DIVISIONAL COURT FILE NO.: 1381
Court File No: 00-GD-49851
DATE: Jan. 5, 2005
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
THEN, MATLOW, PIERCE JJ.
B E T W E E N:
D’AMORE CONSTRUCTION (WINDSOR) LIMITED,
Luigi DiPierdomenico, for the Plaintiff (Respondent)
Plaintiff (Respondent)
- and -
LAWYER’S PROFESSIONAL INDEMNITY COMPANY, BARTLET & RICHARDES, GERALD E. SKILLINGS, FRANK HIGHLEY, RICHARD M. McLAREN and GLEN J. COOPER,
Warren Mueller, Q.C. and Robert J. Reynolds, for the Defendants (Appellants LPIC and Highley)
Defendants (Appellants LPIC and Highley)
HEARD: November 18, 2004, at London, Ontario
PIERCE J:
Introduction
[1] What is the scope of a lawyer’s duty to another lawyer’s client when the lawyers discuss litigation strategy because their clients’ interests in a case are aligned?
[2] The defendant, Frank Highley, was sued for breach of contract, breach of fiduciary duty, and professional negligence, including negligent misrepresentation and conflict of interest, based on alleged discussions he had with the plaintiff’s lawyer concerning a priorities problem under the Personal Property Security Act.
[3] The defendant, Lawyer’s Professional Indemnity Company, (LPIC) was also sued on the basis that it was vicariously liable for Highley’s wrongful conduct. Both moved for summary judgment pursuant to rule 20.01 dismissing the action against them. Their motion was refused by Mr. Justice Abbey. Leave to appeal to the Divisional Court was granted by Mr. Justice Rogin.
[4] Mr. Justice Abbey concluded that while the interests of the plaintiff and the insurer were aligned during a priorities motion, LPIC’s counsel:
“must have had the plaintiff in contemplation and must be taken to have foreseen consequences to the plaintiff resulting from his advice.”
[5] Against that background, he determined that there was a genuine issue for trial. He dismissed LPIC’s motion on the basis that it was vicariously liable for Mr. Highley.
[6] At the conclusion of the hearing of the appeal, this court allowed the appeal and granted summary judgment in favour of the appellants, dismissing the action against them for reasons to be delivered. These are those reasons.
Background
[7] The plaintiff obtained a general security agreement to secure a debt of a certain company. About a week after registration, the debtor changed its corporate name. The security agreement was subsequently registered by the debtor’s solicitor, Skillings, pursuant to the Personal Property Security Act. At the request of the plaintiff, the debtor’s solicitor gave an opinion as to the effect of the agreement, and the prior registrations in respect of it. The name change was not referred to in his opinion letter.
[8] About a year and a half later, the debtor gave a further general security agreement to a bank. Searches by the bank did not reveal the prior registration by the plaintiff against the debtor’s former name and the bank advanced money on the strength of that search. In time, the debtor declared bankruptcy. That triggered a priorities issue between the plaintiff and the bank as to whose security should take precedence under the Personal Property Security Act. This was ultimately decided on motion before Mr. Justice Farley who ruled that the bank had priority on alternative bases that:
a) the joint and several obligation of the debtor company and its principal to the plaintiff did not entitle the plaintiff to be recognized as a secured creditor under the Bankruptcy Act; and
b) the plaintiff’s principal had constructive notice of the name change.
[9] The plaintiff subsequently sued the defendant, Skillings, and his law firm, in negligence, as well as LPIC and their counsel.
[10] The issue on this appeal relates to alleged misconduct by Highley, who was retained by LPIC to defend Skillings. Mr. Highley was considered to have expertise in commercial law. The plaintiff’s complaint concerns Highley’s conduct before the priorities motion.
[11] A solicitor named Beneteau represented the plaintiff at the time the priorities issue arose. Highley wrote to Beneteau to advise that he had been retained by LPIC to assist with the claim against Skillings. Beneteau, who was general counsel, did not wish to undertake the priorities motion and sought advice from Highley as to whom the plaintiff might retain to handle the motion.
[12] Highley recommended a lawyer named Cooper, who became the plaintiff’s solicitor of record on the priorities motion. Skillings reported to LPIC that if the plaintiff were unsuccessful on the priorities motion, a claim would lie against him. To this extent, the plaintiff and Skillings hoped for success on the motion. Their interests were aligned to that point.
[13] Mr. Cooper, on behalf of the plaintiff, decided not to file any affidavit material on the motion and not to cross-examine the bank’s deponent. The plaintiff claims this was at the urging of Highley. This decision was not an oversight, but a considered decision. Cooper wrote to Beneteau, saying:
“…I am extremely reluctant to either cross-examine on this material or more importantly to file any material in reply. I do not want to expose the client to cross-examination and permit the receiver to buttress a perhaps weak case by that means. I have given the matter a great deal of anxious consideration and want to discuss this decision with you before we go any further and to obtain firm instructions from the client. It seems to me that the real question is whether or not filing or cross-examining, as the case may be, will improve our case. I cannot see how that is likely to happen. However, I defer to you in that respect.”
“I have discussed this tactic at length with Mr. Frank Highley who in turn has had the benefit [of] input from Richard McLaren a sometime colleague of his, both in practice of law and in the Faculty of Law at UWO. Professor McLaren agrees that the provisions of section 30(6) dealing with the intervening security interest as against unperfected ones is not engaged because the security interest remained continuously perfected by virtue of the secured party’s lack of knowledge of the name change.”
[14] Mr. Highley did not take part in the priorities motion. He did, however, write to Mr. Cooper two days before the motion with the following disclaimer:
“I confirm that we have had several telephone conversations together concerning the legal position of D’Amore Construction (Windsor) Limited for whom I now understand you are acting as counsel relative to the priorities motion upcoming on October 22, 1999 in Toronto between D’Amore Construction and Hongkong Bank.
Notwithstanding our discussions, I confirm that all of our discussions were simply a mutual sharing of views, opinions and understanding of the law applicable with the view to ascertaining the position of D’Amore Construction.
I trust that it is understood between us that any comments offered by me with respect to the facts or the law applicable are offered without prejudice and are not to be relied upon by you in respect of any advice or commentary which you may give to your client D’Amore Construction, as counsel.”
[15] The motion judge accepted, for the sake of the argument, that Highley offered Cooper advice on the motion that contained a negligent misrepresentation.
The Argument
[16] The plaintiff claims that Mr.Highley acted in bad faith to manipulate information to the disadvantage of the plaintiff. He describes Highley’s conduct as deceitful or reckless. There is no evidence of this. This submission must fail.
[17] The plaintiff alleges that Highley knew or should have known that the interests of his client and the plaintiff would diverge, but acted in contravention of the Law Society’s Rules of Professional Conduct, which prohibit acting in circumstances of real or anticipated conflict of interest.
[18] This argument is not factually driven and is without merit. The plaintiff concedes it would have no complaint had it won the priorities motion. It is obvious that, even had Highley been retained by the plaintiff, the interests of Highley’s client and the plaintiff did not diverge until after the priorities motion. There is no complaint about Highley’s conduct after the motion. The plaintiff never retained Highley. Therefore, it cannot be said that Highley acted in conflict of interest.
[19] Even if this were not so, Mr. Justice Lane noted in Brignolio v. Desmarais, Keenan [1995] O.J. No. 3499 (Ont. Gen. Div.); appeal dismissed [1996] O.J. No. 4812 (Ont. C.A.) that breach of an ethical duty by counsel, in and of itself, cannot found a civil cause of action:
“There is no duty upon the defendant [solicitor] to, or in favour of, the plaintiff to act ethically. That is a duty which is owed to the court. As the duty is not to the plaintiff, he cannot bring an action based upon it. He may have other remedies, but they do not lie in the present action….”
[20] The court was of the same mind in Jensen et al. v. MacGregor et al. (1992) 1992 8550 (BC SC), 89 D.L.R. (4th) 68 (B.C.S.C.), observing at p. 72:
“Generally speaking, while a lawyer may owe an ethical duty to the court to be candid and fair, the only person to whom a lawyer owes an actionable duty is to his client.”
[21] The appellants submit there are four reasons why the motion judge’s decision cannot stand:
it is unreasonable and contrary to public policy to impose a duty of care on solicitors to non-clients arising from discussions about the case by the parties’ counsel, in circumstances where the clients’ interests are aligned, and particularly where the non-client has a remedy against his own lawyer;
the jurisprudence establishes there is no duty of care by a solicitor to non-clients whether or not the non-client’s interest is aligned with or divergent from that of the lawyer’s client;
there is a lack of proximity between the plaintiff and Highley to establish any reasonable perception of the plaintiff’s reliance on Highley; and
Highley’s written disclaimer of responsibility to Cooper.
Duty of Care
[22] The plaintiff does not allege that Highley was its lawyer. There was no contractual relationship. At best, the plaintiff says Highley had a fiduciary relationship to it because he was a consultant to the plaintiff’s lawyer.
[23] The plaintiff suggests that Highley, as a consultant to Cooper, offered him negligent advice on which Cooper and the plaintiff relied. Although Highley never met the plaintiff’s principal, never took instructions from him, and never reported to him, the plaintiff states that it was reasonably foreseeable that Highley’s discussions with Cooper would prompt the plaintiff to rely on Highley’s expertise. It is said this establishes the duty of care as set out in Hercules Management Ltd. v. Ernst & Young, 1997 345 (SCC), [1997] 2 S.C.R. 165; [1997] S.C.J. No. 51 (S.C.C.).
[24] In Hercules Management Ltd., supra, the court begins with the observation that the test for determining whether a duty of care exists in tort is found in Anns v Merton London Borough Council, [1978] A.C. 728 (H.L.) at pp. 751-52:
“First one has to ask whether, as between the alleged wrongdoer and the person who has suffered damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter – in which case a prima facie duty of care arises. Secondly, if the first question is answered affirmatively, it is necessary to consider whether there are any considerations which ought to negative, or to reduce or limit the scope of the duty or the class of person to whom it is owed or the damages to which a breach of it may give rise.”
[25] Mr. Justice La Forest set out two criteria, at paragraph 24, for the establishment of a proximate relationship: the defendant ought to reasonably foresee the plaintiff’s reliance on his representation, and that reliance ought to be reasonable.
[26] It must be remembered that the plaintiff also sued Skillings and Cooper for professional negligence. Only one of these lawyers was actually retained by the plaintiff. The liability of Mr. Highley must be assessed with a view to the remoteness of his relationship to the plaintiff compared to the other counsel. The court in Hercules noted, at paragraph 18 that if there is no duty of care then the question of reliance is inconsequential.
[27] Was it therefore reasonable that Highley would foresee that the plaintiff would rely on his representation? If so, was that reliance reasonable?
[28] This is not a case in which the plaintiff was unrepresented. It had general counsel, Beneteau, and Cooper for the motion. It must be presumed that they provided independent legal advice. Mr. Justice Lane, in Seaway Trust Co. v. Markle (1991) 7 C.C.L.T. (Ont. Gen. Div.) p. 83 at p. 89 approved of the following passage from the New Zealand Court of Appeal in Allied Finance & Investments Ltd. v. Haddow & Co.:
“…I agree with Prichard J. that the relationship between two solicitors acting for their respective clients does not normally of itself impose a duty of care on one solicitor to the client of the other. Normally, the relationship is not sufficiently proximate. Each solicitor is entitled to expect that the other party will look to his own solicitor for advice and protection….And even if prima facie there were sufficient proximity for a duty of care, the consideration that the other party has a solicitor to protect his interests would normally negative a duty….”
[29] The statement of claim does not allege that:
a) Highley owed a duty of care to the plaintiff;
b) The plaintiff relied on Highley’s advice to Cooper (in fact, the plaintiff’s claim denies knowing that Highley advised Cooper);
c) Highley should have known that the plaintiff would rely on Highley’s advice to Cooper; or
d) Highley acted as a solicitor for the plaintiff.
[30] Nor is there is any allegation in the statement of claim that the plaintiff was aware of any discussions between its counsel and Highley. Certainly Highley had no discussions or meetings with the plaintiff’s principal, or anyone else on behalf of his company. He did not advise or report to the plaintiff, take instructions from the plaintiff’s principal, communicate with it in any fashion, represent the plaintiff in court or to others, or bill it. These are the hallmarks of a traditional solicitor-client relationship. On the allegations pleaded here, the plaintiff was unaware of any advice. As a result, there could be no reliance.
[31] We do not accept that there was a proximate relationship between the plaintiff and Highley when the plaintiff was already represented by two counsel. In these circumstances, it would not be reasonable to expect Highley, who represented Skillings, to foresee the plaintiff’s reliance on his advice.
Policy Considerations
[32] The Supreme Court recognized in paragraph 20 in Hercules that policy considerations can negative a duty of care.
[33] Even if there had been a proximate relationship between Highley and the plaintiff, there are compelling policy reasons not to impose a duty of care on counsel when they discuss cases in which their clients share a common interest.
[34] These were alluded to in obiter by Taylor J.A. in Kamahap Enterprises Ltd. v. Chu’s Central Market Ltd. (1989) 1989 242 (BC CA), 64 D.L.R. (4th) 167 (B.C.C.A.) at p. 174:
“I find it unnecessary, and therefore inappropriate, to deal with this case as one in which a duty of care would prima facie be imposed, under the rule formulated in Anns, subject only to exceptions based on “policy” considerations.
Were I wrong in that regard, I would say that there clearly are policy considerations that would require that a lawyer engaged in such circumstances as these not be held to a duty of care to the party with whom his or her client deals in a commercial transaction….”
[35] In Hughes v. Sunbeam Corp. (Canada) Ltd. (2002) 2002 45051 (ON CA), 61 O.R. (3d) 433 (Ont. C.A.), the court discussed the proximity principle and residual policy concerns in relation to a claim against a tester of smoke detectors. The claim was dismissed on the basis that there was not a proximate relationship between the laboratory doing the testing and the ultimate purchaser. At par. 49, the court added:
“Finally, the manufacturers are better positioned to ensure the supply of safe products and provide a more efficient target for redress if their products prove to be unsafe. The law should not expand duties of care at the price of encouraging needless and expensive litigation.”
[36] Here, the policy issue was put succinctly by Mr. Justice Rogin in granting leave to appeal:
“Ultimately, any solicitor who seeks advice must be accountable to his/her own client, and must consider the advice given and make his (her) own decision.
There is a strong policy reason for holding that even in the face of negligent advice given to a solicitor for a different party that the final responsibility for that advice rest [sic] with the solicitor receiving it, rather than the solicitor giving it.”
[37] When a lawyer practices law, his or her duties and obligations to a client are the same, even though the abilities and experience of each lawyer may differ. That equality of obligation means that each lawyer is responsible to advise and protect his or her own client, and not to off-load that duty to another lawyer. As a general rule, it is only the lawyer retained who is privy to his client’s instructions, desires and motivations. That lawyer is in the best position to assess the strengths and weaknesses of the client’s case, and the evidence that may be brought to bear in the client’s cause. There must be no dilution of the lawyer’s responsibility to his own client by attributing professional liability more widely.
[38] It is commonly understood in the legal profession that a lawyer from whom advice is sought offers it as a professional courtesy. It is still the duty of the lawyer receiving that advice to analyze and consider it, based on his or her instructions, research, or other factors, in order to determine a course of action in a particular case.
[39] In practice, imposing professional liability on counsel for an exchange of views or advice where there is a common interest between their clients will have a chilling effect on such discussions among the Bar. It may have the immediate and unintended effect of discouraging any mentoring of junior lawyers by more experienced counsel. It may also limit professional development at the Bar by discouraging frank discussion among counsel with a view to learning the law or improving their skills. This would not be in the interests of the clients they serve, or in the interests of the administration of justice.
[40] The law is a vast study, not to be mastered in a lifetime. Even those who are learned in the law can learn from others. It is an ongoing discipline for the legal profession, one of its satisfying characteristics. Discussion among counsel is one of the means by which the law is learned. This sharing of ideas should not be discouraged by casting the net of professional liability so broadly.
[41] As the claim against Highley has no prospect of success at trial, there is no genuine issue relating to the suit against Highley that must be tried. It follows that the action against him must be dismissed.
[42] This plaintiff alleges that LPIC is vicariously liable for Highley. There is no other independent ground asserted for liability. Therefore, this action as against LPIC must also be dismissed.
Mr. Justice E. Then
Mr. Justice T. Matlow
Madam Justice H. Pierce
Released: January 5, 2005
DIVISIONAL COURT FILE NO.: 1381
Court File No: 00-GD-49851
DATE: January 5, 2005
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
D’AMORE CONSTRUCTION (WINDSOR) LIMITED,
Plaintiff (Respondent)
- and –
LAWYER’S PROFESSIONAL INDEMNITY COMPANY, BARTLET & RICHARDES, GERALD E. SKILLINGS, FRANK HIGHLEY, RICHARD M. McLAREN and GLEN J. COOPER,
Defendants (Appellants LPIC and Highley)
REASONS FOR JUDGMENT
Then, Matlow, Pierce JJ.
Released: January 5, 2005
/mls