CITATION: Law Society of Ontario v. Ejidike, 2020 ONSC 6228

DIVISIONAL COURT FILE NO.: DC-19-533

DATE: 20201023

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Penny, Mew, Favreau JJ

BETWEEN:

Law Society of Ontario

Respondent

– and –

Oby Regina Ejidike

Appellant

David LeMesurier for the Respondent

Justin Necpal for the Appellant

HEARD: October 13, 2020

PENNY J.

Background

1This is an appeal by Ms. Ejidike, a lawyer, from a decision of the Law Society of Ontario’s Appeal Division (reported at 2019 ONLSTA 21) which dismissed the Lawyer’s appeal from a decision of a panel of the Law Society’s Hearing Division finding her liable for substantial costs of a discipline proceeding against her (reported at 2019 ONLSTH 22).

2The Law Society issued a notice of application against the Lawyer alleging numerous counts of professional misconduct and conduct unbecoming a licensee. The Lawyer failed to respond in a timely way to a request to admit from the Law Society. Under the Law Society Tribunal’s Rules, the Lawyer, by failing to make a timely response, was deemed to admit the facts requested. In the lead up to the hearing, the Lawyer raised the possibility of a motion seeking to be relieved of the deemed admissions. The Lawyer was represented by counsel.

3Shortly before the scheduled date for the conduct hearing, and before any motion had been brought regarding the deemed admissions, the parties entered into a settlement agreement. Part of the agreement involved an agreed statement of facts. In the agreement, the Lawyer agreed and admitted the following:

(a) she had failed to respond to the request to admit in a timely way;

(b) she was deemed to have admitted the requested facts;

(c) the admitted facts comprised sufficient evidence to prove the allegations of misconduct; and

(d) given the deemed admissions, the Law Society need not prove the admitted facts in a full hearing.

In consideration for the Lawyer entering into this agreement, the Law Society agreed to forgo its (by then substantial) costs of the proceedings against her.

4The conduct hearing proceeded on the basis of the agreed statement of facts and the deemed admissions. The hearing panel found that the Lawyer engaged in professional misconduct with respect to all but one of the particulars alleged (which was withdrawn). Later the same day, after the hearing concluded, the Lawyer sent an email to the Law Society claiming she had made a “terrible mistake” admitting the requested facts. She purported to resile from her admissions, to rescind the settlement agreement and indicated her wish to proceed with a contested hearing.

5Ultimately, acting on her own behalf but with the benefit of assistance from then duty counsel, Mr. Necpal, the Lawyer brought a motion before the hearing panel seeking leave to withdraw her admissions. The Law Society made it clear that, if the Lawyer proceeded with this motion, the Law Society would be seeking its costs for the entire proceedings against her if the motion were dismissed. The motion proceeded and was dismissed with oral reasons following submissions on the motion.

The Decisions Below

6The hearing panel treated the Lawyer’s motion as a request to reopen the evidence of the hearing. In order to succeed, therefore, the Lawyer had to show

(a) the evidence was relevant to a material issue in the case;

(b) reopening the evidence would not prejudice the other party; and

(c) reopening the evidence would not adversely affect the orderly and expeditious conduct of the hearing.

7The Lawyer’s supporting affidavit simply stated, in support of her motion to withdraw her admissions, that she made a mistake when she agreed to the settlement. The hearing panel considered that the Lawyer had provided no evidence relevant to any material issue in the hearing. Because the Lawyer failed to satisfy the first prong of the test, her motion for leave to reopen the evidence and to seek to withdraw her admissions was dismissed. No appeal is taken from these determinations.

8At the subsequent costs hearing, the hearing panel found that the Lawyer clearly repudiated her agreement with the Law Society by purporting to rescind her agreement to the deemed admissions and by indicating her intention to proceed to a fully contested hearing. This clear repudiation of the agreement, the hearing panel held, relieved the Law Society of its obligation under the agreement to forgo the costs of its investigation and proceedings. It is this determination that was challenged at the Appeal Division of the Law Society Tribunal and before this court.

9The hearing panel accepted the Law Society’s request for $150,000 in costs given the nature, complexity and extent of the allegations and the Lawyer’s resistance to making reasonable admissions when she was unable to provide any evidence to answer the allegations. This determination as to quantum is not challenged.

10The appeal panel dismissed the Lawyer’s appeal, finding that the hearing panel’s decision was a reasonable one which disclosed no error of principle. The appeal panel also found there were strong policy reasons why settlement agreements should be honoured. Settlements promote finality, certainty and regulatory efficiency.

11The appeal panel found that both parties derived benefit from the settlement. The benefit to the Law Society was put at significant risk by the Lawyer’s attempt to resile from the agreement. The Lawyer was attempting to “have her cake and eat it too” by, first, breaching the settlement agreement and bringing a motion for leave to withdraw her admissions and then, when that motion was unsuccessful, trying to return to the status quo ex ante and seeking to hold the Law Society to its original agreement on costs. The appeal panel found that the outcome being promoted by the Lawyer was unreasonable in the circumstances and that the outcome reached by the hearing panel was reasonable.

Standard of Review

12The parties disagree about the standard of review post-Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, 441 D.L.R. (4th) 1. This is because they characterize the core issues in dispute differently. The Lawyer argues this is an appeal on the issue of costs, to which the standard of “error of principle or clearly wrong” applies. The Law Society argues that this is an issue about the interpretation of the settlement agreement, which is a question of mixed fact and law to which the standard of “palpable and overriding error” applies.

13In my view, while the subject matter of the appeal is appropriately described as “costs”, this is not an appeal from the decision-maker’s usual exercise of discretion in determining entitlement, scale and quantum of costs. The real issue in dispute, which determines the disposition of costs in this case, arises from the interpretation of the settlement agreement. That interpretation of the settlement agreement must take place in the context of the factual matrix reasonably known to the parties at the time. This includes the Lawyer’s purported rescission of the agreement and her subsequent motion to withdraw her deemed admissions and to set aside the hearing panel’s findings of misconduct.

14Since the Supreme Court of Canada decision in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, a dispute of this nature, properly understood, involves a question of mixed fact and law. In this sense, therefore, I agree with the Law Society. I do not agree, however, that the characterization of a question for the Court as one of mixed fact and law necessarily dictates that the standard of review is palpable and overriding error. This is because issues of mixed fact and law lie on a spectrum. At one end of this spectrum lies an extricable issue of law; at the other end lie questions of mixed fact and law in respect of which there is no extricable issue of law. The former is subject to the correctness standard; the latter to the palpable and overriding error standard. There must, therefore, be a more nuanced examination of the specific dispute in issue to determine whether it raises an extricable issue of law. I will address this in the analysis of the issues on appeal.

Issues

15There are three essential issues in dispute:

(1) whether the Lawyer’s motion to withdraw her deemed admissions was a breach of the settlement agreement;

(2) if yes, whether the Lawyer’s breach denied to the Law Society the substantial benefit of the agreement; and

(3) if yes, whether the Law Society was entitled to treat its obligations under the settlement agreement (to forgo costs) as at an end.

The Lawyer’s Arguments

16The Lawyer argues before this court that by dismissing the Lawyer’s motion for leave to withdraw her admissions, the hearing panel was holding the Lawyer to her obligations under the settlement agreement. Thus, she argues that if she is being held to her obligations under the agreement, the Law Society must be held to its obligations under the agreement as well.

17The Lawyer takes issue with the characterizations of her motion for leave to withdraw her admissions by the hearing panel and the appeal panel as a “breach” of the settlement agreement, a “resiling from” or “repudiation of” the agreement and a “failure to comply” with the agreement. She says her motion was none of these things. All she did was avail herself of a procedure under the Law Society Rules (Rule 20.06) to move for leave to withdraw her admissions. Nothing in the settlement agreement precluded her from seeking this relief under the Law Society’s Rules.

18The Lawyer then argues that her motion was dismissed. She was held to her admissions. Accordingly, she says, the Law Society was not deprived of the substantial benefit of the agreement; the Law Society, ultimately, retained the benefit of her admissions and the findings of misconduct were left undisturbed without a contested hearing.

19As a result, the Lawyer further submits, the Law Society was not relieved of its obligations under the settlement agreement. As a matter of law and fairness, she argues, because she was held to her bargain, the Law Society must be held to its bargain as well.

Analysis and Disposition

20I would not accept these arguments; they proceed from three false or erroneous premises corresponding to each of the three issues.

Breach of Agreement

21The first false premise is that the Lawyer’s motion to withdraw the deemed admissions was not a breach of the settlement agreement. This raises a question of interpretation of the agreement; it is one of mixed fact and law and involves a review of the agreement in the context of the factual matrix reasonably known to both parties at the time. As I can find no extricable question of law on this issue, the standard of review is palpable and overriding error.

22The hearing panel found that the Lawyer “repudiated the agreement as to costs the moment she resiled from her admissions”. The appeal panel found that the hearing panel committed no error in finding that the Lawyer, by moving to withdraw her admissions, failed to comply with the agreement.

23There was ample evidence to support these findings. The Lawyer failed to make timely response to the Law Society’s request to admit. As a result, she was deemed to have admitted the facts contained in the request to admit. The settlement agreement did not create these deemed admissions; they already existed by virtue of the Lawyer’s conduct. The Lawyer raised the possibility of a motion to withdraw these admissions under Rule 20.06 but no motion was ever brought before the hearing. Rather, on May 29, 2018, with the hearing scheduled to commence June 11, the Lawyer, represented by independent counsel, entered into the settlement agreement.

24The text of the agreed statement of facts (as set out earlier) does not expressly prohibit the Lawyer from moving under Rule 20.06. But, in the circumstances, that was the sole purpose and effect of the settlement agreement. The Law Society did not need a settlement agreement to get the deemed admissions. They were already available. It was the Lawyer’s burden to seek leave to withdraw the deemed admissions, if so advised. The only uncertainty, as of May 2018, was about whether the Lawyer would take steps to try to discharge this burden by moving to withdraw the admissions. What the Law Society got under the agreement, therefore, was the certainty that the Lawyer would not resile from her deemed admissions by later bringing a motion to withdraw them. This is what the Law Society bargained for by its promise to forgo costs.

25This is further confirmed by the transcript of proceedings at the conduct hearing, June 11, 2018, at pp. 56 to 59. Through her counsel, the Lawyer represented to the hearing panel that:

• she was not contesting the allegations against her;

• she recognized that she was deemed to have admitted the contents of the request to admit;

• the deemed admissions were the basis upon which the Lawyer accepted there was evidence to support a finding of misconduct;

• the hearing panel could rely on the admissions contained in the request to admit; and

• “[t]o be clear” her counsel said, “she is not personally admitting any misconduct alleged, she is admitting that it is deemed to have been admitted by operation of the rules”.

26In addition, the transcript reveals that:

• the hearing panel specifically asked, “when it comes to penalty, we won’t be hearing any kind of resiling from the admissions?” Counsel for the Lawyer responded “I do not believe so, no”; and

• the Lawyer’s counsel then asked the Lawyer to confirm whether she was prepared to proceed on the basis described. There was some uncertainty in the Lawyer’s response and the hearing panel adjourned briefly to permit the Lawyer to have a private consultation with her counsel. Upon their return, her counsel confirmed that the Lawyer wished to proceed on the basis outlined in his prior submissions. And, when asked by her counsel to confirm that she wished to proceed on this basis, she replied “Yes”.

27The hearing panel’s conclusions that:

(a) the settlement agreement embodied a promise by the Lawyer not to seek to withdraw her admissions in exchange for which the Law Society promised not to seek its substantial costs of the proceedings; and

(b) the Lawyer “repudiated the agreement as to costs the moment she resiled from her admissions”

were, therefore, well supported by the settlement agreement as interpreted in light of the factual matrix known to the parties at the time. Not only was there no palpable and overriding error by the hearing panel (and the appeal panel) in reaching this conclusion; it was the only conclusion reasonably available in the circumstances.

Deprival of Benefit

28The second false premise is that, after all, the Law Society received the substantial benefit of the settlement agreement. This is, in my opinion, demonstrably wrong.

29Here again, whether the Law Society was deprived of the substantial benefit of the agreement is a question of mixed fact and law in respect of which I can find no extricable issue of law.

30Although neither the hearing panel nor the appeal panel expressly found that the Lawyer’s breach of the settlement agreement deprived the Law Society of the substantial benefit of the agreement, that finding is both necessary to and implicit in the findings that (i) the Lawyer repudiated the agreement as to costs when she moved to withdraw her deemed admissions; and (ii) the repudiation relieved the Law Society of its obligations under the agreement to forgo costs.

31As the analysis of the nature of the Lawyer’s breach of the settlement agreement outlined above shows, by purporting to rescind her agreement not to challenge the deemed admissions, and by prosecuting a motion whose declared purpose was to withdraw her deemed admissions, set aside the findings of misconduct and force the Law Society to a contested hearing of all its allegations, the Law Society lost the very thing it had bargained for. Instead of the certainty of the Lawyer’s agreement on the deemed admissions as a basis for findings of misconduct, the Law Society now faced the risk that the motion to withdraw the deemed admissions would be successful and the deemed admissions would be withdrawn. This in turn exposed the Law Society to the risk that it would have to prosecute its allegations in a lengthy, contested hearing.

32The fact that, with the benefit of hindsight, the Lawyer was unsuccessful is irrelevant to the risk the Law Society faced before the hearing panel ruled on the motion. The Lawyer’s conduct deprived the Law Society of the very certainty and finality it sought in entering into the settlement agreement. It was a breach and a repudiation of the agreement that deprived the Law Society of the substantial benefit of the agreement. Not only did this aspect of the analysis by the hearing and appeal panels not involve a palpable and overriding error, it was, again, the only conclusion reasonably available on the evidence.

Repudiation Relieves Innocent Party of Obligations

33The third fallacy is that because the Lawyer was, ultimately, not permitted to withdraw her admissions, the Law Society was not relieved of its obligations under the agreement regarding costs. This issue, in the circumstances, does raise an extricable issue of law in my view. It is, however, an issue in respect of which neither the hearing panel nor the appeal panel committed any error of law or principle.

34On this point, the hearing panel found that the Lawyer’s clear repudiation of the agreement relieved the Law Society of its obligations under the agreement to forgo costs. The appeal panel found that the hearing panel’s decision was reasonable and did not involve an error of law or principle. I agree.

35Professor Waddams, The Law of Contracts, 7th ed. (Toronto: Carswell, 2017) at ¶599 states:

In Federal Commerce & Navigation Ltd. v. Molena Alpha lnc. [[1979] A.C. 757 (H.L.)] the House of Lords held that an anticipatory breach amounts to a repudiation if it threatens to deprive the innocent party of substantially the whole benefit of the contract, or if it goes to the root of the contract.

36The Lawyer’s pronouncement that “I am rescinding my signed ASF and indicating my intention to proceed to a contested hearing” could reasonably qualify as an anticipatory breach of the agreement. The Lawyer’s filing of a motion with the express purpose of withdrawing her deemed admissions, setting aside the findings of misconduct and proceeding to a contested hearing certainly did so. These actions, as set out in the prior analysis, can reasonably be characterised as depriving the Law Society of substantially the whole benefit of the agreement. The Lawyer’s actions constituted, therefore, precisely the type of breach which entitled the Law Society, in law, to treat the entire contract as rescinded and, as such, the Law Society was relieved from performance of its own obligations under the agreement.

37Finally, it is appropriate to address, in this context, the Lawyer’s argument that it is “unfair” that she should be “held” to her obligation under the settlement agreement while the Law Society is relieved of its obligation. The Lawyer was not “held” to her settlement agreement obligation by the hearing panel or the appeal panel. She was not permitted to withdraw her deemed admissions, to be sure. But, as discussed earlier, those admissions arose independently of the settlement agreement; they existed before the agreement was entered into and continued after the Lawyer’s breach of the agreement. The Lawyer was perhaps “held” to her deemed admissions but not to the settlement agreement obligation which she herself had already breached. There is nothing unfair about this.

38This third determination by the hearing panel and the appeal panel fell squarely within the bounds of well settled law on the nature and effect of the repudiation of a contract. There was no error of law or principle in the appeal panel’s determination of this issue.

Conclusion

39For the foregoing reasons, I would dismiss the Lawyer’s appeal.

Costs

40The Lawyer sought no costs if she were successful. The Law Society sought partial indemnity costs of $5,955. I would award the Law Society partial indemnity costs of $5,000.

Penny J.

I agree _______________________________

Mew J.

I agree _______________________________

Favreau J.