Ristimaki v. Cooper [Indexed as: Ristimaki v. Cooper]
79 O.R. (3d) 648
[2006] O.J. No. 1559
Court of Appeal for Ontario,
Cronk, Gillese and Armstrong JJ.A.
April 21, 2006
Professions -- Barristers and solicitors -- Negligence -- Trial judge erring in applying standard of "egregious error" to assessment of solicitor's conduct rather than reasonableness standard -- Trial judge not erring in using time grid to break solicitor's conduct down into three time periods but trial judge erring in not considering solicitor's conduct as whole rather than solely in segmented time compartments when determining whether his conduct fell below requisite standard of care.
The defendant lawyer acted for the plaintiff in a matrimonial dispute. The defendant was aware from the start that the plaintiff's husband was a flight risk. Within a short time after his retainer, the defendant knew that the husband held assets offshore, that he was threatening to prevent or frustrate any meaningful recovery by the plaintiff in the matrimonial litigation and that there was a significant risk that he would leave the jurisdiction permanently, perhaps prior to discovery and certainly before trial. On August 16, 1994, the defendant prepared a petition for divorce and claimed an equalization of net family property under the Family Law Act, R.S.O. 1990, c. F.3, an accounting of the husband's business interest and an interim order for the preservation and non- dissipation of the husband's property pending trial. He also brought a motion in which he sought the [page649] particulars of the husband's sale of his business. The defendant retained a business valuator to assist in the appraisal of the husband's shares in his company. On the day before the disclosure motion was to be argued, the valuator advised the defendant that he estimated the equalization payment owed to the plaintiff was $8 million and that, in order to ensure that the equalization payment would be made, it would be necessary to secure $7 million. Later the same day, the motion was settled on the following terms: the husband would pay $2.5 million to the plaintiff out of the proceeds of sale of the business as an advance on her equalization payment; the husband would place a further $1.5 million out of the sale proceeds into trust to await the outcome of the proceedings between the parties; the husband would transfer his interest in the parties' Florida property to the plaintiff; and the plaintiff would not bring any motion to have further of the husband's moneys secured prior to judgment.
Prior to the settlement, the defendant did not tell the plaintiff about the valuator's recommendation concerning the required security for the equalization payment, the need for a preservation order in respect of other moneys at risk of leaving the jurisdiction and the fact that, under the terms of the settlement, she would be giving up any further claim for security prior to judgment at trial. The settlement was reached six weeks into the litigation, at a time when the defendant had not yet received a sworn financial statement or an affidavit of documents from counsel for the husband and no examination for discovery of the husband had taken place. The defendant brought a motion for interim support in May 1995. During the argument of that motion, he and counsel for the husband agreed that the trial should take place by January 26, 1996. As a result, interim support was awarded through January 30, 1996. The defendant did not advance the case to trial by January 1996. No formal examination for discovery was conducted and no affidavit of documents was received. No steps had been taken to move the case to trial. In January 1997, Revenue Canada filed a certificate in the amount of $7,444,261 in the Federal Court against the husband for unpaid taxes, penalties and interest and filed a writ of execution with the Sheriff. The Crown thus became a judgment creditor and execution creditor of the husband, and its claim had priority over the claims of other judgment and execution creditors. Revenue Canada claimed against the $1.5 million in the trust account of the husband's solicitor. The plaintiff settled with Revenue Canada for 30 per cent of those funds. In September 1998, the plaintiff obtained default judgment for the balance of the equalization payment. By this time, the husband had taken flight. The default judgment remained unpaid. The plaintiff brought an action against the defendant for negligence. The action was dismissed. The plaintiff appealed.
Held, the appeal should be allowed.
In assessing whether the defendant fell below the standard of care in providing inadequate advice concerning the settlement of the disclosure motion, the trial judge erred in applying the standard of "egregious error" rather than the reasonableness standard. There is no justification for holding lawyers to a different and lower standard than other professionals. The Court of Appeal was not in a position to apply the reasonableness standard to the defendant's recommendation that the plaintiff accept the settlement offer. The difference between the standard of reasonableness and the standard of egregious error is significant. That issue was central to the case against the defendant. It should be determined in the context of a trial in which the trial judge would take the relevant factors into account.
In his review of the evidence, the trial judge divided the defendant's retainer into a time grid of three periods. The use of the time grid and the analysis of the three separate periods were not in themselves reasons to find error with the trial [page650] judge's approach. However, the trial judge should have considered the defendant's conduct as a whole, rather than solely in segmented time compartments, when determining whether his conduct fell below the requisite standard of care. Once the trial judge had conducted his time grid analysis, he should have stepped back and considered whether the failure to move the case to trial, at least prior to the action taken by Revenue Canada and in accordance with the defendant's own agreement with the husband's solicitor, fell below the requisite standard of care. This was a case that, to the knowledge of the defendant, needed to be moved to trial on an urgent basis. This was not done, and no clear explanation for the failure to do so was evident on the record. The trial judge failed to comprehend the significance of the evidence related to the failure to move the case to trial, especially the evidence of counsels' agreement on an early trial date. The findings of the trial judge did not provide a sufficient basis upon which to fully assess the defendant's conduct in failing to try the plaintiff's case after the settlement of the disclosure motion and prior to January 1997. Nor did the record permit the court to fairly determine the realistic likelihood of the plaintiff obtaining an exigible judgment against the husband before the date when Revenue Canada filed its certificate with the Federal Court, or to assess whether an early and expedited trial date could have been obtained in sufficient time to avoid competition between the plaintiff's and Revenue Canada's claims. These were matters to be determined by a trial judge upon proper evidence.
APPEAL from the judgment of Stinson J., [2004] O.J. No. 2699, [2004] O.T.C. 547 (S.C.J.) dismissing a negligence action.
The judgment of the court was delivered by
Folland v. Reardon (2005), 2005 1403 (ON CA), 74 O.R. (3d) 688, [2005] O.J. No. 216, 194 O.A.C. 201, 249 D.L.R. (4th) 167, 28 C.C.L.T. (3d) 1 (C.A.), apld Other cases referred to Central Trust Co. v. Rafuse, 1988 46 (SCC), [1988] 1 S.C.R. 1206, [1988] S.C.J. No. 104, varg 1986 29 (SCC), [1986] 2 S.C.R. 147, [1986] S.C.J. No. 52, 75 N.S.R. (2d) 109, 31 D.L.R. (4th) 481, 69 N.R. 321, 86 A.P.R. 109, 34 B.L.R. 187, 37 C.C.L.T. 117, 42 R.P.R. 161 (sub nom. Central & Eastern Trust Co. v. Rafuse); Confederation Life Insurance Co. v. Shepherd, McKenzie, Plaxton, Little & Jenkins, 1996 3206 (ON CA), [1996] O.J. No. 177, 88 O.A.C. 398, 60 A.C.W.S. (3d) 835 (C.A.), varg [1992] O.J. 2595, 29 R.P.R. (2d) 271, 37 A.C.W.S. (3d) 141 (Gen. Div.); Karpenko v. Paroian, Courey, Cohen & Houston (1980), 1980 1588 (ON SC), 30 O.R. (2d) 776, 117 D.L.R. (3d) 383 (H.C.J.); Major v. Buchanan (1976), 1975 467 (ON SC), 9 O.R. (2d) 491, 61 D.L.R. (3d) 46 (H.C.J.) Statutes referred to Family Law Act, R.S.O. 1990, c. F.3, s. 12 Authorities referred to Grant, S.M., and L.R. Rothstein, Lawyers' Professional Liability, 2nd ed. (Markham: Butterworths, 1998)
Milton A. Davis and J. Thomas Curry, for appellant. Paul J. Pape and Susan M. Chapman, for respondent.
1ARMSTRONG J.A.:-- This is an appeal from the judgment of Stinson J. of the Superior Court of Justice in which he dismissed [page651] the appellant's claim against her lawyer for negligence in respect of his representation of her in a family law dispute against her husband. The respondent seeks leave to cross appeal the trial judge's order in respect of costs.
The Facts
2Leah and Ron Ristimaki were married in 1960. Mr. Ristimaki became a very successful businessman as a result of his 51 per cent ownership of Auto-Trans Holdings Ltd. ("ATH"). ATH, through a subsidiary, was the largest transporter of cars in Canada.
3Mr. and Mrs. Ristimaki enjoyed an extravagant lifestyle. Although they had a rented house in Oakville, Ontario they lived for the most part on a 5-acre property in Florida that was jointly owned through a corporate structure. They also spent considerable time on their 55-foot yacht cruising in the Caribbean and engaging in sport fishing tournaments.
4On November 7, 1993, while he was about to leave their Florida home to travel to Ontario, Mr. Ristimaki advised his wife that he was leaving her and terminating their 33-year marriage. This news came without any warning.
5In March 1994, Mrs. Ristimaki retained Gregory Cooper, a Toronto lawyer who specialized in family law. It is agreed between the parties that from the time of the first meeting between Mrs. Ristimaki and Mr. Cooper, Mrs. Ristimaki warned her lawyer that her husband was planning to sell his business, retire and leave Canada. It is also agreed that Mrs. Ristimaki told Mr. Cooper that her husband was in the habit of selling used equipment for cash, which he deposited offshore in the Bahamas and the Cayman Islands.
6From virtually the outset and on many occasions, Mrs. Ristimaki also told Mr. Cooper that her husband was intending to pay her as little as possible and to disappear. Mr. Cooper always reassured Mrs. Ristimaki and told her not to worry, as she would have so much money that she would be able to buy whatever she wanted.
7Mr. Ristimaki retained Tom Bastedo, also a family law specialist. Mr. Cooper and Mr. Bastedo knew each other well, as they had been law partners until 1991, together with Frank Shostack, a commercial lawyer.
8In April 1994, Mr. Cooper requested that Mr. Bastedo provide him with Mr. Ristimaki's financial statement. By mid- June, Mr. Cooper had not received Mr. Ristimaki's financial statement. On June 17, 1994, he threatened proceedings.
9On July 11, 1994, the sale of ATH was announced. The purchaser was Allied Holdings Inc. of Atlanta, Georgia. A few days [page652] before the public announcement, Mr. Ristimaki advised his wife of the sale. Only a few weeks earlier, he had told Mrs. Ristimaki that his shares were worthless. On July 26, 1994, Mr. Bastedo produced an unsworn financial statement of Mr. Ristimaki that valued Mr. Ristimaki's interest in ATH at $12,750,000 as of separation (November 7, 1993 -- "the valuation date" ).
10In early August, Mr. Cooper prepared a petition for divorce. The petition also claimed an equalization of net family property under the Family Law Act, R.S.O. 1990, c. F.3, an accounting of Mr. Ristimaki's business interest and an interim order for the preservation and non-dissipation of Mr. Ristimaki's property pending trial pursuant to s. 12 of the Family Law Act. Mr. Cooper devised a two-step litigation strategy. The first step was a motion for particulars of the sale of ATH. After the receipt of the particulars, the second step in the strategy was to bring a motion for interim preservation of the sale proceeds from the ATH sale.
11On August 16, 1994, Mr. Cooper served the divorce petition together with a notice of motion in which he sought the particulars of the ATH sale. The motion was adjourned on two occasions and was ultimately returnable on September 27, 2004. Mrs. Ristimaki filed an affidavit in support of the motion in which she deposed:
[Mr. Ristimaki] has been saying for several years that he wished to sell his interest in [ATH]. I believe that he will retire upon the closing of the sale to Allied. Once that occurs, [Mr. Ristimaki] will have no reason to remain in Ontario, and I do not believe that he will. It is therefore urgent that my solicitors be advised forthwith of the particulars of the payments to [Mr. Ristimaki] for his interest in [ATH], so that they may then take steps to protect my position by seeking reasonable security to protect my entitlement to the equalization payment which will be found to be owing to me by [Mr. Ristimaki].
12Mr. Cooper retained a business valuator, Wayne Rudson, to assist in the appraisal of Mr. Ristimaki's shares in ATH. In a letter to Mr. Rudson, Mr. Cooper described Mr. Ristimaki as a flight risk who had already bought a house in Sarasota, Florida. Mr. Cooper advised Mr. Rudson that Mr. Ristimaki spent a lot of time in the Caribbean and along the coast of Mexico, which would make it difficult to enforce a judgment against him.
13In preparation for the disclosure motion, Mr. Cooper made the following file note:
[...] obvious that value of that int. in Auto-Trans is most signif. factor affecting [Ron]'s NFP [...], when sale announced, I frankly cons'd prob. solved [...], there's no evidence of any intervening event between 11/93 and 7/94 which would significantly affect value [...], once sale closes, H. is [page653] gone -- he's already bought a house in Fla ...... I need ... to protect my cl's EP. [...] I don't know if Mr. R.'s sh's--are being bought for cash, for part cash, part shares of Allied; whether he's being pd. on closing, or over a period of years, whether the money is to be paid here or the Cayman Islands (where he already has 415K) ... he could have the $ pd offshore, step onto his boat & enforcement wld be virtually impossible.
(Emphasis added)
14On the day before the disclosure motion was to be argued, Mr. Rudson advised Mr. Cooper that he estimated the equalization payment owed to Mrs. Ristimaki was $8 million on the assumption that ATH was worth $45 million. Ignoring the yacht, Mr. Rudson assumed that the house in Florida was worth $2 million and that Mr. Ristimaki's half interest would go to his wife. In order to ensure that the equalization payment of $8 million would be made, it would be necessary to secure $7 million.
15Later the same day, as a result of a proposal made by Mr. Bastedo and on the recommendation of Mr. Cooper, the motion was settled on the following terms which were confirmed in writing on September 27:
(1) Mr. Ristimaki would pay $2.5 million to Mrs. Ristimaki out of the proceeds of the sale to Allied as an advance on her equalization payment;
(2) Mr. Ristimaki would place a further $1.5 million out of the sale proceeds into trust to await the outcome of the proceedings between the parties;
(3) Mr. Ristimaki would transfer his interest in the Florida property to Mrs. Ristimaki; and
(4) Mrs. Ristimaki would not bring any motion to have further of Mr. Ristimaki's moneys secured prior to judgment.
Prior to the settlement Mr. Cooper did not tell Mrs. Ristimaki about Mr. Rudson's recommendation concerning the required security for the equalization payment, the need for a preservation order in respect of other moneys at risk of leaving the jurisdiction and the fact that, under the terms of the settlement, she would be giving up any further claim for security prior to judgment at trial.
16In November 1994, the sale of ATH was completed. The sale price was $41 million. However, in Mr. Ristimaki's sworn financial statement delivered shortly after the settlement, he stated that the total value of the shares was $25 million as of the valuation date. Mr. Ristimaki, through his counsel, took the position that the value of the shares at the date of the sale was irrelevant. Some evidence at trial suggested that the sale negotiations [page654] began before the valuation date, which led to speculation by Mr. Cooper that the price at the outset may have been in the range of what was eventually agreed upon for the sale. However, Mr. Ristimaki told Mr. Rudson at a meeting that the first contact with Allied was in February 1994. It should be noted that no documents on this issue were ever produced, and no discovery of Mr. Ristimaki was ever conducted, so that the record on this issue is unsatisfactory.
17The settlement of the motion was completed in November 1994. After the settlement, Mr. Ristimaki phoned his wife and told her that he had placed his money offshore and that she should do the same. Mrs. Ristimaki advised Mr. Cooper of this information but he did nothing in response.
18Mr. Cooper brought a motion for interim support in May 1995 before Lissaman J. of the Superior Court of Justice. During the argument of that motion, Mr. Cooper and Mr. Bastedo agreed that the trial should take place by January 26, 1996. As a result, the order of Lissaman J. provided for interim support from April 1, 1995 through January 30, 1996.
19Mr. Cooper did not advance the case to trial by January 1996. In April 1996, he moved to continue the interim support order before Beaulieu J. of the Superior Court of Justice. Beaulieu J. granted the request but included the following term [at para. 45]:
The parties shall seek an early pre-trial and expedited trial from the Family Law Office, with the assistance of a judge as regards timetable if necessary.
When Mr. Cooper's clerk drafted the order of Beaulieu J. she deliberately omitted the above term. In a memo to Mr. Cooper she said, "I figured that we could omit this and see if [Mr. Bastedo] adds it." Mr. Cooper accepted the omission and Mr. Bastedo approved the draft order. In his evidence at trial, Mr. Cooper explained that he left out the term in Beaulieu J.'s. order because Mr. Ristimaki was annoyed with having to pay interim support, and the longer he had to do so, the more agreeable he was likely to be on a final settlement.
20Except for the two support motions, no steps were taken between October 1994 and June 1996 to move the litigation forward. During this period, some advice was given to Mrs. Ristimaki concerning her financial affairs and she was assisted in ancillary issues related to the separation. By the end of June 1996, Mr. Cooper had been on the file for more than two years and three months. As of that time, there had been no formal examination for discovery conducted and no affidavit of documents received. No steps had been taken to move the case to trial. [page655]
21On June 20, 1996, Mr. Shostack, a former partner of Mr. Cooper, met with Mr. Cooper. Mr. Shostack was Mr. Ristimaki's commercial lawyer. At the meeting, he provided Mr. Cooper with a memo on the understanding that Mr. Cooper would show it to no one. The memo was titled, "Hypothetical Fact Situation for Discussion -- Confidential and Without Prejudice." The memo read:
I am advising Mr. X on certain commercial matters relating to his matrimonial proceeding with his former spouse.
Mr. X owes a large amount of tax arrears -- The amount of the liability exceeds the amount of the cash payment to Mrs. X and the amount of the funds in trust.
Mr. X moved out of the country and has all of his assets owned through offshore trusts and companies. He owns very little in his own name.
The tax department has been attempting to contact Mr. X and has recently learned about Mr. X's matrimonial dispute. They are aware that a large amount of funds were paid to Mr. X's lawyer, but have not yet contacted such lawyers to inquire if those funds are still held by such lawyers. Mr. X expects the tax department to seize the trust fund very shortly.
Here is my problem:
Mr. X instructed me to do nothing and allow the tax department to seize the trust monies. He doubted whether discussing this problem with Mrs. X's lawyer would resolve anything.
I disagreed for two reasons. Firstly, I believe that Mrs. X's lawyer would be interested in protecting Mrs. X's property. Secondly, I have known Mrs. X's lawyer for a long time and felt an obligation to make him aware of this problem. Moreover I believed that this lawyer has known me long enough to know that I would not make up a false story to try to extract a settlement.
Mr. X agreed to allow me to speak with Mrs. X's lawyer to offer settling on a division of the monies in Mr. X's lawyer's trust account by paying Mrs. X $500,000. Mr. X intends to use the remainder as part of a settlement on his tax liability.
(Emphasis added)
22On the following day, Mr. Cooper and Mr. Rudson flew to Florida to meet with Mrs. Ristimaki. She instructed Mr. Cooper to reject the $500,000 offer referred to in the above memo, but advised him to make a counter offer for $1 million. Mr. Cooper advised Mr. Shostack of the counter offer but there was never any response.
23On January 8, 1997, Revenue Canada filed a certificate in the amount of $7,444,261 in the Federal Court against Mr. Ristimaki. The amount on the certificate represented unpaid taxes, penalties and interest for the 1994 taxation year. This certificate [page656] has the effect of a judgment. On the same day, Revenue Canada filed a writ of execution with the sheriff in Toronto. The Crown thus became both a judgment creditor and an execution creditor of Mr. Ristimaki. From that point, its claim had priority over the claims of other judgment and execution creditors pursuant to the Crown prerogative.
24Revenue Canada then claimed against the $1.5 million in the Bastedo trust account. Mrs. Ristimaki contested Revenue Canada's claim. However, Low J. of the Superior Court of Justice ruled in favour of Revenue Canada on January 8, 2000. Mrs. Ristimaki appealed. Before the argument of the appeal in December 2000, Mrs. Ristimaki settled with Revenue Canada for 30 per cent of the funds in the Bastedo trust account, which amounted to $493,512.68.
25Meanwhile, on September 30, 1998, Mr. Cooper, acting as agent for Mrs. Ristimaki's new counsel (she had terminated Mr. Cooper's retainer in June 1998), obtained default judgment from Beaulieu J. for the balance of the equalization payment. The amount of the default judgment was $4,437,638 plus prejudgment interest of $1,646,622, totalling $6,084,260. By this time, Mr. Ristimaki had taken flight (apparently to Costa Rica) and his pleadings had been struck. The default judgment remains unpaid. Thus, the fear that Mrs. Ristimaki had expressed from the first day she met Mr. Cooper was realized.
26Mrs. Ristimaki commenced her action against Mr. Cooper for negligence in February 2000. The case went to trial in February and March 2004 over a 16-day period. Judgment was delivered on June 23, 2004. The trial judge found that Mr. Cooper was negligent in a number of respects. However, he found that Mr. Cooper's negligence did not cause any loss to Mrs. Ristimaki. Mrs. Ristimaki's action was dismissed.
The Trial Judgment
27The trial judge, in his review of the evidence, divided Mr. Cooper's retainer into a time grid of three periods:
(i) From the commencement of the retainer in March 1994 to the settlement of September 26, 1994;
(ii) From September 27, 1994 to the meeting with Mr. Shostack on June 20, 1996; and
(iii) From June 21, 1996 to June 19, 1998 when the retainer was terminated. [page657]
Period (i)
28In period one, the trial judge considered three allegations of negligence. The first allegation was that Mr. Cooper fell below the standard of care in failing to advise Mrs. Ristimaki about an interim preservation order and failing to seek such an order in his initial motion, rather than adopting a two-step procedure. The trial judge rejected this allegation and concluded that moving first for particulars was an appropriate way to proceed.
29The second allegation was that Mr. Cooper fell below the standard of care in providing inadequate advice concerning the settlement of the disclosure motion. The trial judge concluded the following, in part, at para. 134 of his judgment:
[I]n failing to inform Mrs. Ristimaki about Mr. Rudson's estimate regarding the amount needed to be put in trust to protect her anticipated equalization payment, in failing to warn Mrs. Ristimaki about the risks that she was assuming in agreeing to the settlement, and in failing to obtain her concurrence to the "no further motion for security" term of the deal, Mr. Cooper fell below the standard of care and breached his duty to Mrs. Ristimaki.
30A related allegation of negligence was advanced by counsel for Mrs. Ristimaki, to the effect that Mr. Cooper had settled the disclosure motion "in the dark". This allegation was supported by expert evidence from Mr. Niman, a specialist in family law. The trial judge rejected this allegation at para. 136 of his reasons for judgment:
I therefore do not accept Mr. Niman's premise that Mr. Cooper settled the motion "in the dark". Mr. Cooper had some information, albeit not obtained directly from Mr. Ristimaki under oath, upon which to base a judgment concerning the potential for a larger equalization payment in favour of the plaintiff. Since I do not accept the premise upon which Mr. Niman's criticism was based, I do not agree that Mr. Cooper fell below the standard in this regard.
31In respect of Mr. Cooper's recommendation to accept the settlement proposal, the trial judge concluded the following at para. 137:
In reaching the foregoing conclusions I am conscious of the comments of Anderson J. in Karpenko v. Paroian, Courey, Cohen & Houston, supra, that "it would only be in the case of some egregious error ... that negligence would be found" in connection with a lawyer's recommendation to a client to settle. My finding of negligence is not based upon the recommendation Mr. Cooper made to his client, or his decision to recommend the settlement notwithstanding he had not obtained disclosure. Plainly, the price of obtaining disclosure would have been the withdrawal of the offer that was in hand. The decision to recommend the settlement was a judgment by counsel based on the available information, and weighing the options. Mr. Cooper had received Mr. Rudson's estimate as to the amount that needed to be put into trust, was aware of the risks of declining the settlement and proceeding with [page658] the motions, and concluded that the settlement was worth recommending to his client. I am not prepared to find that, in making this decision, Mr. Cooper made an "egregious error". Rather, his breach of duty consisted of failing to provide all material information to the client when seeking his client's settlement instructions.
32I pause here to underline the comment of the trial judge that [at para. 137], "[P]lainly the price of obtaining disclosure would have been the withdrawal of the offer that was in hand." While that may be so, the prospect of a subsequent and better offer had Mr. Cooper pressed on with his two-step strategy does not appear to have been considered. I shall return to this subject later.
33The third allegation of negligence in the first period of time was that Mr. Cooper fell below the standard of care in agreeing to the terms of the payment of the $1.5 million into Mr. Bastedo's trust account. The trial judge rejected this allegation and concluded that it was a standard arrangement and that it provided adequate security as between the parties.
34In respect of the one finding of negligence that the trial judge made in the first period, he turned to the issue of causation. The trial judge concluded at para. 149: ". . . that in a case such as this, the plaintiff bears the burden of satisfying the court, on a balance of probabilities, that she would have acted differently had she been properly advised". He relied upon a judgment of Goodman J. in Major v. Buchanan (1976), 1975 467 (ON SC), 9 O.R. (2d) 491, 61 D.L.R. (3d) 46 (H.C.J.).
35The trial judge found that Mrs. Ristimaki never testified that she would have refused the settlement if she had been properly advised by Mr. Cooper. The trial judge observed that the closest she came to giving such evidence was in reference to the settlement correspondence when she said that she did not like the "no further motion for security" term because her husband was a flight risk. Nevertheless, the trial judge concluded that Mrs. Ristimaki had not discharged her burden to satisfy the court that she would have acted differently, if she had been properly advised.
36Notwithstanding the trial judge's conclusion that there was no causal connection between Mr. Cooper's negligence in the first period and the loss claimed by Mrs. Ristimaki, the trial judge proceeded with an assessment of damages in respect of the first period. He did so on a "lost chance" theory of damages.
37The trial judge concluded that there was a reasonable probability that Mr. Cooper would have obtained a s. 12 preservation order in the amount of $7 million and that the risk of non-payment into court was relatively low. However, in the trial judge's view, Mr. Ristimaki would still have defaulted on his tax bill and the related amounts owing to Revenue Canada. He concluded [page659] that the funds paid into court would have been subject to seizure by Revenue Canada.
38The trial judge then considered whether Mrs. Ristimaki would have been able to obtain a final judgment for her equalization claim prior to Revenue Canada seizing the funds. In this regard, he concluded that the litigation would have been hard-fought and protracted. He also said that it was very possible that Mr. Ristimaki would appeal a favourable judgment for Mrs. Ristimaki.
39The trial judge concluded that there was a high likelihood that the $7 million would have remained in court as of January 8, 1997, and thus would have been seized by Revenue Canada. In the result, the failure to obtain a preservation order did not cause any damages. Simply put, Mrs. Ristimaki failed to prove that the chance she lost had any value.
40The trial judge then continued his assessment of damages on the assumption that Revenue Canada did not seize the funds in court. He asked himself the question: would Mr. Ristimaki continue to contest the equalization claim and, if so, what would the result have been?
41The trial judge reasoned that Mr. Ristimaki would probably have contested his wife's equalization claim if he had been required to pay $7 million into court. The trial judge also concluded that Mr. Ristimaki would have argued for a valuation of the ATH shares at a much lower level than the post valuation date sale price of $41 million.
42The trial judge then considered whether the court was bound by the judgment granted on default by Beaulieu J. on September 30, 1998, concerning Mrs. Ristimaki's entitlement to an equalization payment. The trial judge concluded that he was not bound by the prior judgment and that neither the doctrine of abuse of process nor the rule against collateral attack prevented him from arriving at a different result.
43Counsel for Mr. Cooper at trial called an accountant who prepared an estimate of Mrs. Ristimaki's equalization payment, based on a value of the ATH shares of $25 million. From that figure, he calculated an equalization payment owing to Mrs. Ristimaki of $4,586,252, which the trial judge rounded off to $4,600,000.
44The trial judge discounted the $4,600,000 by 5 per cent for contingencies. The value of Mrs. Ristimaki's so-called lost chance was therefore $4,370,000. However, this figure was reduced by amounts previously received: $2.5 million in cash and one-half the value of the Florida property ($800,000) received in the settlement of the disclosure motion and a net recovery from Revenue Canada of $322,629.89. In the result, the trial judge fixed Mrs. Ristimaki's first period damages at $747,370.11. [page660]
Period (ii)
45In the second period of the time grid (September 27, 1994 to June 20, 1996), the trial judge considered the allegation that Mr. Cooper fell below the standard of care by failing to advance the litigation at an appropriate pace. In this time frame, Mr. Cooper did not obtain an affidavit of documents, did not conduct an examination for discovery of Mr. Ristimaki and did not move the case to trial. However, Mr. Cooper did look after a number of other matters for Mrs. Ristimaki, which are referred to above.
46Counsel for Mrs. Ristimaki at trial submitted that if the litigation had moved at an appropriate pace, Mrs. Ristimaki would have been able to collect part of her equalization claim from the funds in the Bastedo trust account before they were seized by Revenue Canada.
47The trial judge concluded that Mr. Cooper's approach in this period was appropriate and, therefore, no damages were suffered by Mrs. Ristimaki as a result of Mr. Cooper's conduct. However, he found that Mr. Cooper fell below an acceptable standard of practice in omitting from the order of Beaulieu J. the provision that directed the parties to seek an early pre- trial and an expedited trial.
48The trial judge considered whether the omission from the order of Beaulieu J. caused any damages. The trial judge concluded that, even with an order for an early pre-trial and expedited trial date, Mrs. Ristimaki would not have been able to collect the funds in the Bastedo trust account before they were seized by Revenue Canada. Mrs. Ristimaki therefore suffered no loss attributable to Mr. Cooper's substandard conduct.
49Notwithstanding the trial judge's analysis of Mr. Cooper's conduct in the second period, he proceeded to a damages assessment. The trial judge concluded that if he had found that Mr. Cooper's negligence had caused Mrs. Ristimaki the loss of the $1.5 million in the Bastedo trust account, he would have deducted the $322,629.89 that she recovered from Revenue Canada, leaving her with damages of $1,177,370.11.
Period (iii)
50In the third period of the time grid considered by the trial judge (June 1996 to June 1998), it was alleged that Mr. Cooper fell below the standard of care in his failure to move the litigation forward on an urgent basis, particularly after Mr. Cooper learned in the meeting with Mr. Shostack that Mr. Ristimaki had defaulted in the payment of his taxes and that it was likely that the $1.5 million in the Bastedo trust account would be seized by Revenue Canada. [page661]
51The trial judge concluded that, apart from motions to strike Mr. Ristimaki's answer and a motion for a further and better affidavit of documents, which was adjourned, there was very little activity following the meeting between Mr. Cooper and Mr. Shostack on June 20, 1996.
52On March 5, 1997, Mr. Cooper met with Mrs. Ristimaki and her friend, Fulton Neil, in Florida to review the status of the litigation. After the meeting, Mr. Neil sent a letter to Mr. Cooper in which he set out particular actions that Mr. Cooper had agreed to take on behalf of Mrs. Ristimaki. These included: the cross-examination of a witness in respect of the value of the ATH shares; a motion to obtain documents; conduct of the discovery of Mr. Ristimaki in June or July; and, proceeding to trial in the fall, if necessary.
53The trial judge made the following finding at para. 271:
I note as well the various steps that were discussed and agreed upon at the March 5, 1997 meeting in order to advance Mrs. Ristimaki's claim. Most of these steps were never taken. While from time to time there were motions and threatened motions to strike Mr. Ristimaki's pleading in order to collect Mrs. Ristimaki's support payments, nothing was actually done to advance her equalization claim until one of the motions to strike succeeded, in May 1998. Although Mr. Cooper was endeavouring during this time frame to assert Mrs. Ristimaki's priority over Revenue Canada to the $1,500,000, this does not excuse his inaction on her matrimonial claim. I have little hesitation in concluding that, over this period, Mr. Cooper did not meet a standard of reasonable diligence and he therefore fell below the standard of care.
54In his consideration of the damages for the third period of the time grid, the trial judge concluded at para. 276 of his reasons that "there were likely no steps that Mr. Cooper could have taken subsequent to June 20, 1996, that would have prevented Revenue Canada from seizing the $1.5 million and asserting its priority to those funds". Thus, Mrs. Ristimaki did not suffer any loss caused by the negligence of Mr. Cooper in this time period.
55Notwithstanding the trial judge's conclusion that there was no causal connection between Mr. Cooper's negligence and the loss claimed by Mrs. Ristimaki in the third period, he assessed her loss as the same as her loss in the second period, i.e., $1,177,370.11.
56The trial judge concluded his reasons for judgment at para. 281 as follows:
I have found that Mr. Cooper fell below the standard on several occasions in his conduct of Mrs. Ristimaki's matrimonial proceeding. I have determined, however, that his conduct did not cause her any loss. It follows that his negligence was not actionable. The claim against him must therefore be dismissed. [page662]
The Appeal
57Counsel for the appellant raises five issues:
(i) The trial judge erred in applying too low a standard of care to Mr. Cooper's actions;
(ii) the trial judge erred in his reliance upon the time grid, which distorted his analysis;
(iii) the trial judge erred in his quantification of Mrs. Ristimaki's damages;
(iv) the trial judge misapprehended Mrs. Ristimaki's evidence; and
(v) the trial judge erred in preferring the evidence of one of the defence experts over the evidence of Mrs. Ristimaki's experts.
58In respect of the first issue, it is my view that the trial judge erred in his articulation of the standard of care that should be applied to Mr. Cooper's advice. In respect of the second issue, while I understand the trial judge's use of the time grid as an aid to his review of the evidence, I am of the opinion that his reliance on the time grid analysis led him to fall into reversible error. In view of these errors, a new trial is required. Having concluded that there should be a new trial, it is neither helpful nor necessary to decide the other three issues raised by the appellant.
Analysis
(i) Standard of care
59Counsel for Mrs. Ristimaki acknowledged that the trial judge correctly articulated the following principles in respect of the standard of care of a lawyer:
(a) A solicitor must bring reasonable care, skill and knowledge to the professional service which he or she has undertaken: see Central Trust Co. v. Rafuse, 1986 29 (SCC), [1986] 2 S.C.R. 147, [1986] S.C.J. No. 52, at p. 208 S.C.R.;
(b) For a solicitor who holds himself or herself out as having particular expertise in a given area of the law, a higher standard of care applies: see Confederation Life Insurance Co. v. Shepherd-McKenzie, Plaxton, Little & Jenkins, [1992] O.J. No. 2595, 29 R.P.R. (2d) 271 (Gen. Div), varied on other grounds 1996 3206 (ON CA), [1996] O.J. No. 177, 88 O.A.C. 398 (C.A.); and[page663]
(c) A lawyer who does not adequately or diligently protect the client's interests will be found negligent: see Stephen M. Grant and Linda R. Rothstein, Lawyers' Professional Liability, 2nd ed. (Markham: Butterworths, 1998) at 23.
60Although counsel for Mrs. Ristimaki accepted that the trial judge's articulation of the above principles was correct, he further submits that the trial judge erred in applying the "egregious error" test to Mr. Cooper's recommendation to settle the disclosure motion. As already mentioned in para. 31 of these reasons, the trial judge relied upon the judgment of Anderson J. in Karpenko v. Paroian, Courey, Cohen & Houston (1980), 1980 1588 (ON SC), 30 O.R. (2d) 776, 117 D.L.R. (3d) 383 (H.C.J.). In that case, Anderson J. observed at p. 790 O.R. that, "it would only be in a clear and exceptional case that the decision of counsel to recommend settlement could be successfully assailed". Anderson J. further observed at p. 791 O.R. that, in order to establish negligence against a lawyer in respect of his or her advice concerning the settlement of a case, proof of an egregious error is required.
61Unfortunately, at the time that the trial judge delivered his judgment in this case, he did not have the benefit of this court's decision in Folland v. Reardon (2005), 2005 1403 (ON CA), 74 O.R. (3d) 688, [2005] O.J. No. 216 (C.A), which had not yet been argued in this court. In Folland v. Reardon, the court held that there is no justification for holding lawyers to a different and lower standard than other professionals. Doherty J.A., speaking for the court, said at paras. 41 and 42:
I see no justification for departing from the reasonableness standard. That standard has proven to be sufficiently flexible and fact-sensitive to be effectively applied to a myriad of situations in which allegations of negligence arise out of the delicate exercise of judgment by professionals. Without diminishing the difficulty of many judgments that counsel must make in the course of litigation, the judgment calls made by lawyers are no more difficult than those made by other professionals. The decisions of other professionals are routinely subjected to a reasonableness standard in negligence lawsuits. I see no reason why lawyers should not be subjected to the same standard: Major v. Buchanan (1975), 1975 467 (ON SC), 9 O.R. (2nd) 491, 61 D.L.R. (3d) 46 (H.C.J.) at p. 510 O.R.
Recognition that some decisions made by lawyers are subject to a different standard than the reasonableness standard would also require courts to decide whether the impugned conduct of the lawyer fell under the rubric of "barrister's work" or was properly described as "solicitor's work." This distinction would be difficult to make in some situations. Sometimes, the alleged negligent conduct by the lawyer will encompass both kinds of work.
62It necessarily follows that the trial judge erred in his application of the "egregious error test". The question then arises [page664] whether Mr. Cooper's advice to settle the disclosure motion at the time, and on the terms proposed by Mr. Bastedo, met the standard of reasonableness. In considering this question, it seems to me that the following factors come into play:
(i) Mr. Cooper, on behalf of Mrs. Ristimaki, was only six weeks into the litigation;
(ii) Mr. Cooper had not yet received a sworn financial statement from counsel for Mr. Ristimaki;
(iii) Mr. Cooper had not received an affidavit of documents from counsel for Mr. Ristimaki;
(iv) No examination for discovery of Mr. Ristimaki had been held;
(v) No preservation order under s. 12 of the Family Law Act had been obtained or moved for;
(vi) The offer of September 26, 1994 was the first offer, or first significant offer -- it would, I suggest, be unusual for this offer to be the last;
(vii) Mr. Gerald Sadvari, one of Mrs. Ristimaki's experts, testified that had Mr. Cooper proceeded with a preservation motion, it would have produced a better settlement or the result of the motion would have been better: He also said that a preservation motion would have strengthened Mr. Cooper's bargaining position;
(viii) Mr. Ristimaki was sitting on an agreement for the purchase of his shares in ATH, which was scheduled to close later in the fall and which was very favourable to him -- several million dollars more than his earlier valuation. Thus, Mr. Ristimaki's "appetite" for settlement with his wife needed to be assessed, as well as the extent to which proceeding with the Cooper two-step strategy potentially could have put the ATH sale in jeopardy, thereby increasing the likelihood of Mr. Ristimaki's making a subsequent and better offer; and
(ix) Had the sale been concluded, the prospects of obtaining a court order requiring payment of the sale proceeds or a significant portion thereof into court pursuant to a preservation order was also a potential factor for consideration. [page665]
63While the trial judge considered some of the above factors in other parts of his reasons, he does not appear to have considered them in respect of Mr. Cooper's recommendation for settlement of the motion. Nowhere does he consider the early stage of the litigation and the prospect that a rejection of the September 26 offer might have produced a subsequent and better offer. As I have said, the trial judge observed [at para. 137] that, "[P]lainly, the price of obtaining disclosure would have been the withdrawal of the offer that was in hand." While that is so, the trial judge's view appears to have been that this was an "all or nothing" situation -- either Mrs. Ristimaki accepted the offer of September 26 or she proceeded with the litigation to the bitter end. With respect, I disagree.
64In fairness to the trial judge, while the position set out in the above paragraph was vigorously pursued in oral argument before this court, the record reveals that it was not argued before the trial judge. Nonetheless, the point is an important one and there was some evidence before the trial judge on the issue.
65In view of the trial judge's application of the egregious error standard to the assessment of Mr. Cooper's conduct in recommending the settlement of the disclosure motion, the next question is whether this court should apply the reasonableness standard to the recommendation of Mr. Cooper. In my opinion, on this record, this court is not in a position to do so.
66The difference between the standard of reasonableness and the standard of egregious error is significant. In my view, this issue is central to the case against Mr. Cooper. It should be determined in the context of a trial in which the trial judge would take into account the above factors and any other relevant factors that the court considers appropriate.
67There is an additional reason for declining to conclude that this court should determine the issue. If the conclusion should be that Mr. Cooper fell below the standard of reasonableness in recommending the settlement, it follows that a reasonably competent lawyer would have recommended against accepting the proposed settlement. On the record before us, it appears likely that Mrs. Ristimaki would have accepted that advice. What then must follow is a causation analysis and an assessment of damages, which would take into account some of the same factors that would go into the standard of reasonableness analysis. These matters are also best left to a trial judge.
(ii) Did the trial judge err in his reliance on the time grid?
68Counsel for Mrs. Ristimaki submits that Mr. Cooper's inaction was sustained over years and that to analyze his conduct by means of the time grid produced a fictitious result. [page666]
69Counsel for Mrs. Ristimaki further submits that Mr. Cooper did not make three separate decisions to delay his prosecution of the action. The alleged delay constitutes one sustained act of neglect and the trial judge should have considered the totality of Mr. Cooper's actions and inactions, instead of proceeding to dissect his conduct within three precise time periods.
70Counsel's argument is summarized as follows:
From March 1994 to June 1998, Cooper took no steps to preserve [Mr. Ristimaki's] assets for [Mrs. Ristimaki's] benefit. He sought no discovery or other examination of [Mr. Ristimaki]. He did nothing to bring the case to trial, letting the original January 1996 target date pass by. When [Mrs. Ristimaki] finally obtained default judgment, Cooper's retainer had been terminated, and there were no assets remaining to satisfy it, because of his inaction. The time grid distorts this.
The distortion is achieved by reductionism, i.e. by creating three time periods in which Cooper's acts are isolated and not related. In truth, there was only one time period, in which all of his acts were related.
The time grid was not the case [Mrs. Ristimaki] put to the court. The case was the sustained, linear negligence of Cooper.
By embarking on the grid-driven analysis, the [trial judge] denied [Mrs. Ristimaki] an adjudication on the case she was putting forward.
It was either an error of law, or of mixed fact and law, for [the trial judge] to have applied the grid. Without the grid, the causal link between [Mrs. Ristimaki's] loss and Cooper's negligence is patent.
71I am not persuaded that the use of the time grid and the analysis of the three separate periods are in themselves reasons to find error with the approach of the trial judge. This was a complex case in which the trial judge was required to conduct a detailed review of a lawyer's conduct of his representation of a client over more than four years. It is clear that the trial judge found it useful to proceed in a chronological fashion by looking at Mr. Cooper's conduct within specific time frames.
72However, I agree with counsel for Mrs. Ristimaki that it was necessary to consider Mr. Cooper's conduct as a whole, rather than solely in segmented time compartments, when determining whether his conduct fell below the requisite standard of care. In my view, once the trial judge had conducted his time grid analysis, he should have stepped back and considered whether the failure to move the case to trial, at least prior to the action taken by Revenue Canada and in accordance with Mr. Cooper's own agreement with Mr. Bastedo as found by the trial judge and as further directed by Beaulieu J. in April 1996, fell the below the requisite standard of care.
73This is a case that, to the knowledge of Mr. Cooper, needed to be moved to trial on an urgent basis. Mr. Cooper was fixed with [page667] the knowledge from the outset of his retainer that Mr. Ristimaki was a flight risk. Knowing that, absent a settlement, the only certain way of securing Mrs. Ristimaki's lawful entitlement was to get her case decided by a trial judge. A settlement of a family law dispute is clearly the optimal result; however, often the only way to achieve a settlement is to force the recalcitrant party to the courtroom door. To a large degree, this was demonstrated in this case by the fact that Mr. Ristimaki proposed a settlement late in the day before the disclosure motion was to be argued.
74Mr. Cooper and Mr. Bastedo agreed in May 1995 that this case should be tried by January 26, 1996. Yet no steps were taken to achieve that specific objective and no clear explanation for the failure to do so is evident on the record. In the trial judge's analysis of the second period time grid, he lists a number of activities undertaken by Mr. Cooper and Mr. Rudson on Mrs. Ristimaki's behalf including: completing the details of the transfer of the Florida property; obtaining informal discovery; bringing motions for interim spousal support; providing financial, investment and tax advice; advising in respect of Mrs. Ristimaki's right to her husband's pension; and obtaining a divorce judgment.
75The trial judge concluded his analysis of the second period of the time grid in paras. 249-52 of his reasons as follows:
The standard to which a lawyer is held is one of reasonable diligence. What is reasonable will vary depending upon the circumstances of a particular case, taking into account the client's goals, the means available to attain those goals and strategic considerations regarding the best approach to take. As Mr. Niman observed, "it is not necessarily a question of every case proceeding quickly." The vast majority of cases do not reach trial. Very often, compromises are reached and settlements achieved without pursuing all available formal litigation options. Counsel may determine that there are advantages to be gained by pursuing a more informal approach and seeking to resolve a dispute by agreement, [rather than] resorting to formal procedures where agreement cannot be reached. Indeed, from a policy perspective, informal resolution of disputes is to be preferred over formal court proceedings, provided the clients' interests are protected and their rights are not compromised.
Having said this, I am unable to find that the defendant's approach to the prosecution of the Ristimaki matrimonial litigation in the period between September 1994 and June 1996 was substandard. Rather, Mr. Cooper's conduct of the case over this period was consistent with the foregoing principles. Having obtained a substantial up-front cash payment on account of Mrs. Ristimaki's equalization claim entitlement, a further $1,500,000 in trust, as well as an agreement for the transfer of full ownership of the Florida house, Mr. Cooper adopted an approach designed to elicit informally the information that he needed to assess his client's potential recovery and Mr. Ristimaki's likely response to her claim. He obtained an order for interim support. He addressed the division of Mr. Ristimaki's pension, tax issues associated with the interim settlement and the transfer of his house. Having informally determined his client's best case, he sought her instructions [page668] regarding settlement and attempted to negotiate a final resolution with Mr. Bastedo. When that approach did not accomplish the desired result, he resorted to the more formal process, demanding delivery of a sworn affidavit of documents.
It was not foreseeable that the failure of Mr. Cooper to advance Mrs. Ristimaki's case through discovery and to trial by [January] 1996 (or, for that matter, by January 1997) would have put the $1,500,000 at risk. Simply stated, it could not have been anticipated that Mr. Ristimaki would violate Canadian tax law as he did. Where a risk cannot reasonably be anticipated, a person cannot be held liable for failing to take steps to guard against it. "A defendant need only pay attention to what is probable not what is possible": G.H.L. Fridman, The Law of Torts in Canada, 2nd ed. (Toronto: Carswell, 2002) at 389, citing Ouellet v. Cloutier, 1947 35 (SCC), [1947] S.C.R. 521 at 526, per Taschereau J.
When viewed without the benefit of hindsight, having regard to the various steps that he took to advance Mrs. Ristimaki's interests, Mr. Cooper's approach during Period II was appropriate.
76The above analysis fails to recognize the significance of the agreement between Mr. Bastedo and Mr. Cooper. Two senior family law specialists agreed in the spring of 1995 to conduct the trial before January 26, 1996. Settlement discussion is something which pervades, and should pervade, almost every lawsuit. However, given the circumstances, I see no reason why settlement discussions and the other activities listed by the trial judge should have delayed the case moving to trial. Those activities could and should have been carried out while advancing the case to trial. In order to accomplish this, Mr. Cooper needed full document production, including production of documents related to the ATH sale and an examination for discovery of Mr. Ristimaki.
77It is worth noting here that Mr. Sadvari testified that the Family Law Division was and remains very efficient with respect to giving dates for trials. It was his opinion that, even though there was a lot of work to do, there would have been no problem getting the case to trial by the end of January 1996. Mr. Sadvari at that time was both a member of the Bench and Bar Committee and Chair of the Family Law Section of the Canadian Bar Association of Ontario.
78The trial judge held that, if Mr. Ristimaki had been required to pay $7 million into court as part of a court- ordered preservation order, there was good reason to believe that the litigation over Mrs. Ristimaki's equalization claim would have been hard fought and protracted. He also observed that, in these circumstances, there was a high likelihood that the litigation would have taken considerable time to reach trial and that it was very possible that a trial judgment favourable to Mrs. Ristimaki would have been appealed by her husband. [page669]
79Later in his reasons, in the context of his second period time grid analysis, the trial judge concluded that even with the April 1996 order for an early pre-trial and expedited trial date, it was likely that Mrs. Ristimaki would not have been able to collect any funds from her husband before Revenue Canada asserted its claim. The trial judge reasoned that Mr. Ristimaki could have controlled the timing of both the matrimonial litigation and Revenue Canada's pursuit of its claim, by seeking to ensure that his funds went to Revenue Canada before they were recovered by Mrs. Ristimaki.
80Nowhere in his reasons, however, does the trial judge consider the likely course and pace of the matrimonial litigation had the settlement of the disclosure motion and a trial by January 26, 1996 both gone ahead, in accordance with counsels' agreement to try the case by that date.
81As I have stressed, counsel in this case agreed to proceed to trial by January 26, 1996. Even assuming that, following the settlement of the disclosure motion, the litigation might have been vigorously contested and that Mr. Ristimaki might have pursued his appeal rights in the face of an adverse trial judgment against him, if Mr. Cooper had pressed on to trial before January 26, 1996 in accordance with his agreement with Mr. Bastedo, it may have been possible to obtain a final enforceable judgment in favour of Mrs. Ristimaki before Revenue Canada took its initial steps in January 1997 to enforce its claim against Mr. Ristimaki. The trial judge's reasons reveal no consideration of this contingency, of the implications of Mr. Cooper's failure to insist upon the agreed early trial date, or of his unexplained failure to even pursue this option.
82Had such a final judgment been obtained prior to January 1997, Mrs. Ristimaki, as a judgment and execution creditor of her husband, would have been positioned to enforce her judgment against Mr. Ristimaki before Revenue Canada's claim crystallized, thereby avoiding the consequences of a prior ranking claim by Revenue Canada under the Crown prerogative against the funds held in trust by Mr. Bastedo and Mr. Ristimaki's other assets. Put another way, if counsels' 1995 agreement on an early trial had been honoured, it cannot be assumed that Revenue Canada's claim would have come into competition with Mrs. Ristimaki's claim, or that Revenue Canada's claim would have prevailed. The issue of competing priorities between judgment creditors may simply have been avoided all together.
83By these comments, I do not wish to be understood as suggesting that the trial judge erred in finding that Mr. Ristimaki's violation of Canadian tax law could not have been anticipated. That is not the issue. Mr. Cooper knew from the outset of his retainer that Mr. Ristimaki was a real flight risk. Within a short [page670] time after his retainer, Mr. Cooper also knew that Mr. Ristimaki held assets offshore, that he was threatening to prevent or frustrate any meaningful recovery by his wife in the matrimonial litigation and that there was a significant risk that Mr. Ristimaki himself would leave the jurisdiction permanently, perhaps prior to discovery and probably before trial. These factors alone required that the case be moved to trial on an urgent basis.
84In the end, the findings of the trial judge do not provide a sufficient basis upon which to fully assess Mr. Cooper's conduct in failing to try Mrs. Ristimaki's case after the settlement of the disclosure motion and prior to January 1997. Nor does the record permit this court to fairly determine the realistic likelihood of Mrs. Ristimaki obtaining an exigible judgment against her husband before January 8, 1997 (when Revenue Canada filed its certificate with the Federal Court), or to assess whether an early and expedited trial date and, potentially, an expedited appeal date could have been obtained in these circumstances in sufficient time to avoid competition between Mrs. Ristimaki's and Revenue Canada's claims. Consequently, these are matters to be determined by a trial judge upon proper evidence.
85In my view, the trial judge failed to apprehend the significance of the evidence related to the failure to move this case to trial, especially the evidence of counsels' agreement on an early trial date. He may well have erred in this regard because he focused on the time grid analysis. He concluded that the activities that were taken on behalf of Mrs. Ristimaki in the second period were sufficient and that Mr. Cooper had discharged his duty to his client. In so concluding, the trial judge's analysis ignores that there was another and more compelling need.
Disposition of the Appeal
86Accordingly, for the reasons given, I would allow the appeal, set aside the judgment of the trial judge and order a new trial.
Cross Appeal as to Costs
87The trial judge concluded, that since he had found that Mr. Cooper's conduct fell below the acceptable standard in a number of respects, both sides should bear their own costs.
88Counsel for Mr. Cooper seeks leave to appeal the costs order on the basis that costs should follow the event and that Mrs. Ristimaki had rejected two significant settlement offers.
89In the disposition that I would make of the main appeal, the circumstances would change significantly and, in my view, the cross appeal would no longer be relevant. I would therefore dismiss the application for leave to appeal the costs order. [page671]
Costs of the First Trial
90I would reserve the costs of the first trial to the judge hearing the new trial.
The Costs of the Appeal and Cross Appeal
91Counsel for Mrs. Ristimaki has submitted a partial indemnity bill of costs for the appeal and cross appeal in the total amount of $86,216.12, including disbursements and GST.
92Mrs. Ristimaki has succeeded in setting aside the trial judgment. Costs should follow the event. However, part of Mrs. Ristimaki's success is attributable to a change in the law brought about by this court's judgment in Folland v. Reardon. That judgment was not available to the trial judge or the parties at the time of the trial. I would consider the change in the law a factor in allowing for some reduction in the quantum of costs to which Mrs. Ristimaki would be entitled.
93Also there were three senior lawyers who worked on the appeal, as well as a senior "non-practising lawyer". The non- practising lawyer is charged at an hourly rate of $300 in respect of 66.3 hours.
94Although I am certain that each of the senior lawyers made a significant contribution to the presentation of the appeal, I do not believe that the respondent should be saddled with responsibility for all the costs related to their work, even on a partial indemnity scale.
95Taking all the above into consideration, I would fix the costs of the appeal payable by the respondent to the appellant on a partial indemnity basis at $60,000 including disbursements and GST.
96In respect of the costs of the cross appeal I would fix those costs payable by the respondent to the appellant on a partial indemnity basis at $3,500 including disbursements and GST.
Appeal allowed.
