- DATE: 20020408 DOCKET: C35527
COURT OF APPEAL FOR ONTARIO
RE:
OCCIDENTAL CHEMICAL CORPORATION (Plaintiff) – and – THE SOVEREIGN GENERAL INSURANCE COMPANY (Defendant/Appellant) – and – ATKINSON, McMAHON and TERRENCE McMAHON (Third Parties/Respondents)
BEFORE:
FELDMAN, MACPHERSON AND SIMMONS JJ.A.
COUNSEL:
Lloyd D. Cadsby, Q.C. and
Kelly A. Charlebois
for the appellant
Alan D. Hunter, Q.C. and
James T. Eamon
for the respondents
HEARD:
April 5, 2002
On appeal from the judgment of Justice W. J. Lloyd Brennan dated November 29, 2000.
E N D O R S E M E N T
Released Orally: April 5, 2002
[1] The appellant Sovereign General Insurance Company ("Sovereign") appeals from the judgment of Brennan J. dated November 29, 2000, which dismissed Sovereign's claim against the third parties, the Alberta law firm Atkinson, McMahon and one of its senior partners, Terrence McMahon. Sovereign's claim was for damages, arising from the third parties' advice to Sovereign not to defend an action commenced by the plaintiff Occidental Chemical Corporation ("Occidental") against Sovereign in New York State. Brennan J. found that the legal advice furnished by the third parties to the defendant was not negligent, but rather was performed with a reasonable standard of care.
[2] As a result of Sovereign not defending the New York action, Occidental obtained default judgment in the New York proceeding. Occidental brought a motion for summary judgment in Ontario against Sovereign to enforce the New York default judgment. Sovereign entered into minutes of settlement with Occidental in response to this motion, which was acknowledged to be reasonable by the third parties, which resulted in Sovereign paying Occidental $2,921,168. It was this amount that Sovereign sought to recover from its legal advisers through its third party claim.
[3] Before the trial judge, Sovereign attacked the advice it received in an opinion letter signed by Terrence McMahon on December 14, 1989. In the first three paragraphs of the letter, Mr. McMahon considered the Canadian law with respect to the recognition and enforcement of foreign judgments. He stated, inter alia:
Taking into consideration the present state of Canadian law in regard to the recognition of foreign judgments, our opinion is that a defence should not be filed.
Accordingly, if Occidental seeks to enforce its New York judgment in Canada, it can be successfully defended by contesting jurisdiction. We must point out that there is recent authority, currently on appeal to the Supreme Court of Canada, which states that the residency and submission arguments are no longer available as defences against the recognition of judgments from other provinces (as opposed to other countries). Based on this recent development, there is some risk that the principle could be extended to include cases such as the one at hand, thereby allowing recognition of a New York judgment in Canada even where the defendant is not resident in New York or has not submitted to the jurisdiction.
[4] Sovereign does not challenge any of this advice. The first passage was an accurate statement of the existing Canadian law. The second passage referred to Morguard v. DeSaroye, [1990] 3 S.C.R. 1077 ("Morguard"), in which, a year after Mr. McMahon gave his advice, the Supreme Court of Canada established a new rule for the recognition and enforcement of judgments of courts in other provinces. The rationale in Morguard was then applied by Ontario courts to foreign judgments: see Arrowmaster Inc. v. Unique Forming Ltd. (1993), 17 O.R. (3d) 407 (Gen. Div.) and United States of America v. Ivey (1995), 26 O.R. (3d) 533 (Gen. Div.). Thus, by the time Occidental sued Sovereign in Ontario to enforce its New York judgment, the law of Ontario had changed. In other words, the "some risk" to which Mr. McMahon adverted in his opinion had in fact come to fruition. However, Sovereign does not base its claim on these passages in Mr. McMahon's letter; indeed Sovereign concedes that this component of the advice was entirely professional.
[5] Sovereign attacks the final paragraph in Mr. McMahon's letter in which he observed:
There may, however, be a more substantial risk involved in defending the Writ in New York. A New York jury deciding a case brought by a New York company against a foreign bonding company may, in any event, be sympathetic to the New York company. If Sovereign General defends, and judgment is obtained against it, our courts would be inclined to enforce the judgment in Canada on the ground there was submission to the foreign jurisdiction. Accordingly, we advise not to defend in New York and to face Occidental in Canada raising the defence that the New York court acted without jurisdiction in the matter.
[6] In his comprehensive reasons, the trial judge concluded that the advice regarding jury sympathy in this paragraph was "wrong". Sovereign argued that if the trial judge reached this conclusion, then liability should follow because it had relied on this component of Mr. McMahon's advice.
[7] The trial judge rejected this argument. After carefully reviewing the evidence, he concluded:
I hold that the remark about jury sympathy did not contribute in a material way to the decision taken by Sovereign. It cannot be said to have caused the decision. . . The legal advice which contributed to Sovereign's decision was the jurisdictional advice; Sovereign's decision would have been the same without the jury remark.
[8] Sovereign contends that the trial judge erred in reaching this conclusion. Sovereign claims that the 'jury sympathy' component of the advice was central to its decision not to defend the New York action. Accordingly, the trial judge erred by not finding that there was the requisite causal link between Mr. McMahon's incorrect advice and the decision Sovereign made which led to the injury it suffered.
[9] We do not agree with Sovereign's submissions on this issue. The trial judge's analysis on the causation issue was strongly supported by the record before him. He engaged in a careful review of the structure and contents of the letter. He also considered the testimony of the two principal Sovereign witnesses, Mr. Wingerter and Mr. Bowes, and concluded that it did not support Sovereign's position that the 'jury sympathy' point was an important factor in terms of Sovereign's final decision. He also considered the testimony of six expert witnesses, including Clifton O'Brien, an experienced Alberta counsel who "considered McMahon's opinion to be accurate and his advice to refrain from defending the New York action to be sound and reasonable".
[10] In the end, we can see no basis for overturning the judgment of the trial judge. His analysis was comprehensive and lucid. His conclusion was, in our view, correct.
[11] The appeal is dismissed with costs fixed at $17,000, inclusive of disbursements and GST.
"K. Feldman J.A."
"J. C. MacPherson J.A."
"Janet M. Simmons J.A."