Spirou v. Chant, 2013 ONSC 1330
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Kimberley Spirou
Plaintiff
– and –
Warren Chant, Barbara Sebben, Kimberly Winger, Christine Mitchell, Patricia Velleau, Robert Turner and the Religious Hospitallers of Hotel-Dieu of St. Joseph of the Diocese of London o/a Hotel-Dieu Grace Hospital
Defendants
COUNSEL:
Todd R. Branch, for the Plaintiff/Responding Party
John McGowan, for the Defendants/Responding Parties
Peter J. Osborne, for the Appellants Shulgan, Martini, Marusic, LLP
HEARD: February 28, 2013
LEAVE TO APPEAL COST ORDER
1Justice Thomas, on April 25, 2012, made a cost award against Shulgan Martini Marusic, LLP (“SMM”), the appellants, and SMM seeks leave to appeal the cost order. The cost order required SMM to pay the respondent, Hotel-Dieu Grace Hospital (the “hospital”), the amount of $75,500 and to pay Kimberley Spirou, the plaintiff, the amount of $10,286.42. SMM submits that Justice Thomas erred in fact and in law in determining that SMM should bear the responsibility for the costs of the motion.
2On December 6, 2010, Kimberley Spirou was terminated from her employment with the hospital and she retained SMM and, specifically, Myron Shulgan, to represent her in a wrongful dismissal action. The statement of claim was issued on behalf of Kimberley Spirou on December 9, 2010.
3Gerri Wong, a member of the SMM firm, became aware SMM was representing Kimberley Spirou in the wrongful dismissal action. As a result she spoke with Mr. Shulgan and indicated that she believed that the firm was in a conflict of interest as she was doing work for the hospital. She followed up with the Law Society and was informed there was a conflict of interest. Mr. Shulgan, Mr. Martini and Ms. Marusic of the firm disagreed with Gerri Wong’s position. As a result of advice from the Law Society, Ms. Wong informed the hospital of the conflict. Mr. McGowan, representing the hospital, informed Mr. Shulgan of the conflict of interest and that SMM may not act and there would be the potential cost consequences if they continued to act.
4Kimberley Spirou became aware that there was a possible conflict issue through a friend and Mr. Shulgan assured her that Gerri Wong was sharing office space and that the issue was a defence tactic.
5The motion was brought by the hospital seeking to remove SMM. Mr. Shulgan indicated to Kim Spirou that she might want to seek another lawyer but the context was Ms. Wong sharing office space and it being a defence tactic.
6Mr. Colautti was hired by SMM to act for them on the conflict motion and, in February 2011, he provided SMM a legal opinion that Gerri Wong was a member of the firm but that in his opinion there was no conflict. Ms. Spirou was aware Mr. Colautti was retained by SMM and by a November 22, 2011 letter to her, she was informed that Ms. Wong was a member of SMM. The November 22 letter indicated that the February opinion to SMM as well as a transcript of Ms. Wong’s cross-examination was enclosed. There is disagreement as to whether these two items were enclosed with the November 22 letter but Justice Thomas found that Ms. Spirou was aware of the February opinion which, at the very least, appears was summarized as part of the November 22 letter. Ms. Spirou disputes that she received the Gerri Wong transcript.
7In the November 22, 2011 letter Mr. Colautti indicated he was counsel for SMM and advised Kim Spirou if she wanted independent legal advice she could do so. He advised Kim Spirou that the defendants had offered to settle for $25,000 if SMM would cease to act. Ms. Spirou accepted Mr. Shulgan’s and Mr. Colautti’s opinions that there was no conflict. However, Mr. Colautti indicated a judge might decide otherwise.
8On the cost motion, Ms. Spirou indicated in an affidavit before Justice Thomas that she was shocked by the information as to Ms. Wong’s dispute with the firm and the details of the conflict. Mr. Colautti, on the cost motion, despite his previous opinion, argued that Ms. Wong was not a member of the firm and, in the alternative, if she was a member of the firm then her work for the hospital did not result in conflict. As SMM did not inform Ms. Spirou of Ms. Wong’s concerns and the Law Society’s opinion, Justice Thomas was of the opinion that SMM did not provide full disclosure to Ms. Spirou.
9Justice Thomas determined that SMM was in conflict and they could not act for Kim Spirou and held that Mr. Shulgan should have recognized early on his position was not winnable. As a result of the actions of the firm Justice Thomas put the firm on notice that he was considering costs against it. On the return of the costs motion he ordered costs to be paid by SMM which is the subject matter of this leave application.
10The test for leave to appeal is in rule 62.02(4) of the Rules of Civil Procedure, R.S.O. 1990, Reg. 194, which permits leave to appeal to a Divisional Court where (a) there is a conflicting decision of another court in Ontario or elsewhere and it is desirable that leave be granted; or (b) there is good reason to doubt the correctness of the order and the proposed appeal involves matters of such importance that leave to appeal should be granted.
11I am satisfied there are no conflicting decisions in another court. Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 1992 7405 (ON SC), 7 O.R. (3d) 542 (Ont. Div. Ct.) held that:
An exercise of discretion which has led to a different result because of different circumstances does not meet the requirement for a conflicting decision.
12This leave motion involves Ms. Wong as a member of SMM informing the firm of a conflict of interest which was confirmed by the Law Society. SMM disagreed. Ms. Wong alerted the hospital of the conflict. The hospital informed Mr. Shulgan there was a conflict and that SMM may not act. Mr. Shulgan continued to state to Ms. Spirou there was no conflict because Ms. Wong only shared office space and it was a defence tactic.
13It appears that the earliest that Ms. Spirou was aware that Ms. Wong was a member of the firm and not sharing office space was Mr. Colautti’s November 22, 2011 letter to her. It is her position that she did not understand what that meant until she attended the hearing on December 12, 2011. She then became aware the full extent of Ms. Wong’s role as a member of SMM and the dispute as to the conflict issue within the firm and she was shocked. Justice Thomas found that this lack of disclosure resulted in Ms. Spirou not having full information to properly instruct counsel to oppose the conflict motion.
14On the cost motion, Justice Thomas determined that SMM caused the costs incurred for the preparation of the argument without reasonable cause and it must bear the costs.
15I am of the opinion that in the cost award there was nothing punitive in Justice Thomas’s reasoning. He was of the opinion that Ms. Spirou, because she was not fully informed, should not bear the costs and the costs should be borne by her lawyer who withheld crucial information from her. This involved Ms. Wong’s involvement with the firm, the nature of the conflict that she had outlined, including the Law Society opinion. Despite that, SMM continued to inform Ms. Spirou that Ms. Wong was office sharing and it was a defence tactic.
16Justice Thomas was of the opinion that the motion was destined to fail.
17The standard of review is outlined in the Rand Estate v. Lenton (2007), 156 A.C.W.S. (3d) 234, that on a rule 57.07 appeal there is an obligation to demonstrate a finding that there is clearly an error which is material to the lower court’s determination.
18In my opinion, there is nothing in the findings of Justice Thomas that are clearly in error and material to his determination.
19As Justice Thomas noted in his cost endorsement, SMM had all the necessary information to determine that they were in conflict and remove themselves from the record by February of 2011 when they received Mr. Colautti’s legal opinion that Ms. Wong was a member of the firm. Despite the Colautti opinion of February 2011, the position taken by the plaintiff right up to the date of argument was that Ms. Wong was not a member of SMM. That position was held to be without merit and required counsel for the respondents to prepare detailed motion material directed to that issue and significant time was spent.
20As Justice Thomas found, it was for SMM to advise Ms. Spirou of the conflict which was revealed by one of their members namely Ms. Wong and the Law Society opinion. By not providing Ms. Spirou with the full information regarding Ms. Wong, Ms. Spirou could not make an informed decision as to whether she should retain SMM. Justice Thomas noted that Mr. Colautti being retained was necessary but that fact did not relieve SMM of their obligation to step down.
21As stated by Justice Thomas, “I have no doubt that any reasonable person would reach the conclusion that SMM was in conflict on these facts and further there is a very real argument here that the plaintiff could not provide an informed instruction to counsel on the totality of the disclosure made to her.”
22I do not doubt the correctness of Justice Thomas’s order. Further, I comment that even if I had done so, I do not believe the appeal involves matter of general importance. This case involves the straightforward proposition as provided by rule 2.04(3)-(5) of the Rules of Professional Conduct that a law firm cannot act against its own client without that client’s consent.
23In effect, the law firm was defending a motion to remove themselves as counsel when they were acting against their own client. As noted by Justice Thomas when he awarded costs against SMM, their argument was clearly without merit and on the main motion their position was untenable and doomed to fail.
24Rule 57.07 of the Rules of Civil Procedure authorizes costs against a party’s solicitor as interpreted by Carleton v. Beaverton Hotel, 2008 CarswellOnt 753 (Ont. S.C.), rev’d 2009 CarswellOnt 6303 (Ont. Div. Ct.). This involves a two-part test, first is whether the lawyer’s conduct falls within rule 57.07(1) in the sense of causing costs to be incurred unnecessarily and, secondly, to consider as a matter of discussion and applying the extreme caution principle whether in the circumstances of a particular case the imposition of costs against the lawyer personally is warranted.
25Justice Thomas did a careful analysis as previously noted and determined that the first part of the test was satisfied. The second part involves analysis of the extreme caution principle as outlined in Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3. In this regard Justice Thomas gave specific consideration to that principle that a lawyer cannot be held personally responsible for lack of success occasioning an adverse cost award except in extreme circumstances.
26Justice Thomas ruled that SMM had a unique duty to step aside as counsel in December 2010 which was within their sole expertise, knowledge and control. Justice Thomas ruled that SMM did not do as their duty of loyalty to their client demanded and ruled that SMM was responsible for the costs incurred by the defendants. Further, Justice Thomas ruled that litigation was unduly lengthened by SMM’s failure to withdraw. He specifically referred to the Young case and stated at para. 39 of the cost award that “conduct of parties who have no arguable case and through intransigence require the court’s time often leads to indemnification of their successful adversary.” Further, Justice Thomas said “I have considered all these facts in exercising my discretion.”
27Therefore, Justice Thomas was of the opinion that SMM’s conduct warranted an award of costs under the rule. Further, Justice Thomas commented that Mr. Shulgan’s written submission to him on the costs motion confirmed the failure of counsel to come to grips with their responsibility.
28Justice Thomas was of the opinion that as the position of SMM had no merit, that substantial indemnity costs were appropriate.
29The defendants offered to settle for $25,000 which was not accepted. SMM argued it was for Ms. Spirou to accept or reject the proposed settlement. There is no question that Ms. Spirou wanted Mr. Shulgan of SMM to represent her, but the ultimate decision as to whether or not SMM should remove themselves from the record was on SMM. It was they that had all the facts and, in fact, Justice Thomas determined that Ms. Spirou did not have full disclosure of the facts involving Ms. Wong. It was always open to SMM to accept liability for costs incurred as a result of their conflict and their conduct. As a result nothing related to the settlement of the motion required instructions or consent of Ms. Spirou.
30Concerning the quantum of costs being reviewable, it has been stated in various cases that the judge in the first instance is in the best position to determine entitlement, scale and quantum of an award of costs and that the Supreme Court of Canada has established the principle of deferring to the judge’s exercise of discretion (Canada Pacific Limited v. Matskuy Indian Band, 1995 145 (SCC), [1995] 1 S.C.R. 3).
31Anderson v. St. Jude Medical Inc. (2006), 2006 85158 (ON SCDC), 264 D.LR. (4th) 557 at para. 13, emphasizes the requirement to properly apply principles of reasonable proportionality and consistency. It is not sufficient to show that the award was excessive but that the quantum arrived at was determined by applying a plainly wrong principle.
32Justice Thomas had sufficient grounds to conclude that substantial indemnity costs were appropriate. The appellants rejected a reasonable offer to settle and their position on the motion was clearly without merit and untenable. Justice Thomas held that Ms. Spirou could not provide an informed instruction to counsel on the totality of disclosure made to her.
33Further, Justice Thomas determined that Ms. Spirou was given blatant misrepresentations about Ms. Wong’s position and the firm failed to disclose important information regarding conversations between the partners of SMM and Ms. Wong.
34Concerning whether there had been a waiver by the hospital Justice Thomas determined that no waiver was ever sought or obtained.
35Justice Thomas reduced the respondent’s costs request by 40 per cent and he referred to and applied the principle of proportionality in the cost award he made.
36Therefore, order that the request for leave to appeal is denied with costs.
37The defendant hospital and Ms. Spirou are each entitled to costs. They are to submit written submissions to me as to costs within 30 days of this decision and response from SMM within 15 days thereafter.
Original signed by Justice Patterson
Terrence L.J. Patterson
Justice
Released: March 20, 2013
CITATION: Spirou v. Chant, 2013 ONSC 1330
COURT FILE NO.: DC-12-33-0000
DATE: 2013-03-20
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Kimberley Spirou
Plaintiff
– and –
Warren Chant, Barbara Sebben, Kimberly Winger, Christine Mitchell, Patricia Velleau, Robert Turner and the Religious Hospitallers of Hotel-Dieu of St. Joseph of the Diocese of London o/a Hotel-Dieu Grace Hospital
Defendants
LEAVE TO APPEAL COST ORDER
Patterson J.
Released: March 20, 2013