SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-13-0353 and CV-13-0351
DATE: 2014-01-07

RE: PETER CATFORD, ELLEN CATFORD and JANE CHARLOTTE VOYVODIC CATFORD, Applicants

AND:

RODERICK ROLAND CATFORD, Respondent

BEFORE: THE HON. MADAM JUSTICE S.E. HEALEY

COUNSEL:
D. Dooley, E. Durant, as agent for Arbesman Hamilton Roswall LLP

H. Turner, for the Respondent

HEARD: January 3, 2014

COSTS ENDORSEMENT

[1] This endorsement concerns the costs of a motion brought by the respondent Roderick Catford to enforce settlement of this proceeding, arising from an accepted offer to settle.

[2] The moving party was not successful. This court determined, that although there was a binding settlement, it should exercise its discretion to set aside that settlement because a weighing of the potential prejudice to each side favoured the applicants, such that the settlement should not be permitted to stand.

[3] This court was required on the facts raised by the motion to decide whether the two lawyers who represent the applicants made an innocent slip by accepting the respondent’s offer to settle, or whether they intended to deliver the very acceptance of offer that was sent to opposing counsel, later realized that they had made a substantive error, and attempted to cover up their mistake. In finding that it was the former, this court wrote:

11. Having considered the facts as set out below, by the barest of margins and giving the solicitors the benefit of much doubt, I am ruling that the result in this case came about by innocent mistake. As the evidence shows, there is much to support the opposite conclusion, which is that a substantive error of law was made when the acceptance of offer was delivered at first instance, and that both lawyers manufactured evidence to paint a different picture after the fact. To the extent that such a conclusion could be supported by the evidence, the lawyers in question have no one to blame but themselves, as it is their own lax practices in the areas of docketing, record keeping and note taking that points one in the direction of such a serious allegation. While this ruling must not be seen to excuse such practices, it is that very sloppiness that ultimately leads me to the conclusion that, on the occasion in question, it is plausible that the wrong document was inadvertently delivered to the opposing party. These observations will factor into any assessment of costs that this court may be requested to make in respect of this motion.

[4] On behalf of its insureds, LawPRO now seeks to recover its costs in the amount of $18,841.10 on a partial indemnity basis, its counsel arguing that they are presumptively entitled as the successful party.

[5] The respondent seeks costs on a partial indemnity basis in the total amount of $17,740.44, to be paid personally by the applicants’ lawyers, Ms. Hamilton and Mr. Arbesman.

[6] The crux of Mr. Dooley’s argument is that because this court determined that an innocent mistake was made, and rejected the respondent’s assertion that the applicants had changed their minds about accepting the offer, a position he asserted was then taken up by their counsel in a collusive lie, that costs should flow against the respondent. He argues that it was the respondent who created the costs related to this motion, by refusing to accept the assertion of Ms. Hamilton that she made a mistake in delivering the wrong acceptance of offer. He argues that the costs were caused solely by the respondent’s decision to enforce the settlement in the face of an admitted mistake.

[7] This court respectfully disagrees with that argument. First, as found in my Reasons, there was an unequivocal offer and acceptance and therefore a binding settlement was reached at law. In these circumstances it was reasonable for the respondent to require compelling evidence as to why that agreement should be voided.

[8] Second, it was not unreasonable for the respondent to disbelieve the word of this particular lawyer when she urged him to accept that an innocent mistake had occurred. One of the unfortunate outcomes of incivility and lack of professionalism is that it breeds distrust among counsel and parties, and in this case the trustworthiness of Ms. Hamilton’s reputation has been diminished in the eyes of the respondent and his counsel by her conduct in this proceeding. This has been the subject of comment of this court in the past Catford v. Catford, 2013 ONSC 5616. Incivility covers a wide range of unprofessional behaviour that not only leads to frustration on the part of opposing counsel and the court, but increased costs and delays in the legal system. This lack of civility unfortunately paved the way for the respondent to adopt a defensive and skeptical response to Ms. Hamilton’s assertion of innocent error. In Rand Estate v. Lenton, 2009 ONCA 251 the Court of Appeal noted that:

Rule 57.07(1) requires an examination of the entire course of litigation that went on before the application judge so that the application judge can put into proper context the specific actions and conduct of counsel. This holistic examination of the lawyers’ conduct produces an accurate and tempered assessment.

Similarly, in Galganov v. Russell (Township), 2012 ONCA 410 at para. 19 the court stated “[i]n determining whether a lawyer’s conduct falls within rule 57.07(1), the court must consider the facts of the case and the particular conduct which has been attributed to the lawyer”, in which passage the court referenced Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham (1998), 16 C.P.C. (4th) 201 (Ont. Gen. Div.), at para. 115. Accordingly, I find that law and the facts require that this factor be taken into account in assessing who is responsible for the costs attributed to this motion.

[9] Third, and most significantly, the evidence, or lack thereof, presented by the applicants’ lawyers in support of innocent mistake could hardly have given the respondent reason to change his mind. There was no way, even after cross-examinations of the lawyers had been conducted, for the respondent to be in position to clearly see that an innocent mistake had been made. The evidence of the two lawyers was implausible, unconvincing and, as outlined in my Reasons, could easily give rise to the conclusion that they had both fabricated evidence to cover up the fact that Ms. Hamilton may have intentionally sent the unconditional acceptance of offer, and later realized that she had compromised her clients’ interest by doing so. I repeat from my earlier Endorsement:

To the extent that such a conclusion could be supported by the evidence, the lawyers have no one to blame but themselves, as it is their own lax practices in the areas of docketing, record keeping and note taking that points one in the direction of such a serious allegation.

[10] Mr. Dooley argues that the criticisms of the court with respect to their “lax practices” should not place this case within that rare category of cases where the lawyer’s conduct should be responded to with costs. Yet it was exactly those professional shortcomings that were the genesis of the costs of this motion, requiring first Ms. Turner and then the court to attempt to make some sense out of these lawyers’ notes, email communication and dockets, or in some cases the absence of any of these. Ultimately, little sense could be made of their evidence, other than that an unconditional acceptance of offer was drafted contrary to the applicants’ instructions, was never sent to the clients for review, and was mistakenly faxed and then emailed to opposing counsel. Further evidence that they were derelict in their duties to their clients was rife throughout the evidence. These practices, falling below the expected standard of a reasonable, prudent lawyer, not only made the fact finding on this motion more difficult, but these practices were the cause of the motion. As one example of many, Mr. Catford would have been a better position to evaluate whether the acceptance of offer that was sent was done contrary to the applicants’ settlement instructions had he not been faced with a single page filled with nothing other than cartoons and doodles made by Ms. Hamilton as her notes of a telephone conference that occurred between the two lawyers and two of the applicants, and not a single note taken by Mr. Arbesman from that same teleconference.

[11] The legal test for when costs will be awarded against a solicitor personally was recently outlined by the Ontario Court of Appeal in Galganov v. Russell (Township), supra, as follows:

1. The first step 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;

2. The second step is to consider, as a matter of discretion and applying the extreme caution principle ennunciated in Young, whether, in the circumstances, the imposition of costs against the lawyer personally is warranted.

[12] In this case the first step in the inquiry leads to the clear conclusion that the costs incurred were caused solely by the lawyers involved. Specifically, the following conduct contributed to delay and unnecessary costs, in respect of both counsel:

i) failing to recognize and admit that a binding agreement had been made;

ii) failing to follow minimum practice standards during this litigation of maintaining detailed and accurate time dockets, failing to take accurate notes of their clients’ instructions during telephone conferences, failing to confirm instructions to clients, failing to communicate with one client to obtain instructions prior to delivering an offer on her behalf, and failing to review settlement documents with clients, all of which prevented them from demonstrating to opposing counsel that a mistake had been made, and falling short of their duty to the court to provide reasonable, comprehensible and credible evidence in support of their position;

iii) failing to admit that their records and procedures were so deficient that clear evidence of how the error could have occurred was missing. Much of the evidence of what transpired during the period in question was presented to opposing counsel only in response to undertakings given on cross-examination.

And in respect of Ms. Hamilton:

iv) being argumentative and deliberately obtuse about the facts on which she was being examined at her cross-examination;

v) failing to maintain the standards of civility and professionalism owed by a lawyer to opposing counsel and the court, which contributed to the disinclination of the respondent and his counsel to accept her evidence;

vi) preparing an acceptance of offer that was contrary to her clients’ instructions; and

vii) delivering the incorrect acceptance of offer not once, but twice.

[13] The next step requires the court to consider the principles in Young v. Young (1993), 1993 34 (SCC), 4 S.C.R. 3 at pp. 135-136, by which judges are cautioned to be extremely reluctant to award costs against lawyers, so as not to conflict with or jeopardize their professional duties. However, this is not a case where the threat of a cost award could have detracted from the lawyers’ professional duties. Nor is it a case where confidential client information had to be protected; this court has no difficulty with the amount of information redacted by Mr. Dooley’s office to protect confidential exchanges other than those that concerned the settlement in question.

[14] Since Young was decided, there has been cause for renewed focus in the legal profession on civility and professionalism. In his Civil Justice Review Project: Summary of Finding and Recommendations, former Justice Coulter A. Osborne noted at p. 118 that LawPRO had been advocating that lawyers behave in civil manner in order to avoid Rule 57.07 claims for costs, noting that such claims had been on the rise in the three years prior to the release of his report in 2007. He also noted that cost orders may “have a considerable therapeutic effect” on uncivil conduct in those relatively rare cases where the court concludes that the solicitor personally pay the costs. Yet I am mindful that the purpose of Rule 57.07(1) is to protect and compensate a party who has been subjected to costs without reasonable cause, and not to punish a lawyer: Young, supra, at p. 135; Galganov, supra at para. 14. Nonetheless, this case illustrates how incivility and unprofessionalism, where it plays a role in wasting costs, can have a direct effect on the pockets of a lawyer.

[15] Costs may be awarded against a solicitor personally without requiring that something more than mistake, negligence or an error of judgment be shown: Walsh v. 1124660 Ontario Ltd., [2002] O.J. No. 4069 (S.C.J.); Rod v. Scugog (Township), 2003 25328 (Ont. S.C.J.); Srajeldin v. Ramsumeer, 2013 ONSC 6178 (Ont. S.C.J.). The court in Marchand v. Public General Hospital Society, supra, cited with approval in Galganov, supra, held that mere negligence can attract costs consequences, as well as acts that fall short of negligence. Evidence of bad faith is not required. However, while bad faith is not a requirement for imposing costs under Rule 57.07(1) “[i]t is only when a lawyer pursued 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.” In this case the lawyers have been derelict in their duties to their clients, to the court and to the administration of justice for the reasons set out in this ruling.

[16] In the circumstances of this case, there are no individuals involved who should absorb the cost of this motion other than Ms. Hamilton and Mr. Arbesman.

[17] Having reviewed the Bill of Costs of Ms. Turner, and having regard to the factors set out in Rule 57.01(1), I find the amounts billed are commensurate with the time required by the complexity of this matter. A “forensic analysis” by Ms. Turner of the events that unfolded in Mr. Arbesman and Ms. Hamilton’s law office between the dates in question was necessary, just as the court found such an analysis to be necessary in reaching its findings. Cross-examinations were necessary to attempt to uncover the facts. The costs sought are within the reasonable expectation of Ms. Hamilton and Mr. Arbesman, as the amount is slightly less than that charged by their own counsel. Although Mr. Dooley challenged the costs charged in relation to travelling time, it is noted on Ms. Turner’s Bill of Costs that travel was charged at a 50 percent rate.

[18] Being satisfied that the costs sought to be recovered are reasonable in all the circumstances, this court orders that Kara Hamilton and Lex Arbesman shall pay to the respondent the sum of $17,740.44 on a partial indemnity basis, payable within 30 days.

HEALEY J.

Date: January 7, 2014