Court of Appeal for Ontario

Date: 2018-02-20 Docket: C64038

Judges: Hourigan, Roberts and Nordheimer JJ.A.

Between

Aird & Berlis LLP Plaintiff/Defendant by Counterclaim (Respondent)

and

Oravital Inc. and Alliance H. Inc. Defendants/Plaintiffs by Counterclaim (Appellant)

Counsel

Geoff R. Hall and Anu Koshal, for the appellants

Michael Kestenberg and Marc Kestenberg, for the respondent

Heard: February 14, 2018

On Appeal

On appeal from the judgment of Justice Elizabeth Stewart of the Superior Court of Justice, dated June 15, 2017, with reasons reported at 2017 ONSC 3391.

Reasons for Decision

[1] The appellants appeal from the judgment in favour of their former solicitors, the respondent law firm, Aird & Berlis, and from the dismissal of their counterclaim for damages for professional negligence against them.

[2] For almost five years, Aird & Berlis was retained by the appellants to represent the appellant, Oravital Inc., in what the motion judge aptly described as "acrimonious and protracted" litigation commenced in June 2010 ("the Oravital action").

[3] After the appellants changed lawyers, Aird & Berlis commenced an action against the appellants to recover payment of its unpaid accounts in the amount of $182,569.63. The appellants counterclaimed for $1,000,000, alleging that Aird & Berlis was negligent in its carriage of its retainer. In particular, the appellants alleged that Aird & Berlis had failed to provide them with a meaningful assessment of the potential damages in the Oravital action, which would have allowed for an earlier conclusion of the litigation and avoided the incurrence of most of Aird & Berlis' billed fees and disbursements.

[4] Aird & Berlis successfully moved for summary judgment. The motion judge found that there was no causal link between Aird & Berlis' failure to obtain a formal damages assessment at an earlier stage and the continuation of the Oravital action by the appellants.

[5] We agree that the appeal should be allowed and that the judgment and dismissal of the counterclaim be set aside. As we are of the view that there are genuine issues requiring a trial, we will limit our reasons for allowing the appeal.

[6] In our view, the motion judge erred in law in finding that the appellants' principals as sophisticated business people were aware of the value of the damages and risks of litigation. This finding reflects a misapprehension of the solicitors' duty of care to advise the clients about the legal basis for the damages and the risks of litigation.

[7] We are also of the view that the motion judge erred in determining the claim and the counterclaim on a motion for summary judgment. In particular, the motion judge's disposition of the issue of causation was not open to her to make on the record before her. Her findings concerning the appellants' dominant purpose for carrying on the litigation and the assessment of their damages claim were not available on this record, even under the court's enhanced powers pursuant to r. 20.04(2.1) of the Rules of Civil Procedure, given the highly contentious inconsistencies about these issues that required a trial to resolve.

[8] To be fair to the motion judge, the parties took the position that the issues in the action and the counterclaim could be resolved on a motion for summary judgment. They were mistaken.

[9] Accordingly, we allow the appeal, set aside the judgment and dismissal of the counterclaim, and remit the claim and counterclaim to trial.

[10] As agreed, the appellants are entitled to their partial indemnity costs in the amount of $22,500, inclusive of disbursements and applicable taxes.

C.W. Hourigan J.A.

L.B. Roberts J.A.

I.V.B. Nordheimer J.A.