SUPERIOR COURT OF JUSTICE – ONTARIO

DATE: October 25, 2013

LONDON COURT FILE NO.: 60153
CHATHAM COURT FILE NO.: 4860/10

RE: Lawrence Ramsden and 1358329 Ontario Inc., plaintiff (defendants by counterclaim)

AND:

Robert Van Alphen, Joanne Doris Van Alphen and 1732076 Ontario Limited, defendants (plaintiffs by counterclaim)

BEFORE: MITROW J.

COUNSEL:
Peter M. Callahan, agent for the plaintiffs (defendants by counterclaim), and also appearing personally and for RZCD Law Firm LLP

No one appearing for the defendants (plaintiffs by counterclaim)

Mr. Ian S. Wright for Scott, Petrie, Brander, Walters & Wright LLP, moving party

• AND -

COURT FILE NO.: 6074-12SR A1

RE: 1463096 Ontario Inc., plaintiff

AND:

Robert Van Alphen, Joanne Doris Van Alphen, 1358329 Ontario Inc., 1358329 Ontario Inc. carrying on business as Nu-Co, 1732076 Ontario Limited and 1173928 Ontario Inc., defendants

AND:

Lawrence Ramsden, third party

BEFORE: MITROW J.

COUNSEL:
Peter Callahan, agent for the third party, and also appearing personally and for RZCD Law Firm LLP

No one appearing for the defendants

Mr. Ian S. Wright for Scott, Petrie, Brander, Walters & Wright LLP, moving party

HEARD: October 2, 2013

ENDORSEMENT

INTRODUCTION

[1] The law firm of Scott, Petrie, Brander, Walters & Wright LLP (“Scott Petrie”) brings two motions in two actions seeking similar relief in both motions.

[2] In the action that was initially started in London and later transferred to Chatham (“the Chatham action”) the motion requests that Scott Petrie be removed as solicitors of record for the plaintiffs Lawrence Ramsden (“Ramsden”) and 1358329 Ontario Inc. (“135”).

[3] In the other action (“the London action”) the motion requests that Scott Petrie be removed a solicitors of record for Ramsden who is named as the third party in that action.

[4] Mr. Ian S. Wright (“Mr. Wright”), a partner of Scott Petrie, had carriage of both actions.

[5] Both motions also seek various orders that can be described as incidental to removing Scott Petrie as solicitors of record.

[6] Significantly however both motions seek costs personally against Mr. Peter M. Callahan (“Mr. Callahan”) of the RZCD Law Firm LLP. Scott Petrie alleges that Mr. Callahan assumed carriage of both actions in relation to Ramsden and 135 (specifically for Ramsden and 135 in the Chatham action, and for Ramsden in the London action), that Mr. Callahan gave an undertaking to Scott Petrie to file the necessary notices of change of lawyer in both actions and that Mr. Callahan failed to comply with his undertaking. Consequently Scott Petrie submits that Mr. Callahan’s conduct has needlessly caused Scott Petrie to have to bring two motions to be removed as solicitors of record, the costs of which Mr. Callahan should be ordered to pay personally pursuant to rule 57.07 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Scott Petrie has filed a costs outline (Exhibit 1) and submits in its outline that Mr. Callahan should pay “on a solicitor and client basis” costs in the amount of $4,395.45.

[7] Mr. Callahan submits that he never assumed carriage of the London action, and that he was prepared that to file the required notice of change in the Chatham action, but was not in a position to do so until he received some information that he had requested from Mr. Wright. Mr. Callahan submits that this is not a proper case to order him to pay costs.

[8] Mr. Callahan advised the court that he was appearing on the motions “as agent” for Ramsden and 135 for the purpose of advising the court that Ramsden and 135 have no objection to Scott Petrie being removed as solicitors of record in both actions. Mr. Callahan submits that the reason for his attendance personally in London (Mr. Callahan practices in Mississauga) was to defend the costs claim being made against him.

[9] During argument of the motions there was no real issue as to having Scott Petrie removed as solicitors of record in both actions and that is confirmed in the order below.

[10] The substantive live issue that was canvassed in the affidavit material and that was most prominent during argument, centred around Scott Petrie’s claim for costs against Mr. Callahan.

DID MR. CALLAHAN FAIL TO COMPLY WITH AN UNDERTAKING

[11] The starting point is Mr. Callahan’s letter to Scott Petrie dated May 17, 2013 acknowledging that Mr. Callahan has been retained by Ramsden and 135 in the Chatham action. This letter was accompanied by a direction signed by Ramsden to transfer the Chatham file. The letter from Mr. Callahan included a statement that a “Notice of Change of Representation” would be provided “once we have had a chance to gather the file materials and to conduct a preliminary review”.

[12] Mr. Wright on behalf of Scott Petrie, responded by letter dated May 21, 2013 that the documents of Ramsden and 135 are available for pickup on Mr. Callahan’s “personal undertaking” that within seven days after receipt of the file he would serve and file the required notices of change in the London and Chatham actions (and also a third action that was not included in the motions brought by Scott Petrie).

[13] On June 4, 2013 Mr. Callahan emailed Mr. Wright confirming that he will provide Mr. Wright “with the required notice to remove you as solicitor of record”. By way of context this email was a response by Mr. Callahan to an email forwarded earlier that day by Mr. Wright to Mr. Ramsden (his client), and copied to Mr. Callahan, requesting confirmation from the client that prior to the client picking up the materials that Mr. Callahan will provide in writing his undertaking that this firm will serve and file the “Notices of Change of Lawyers” within the next seven days.

[14] Mr. Wright, after receiving Mr. Callahan’s email, then emailed Mr. Ramsden the next day (copying Mr. Callahan) advising that nothing more was required from his client (other than payment of the account) because Mr. Callahan had given his undertaking to serve the necessary “Notices” within seven days.

[15] Very soon thereafter Mr. Wright’s accounts were paid and the files for all three actions were given to the client.

[16] At this point, it is apparent that Mr. Callahan and Mr. Wright were not “ad idem”. Respectfully, and as discussed below, both counsel must share the responsibility for what can be described as some confusion about what was being agreed to.

[17] Firstly, Mr. Callahan’s initial letter and direction were clear that Mr. Callahan was only assuming carriage of the Chatham action. There was no basis for Mr. Wright to request from Mr. Callahan undertakings for notices of change of lawyer in the London action (and also the third action that is not part of the motions). Mr. Callahan in fact, was already counsel for the plaintiff in the London action and Mr. Callahan submits that it was not reasonable for Mr. Wright to assume that Mr. Callahan could represent Mr. Ramsden (the third party) because of a potential conflict – a submission that was rejected by Mr. Wright.

[18] Unfortunately, Mr. Callahan’s email of June 4, 2013, that he will provide the “required notice,” was poorly worded because he was clearly aware from Mr. Wright’s earlier email that Mr. Wright was expecting notices of change in all the actions, and further, that the notices of change would be delivered within seven days. A lot of the confusion that followed could have been avoided had Mr. Callahan clarified in his responding email that he was not taking over carriage of any actions other than the Chatham action and confirming that although he would provide the required undertaking it would not necessarily be within the next seven days as Mr. Callahan needed to review the file before forwarding the required notice of change.

[19] Mr. Callahan submits that in his original letter he only referred to providing the required “notice” (not the plural, “notices”) and also that he stated in this letter that he needed to conduct a “preliminary review” prior to providing the notice of change. While Mr. Callahan is correct in that submission, he should have been aware that the context of his June 4, 2013 email may have been interpreted by Mr. Wright as Mr. Callahan now agreeing to assume carriage of all the actions and providing notices of change in all the actions within seven days.

[20] Against this evidentiary background, I cannot find that Mr. Callahan provided any undertaking regarding the London action (and also the third action). Having said that, I may have some sympathy for Mr. Wright believing (although wrongly) that there was such an undertaking given.

[21] I do find that Mr. Callahan did give an undertaking to provide a notice of change for the Chatham action. The next issue is when this undertaking was to be complied with.

[22] The exchange of emails between counsel shows that Mr. Wright continued to request compliance with the undertaking to serve the notices while Mr. Callahan was requesting information from Mr. Wright. Specifically on June 28, 2012, Mr. Callahan emailed Mr. Wright that he had a question regarding whether an agreement had been entered into with opposing counsel in the Chatham action that certain documents that had been produced would not be shown to Mr. Ramsden. This email was prompted by an earlier email that day from Mr. Wright to serve and file the notice of change. Mr. Callahan expressed a concern that he needed this information so as to “not inadvertently run afoul” of any agreement that may have been made. Mr. Callahan was making this inquiry based on information he had received from Mr. Ramsden. Mr. Callahan was indicating in his emails that he would not file the notice of change until he had an answer to his question.

[23] In his email dated July 3, 2013 Mr. Wright advised that if the notice of change was not been received within seven days that he would seek an order removing Scott Petrie as solicitors of record and that “we will seek costs of the motion against your firm”. The next day (July 4, 2013) Mr. Wright, in response to Mr. Callahan’s request for information, directed Mr. Callahan to a specific location in the files where necessary documents could be found. Later the same day Mr. Callahan responded that he had looked where directed, that he had found some documents but that he still had some questions and sought further clarification from Mr. Wright.

[24] The motion records were served by Scott Petrie on July 9, 2013 returnable July 16, 2013. Mr. Callahan’s firm was served by fax. Mr. Callahan forwarded a letter to Mr. Wright dated July 15, 2013 (the day prior to the return date of the motions) advising that he had just returned from vacation and complaining that Mr. Wright had served the motions improperly by faxing them because Mr. Callahan’s consent had not been obtained in advance. Also, Mr. Callahan requested an adjournment.

[25] As it turned out, neither an agreement regarding an adjournment, nor terms of an adjournment, was reached and a lawyer from Mr. Callahan’s firm attended in court on July 16, 2013. On that day an order was made adjourning both motions to October 2, 2013 for argument (two hours was estimated) with responding materials to be served by September 13, 2013. Mr. Callahan did not comply with that order as he served his affidavit material (being an affidavit from his law clerk sworn September 30, 2013) just prior to the motion date. Also Mr. Callahan failed to deliver a factum for the long motion as required by the practice direction from the Chief Justice dated October 26, 2005. At the hearing both counsel agreed there should be no further adjournment, and Mr. Wright consented to Mr. Callahan filing his late-served affidavit and Mr. Callahan, in turn, consented to Mr. Wright filing a reply affidavit.

[26] On the facts I decline to make a finding that Mr. Callahan’s undertaking to file a notice of change of lawyers in the Chatham action included a term that he would file the notice “within seven days.” The evidence supports a finding that Mr. Callahan’s agreement to file the notice of change was subject to his prior review of the file, which caused him to request some additional information that he felt was still outstanding when the motions were served. In the circumstances, it was reasonable for Mr. Callahan to request the information that he did prior to any delivery of a notice of change in the Chatham action. I find there was no failure by Mr. Callahan to comply with an undertaking. Having said this, it is somewhat understandable why Mr. Wright could have believed that this undertaking would be fulfilled within seven days after the file was delivered.

SHOULD COSTS OF THE MOTIONS BE PAID BY MR. CALLAHAN

The Law

[27] The liability of a lawyer to pay costs personally is governed by rule is 57.07 which is reproduced below:

LIABILITY OF LAWYER FOR COSTS

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.

[28] At common law a court may order costs against a lawyer as part of its inherent jurisdiction to control its own process. In principle, costs are awarded as compensation for a successful party, not to punish a lawyer. Such compensatory costs may be awarded in circumstances where, for example, a lawyer has acted in bad faith. However, the courts must be extremely cautious in awarding costs personally against a lawyer given a lawyer’s duty to bring forward with courage even unpopular cases: Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3 at para. 254.

[29] The scope of rule 57.07 is broader than the common law and does not necessitate a finding of some degree of misconduct: M.D. v. Windsor-Essex Children’s Aid Society, [2010] O.J. 2270 (S.C.J), at paras. 51, 56.

[30] Rule 57.07 encompasses a two part test. The first step is an inquiry as to whether the lawyer’s conduct falls within the scope of the rule in the sense of causing costs to be incurred unnecessarily, and the second step is to consider whether the imposition of costs is warranted in the circumstances, having regard to the extreme caution principle: Carleton v. Beaverton Hotel, [2009] O.J. 2409 (Div. Ct.), at paras. 17, 21.

Discussion

[31] Although I have found that Mr. Callahan did not fail to comply with an undertaking, it remains necessary to examine whether there was other conduct that engages Rule 57.07.

[32] The stark reality of the motions is this: the burgeoning costs of the motions are attributable to the claim for the costs against Mr. Callahan, prompting an argued special appointment motion that lasted half a day. Put another way, significant costs were incurred because of the claim for costs by Scott Petrie against Mr. Callahan.

[33] Although Mr. Wright may have had some justifiable displeasure about the manner in which the matter had unfolded, Scott Petrie could have, and in my view should have, served two simple motion records on its clients and the other parties (with copies to Mr. Callahan) to be removed as solicitors of record. The supporting affidavits would have been quite brief and could have been prepared with minimal cost. Clearly the solicitor-client relationship had broken down as Mr. Ramsden had moved one of the actions to Mr. Callahan’s office and the clients had also picked up the files from the other two actions. In such a scenario it is difficult to envision any basis on which an order removing Scott Petrie as solicitors of record would not have been granted. If some issue developed, Scott Petrie could have claimed costs against any person who unsuccessfully defended the motions.

[34] Further, Scott Petrie had previously corresponded with Mr. Ramsden (copying Mr. Callahan) on the issue of the notices of change and the release of the files. It was open to Scott Petrie, prior to bringing any motions, to write to Mr. Ramsden enclosing appropriate notices of change for all the actions with a request to execute those forms and to return them to Scott Petrie within a specified time. In addition, the client could have been warned that if there was no response to the letter then the client may face a request for costs if Scott Petrie had to bring any motions.

[35] Applying the first part of the test as set out in Carleton v. Beaverton Hotel, I find that Mr. Callahan did not cause costs to be incurred “without reasonable cause or to be wasted by undue delay, negligence, or other default” as contemplated by rule 57.07. If I am wrong, and Mr. Callahan did contribute to unnecessary costs being incurred, I find that the application of the extreme caution principle would not justify any costs being awarded against Mr. Callahan on the facts of this case.

[36] Although the order below also makes provision for costs submissions, counsel are urged to agree on the issue of costs and to take into account that the reasons set out above conclude that there is a sharing of responsibility as to how events unfolded.

ORDER

[37] For reasons set out above an order shall issue incorporating the following:

a. Scott Petrie are removed as solicitors of record for Lawrence Ramsden and 1358329 Ontario Inc. in the Chatham action (being court file number 60153 in London and subsequently transferred to Chatham as court file number 4860/10);

b. Scott Petrie are removed as solicitors of record for Lawrence Ramsden in the London action (being court file no. 6074-12SR A1).

c. If the parties cannot agree on costs, then written costs submissions shall be forwarded to the trial coordinator. The costs submissions on behalf of Lawrence Ramsden, 1358329 Ontario Inc., Mr. Peter M. Callahan and RZCD Law Firm shall be filed within 14 days, responding costs submissions of Scott Petrie shall be filed 14 days thereafter, and a reply, if any, shall be filed 7 days thereafter. The costs submissions shall be limited to three typed pages plus copies of any offers, time dockets and authorities, and the reply, if any, shall be limited to two pages; and

d. The signed and issued order shall include all the information required by subrule 15.04(4) of the Rules of Civil Procedure.

“Justice Victor Mitrow”

Justice Victor Mitrow

Date: October 25, 2013