COURT FILE NO.: CV-16-548102
DATE: 20180306
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MICHAEL MASON
Plaintiff
– and –
PERRAS MONGENAIS, BLUMBERG SEGAL LLP and SCOTT D. CHAMBERS
Defendants
Jeffrey Radnoff, lawyer for the Plaintiff
Michael Kestenberg and Aaron Hershtal, lawyer for the Defendant Perras Mongenais,
Susan Sack, lawyer for Scott D. Chambers and Blumberg Segal LLP
HEARD: February 28, 2018
F.L. Myers J.
The Motion
[1] The defendant Perras Mongenais, a law firm, moves for summary judgment dismissing the plaintiff’s claims against it for professional negligence.
[2] For the reasons that follow the motion is granted.
[3] In my view, the cost and delay to Perras Mongenais of requiring it to participate in a trial when its lack of liability is so clear would be unjust and amount to a failure of justice.
[4] Any risk of costly duplication or inconsistent findings is remote.
[5] Granting summary judgment in favour of Perras Mongenais is in the interests of justice as it is the efficient, affordable, and most proportionate outcome. Summary judgment in this case therefore advances the goals of access to justice
Partial Summary Judgment
[6] A single lawsuit often includes numerous claims against a number of different defendants. A trial judgment usually disposes of all of the claims among all of the parties.
[7] In this case, the defendant Perras Mongenais seeks summary judgment dismissing the plaintiff’s claims against it. The plaintiff’s lawyers’ negligence claims against the other defendants will continue even if the motion is successful. So the summary judgment being sought is only a partial resolution of the litigation as a whole and is referred to therefore as “partial summary judgment.” It should be noted though, that from the moving party’s point of view, the case will be over. There is nothing partial about the judgment that it seeks dismissing the claim against itself.
[8] The issue of whether and when a partial summary judgment is available when causes of action remain for trial is a difficult one. It brings into sharp focus the conflict between the traditional status of the civil trial process as the gold standard for fact finding and the “culture shift” heralded by the Supreme Court of Canada in Hryniak v Mauldin, 2014 SCC 7. The “culture shift” involves a recognition that while trials may be the best method to enable a court to resolve conflicting narratives advanced by the parties, the trial process is so slow and expensive that its use has made civil justice inaccessible and unattainable for most Canadians.
[9] The “culture shift” requires courts to resolve litigation without the cost and delay of the full trial process where they can do so in a fair and just manner. The “shift” requires a change in lawyers’ and judges’ historic belief that trials are the only way to resolve contested facts. Instead, under Hryniak, judges are called upon to make judgment calls as to when they can have confidence that they can find the necessary facts and apply the relevant legal principles fairly without the full rigour, cost, delay, and distress caused by the trial process. The goal is to enhance access to justice by reducing the frequently unbearable personal and financial costs required to obtain a court decision in civil litigation. This means resolving cases where it is possible to do so in a fair and just manner without a trial. When a judge is satisfied that it is fair and just to do so, she or he will decide cases on a paper record, perhaps with some out-of-court witness examinations, or invoking enhanced fact-finding powers, including designing “mini-trials,” all to avoid inflicting on the parties the negative effects of the trial process if possible.
[10] As described by the Supreme Court of Canada at para. 3 of Hryniak:
This shift entails simplifying pre-trial procedures and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case. The balance between procedure and access struck by our justice system must come to reflect modern reality and recognize that new models of adjudication can be fair and just.
[11] And at para. 28:
The principal goal remains the same: a fair process that results in a just adjudication of disputes. A fair and just process must permit a judge to find the facts necessary to resolve the dispute and to apply the relevant legal principles to the facts as found. However, that process is illusory unless it is also accessible — proportionate, timely and affordable. The proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure.
[12] The challenge is discerning how to strike a balance that provides enough procedure to ensure a fair and just outcome but without so much expense and delay as to undermine the justness of the outcome. The Supreme Court of Canada recognized that this challenge will be particularly acute in cases of partial summary judgment. Notably, Hryniak itself was a case of partial summary judgment. No trial was required to decide the case against Mr. Hryniak while a trial was still required to assess the liability of the other co-defendants.
[13] At para. 60, the Supreme Court of Canada recognized the risks of allowing summary judgment against one defendant while the claim continued against others:
The “interest of justice” inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicative proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach. [Emphasis added.]
[14] While judges are required to be careful to understand the risks of duplicative proceedings and inconsistent findings that might undermine the justness and proportionality of granting summary judgment to less than all of the defendants, nevertheless, the Supreme Court recognized that resolving an important claim against a key party could also significantly advance the goals of securing the most efficient, affordable and proportionate outcome for all. The Supreme Court advised caution before granting partial summary judgment but it did not preclude partial summary judgment in appropriate cases.
[15] In all cases of summary judgment, the judge must assess whether there is a genuine issue requiring a trial as follows:
- There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
[16] The Supreme Court of Canada recognized that this determination and the related decisions to utilize the enhanced fact finding powers under Rules 20.04 (2.1) and (2.2) in the interests of justice, involve a balancing of facts and law. They are judgment calls that attract deference. (See Hryniak at para. 81 and following). There will be cases where a summary process would resolve so little of value and/or create too much risk of costly duplication or inconsistent verdicts to be viewed as either just or proportionate. But to implement a change in the legal culture – a “culture shift” – judges have to be able to say that in appropriate cases, viewed in the context of the litigation as a whole, partial summary resolution achieves the goals of fairness and promoting access to justice as was the case in Hryniak itself.
Assessing Claims for Partial Summary Judgement in the Context of the Litigation as a Whole
[17] Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 is the leading case that discusses the parameters for assessing claims for partial summary judgment in the context of the litigation as a whole. It drew its approach from Hryniak and the discussion of the contextual approach in para. 60 recited above. In Baywood, the motions judge held that a trial was required to determine the validity of two promissory notes asserted by the defendant in a counterclaim. However, the judge held that he could determine summarily the question of the validity of a release that was part of the same set of deal documents as the promissory notes. The judge held that the release provided a defence to the plaintiff’s claim while resolution of the counterclaim on the promissory notes required a trial.
[18] The Court of Appeal overruled, reasoning that it was an error for the judge to isolate and make findings on the release when it was intertwined with all the deal documents including the promissory notes:
[37] In the complex situation in this case, it is therefore entirely possible that the trial judge who hears the trial of the issue on the validity of the promissory notes will develop a fuller appreciation of the relationships and the transactional context than the motions judge. That could force a trial decision on the promissory notes that would be implicitly inconsistent with the motions judge’s finding that the Third Release is fully valid and effective, even though the parties would be bound by that finding. The process, in this context, risks inconsistent findings and substantive injustice.
[38] In light of the factual connection between the promissory notes and Third Release, and Ralph’s testimony, it was an error in principle for the motions judge to refer the enforceability of the promissory notes to trial while summarily determining the enforceability of the Third Release.
[19] It readily follows that where a trial is required involving the same parties, the same witnesses providing the same evidence about the same facts in issue as are relied upon for summary judgment, the risk of duplication and inconsistent outcomes is particularly acute. In such cases, the benefits of summary judgment as a cost saving or tool for efficiency are lost since a trial is required on all the same facts among all the same parties anyway.
[20] It should also be recalled that in Hryniak, at para. 70, the Supreme Court of Canada understood that it may be possible to discern in advance that a proposed motion for partial summary judgment would not be proportionate. It discussed the availability of motions for directions in advance of the hearing of summary judgment motions where such issues can be considered. At motions for directions (whether referred to as “9:30 appointments” on the Commercial List, “Chambers Appointments” on the Civil List, or Civil Practice Court) the parties can identify their concerns about the appropriateness of a summary process. Where concerns are well-founded, the court may decline to allow the motion to proceed or it may assist the parties to put in place customized procedures, including evidence collection, limited or full written or oral discovery, or such other processes as may be helpful in structuring either a motion for partial summary judgment or for the efficient case management of the entire case.
[21] After Baywood, in cases such as Griva v Griva, 2016 ONSC 1820, judges have declined to schedule motions for partial summary judgment where they can determine at the outset that the facts and evidence in support of the summary judgment sought are so intertwined with the issues and evidence that will remain for trial so as to fail to meet the requirement of proportionality in the context of the litigation as a whole under Hryniak. By corollary, to avoid cases where the facts and evidence are intertwined with those that will remain for trial, judges have looked for issues for partial summary judgment that are “distinct” from those that will remain for trial. In Griva, Firestone J. wrote:
[17] In Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, at para 33, the court confirmed that the motions judge must “assess the advisability of the summary judgment process in the context of the litigation as a whole.” In Hryniak the Supreme Court at para. 60 specifically stated that “`the interest of justice’ inquiry goes further and also considers the consequences of the motion in the context of litigation as a whole.”
[18] Given the Supreme Court’s pronouncement at para. 72 in Hryniak, these considerations are equally applicable to all procedural orders and directions made by the court at a case conference in exercising its gate-keeping role.
[19] I adopt the reasoning of Myers J. in 2287913 Ontario Inc. v. Blue Falls Manufacturing Ltd., 2015 ONSC 7982, where at para. 17 he states in part: “[W]here a party advances a small number of discrete issues that may resolve the entire case, it is much easier to conclude that a thorough investigation of those issues may be the most proportional process even though the issues may be complex or have some facts in dispute.” At para. 59 of Hryniak, Justice Karakatsanis wrote: “[W]hat is fair and just turns on the nature of the issues, the nature and strength of the evidence and what is the proportional procedure.”
[20] For the reasons given it would not serve the principles of proportionality, timeliness and affordability to schedule the requested motion for partial summary judgment.
[22] In Butera v. Chown, Cairns LLP, 2017 ONCA 783, a panel of the Court of Appeal confirmed that partial summary judgment lies best when the issues involved are distinct from those that will remain for trial. In Butera, as in Baywood, the lower court resolved one cause of action between the parties without a final resolution against any party. The proceeding continued against all parties. The court expressed very significant concerns with the risks involved with partial summary judgment motions and reasoned as follows:
[30] First, such motions cause the resolution of the main action to be delayed. Typically, an action does not progress in the face of a motion for partial summary judgment. A delay tactic, dressed as a request for partial summary judgment, may be used, albeit improperly, to cause an opposing party to expend time and legal fees on a motion that will not finally determine the action and, at best, will only resolve one element of the action. At worst, the result is only increased fees and delay. There is also always the possibility of an appeal.
[31] Second, a motion for partial summary judgment may by very expensive. The provision for a presumptive cost award for an unsuccessful summary judgment motion that existed under the former summary judgment rule has been repealed, thereby removing a disincentive for bringing partial summary judgment motions.
[32] Third, judges, who already face a significant responsibility addressing the increase in summary judgment motions that have flowed since Hryniak, are required to spend time hearing partial summary judgment motions and writing comprehensive reasons on an issue that does not dispose of the action.
[33] Fourth, the record available at the hearing of a partial summary judgment motion will likely not be as expansive as the record at trial therefore increasing the danger of inconsistent findings.
[34] When bringing a motion for partial summary judgment, the moving party should consider these factors in assessing whether the motion is advisable in the context of the litigation as a whole. A motion for partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner. Such an approach is consistent with the objectives described by the Supreme Court in Hryniak and with the direction that the Rules be liberally construed to secure the just, most expeditious, and least expensive determination of every civil proceeding on its merits. [Emphasis added.]
[23] Although expressed in strong terms, the actual holding in para. 34 of Butera is that where an issue is discrete, or distinct, or can be readily bifurcated from those that remain for trial, there will be little risk of duplication and inconsistent verdicts to limit the proportionality of partial summary judgment. In the last line of para. 60 of Hryniak the Supreme Court of Canada determined that even if there is risk of duplication or inconsistent verdicts, “the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach.” In cases where the action is not ended against any party the countervailing benefit identified by the Supreme Court of Canada is likely lessened. But I note that the Supreme Court only required that an important issue be resolved against a party rather than that all issues be resolved against the party.
[24] Subsequent decisions of the Court of Appeal have continued to recognize and uphold orders granting partial summary judgment that end claims against a party under Baywood and Hryniak without any reference to Butera or any recognition that the outcome was “rare.”
[25] The only case at the Court of Appeal to cite Butera to date is Sirois v. Weston, 2017 ONCA 1002. In that case, the court upheld a decision by Toscano Roccamo J. dismissing a claim due to the expiry of a limitation period. To deal with Butera, the court wrote:
[13] Finally, the appellants’ reliance on this court’s decision in Butera v. Chown, Cairns LLP, 2017 ONCA 783 is misplaced. The expiration of the limitation period as it related to this sole defendant is precisely the type of discrete issue that could be separated from the other claims in the action and “dealt with expeditiously and in a cost effective manner” (para. 34).
[26] In Sirois, the Court of Appeal accepted that limitations periods are distinct issues that can be readily bifurcated from the remaining merits of the issues before the court. This satisfies Baywood and Butera.
[27] In Li v. Li, 2017 ONCA 942 the Court of Appeal upheld an order for partial summary judgment without reference to Butera and did not suggest that a partial summary judgment was a rare exception to Hryniak. The Li case involved the foreign law of India. The defendant argued that under Indian law the case was barred by a particular rule of civil procedure. The motion had nothing to do with underlying merits. The order under appeal had determined that the Indian law did not apply to bar the case and the court did so on a final basis using the process established in Skunk v. Ketash, 2016 ONCA 841. That is, the lower court granted a final declaration that the Indian law did not apply so that the issue was no longer open to the parties at the trial. No party was let out of the action by the partial judgment granted. Rather, an issue that could have ended the case if it went one way was resolved the other way. The case continued against all parties but with one issue resolved.
[28] Other recent cases of the Court of Appeal dealing with partial summary judgments without reference to Butera include Aird & Berlis LLP v. Oravital Inc., 2018 ONCA 164 and Tapak v. Non-Marine Underwriters, Lloyd's of London, 2018 ONCA 168.
[29] In Kueber v. Royal Victoria Regional Health Centre, 2018 ONCA 125 the Court of Appeal upheld an order granting partial summary judgment dismissing several claims brought against numerous parties by a self-represented plaintiff. The underlying, principal claim was for medical malpractice. The Court of Appeal upheld the order leaving claims against a hospital outstanding for trial. But in dismissing a number of apparently weaker claims against ambulance attendants and doctors, the Court of Appeal wrote:
[3] In our view, this is precisely the type of case that summary judgment is designed to address so as to avoid putting the parties to the time and expense of a full blown trial. It is the type of case that can be fairly resolved “in line with the goal of proportionate, cost-effective and timely dispute resolution”: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 67. [Emphasis added.]
[30] It is clear that the outcome in Keuber was affected by the fact that the plaintiff had over-pleaded and had no expert report to support a claim of negligence at least on some of her claims. But, despite Butera, the Court of Appeal recognized that a paradigm case for summary judgment can be a motion for partial summary judgment that is not based on Butera or Baywood or discrete issues or bifurcated issues or rarity. The issue instead, was whether the judge could have confidence that it is fair, just, and proportionate in the context of the litigation as a whole to find the facts and apply the law to the facts so found.
[31] To determine the availability of a summary judgment or a partial summary judgment each case is decided on its own merits and in accordance with its particular circumstances. In Hryniak, the Supreme Court of Canada directed judges to make a comparative inquiry; comparing what is before them on the motion to what a trial might look like:
[57] This inquiry into the interest of justice is, by its nature, comparative. Proportionality is assessed in relation to the full trial. It may require the motion judge to assess the relative efficiencies of proceeding by way of summary judgment, as opposed to trial. This would involve a comparison of, among other things, the cost and speed of both procedures. (Although summary judgment may be expensive and time consuming, as in this case, a trial may be even more expensive and slower.) It may also involve a comparison of the evidence that will be available at trial and on the motion as well as the opportunity to fairly evaluate it. (Even if the evidence available on the motion is limited, there may be no reason to think better evidence would be available at trial.)
[32] Discrete issues, like limitation periods, which do not overlap with the merits that are left for trial, occupy the most efficient end of the spectrum. Cases like Baywood, where the same parties will go to trial with the same witnesses testifying to the very same facts as are in issue on a motion for summary judgment represent the other end of the spectrum. In the middle, are cases like this one and Hryniak where the litigation against a party can be brought to an end by partial summary judgment. Although not all parties will go to trial, the issues to be resolved summarily are not perfectly discrete and have some relation to the issues that remain for trial. The question then is whether the risks of duplication and inconsistent findings outweigh the benefits of summary resolution and preclude summary resolution from being proportionate where the case is brought to an end against some but not all of the parties. To resolve this issue, the judge must exercise his or her judgment to determine the comparative balancing discussed in Hryniak.
[33] The Supreme Court of Canada did not impose a bright line rule to default to a trial if there is no wholly discrete or bifurcated issue. Approaching trials as the default process is not a culture shift at all. It perpetuates the practical roadblocks on access to justice that the Supreme Court of Canada identified as being the greatest challenge to the rule of law in Canada. The shift required is an understanding that judges will be deciding cases summarily as much as possible to avoid the expense and delays of the trial process that put civil justice beyond the reach of most Canadians. The shift is that, instead of defaulting to trials, judges will exercise judgment, where possible, to find proportionate processes to allow a fair and just resolution on the facts of each case that avoids the cost and delays of the trial process. If the risk of duplication and inconsistent verdicts is high, then Baywood and Hryniak dictate that a trial is required. But that is the last option not the best one. This requires buy-in to the notion that judges will exercise discretion to determine in each case the amount of process required on the facts and law to give them confidence that the case can be resolved fairly, justly, and proportionately. That is the “culture shift.”
The Facts
(a) The Tax Problem
[34] The plaintiff, Michael Mason retained the defendant Scott Chambers to act as his lawyer in connection with his divorce from his spouse Lise Mason. Among other things, equalization and spousal support were in issue. The married parties owned a business through a corporation. Each of the spouses owned shares of the corporation. As the trial approached and settlement discussions neared a deal, it became apparent to Mr. Chambers that Mr. Mason required tax advice that Mr. Chambers and his law firm were not able to provide.
[35] Mr. Mason had accountants and an expert witness accountant on retainer already. He also had used previously the tax and corporate legal services of Pierre Perras of the Perras Mongenais firm in connection with the family business. Mr. Mason and Mr. Chambers were in touch with the accountants throughout. As settlement neared, on Mr. Chambers’ suggestion, Mr. Mason instructed Mr. Chambers to seek tax advice from Mr. Perras.
[36] It is undisputed that Mr. Mason did not want to be involved in the details of the tax planning. He recognized that he is unsophisticated in such matters and he preferred to leave it to the lawyers to protect him. Apart from making a single telephone call to Mr. Perras just to put Mr. Chambers on the phone with him, Mr. Mason was not involved in the discussions between the two lawyers. Whether or how Mr. Chambers explained the tax advice received from Mr. Perras to Mr. Mason is of no consequence on this motion and is relevant only to the negligence claim as between them.
[37] At about noon on March 13, 2014, the Friday before the scheduled commencement of the Masons’ trial on Monday, March 17, 2014, Mr. Chambers sent an email to Mr. Perras to introduce himself and to seek Mr. Perras’ advice. Mr. Chambers enclosed two competing offers to settle the matrimonial proceedings. He explained that the settlement being discussed contemplated that Mr. Mason would cause the family corporation to redeem or buy his ex-spouse’s shares. Mr. Chambers wrote:
We want to understand the tax implications, consequences and if there are any tax opportunities available to Michael or the corporation in such a transaction.
[38] Mr. Perras left a voicemail for Mr. Chambers asking for more specific instructions. Mr. Chambers responded by email as follows:
Further to your telephone message this afternoon, we have asked Mike to contact you to provide you with instructions. However, what we are looking for is some tax advice as follows:
How to structure the your [sic] proposed offer to buy or redeem Lise’s shares in [the corporation] in the most effective manner from a tax standpoint for you [sic] and the business; and
To understand the tax implications on Lise’s offer to you [sic] and the business; and
Get suggestions on an alternative means to structure an offer to settle that is more tax advantageous than the offers as they stand.
[39] Mr. Perras responded by email later that afternoon. He pointed out to Mr. Chambers that he has acted for both spouses in the past. He said that he “can offer the following general advice at this time.” Mr. Kestenberg argues that as between two lawyers, this disclosure – that Mr. Perras had acted for both parties previously coupled with an offer of only general advice – was a clear statement that Perras Mongenais was in conflict of interest and could not act against the interests of its former client Lise Mason. However, while the advice given in the remained of the email was certainly preliminary in nature, it is not at all clear to me that Perras Mongenais was declining to act. In fact, a few days later, Mr. Perras gave further advice concerning the protection of Mr. Mason’s interest alone. The firm billed for the advice it gave. I do not accept the argument that Perras Mongenais did not act for Mr. Mason or limited its duties to him by its rather general hint of a possible conflict of interest.
[40] The actual preliminary advice that Mr. Perras gave to Mr. Chambers in this first email is the key fact in this case. The email is clear and is undisputed. Mr. Perras wrote:
Any resolution of the matter which involves a transfer of shares by Lise to Mike and a payment by Mike to Lise will be somewhat inefficient from an income tax point of view as Mike will require after personal tax dollars to make the payments (at Mike’s marginal rate, he will need well in excess of $3M pre tax to pay $1.75M).
On the other hand, if, prior to the divorce, Lise were to transfer her shares to a holding corporation, and such shares were redeemed by [the Mason family corporation], no immediate tax liability would arise. Lise would only be subject to tax as she withdrew the funds (by way of dividends) from the holding corporation. Depending on the rate at which the funds were personally withdrawn by Lise, a low rate of tax (and possibly no, or a negligible amount) would apply.
[41] Mr. Perras told Mr. Chambers that if Mr. Mason agreed to pay his spouse $1.75 million for her shares by way of equalization, he would incur at least another $1.25 in personal tax obligations (over $3 million in total outlay) as he drew money from the company to fund the purchase. This has now come to pass. There is no dispute that Mr. Mason settled with his ex-spouse by agreeing personally to buy her shares. He has or will incur tax of approximately $1.3 million. Mr. Perras’ advice was correct.
[42] Mr. Perras correctly identified the exact risk that occurred and the correct quantum. (I regard the difference between $1.25 million and $1.3 million as immaterial for the purposes of this motion.)
[43] Mr. Perras also advised Mr. Chambers in the same email that the purchase could be carried out by another route involving redemption of the ex-spouse’s shares with no adverse tax consequence to Mr. Mason and perhaps only minimal tax obligations on Ms. Mason. This has been referred to by the parties as the “redemption approach”. There is no tax hit to Mr. Mason on this approach because the corporation would pay Ms. Mason’s holding company for her shares. Under the redemption approach, Mr. Mason would not have to draw money from the corporation to himself personally and pay tax on that money to fund redemption as he would have to do to buy the shares personally.
[44] Mr. Chambers confirmed in cross-examination that he understood the two approaches. He knew that if Mr. Mason purchased the shares personally he would have to use after-tax dollars which was not tax efficient.
[45] Mr. Chambers did not follow up or ask Mr. Perras anything further about this preliminary advice despite the fact that it is expressly said to require further review. Rather, the next Mr. Perras heard from Mr. Chambers was in an email dated March 17, 20014 at 2:34 pm. In that email, Mr. Chambers forwarded draft minutes of settlement to Mr. Perras and asked him to “review these draft minutes of settlement and get back to us as soon as possible.”
[46] About 30 minutes later, Mr. Mason called Mr. Perras and immediately put Mr. Chambers on the phone. Mr. Perras told Mr. Chambers that on reviewing the minutes of settlement he saw that the redemption approach that he had recommended was not being used. Mr. Chambers told Mr. Perras that the ex-spouse refused to accept the redemption approach. She wanted to receive all cash and did not want the tax burden to be on her. Instead, Mr. Chambers advised that he had negotiated a “tax discount” on the share purchase price to take into account the negative tax outcome caused by Mr. Mason buying the shares personally.
[47] The idea of Mr. Mason taking a discount in the purchase price of the shares to reflect his potential tax liability was not raised with Mr. Perras previously. It was put to him as a fait accompli because Ms. Mason would not agree to the more tax efficient redemption approach recommended by Mr. Perras.
[48] Mr. Chambers next told Mr. Perras that he and Mr. Mason were in a settlement conference ready to sign the minutes of settlement but they needed advice on para. 1 (c) of the draft minutes of settlement that provided for a spousal rollover of the family corporation’s shares. Para. 1 (c) of the minutes of settlement dealt with the elections available under the Income Tax Act when one spouse transfers shares to another. Under the settlement terms proposed, based on the elections agreed upon, Mr. Mason was assuming liability for all taxes on any future disposition of the shares that he would be buying.
[49] By email sent just over one hour after receiving the minutes of settlement, Mr. Perras explained that in para. 1 (c) the parties were electing to take a tax free rollover of Ms. Mason’s shares on the transfer to Mr. Mason. Mr. Perras then explained how the tax attribution rules would apply to the revenue earned on the transferred shares in Mr. Mason’s hands. He concluded, “From Mike’s perspective, that is fine.”
[50] The email concluded, “Let me know if you need more from me.”
[51] The parties then settled equalization and entered into minutes of settlement that were incorporated into a court order. At 6:30 that evening, Mr. Chambers responded by email, “Thanks Pierre. This information was very helpful.”
[52] Although the parties settled equalization, the trial went ahead on the issue of support. In the result the court ordered Mr. Mason to pay almost $10,000 per month in spousal support. This was not a positive outcome from Mr. Mason’s perspective.
[53] On May 2, 2014, Mr. Perras was questioned on behalf of Mr. Mason about the negative tax outcome of the share purchase in the equalization settlement. Mr. Perras responded as follows:
On March 17 I received draft minutes of settlement which reflected a transfer of the shares by Lise to Mike. When I pointed out to Scott [Chambers] that the minutes did not reflect the corporate redemption approach, he indicated that after reviewing the matter with their accountant, the amount to be paid by Mike had been reduced to take into account the negative income tax implications.
[54] Mr. Chambers responded that afternoon:
By way of background, it was originally proposed that there would be a redemption of Lise’s shares. This was clearly unacceptable to them due to the apparent considerable tax consequences for her. Her subsequent proposal, on the other hand, we were told, would have similar considerable tax consequences for Mike. A compromise was proposed, whereby the purchase price that Lise wanted, based on the two valuations obtained, would be reduced to take into account some of Mike’s tax resulting from the transaction. The Minutes of Settlement reflected this reduced purchase price.
[55] Mr. Mason’s accountants understood that in calculating asset values for family law equalization purposes, each spouse is entitled to deduct the likely disposition costs from the value of his or her assets including taxes that they would incur in future to convert their assets to cash. In valuing the family business for Mr. Mason therefore, his accountants told him that if and when he might eventually sell the business, he would incur $792,000 in tax based on whatever assumptions they made about future values and taxes. It appears that Mr. Chambers properly had the ex-spouse agree that the value of the business on Mr. Mason’s side of the equalization balance sheet should be reduced to reflect his future tax cost on disposition. However, there is no indication before me that this deduction was intended to address or redressed at all the taxes that Mr. Perras had identified and warned Mr. Chambers would be incurred by Mr. Mason if he bought his spouse’s shares personally now.
[56] Mr. Mason next retained Mr. Mongenais of the same Perras Mongenais firm to bring an appeal from the trial judge’s support decision. Ms. Mason waived any conflict of interest and agreed that the firm could act against her.
[57] In discussing the issues with Mr. Chamber’s LawPro counsel in the fall of 2014, Mr. Mongenais described the plaintiff’s predicament as follows:
Those involved in the negotiation on March 17th seem to have turned their minds to the tax cost of a potential disposition by Mr. Mason to a third party down the road, but not to the tax cost of extracting the funds immediately to satisfy an equalization debt.
[58] In the fall of 2014, Mr. Mongenais succeeded in obtaining a negotiated offer from Ms. Mason’s counsel to restructure the equalization payment as a redemption so as to save Mr. Mason tax. However, it was also a term of the offer that Mr. Mason abandon his appeal from the support decision at trial. Mr. Mason obtained input from another lawyer and decided that he was not willing to accept the offer. He decided that his position would be better protected by continuing the appeal and suing his lawyers.
[59] Mr. Mason won his appeal. The Court of Appeal reduced Mr. Mason’s support obligation to approximately $1,500 per month.
(b) Specific Evidence about Mr. Perras’ Retainer
[60] In discussing the tax issues with Mr. Mason’s accountants during the trial, Mr. Chambers wrote:
I have attached the draft Minutes of Settlement. We forwarded them to Pierre on Monday for some ad hoc advise [sic] before they were executed.
[61] Mr. Chambers was examined as a witness for this motion. In cross-examination about this note and the nature of the advice that he sought and received from Mr. Perras on March 17, 2014, Mr. Chambers testified as follows:
468 Q. For some ad hoc advice. Can you tell me what ad hoc advice is, please?
A. I think I’m referring – basically the expression I was trying to find was on the fly. Basically we were – we were negotiating the settlement on March 17th and we needed Pierre—
469 Q. And on the fly was Pierre Perras responding on the fly?
A. Yeah. We needed him right then and there. That’s really what I meant.
470 Q. There was no hard and fast opinion that was asked of Mr. Perras, it was just a quick response, fair?
A. Well, my email on the 13th was clarifying what I needed from Pierre.
471 Q. We’ll get to that.
A. Yeah.
472 Q. What I’m asking now is ad hoc does not mean a hard comprehensive opinion, it’s a quick response, correct?
A. Yeah. I needed a quick response from him.
[62] Mr. Radnoff took the court through many facts dealing with the relationship between Mr. Chambers and Mr. Mason. He showed, for example, efforts by Mr. Chambers to ensure that Mr. Mason obtained independent tax advice. Mr. Chambers had Mr. Mason sign written confirmation that he was not relying on Mr. Chambers or his firm for tax advice when he signed the minutes of settlement. Under cross-examination by Mr. Radnoff, Mr. Chambers testified:
204 Q. Okay. And at page 37, there’s a line that says from Mike[‘s], perspective that is fine. Do you know what that means, sir?
A. My understanding of it was that he reviewed the minutes of settlement, he explained to us the various sections of the Income Tax Act that he was quoting there, 73.1 or 73 (1), 74.2, 74.1 and then he goes in and basically says from Mike’s perspective this is fine. So we understood that the spousal rollover was fine for Mike from a tax perspective bearing in mind that he is getting a discount for the contingent tax liability.
205 Q. Okay. But there’s no reference to a contingent tax liability here.
A. No, that was verbal. I told him that prior to this email to us.
[63] What follows next in the transcript is evidence concerning discussions between Mr. Chambers and Mr. Mason as to what advice Mr. Chambers may have passed on to the ultimate client. Later in the examination, Mr. Chambers asserted that he relied on Mr. Perras to give Mr. Mason accurate advice.
[64] Mr. Radnoff also referred to the transcript of his cross-examination of Mr. Perras including the following evidence about the events of March 17, 2014:
136 Q. Okay. And so did Scott – did you speak to Scott after you received this e-mail?
A. Well, when Mason called he handed the phone to Scott, and I said, ‘You did not follow the redemption approach.’
137 Q. Okay. And what did he say to you?
A. He said ‘No, we negotiated a discount we’re only looking for your comments on the paragraph 1 (c). We’re in a rush. The judge is waiting for us to sign these minutes of settlement’.
138 Q. So if we go to page 42 of your record, you’re saying 1 (c) was what you were asked to review?
A. Yes.
139 Q. And that was all you were asked to review, sir?
A. Yes.
140 Q. So I take it you disregarded the balance of the document?
A. Yes.
141 Q. So you did not review paragraph 1 (g) of the document, sir?
A. No.
142 Q. And is that because you felt that wasn’t part of your retainer?
A. That’s what I was asked to do, review 1 (c).
[65] Paragraph 1 (g) of the minutes of settlement, to which Mr. Radnoff referred, provided for the sale of the corporate shares from Ms. Mason to Mr. Mason. Mr. Perras says that he did not review that paragraph. Yet he knew that the redemption approach was not being followed. Mr. Radnoff argued that this undermined Mr. Perras’ credibility. But he did not ask Mr. Perras how he knew this or provide Mr. Perras with an opportunity to respond as required under the rule in Browne v Dunn. Moreover, it is apparent from reviewing para. 1 (c) of the minutes of settlement that the transaction must be a sale between spouses. Section 74.1 of the Income Tax Act referred to in para. 1 (c) is entitled “[t]ransfers and loans to spouse or common-law partner.” The provisions make clear on their face that the issue under discussion is a sale between spouses. The fact that Mr. Perras realized and noted expressly to Mr. Chambers that the redemption approach was not being used is consistent with the evidence of both lawyers.
[66] Mr. Radnoff then relied on communications among Mr. Chambers, Mr. Mason, and the accountants to show the confusion that seems to have existed on the tax treatment of the settlement and the purpose and impact of the “tax discount” negotiated on the accountant’s advice. Apart from it being apparent that Mr. Chambers tried to deflect blame to Mr. Perras, all of those communications go to questions between Mr. Mason and Mr. Chambers rather than to the liability of Mr. Perras on the advice that he gave or did not give.
[67] Finally, Mr. Radnoff points to the evidence of Mr. Mason that he believed that Mr. Perras had advised that the settlement was fine from a tax perspective and that had he known that he was being asked to pay an extra $1.3 million in tax in the equalization settlement he would have gone to trial where the tax implications would have been fully considered and accounted for.
Expert Evidence
[68] Mr. Mason has delivered expert evidence from Evelyn Rayson, a very experienced family lawyer. While her report is preliminary, she raises two areas where she says Mr. Perras’ advice failed to meet the applicable standard of care in the profession.
[69] First, Ms. Rayson opines that Mr. Perras failed to meet the applicable standard of care of a prudent lawyer by failing “to remind Mr. Chambers of the advice that he had given three days earlier.” A prudent lawyer, she says, would have emphasized that it was inadvisable for Mr. Mason to draw money from his corporation to pay equalization in this case.
[70] Ms. Rayson opines further, that Mr. Perras failed to meet that applicable standard of prudence by failing to inform himself of the nature and amount of the tax discount negotiated by Mr. Chambers. By failing to do so he was part of the reason why Mr. Mason was deprived of the opportunity to have the adverse tax consequences of drawing funds from the family corporation addressed either in the settlement or at trial.
[71] The duties identified by Ms. Rayson are simply stated to be duties that she believes are owed. She does not say how she determined the duties to exist or to represent the standard of practice in the profession other than asserting this to be so. Mr. Radnoff points to Ms. Rayson’s deep experience and to the Court of Appeal decision in Sengmueller v Sengmueller, 1994 CanLII 8711 (ON CA), [1994] OJ No 276 (CA). That case basically provides that all tax consequences of the marriage breakdown and equalization process should be considered and reflected in the equalization calculations. While the case does not speak about lawyer’s professional duties of care, one can readily extrapolate that if taxes are included in equalization calculations, lawyers who are retained to deal with equalization must ensure that the client is competently advised and represented on the tax issues.
[72] I am not dealing with whether Mr. Chambers met his duties to Mr. Mason. The question here is what Mr. Perras was retained to do and did he provide the services negligently.
[73] Mr. Chambers explained the situation with reference to the three questions that he had initially posed to Mr. Perras in his March 13, 2014 email cited at para. [38] above:
410 Q. Okay. These are the three things you needed from Mr. Perras?
A. Correct.
411 Q. And you relied on him to give you accurate advice in respect to those three items, sir?
A. Well, I relied on him to give Mr. Mason accurate advice.
412 Q. Right. But you were the one negotiating the settlement, weren’t you sir?
A. Right. But I wasn’t Pierre’s client. Mr. Mason was Pierre’s client.
413 Q. Did you rely on any information from Mr. Perras or not?
A. Well, I sent him the minutes of settlement on the day, so I relied on his information to how the deal was structured.
414 Q. Exactly. So you relied on him to give you accurate information about the tax implications of the offer, correct?
A. Again, Mr. Mason was relying on him. I wasn’t relying on him.
415 Q. Okay. Sir, who was the one that was negotiating the ultimate settlement?
416 A. Myself and Mr. Lanthier.
416 Q. Okay. So you needed tax information to negotiate that settlement. Did you not care about the tax information?
A. No, I cared about the tax information but I’m saying that I wasn’t Pierre’s client. Mr. Mason was Pierre’s client.
417 Q. I didn’t ask you, sir, who the client was.
A. But the information I’m getting from Mr. Mason via Pierre, Mr. Mason is relying on that information.
418 Q. Sir, you received e-mails from Mr. Perras, correct?
A. Correct.
419 Q. Okay. Did you expect those e-mails to be accurate, sir?
A. Yes.
420 Q. Did you review those e-mails carefully, sir?
A. Yes.
421 Q. Okay. Sir, in order to negotiate—
MS. SACK: Hold on.
BY MR. RADNOFF:
422 Q. So let’s get back to it in a moment. You are looking at the March 13th e-mail, sir.
A. Yes.
423 Q. And my question to you was you had sent the client out to get tax advice, right, on this settlement?
A. Yes.
424 Q. And the tax advice included the tax impact to the corporation and to Mr. Mason as well, correct?
A. Yes. To the corporation and to Mr. Mason personally.
425 Q. Yes. And obviously Mr. Mason needed the information but you also needed the information, sir, so you could negotiate on his behalf, correct?
A. Correct.
426 Q. And so, therefore, in order to make sure that the settlement was appropriate, you needed accurate information from Mr. Perras?
A. And Mr. Perras, Mr. Letorneau and Mr. Mandel [the last two being the client’s accountants].
[74] Under cross-examination by Mr. Kestenberg, Mr. Chambers continued:
- Q. As of March the 13th, the only issue that you understood Pierre was looking at was buying the shares from Lise. That’s your first sentence.
A. Well, the tax implications and the tax structure of a potential sale or purchase of the shares held by Lise.
512 Q. All he was looking at was the issue of the shares being bought from Lise, nothing else.
A. Well, yes.
[75] I find that Mr. Chambers knew that he was the representative of Mr. Mason dealing with Mr. Perras to obtain the tax advice that Mr. Mason required to enable Mr. Chambers to negotiate the settlement. On March 13, Mr. Chambers contacted Mr. Perras on behalf of Mr. Mason at his request. Mr. Chambers sent the initial three questions to Mr. Perras. He received and dealt with Mr. Perras’ preliminary advice and warning against structuring the settlement as a purchase of shares by Mr. Mason personally. On March 17, Mr. Chambers sent to Mr. Perras the urgent request for further advice during the settlement conference. He had the telephone call with Mr. Perras in which Mr. Chambers sought and received advice about a spousal rollover. He received the email confirming that advice that day.
[76] I will deal with the context of the litigation as a whole below. As between the plaintiff and Perras Mongenais, the record before me allows me to make all necessary findings of fact and apply the law to the facts in a fair and just manner. While the issues involving Mr. Chamber’s retainer of Mr. Perras and how Mr. Chambers dealt with the advice he received may be of relevance to the plaintiff’s claims against Mr. Chambers and his firm, the plaintiff’s entire claim against Perras Mongenais is captured in five contemporaneous emails – three on March 13 and two on March17, 2014 and one telephone call between Mr. Chambers and Mr. Perras on March 17, 2014. There are no further witnesses required to put this evidence before the court. All of the fact witnesses have been cross-examined extensively. There are no credibility issues. The emails speak for themselves. The content of the one telephone call is confirmed in the May 2, 2014 email and is also not contested.
[77] I find that Mr. Chambers initially approached Mr. Perras to seek input on three questions including the general point in the second question “[t]o understand the tax implications on Lise’s offer”. The advice sought by Mr. Chambers was advice concerning the tax implications of the purchase of shares from the ex-spouse as proposed in the two competing offers. Mr. Perras gave a preliminary response that clearly and plainly identified a quantified risk of at least $1.25 million in tax accruing due if Mr. Mason purchased the shares himself rather than by the redemption approach. Four days later, Mr. Chambers called back seeking urgent input on the implications of a specific tax question involving the spousal rollover elections set out in para. 1 (c) of the draft minutes of settlement that had been negotiated by Mr. Chambers and perhaps others but with no involvement of Mr. Perras. Mr. Perras raised the redemption approach again and Mr. Chambers indicated that it had been rejected by the ex-spouse but he had negotiated a tax discount in its place with accounting advice. Mr. Chambers then asked Mr. Perras for ad hoc advice on a particular clause of the draft settlement agreement that was premised on the purchase of the shares directly by Mr. Mason. Mr. Chambers did not seek an opinion from Mr. Perras. He wanted quick advice from Mr. Perras “on the fly.” Mr. Perras responded to Mr. Chamber’s request very quickly. Mr. Perras asked to be informed if Mr. Chambers required anything further of him. Mr. Chambers wrote back in the early evening to thank Mr. Perras for his helpful information.
[78] All of the advice provided by Mr. Perras was correct and responsive to the questions asked of him.
The Law
[79] Perras Mongenais says that there is no genuine issue requiring a trial on the allegations of negligence that the plaintiff makes against the firm. It says it did nothing wrong. I agree.
[80] As to Ms. Rayson’s opinion that Mr. Perras ought to have repeated his advice to Mr. Chambers, Mr. Kestenberg relies on the decision of Mossip J. in Kumar v. Atkinson, 2004 CanLII 4777 (ON SC). In that case, Mossip J. discussed the scope of the lawyers’ duty to bring home to clients the risks of particular courses of conduct. At para. 27 of the decision, Mossip J. referred to the decision in Turi v. Swaniak, 2002 CanLII 16394 (ON SC), (2002), 61 O.R. (3d) 368, in which Speigel J. wrote at p. 390:
In my view, having foreseen this risk, the defendant owed the plaintiff a duty to take reasonable steps to avoid or minimize that risk. The defendant could easily and conveniently have satisfied this duty by sending the plaintiff a short written memorandum setting out the advice concerning the proper use of the corporate name and the consequences, which would not have taken much more time or effort than writing the note. I conclude that the defendant's failure to do so, on the particular facts of this case, constituted a breach of the standard of care.
I do not think Mr. Gray's evidence on cross-examination conflicts with the conclusion that I have reached. I do not agree with Mr. Kestenberg's submission that Mr. Gray in effect endorsed the defendant's method of providing the advice. What I derive from the totality of Mr. Gray's evidence on this issue is that while the best practice is to provide the advice in writing, a failure to do so would not constitute a breach of the standard, provided that the solicitor is satisfied on reasonable grounds that the advice had been effectively brought home to the client. I find, for the reasons that I have indicated, that the advice was not effectively brought home to the plaintiff, and the defendant had no reasonable grounds for believing that it had been. [Emphasis added.]
[81] In this case, Mr. Perras did send a memo to Mr. Chambers that clearly set out the risk of Mr. Mason buying the shares personally; the $1.25 million dollars (or more) tax liability consequences of doing so; and his advice that Mr. Mason structure the proposed purchase using the redemption approach. Mr. Perras was speaking to a lawyer who could be expected to understand and did understand the plainly written explanation and advice.
[82] In Kumar, Mossip J. also discussed the decision of Southin J. (as she then was) in Girardet v. Crease and Company, 1987 CanLII 160 (BC SC), (1987), 11 B.C.L.R. (2d) 361 (B.C.S.C.) at p. 371:
But if the client has stopped her ears against unpalatable advice, in the sense of the reasons, can she later assert that the solicitor was negligent in not forcing her to listen? I think not. ...
Now a first-rate solicitor does all he can by explaining his position again and again, if necessary, to save a client from the consequences of the client’s own folly – sometimes a very wearying endeavour – but a solicitor who does not go further than quietly giving his advice and reasons once, as I find the defendant did, cannot be considered in breach of his duty of reasonable care and skill. The action must, therefore, be dismissed with costs. [Emphasis added.]
[83] Justice Southin disagrees with the view of Ms. Rayson that a lawyer is required to repeat her advice to meet the standard of care. I do not have to decide between the two standards however. No one denies that Mr. Perras did raise the issue a second time. Ms. Rayson did not seem to recognize this fact. In the telephone conversation on March 17, 2014, Mr. Perras expressed to Mr. Chambers that he saw that the minutes of settlement did not follow the redemption approach that Mr. Perras had recommended. Mr. Chambers’ response indicated that he understood that this was the case because he said that he had raised the redemption approach in the negotiations and the ex-spouse had rejected it. He then advised that with Mr. Mason’s accountants’ input, he had negotiated something else, a discount on the purchase price, in its place.
[84] Mr. Radnoff notes that Mr. Perras’ advice on the redemption approach was given with respect to offers to settle four days earlier. He argues that Mr. Perras was obliged to give fresh advice on the minutes of settlement despite the fact that they were carrying into effect the same share purchase transaction as was proposed in the earlier offers. Ms. Rayson’s evidence does not support Mr. Radnoff’s argument. Ms. Rayson says that to meet the standard of care, Mr. Perras was required to “remind Chambers of the advice that he had given three days earlier.” And that is exactly what Mr. Perras did.
[85] As to Ms. Rayson’s second opinion, that Mr. Perras was duty-bound to “inform himself of the nature and amount of the ‘tax discount,’” Ms. Rayson relies upon no legal authorities for this duty. In my view, Mr. Perras was obliged to fulfil his retainer as agreed and to meet the standard of a reasonable lawyer in doing so.
[86] In Midland Bank Trust Co. Ltd. v. Hett, Stubbs & Kemp, [1978] 3 All E.R. 571 at p. 583, cited with approval in Central Trust Co. v. Rafuse et al., 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147, 31 D.L.R. (4th) 481, Oliver J. wrote:
There is no such thing as a general retainer in that sense. The expression 'my solicitor' is as meaningless as the expression 'my tailor' or 'my bookmaker' as establishing any general duty apart from that arising out of a particular matter in which his services are retained. The extent of his duties depends on the terms and limits of that retainer and any duty of care to be implied must be related to what he is instructed to do.
Now no doubt the duties owed by a solicitor to his client are high, in the sense that he holds himself out as practising a highly skilled and exacting profession, but I think that the court must beware of imposing on solicitors, or on professional men in other spheres, duties which go beyond the scope of what they are requested and undertake to do. It may be that a particularly meticulous and conscientious practitioner would, in his client's general interests, take it on himself to pursue a line of enquiry beyond the strict limits comprehended by his instructions. But that is not the test. The test is what the reasonably competent practitioner would do having regard to the standards normally adopted in his profession, and cases such as Duchess of Argyll v. Beuselinck, Griffiths v Evans and Hall v. Meyrick demonstrate that the duty is directly related to the confines of the retainer.
[87] I accept, of course, that in cases of ambiguity as to a lawyer’s retainer, the word of the client will usually be favoured. The lawyer, as the professional, has both the duty and the opportunity to clarify her retainer with an appropriate letter or memo. But there is no ambiguity here. Mr. Chambers asked questions. Mr. Perras provided correct answers to the questions asked as circumstances allowed. When Mr. Chambers told Mr. Perras about the tax discount, circumstances were not appropriate for Mr. Perras to respond to Mr. Chambers’ urgent question about spousal rollovers with a request to be told more about the nature and amount of the tax discount. The issue was no longer whether the redemption approach would be implemented as recommended by Mr. Perras. Mr. Chambers had already told him that that ship had sailed. The redemption approach had been rejected and was off the table. Mr. Perras was not asked for an opinion on the structure of the proposed settlement as negotiated by Mr. Chambers with accounting input. The “tax discount” was presented to Mr. Perras by Mr. Chambers as an answer to the redemption issue rather than as a question. But Mr. Chambers did ask a specific question about spousal rollovers which he urgently needed answered so he could go back into a judge’s chambers and finish off a negotiation in the next several minutes. Mr. Perras provided the answer sought.
[88] I do not reject Ms. Rayson’s evidence that a prudent lawyer would want to inform himself or herself of the nature and amount of the tax discount. But I add the proviso, “if he or she was retained to do so”. Nothing in the circumstances or content of the urgent email and telephone call on March 17, 2014 suggests that Mr. Perras was invited or reasonably ought to have been expected to comment on the tax discount that Mr. Chambers had apparently negotiated knowing the risk of a purchase of shares by Mr. Mason. Nothing in the three questions posed on March 13, assuming they remained relevant during the urgent call, indicated to Mr. Perras that he was expected to comment on the nature and quantum of a discount that would be negotiated later, without his involvement or input, by his instructing counsel and with Mr. Mason’s accountants. Whether Mr. Chambers was correct or not, or at fault or not, for any perceived inadequacy of the tax discount is not before me. But nothing in the circumstances of the email and telephone call on March 17, 2014 put that question on Mr. Perras’ plate or ought reasonably to have alerted Mr. Perras that anyone was seeking his advice on the nature and quantum of the tax discount. No one was.
[89] One of the arguments advanced by Perras Mongenais and supported by counsel for Mr. Chambers on this motion is that Mr. Mason’s failure to accept the offer to re-structure the settlement to eliminate his tax burden, as negotiated later in the fall by Mr. Mongenais, prevents the plaintiff from asserting that the lawyers’ negligence caused his losses. The lawyers argue that at first, the ex-spouse refused the redemption approach and then Mr. Mason chose not to revise the settlement to accept it. On this argument, nothing that Perras did or did not do caused Mr. Mason to incur the tax prejudice that he incurred.
[90] I agree with Mr. Radnoff that the issue is also one of mitigation for the trial between Mr. Chambers and the plaintiff. Whether the revised deal broke the chain of causation or was unreasonable mitigation due to its requirement that Mr. Mason waive his appeal from the support order made at trial has nothing to do with Mr. Perras if his advice was not negligent. His liability rises or falls on the discrete dealings between himself and Mr. Chambers on behalf of the plaintiff.
[91] Mr. Radnoff argues that Mr. Perras had an ethical and legal duty to communicate clearly and effectively. Relying on cases such as Turi, cited above, Mr. Radnoff rightly argues that a lawyer has a duty to ensure that his advice is understood or “brought home” to the client. A lawyer has a duty to warn a client of adverse consequences of reasonably foreseeable risks. Mr. Radnoff argues that Mr. Perras had a duty to ensure that Mr. Mason understood that he was going to incur a $1.3 million tax liability so that he would reject the settlement offer and allow the taxes to be dealt with properly at trial.
[92] Mr. Perras dealt with Mr. Mason’s authorized agent and lawyer Mr. Chambers. This was how Mr. Mason wished the retainer to be conducted. I am aware of no basis in law for a lawyer to be required to ignore a client’s instruction that the lawyer deal with another lawyer on the client’s behalf. Mr. Chambers conveyed to Mr. Perras that he understood the issue but the ex-spouse had rejected the redemption approach. Mr. Perras’ advice was conveyed in an understandable way and was understood. What Mr. Chambers did with the advice is not an issue for Mr. Perras or relevant to the question of liability of the Perras Mongenais firm.
Assessment in the Context of the Litigation as a Whole
[93] Hryniak directs a comparative analysis of the costs and speed of summary judgment as compared to a trial. It is apparent that from the perspective of Perras Mongenais, the cost and speed of this process is far preferable than being required to be a bit player with involvement in a four day slice of a negligence action that considers a full family law proceeding from beginning to end. From the perspective of access to justice, ending distressing and expensive jeopardy sooner is always better. But there is a countervailing perspective of course.
[94] Baywood and Hryniak direct a consideration of the risk of duplication and inconsistent findings. Griva discusses discrete issues. Butera says that only bifurcated issues should be dealt with summarily.
[95] If summary judgment is granted, Mr. Mason and Mr. Chambers may still go to trial. They will be dealing with a much larger set of facts and issues. There is no doubt that the questions of whether Mr. Chambers acted prudently in dealing with Mr. Mason’s tax issues will be one of the important issues in the case. The same facts that I deal with above – the five emails and the telephone call on March 17, 2014 – will be put into evidence. Mr. Perras could be called as a witness although his evidence is fixed in emails including his May 2, 2014 email that recites his recollection of the telephone call which is not disputed by Mr. Chambers. Granting summary judgment therefore saves little evidence or time at trial. The trial will not be significantly shortened. But the parties will not be the same. Perras Mongenais will not be there as a party. Costs may be reduced as the focus of the claim sharpens on Mr. Chambers and his firm.
[96] I have considered whether there may be a risk of inconsistent findings at trial. Might a trial judge be inclined to find that Mr. Perras’ retainer was different than I have found it to be? Mr. Chambers will likely be blaming Mr. Perras at trial. But there is no crossclaim by either lawyer against the other. To the contrary, Mr. Chambers supports the request for summary judgment in favour of Perras Mongenais. He is not asserting that his ability to defend himself is prejudiced by summarily determining the claims against Perras Mongenais. The issues of prejudice, duplication, and inconsistent findings fall to be determined principally from the perspective of the plaintiff.
[97] Mr. Mason says he relied on Mr. Perras’ advice. But there is no dispute that Mr. Mason did not deal with Mr. Perras. Their only contact was a brief call in which Mr. Mason extracted himself from the relationship and put forward Mr. Chambers as his representative. Mr. Mason intentionally had Mr. Chambers carry the burden to obtain the tax advice sought from Mr. Perras. Mr. Mason wanted to have no involvement in the discussions as he wanted the lawyers to deal with the tax issues for him. Any assessment then of Mr. Mason’s reliance on Perras Mongenais turns on his discussions and involvement with Mr. Chambers and not with Mr. Perras. That is, the issue of Mr. Mason’s reliance, does not go to the issue of negligence of Perras Mongenais but is an issue for resolution among Mr. Mason, Mr. Chambers, and his firm.
[98] Mr. Chambers will, at minimum, argue that Mr. Mason knew and agreed that he was not relying on Mr. Chambers for tax advice. He had Mr. Chambers retain Mr. Perras and accountants to provide the necessary tax advice. But none of that requires findings on the dealings between Mr. Perras and Mr. Chambers in my view. I make no findings on what Mr. Chambers was required to do or whether he properly carried out his duties to the plaintiff whatever they may have been. I make no credibility findings on this motion. At trial, the judge may look at the five emails and the telephone call between Mr. Perras and Mr. Chambers to assess how Mr. Chambers acted vis-à-vis the plaintiff. But she or he will not be called upon to make findings that I have made as to the facts and duties specifically as between Messrs. Perras and Chambers on behalf of Mr. Mason.
[99] I recognize that nothing is certain and there are risks of both duplication and that a judge could look at the same undisputed facts that I have reviewed and possibly see them differently. But there is a further countervailing factor as well. Even where there is some overlap, as provided in the last sentence of para. 60 of Hryniak, “the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost effective approach.” At para. 25 of Hryniak, the Supreme Court expressed in strong terms the need for people to be able to access speedier justice where appropriate:
Prompt judicial resolution of legal disputes allows individuals to get on with their lives. But, when court costs and delays become too great, people look for alternatives or simply give up on justice.
[100] I post to the efficient and affordable column on the comparative ledger the ending of the case against Perras Mongenais and the refocusing of the case solely on Mr. Chambers. This is not just a resolution of a single issue as among all the same parties. Rather a significant party will be out of the case. Its costs will end. Mr. Perras’ jeopardy will end. Costly discovery processes involving the firm will end for all parties. The case will be streamlined as the plaintiff now focuses solely on Mr. Chambers and his firm. Opportunities for summary resolution should be enhanced as issues are narrowed. Settlement prospects for the remaining parties will also be enhanced.
[101] In the proportionality column of the comparative ledger I consider the four competing policies stressed by Pepall J.A. in Butera:
Delay - This motion has delayed the action from proceeding to discovery. I am not clear on why examinations for discovery at least of Mr. Chambers could not have proceeded in the interim. No directions requiring documentary discovery were made in the scheduling case conference. In any event, the transcripts of the examinations of Messrs. Chambers, Mason, and others should also go a long way toward either shortening or eliminating the need for much further oral discovery.
Expense - The motion process has been expensive no doubt. Even if some of the transcripts are used at trial, there will be an additional cost of dealing with the defendants’ separately as opposed to together. However, as noted above, some expenses may be saved or reduced with Perras Mongenais out of the action and some or all of discovery being replaced by the cross-examination transcripts from this motion. Moreover, whether all costs lay at Perras Mongenais’ feet is questionable. The plaintiff chose to sue both firms knowing that Mr. Perras’ role was brief and discrete from the plaintiff’s dealings with Mr. Chambers and his accountants. Mr. Mason knew that he dealt with Mr. Chambers and his accountants and had no dealings of substance at all with Mr. Perras.
Judicial Resources - I am not sure that judges can assess the effect of summary judgment on judicial resources in individual cases. I have written comprehensive reasons. They do resolve the case between the plaintiff and Perras Mongenais. The decision was released on a timely basis causing no apparent strain on resources.
The Expansive Trial Record - Finally, I have found that the record in this motion likely is as expansive as the record would be at trial in relation to the issues between the plaintiff and Perras Mongenais. I agree with Mr. Kestenberg and find that that the issues are sufficiently discrete that there is no realistic risk of inconsistent findings.
[102] In all, I do not see how this case differs in kind from Hryniak itself. The motion does not just resolve a single issue among parties who will all remain at the trial. The claims against Perras Mongenais are being brought to an end. On balance, there is a risk of overlap with the issues that remain against the other parties, but, in my view, the questions are sufficiently discrete that the risk of prejudice and, especially, inconsistent findings, is small. Weighed against that is the early end of the case against Perras Mongenais and the efficient refocusing of the remaining case on Mr. Chambers and his firm alone. The facts, issues, and circumstances on this motion lead to the conclusion, as in Hryniak, that it is in the interests of justice to end the case against an important player.
[103] I am not prepared to accept a bright line rule that consigns to the delays, distress, and inefficient costs of the trial process, every case that might possibly have a risk of duplication or inconsistent verdicts when partial summary judgment is sought. Clever counsel will almost always be able to imagine a scenario where such risks might exist. There is a balancing to be performed – weighing the realistic risks against the benefits of a partial summary process. In this case, I do not even know if there will be a trial required. I do not know, for example, if the remaining case against Mr. Chambers and his firm might be soluble on its own motion for summary judgment or through a customized process designed with case management input to avoid a full on trial. It is not obvious to me that there will be credibility issues or such heavily competing factual narratives as to require a full trial as opposed to a paper record. The course of conduct in issue is very well documented as it involved settlement discussions among lawyers and accountants in litigation proceedings. Even if there are some credibility issues, the enhanced powers available under Rules 20.04 (2.1) and (2.2) including a mini-trial may well suffice. If those outcomes are speculative, so too is any conclusion that the remaining case will definitely go to trial or that there is an air of reality to any likelihood of inconsistent findings at such a trial if any.
[104] Before being scheduled, motions for partial summary judgment require case management at a case conference as provided for in Griva. The court will assist counsel and the parties, where possible, to design the most efficient, affordable processes for the proportionate resolution of each case. Case management directions at and after the scheduling of motions for partial summary judgment help implement the important goals outlined in Hryniak, enhance settlement prospects, and ensure that each case gets just the process that it needs.
Result
[105] Order to go granting summary judgment dismissing the action against Perras Mongenais.
[106] Perras Mongenais is entitled to its costs on a partial indemnity basis for the entire action. I have reviewed the parties’ costs outlines. The rates billed by Mr. Kestenberg, especially for himself, are very reasonable and reflect a LawPro discount. The hours too are reasonable in response to the volume of material and numerous witnesses put up against the motion. In light of Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ON CA) and the importance of ensuring that costs are fixed at a quantum that is reasonably anticipated by the paying party, and reviewing Mr. Radnoff’ costs outline just for the motion, in my view, Mr. Mason should pay costs to the defendant Perras Mongenais on a partial indemnity basis fixed in the amount of $55,000 all-in forthwith.
F.L. Myers J.
Released: March 6, 2018
COURT FILE NO.: CV-16-548102
DATE: 20180306
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MICHAEL MASON
Plaintiff
– and –
PERRAS MONGENAIS, BLUMBERG SEGAL LLP and SCOTT D. CHAMBERS
Defendants
REASONS FOR JUDGMENT
F.L. Myers J.
Released: March 6, 2018