Haider Humza Inc. et al. v. Rafiq et al.

[Indexed as: Haider Humza Inc. v. Rafiq]

Ontario Reports

Ontario Superior Court of Justice,

Morgan J.

May 30, 2013

116 O.R. (3d) 73 | 2013 ONSC 3161

Case Summary

Civil procedure — Costs — Costs against solicitor personally — Master awarding costs against solicitor personally on ground that solicitor engaged in sharp practice contrary to rule 6.03(3) of Rules of Professional Conduct — Solicitor granted leave to appeal — Master exceeding his jurisdiction in making actual finding under Rules of Professional Conduct.

In making an order of costs against a solicitor personally, the master made an actual finding that the solicitor had engaged in sharp practice contrary to rule 6.03(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The solicitor applied for leave to appeal the costs order.

Held, the application should be allowed.

While the master was entitled to examine the solicitor's conduct in a motion for costs personally against the solicitor, making an actual finding under the Rules of Professional Conduct was beyond the master's jurisdiction. Moreover, in the context of the argument over costs, the defendants did not prove their case against the solicitor with viva voce evidence and witnesses subject to cross-examination in the same way that discipline counsel would be required to do at a Law Society discipline hearing, and the solicitor did not muster the kind of defence that would have been available to him at a discipline hearing. It would be unfair, in the circumstances, to pin the solicitor with the stigma of having been determined to have breached the Rules of Professional Conduct.

Garten v. Kruk, 2009 58071 (ON SCDC), [2009] O.J. No. 4438, 257 O.A.C. 59 (Div. Ct.), consd

Other cases referred to

Barker v. Hayes, [2007] B.C.J. No. 136, 2007 BCCA 51, 235 B.C.A.C. 266, 64 B.C.L.R. (4th) 90, 155 A.C.W.S. (3d) 19; Black v. Law Society of Alberta, 1989 132 (SCC), [1989] 1 S.C.R. 591, [1989] S.C.J. No. 27, 58 D.L.R. (4th) 317, 93 N.R. 266, [1989] 4 W.W.R. 1, J.E. 89-647, 66 Alta. L.R. (2d) 97, 96 A.R. 352, 37 Admin. L.R. 161, 38 C.R.R. 193, 15 A.C.W.S. (3d) 41; Canada 3000 Inc. (Re) (2004), 2004 32169 (ON CA), 69 O.R. (3d) 1, [2004] O.J. No. 141, 235 D.L.R. (4th) 618, 183 O.A.C. 201, 3 C.B.R. (5th) 207, 128 A.C.W.S. (3d) 869 (C.A.); Haider Humza Inc. v. Rafiq, [2012] O.J. No. 5099, 2012 ONSC 6161 (S.C.J.); Haider Humza Inc. v. Rafiq, [2012] O.J. No. 1739, 2012 ONSC 1796 (S.C.J.); Johal v. Virdi, [2011] B.C.J. No. 1975, 2011 BCCA 412, 312 B.C.A.C. 5, 14 C.P.C. (7th) 1; Law Society of Upper Canada v. French, 1974 24 (SCC), [1975] 2 S.C.R. 767, [1974] S.C.J. No. 125, 49 D.L.R. (3d) 1, 3 N.R. 410; Law Society of Upper Canada v. Neinstein (2010), 99 O.R. (3d) 1, [2010] O.J. No. 1046, 2010 ONCA 193, 317 D.L.R. (4th) 419, 259 O.A.C. 313, 1 Admin. L.R. (5th) 1, 186 A.C.W.S. (3d) 836; McNaughton Automotive Ltd. v. Co-operators General Insurance Co. (2008), 95 O.R. (3d) 365, [2008] O.J. No. 5040, 2008 ONCA 597, 62 C.P.C. (6th) 196, 298 D.L.R. (4th) 86, 250 O.A.C. 352 ; Shairp v. M.N.R., 1988 9436 (FCA), [1988] F.C.J. No. 923, [1989] 1 F.C. 562, 26 F.T.R. 80, 93 N.R. 396, [1988] 2 C.T.C. 344, 88 D.T.C. 6484, 12 A.C.W.S. (3d) 224 (C.A.); Thanni v. Canada (Minister of Citizenship and Immigration), [2001] F.C.J. No. 582, 2001 FCT 353, 203 F.T.R. 117, 108 A.C.W.S. (3d) 879 (T.D.)

Statutes referred to

Canadian Charter of Rights and Freedoms

Courts of Justice Act, R.S.O. 1990, c. C.43, s. 133(b)

Law Society Act, R.S.O. 1990, c. L.8 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 57.07(2)

Authorities referred to

Law Society of Upper Canada, By-law 11

Law Society of Upper Canada, Rules of Professional Conduct

APPLICATION for leave to appeal a costs order.

Murray Teitel (former counsel for the plaintiffs), in person.

Aswani K. Datt, for defendant, Mohammed Rafiq a.k.a. Mohammad Rafiq, a.k.a. Muhammad Rafiq.

[1] Endorsement of MORGAN J.: — Murry Teitel, former counsel for the plaintiffs in this action, seeks leave to appeal the order of Master Dash dated October 30, 2012 [ [2012] O.J. No. 5099, 2012 ONSC 6161 (S.C.J.)], in which the learned Master ordered Mr. Teitel to personally pay $3,000 to Aswani K. Datt, counsel for the defendant Mohammad Rafiq. The plaintiffs themselves take no position in this motion.

[2] Section 133(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43 provides that "[n]o appeal lies without leave of the court to which the appeal is to be taken . . . where the appeal is only as to costs that are in the discretion of the court that made the order for costs". In my view, there are legal questions here that deserve an appellate court's attention.

[3] Mr. Datt, on behalf of Mr. Rafiq, submits that s. 133(b) confers an important gatekeeping function on the court. In applying this provision, the Court of Appeal has stated that, "[l]eave to appeal a costs order will not be granted save in obvious cases where the party seeking leave convinces the court that there are 'strong grounds upon which the appellate court could find that the judge erred in exercising his discretion'": McNaughton Automotive Ltd. v. Co-operators General Insurance Co. (2008), 2008 ONCA 597, 95 O.R. (3d) 365, [2008] O.J. No. 5040 (C.A.), at para. 24.

[4] I recognize that costs orders are discretionary and that appellate courts are loathe to set them aside: Canada 3000 Inc. (Re) (2004), 2004 32169 (ON CA), 69 O.R. (3d) 1, [2004] O.J. No. 141 (C.A.), at para. 216. To put it as the British Columbia Court of Appeal did under that province's similar rule for leave to appeal a costs order, "[a] trial judge has a broad discretion with respect to cost awards and an appellate court will not interfere with the exercise of that discretion short of misdirection on a matter of legal principle or a decision so clearly wrong as to amount to an injustice": Johal v. Virdi, 2011 BCCA 412, at para. 2.

[5] The central point in Master Dash's ruling is his finding, at para. 21 of his October 30, 2012 endorsement, that Mr. Teitel engaged in "sharp practice" contrary to rule 6.03(3) of the Law Society's Rules of Professional Conduct. As the Court of Appeal pointed out in Law Society of Upper Canada v. Neinstein (2010), 99 O.R. (3d) 1, [2010] O.J. No. 1046, 2010 ONCA 193, at para. 60, "[a] finding of professional misconduct against a lawyer obviously has important significance for that lawyer". The point of principle raised by the present motion goes well beyond the $3,000 in costs that is otherwise at stake.

[6] I pause here to note that the learned Master did not simply state that there are facts in the record that suggested a lack of professional ethics on Mr. Teitel's part. He went so far as to make a determination under the Rules of Professional Conduct. At para. 19 of his endorsement, Master Dash set out the precise terms of rule 6.03(3), and at paras. 20 and 21 he methodically applied the rule to the facts as he saw them. Finally, in the conclusion of para. 21 of his endorsement, the Master held that, "in lulling Mr. Datt into a false sense of security and failing to warn, he [i.e., Mr. Teitel] has engaged in sharp practice".

[7] In coming to this conclusion, Master Dash relied on the Divisional Court's judgment in Garten v. Kruk, 2009 58071 (ON SCDC), [2009] O.J. No. 4438, 257 O.A.C. 59 (Div. Ct.). In that case, the defendant appealed a Master's order refusing to set aside a noting in default where plaintiff's counsel had not warned defendant's counsel that he was about to do that. Wilson J. indicated, in one sentence and as one of her reasons for reversing the Master's order, that the Master's refusal to grant relief to the defendant "reinforces sharp practice": Garten, at para. 14.

[8] This turn of phrase does not support the type of analysis engaged in or the conclusion reached by Master Dash. It is one thing to use a phrase such as "sharp practice" in the legitimate way it was used by Wilson J. in Garten -- i.e., as shorthand for an aggressive tactic that is disapproved by the courts. It is another thing for a Master, sitting in motions court and writing an endorsement on a question of costs, to cite a specific provision of the Rules of Professional Conduct, to analyze a solicitor's conduct in reference to the terms of that rule, and to make a specific finding that the solicitor has breached the rule.

[9] Under the Law Society Act, R.S.O. 1990, c. L.8 and By-law 11 (2007) of the Law Society of Upper Canada, it is a hearing panel constituted by the Law Society that has jurisdiction to make a determination that a solicitor has breached the Rules of Professional Conduct. The hearing to be conducted in order to arrive at that determination would engage the Law Society's discipline counsel as prosecutor, and would be a regulatory hearing to which many of the protections contained in the Canadian Charter of Rights and Freedoms would apply: Black v. Law Society of Alberta, 1989 132 (SCC), [1989] 1 S.C.R. 591, [1989] S.C.J. No. 27.

[10] In the context of an argument over costs, Mr. Rafiq and Mr. Datt did not prove their case against Mr. Teitel with viva voce evidence and witnesses subject to cross-examination the way that discipline counsel would be required to do at a Law Society hearing. Certainly, Mr. Teitel did not muster the kind of defence that would have been available to him at a Law Society discipline hearing. Indeed, the fact that a relatively small amount of money was at stake in the costs award adds to the sense that it was not defended by Mr. Teitel in the way that a charge of professional misconduct by the Law Society doubtless would be defended.

[11] A costs award reflects an exercise of discretion by a judge or master; a finding of professional misconduct by a Law Society hearing panel is not discretionary and requires full natural justice: Law Society of Upper Canada v. French, 1974 24 (SCC), [1975] 2 S.C.R. 767, [1974] S.C.J. No. 125. While Master Dash was entitled to examine Mr. Teitel's conduct in a motion under Rule 57.07(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for costs personally against the solicitor, making an actual finding under the Rules of Professional Conduct was beyond the Master's jurisdiction.

[12] I am particularly concerned about this in the present circumstances, as the record before me shows that the litigation between the parties has already spawned at least one complaint to the Law Society. The defendant Saida Banu Rafiq, who is separately represented in these proceedings but who is the spouse of Mr. Datt's client Mr. Rafiq, filed a complaint of professional misconduct against Mr. Teitel on November 24, 2010. In that complaint she alleged that Mr. Teitel lied to the court during the course of the civil proceedings. In his affidavit of September 28, 2012, Mr. Teitel deposed that the Law Society has dismissed Ms. Rafiq's complaint.

[13] Given this history, it is particularly unfair to Mr. Teitel to have a question of his adherence to the Rules of Professional Conduct seemingly judged in the context of a costs motion before a Master. If there are to be any further complaints of professional misconduct against Mr. Teitel, he will be entitled, as is any solicitor, to a proper investigation and determination by the Law Society's Proceedings Authorization Committee and a hearing before a panel of benchers. There he can retain counsel if he wishes, call his own witnesses and cross-examine adverse witness, and generally defend himself in a way that is authorized under the Law Society Act and applicable by-laws and procedures. Master Dash's conclusion about "sharp practice" contained in his endorsement of October 30, 2012, should not be referenced in any subsequent Law Society proceeding in a way that pre-judges or otherwise prejudices Mr. Teitel.

[14] I also have cause to be concerned about the fact finding exercise leading up to this extra-jurisdictional conclusion. The "sharp practice" to which Master Dash refers is, in essence, the failure by Mr. Teitel to advise Mr. Datt that the costs ordered to be paid by Mr. Teitel's client in a previous motion on April 23, 2012 [[2012] O.J. No. 1739, 2012 ONSC 1796 (S.C.J.)] would not be paid directly to Mr. Rafiq, but rather that Mr. Teitel was arranging for those costs to be paid to the Ministry of Revenue under a garnishment order (the Ministry being a judgment creditor of Mr. Rafiq's).

[15] The most egregious thing about this failure to warn Mr. Datt about the garnishment is that a portion of the costs ordered payable to Mr. Datt's client on April 23 were, in fact, supposed to be payable to Mr. Datt on his own account. In the motion leading to the April 23 endorsement, Mr. Teitel sought to examine Mr. Datt, and so Mr. Datt not only had to defend his client but had to retain counsel to defend himself. A lawyer does not typically warn his client's creditor of his client's intention to pay moneys to another creditor under a garnishment order; but a lawyer should certainly advise the creditor's lawyer if some of what are arguably the creditor's lawyer's own funds are to be paid to the client's judgment creditor.

[16] Mr. Teitel deposed in his affidavit, and submitted to Master Dash as well as to me, that in dealing with the Ministry of Revenue garnishment he was unaware that a portion of the April 23 costs belonged to Mr. Datt rather than to Mr. Rafiq.

[17] The fact that some of the costs were payable on Mr. Datt's account had been left out of the formal court order that the solicitors took out following the April 23, 2012 motion. The reason for that mistake was that Master Dash had left Mr. Datt out of the conclusion of the costs portion of his April 23 endorsement; and the reason for that omission, in turn, was that Mr. Datt had submitted a bill of costs that combined his own costs and those of his client in an intertwined way. It was therefore only possible to discern that a portion of the costs were supposed to be on Mr. Datt's account by reading all the way through Master Dash's 14-page endorsement of April 23, 2012.

[18] Master Dash's April 23 endorsement [[2012] O.J. No. 1739, 2012 ONSC 1796 (S.C.J.)] was very critical of Mr. Teitel. It accused Mr. Teitel of approaching the current litigation with "scorched earth" tactics. When the next motion in this matter came before Master Dash on September 13, 2012, Mr. Teitel deposed in his affidavit that he was so upset by Master Dash's April 23 ruling that he stopped reading when he was midway through it. For that reason, he explained, he was unaware that a portion of the costs should have been earmarked for Mr. Datt. He had looked at the disposition at the end of the endorsement, and at the formal order drafted by Mr. Datt, and saw that both Master Dash and Mr. Datt appeared to think that the costs were payable only to Mr. Rafiq as defendant.

[19] During the course of the September 13 hearing, Mr. Teitel went through all of this with Master Dash. The transcript of the proceedings of that date, which were filed in the motion before me, show that Mr. Teitel not only reiterated that he was unaware that the costs order should have been apportioned between Mr. Dash and Mr. Rafiq, but that Master Dash appeared to agree with him. The following exchange appears at p. 48, lines 6-19 of the September 13, 2012 transcript:

[Mr. TEITEL]: My counter to that is that I did not -- I read the end, I did read the breakdown. I had no knowledge whatsoever that Ms. Diaz [i.e., Mr. Datt's personal counsel at the prior motion] was entitled, that some of that was going to him. Therefore, I did not do anything improperly. Yes, maybe I should have read the whole order; maybe I should have remembered, whatever, But, I had no knowledge that any of that -- that the order should not have been the way you wrote it.

THE COURT: I can totally accept that.

[20] At p. 55, lines 3-8 of the same transcript, Master Dash reiterated the point:

THE COURT: No. I thoroughly believe that you had absolutely no knowledge that Mr. Datt was seeking the costs for himself.

[21] Despite these comments during the hearing, and the uncontroverted evidence of Mr. Teitel that he did not know that the costs were partly for Mr. Datt, Master Dash came to the opposite conclusion in his October 30, 2012 endorsement.

[22] At para. 18, the Master reasoned that if Mr. Datt had been warned of the garnishment in favour of the Ministry of Revenue, he could have "requested an amendment of [the] cost decision". Immediately after this statement, at para. 19 of his endorsement, Master Dash launched into rule 6.03(3) of the Rules of Professional Conduct and continued his analysis of "sharp practice" through para. 20. Then, at para. 21, he put it all together and found Mr. Teitel guilty of intentionally taking advantage of the mistake in the April 23 costs order.

[23] The question of whether Mr. Teitel's silence regarding Mr. Datt's costs was done knowingly, or was a result of Master Dash's own mistake in omitting Mr. Datt's costs from the conclusion of his April 23 endorsement, goes to the heart of the decision in issue here. In argument before me, Mr. Teitel put the point rather philosophically. As he explained it, the Master "cannot say that he [i.e., Mr. Teitel] was unaware of the mistake and that he took advantage of the mistake. This violates Aristotle's view of the mistaken middle." It is a narrative that cannot hold together as a logical whole.

[24] Mr. Teitel went on to characterize Master Dash's statements during the court hearing as "findings of fact" that ran counter to those that ultimately appeared in his endorsement. In my view, this takes the point too far. It is clear that "a judge of a court of record can only dispose finally, on behalf of the court, of a matter he has been seized of by filing and entering a written decision": Shairp v. M.N.R., 1988 9436 (FCA), [1988] F.C.J. No. 923, [1988] 2 C.T.C. 344 (C.A.), at para. 7.

[25] While it is the case that a judge's written reasons for judgment must accord with his or her oral reasons previously delivered, Thanni v. Canada (Minister of Citizenship and Immigration), 2001 FCT 353, [2001] F.C.J. No. 582, 203 F.T.R. 117 (T.D.), at para. 12, the discussions between a judge and counsel during the course of argument are not in the same category. A judge is not estopped from reaching a conclusion by virtue of his seemingly contrary comments from the bench during the hearing.

[26] That said, in the face of the comments by Master Dash, it is understandable that Mr. Teitel was not prepared to answer for his own professional conduct when the hearing on costs returned the following month. He arrived at the next hearing thinking that Master Dash had already put to rest the question of his intentional failure to warn. This only adds to the unfairness of pinning Mr. Teitel with the stigma of having been determined to have breached the Rules of Professional Conduct.

[27] I note here that Master Dash appears to have been very conscious of the import of his professionalism analysis. At the September 13, 2012 hearing, he went out of his way to tell Mr. Teitel that the "sharp practice" question was to be taken as an actual assessment of his adherence to the Law Society's Rules, and that it would have serious consequences for Mr. Teitel. At pp. 56-57, lines 30-34 of the September 13 transcript, the Master advised Mr. Teitel of this:

And, if I'm going to make a finding that you've engaged in sharp practice, I should give you the opportunity. In fact, it would be prudent for you to have counsel here to dissuade me of that.

[28] As it turned out, Mr. Teitel did not retain his own counsel, presumably because he believed that the question of his own intentional conduct had been resolved in his favour. Again, I emphasize this not because Master Dash wasn't entitled to change his mind between the hearing and the writing of his endorsement; he was. I emphasize it to stress the seriousness with which the Master took his finding of a breach of the Rules of Professional Conduct -- it was an actual finding and not just a passing reference or a way of characterizing the facts -- and to highlight the problematic process that Mr. Teitel found himself confronting.

[29] In my view, Master Dash's venture into an area that is not in the Master's jurisdiction needs to be revisited by an appellate court given its centrality to his assessment of costs against Mr. Teitel. The British Columbia Court of Appeal has observed that "[t]he purpose of requiring leave to appeal is to weed out cases that do not warrant the time and attention of the Court": Barker v. Hayes, 2007 BCCA 51, [2007] B.C.J. No. 136, 64 B.C.L.R. (4th) 90 (C.A.), at para. 14. That statement, of course, is also true in the inverse; that is, another purpose of requiring leave to appeal is to identify those cases that appear to contain an error worthy of the time and attention of a court. In my view, this is one such case.

[30] Leave to appeal the order of Master Dash dated October 30, 2012 is hereby granted.

[31] This motion for leave to appeal was, in effect, precipitated by a three-way error on the part of Mr. Teitel, Master Dash and Mr. Datt in the reading, drafting and taking out the order for the April 23 endorsement. Given the way it arose, there will be no costs of this motion for or against any party.

Application allowed.

End of Document