A.” Barrington-Foote J.A. I concur. “Kalmakoff J.A.” Kalmakoff J.A.