Court of Appeal for Ontario

Date: 2018-05-18 Docket: C63723 Judges: Brown, Huscroft and Trotter JJ.A.

Parties

Between

Lang Michener LLP Moving Party (Respondent)

and

Gregory P. King Responding Party (Appellant)

Counsel

Gregory King, acting in person

Gavin Tighe and Robert Winterstein, for the respondent

Hearing

Heard and released orally: May 16, 2018

On appeal from: The order of Justice David L. Corbett of the Superior Court of Justice, dated March 31, 2017, with reasons reported at 2017 ONSC 1917, and from the costs order of the same date, with reasons reported at 2017 ONSC 3920.

Reasons for Decision

I. Overview

1The appellant, Gregory King, a lawyer, appeals from the order granting summary judgment dismissing his counterclaim against the respondent, Lang Michener LLP.

2In 2007, Mr. King retained Lang Michener to defend him in proceedings commenced by the trustee of a bankrupt Italian company, Sincies Chiementin SpA ("Sincies"), to enforce a judgment issued by an Italian court on October 1, 2001 against Mr. King (the "Italian Judgment"). The amount of the Italian Judgment was U.S. $600,000, plus interest, currency appreciation and costs. Following a four-day hearing, Whalen J. granted the trustee summary judgment recognizing and enforcing the Italian Judgment (the "Enforcement Judgment"): 2010 ONSC 6453.

3This court dismissed Mr. King's appeal from the Enforcement Judgment: 2012 ONCA 653. Mr. King's request for leave to appeal to the Supreme Court of Canada was denied: [2012] S.C.C.A. No. 516.

4In March 2011, Lang Michener commenced an action against Mr. King seeking payment of its fees for services rendered in the enforcement proceeding. By Statement of Defence and Counterclaim dated May 5, 2011 (and amended October 16, 2013), Mr. King advanced three defences:

(i) Lang Michener breached its retainer agreement by charging fees that were out of proportion to the amounts agreed;

(ii) the law firm provided representation and advice at the enforcement proceeding that fell below the standard of care; and

(iii) one of the firm's lawyers, John Kelly, was negligent in the advice he provided to Mr. King in 2008 about a possible action against LawPro, which had denied Mr. King coverage under his professional liability insurance policy (the "Policy") for the Italian Judgment.

5Mr. King counter-claimed against Lang Michener, advancing the same three grounds as the basis for his counter-claim. Mr. King sought judgment against Lang Michener in the amount he owed under the Italian Judgment, together with all legal fees and other costs he had incurred in defending the trustee's enforcement and recognition claim.

6The motion judge granted summary judgment dismissing Mr. King's counterclaim. The motion judge made no finding about the value of the services Lang Michener had rendered; that issue awaits determination in the main action. However, he dismissed the counterclaim for two main reasons:

(i) Mr. King's claim against Lang Michener for negligent representation during the enforcement proceeding constituted an impermissible collateral attack on the findings made by Whalen J. and, in any event"there is no basis in fact available to Mr. King that any shortcomings in oral argument by Lang Michener could possibly have caused him any compensable damages"; and

(ii) Regardless of the advice Kelly might have given Mr. King in 2008 about a possible claim against LawPro under the Policy, Mr. King suffered no damages because the Policy did not cover a claim based in fraud, such as the Italian Judgment, and Mr. King had failed to report a claim to LawPro within the time required by the Policy, which was long before he retained Lang Michener in 2008.

Grounds of Appeal

7On this appeal, Mr. King does not challenge the motion judge's dismissal of that part of his counterclaim alleging that Lang Michener was negligent in representing him at the enforcement proceedings. Mr. King limits his appeal to the motion judge's dismissal of that part of his counterclaim alleging negligent advice given by Lang Michener in 2008 in respect of a possible claim against LawPro.

8At the hearing, Mr. King clarified that he was abandoning his claim for relief in the counterclaim in respect of the amount of the Italian Judgment; his claim for damages is now limited to the costs he incurred in defending the enforcement proceedings.

9Mr. King also seeks leave to appeal the motion judge's award of costs of $45,000 against him.

Analysis

10To dispose of this appeal, it is only necessary to consider Mr. King's argument that the motion judge erred in finding that the Policy did not cover Mr. King's claim in respect of the enforcement of the Italian Judgment.

11The coverage grant under the Policy stated:

To pay on behalf of the INSURED all sums which the INSURED shall become legally obligated to pay as DAMAGES arising out of a CLAIM, provided the liability of the INSURED is the result of an error, omission or negligent act in the performance of or the failure to perform PROFESSIONAL SERVICES for others.

12"PROFESSIONAL SERVICES" is defined in the Policy as "the practice of the Law of Canada, its provinces or territories, and specifically those services performed, or which ought to have been performed, by or on behalf of an Insured in such Insured's capacity as a lawyer and as a member of the Law Society of Upper Canada…."

13In its November 23, 2007 letter to Mr. King denying coverage for his claim based on the proceedings to enforce the Italian Judgment, LawPro wrote:

The Italian Judgment is based only on claims for "extra-contractual" remedies against you. The Italian Court specifically disavowed any jurisdiction to consider the professional liability claims and adjudged you liable on a finding of civil fraud. Thus, should an Ontario court decide to enforce the Italian Judgment in Ontario, given the Italian Court's assessment of the allegations made against you is not based on any "error, omission or negligent act in the performance of or failure to perform Professional Services", the Coverage Grant would not be activated. As the Coverage Grant is not triggered, there can be no coverage under the Policy available to you in relation to an Ontario Action.

14The motion judge found that Mr. King's liability in respect of the Italian Judgment was not the "result of an error, omission or negligent act in the performance of or the failure to perform professional services for others." He stated, at paras. 48, 49, 50 and 52 of his reasons:

In its judgment, the Italian court specifically declined to take jurisdiction over [Mr.] King in relation to allegations of professional liability:

… to ascertain the professional liability of Mr. King is certainly outside the scope of Italian jurisdiction, as it has been shown that the services performed by the defendant [Mr. King] did not take place in Italy. In summary, Italian jurisdiction exists only with regard to the extra-contractual action.

The Italian court's findings on the issue of "extra-contractual liability" were as follows:

Indeed, in light of the reconstruction of facts set forth above… Mr. King and Mr Chan, as they agreed between themselves, as shown by the numerous contacts between them which left indisputable traces in the documents examined, acted in such a way as to defraud [Sincies], first by persuading it to undertake a significant financial commitment for a commercial transaction which, in fact, had never been initiated, and then by definitively preventing it from recovering the amount advanced.

The insurance policy covered claims against [Mr.] King arising from his provision of professional services. It did not cover personal claims against [Mr.] King. The judgment against [Mr.] King finds that he acted in concert with [Mr.] Chan to defraud Sincies of the US $600,000. The fraud arose in the context of a transaction in which [Mr.] King acted as solicitor and provided legal services, but it is not in respect to an "error, omission or negligent act" in those legal services.

The Italian judgment sounds in fraud, not professional negligence, and coverage was not available for [Mr.] King from LawPro in respect to liability for fraud…

15Mr. King submits the motion judge erred in reaching this conclusion for two reasons. First, the motion judge departed from the statement of this court, in its brief endorsement dismissing Mr. King's appeal from the Enforcement Judgment, that described the Italian Judgment as one which found Mr. King liable "for his professional conduct as a lawyer in a failed joint venture."

16We do not accept that submission. The issue of coverage under the Policy was not before this court on the appeal from the Enforcement Judgment. The language used by this court obviously was in the nature of a short-hand description of the Italian Judgment. The precise basis for the Italian Judgment was set out in that judgment, which the motion judge accurately described in his reasons.

17Second, Mr. King argues that he was not acting in his "personal capacity" for Sincies or Chan. Consequently, the motion judge should have directed a trial on the issue as to whether Mr. King's liability in Italy arose from his professional conduct.

18We see no merit in this submission. The motion judge made no error in finding the Italian court had specifically declined to take jurisdiction over Mr. King in relation to allegations of professional liability. That finding was firmly anchored in the reasons of the Italian court, which stated, at para. 9:

[A] contractual action in order to ascertain the professional liability of Mr. Mr. King is certainly outside the scope of Italian jurisdiction, as it has been shown that the service performed by the defendant did not take place in Italy. The documentation filed on the record, in fact, shows that he maintained his professional offices in Canada, where he also pursued the majority of his activities, although he sometimes performed services (attending meetings) in China or Hong Kong.

19Coverage under the Policy was only available for liability resulting from an error, omission or negligent act "in the performance of or the failure to perform PROFESSIONAL SERVICES for others." The Italian Judgment was clear that Mr. King's liability was not in respect of professional services he had rendered. Accordingly, we see no error in the motion judge's conclusion, at para. 52 of his reasons, that "regardless of the advice that was given by Kelly, [Mr.] King has suffered no damages: he would have lost an action against LawPro, and so his failure to start such a lawsuit after LawPro denied coverage in November 1997 has cost him nothing."

20In light of our conclusion that the motion judge did not err in holding Mr. King did not have coverage under the Policy because his liability claim was not in respect of "professional services" rendered, there is no need to consider Mr. King's submissions regarding the motion judge's findings about: (i) the timeliness of his reporting the claim to LawPro; (ii) the availability of the exception to the exclusion of coverage in respect of fraudulent acts; and (iii) the applicability of an endorsement to the Policy deeming, as an error, omission or negligent act, an insured's vicarious liability for the acts of others "arising out of the provision of PROFESSIONAL SERVICES."

21As to Mr. King's request for leave to appeal the motion judge's cost order, we grant leave to appeal, but we do not interfere with the costs award. We see no error in principle by the motion judge, nor was his award unreasonable.

II. Disposition

22For the reasons set out above, we dismiss the appeal. We grant leave to appeal the motion judge's cost award but dismiss the appeal.

23Lang Michener is entitled to its costs of the appeal in the amount of $15,000, inclusive of disbursements and all applicable taxes.

David Brown J.A.

Grant Huscroft J.A.

Gary T. Trotter J.A.