Court File and Parties

COURT FILE NO.: CV-10-100438-00 DATE: 20160411 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

614128 Ontario Ltd. O/A Trisan Construction, Plaintiff – and – Bernie Bianchi, Goretti Bianchi and Mark A. Epstein, Defendants

COUNSEL: Krista J. McKenzie, for the Plaintiff Jeffrey Simpson, for the Defendant

HEARD: February 24, 2016

REASONS FOR DECISION

CHARNEY J.:

Introduction

[1] The plaintiff, Trisan Construction (Trisan), brings this motion for summary judgment pursuant to Rule 20 of the Rules of Civil Procedure against the Defendant, Mark Epstein (Epstein), for professional negligence and breach of contract. Trisan is in the construction business and specializes in water mains, sewers and concrete. Epstein is the former lawyer for Trisan and was retained to represent Trisan in a civil action to recover funds for services provided in relation to a construction project. The main issues on this motion for summary judgment is whether Epstein breached the standard of care for a professional and, if so, whether any such breach caused any damages to the plaintiff.

[2] For the reasons set out below I conclude that I am unable to resolve all of the issues raised on the basis of a summary judgment motion and direct the trial of an issue with respect to the one outstanding issue.

Facts

[3] In order to understand the basis of this claim a detailed chronology of the facts is required. This solicitor/client relationship in this case was conducted almost exclusively by email – the lawyer rarely met with the client in person. As a result, there is little room for factual disputes regarding the discussions and advice provided by the lawyer. It is all recorded in writing and was all provided on this motion for summary judgment.

[4] Unfortunately, the emails often relate to more than one file and the “subject” line on the solicitor’s emails often has a generic reference to “collections” rather than to a particular file. Many of the copies of emails provided in the motion record state “Please see attached” but no attachment is included. The chronology is sometimes hard to follow because it is sometimes unclear from an email which of several claims is being discussed. The plaintiff’s affidavit sometimes confuses correspondence related to one claim with correspondence related to other unrelated claims, and the plaintiff’s factum does not set out the facts in strictly chronological order. The defendant’s affidavit is somewhat selective in its narrative, with large parts of the chronology missing entirely. Notwithstanding these limitations, I am able to make the following findings of fact on the basis of the written record provided by the parties:

[5] On December 12, 2006, Trisan’s controller contacted Epstein by email. She wrote that she noticed that his website indicated that he provided legal services in commercial litigation and asked whether he could assist their construction company in collecting payments. Epstein responded that same day advising “collections are definitely something that we can help out with.”

[6] On December 13, 2006 Trisan’s controller advised Epstein that Trisan had four matters on which she would like to retain him. Her email stated “Where do we go from here. What information would you need from me to start.” It is clear from this email that Trisan is an unsophisticated litigant placing reliance on the advice of its solicitor.

[7] Epstein responded the same day, requesting copies of outstanding invoices and advising “in some situations we may be able to register a lien on title. To do so we have to file within 45 days of last attendance. Please keep this in mind.”

[8] One of these four matters pertained to a project called Aspen Heights 2. Trisan was a sub-contractor to a company called Bianchi Contracting (2004) Inc. (Bianchi) which was the general contractor for another company named The Kaitlin Group Ltd. (Kaitlin). In 2004 and 2005 Trisan provided concrete services installing sidewalks for Bianchi on the Aspen Heights 2 project and invoiced $175,213.64 plus G.S.T. in progress billings to Bianchi. The affidavit evidence filed on this motion does not indicate the date of substantial completion by Trisan, although I infer from the information provided that it was prior to November 2005.

[9] After payments and credits, Trisan claimed that Bianchi’s total amount outstanding was $102,931.22 including G.S.T. of which $18,747.86 including G.S.T, was holdback money. No further payments were made to Trisan after November 7, 2005.

[10] On January 18, 2007, Trisan’s controller emailed Epstein and advised him that she could not find the Bianchi file but would speak to the head of Trisan when he returned from vacation.

[11] Epstein responded the same day with information regarding the retainer ($2,000), fee ($1,500 plus disbursements if not defended) and hourly rate ($200 per hour if defended) to proceed on the Bianchi claim.

[12] On January 24, 2007, Trisan replied to Epstein, confirming that she would send the money for the retainer and asking him to fax the retainer agreement. She stated:

As for Bianchi – apparently they are currently sueing (sic) for their money on this project from Kaitlin Group and Sernas (the consultants). Their lawyer is Kenneth Movat … We would like to have you call their lawyer and find out where things are at and then advise what we should do from there.

[13] Trisan also inquired whether “we need to set up a meeting to go over anything.”

[14] Epstein replied on January 24, 2007, that he would require a retainer on account of the Bianchi file and “in all likelihood we would be required to file a claim of our own at some point and in order to avoid a time limitation defence”. Epstein requested a $1,000 retainer “and should we proceed to file this can be topped up to $2,000”, and concluded: “At this point a meeting would not be required. We will prepare draft claims for your review upon receipt of funds.”

[15] Trisan sent a $1,000 retainer on February 1, 2007. I accept this date as the date that Epstein was formally retained by Trisan.

[16] On February 1, 2007 Epstein wrote to Trisan stating:

[W]e will require the full retainer [an additional $1,000] on Bianchi prior to filing. Since a demand was already sent out we will be commencing the claim right away.

[17] Epstein responded to a further inquiry from Trisan that same day, advising them that it would be “a good idea to issue the claim” against Bianchi “in light of time limitations and in our letter serving it advise that we are prepared to hold off on judgment until we hear from them on that matter”. He also agreed to call Bianchi’s lawyer [Movat].

[18] On February 6, 2007, Epstein responded to a request for a status update from Trisan to advise them that his assistant was “preparing the draft claims” which would be forwarded to Trisan for review “by the end of the week…I will let you know as soon as I hear from Bianchi’s lawyer”. That same day Epstein was able to speak to Movat’s associate, and he emailed Trisan to advise them that he was informed by the associate that Bianchi had reached a tentative settlement for payment by Kaitlin of the outstanding account. Epstein advised Trisan that that he would advise Bianchi’s lawyer of the outstanding balance on Trisan’ account and that Bianchi’s lawyer would seek instructions from his client.

[19] Trisan emailed Epstein the next day requesting him to advise Kaitlin (and their lawyer) of the outstanding amount owed to Trisan so that Kaitlin would be on notice of that amount before Kaitlin released all the money to Bianchi.

[20] On February 7, 2007, Epstien requested Trisan confirm the amount owing and indicated that he would forward this information to Kaitlin, but did not yet know who Kaitlin’s lawyer was. On that same date Epstein did send a letter to Bianchi’s lawyer confirming that Bianchi owed Trisan $102,931.21. He asked Bianchi’s lawyer to “advise as to your client’s position regarding payment of this debt.”

[21] On February 13, 2007, Epstein emailed Trisan to advise that “letters have gone out to Kaitlin and Bianchi.” In fact, the letter had only gone to Bianchi. A copy of the letter was not faxed to Kaitlin until February 15, 2007, which (unbeknown to Trisan or Epstein at the time) was the day before Kaitlin’s last payment to Bianchi.

[22] Epstein wrote to Bianchi’s lawyer again on February 26, 2007, requesting a response to his letter of Febrary 7, 2007.

[23] On March 6, 2007, Trisan’s controller emailed Epstein’s assistant to advise that Trisan had heard from Bianchi that the case between Bianchi and Kaitlin had settled and asked where that left Trisan and its ability to collect its $102,000.00. Epstein’s assistant replied the same day to advise that they had not received a “formal reply” from Bianchi, and that Epstein had left a message for Bianchi’s counsel.

[24] In response to another query from Trisan requesting an update on the progress of the Bianchi claim, Epstein advised Trisan on March 21, 2007:

To date we have not heard back from the solicitors for Bianchi. I have left another message today and would suggest that we write and indicate that we will be filing a claim in Court if we do not receive a response.

[25] Trisan replied the same day confirming that it wanted Epstein to file the claim if there was no reply to his letter.

[26] On March 21, 2007, Epstein wrote to counsel for Bianchi stating:

I write further to our letters of February 7th and 26th wherein we requested your client’s position with respect to payment in this matter. Our client was under the impression from yours that this matter would not require a Court proceeding, please advise forthwith if this is in fact the case. Failing which, we would ask that you advise if you are in a position to accept service on your client’s behalf. Should we not hear from you by the end of business on March 26th, we will effect service on your client directly.

[27] By March 28, 2007, there was still no reply from Bianchi’s lawyer. Epstein wrote to Trisan and asked “Please advise if we should draft the statement of claim if we don’t hear from him by tomorrow.” Trisan replied “What do you recommend?” Epstien replied on March 29, 2007: “I suggest that we go ahead with the claim so that they take this seriously”.

[28] On April 4, 2007, Epstein’s office emailed Trisan a copy of a statement of claim for Trisan’s review. This was the first draft of the statement of claim against Bianchi. Trisan replied the same day with the corrections.

[29] On April 19, 2007, Epstein finally received an email from a law clerk at Bianchi’s lawyer’s office to advise that the associate responsible for the Bianchi file was no longer with the firm, and that their law firm was “seeking instructions” from Bianchi with regard to this matter.

[30] On May 9, 2007, Epstein wrote to Trisan with regard to the Bianchi claim and a small claims court claim he was acting on. He stated:

You are correct that there is a two year limitation period for the commencement of collection proceedings. This time period would commence from the date of the invoice. As discussed, this action (as well as Bianchi) are statute barred as they arise from transactions in 2004 and 2005. You had instructed that we proceed on these matters nonetheless. Please advise if this remains the case. Attached is the Bianchi Claim.

[31] Epstein’s advice that the limitation period in the Bianchi matter had already expired was not correct. One of the contracts between Trisan and Bianchi was dated July 2005, and Bianchi did not default on payments until November 2005. When advising his client on the limitation period issue it was incumbent on Epstein to provide them with his opinion with regard to the date on which the limitation period expired, not simply state that they had expired.

[32] At this point Trisan’s controller began to exhibit her frustration with Epstein’s procrastination. She replied on the same day. With regard to the Bianchi claim she stated: “Charmaine (Epstein’s legal assistant) sent me an email in early April in regards to Bianchi and on April 4th I sent her all the corrections – That was 5 weeks ago and apparently there is no letter sent out yet. Needless to say – I am frustrated by the amount of time it is taken (sic) to get these things done.”

[33] Epstein’s reply, also dated May 9, 2007 states:

With respect to Bianchi, we have corresponded with their lawyers for some time and since your correspondence with Charmaine they have switched lawyers, apparently Mr. Nicholson no longer works at Movat Eccelston. Mr. Movat was to follow up with instructions but never did. We are therefore issuing the claim now. Given the time that has elapsed in bringing this matter to collections, I did not recognize it as being urgent.

[34] There is a lot wrong with this paragraph. It totally disregards the instructions received from the client several times that if there were no reply by March 28, 2007, Epstein was to issue and serve a statement of claim. Indeed, this had been Epstein’s advice and the client’s instructions as early as February 1, 2007, when Epstein was first formally retained.

[35] In addition, Bianchi had not in fact “switched lawyers” – Bianchi was represented by the law firm Movat Eccelston from the beginning of this proceeding and continued to be represented by Movat Ecceston at this time. Bianchi appears to be ragging the puck in an effort to delay the lawsuit, and Epstein was doing little to protect his client’s interests.

[36] Finally, Epstein’s suggestion that he did not recognize the matter as urgent strains credulity given his advice from day one that the claim had to be issued quickly because there was a potential limitation period issue. Given Epstein’s concern that the expiration of a limitation period was imminent, it was incumbent on him to determine its urgency. At no time, however, did Epstein actually calculate when the limitation period might expire so that he could properly advise the client and ensure that the statement of claim was issued in time.

[37] The statement of claim was finally issued by Epstein’s office on May 15, 2007. The claim was against Bianchi Contracting (2004) Inc. and John Bianchi Grading Ltd. The directors and officers of the corporation were not named as defendants. The claim was served on July 3, 2007.

[38] Bianchi did not defend the action and Epstein acted expeditiously, obtaining default judgment on August 10, 2007. Epstein’s office advised Trisan of the default judgment on August 15, 2007, and indicated its intention to proceed with an examination of a director and try to garnish any known bank accounts. Trisan provided Epstein with a cancelled cheque from Bianchi in order to commence garnishment of Bianchi’s bank account.

[39] On September 26, 2007, Epstein’s office advised Trisan that “The Bianchi garnishment went out this week.” On October 2, 2007, Epstein advised Trisan that “Garnishment is out to be issued and served. A correction was required and has been completed. I expect the bank will receive it tomorrow.”

[40] In fact, the notice of garnishment was not issued until November 8, 2007.

[41] When Bianchi learned of the notice of garnishment it took the position that it had never been served with the statement of claim and moved to set aside the default judgment and notice of garnishment. On January 23, 2008, Bianchi’s motion was allowed by Boswell J., who concluded that Bianchi’s allegation that they had not been served with the statement of claim was “plausible” and that he was satisfied by the material served on the motion that Bianchi had a meritorious defence. He also ordered Bianchi to file its statement of defence within 10 days and pay Trisan $3,000 for costs thrown away.

[42] Bianchi’s statement of defence was filed on January 28, 2008. The details of the defence are not relevant to the negligence claim, except for two points:

(a) The defendant did not plead that the claim was barred by any limitation period; and, (b) Once the defence was filed the case could not be resolved summarily.

[43] Epstein sought advice from another lawyer, Elliot Goldstein (Goldstien), regarding how to respond to the statement of defence. It is apparent from Goldstein’s memo to Epstein that Epstein was less familiar with this area of law. Epstein followed Goldstien’s advice regarding the content of the Reply and filed the Reply on February 7, 2008.

[44] Bianchi paid the $3,000 costs on April 2, 2008.

[45] At this point Trisan has a litany of complaints regarding Epstein’s lack of communication, revolving juniors, accounting of trust funds and billing procedures. The chronology regarding the preparation of the affidavit of documents provides a good example of Trisan’s continued frustration with Epstein and his office.

[46] Epstein advised Trisan’s that his office would prepare the affidavit of documents, but this preparation proceeded at a glacial pace, with Trisan being offered little guidance from Epstein’s office with regard to its purpose or contents. On May 23, 2008, Trisan received an email from Epstein’s junior associate, who advised:

The affidavit of document’s for Trisan v. Bianchi is ready. Are you available to come in Monday to sign?

[47] Trisan’s controller replied that day, asking to see the affidavit and the documents so she could look them over. On May 27 Trisan received another email from Epstein’s associate stating:

Affidavit of Documents is attached. Please review and comment. I will need to meet with the deponent. I can come to your office. What is Kevin’s title. The deponent needs to be an officer of the corporation.

[48] Having an opportunity to review this draft affidavit of documents, Trisan responded with evident frustration:

There is no KEVIN. If you are asking about the Owner it is Angello Santrorelli – President. Your affidavit has signature of Kenneth Movat at the bottom – That is the name of Their Lawyer. I do not understand your list of documents. Once we no longer are in possession of? Do we list what they claimed existed that we have no knowledge of? Also need to include the copies of invoices for Lafarge that they paid on our behalf. That was then deducted from our invoice to them in arriving at the $102k still owing

[49] Epstien’s associate replied by email on May 28 with the first explanation of what was supposed to go into the affidavit of documents. The first paragraph of this email apologized for the previous confusion with the following explanation:

I will amend it to Angelo. I have just begun working on this file as I started here a few weeks ago, and have yet to review the file in its entirety. I sent along the affidavit last night as I know you wanted it asap to review.

[50] Clearly this associate lawyer was not being provided with appropriate supervision. Only one week earlier she had assumed that the affidavit of documents was complete and asked Trisan to come in to the office to sign the affidavit. Now it is acknowledged that she had not even reviewed the file and had no idea whether the affidavit she was asking the client to sign was complete or accurate.

[51] A new affidavit of documents was forwarded to Trisan for its review on June 16, 2008. The affidavit of documents was signed by Trisan’s president on June 23, 2008, and served on Bianchi’s lawyers on June 24, 2008.

[52] On July 3, 2008, Trisan wrote to Epstein with questions regarding the Bianchi claim:

I do believe Angelo has come in to sign the affidavit. What are the next steps? It was almost a year ago that we were first given judgment? Things seems to be moving very slow here as well. I do not understand all the legal steps that need to be done – I am constantly trying to get a clear picture - and it doesn’t seem to be happening. On the other hand if I do not follow up – Nothing at all seems to get done. Please give me a better understanding so that these 2 cases can get resolved.

[53] Epstein replied on the same day:

Your affidavit on Bianchi has been served and we are arranging examinations for discovery. At the same time we have proposed a settlement meeting to discuss a resolution of the matter. This process will take time. Do not expect a resolution until the Fall of 2009 at the earliest.

[54] On July 7, 2008, Epstein received a letter from Bianchi’s counsel to advise that they were no longer solicitors of record, and that Bianchi was now represented by Mr. Veltri at the firm Bianchi Presta.

[55] Epstein immediately wrote to Veltri that same day asking when Bianchi would be providing its affidavit of documents and asking for dates for examinations for discovery.

[56] After that letter nothing appears to have happened on this file until October 23, 2008, when Trisan wrote to Epstein for an update, stating:

We are very concerned that Bianchi Grading will be going out of business and would like to move on that one. I do believe last email you sent me on this was in regard to a settlement meeting date.

[57] Two weeks later on November 7, 2008, Epstein responded:

We sent a letter a couple weeks ago [October 26, 2008] to the other side on the Bianchi matter regarding a settlement meeting prior to examinations and have yet to receive a response. I will be getting Elliott Goldstein of my office involved in these matters as he has the experience to carry these to Trial if necessary. I will be sitting down with him next week and then he will arrange a meeting with you and/or Angelo to discuss moving forward.

[58] Epstein’s October 26, 2008 letter to Bianchi’s counsel was a repeat of the July 7, 2008 letter, asking when they would receive the affidavit of documents and requesting dates for discovery. It made no mention of a settlement meeting.

[59] In addition, this was the first that Trisan had ever heard of Goldstein, who was actually not a lawyer in Epstein’s office. Trisan states that this was the first time they were advised by Epstein that he did not have the experience required to take the case to trial.

[60] Epstein did not advise Trisan that Goldstein was not a lawyer in his office. Indeed, in response to Trisan’s frustration (expressed in an email dated November 8, 2008) that Epstein’s “constant change of personnel has left our cases pushed to the bottom of the pile”, Epstein responded that “Different members of the firm have handled different aspects of the files.” He also reassured Trisan “I am meeting with Elliot on Wednesday. He will immediately move your matter forward.”

[61] On November 19, 2008, Goldstein wrote to Bianchi’s new lawyer, advising that he had been retained to act as counsel to Epstein’s law firm. Goldstein demanded the Bianchi affidavit of documents and, for the first time, indicated that he would move to strike the statement of defence if the affidavit of documents was not provided. He also proposed a settlement conference.

[62] On December 1, 2008, Goldstein spoke to Bianchi’s counsel Veltri, and was informed by Veltri that Bianchi had been placed in receivership by court order, and that Veltri was awaiting instructions from Royal Bank of Canada (RBC). His information was that Bianchi was not bankrupt, but may be insolvent. Goldstein wrote to Veltri on December 4, 2008:

My client is growing impatient and instructed me to remind you that a portion of the amount claimed in the Statement of Claim is statutory holdback on various invoices. The holdbacks total $17,521.36 excluding GST.

May I suggest that you bring to the attention of RBC that some, if not all of the monies claimed by the plaintiff may be imposed with a trust. Depending upon RBC’s decision, I may recommend to my client that it amend the Statement of Claim to sue persons “behind” the corporation for allegedly causing the corporation to deal with the alleged trust funds in a manner not authorized by the trust.

[63] On January 19, 2009, Goldstein was advised by counsel for RBC that “the Action against Bianchi is stayed pursuant to paragraph 9 of the Appointment Order” dated October 17, 2008.

[64] On February 5, 2009, Epstein wrote to counsel for RBC and the receiver (Grant Thornton) seeking an accounting of funds received by Bianchi in relation to the claim, and following up on Goldstein’s advice, stated:

Failing the above, our instructions are to seek leave to amend our pleadings to add the principals of Bianchi and potentially RBC as defendants to the action. As you are aware, a portion of the funds we are seeking represent trust funds pursuant to the Construction Lien Act.

[65] On February 19, 2009, Epstein received a response from Grant Thornton as follows:

We have reviewed Bianchi Contracting’s books and records and have determined that payments in the amount of $917,445.40 were made by Kaitlin Group Limited to Bianchi Contracting. The final payment was made on February 16, 2007. A detailed schedule of invoices and payments is attached for your reference.

Bianchi Contracting did not maintain separate accounting records or bank accounts for each of its projects. All accounting was done through one set of general ledger accounts and all deposits and payments were processed through one operating bank account. It is therefore impossible to determine where the funds received from the Kaitlin Group Limited were disbursed.

Grant Thornton Limited was appointed as Interim Receiver and Receiver of Bianchi Contracting on October 17, 2008. At the date of our appointment Bianchi Contracting’s operating bank account was in overdraft. We have not taken possession of any funds that may be identified as trust funds.

[66] The detailed schedule of invoices and payments that is attached to that letter indicates that on February 16, 2007 (just two weeks after Epstein was retained) Bianchi had a total of $11,784.09 in its account. That money was paid out on February 19, 2007, and after that the account remained at zero balance.

[67] Bianchi’s equipment was sold at an auction with the approval of the court. The net proceeds from the sale went first to Canada Revenue Agency and the balance was not sufficient to cover the repayment of RBC’s secured loans.

[68] On February 23, 2009, Epstein forwarded the Grant Thornton letter to Trisan, stating:

It appears that we do not have a claim against the bank as no funds were received in relation to Kaitlin Group since the appointment of the Receiver. Our only alternative would be to seek judgment against the owner(s) of Bianchi and if they declare bankruptcy our claim would be lost.

Given the amount of the holdback and steps we would be required to take to amend the claim, ie. a Motion, I would not recommend proceeding any further with this claim.

[69] Trisan was incredulous and asked Epstein to do “whatever it takes to get our money from the bank, owners, or anyone else.”

[70] Epstein replied:

What I am saying is that we have exhausted all legal remedies that are likely to yield any payment to you…Furthermore, if you would like us to pursue the owners of Bianchi your claim would not survive bankruptcy. My legal recommendation would be to cut your losses.

[71] On March 31, 2009, Trisan confirmed its intention to dismiss Epstein and retain new solicitors to continue the Bianchi claims.

Motion For Summary Judgment

[72] Trisan has brought a motion for summary judgment pursuant to Rule 20.01 of the Rules of Civil Procedure. Pursuant to Rule 20.04(2)(a):

The court shall grant summary judgement if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.

[73] Rule 20.04(2.1) sets out the powers of the court on a motion for summary judgment:

In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.
2. Evaluating the credibility of a deponent.
3. Drawing any reasonable inference from the evidence.

[74] These powers have been extensively reviewed by the Supreme Court of Canada in the case of Hryniak v. Mauldin, 2014 SCC 7 [2014] 1 S.C.R. 87.

[75] Even with these extended powers a motion for summary judgment is appropriate only if the material provided on the motion “gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute” Hryniak v. Mauldin, supra, at para. 50.

[76] Where summary judgment is refused or is granted only in part, Rule 20.05 authorizes “the court may make an order specifying what material facts are not in dispute and defining the issues to be tried, and order that the action proceed to trial expeditiously” and to give directions or impose such terms as are just.

[77] Two issues must be determined for the plaintiff to succeed on this motion for summary judgment. First it must demonstrate that Epstein’s conduct fell below the applicable standard of care. Secondly, it must demonstrate that the solicitor’s negligence caused the plaintiff to suffer damages. “Absent proof of causation and damages the plaintiff’s action must fail”: Mirkais Investments Inc. v. Klotz, 2014 ONSC 6907 at para. 2 and 18, aff’d 2015 ONCA 632.

[78] While there are facts in dispute in this case I am satisfied that the email correspondence provided by both parties provides a complete, accurate and reliable picture of their communications, and that a trial would contribute little if anything to the written record I already have. The factual disputes relate primarily to the parties’ different interpretations or “spin” on the email correspondence in the record. Accordingly, I am of the view that most of the legal issues can be resolved on the basis of the material before the court.

[79] I am also of the view that it is in the interests of justice and the principles of proportionality that this matter proceed by way of summary judgment. This case has been outstanding for nearly seven years, and the evidence provided on this motion indicates that there is far less money at stake than the plaintiff believed.

[80] On the other hand, there is one important issue in this case where I find that the record does not permit me to apply the relevant legal principles so as to resolve the dispute. This issue relates to the plaintiff’s allegation that Epstein failed to advise them to bring a construction law breach of trust claim against the directors and officers of Bianchi pursuant to s.13 of the Construction Lien Act, R.S.O. 1990 c.C-30.

Allegations of Negligence

[81] The plaintiff alleges that Epstein’s conduct fell below the applicable standard of care: that of a reasonably competent solicitor (Ristimaki v. Cooper, 79 O.R. (3d) 648).

[82] A lawyer who is retained must bring “reasonable care, skill and knowledge to the performance of the professional service which he has undertaken.” (Central Eastern Trust Co. v. Rafuse, [1986] 2 S.C.R. 147 at para 58). Epstein held himself out to practice commercial law and agreed to be retained by Trisan to take on a construction law dispute.

[83] As well, “a solicitor’s conduct must be viewed in the context of the surrounding circumstances. The reasonableness of the lawyer’s impugned conduct is judged in light of the surrounding circumstances such as the time available to complete the work, the nature of the client’s instructions, and the experience and sophistication of the client.” (Singer v. Lipman Zener Waxman LLP, 2014 ONSC 4521, at para. 110; 1483677 Ontario Ltd. v Howard, 2015 ONSC 6217, at para. 155). “Whether or not a solicitor’s actions fell below the appropriate standard of care is a determination that will be made based on all of the evidence, taking into account the particular circumstances of the situation and including expert opinion.” (1483677 Ontario Ltd. v Howard, at para. 157.)

[84] The reference to expert opinion in the Howard case is relevant in this case because the plaintiff did not file any expert evidence to support its position. The only affidavit it filed was the affidavit of Carol van Maris, who is the Controller of the plaintiff corporation.

[85] The defendant takes the position that the court must be very careful about finding a solicitor negligent in the absence of expert evidence regarding relevant issues such as the expected standard of care and timing to judgment for claims of this type. While some issues of professional negligence of lawyers will be “commonly within the experience of a lawyer” and therefore within the court’s experience, others will require expert evidence (Hendry v. Strike, [2005] O.J. No. 6306 (Sup. Ct.) at para. 143). I agree with this caveat, and approach my analysis with that caution in mind.

[86] Although Trisan has many complaints about Epstein’s conduct, its allegations of negligence fall into six categories:

(a) The solicitor failed to provide a proper retainer agreement, failed to discuss timing, process, client expectations, which staff would be working on files and their hourly rates and fees; (b) The solicitor failed to determine the date of substantial completion of the project Aspen Heights 2 and failed to provide a proper opinion for the limitation period; (c) The solicitor failed to issue the statement of claim for 5 months and did not serve it for two more months; (d) The solicitor took almost three months after obtaining default judgment to issue the notice of garnishment; (e) The solicitor failed to act in a timely manner to seize the funds being paid by Kaitlin to Bianchi in trust for the plaintiff; (f) The solicitor failed to bring a Construction Lien Act breach of trust claim against the directors and officers of Bianchi.

[87] I will deal with each of these allegations in turn.

Failure to provide proper retainer agreement

[88] The plaintiff relies on the Client Services and Communications Practice Management Guidelines set out by the Law Society of Upper Canada. It argues that Epstein failed to provide a proper retainer agreement to the plaintiff and failed to discuss timing, process, client expectations, which staff would be working on the files and their hourly rates, and fees. The plaintiff alleges that this resulted in confusion on the part of Trisan’s controller.

[89] Epstein did provide the plaintiff with the cost of his retainer, fees and hourly rate, and a very brief description of the intended work.

[90] While the email chain provided does demonstrate that Epstein’s limited communications with Trisan’s controller frequently led to confusion and frustration on her part, I cannot, on the basis of the evidence provided on this motion, conclude that Epstein’s conduct in this regard fell below the applicable standard of care, or that they caused the plaintiff to suffer any damages.

[91] The LSUC guidelines relied on by the plaintiff state that “a decision not to follow the Guideline will not, in and of itself, indicate that a member has failed to provide quality service.” This is consistent with the authorities that confirm that there is a distinction between the rules of professional conduct and the law of negligence, and that a breach of the rules, or in this case guidelines, does not necessarily lead to a finding of negligence.

[92] In Galambos v. Perez, 2009 SCC 48; [2009] 3 S.C.R. 247 at para. 29 the Supreme Court of Canada stated:

[…] there is an important distinction between the rules of professional conduct and the law of negligence. Breach of one does not necessarily involve breach of the other. Conduct may be negligent but not breach rules of professional conduct, and breaching the rules of professional conduct is not necessarily negligence. Codes of professional conduct, while they are important statements of public policy with respect to the conduct of lawyers, are designed to serve as a guide to lawyers and are typically enforced in disciplinary proceedings. They are of importance in determining the nature and extent of duties flowing from a professional relationship: Hodgkinson v. Simms, [1994] 3 S.C.R. 377, at p. 425. They are not, however, binding on the courts and do not necessarily describe the applicable duty or standard of care in negligence: see, e.g., MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235, at pp. 1244-45; Meadwell Enterprises Ltd. v. Clay and Co. (1983), 44 B.C.L.R. 188 (S.C.); S. M. Grant and L. R. Rothstein, Lawyers' Professional Liability (2nd ed. 1998), at pp. 8-10.

[93] This is not to suggest that failure to comply with rules or guidelines is not without sanction. Failure to comply with rules or guidelines may lead to disciplinary proceedings by the Law Society in certain situations (1483677 Ontario Ltd. v Howard at para. 167) or, where the retainer or fees are at issue, the assessment of a solicitor’s bill under the Solicitor’s Act, R.S.O. 1990, c. S.15. Such failures do not, by themselves, establish the applicable standard of care for a negligence claim. Since this is the only basis upon which this allegation of negligence is founded, the plaintiff has not established a cause of action for negligence on the evidence filed with regard to this claim.

[94] In addition, while the evidence does demonstrate that Trisan’s controller was often frustrated and confused by the lack of communication from Epstein, there is no evidence that this caused Trisan to suffer damages.

Failure to determine and provide an opinion on the limitation period

[95] From almost the first day of their communications Epstein warned the plaintiffs that their claims were subject to imminent limitation periods. There is no evidence, however, that he actually figured out when the limitation period for the claim against Bianchi expired or that he advised the client accordingly.

[96] Epstein’s January 24, 2007 email to Trisan regarding the Bianchi claim stated: “in all likelihood we would be required to file a claim of our own at some point and in order to avoid a time limitation defence”. He was never more specific than this. His email of May 9, 2007, stated that the limitation period on the Bianchi claim had already expired. He failed to provide a proper opinion for the limitation period to the plaintiff. Advising a client that they will have to file a claim “at some point” in order to avoid the expiry of a limitation period falls below the applicable standard of care of a reasonably competent solicitor.

[97] Notwithstanding this evident failure, there is no allegation or evidence that Epstein actually missed any limitation periods. The statement of claim against Bianchi was finally issued on May 15, 2007, approximately three and one-half months after Epstein was retained. There is no evidence or argument that any limitation period expired between February 1, 2007 and May 15, 2007. When Bianchi finally did get around to filing a statement of defence in January 2008, it did not rely on a limitation period defence. Accordingly, I conclude that Epstein’s negligence in failing to properly identify the expiry of the limitation period did not cause the plaintiff any damages, and this part of the action must fail.

Failure to issue and serve the Statement of Claim in a timely manner

[98] The plaintiff’s claim that Epstein failed to issue the statement of claim for five months is based on their assertion that he was retained in December, 2006. As indicated above, I have concluded, based on the emails provided by both parties, that Epstein was not retained until February 1, 2007.

[99] It is clear from the email chain provided that Epstein advised the client that the statement of claim should be issued as soon as possible and that he was preparing the claim to serve with his demand letter. He indicated as early as February 1, 2007, that he would prepare a draft claim, and repeated his intention to file a statement of claim on March 21, 2007. Trisan confirmed these instructions the same day. Epstein did not commence to draft the statement of claim until April 2007.

[100] In his affidavit dated February 3, 2016, filed on this motion, Epstein states that he did not receive instructions from Trisan to file a statement of claim until April 2007. He states that Trisan’s controller had “unrealistic expectations of the litigation process”. This position is not consistent with the email chain that indicates that he sought and received instructions to issue and serve the statement of claim as early as February, 2007. As I read the emails, Epstein keeps advising the client that he will prepare and serve a statement of claim, and the client keeps saying yes. Time passes, the client requests a status update, and Epstein emails yet again to ask whether the client wants him to file a statement of claim. Trisan’s “expectations” did not relate to the litigation process. Trisan simply expected that Epstein would do what he said he would do when he said he would do it.

[101] The issue, however, once again, is whether the plaintiff has proven that the delay between February 2007 and May 2007 (or the date of service in July) resulted in damages to the plaintiff.

[102] The defendant argues that the evidence on this motion demonstrates that “even if the Action moved forward at lightning speed, Bianchi was already insolvent and there was no hope for collection”. Based on the evidence available on this motion, I must agree with that assessment.

[103] The defendant relies on the affidavit of David Flewelling dated October 15, 2008, which was filed by the Royal Bank of Canada in support of the motion appointing Grant Thornton the receiver of Bianchi Contracting. This affidavit indicates that as early as February 2006, (the year before Epstein was retained) Bianchi was in debt to RBC in the amount of $1,100,000.00 and $405,000.00 to Canada Revenue Agency (CRA). On October 11, 2007, RBC made demand on Bianchi for the immediate repayment of its secured loans in the total amount of $2.6 million. By September 17, 2008, Bianchi’s source deduction arrears to CRA amounted to approximately $928,000.00.

[104] RBC issued its first set of written demands for repayment on October 11, 2007. After that date there was no realistic possibility of recovery by unsecured creditors such as Trisan, which rank lower in priority than RBC. The evidence does demonstrate that there was no surplus for unsecured creditors.

[105] The evidence from Grant Thornton also indicates that the final payment made by Kaitlin Group to Bianchi was February 16, 2007, and all money was disbursed within days, leaving Bianchi with a zero balance. Any judgment in Trisan’s favour would have amounted to a pyrrhic victory.

[106] Based on all of this evidence I am unable to conclude that the Epstein’s three month delay in issuing the statement of claim caused any damages to the plaintiffs. Given the defendant’s intention to defend the action (as demonstrated by their moving to set aside the default judgment and filing a statement of defence), it is most unlikely that the claim could have been prosecuted to a successful conclusion prior to October 2008, or that there would have been any assets available to satisfy a judgment even if it had.

[107] Accordingly, even if Epstein’s delay in issuing the statement of claim was negligent, it did not, as it turns out, cause the plaintiffs any damages and this part of the action must fail.

Failure to issue the Notice of Garnishment until three months after default judgment

[108] Default judgment was obtained on August 15, 2007, and the notice of garnishment served on November 8, 2007. It is unclear why this took nearly three months. Epstein’s affidavit provides no explanation for this delay. Immediately after the service of the notice of garnishment Bianchi moved to set aside the default judgment, taking the position that the service of the notice of garnishment was the first it had ever heard of the claim by Trisan.

[109] I am unable to conclude that events would have unfolded differently if Epstein had served the notice of garnishment earlier. Whenever the notice was served, Bianchi would have immediately responded with a motion to set aside the default judgment and notice of garnishment. RBC issued its first set of written demands to Bianchi for repayment on October 11, 2007. After that date there was no realistic prospect that funds would have been available through the garnishment process. Accordingly, even if Epstein could have proceeded with greater alacrity in serving the notice of garnishment, I am unable to conclude that the delay caused the plaintiffs any damages, and this part of the action must fail.

Failure to act in a timely manner to seize the funds paid by Kaitlin to Bianchi in trust for the plaintiff

[110] The only evidence available on this issue is that provided by Grant Thornton that the final payment made by Kaitlin Group to Bianchi was February 16, 2007, and all money was disbursed within days, leaving Bianchi with a zero balance. Given that Epstein was not retained until February 1, 2007, I cannot conclude that he was negligent in this regard. The email chain indicates that in January and February 2007, Trisan was hopeful that the matter could still be resolved without recourse to litigation. The agreed strategy at that point was to issue a statement of claim to protect against the expiry of a limitation period, speak with Bianchi’s lawyer and send a demand letter. With the exception of issuing the statement of claim, Epstein did follow through on these instructions in February 2007, and there is no evidence that there was more that he could have done at that point.

Failure to bring a Construction Lien Act breach of trust claim against the directors and officers of Bianchi

[111] Section 8(1) of the Construction Lien Act stipulates that all amounts owing to the subcontractors (on account of the contract or subcontract of an improvement) constitute a trust fund. Section 8(2) provides that the contractor is the trustee of the trust fund created by subsection (1):

8.(1) All amounts,

(a) owing to a contractor or subcontractor, whether or not due or payable; or, (b) received by a contractor or subcontractor,

on account of the contract or subcontract price of an improvement constitute a trust fund for the benefit of the subcontractors and other persons who have supplied services or materials to the improvement who are owed amounts by the contractor or subcontractor.

(2) The contractor or subcontractor is the trustee of the trust fund created by subsection (1) and the contractor or subcontractor shall not appropriate or convert any part of the fund to the contractor's or subcontractor's own use or to any use inconsistent with the trust until all subcontractors and other persons who supply services or materials to the improvement are paid all amounts related to the improvement owed to them by the contractor or subcontractor.

[112] In addition to those liable in an action for breach of trust under s.8, s.13 of the Construction Lien Act makes directors and officers of a corporation liable for breach of trust if they assented to, or acquiesced in, conduct that they reasonably ought to have known amounted to a breach of trust by the corporation. The section permits the court to “pierce the corporate veil” by providing for personal liability of a corporation’s directing minds for a breach of trust by that corporation: Zurich Indemnity Co. of Canada v. Matthews (2005), 254 DLR (4th) 97 (C.A.) at para. 17; 1379691 Ontario Ltd. v. Appugliesi at paras. 47-54.

[113] Based on these provisions of the Construction Lien Act, Trisan had the right to bring a claim against the directors and officers of Bianchi for breach of trust.

[114] The affidavit material provided on this motion by the defendant includes Bianchi Corporation’s Corporate Profile Report. This report identifies Bernie Bianchi as (or was at the relevant time) the president, secretary and treasurer of Bianchi and a director of the company. The other director of the company is Alex Bianchi. Alex is also the vice-president. Goretti Bianchi is an officer and general manager of Bianchi.

[115] Trisan argues that Epstein should have advised Trisan from the outset that a s. 13 claim against the directors and officers of Bianchi for holdback money and breach of trust was a possibility. While not referenced in argument, s. 39 of the Construction Lien Act could have been used in conjunction with s.13 to require Bianchi to provide information including the state of the accounts between the owner and the contractor. There is no evidence that this was ever considered when Epstein was retained in February 2007.

[116] Trisan’s argument that Epstein should have advised them of the possibility of bringing a s.13 claim is supported by Goldstein’s letter to Bianchi’s lawyer on December 4, 2008, in which Goldstein threatened to bring a s.13 claim against the directors personally. Great weight is placed on this evidence because Goldstein had more experience than Epstein on construction lien matters, and Epstein relied on Goldstein to advise him with regard to this file. Trisan asks that I infer from this evidence that a reasonably competent solicitor familiar with the relevant legislation would at least recommend this option to the client and advise of any advantages or disadvantages of taking this approach. I agree that this is a reasonable inference and find accordingly.

[117] Epstein acknowledges in his affidavit that he did not recommend this option to his client until after he learned that Bianchi was in receivership in December 2008. In fact, he first proposed this option to Trisan in an email dated February 23, 2009. This was two years after he was first retained. He offers no explanation as to why he did not recommend or propose this option when he first advised Trisan with regard to the litigation in February 2007.

[118] Epstein claims in his affidavit that “the Plaintiff advised me that it did not wish to pursue this avenue of relief.” In fact, Angelo Santorelli (Trisan’s president) said the exact opposite. His reply email of February 23, 2009 stated: “You should do whatever it takes to get our money from the bank, owners, or anyone else.” It was soon after this that Trisan dismissed Epstein as its solicitor and retained a different law firm. In any event, the question is not whether he should have commenced a s.13 proceeding in February 2009, but whether one should have been commenced (or at least considered) in February 2007.

[119] Epstein states that the “holdback funds only amounted to approximately $17,000” and that “the cost to pursue the holdback would exceed the ultimate amount of recovery”. This ignores the impact that the lawsuit against the directors and officers of Bianchi personally could have had on the claim if it had been referenced in the original demand letter and been made part of the original claim. While there is evidence that Bianchi Corporation was insolvent there is no evidence before me regarding the ability of the directors and officers to pay.

[120] That is the point where the record on this motion goes cold and I do not have the “confidence that [I] can find the necessary facts and apply the relevant legal principles so as to resolve the dispute” Hryniak v. Mauldin, at para. 50.

[121] Neither party provided any evidence with respect to the likely outcome of a s.13 Construction Lien Act claim against the directors and officers of Bianchi personally when Epstein was first retained in February 2007. A claim under s.13 of the Construction Lien Act is a potentially complex proceeding in a specialized area of practice. I am not in a position to decide on the basis of the record before me on this motion whether such advice might have resulted in a different or better outcome for the plaintiff. I agree with the defendant that some expert evidence is required with respect to this aspect of the case.

[122] In an action for solicitor’s negligence the plaintiff must demonstrate that, if properly advised, he would have avoided the damages suffered.

[123] In the absence of any expert evidence on either side I am unable to decide whether Epstein’s failure to provide this advice in a timely fashion did cause damage to the plaintiff’s case or to quantify damages.

Conclusion

[124] Based on the foregoing I make the following findings and directions:

Findings

1. The retainer agreement provided by the solicitor did not constitute negligence and did not cause any damages to the plaintiff.
2. There is no evidence that any limitation period was missed, and the solicitor’s failure to determine and provide an opinion on the limitation period, while negligent, did not result in any damage to the plaintiff.
3. The solicitor’s failure to issue and serve the statement of claim in a timely manner did not result in any damages to the plaintiff.
4. The solicitor’s failure to issue the notice of garnishment until three months after obtaining default judgment did not result in any damages to the plaintiff.
5. The solicitor was not negligent in failing to seize the funds paid on February 16, 2007 by Kaitlin to Bianchi.
6. The solicitor’s failure to advise Trisan that it could bring a breach of trust claim under s.13 of the Construction Lien Act against the directors and officers of Bianchi was negligent, but, in the absence of any expert evidence on either side I am unable to decide whether the failure to provide this advice in a timely fashion did cause damage to the plaintiff’s case or to quantify damages.

Directions

1. The issue of whether the solicitor’s failure to provide advice with regard to s.13 of the Construction Lien Act in a timely fashion caused damage to the plaintiff’s case, and, if so, the quantification of damages does require the trial of an issue.
2. Accordingly, I am making an order under Rule 20.05 that this case proceed to trial on this outstanding issue. To this end, I give the following directions:
3. If the plaintiff wants to proceed with the balance of this case it must file an expert affidavit in relation to the availability and likelihood of success of a Construction Lien Act s.13 claim on the facts of this case within sixty days of this decision. The defendant must file a responding affidavit within 30 days thereafter. The affidavits will assume the facts as found in the chronology set out in this decision and the financial facts set out in the affidavit of David Flewelling dated October 15, 2008.
4. Based on these affidavits, either party may bring a motion for summary judgment. If a motion for summary judgment is brought by either party, the parties may cross-examine the opposing deponent before the motion for summary judgment is heard, and the affidavit and transcript of the cross-examination will be part of the record on the motion for summary judgment.
5. I am not seized on this case or the motion for summary judgment.

Costs

[125] The costs of this motion are reserved to the judge hearing the motion for summary judgment on the outstanding issue. In the event that the plaintiff elects not to proceed with the outstanding issue, and the parties are unable to agree on costs, the plaintiff may file submissions on costs within 60 days of the release of this decision. Such submissions will be limited to 3 pages plus a costs outline and any offer to settle. The defendant will have 15 days thereafter to file its costs submissions on the same terms. The plaintiff will have a right of reply, also limited to 3 pages, 10 days thereafter.

Justice R.E. Charney

Released: April 11, 2016