CITATION: Cozzi v. Sidiropoulos, 2018 ONSC 309
DIVISIONAL COURT FILE NO.: DC44/17
DATE: 20180112
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
PETER B. COZZI
Appellant
– and –
JOSEPH SIDIROPOULOS
Respondent
Jordan Sobel, for the Appellant
Asher Honickman, for the Respondent
HEARD: October 25, 2017, at Toronto, Ontario
Michael G. Quigley J.
REASONS FOR DECISION
Overview
[1] The appellant, Peter B. Cozzi, and the respondent, Joseph Sidiropoulos, are both solicitors, both personal injury lawyers. They have been engaged in an eight-year dispute over the sum of $3,481.70 due to Mr. Cozzi from Mr. Sidiropoulos.
[2] In June 2009, a client who had retained Mr. Cozzi to represent him in a personal injury action decided to change solicitors. The client, Mr. Michael Hunwicks, retained Mr. Sidiropoulos to take over that action.
[3] At that time, as part of the transfer of the file to his carriage, Mr. Sidiropoulos undertook to Mr. Cozzi to “protect” Mr. Cozzi’s account. Mr. Sidiropoulos claims that he understood that his undertaking was contingent upon Mr. Cozzi delivering his complete file material on a timely basis in order to permit the action to proceed expeditiously. Mr. Sidiropoulos claimed that never happened and that Mr. Cozzi’s delay in transferring the file materials negatively affected Mr. Hunwicks’ action. It is undisputed that Mr. Sidiropoulos later revoked this undertaking. When Mr. Hunwicks’ personal injury claim settled, Mr Sidiropoulos paid out a small component of Mr. Cozzi’s account that was not in dispute, but he did not remit the $3,481.70 disputed portion of Mr. Cozzi’s account. Mr. Sidiropoulos claimed that Mr. Hunwicks had instructed him not to pay, on the basis that Mr. Cozzi had failed to deliver the complete file material as he had undertaken to do, and on the basis he had negligently handled the file.
[4] As a result, Mr. Cozzi brought an action directly against Mr. Hunwicks in Small Claims Court to recover the outstanding account, but that action was administratively dismissed. The court refused to set aside the dismissal. That decision was upheld by both the Divisional Court and the Court of Appeal.
[5] After the Small Claims Court refused to set aside the administrative dismissal in the action against Mr. Hunwicks, Mr. Cozzi commenced this Small Claims Court action against Mr. Sidiropoulos personally based on his breach of undertaking to protect Mr. Cozzi’s account.
[6] Mr. Cozzi’s personal claim against Mr. Sidiropoulos was dismissed at trial. Deputy Judge Kilian found (i) that the action was brought outside the two-year limitation period, and (ii) that there was no tenable cause of action since the appellant’s action against Mr. Hunwicks for the unpaid account had been administratively dismissed. Mr. Cozzi now appeals to this court from that decision.[^1]
[7] On this appeal, the appellant advances five alleged errors committed by Kilian D.J. in his decision: (i) in allegedly holding that a solicitor's personal undertaking could be unilaterally revoked; (ii) in holding that a limitation period could apply to a claim of relief from the breach of a solicitor's undertaking; (iii) in his determination of when that limitation period started to run; (iv) in allegedly holding that a solicitor's personal undertaking does not grant enforceable equitable rights to the recipient of that undertaking; and finally, (v) in failing to order the respondent to be personally liable for the Appellant's outstanding account of $3,481.70 as a result of his breach of his personal undertaking. I use the word “allegedly” in reference to items (i) and (iv) because in my view, as explained in these reasons, they are a mischaracterization and Kilian D.J. did not make those findings.
[8] The respondent argues there was no error of law committed by the Deputy Judge. He notes that Kilian D.J. found that the action was brought outside the two-year limitation period, and that there was no tenable cause of action since the appellant’s action against Mr. Hunwicks for the unpaid account had been administratively dismissed. The respondent argues that either one of those findings would have been sufficient on its own to dismiss the claim.
[9] The appellant does not challenge Kilian D.J.’s finding that the claim against Mr. Sidiropoulos was discovered and discoverable on December 6, 2010 at the latest, but instead takes the position that the Limitations Act, 2002 S.O. 2002, c. 24, Sched. B, (the Limitations Act) simply does not operate in respect of claims arising from a breach of a solicitor’s undertaking. The respondent argues not only that this is incorrect, but also that there is no basis to invoke the equitable doctrine of promissory estoppel. Since Mr. Cozzi knew as early as October 6, 2010 that Mr. Sidiropoulos had effectively revoked the undertaking, he could not have relied on the undertaking after that point, so he argues there is no basis for an estoppel to apply and the action, brought only after about three and a half years had passed from the time the claim was discovered and discoverable, was properly dismissed on this basis.
[10] Moreover, the respondent contends that Kilian D.J. correctly found that there was no longer a tenable cause of action once the claim against Mr. Hunwicks was administratively dismissed, for the simple reason that there was no longer any account to protect at that point.
[11] In my view, it was open to the Deputy Judge to make all of the factual findings he made, which are fully supported on the record before me. I am also of the view that in the result the appeal must be dismissed. I have concluded that Kilian D.J. erred in his conclusion on the cause of action issue, but correctly determined the Limitations Act applied. My reasons for reaching these conclusions follow.
Background
[12] Michael Hunwicks was involved in a December 1, 2005 accident where he was hit by something that fell off an overpass as he was walking underneath. He retained Mr. Cozzi to act for him. In June of 2009 he changed lawyers, and retained Mr. Sidiropoulos to take over the litigation.
[13] Mr. Sidiropoulos wrote to Mr. Cozzi on June 25, 2009. He confirmed that he had been retained to take over the file and asked Mr. Cozzi to forward the “entire original contents of this file as soon as possible.” The letter went on to state that “[i]f you were under a contingency arrangement with Michael [Hunwicks] I will undertake to protect your account to date for all reasonable charges incurred, subject to my client’s right to assess your account” [my emphasis].
[14] Mr. Sidiropoulos acknowledges that he settled Hunwicks’ action and disbursed the settlement funds through his trust account but that he did not pay the appellant’s outstanding account. However, he also claims there is more to the story than Mr. Cozzi has related.
[15] Fifteen months after taking on the Hunwicks’ retainer, Mr. Sidiropoulos sent Mr. Cozzi a letter on September 15, 2010 noting that “numerous documents in your possession were missing, including matters pertaining to Michael [Hunwicks’] ODSP application, records, invoices, and payroll information from various towing jobs, health records, health reports, etc.” The letter concluded that this material was urgently needed for trial.
[16] Mr. Cozzi responded to Mr. Sidiropoulos’ letter the next day. He tacitly acknowledged that he had not yet provided the complete file contents, but indicated that he would release the contents of the file in exchange for Mr. Sidiropoulos’ undertaking to protect his account.
[17] After Mr. Hunwicks’ personal injury action was settled, the parties exchanged several e-mails on October 6, 2010, in which Mr. Sidiropoulos made it clear that, while he would honour Mr. Cozzi’s account in respect of the ODSP appeal, he would not pay Mr. Cozzi’s outstanding account in the personal injury action. Mr. Sidiropoulos took the position in those e-mails that Mr. Cozzi had never provided the complete accident file as he had promised, had been negligent in his handling of the file, and also alleged that Mr. Cozzi had created a false affidavit for Mr. Hunwicks to swear.
[18] About six weeks later, Mr. Cozzi sent Mr. Sidiropoulos a letter on November 16, 2010 forwarding his two accounts, the first regarding the ODSP appeal and the second for the $3,481.70 account related to the personal injury.
[19] On December 6, 2010, Mr. Sidiropoulos wrote to Mr. Cozzi. He enclosed funds in satisfaction of Mr. Cozzi’s ODSP account, but told him that Mr. Hunwicks “would not authorize” the release of any additional funds. Further, noting that the complete file had never been provided, Mr. Sidiropoulos again stated that he was not bound by his previous undertaking. The letter reiterated that the file had been handled negligently, claimed that had led to multiple costly delays and that on that basis, Mr. Hunwicks had forbidden the release of any settlement funds to Mr. Cozzi, other than the ODSP account.
[20] Mr. Cozzi’s factum on this appeal neglects to mention that Mr. Cozzi commenced a separate action against Mr. Hunwicks in the Small Claims Court seven months following Mr. Sidiropoulos’ letter of December 6, 2010. In that claim, Mr. Cozzi sought damages directly against his former client for his unpaid account of $3,481.70. That is the same amount he claimed in this action against Mr. Sidiropoulos.
[21] The direct claim against his former client was issued on July 22, 2011. However, Mr. Cozzi failed to prosecute his action against Mr. Hunwicks. That action was dismissed as abandoned on December 28, 2012, more than seventeen months after it had been issued.
[22] Mr. Cozzi moved to set aside the dismissal, but even that motion did not proceed until April 2014, sixteen months after it had been administratively dismissed. At the return of the motion, Deputy Judge A. McNeely rejected Mr. Cozzi’s explanation for failing to prosecute that action. She found nothing in the affidavit evidence to demonstrate that Mr. Cozzi intended at all times to comply with the time limits for proceeding with the action. As such, she dismissed the motion to set aside the administrative dismissal of his claim against Mr. Hunwicks.[^2]
[23] Mr. Cozzi appealed the administrative dismissal of his action against Mr. Hunwicks, but, the Divisional Court upheld the decision of A. McNeely D.J. on May 25, 2015, and ordered costs of $5,000. Mr. Cozzi sought leave to appeal, but on October 21, 2015, the Court of Appeal dismissed that motion and ordered $750 in costs against Mr. Cozzi.[^3]
The decision appealed from
[24] Mr. Cozzi commenced this separate action against Mr. Sidiropoulos on July 25, 2014, several months after his motion to reinstate the action in Cozzi v. Hunwicks had been dismissed.
[25] Mr. Cozzi devotes several pages in his factum[^4] to summarizing Mr. Hunwicks’ evidence at trial, but that summary omits important context and subsequent clarification. Initially, Mr. Hunwicks testified that he instructed Mr. Sidiropoulos to “pay what we were supposed to pay”, but he acknowledged in cross-examination that he had instructed Mr. Sidiropoulos not to pay Mr. Cozzi’s account in respect of the personal injury action. He testified that he gave those instructions because Mr. Cozzi had withheld his file and had not completed his work. Mr. Hunwicks also confirmed that he was generally dissatisfied with Mr. Cozzi’s services.[^5]
[26] The Deputy Judge made a specific finding of fact that Mr. Hunwicks had instructed Mr. Sidiropoulos not to pay the account.[^6]
[27] Mr. Sidiropoulos testified at trial that his undertaking to protect Mr. Cozzi’s account was contingent upon Mr. Cozzi delivering the complete file contents, which was never done. However, this evidence was rejected by the trial judge.
[28] After hearing the evidence and receiving written submissions from each party, the Deputy Judge dismissed the action. He found that the Limitations Act applied and that Mr. Cozzi’s claim was brought outside the two-year limitation period. He found that the claim against Mr. Sidiropoulos would have been legally discovered on December 6, 2010 after the Hunwicks personal injury claim had been settled, when Mr. Sidiropoulos specifically advised Mr. Cozzi that he would not pay the account, and thus not honour his undertaking “to protect” Mr. Cozzi’s account. Kilian D.J. also found that there was no longer a cause of action against Mr. Sidiropoulos, as the court had already dismissed Mr. Cozzi’s action against Mr. Hunwicks and thus there was “nothing for the Defendant to protect.”[^7]
[29] Mr. Sidiropoulos acknowledges, as the Deputy Judge found, (i) that he received and deposited the settlement funds from the Hunwicks action into his trust account settlement funds, and (ii) that “he may have made a promise to pay the account”, but no longer felt bound by it.
[30] Of core importance to his decision, however, the Deputy Judge found that Mr. Sidiropoulos had never undertaken to personally pay Mr. Cozzi’s account – he had merely undertaken to protect that account. He found that, “Holding the funds in trust as requested by the Plaintiff would have sufficed” to protect the account. Finally, Mr. Sidiropoulos acknowledges that Kilian D.J. did make the factual findings and reached the legal conclusions set out at paragraphs 11-17 of the appellant’s factum, as set out below.
Standard of Review
[31] Housen v. Nikolaisen[^8] establishes that the trial judge’s legal conclusions are subject to a standard of correctness, but that findings of fact will not be disturbed unless they contain a “palpable and overriding error.” A palpable error is one that is plainly seen. The decision cites a number of dictionary definitions, including the Cambridge International Dictionary of English (1996), which defines “palpable” as “so obvious that it can easily be seen or known.” Fish J. added in H.L. v. Canada (A.G.) that for the palpable error to be “overriding” it must “discredit the result.”[^9]
[32] The import of this definition is that it is not open to appellate courts to interfere with reasonable inferences drawn by the trial judge, even where the appellate court is of the view that another inference is more persuasive:
Not infrequently, different inferences may reasonably be drawn from facts found by the trial judge to have been directly proven. Appellate scrutiny determines whether inferences drawn by the judge are "reasonably supported by the evidence". If they are, the reviewing court cannot reweigh the evidence by substituting, for the reasonable inference preferred by the trial judge, an equally -- or even more -- persuasive inference of its own [emphasis in original].[^10]
Issues and analysis
[33] The only issue here is whether the Deputy Judge’s decision should be set aside. As the respondent noted in his factum and emphasized in his submissions before me, the Deputy Judge made two findings, each of which on its own was sufficient to dispose of Mr. Cozzi’s claims against Mr. Sidiropoulos: (i) that Mr. Cozzi’s claim was barred by the Limitations Act., and (ii) that there was no longer a tenable cause of action against Mr. Sidiropoulos at the time the action was commenced. If the Deputy Judge was correct with respect to either finding, the appeal must be dismissed, as either finding, on its own, would have been sufficient to dismiss the action. I consider each of these issues in turn, but first, I think it important to list the numerous findings that the trial judge made that ultimately informed his decision.
(i) Important Findings of the Trial Judge
[34] The trial judge identified seven issues that he had to resolve. He first determined that the retainer agreement in issue was not a contingency agreement, and so he had jurisdiction to consider the other trial issues. That is not contested on this appeal, so it requires no further consideration.
[35] The live issues here are as follows: (i) did Mr. Sidiropoulos provide a personal undertaking; (ii) was it conditional; (iii) did Mr. Sidiropoulos breach that undertaking; (iv) is the matter res judicata; (v) if not, was the breach of the undertaking the cause of the alleged damages; and (vi) does the Limitations Act apply.
[36] In his reasons, Deputy Judge Kilian made the following determinations of fact and law relative to those questions:
(i) that the undertaking was unconditional except as to the reasonableness of Mr. Cozzi’s account and the right to have it assessed;
(ii) that Mr. Sidiropoulos breached his undertaking;
(iii) that Mr. Sidiropoulos’ undertaking was not an undertaking to pay Mr. Cozzi’s account, but rather to protect it out of funds that Mr. Hunwicks would receive on settlement of his personal injury claim. Holding the required funds in trust, as Mr. Cozzi requested, would have been enough to satisfy the undertaking. The Deputy Judge found that the respondent’s claims of negligence by Mr. Cozzi and his alleged failure to produce Mr. Hunwicks’ entire file was incredulous. He found no evidence that the withholding of the file interfered with or affected the settlement of Mr. Hunwicks’ accident claim;
(iv) that the claim was not res judicata. Even though the amount of the claim is the same as in Mr. Cozzi’s action directly against Mr. Hunwicks, which was administratively dismissed, the defendants are different and the causes of action are different – breach of contract against Mr. Hunwicks and breach of a solicitor’s undertaking against Mr. Sidiropoulos;
(v) that Mr. Sidiropoulos caused Mr. Cozzi’s damages by breaching his undertaking. More specifically, the Deputy Judge stated as follows:
The undertaking is an act of utmost good faith and the lawyer has a duty to make all reasonable efforts to perform his undertaking. Here the Defendant had the money in his trust account. The true cause of the damage is the Defendant’s failure to protect the Plaintiff’s account by not holding back the amount claimed and not having the account assessed. Instead he decided unilaterally that the account was unreasonable, the Plaintiff was negligent and failed to provided [sic] his whole file and felt no longer obligated to honor the undertaking. Furthermore, he gave this opinion to his client who then instructed him not to pay the account. This is not a best effort to perform his undertaking.
[37] All of these findings plainly favoured Mr. Cozzi. Had Mr. Cozzi acted with greater urgency to bring his claim against Mr. Sidiropoulos, or more importantly had he acted with diligence to prosecute his claim against Mr. Hunwicks, no doubt the result before Kilian D.J. would have been different. But as the record shows, he did neither of those things.
[38] First, having been put on notice on October 6 and again, clearly, on December 6, 2010 that Mr. Sidiropoulos would not be paying Mr. Cozzi’s account, the Deputy Judge found that the two-year limitation period commenced to run, but Mr. Cozzi did not commence this action against Mr. Sidiropoulos until February 12, 2016. That was more than three months after the limitation period expired, and more than five years after Mr. Cozzi knew that Mr. Sidiropoulos was not going to honour the undertaking he gave.
[39] Second, the Deputy Judge concluded that Mr. Cozzi negligently allowed his own claim against Mr. Hunwicks to be dismissed administratively owing to his failure to diligently prosecute that action. His delay and failure to take prompt steps to have that administrative step set aside serves to emphasize his seeming carelessness and lassitude in pursuing that claim. Inexplicably, he waited sixteen months after the claim had been dismissed, i.e., a full thirty-three months after the action was commenced, to seek to set the dismissal aside. This does not evidence diligent pursuit of an action. In the result, the Deputy Judge found that the termination of the Hunwicks’ cause of action resulted in there being no cause of action in this claim against Mr. Sidiropoulos by the time Mr. Cozzi got around to commencing it.
[40] These are the two critical findings that lie at the heart of the Deputy Judge’s reasons and this appeal. They are considered in the paragraphs that follow. I have considered the second issue first, because it goes to the very nature of a solicitor’s undertaking, that issue is whether Mr. Cozzi’s claim ended when the action against the client was dismissed. I will then consider whether, as the Deputy Judge found, the alleged limitation period, or other legal principles operate to defeat Mr. Cozzi’s claim.
(ii) Did Mr. Cozzi’s claim end when the action against the client was dismissed?
[41] The second of the critical findings made by the Deputy Judge was that once Mr. Cozzi’s Small Claims Court action against Mr. Hunwicks was dismissed, he no longer had a tenable cause of action to recover his outstanding account. It was Kilian D.J.’s view that there could no longer have been a tenable cause of action against Mr. Sidiropoulos for failing to protect Mr. Cozzi’s account, because there was no longer any account for Mr. Sidiropoulos to protect at that point.[^11]
[42] Kilian D.J. found that holding the funds in trust would have sufficed to comply with this undertaking.[^12] These funds belonged to Mr. Hunwicks. Even if Mr. Sidiropoulos had kept the funds in his trust account initially, and thereby complied with the undertaking, it is implicit in the Deputy Judge’s reasons that the funds would have properly been dispensed to Mr. Hunwicks after Mr. Cozzi’s claim against Hunwicks was dismissed and all avenues of appeal had been exhausted in that action. The Deputy Judge put it succinctly as follows:
Had the Plaintiff been successful in his action against the Client, he could have looked to the Defendant for compensation for not protecting his account, but when the action in the Small Claims Court was dismissed and the motion to revive it and the two appeals failed, the Client no longer owed any money to the Plaintiff and consequently the issue became moot since there was nothing for the defendant to protect.
[43] Stated differently, the Deputy Judge’s reasons show that he found that result necessarily followed from the nature of the undertaking given, regardless of whether Mr. Sidiropoulos was at fault for breaching that undertaking. In his view, the account that was due to Mr. Cozzi was not an account owing by Mr. Sidiropoulos. It was owed by Mr. Hunwicks. Mr. Sidiropoulos simply undertook to protect his account, that is, to pay Mr. Cozzi monies due to him out of the settlement proceeds received in respect of Mr. Hunwicks’ personal injury action.
[44] The Deputy Judge found that when Mr. Hunwicks instructed Mr. Sidiropoulos not to pay Mr. Cozzi, the action for recovery of the sum owed was not against Mr. Sidiropoulos, who had been instructed by his client to pay the entire amount out to the client except for the ODSP related fee. Rather, he found it was against Mr. Hunwicks.
[45] In my view the Deputy Judge erred in reaching this conclusion, as I will explain, having regard to the leading decision in Thomas Gold Pettingill LLP v. Ani-Wall Concrete Forming Inc. and Cassels Brock & Blackwell LLP (“Cassels Brock”) on the subject of solicitor’s undertakings.[^13]
[46] That case involved an application by the law firm, Thomas Gold Pettingill LLP (“TGP”), for a declaration that the respondent law firm, Cassels Brock, was entitled to funds remaining from a settlement amount that was held in TGP's trust account, or that the funds be paid into court pursuant to an interpleader order. The client objected and claimed entitlement to the remaining settlement proceeds.
[47] The client had retained Cassels Brock in 2003 for a litigation matter. During the retainer, Cassels Brock issued bills, and except for the final invoice dated June 2008, all of the accounts were paid. There was a partial payment of the last invoice, leaving a net balance of $59,372. However, the lawyer who had carriage of the file left Cassels Brock in 2008 and, with several other Cassels Brock partners, founded TGP. The file was then transferred to TGP, which completed and ultimately settled the matter.
[48] Since the client's final account owing to Cassels Brock had not been paid at the time of the transfer of the file to the new firm, the solicitor, Mr. Thomas, gave his personal undertaking that the account would be paid out of the settlement funds. Cassels Brock argued that the client agreed to pay the final account out of the settlement funds. The client denied this. After the settlement, TGP received the settlement funds in 2009, and the funds were paid to the client with a holdback for Cassels Brock's final account. TGP had $61,351 from the settlement proceeds left in its trust account.
[49] Perell J. allowed the application. He found that Cassels Brock was entitled to the funds being held by TGP pursuant to a solicitor's lien. Most importantly here, he found that the solicitor breached his personal undertaking to pay the Cassels Brock account when the client gave instructions that the settlement funds were not to be paid to Cassels Brock and the lawyer did not himself honour the undertaking by paying the account. Perell J. found that for the lawyer to have made an undertaking without personal liability, but binding on the client, he would have had to implement instructions from the client to make an equitable assignment or direction of the settlement proceeds.
[50] Perell J. describes the two types of solicitor’s undertakings at paras. 45 and 46 of his reasons:
45 Lawyer's undertakings are of two types. The first type of undertaking is an undertaking given by the lawyer acting as an agent of his or her client; the lawyer makes it clear that the principal, i.e. the client, is the party responsible for the satisfaction of the undertaking. This type of undertaking does not expose the lawyer to liability: Re Jost and Solicitors (1978), 7 C.P.C. 303 (N.S.S.C.); Wakefield v. Duckworth & Co., [1915] 1 K.B. 218. The second type of undertaking, which does expose the lawyer to liability, is the personal undertaking of the lawyer acting in his or her professional capacity as a lawyer.
46 In the case at bar, I conclude that Mr. Thomas made the second type of undertaking, a personal undertaking, not an undertaking made as agent for his client Ani-Wall. (my emphasis)
[51] In this case, this leads directly to the question of whether the claim ended when the action against the client was dismissed. It is obvious that if the action against the client is dismissed and the client does not have to pay, that there is arguably nothing left to protect.
[52] However, that fails to capture the point. The lawyer made a promise. In exchange for the file he would “protect” the fee. Despite some objection from the lawyer who made the promise, the Deputy Judge found the file was delivered. The lawyer broke his promise to pay.
[53] In my view, depending on the type of undertaking given, it must be at least arguable that the solicitor’s promise exists independent of what the client does. The lawyer ought not to be released from his promise because the client instructs him not to pay the account. Some of the case law discussed below makes that point. Having changed lawyers for whatever reason and the file having been delivered based on the undertaking, the client cannot decide that due to incompetence he has changed his mind and the fee should not be paid.
[54] The key question is which type of undertaking is engaged in this case. As noted above, in Cassels Brock, Perell J. fairly makes the point that there are two kinds of undertakings a lawyer can make, one with the client’s instruction (which binds the client) or one the lawyer makes on his or her own account. In this case, as in that one, it is clear to me that the undertaking is of the second type. There was no evidence here of the solicitor having merely acted as agent of Mr. Hunwicks in undertaking to Mr. Cozzi that he would protect his account. The solicitor’s undertaking existed independent of the client.
[55] The money having been paid to the client in breach of the undertaking, the question becomes whether the lawyer looking to be paid is required to go after the client (and pay the cost of doing so) before he can look to the undertaking of the lawyer. If so, then plainly, the undertaking of the solicitor to pay out the former lawyer out of the settlement does not mean much. As such, if the undertaking is that of the solicitor, and there is no obligation for the former lawyer to first pursue the client for payment, then the fact that the action against the client was administratively dismissed should not matter. This would inevitably be the case if the obligation taken on through the giving of the undertaking exists independent of the client.
[56] If it went no further, the lawyer could interplead saying he has two claimants for the money and ask the court where the money should go. Yet again, the Cassels Brock case comes into play. That was an interpleader but an objection was made on the basis that the interpleading party (the law firm TGP) was not disinterested. If the client did not pay, TGP would have to. Unfortunately, Perell J. provided no guidance on that issue. At paras. 34-35 he states:
34 Ani-Wall's argument is that it is the owner of the settlement funds and that Cassels Brock has no proprietary interest in the funds being held in the trust account by way of solicitors' lien, charging lien, charging order, or otherwise. In the alternative, if Cassels Brock has a proprietary claim to the funds being held in trust, then Ani-Wall submits that Cassels Brock's claim for payment for its final account is statute-barred.
35 Ani-Wall also argues that TGP is not entitled to interplead the funds being held in trust, because, under rule 43.02 (1)(b)(ii), the person seeking an interpleader order must "claim no beneficial interest in the property, other than a lien for costs, fees or experts." Ani-Wall argues that Mr. Thomas has a beneficial interest in the funds because a payment to Cassels Brock would discharge Mr. Thomas' personal undertaking and thus TGP is disqualified from seeking an interpleader order. (I note here that because of my decision that Cassels Brock is entitled to the funds without interpleader, I will not rule on this argument.)
[57] The answer in this decision, however, does not require those questions to be answered. It simply requires a determination whether there is a difference between undertaking to “protect” as opposed to undertaking to “pay”.
[58] I can find no meaningful difference between the two words in this context. The account is protected only if it is paid or held in trust pending directions from the court. The focal question is the nature of the undertaking given. The defining difference is the type of undertaking that was given and the involvement or lack of involvement of the client, not the niceties of the choice between the two words. Given the high premium we put on the “solemn undertakings” of lawyers, whether it is “protect” or “pay” has no meaningful difference. It is the same thing. Its significance in terms of whether personal liability of the solicitor who gave the undertaking is engaged, is whether he gave it personally, or whether he gave it as the mere agent of his client.
[59] If the lawyer does not get paid that necessarily means that the obligation “to protect” the fee failed, and so and the lawyer is required to pay. This would be the case where the undertaking is the lawyer’s, independent of the client, as it is in this case. It would be as in the Cassels Brock case. The solicitor in that case, undertook to pay the fees of Cassels, Brock without involving the client, just as Mr. Sidiropoulos undertook to protect Mr. Cozzi’s fee in this case. It was his independent obligation to fulfill the commitment (see paras. 63 and 65-67):
63 There are obligations, however, if a lawyer does give an undertaking. The undertaking will include a continuing obligation of the solicitor to refrain from actions that would frustrate the performance of the undertaking. The lawyer who gives an undertaking is expected to provide timely notification of circumstances coming to the lawyer's attention that may prevent the lawyer from honouring his or her undertaking. The former lawyer must be advised of all facts necessary to permit him or her to protect his or her account.
65 Finally, the undertaking requires the lawyer to cease acting on behalf of the client from the time when the lawyer learns that the client proposes to take actions that would frustrate the undertaking. Whether the obligation to withdraw conflicts with the solicitor's professional responsibilities to the client will depends upon the particular circumstances of a case.
66 Justice Wilton-Siegel[^14] concluded that Mr. Sternberg breached his obligations by continuing to act for Mr. Campbell. By failing to take any steps at the time of taking over this litigation, Mr. Sternberg took on himself the risk of exposure to his client after any future withdrawal from the action, as well as the risk of exposure to any claim for breach of confidentiality.
67 The above discussion leads me to the conclusion that Mr. Thomas was under no obligation to give an undertaking to have Cassels Brock's account paid from the proceeds of the settlement but having given the undertaking, Mr. Thomas breached it when Ani-Wall gave instructions that the settlement funds not be paid to Cassels Brock and Mr. Thomas did not himself honour the undertaking by paying the account.
For these reasons, I disagree with the Deputy Judge that there was no debt due to Mr. Cozzi after his action against Mr. Hunwicks was dismissed. There may no longer have been a debt due from Mr. Hunwicks which could be protected, but that did not discharge the personal undertaking given by Mr. Sidiropoulos to “protect” the account personally because that was the nature of the undertaking given and received. Accordingly, in my view, the Deputy Judge erred in concluding that Mr. Cozzi’s claim ended when the action against the client was dismissed. However, this is not the end of the story. The limitations issue remains and is addressed below.
(iii) Does the Limitation period or other principles defeat Mr. Cozzi’s claim?
[60] The question that remains on this appeal is whether, as the Deputy Judge found, the alleged limitation period, or other legal principles operate to defeat Mr. Cozzi’s claim.
[61] There is no question here that Mr. Cozzi knew in December of 2010 that Mr. Sidiropoulos was not going to “protect” or “pay” his account. It is indisputable. Kilian D.J. found that Mr. Cozzi’s claim had been brought outside the two-year limitation period prescribed by the Limitations Act. This conclusion was based on his finding that the claim was discovered on December 6, 2010 – approximately three and a half years before the plaintiff’s Claim was issued – when Mr. Sidiropoulos paid the ODSP account and specifically told Mr. Cozzi that he would not pay the outstanding accident account.[^15] This court stated in Toronto Standard Condominium Corp. No 1703 v. 1 King West Inc.[^16], that the “issue of discoverability is a question of fact, which requires establishing a palpable and overriding error.” Kilian D.J. made no error in concluding that Mr. Cozzi’s claim for the stated, or at a minimum anticipatory breach by Mr. Sidiropoulos of his personal undertaking was known at that time.
[62] Mr. Cozzi takes no issue in his factum or submissions with that finding. Neither does he dispute that the claim against Mr. Sidiropoulos was issued more than 43 months after it was discovered. He argues instead, however, that the law is “well-settled” that an action to enforce a solicitor’s undertaking is not subject to the two-year limitation period, but in my view, this statement oversimplifies and misstates the law.
[63] First, Mr. Cozzi tries to counter that proposition by noting that Kilian D.J. correctly adopted the law that a personal undertaking from a solicitor is not discharged by notification. I agree. Moreover, I agree with the appellant on the general proposition that a solicitor’s undertaking and a client’s undertaking will continue to be enforceable without the interference of a limitation period: Sokoloff v. Mahoney.[^17] The Deputy Judge specifically recognized this in para. 17 when he quoted from para. 15 of Sokoloff as follows:
15 There is also clear case law that a solicitor's undertaking as well as a client's undertaking is enforceable, can be relied upon, and stops the clock running for the purpose of a limitation defence unless revoked. In Tembec Industries Inc. v. Lumberman's Underwriting Alliance, 2001 28252 (ON SC), 52 O.R. (3d) 334, [2001] O.J. No. 72 at paras 21-22, Ground J. held that an undertaking to pay a specified amount in damages gives rise to promissory estoppel where the recipient of the undertaking relied on it. Such reliance is expressly contemplated by a solicitor who gives an undertaking, as Wilton-Siegel J. held in Bogoroch & Associates v. Sternberg, [2005] O.J. No. 2522 at para 38. (my emphasis)
[64] Mr. Cozzi had a right to rely on Mr. Sidiropoulos’ undertaking that he would “protect his account”, that is, until it was revoked. The Deputy Judge correctly notes as well that mere notification does not discharge the undertaking. In Bogoroch[^18], Wilton-Siegel J.[^19] states as follows at para. 72:
72 Lastly, I conclude that the undertaking continues after notification of the client's actions to the first solicitor. It is not discharged by notification. If that were the case, it would be possible for the client to avoid the operation of the undertaking at the very time when it becomes meaningful. This implies that the undertaking includes a continuing obligation of the solicitor to refrain from actions that would frustrate the performance of the undertaking. I think this also follows from the understanding, that undertakings given by lawyers are matters of the utmost good faith and must receive scrupulous attention, as Quinn J. noted in Towne. v. Miller. The principle is also enunciated in Rule 4.01(7) of the Rules of Professional Conduct, which provides that a lawyer must "strictly and scrupulously" perform undertakings given in the course of litigation.
[65] Having included that reference, the Deputy Judge then concluded his reasons as follows:
I adopt this statement. If a solicitor could escape his personal undertaking simply because his client instructed him not to pay, the undertaking would be so unreliable that no counsel would trust it and would defeat the purpose of an undertaking. But when it has been made clear by the counsel who had given the undertaking that he was not bound by it and would not honour it, time runs from that date, or the date the Defendant received the funds and the Plaintiff became aware of it, whichever is later. To commence an action earlier would be premature since there are no funds in the hands of the Defendant to protect the account. In this case, that would be on December 6, 2010 when the ODSP account was paid and he was told the accident account would not be paid. This claim was issued on February 12, 2016, which brings this action far outside the two-year limitation period.
[66] However, the suggestion was made in argument that the Cassels Brock’s case might be read to suggest that the Deputy Judge was wrong to say that the limitation period applied to the claim against the client, because in his decision Perell J. states at paras. 95-97 that the right to a solicitor’s lien or charging order is not subject to any limitation:
95 For the circumstances of the case at bar, the circumstance that the common law charging lien is an aspect of the court's inherent jurisdiction is particularly significant because of the Court of Appeal's holding in Guillemette v. Doucet, supra that a superior court has an inherent jurisdiction to review lawyers' accounts entirely apart from any statutory authority and that the inherent jurisdiction is not subject to a time limit.
96 The significance to the case at bar is that the charging lien is not subject to a limitation period. This was also the holding of Justice Veit of the Alberta Court of Queens' Bench in Re Cochard, supra at para. 70. Similarly, in Merchant Law Group v. McLeod & Co., supra at para. 50, Justice Rawlins stated:
It is clear from the authorities, including Atkinson, that the charging lien is not subject to any statute of limitations. Nevertheless, the equitable nature of the Court's intervention means that equitable defences may be raised. For example, if there has been excessive delay in bringing the application, the defence of laches may apply.
97 These authorities thus support Cassels Brock's first argument that its claim to a charging order is not statute-barred. These authorities also support Cassels Brock's second argument that relies on s. 16 (1) of the Limitations Act, which, to repeat, provides that there is no limitation period in respect of a proceeding for a declaration if no consequential relief is sought.
[67] I reject the proposition on this appeal that the operation of the limitation period in the particular circumstances of this case is ousted by allegedly higher principles espoused by counsel for Mr. Cozzi derived from Cassels Brock and other decisions.
[68] The Limitations Act states that, unless the Act provides otherwise, a claim shall not be commenced after the second anniversary of the day on which the claim was discovered. The Act contains certain exceptions to the general two-year rule, but none of those exceptions pertain to a claim arising from a breach of a solicitor’s undertaking.[^20]
[69] Mr. Cozzi argues at paragraphs 19 and 20 of his factum that the Court has an inherent authority to assess a lawyer’s account and that this authority is not subject to a time limit. This principle is not summarized correctly, but, in any event, it has no bearing on this claim. Certainly, the Court of Appeal’s decision in Guillemette v. Doucet[^21] shows, as Perell J. noted in Cassels Brock, that the superior courts do have an inherent jurisdiction to review lawyer’s accounts entirely apart from any statutory authority and that such inherent jurisdiction is not subject to a time limit. However, Guillemette v. Doucet deals with s. 4 of the Solicitor’s Act. That provision concerns the right of a client to assess a solicitor’s account. The case stands for the proposition that a limitation period does not apply to a client who wishes to assess a solicitor’s account more than two years after the account has been delivered where the client can demonstrate “special circumstances.” However, Mr. Cozzi was never Mr. Sidiropoulos’ client and this claim does not concern the assessment of Mr. Sidiropoulos’ account.
[70] Equally, it is true that the Supreme Court has said that a party can be estopped from relying upon a limitations defence based on the doctrine of “promissory estoppel”, but this is equitable relief. It requires the other party relying on it demonstrate 1) that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on, and 2) that, in reliance on this representation, he acted on it or in some way changed his position.[^22] I might add, as an equitable remedy, it also requires that the claimant purposefully pursue his claim, and not permit it to languish for months upon months.
[71] However, there was no finding at trial that Mr. Cozzi relied upon Mr. Sidiropoulos’ undertaking and acted on it or in some way changed his position. Certainly Mr. Cozzi was entitled to rely on Mr. Sidiropoulos’ personal undertaking, at least until he learned with finality that it would not be honoured. Kilian D.J. found that Mr. Cozzi was “put on notice” of the revocation of the undertaking in October 2010 or December 2010 at the latest.[^23] The necessary implication of this finding is that Mr. Cozzi could not realistically or reasonably have relied on the undertaking after that date – he knew at that time that it would not be honoured.
[72] The respondents argued that the evidence suggests that Mr. Cozzi had never relied upon the undertaking based on the September 16, 2010 letter in which Mr. Cozzi indicated that he would release his complete file “in exchange for Mr. Sidiropoulos’ undertaking to protect his account.”[^24] They argue that statement that Mr. Cozzi would seek an undertaking in September 2010 from Mr. Sidiropoulos to protect his account strongly suggests that he was not relying upon a previous undertaking from June 2009. I would not interpret that statement as meaning there was no reliance on the solicitor’s undertaking before that day, but simply as a reinforcement and reiteration of the earlier communication that gave rise to Mr. Sidiropoulos’ initial undertaking “to protect the account.” However, regardless, Mr. Cozzi certainly could no longer have relied upon the undertaking after December of 2010 because Mr. Sidiropoulos had unequivocally told him the account would not be paid. Mr. Cozzi could not reasonably have thought otherwise. He knew it would not be paid.
[73] Finally, Mr. Cozzi relied upon the decision in Sokoloff v. Mahoney[^25] to support his position, but in my view, that reliance is misplaced. Sokoloff was a different case. In Sokoloff, the court found that the solicitor’s undertakings “were never withdrawn” and that “[a]t no time did Falconeri advise that he would not respect his clear undertaking…” The doctrine of promissory estoppel applied in those circumstances, but in so finding, the court emphasized that “the defendants at no time advised the Plaintiff that the undertaking was revoked” (my emphasis). Those findings stand in direct contrast to the factual finding of Kilian D.J. that Mr. Sidiropoulos’ undertaking had been expressly revoked, twice, on October 6 and again on December 6, 2010.[^26]
[74] In sum, Kilian D.J. made a finding of fact, which Mr. Cozzi does not now dispute, that the claim against Mr. Sidiropoulos was discovered on December 6, 2010. Once revoked, just because the source of the claim is a solicitor’s undertaking, cannot mean that there is no limitation on the time within which the aggrieved solicitor, Mr. Cozzi in this case, can seek to enforce Mr. Sidiropoulos’ breached personal promise. In my view, Kilian D.J. correctly applied the Limitations Act and found that the action was issued more than two years after the date it was discovered, and was therefore statute-barred. This on its own is adequate to dispose of the appeal.
[75] Even if this were not enough, it is enough that this leisurely pursued claim has been languishing from its inception for around 33 months. Even in Cassels Brock, Perell J. acknowledges that the right of a claimant in equity to recover relative to a solicitors lien or to seek a charging order can and will be limited by the application of the equitable principle of laches. It does not matter. The passage of time in this case is enough for equity, and the continuing demands on court resources, to say that when it’s over, it’s over.
Conclusion
[76] Despite my finding that the trial judge erred in concluding that there was no cause of action remaining against Mr. Sidiropoulos once the action against Mr. Hunwicks was dismissed, there was no error in the Deputy Judge’s decision that Mr. Cozzi was well outside the limitation period when he commenced his action against Mr. Sidiropoulos. The appeal is dismissed.
[77] As for costs, Mr. Cozzi’s counsel sought costs of $8,421 if he was successful on the appeal, but if not successful, argued that no costs should be awarded against Mr. Cozzi since, in his view, the case involves novel issues and points of law, and so it would not be in the public interest to require Mr. Cozzi to pay costs.
[78] The respondent disagrees. He correctly notes that this case has been going on for over eight years. Mr. Cozzi has continued to pursue the claims for $3,481.70, but, in my view, his failure to collect that amount has been entirely his own fault, owing to his out of time commencement of this action to recover the sum from Mr. Sidiropoulos. The respondent argues that it would be unfair to reward his conduct by awarding no costs.
[79] However, counsel for Mr. Sidiropoulos goes on to claim he is entitled to at least partial full indemnity costs because he made an offer to settle this appeal on August 3, 2017 under Rule 49. That offer was to settle the matter by a consent dismissal of the appeal without costs to either party and with no payment being made by Mr. Sidiropoulos. Consistent with his prior conduct in these matters, Mr. Cozzi never responded to that offer. As such, counsel claims that costs should be payable to the respondent by the appellant on a substantial indemnity basis since August 3, 2017, given that, in his view, the respondent has been completely successful on this appeal.
[80] I reject the position of both solicitors. In my view, neither is entitled to costs, and it is disingenuous to suggest from his vantage point that Mr. Sidiropoulos has emerged vindicated, his reputation intact. The solicitor who gave a personal undertaking failed in his professional duty to honour it. Were it not for the lassitude of the appellant in pursuing his claim, he could and should have been held liable on his promise. The appellant should have succeeded in his claim, but has only his own conduct to blame for his inability to do so.
[81] This is a petty claim for less than $3,500 that has been taking space in our justice system for close to nine years. The conduct of both parties has been shameful, one for its disdain of a professional obligation and promise, and the other for having neither the energy nor the aptitude to properly pursue a legitimate claim on a timely basis. Neither party is to be rewarded. Both parties will bear their own costs.
Michael G. Quigley J.
Released: January 12, 2018
CITATION: Cozzi v. Sidiropoulos, 2018 ONSC 309
DIVISIONAL COURT FILE NO.: DC44/17
DATE: 20180112
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
PETER B. COZZI
Appellant
– and –
JOSEPH SIDIROPOULOS
Respondent
REASONS FOR DECISION
Michael G. Quigley J.
Released: January 12, 2018
[^1]: Reasons of C.W. Kilian, D.J. in Cozzi v. Hunwicks, Court File No. SC-14-4548-00, Appeal Book, p. 5-10 (the “Reasons”). [^2]: Reasons of A. McNeely, D.J. in Cozzi v. Hunwicks, Court File No. SC-11-120437-00, Exhibit Book, p. 325-331. [^3]: Endorsement in Cozzi v. Hunwicks, Court File No. 392/14, dated May 25, 2015, Exhibit Book Tab, pp. 332-336; Endorsement in Cozzi v. Hunwicks, Court File No. M45193, dated October 21, 2015, Exhibit Book, pp. 337-342. [^4]: Paragraph 41, and pages 12 – 14. [^5]: Transcript of Trial, June 1, 2016, Cross-Examination of Michael Hunwicks, p. 25 line 24 – p.26 line 21 [^6]: Reasons, para. 15. [^7]: Reasons, paras. 17 & 18. [^8]: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, paras. 5-6 (S.C.C.). [^9]: H.L. v. Canada (A.G.), 2005 SCC 25, [2005] 1 SCR 401, para. 69 (S.C.C.). [^10]: Ibid., at para. 74. [^11]: Reasons, para. 18. [^12]: Reasons, para. 13. [^13]: 2012 ONSC 2182, [2012] O.J. No. 2109; 2012 ONSC 2182. [^14]: See Bogoroch & Associates v. Sternberg, [2005] O.J. No. 2522 (S.C.J.), discussed below, where Justice Wilton-Siegel discussed the problems associated with the various different arrangements to "protect a lawyer's account." [^15]: Reasons, para. 17. [^16]: Toronto Standard Condominium Corp. No 1703 v. 1 King West Inc., 2010 ONSC 2129, [2010] O.J. No. 1675, para. 12 (Div. Ct.). [^17]: Wendy Sokoloff Professional Assn. v. Mahoney, [2015] O.J. No. 1518, paras. 7, 11 & 16. [^18]: [2005] O.J. No. 2522. [^19]: I note that Kilian D.J. incorrectly attributes this decision to J. Wilson J., rather than Wilton-Siegel J. [^20]: Limitations Act, 2002, supra, at ss. 2, 4 & 16. [^21]: Guillemette v. Doucet, 2007 ONCA 743, [2007] O.J. No. 4172, paras. 34 & 35 (C.A.). [^22]: Maracle v. Travellers Indemnity Co. of Canada, 1991 58 (SCC), [1991] 2 S.C.R. 50 at p. 57. [^23]: Reasons, para. 17. [^24]: Letter from Peter Cozzi to Joseph Sidiropoulos dated September 16, 2010, Exhibit Book p. 245-246. [^25]: Wendy Sokoloff Professional Assn. v. Mahoney, [2015] O.J. No. 1518, paras. 7, 11 & 16. [^26]: Reasons, para 17.