DATE: 20050526
DOCKET: C40441
COURT OF APPEAL FOR ONTARIO
WEILER, ARMSTRONG and BLAIR JJ.A.
B E T W E E N :
HERSHEL STEMEROFF and 371689 ONTARIO LIMITED
Maxwell M. Steidman, Q.C., for the Respondent/Cross-Appellant
Respondent/Cross-Appellant
- and -
HOWARD SWARTZ, SWARTZ & SWARTZ and BAKER, SCHNEIDER, SWARTZ
Gary M. Caplan and Theresa Hartley, for the Appellant/Respondent in Cross-Appeal, Howard Swartz
Appellant/Respondent in Cross-Appeal
Heard: November 19, 2004
On appeal from the judgment of Justice Keith A. Hoilett of the Superior Court of Justice dated July 9, 2003.
ARMSTRONG J.A.:
[1] This is an appeal and cross-appeal from the judgment of Hoilett J. of the Superior Court of Justice in which he awarded damages to the plaintiff for deceit and for professional services rendered in the amount of $35,467.65. The trial judge also awarded the plaintiff his costs on a substantial indemnity basis in the amount of $55,000 inclusive of disbursements and Goods and Services Tax.
FACTUAL BACKGROUND
[2] The plaintiff (Stemeroff) is a dentist and the defendant (Swartz) is a lawyer. Stemeroff invested from time to time in real estate. In 1981, Stemeroff retained Swartz to sue his lawyers for negligence and fraud arising from failed mortgage investments. Three actions were commenced on behalf of Stemeroff.
[3] Stemeroff and Swartz entered into an oral barter arrangement whereby both would keep a running account of dental services provided by Stemeroff to the Swartz family and legal services provided by Swartz to Stemeroff. It was agreed that when the legal actions against Stemeroff’s lawyers concluded that the running accounts would be set off against each other and whatever balance was owing would be paid.
[4] The actions were dormant between 1981 and 1987 while criminal charges were pending against the lawyers. The lawyers were eventually acquitted.
[5] Between 1991 and November 1994, Swartz falsely advised Stemeroff that the actions had been set down for trial and placed on the trial list. In November 1994, Swartz advised Stemeroff that the cases were about to be reached for trial and that it was necessary to prepare for trial. Between November 1994 and August 1998, Swartz falsely advised Stemeroff of four separate applications that he had made to the court to fix trial dates and of 18 separate dates for the commencement of the trial. At the last minute, Swartz advised Stemeroff that the trial dates had been adjourned.
[6] In June 1997, Swartz falsely advised Stemeroff that he had written the Attorney General of Ontario to complain about the failure of the court to try the three actions. He even produced a copy of a letter which he falsely said had been sent to the Attorney General.
[7] In 1999, Stemeroff commenced this action against Swartz for negligence, breach of contract and deceit. In 2001, the insurers for Swartz settled the claims for negligence and breach of contract. Stemeroff was paid $440,000. Expressly excluded from the settlement were the non-insured claims, claims for damages arising from deceit and Stemeroff’s claims for dental services rendered to Swartz and his family. It is these claims which are the subject matter of this action which finally came to trial in March of 2003.
[8] Liability was not in issue at the trial which proceeded as an assessment of damages. The damages, however, were vigorously contested.
[9] In respect of the claim for deceit, Stemeroff sought a total of $69,349. The trial judge awarded him $20,000. In respect of his claim for the money owing for dental services pursuant to the barter agreement, Stemeroff sought $17,810.87 and was awarded $15,467.65.
THE DAMAGES FOR DECEIT
[10] Stemeroff testified that his office was interrupted for a total of 52 days; partially for some days and completely for others. Time was required to meet with Swartz to prepare for trial and review documents and transcripts. When, on short notice, Stemeroff was advised that the trial was not proceeding, he had to reorganize and reschedule his office routine. However, the trial judge found that no patients were lost and all affected appointments were rescheduled – apparently within ordinary office hours on other days. Nevertheless, the trial judge found that the cumulative effect of the many alleged adjournments was to diminish the overall efficiency of Stemeroff’s office.
[11] Stemeroff calculated his damages by taking a random sampling of average daily gross fees earned for each of the months involved over a four year period and from that amount, he deducted the amount of fees, if any, actually billed on the day in question. This formula produced the total claim of $69,349.
[12] The trial judge rejected Stemeroff’s calculation of these damages:
Regardless of the merits of the formula employed, it is admittedly crude; making no adjustments, as it does not, for any of the expenses normally associated with the running of an office. Similarly, no account is taken of the fact that on the days that no patients were seen no attempt was made to place a value on administrative and related activities that were assigned to the office staff.
The trial judge, relying upon Sklar-Peppler Furniture Corp. v. George C. Sweet Agencies Ltd., [1995] N.S.J. No. 1 (N.S.C.A.), concluded that the calculation of damages based upon gross fees without any deduction for expenses could not be adopted. Since there was no evidence of the relevant expenses, the quantum of damages as claimed by Stemeroff became speculative.
[13] In spite of the problems presented by the evidence (or lack of evidence) in this case, the trial judge proceeded to assess the damages for deceit as follows:
Notwithstanding the challenges posed by the peculiar circumstances of this case in the assessment of damages, I am of the view that there should be some assessment of damages. I am impelled to that conclusion because of the scope of what, were it an isolated event, may have been treated as merely an inconvenience. The insusceptibility to ease of precise calculation should not render immune from compensation circumstances so egregious as to make patent an injury; albeit one that is not easily commensurable. In the present case, there were eight (8) days when no patients were seen; for the other forty-eight days of disruption various ad hoc arrangements had to be made. It is the cumulative effect of all those disruptions to the smooth running of the plaintiffs office which, in my opinion, warrants some compensation. An amount in the sum of $20,000.00 fairly represents that loss, in my view.
[14] Counsel for Swartz submits on this appeal that the trial judge erred in awarding damages in the amount of $20,000 for disruption to the smooth running of the office. He further submits that the trial judge, in effect, awarded damages for inconvenience, the particulars of which were not pleaded in the statement of claim and not proved at trial.
[15] Stemeroff cross-appeals in respect of the damages awarded for deceit on the basis that the trial judge erred in rejecting his original claim for $69,349 which he asserts was advanced on a reasonable basis. He also asserts that a modified approach to these damages produced a total of $60,085 which supported a figure for damages between the two numbers of $65,000.
[16] In my view, the trial judge was correct to reject the theory of damages advanced by Stemeroff. However, I believe that the trial judge erred in postulating a theory of damages that was not supported by the evidence. Although there was some obvious disruption to the smooth running of the office, there was no evidence that Stemeroff lost a penny as a result. All of his patients were accommodated and all of his anticipated fees were earned within regular office hours at other times. I would therefore allow Swartz’s appeal and dismiss Stemeroff’s cross-appeal in respect of the damages for deceit.
THE DAMAGES FOR BREACH OF THE BARTER ARRANGEMENT
[17] Stemeroff testified at trial in respect of the amounts owing pursuant to the barter arrangement. His evidence was based upon financial information taken from his office records. He was subjected to detailed cross-examination by counsel for Swartz. He was not able to explain every entry in his office records. The trial judge concluded, however, that he was satisfied that Stemeroff had established his claim pursuant to the barter arrangement subject to two minor adjustments. Swartz submits in this appeal, as he did at trial, that Stemeroff’s record keeping was unreliable and that the trial judge erred in his conclusion that $15,467.65 was payable to Stemeroff. In my view, the trial judge’s conclusion in respect of these damages is fact based. Unless there is a palpable and over-riding error, there is no basis upon which to interfere. See Housen and Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 and H.L. v. Canada (Attorney General), [2005] S.C.C. 25. I see no such error.
[18] I would therefore dismiss Swartz’s appeal in respect of the damages for breach of the barter arrangement.
DISPOSITION
[19] I would allow the appeal of Swartz in part and set aside the award of damages for deceit in the amount of $20,000. I would dismiss the cross-appeal of Stemeroff in respect of the damages for deceit. I would dismiss the appeal of Swartz in respect of the damages awarded for breach of the barter arrangement in the amount of $15,467.65.
COSTS OF THE TRIAL
[20] The trial judge awarded Stemeroff costs on a substantial indemnity basis. I fully endorse the following comments of the trial judge contained in his reasons for the costs award:
The record of this trial and the antecedents leading up to the trial speak for themselves and suffice it to say that the deceit on the part of the defendant was egregious, and all the more so when one has regard to the fact that he was a barrister and solicitor, an officer of the court, who, if anyone, should have been acutely aware of the moral and ethical norms by which his conduct should be governed. I have no difficulty in concluding, therefore, that costs should be awarded on a substantial indemnity scale.
[21] However, I must take into account that I have set aside the damages award for deceit. While I have concluded that Stemeroff failed to prove his damages for deceit, the egregious conduct of Swartz is not any less egregious as a result – particularly bearing in mind that he was a barrister and solicitor and an officer of the court at the time. Although Swartz has successfully defended part of the damages claim, he still remains liable for the amount owing under the barter arrangement. The barter arrangement was an integral part of the relationship between Stemeroff and Swartz in which Swartz defaulted. He did not testify at trial and simply stood on his right to require Stemeroff to prove the amount owing. I see no reason to interfere with the trial judge’s conclusion that Swartz should be liable to pay costs on a substantial indemnity basis. However, given the fact that part of the trial judgment has been altered as a result of this appeal, I would reduce the trial costs from $55,000 to $40,000.
COSTS OF THE APPEAL AND CROSS-APPEAL
[22] There is divided success on the appeal and cross-appeal. I would therefore make no order as to costs of the appeal and cross-appeal.
RELEASED:
“MAY 26 2005” “Robert P. Armstrong J.A.”
“KMW” “I agree K.M. Weiler J.A.”
“I agree R.A. Blair J.A.”