SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: CV-04-265351
DATE: 2013/02/20

RE: Kerr v. CIBC World Markets Inc. et al. and Transamerica Life Insurance Company of Canada

BEFORE: MASTER GRAHAM

HEARD: February 15, 2013

COUNSEL:
M. Polley and J. Haylock for the plaintiff
B. Radnoff for solicitor D. Evans
C. Donovan and S. Dewart for solicitor J. Ormston

ENDORSEMENT

(Motion by the plaintiff for payment of costs by solicitors personally)

[1] On July 5, 2012, I dismissed the plaintiff’s motion to restore this action to the trial list and also dismissed the action. My reasons on that motion are reported at [2012] O.J. No. 3306. The plaintiff now moves for orders as follows:

1. Requiring the solicitors who acted for her to reimburse the fees that she paid to them.

2. Requiring her former solicitor Mr. Ormston to reimburse to her the costs of $4,000.00 awarded on the adjournment of the plaintiff’s motion on January 14, 2011 and the costs of $9,000.00 awarded in respect of the defendants’ motions to dismiss the action.

3. Requiring both former solicitors to pay the costs totaling $85,000.00 that the plaintiff negotiated and agreed to as the costs of the dismissal of the action.

[2] Rule 57.07 provides the court with jurisdiction to award costs against a solicitor personally:

57.07(1) Where a lawyer for a party has caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default, the court may make an order,

(a) disallowing costs between the lawyer and client or directing the lawyer to repay to the client money paid on account of costs;

(b) directing the lawyer to reimburse the client for any costs that the client has been ordered to pay to any other party; and

(c) requiring the lawyer personally to pay the costs of any party.

(2) An order under subrule (1) may be made by the court on its own initiative or on the motion of any party to the proceeding, but no such order shall be made unless the lawyer is given a reasonable opportunity to make representations to the court.

(3) The court may direct that notice of an order against a lawyer under subrule (1) be given to the client in the manner specified in the order.

[3] As required by rule 57.07(2), the lawyers responding to the motion have been given a reasonable opportunity to make submissions.

[4] The plaintiff and both solicitors have included in their material the case of Galganov v. Russell(Township), 2012 ONCA 410, [2012] O.J. No. 2679 (C.A.), which sets out the principles applicable to a motion for costs against a lawyer personally, as follows:

1. The basic principle on which costs are awarded is as compensation for the successful party, not in order to punish a barrister. (See: Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3 at pp. 135-136)

2. ... [C]ourts must be extremely cautious in awarding costs personally against a lawyer, given the duties upon a lawyer to guard confidentiality of instructions and to bring forward with courage even unpopular causes. A lawyer should not be placed in a situation where his or her fear of an adverse order of costs may conflict with these fundamental duties of his or her calling. (See: Young, supra)

3. The first step [in determining the liability of a lawyer for costs under rule 57.07(1)] is to inquire whether the lawyer's conduct falls within rule 57.07(1) in the sense that it caused costs to be incurred unnecessarily. Rule 57.07(1) refers specifically to conduct that "caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default". The court in Marchand held that mere negligence can attract costs consequences in addition to actions or omissions which fall short of negligence. The court confirmed that "bad faith" is not a requirement for imposing the costs consequences of rule 57.07(1) and concluded, at para. 122, that "[i]t is only when a lawyer pursues a goal which is clearly unattainable or is clearly derelict in his or her duties as an officer of the court that resort should be had to [r]. 57.07." (See: Galganov, supra at paragraph 18 and Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham (1998), 16 C.P.C. (4th) 201(Ont. Gen. Div.))

4. The second step is to consider, as a matter of discretion and applying the extreme caution principle enunciated in Young, whether, in the circumstances, the imposition of costs against the lawyer personally is warranted. The "extreme caution" principle, as stated in Young, means that "these awards must only be made sparingly, with care and discretion, only in clear cases, and not simply because the conduct of a lawyer may appear to fall within the circumstances described in [r]ule 57.07(1)": Carleton v. Beaverton Hotel (2009), 2009 92124 (ON SCDC), 96 O.R. (3d) 391 (Div. Ct.) at para. 15.

5. The legal test under rule 57.07(1) is not concerned with a lawyer’s professional conduct generally, but whether such conduct, including the conduct of the litigation, caused unreasonable costs to be incurred. (See: Carleton at para 18)

[5] In an affidavit sworn January 12, 2011, the responding solicitor Ms. Evans deposed that the failure of the plaintiff to provide answers to the undertakings was caused solely by her actions (paragraph 14). In addition, Ms. Evans deposed (paragraph 19): “I have no explanation as to why I did not follow up with providing the answers to the undertakings and refusals, why it took me so long to follow-up with the court with respect to the trial date and why I did not respond to the defendants’ correspondence dated January 19, 2010 enclosing an offer to settle.”

[6] In his affidavit sworn January 8, 2013, the responding solicitor Mr. Ormston deposed (paragraph 7) that following the cross-examination of Ms. Evans on her affidavit on April 7, 2011, “I took no steps to attend to reschedule the motion, and I allowed the matter to languish. The resulting delay contributed to the ultimate dismissal of the action when the defendants brought the matter back before the court.”

[7] In addition, in his letter to the plaintiff of November 13, 2012, which he refers to in his affidavit, Mr. Ormston states:

“I hereby acknowledge that I failed to act as diligently and aggressively as I could to get your case restored to the trial list from the time when I became your solicitor on November 15, 2010 until June 22, 2012 when the Master heard your motion. I have no reasonable explanation as to why I did not diligently initiate the necessary actions on your behalf to get your case back on the Trial List.”

[8] In his letter to the plaintiff of November 14, 2012, Mr. Ormston, in referring to the 14 month delay between the cross-examination of Ms. Evans in April, 2011 and the hearing of the defendants’ motion in June, 2012, states: “This delay was inexcusable and as set out above, I have no reasonable explanation for why I did not follow through on your instructions.”

[9] In his affidavit, Mr. Ormston explains that the delay for which he was responsible was caused by serious difficulties in his personal life, but acknowledges that this explanation does not excuse his failure to attend to his professional obligations.

[10] The plaintiff has commenced a negligence action against both of her former solicitors in which her allegations include that the dismissal of her action was the result of their inexcusable delay.

[11] The position of the plaintiff on this motion is that, given the admissions of both of her former lawyers that they were responsible for the periods of unexplained and inexcusable delay during their respective retainers, which delays resulted in the dismissal of the action, this is a clear case for the relief provided in rule 57.07(1), which is available in cases of “undue delay, negligence or other default”.

[12] Applying the three possible headings of relief, the plaintiff submits that first, the lawyers should repay the amounts that the plaintiff has paid them on account of costs, meaning their fees (rule 57.07(1)(a)). Second, Mr. Ormston should reimburse the plaintiff for the costs totaling $13,000.00 ($4,000.00 + $9,000.00) that she has been ordered to pay to the defendants (rule 57.07(1)(b)) pursuant to my orders made on the motions. Third, the lawyers should pay personally the defendants’ costs of the dismissal of the action, totaling $85,000.00 (rule 57.07(1)(c)).

[13] The solicitors submit that the issue of whether they were negligent and the consequences of any such negligence should be resolved in the solicitors’ negligence action. In that action, the issues of whether, if not for the dismissal of the action, the plaintiff would have recovered damages against the defendants CIBC World Markets and Transamerica, and the apportionment of any damages as between the two solicitors, can be resolved on the basis of full production, discovery and expert evidence.

[14] The solicitors rely on Attis v. Ontario, 2011 ONCA 675 and Harley v. McDonald, [2001] UK PC 18.

[15] In Attis, the applicant, whose solicitors were ordered at first instance to pay the defendant’s costs personally, had commenced civil proceedings against her solicitors. The Court of Appeal, in overturning the lower court’s ruling, referred to s. 138 of the Courts of Justice Act:

138. As far as possible, multiplicity of legal proceedings shall be avoided.

[16] The Court of Appeal then concluded as follows (paragraph 24):

“24 The motions judge, being aware of the late Ms. Attis’ civil proceeding and given the almost identical relief sought, should have directed the action to proceed which would have engaged all the usual pre-trial mechanisms. The rather unconventional approach taken by the motions judge, in the face of an existing civil action, was one that ought to have been avoided.”

[17] In Harley, supra, the Judicial Committee of the Privy Council considered the issue of when the court may make a costs order against a lawyer and stated as follows (paragraph 50):

“50 As a general rule allegations of breach of duty relating to the conduct of the case by a barrister or solicitor with a view to the making of a costs order should be confined strictly to questions which are apt for summary disposal by the court. Failures to appear, conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of a hearing by gross repetition or extreme slowness in the presentation of evidence or argument are typical examples. The factual basis for the exercise of the jurisdiction in such circumstances is likely to be found in facts which are within judicial knowledge because the relevant events took place in court or are facts that can easily be verified. . . . ”

[18] The court then discussed the circumstances in which a costs order may not be appropriate. In the case of serious breaches of the lawyer’s duty to the court, which may involve allegations of professional misconduct, the court commented that it is not appropriate for the court to rule upon whether there has been a breach of the rules of professional conduct, which would normally be a matter for a disciplinary proceeding. Where there is an issue of whether the lawyer may be liable to the client in negligence, the court stated (paragraph 51):

“51 . . . Nor is it appropriate for the court in exercising its summary jurisdiction to make a costs order to say whether the client has a cause of action against his barrister or solicitor for negligence. This is a matter which ought to be dealt with in separate proceedings, in which the issues of fact and law between the client and the practitioner are clearly focused and the practitioner is given a full and fair opportunity to respond to the client’s claim.”

[19] The issues of negligence and delay on this costs motion do overlap with the issues in the solicitors’ negligence action, and could be resolved in that action. However, the plaintiff is currently facing further costs awards of $60,000.00 to Transamerica and $25,000.00 to the CIBC defendants both payable within 30 days of the resolution or abandonment of a motion to set aside or an appeal of my July 5, 2012 order. So, if I rule as advocated by the solicitors, and defer all issues before me to be determined in the negligence action, the plaintiff, who on the evidence before me was not well-served by her lawyers, will have to pay the defendants’ costs of the action totaling $85,000.00, in the event that her appeal of my dismissal of the action is not successful.

[20] As summarized in paragraph 30 of my Reasons for Decision of July 5, 2012, I dismissed the action primarily on the basis of delay for which the plaintiff’s former lawyers now take full responsibility. Nonetheless, the solicitors are now essentially saying to their former client: “We know that we did not do what we were supposed to do but you should still have to fund the additional costs resulting from our delay and then pursue us for those costs in your negligence action.”

[21] The problem with the solicitors’ position is that although they can argue about whether the plaintiff would have recovered anything even if the action had not been dismissed as a consequence of their delay (i.e. the issue of causation), which could influence whether they have to refund their fees, it does not address the unfairness of the plaintiff having to pay the costs directly related to her lawyers’ acknowledged delay.

[22] The question is whether this court should determine whether the solicitors should pay or refund the costs paid or payable by the plaintiff to the defendants or whether that issue should be resolved in the negligence action. Rule 57.07(1) gives the court jurisdiction to grant relief to the plaintiff arising out of her lawyers’ “undue delay”. Because the evidence in this case of both the lawyers’ delay and the relationship between the delay and the costs consequences to the plaintiff are so clear, this is one of the rare instances in which the court should order that the lawyers pay those costs on a motion. The clear and unequivocal nature of the evidence makes such an order consistent with the “extreme caution” principle stated in Young v. Young, supra.

[23] Accordingly, the solicitors shall pay the defendants’ costs of the action as awarded on consent in my endorsements of January 16, 2013, in the event that those costs become payable. Because, on the evidence before me, both lawyers materially contributed to the delay, they shall pay those costs of $85,000.00 in equal shares of $42,500.00 in the event that they do become payable, subject to reapportionment in the solicitors’ negligence action.

[24] Because the costs of the dismissal motion of $9,000.00 also flow from delay for which both lawyers are responsible, Mr. Ormston and Ms. Evans shall each refund to the plaintiff the sum of $4,500.00, payable within 30 days, with this amount also subject to reapportionment in the solicitors’ negligence action.

[25] The costs of $4,000.00 awarded to the defendants on the adjournment of January 14, 2011 were taken into account by Mr. Ormston in the discount applied to his fees in his account of February 16, 2011 and I make no order in respect of those costs.

[26] As stated above, because there are issues of causation to be resolved in the negligence action that are not so inextricably linked to the solicitors’ delay, I decline to order that the fees paid to the lawyers be refunded. The issue of the possible reimbursement of those fees shall be resolved in the negligence action.

[27] These rulings do not constitute a finding of negligence on the solicitors. Rather, they are based on the finding in my reasons of July 5, 2012 that the plaintiff or her solicitors were responsible for the undue delay that resulted in the dismissal of the action and the related costs awards, combined with the solicitors’ subsequent admission of responsibility for the delay.

Costs of this motion

[28] At the conclusion of the hearing, I received costs outlines from counsel for the plaintiff and for the solicitor Ms. Evans. Counsel for Mr. Ormston stated that he would not seek costs of this motion even if successful so he did not submit a costs outline. Counsel informed me that they wished to make costs submissions following my decision on the motion. Accordingly, if the parties cannot agree to the disposition of the costs of this motion, they shall provide costs submissions in writing, the plaintiff within 30 days and each of the solicitors within 15 days thereafter.

MASTER GRAHAM

DATE: February 20, 2013