COURT FILE NO.: CV-17-576350
DATE: 20191129
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
COCO PAVING INC.
Plaintiff /Responding Party
– and –
WILLMS & SHIER ENVIRONMENTAL LAWYERS LLP and RICHARD BUTLER
Defendants / Moving Parties
Albert M. Engel, Nina Perfetto and Kyle Kuepfer, for the Plaintiff / Responding Party
Sean Dewart and Chris Donovan, for the Defendants / Moving Parties
HEARD: January 30 and September 29, 2019
JUSTICE S. nakatsuru
[1] The Defendants, Richard Butler and his law firm, Willms & Shier Environmental Lawyers LLP, acted for the Plaintiff, Coco Paving Inc. (“Coco Paving”), in a Ministry of Environment and Climate Change (“MOECC”) prosecution in 2014. Coco Paving had an insurance policy with AIG Insurance Company of Canada (“AIG”). AIG had agreed to cover the legal costs to defend the charges. Coco Paving has alleged that Mr. Butler misrepresented a settlement agreement with the Crown prosecutor. This led to AIG capping its coverage for the legal costs. Coco Paving is suing Mr. Butler and his firm for negligent misrepresentation, breach of the retainer agreement, and professional negligence.
[2] The Defendants have brought a summary judgment motion seeking to dismiss the actions against them. The Plaintiff submitted that there were genuine issues requiring a trial. After reviewing the materials and hearing submissions, I found that there was a genuine issue requiring a trial. There were credibility and reliability issues that required testimony. This could not be resolved on the written record. Thus, a mini-trial was conducted. After hearing from the witnesses, both Plaintiff and Defendants now seek summary judgment in their favour.
[3] For the following reasons, I grant the Defendants’ summary judgment motion.
A. OVERVIEW OF THE CASE
[4] Coco Paving is a business that builds roads. Jennifer Coco is its Chief Executive Officer. On March 11, 2013, in Windsor, Ontario, a worker of Coco Paving struck a gas line while working on a project to install new storm sewers and water mains. This released gas into the environment and closed the tunnel to Detroit for a period of time. As a result, MOECC charged Coco Paving with an offence under the Environmental Protection Act, R.S.O. 1990, c. E-19 (the “EPA charge”).
[5] On May 7, 2014, Coco Paving retained Willms & Shier to act as its defence counsel. Mr. Butler had primary carriage of the case. He took instructions from Coco Paving’s in-house lawyers. Those in-house lawyers changed over time. Mr. Edward Pendergrast and Mr. Adam Lewinberg were counsel during the period in which this litigation took place. In response to the EPA charge, Coco Paving’s position was that it had taken all reasonable steps to avoid the incident. Coco Paving did not wish to plead guilty. In its business, gas line breaks were not an infrequent occurrence and if it was convicted of the EPA charge, any subsequent conviction would lead to a minimum fine of $100,000.
[6] Coco Paving had an insurance policy with AIG to cover the fines, legal costs, and disbursements to defend the charge. Further, Clause 2 of the policy provided that AIG had the right to defend including but not limited to the right to appoint counsel, and the duty to defend such claims. Clause 4 required Coco Paving to cooperate with AIG to defend the claim. Clause 3 stated:
The Company [AIG] will present any settlement offers to the Insured, and if the Insured refuses to consent to any settlement within the limits of the liability of the Policy recommended by the Company and acceptable to the claimant, the Company’s duty to defend the Insured shall then cease and the Insured shall thereafter negotiate or defend such Claim independently of the Company and the Company’s liability shall not exceed the amount, less the Deductible or any outstanding Deductible balance, for which the Claim could have been settled if such recommendation was consented to.
[7] On May 15, 2014, Brian Taylor, an AIG claims examiner, agreed to cover the legal costs with Mr. Butler acting as the defence lawyer. Mr. Butler, who had not worked with AIG before, was to include Mr. Taylor on communications regarding the case. Mr. Butler did not receive a copy of the policy nor did he give coverage advice about it in the litigation.
[8] On May 23, 2014, AIG gave Mr. Butler a document titled “Litigation Management Guidelines” which set out the policies and practices he was to follow in providing legal services that were being covered under the policy. In the Guidelines, the Defendants were required to communicate all significant case developments to AIG including any settlement overtures by other parties.
[9] Mr. Pendergrast instructed Mr. Butler to inquire with the Crown, Ms. Kromkamp, about her position on resolution and fine.
[10] On June 27, 2014, Ms. Kromkamp offered to resolve the charge on the basis that Coco Paving plead guilty with a joint submission for a $325,000 fine plus a 25% victim surcharge (“VS”). The Crown’s position was that the applicable statutory fine was in the range of $100,000 to $10 million due to Coco Paving’s three previous ticket convictions.
[11] On July 2, 2014, Mr. Butler recommended that the Crown’s offer be rejected. Both Coco Paving and Mr. Taylor agreed. After this, Mr. Butler interviewed the Coco Paving employees involved in the March 2013 gas strike. After the interviews, Mr. Butler had concerns about the credibility of some of these witnesses.
[12] On July 16, 2014, Mr. Taylor wrote to Mr. Butler asking about the likelihood of a successful prosecution and whether the Crown would be open to negotiation on the fine. The next day Mr. Butler responded advising that he had interviewed Coco Paving personnel and that more investigation on the due diligence investigation needed to be conducted. After that investigation, he would provide an opinion about available defences and due diligence arguments pursuant to the litigation plan and timetable. Regarding the second question, Mr. Butler replied that the Crown would most certainly negotiate but Coco Paving would have to show a strong defence and a lack of fear to litigate. A pre-trial would be conducted at which time that position could be put forward.
[13] On July 17, 2014, Mr. Taylor thanked Mr. Butler for the update and advised that he would await the analysis and that they should schedule a meeting with Ms. Coco. The same day, Mr. Butler sent Ms. Coco and others an email advising about next steps and about the analysis that he was preparing. He wrote that he had also suggested to Mr. Taylor at AIG that a strategy should be discussed to bring the Crown “back to reality” regarding the fine. He asked if Ms. Coco wished to discuss strategy before he went on holidays. Ms. Coco wrote to Mr. Butler reiterating their position that the Crown’s proposed fine was punitive and it should be rejected. She took the view that the incident was minor and that they needed to be very affirmative in defending their position.
[14] During the summer, Mr. Butler continued his preparations. A pre-trial conference was scheduled for October 30, 2014. Mr. Butler retained experts on the issue of whether the adverse effect of the gas leak was non-existent or negligible and on Coco Paving’s due diligence defence.
[15] On September 12, 2014, Mr. Butler provided Mr. Lewinberg with a memorandum setting out the likelihood that the Crown could prove its case, the strengths and weaknesses of the due diligence defence, and next steps in the litigation. His conclusion was the Crown was likely able to prove the elements of the offence but the due diligence defence was a reasonable one. That said, the margin between a successful due diligence defence and conviction was, in Mr. Butler’s view, very close given the credibility issues with Coco Paving’s witnesses. In the end, he came to the view that it was more likely that Coco Paving would be convicted.
[16] On October 30, 2014, Mr. Butler attended the pre-trial before a Justice of the Peace in Windsor. Mr. Lewinberg and Joseph Sbrocca, the Executive General Manager of Coco Paving, attended as well. After hearing submissions from counsel, the Justice of the Peace sent Mr. Butler and Ms. Kromkamp into the hallway to discuss settlement.
[17] In the hallway, Mr. Butler and Ms. Kromkamp spoke. Mr. Lewinberg was standing with them and Mr. Sbrocca was a few feet away. Mr. Butler testified that Ms. Kromkamp advised that she would consider revising her settlement position if Coco Paving disclosed the gas loss due to the incident and the scope of the due diligence efforts. Mr. Butler testified that Ms. Kromkamp said she would consider the statutory minimum of $100,000 plus the VS.
[18] Following the pre-trial, Mr. Sbrocca drove Mr. Butler and Mr. Lewinberg to the Windsor airport. They discussed the need to consider the settlement especially given concerns about the credibility of Coco Paving’s witnesses.
[19] On November 3, 2014, Mr. Butler reported to Mr. Taylor about the developments including settlement discussions at the pre-trial. Mr. Butler recommended providing the Crown with the information requested to continue settlement negotiations. This email was copied to Mr. Lewinberg.
[20] On November 5, 2014, Mr. Butler along with other members of his firm had a teleconference with Ms. Coco and Mr. Lewinberg. Mr. Butler advised of the risks about going to trial, though he specified he was prepared to proceed to trial. Ms. Coco confirmed that she did not wish to resolve the charges and instructed Mr. Butler to proceed to and prepare for trial. Her position was that it was not feasible for Coco Paving to pay a $100,000 fine every time a common occurrence such as a gas strike occurred. The same day, Ms. Kromkamp asked for the disclosure that she and Mr. Butler had discussed. Mr. Butler asked Mr. Lewinberg and Mr. Taylor about the disclosure, recommending it be provided. Mr. Lewinberg instructed him to provide a redacted gas invoice to Ms. Kromkamp, which was done.
[21] Later that day, Mr. Butler had a telephone conversation with Mr. Taylor, who suggested that AIG may want to resolve the case on an economic basis as it was concerned that the costs of proceeding to trial could exceed the fine that was negotiated.
[22] On November 10, 2014, Mr. Butler provided Ms. Coco with the memorandum she requested on November 7^th^, regarding whether the gas strike caused an adverse effect, proof of which was required to sustain the charges. Ms. Coco did not agree with Mr. Butler’s opinion. The memorandum was not provided to AIG pursuant to Ms. Coco’s instructions.
[23] On November 12, 2014, Mr. Butler spoke with Ms. Coco, Mr. Lewinberg, Mr. Sbrocca, and representatives of Coco Paving’s insurance brokers, Master’s Insurance, about the strengths and weaknesses of the case. Ms. Coco did not agree with Mr. Butler’s analysis of the situation. The insurance brokers wished Mr. Butler to advise AIG that Coco Paving’s chances of success at trial was very good, but Mr. Butler was concerned about the credibility of its witnesses. He recommended that further disclosure be given to the Crown for settlement purposes. Ms. Coco instructed him not to do so.
[24] On November 13, 2014, Mr. Taylor spoke with Mr. Butler. When Mr. Taylor told him that it was his understanding from the insurance brokers that Mr. Butler had advised Coco Paving that it was nearly certain to succeed at trial, Mr. Butler advised that this was not his opinion. Mr. Taylor asked for a memorandum setting out the strengths and weaknesses of the case.
[25] On November 17, 2014, Ms. Kromkamp asked Mr. Butler about further defence disclosure. Mr. Butler responded that the redacted gas invoice should be enough. When this discussion was reported to Mr. Lewinberg, he instructed Mr. Butler not to provide any further disclosure.
[26] On November 18, 2014, Mr. Butler provided Mr. Lewinberg with a draft of the memorandum that Mr. Taylor had sought about the strengths and weaknesses of the case. Mr. Butler advised Mr. Lewinberg that this memorandum had been requested by Mr. Taylor and he asked Mr. Lewinberg for his thoughts before he forwarded the memorandum to Mr. Taylor. Mr. Butler’s view in the memorandum was that there was a 60% chance of conviction and a 40% chance of acquittal. He noted that the opinion was consistent with his earlier September memo and their discussion in the car. Again, Mr. Butler was concerned about Coco Paving’s problematic witnesses.
[27] Mr. Butler’s email and memorandum were then sent by Mr. Lewinberg to Ms. Coco. Mr. Lewinberg asked Ms. Coco to schedule a time to discuss this and to give direction to Mr. Butler. In response, Ms. Coco advised Mr. Butler on November 18^th^ that she was unable to support his position and that Coco Paving would seriously consider getting an alternative legal opinion. Mr. Butler wrote to Ms. Coco copying Mr. Lewinberg that he could arrange such an opinion if required. Mr. Butler noted that Mr. Taylor had requested this memorandum because Mr. Taylor was uncomfortable with the comments made by Master’s Insurance on the phone the previous week. Mr. Butler noted that the memorandum was not meant to dissuade Coco Paving from fighting the charge or that their firm was not up to the task. Mr. Butler emphasized that their firm was committed to Coco Paving and advocating on its behalf.
[28] On November 19, 2014, Ms. Coco instructed Mr. Butler to prepare for trial.
[29] On November 25, 2014, Mr. Taylor followed up with Mr. Butler about the memorandum. Mr. Butler provided him with the memorandum that he had given on November 18^th^ to Coco Paving (the “Memorandum”). Mr. Taylor then wrote to Coco Paving that day advising that if it did not instruct Mr. Butler to provide the Crown with further disclosure to resolve the charges, it would limit the coverage of legal fees to $135,000 according to the terms of the policy.
[30] Coco Paving advised AIG that it would not pursue settlement and AIG limited coverage on December 1, 2014.
[31] On March 3, 2015, Coco Paving advised Mr. Butler that it was retaining Fogler, Rubinoff LLP to represent it in defending the charge.
[32] On May 22, 2015, Mr. Albert Engel, new counsel for Coco Paving, wrote to Ms. Kromkamp to request the charge be withdrawn.
[33] On June 15, 2015, Ms. Kromkamp advised that she would not drop the charge. She advised she would resolve the case with a fine of $165,000, plus VS.
[34] When Mr. Engel asked Ms. Kromkamp about the offer described by Mr. Butler, Ms. Kromkamp advised that she could not recall such an offer of $100,000.
[35] The case went to trial and on June 28, 2016, the Justice of the Peace acquitted Coco Paving. MOECC appealed and this appeal was later dismissed.
[36] Coco Paving wrote to AIG in September of 2016 to request it reconsider its decision to limit coverage. On January 9, 2017, AIG advised it would not.
[37] On June 1, 2017, Coco Paving issued the Statement of Claim in this action.
B. TEST FOR SUMMARY JUDGMENT
[38] Pursuant to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, a plaintiff is entitled to move for summary judgment dismissing all or part of a defendant’s claim. Rule 20.04(2) mandates that the court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to all or part of the claim.
[39] In Hryniak v. Mauldin, 2014 SCC 7, 1 S.C.R. 87, at para. 45, the Supreme Court of Canada confirmed that summary judgment is a significant alternative model of adjudication. Rule 20 provides judges with fact-finding powers (i.e., the power to weigh evidence, evaluate credibility, and draw inferences) if required in order to eliminate unmeritorious claims that have no chance of success at trial.
[40] Determination of a motion for summary judgment involves a two-step approach. A judge must:
Determine whether there is a genuine issue requiring trial based only on the evidence before him or her, without using the fact-finding powers. If there is no genuine issue requiring a trial, summary judgment must be granted; or
If there appears to be a genuine issue requiring a trial, the judge should then determine whether the need for a trial can be avoided by using the fact-finding powers to weigh evidence, evaluate credibility, and draw inferences.
[41] Notably, in Hryniak, the Supreme Court of Canada held that the focus should not be on what further or other evidence could be adduced at trial, but rather, on whether a trial is required. A trial is not required when the summary judgment 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 more proportionate, more expeditious and less expensive means to achieve a just result: Hryniak, at para. 49.
[42] If there appears to be a genuine issue requiring a trial, then the court should determine if the need for a trial can be avoided by using the fact-finding powers under Rule 20.04. The use of the fact-finding powers will not be against the interest of justice if the use will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
[43] The Supreme Court of Canada confirmed that a documentary record, particularly when supplemented by the court’s fact-finding powers, is often sufficient to resolve material issues fairly and justly: Hryniak, at para. 57.
[44] A responding party may not rest solely on the allegations or denials in the party’s pleadings. Under Rule 20.0(2), they must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial. In the absence of detailed and supporting evidence, the case law has held that a self-serving affidavit does not create a triable issue: Guarantee Co. of North America v. Gordon Capital Corp., 1999 CanLII 664 (SCC), [1999] 3 S.C.R. 423, at para. 31. Each side must “put its best foot forward” with respect to the existence or non-existence of material issues to be tried. A court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial.
C. ANALYSIS
I. A Genuine Issue Requiring Trial
[45] After the initial hearing, I found there was a genuine issue requiring a trial. While there was considerable documentary evidence that I could rely upon, I found that the credibility and reliability issues of the main witnesses required a trial. This could not be determined on the affidavits and the written transcripts of the cross-examinations conducted. To that extent, I agreed with Coco Paving.
[46] Moving to the second stage, I found that a trial could be avoided if I used my expanded fact-finding powers. To achieve a just result, viva voce evidence from three witnesses was heard: Ms. Coco, Mr. Butler, and Ms. Kromkamp. Doing this was a more proportionate, more expeditious and less expensive means to achieve a just result.
[47] Fundamentally, Coco Paving makes two claims against Mr. Butler: (1) negligent misrepresentation; and (2) professional negligence.
[48] Negligent misrepresentation occurs when: (a) a duty of care exists between the representor and the represented; (b) the representation made to the represented was untrue, inaccurate or misleading; (c) the representation was made negligently; (d) the represented reasonably relied on the misrepresentation; and (e) the represented suffered damages as a result of the reliance: The Queen v. Cognos Inc., 1993 CanLII 146 (SCC), [1993] 1 S.C.R. 87, at para. 34 [Cognos].
[49] A lawyer will be negligent when their conduct has fallen below the standard of care of a reasonably competent solicitor in a similar situation giving rise to damages: Krawchuk v. Scherbak, 2011 ONCA 352, 332 D.L.R. (4th) 310.
[50] On this summary judgment motion, the following are essentially the issues that need to be determined:
(1) What transpired between Ms. Kromkamp and Mr. Butler in terms of settlement discussions held on October 30, 2014?;
(2) What was communicated to Coco Paving about the settlement discussions and was it accurate?; and
(3) Did Mr. Butler fall below the standard of care and breach the contract with Coco Paving by being in a conflict of interest, preferring AIG’s interest, or sending AIG privileged settlement discussions and confidential assessments of the defence to AIG, and thereby prejudicing Coco Paving’s insurance coverage?
II. The “Offer” of October 30, 2014
[51] Coco Paving submits that the Crown did not make any offer at the pre-trial to Mr. Butler. Coco Paving points to Ms. Kromkamp’s testimony where she does not recall making such an offer and the fact she made no notes or other written confirmation of any such offer. Coco Paving’s theory of its case is that Mr. Butler was more interested in impressing AIG than protecting Coco Paving’s interest. He was interested in impressing AIG because it was a potentially lucrative client. The Plaintiff alleges that to impress AIG, Mr. Butler attempted to manufacture a settlement of the EPA charge and misrepresented the existence of an “offer” from Ms. Kromkamp as a crystallized settlement opportunity. This furthered the divergence between Coco Paving and AIG’s interests, which ultimately resulted in AIG limiting its coverage of Coco Paving in its defence against the charge.
[52] I reject this submission.
[53] First, I accept Mr. Butler’s testimony about the settlement discussions with Ms. Kromkamp after the pre-trial.
[54] Mr. Butler was candid and forthright in his evidence. He was cross-examined thoroughly, and his testimony was placed under considerable pressure. He remained substantially consistent and was not impeached. When asked about the various descriptions he gave of the emails at different times, his explanations were credible. In short, I found no significant reason not to believe him.
[55] I find his account to be plausible. The Justice of the Peace had suggested that counsel have further settlement discussions. Given the circumstances, this occurred informally in the hallway. The Crown indicated a willingness to consider a fine lower than the fine previously suggested. This was made conditional on seeing two pieces of evidence that were in the possession of the defence: the amount of gas released and the effect on the environment and the due diligence evidence. Such a Crown position is both believable and reasonable. Given the informal circumstances, I would not expect that such a position would be memorialized in writing as it had not yet crystallized to the point of acceptance.
[56] Mr. Butler’s testimony is further confirmed by the November 3^rd^ email to Mr. Taylor which was copied to Mr. Lewinberg. This email outlines what Mr. Butler says occurred at the pre-trial. In essence, it was an offer to consider a lower fine subject to conditions. I will outline this in more detail when I deal with the second issue. For now, I find that Mr. Butler’s immediate confirmation of this conversation via email supports his credibility and the reliability of his account. I further note that in several other emails, in one way or another, Mr. Butler also contemporaneously confirmed the details of this conversation that he had with Ms. Kromkamp at the pre-trial.
[57] I find that it defies common sense that Mr. Butler would make up out of whole cloth this conversation if it did not happen. He knew there were witnesses present. Mr. Lewinberg was present. Perhaps Mr. Sbrocca could have overheard it. If no such offer was made, it would have been easy to dispute it by other witnesses. Two witnesses who had a bias in favour of their employer, Coco Paving. I accept that the three individuals spoke about it in the car ride back to the airport. That too has the ring of truth. In addition, Mr. Butler was aware that Ms. Kromkamp could account for this conversation. It makes little sense for Mr. Butler to make up the settlement discussions if it did not happen; such a fabrication would have invariably come to light.
[58] Mr. Lewinberg, who was present at the pre-trial, gave no evidence on the motion. Significantly, during the narrative of the back and forth communications between Mr. Butler, AIG, and Coco Paving, Mr. Lewinberg never disputed or questioned Mr. Butler’s description of what happened. Mr. Lewinberg was copied on the November 3^rd^ email. Nothing was raised by Mr. Lewinberg indicating any disagreement with Mr. Butler’s portrayal of the conversation with Ms. Kromkamp or that Mr. Lewinberg found Mr. Butler’s description to be misleading in any way.
[59] Further, I find that Ms. Kromkamp’s conduct on November 5^th^ when she emailed Mr. Butler to request disclosure of the information discussed at the pre-trial also confirms Mr. Butler’s evidence of the settlement discussion. That is, her request supports Mr. Butler’s testimony that the Crown agreed to reconsider her position once she received defence disclosure.
[60] I find Ms. Kromkamp to be a completely honest witness. However, I prefer Mr. Butler’s recollections of the conversation over that of Ms. Kromkamp’s. His memory of it is better than hers. She has admitted that she has only a vague recollection of the hallway conversation and recalls nothing specific.
[61] I appreciate that Ms. Kromkamp did not make any notes of the alleged discussion about a potential resolution for $100,000. Ms. Kromkamp admitted in her testimony that she may or may not have made notes if that discussion was had. In the circumstances where such an offer was not firm but conditional, the fact that she may not have made a note of it is understandable, in my view.
[62] When the whole of her evidence is scrutinized, she does not contradict Mr. Butler’s evidence.
[63] There is an inconsistency between Mr. Butler and Ms. Kromkamp about what she said during the pre-trial discussions that she could not go below the statutory minimum without instructions. Ms. Kromkamp testified that she did not need such instructions and would not have said that. I have no reason to disbelieve her. This makes sense that as a prosecutor she had an independent discretion to exercise and did not require specific instructions from her client. However, I find the discrepancy to be insignificant. Ms. Kromkamp acknowledged that Mr. Butler had an argument that the statutory minimum did not apply and that this was something she would consider and possibly discuss with a colleague. In my view, the inconsistency can readily be explained by an innocent misunderstanding about what was said or a small failure in recollection. Ms. Kromkamp could readily have said she would speak with a colleague, which was erroneously interpreted by Mr. Butler as a need to seek instructions.
[64] Any other alleged inconsistencies between their evidence are minor and can be explained by the fact that they are different witnesses doing their best to recall the same event.
[65] Ms. Kromkamp does admit in her cross-examination that she vaguely recalls $100,000 being discussed as the mandatory minimum. Thus, in other words, she does allow that the figure was discussed.
[66] In conclusion, I find that Ms. Kromkamp does not dispute Mr. Butler’s testimony. She candidly and forthrightly agreed with Mr. Butler’s counsel in cross-examination that this was the case.
[67] As a result of my factual findings regarding the evidence of Mr. Butler and Ms. Kromkamp, I find that in the hallway Mr. Butler and Ms. Kromkamp had the informal settlement discussions as testified to by Mr. Butler.
[68] In the conversation between Ms. Kromkamp and Mr. Engel in June of 2015, Ms. Kromkamp’s understandable lack of recollection of the specifics of the informal settlement discussions she had with Mr. Butler has mistakenly led Coco Paving to question the very existence of that discussion. Coco Paving’s belief arose due to the breakdown in the solicitor-client relationship between Mr. Butler and Coco Paving. Put another way, Coco Paving simply no longer trusted Mr. Butler’s advice or his account about how the case had been handled. Thus, Coco Paving made the inferential leap from Ms. Kromkamp’s lack of recollection to a conclusion that Mr. Butler fabricated the settlement discussions. This leap was not warranted.
III. The Alleged Misrepresentation of the Offer
[69] The standard of care that a lawyer must meet is an objective standard. In Cognos, at para. 56, the Supreme Court of Canada described it in the following way:
The applicable standard of care should be the one used in every negligence case, namely the universally accepted, albeit hypothetical, "reasonable person". The standard of care required by a person making representations is an objective one. It is a duty to exercise such reasonable care as the circumstances require to ensure that representations made are accurate and not misleading: see Hedley Byrne, supra, at p. 486, per Lord Reid; Hodgins v. Hydro-Electric Commission, supra, at pp. 506-9, per Ritchie J. for the majority of this Court; H.B. Nickerson & Sons v. Wooldridge, supra, at pp. 135-36; J. G. Fleming, The Law of Torts (7th ed. 1987), at pp. 96-104 and 614; Linden, supra, at pp. 105-19; and Klar, supra, at pp. 159-60. Professor Klar provides some useful insight on this issue (at p. 160):
An advisor does not guarantee the accuracy of the statement made, but is only required to exercise reasonable care with respect to it. As with the issue of standard of care in negligence in general, this is a question of fact which must be determined according to the circumstances of the case. Taking into account the nature of the occasion, the purpose for which the statement was made, the foreseeable use of the statement, the probable damage which will result from an inaccurate statement, the status of the advisor and the level of competence generally observed by others similarly placed, the trier of fact will determine whether the advisor was negligent.
[70] In the case at bar, it is not enough that the Defendants prove that the pre-trial hallway conversation took place. The Defendants must prove that this discussion with the Crown was accurately represented to Coco Paving and that Mr. Butler met the standard of care.
[71] In this regard, the November 3^rd^ email to Mr. Taylor copied to Mr. Lewinberg is important. This email outlines what Mr. Butler said occurred at the pre-trial:
In the hallway, in further negotiations with the Crown, the Crown offered to consider a lower fine if Coco Paving will share some of its evidence of the magnitude of the gas loss, and perhaps additional evidence on the scope of Coco Paving’s due diligence efforts. I told the Crown candidly that Coco Paving will not settle for a six figure fine. For that amount, a trial is a viable alternative. Second, Coco Paving can’t pay $100,000 every time there is a gas strike. Strikes are too common in the construction industry, despite any level of due diligence. The Crown said that she can’t go below the $100,000 statutory minimum without instructions and without additional evidence, but will consider the statutory minimum if we provide appropriate evidence. We agreed to provide some of the requested information.
Although we don’t have a firm offer, the Crown is willing to move from $325,000 (plus victim surcharge, for a total of $406,250) to $100,000 (plus victim surcharge, for a total of $125,000) subject to additional information. That is a substantial move. [Emphasis added.]
[72] I find that this reporting of the discussion after the pre-trial is an accurate account of what took place in the hallway conversation. In other words, it is consistent with Mr. Butler’s testimony.
[73] The very wording, that the Crown would “consider” the statutory minimum, reveals that this is not a settlement offer. It was not capable of being accepted as the Crown had not yet decided to make the offer of the statutory minimum. In addition, by its own terms, it could not simply be accepted upon fulfillment of its conditions. While the release of the volume of gas is something that could be readily confirmed, one cannot expect that a Crown prosecutor would make an offer that could be accepted that was dependent upon being convinced of the strength of a due diligence defence without ever seeing the evidence supporting it.
[74] This is emphasized by Mr. Butler’s express acknowledgment that this was not a “firm offer.” While it is true that Mr. Butler advised that he believed the Crown was willing to entertain a substantial reduction in the fine, any reasonable person would understand that this settlement offer could not be achieved until further discussions or negotiations were successfully completed.
[75] In addition, I accept Mr. Butler’s evidence that on November 12, 2014, when he discussed the issue of settlement discussions with, amongst others, Ms. Coco, Mr. Lewinberg, and Mr. Ciccolini of Master’s Insurance, he emphasized that the Crown had not made a firm offer but rather was willing to consider a more moderate settlement if Coco Paving’s due diligence defence was disclosed. Mr. Butler’s evidence on this is consistent with the whole of the evidence. I do not accept Ms. Coco’s recollections. The Plaintiff has not presented any other evidence to contradict this. This confirms that Coco Paving would not have been under any mistaken belief that the Crown’s offer was one capable of being accepted.
[76] Furthermore, the conduct of the parties reveal that it was understood that this was not a crystallized offer capable of being accepted. The overall course of conduct by Coco Paving, AIG, and Mr. Butler shows that what was being considered was not whether the Crown’s offer should be accepted but rather whether further discussions and negotiations about settlement should be conducted. Put another way, it was not a conditional offer that could be accepted once the information about the volume of gas and due diligence defence was given to the Crown. Rather, these were the parameters for further discussion and negotiation. Mr. Butler conveyed to his client his view that the Crown was open and willing to entertain this. He did not convey that he had achieved a conditional offer.
[77] On November 18, 2014, in his draft memorandum to be sent to Mr. Taylor that was sent to Mr. Lewinberg for his review, Mr. Butler described the settlement situation as follows:
Following the Pre-trial, the Crown made a without prejudice conditional verbal offer of the statutory minimum amount of $100,000 subject to Coco Paving sharing additional evidence of its Health and Safety due diligence and the minimal gas loss.
[78] I find that there is nothing misleading or inaccurate about this description in and of itself. Fundamentally, it is not characterized as an offer that can be accepted. Further, it must be viewed in light of the previous memorandum and continuing discussions. While the wording is different, I find that Coco Paving could be under no misapprehension about the true nature of this settlement discussion by this description in this memorandum.
[79] I can see no other way to view this. It was accurately set out by Mr. Butler. The surrounding circumstances were such that no one could have reasonably viewed this in any other way. Mr. Taylor himself did not characterize it as an offer capable of being accepted in his letter of November 25^th^:
Defence counsel Richard Butler of Wilms Shier [sic] has advised in his recent report on the Pretrial that was held on this matter in Windsor on October 29, 2014 [sic] that the Crown has cropped its exorbitant demand for a fine in excess of $300,000 plus a victim surcharge of 25% and is willing to consider a fine in the amount of the statutory minimum of $100,000 plus a victim surcharge for a total of $125,000. Although not a formal offer, counsel is of the opinion that upon providing the Crown with documentation which they have requested, then this matter can be concluded with fine in that amount.
AIG recommends that the documentation requested by the Crown be released and defence counsel be instructed to enter negotiations with the Crown to conclude this matter on the basis of the statutory minimum fine of $100,000 and 25% victim surcharge. Additional legal costs to conclude on this basis are estimated to be $10,000.
[80] This email shows that it was Mr. Butler’s opinion that upon further negotiations, he was of the view that the Crown could be brought about to agree to the $100,000 settlement deal. This is not the same as the Crown having made that agreement to settle. Mr. Butler receiving instructions to “enter negotiations” is not the same as Mr. Butler receiving instructions to accept an offer. The fact that Mr. Taylor recommended that Mr. Butler enter into further negotiations demonstrates that the offer was not simply capable of being accepted once the conditions were fulfilled. It was clear to Mr. Taylor. I find that it was clear to Coco Paving.
[81] Coco Paving submits that other documents characterize this Crown “offer” in a fashion that is less equivocal and indicates that it was a firm offer. Put another way, Coco Paving alleges that these other documents show that Mr. Butler fell below the standard of care in failing to represent his discussions with Ms. Kromkamp accurately.
[82] One of the documents is AIG’s refusal of Coco Paving’s request for coverage after its acquittal. When it describes the “Crown’s proposed settlement”, it is not accurate. However, this communication did not originate from Mr. Butler, but rather from AIG (not Mr. Taylor).
[83] The other descriptions by Mr. Butler of this conversation must be viewed in context. These other descriptions must be assessed in light of the November 3^rd^ email and other communications that clearly indicate that this was not a firm offer. It is relevant that the Crown would only consider moving to the statutory minimum once satisfied with the information provided by Coco Paving. Coco Paving knew the parameters of this “offer” from the very beginning. If Mr. Butler referred to “a Crown offer to settle” at other times, it was more of a short-form reference to the settlement negotiations. It would not be misleading since Coco Paving was already aware of the exact nature of the offer. It must be remembered that Mr. Lewinberg was often copied on the documentation and he was keenly aware of the preliminary and conditional nature of it. Looking at the whole of the evidence, I find that Coco Paving could not have been misled. It rather understood exactly what Mr. Butler was reporting.
[84] Ms. Coco testified that it was her understanding that the Crown was willing to accept the $100,000 fine plus victim surcharge provided due diligence was provided. Key to her understanding was that this was an offer that was capable of being accepted by Coco Paving.
[85] I find Ms. Coco’s evidence is unreliable on the issue of her understanding of the settlement discussions. I do not accept Ms. Coco’s testimony that she believed it was an offer capable of acceptance. Her recollections are not as accurate as Mr. Butler’s. Aspects of the frailty of her recollection were demonstrated in cross-examination. As an example, she testified in cross-examination that she would have expected some advice about the risks of providing due diligence evidence to the Crown and that she did not receive any from Mr. Butler. When shown documentation where Mr. Butler counseled not to provide additional information to the Crown as Coco Paving was going to trial, Ms. Coco did not recall it. She went further and denied it given her lack of recollection. She eventually agreed, albeit grudgingly, that there was a defect in her memory.
[86] In addition, Ms. Coco’s evidence must be weighed through her belief, wrongly held, that Mr. Butler was acting in AIG’s and not Coco Paving’s best interest. She is understandably upset that AIG limited her coverage. In cross-examination, she was unreasonably resistant to some suggestions and did not respond directly as a result of this attitude. However, when taken to some of the emails and opinions where Mr. Butler qualified what the Crown was proposing as an offer to consider or as conditional on defence disclosure, Ms. Coco had to admit that she had no difficulty understanding this advice.
[87] To me, Ms. Coco’s purported belief in what she was being advised is contrary to the plain language used by Mr. Butler in his representation.
[88] I recognize that in some circumstances silence, failure to correct a misimpression, or half- truths can amount to a misrepresentation: Meridian Credit Union Ltd. v. Baig, 2016 ONCA 150, 394 D.L.R. (4th) 601, at para. 30. However, this is not the case here. Therefore, I find there was no negligent misrepresentation since no misrepresentation was made by Mr. Butler.
[89] Mr. Butler also submits that there was no reliance on the alleged misrepresentations by Coco Paving. Given my findings, it is unnecessary to deal with this issue.
[90] For similar reasons, I reject Coco Paving’s claim of professional negligence based on the same allegations. Further, I find Mr. Butler did not fall below the standard of care by failing to confirm the offer or by failing to follow-up with MOECC to discuss this pre-trial discussion. In the circumstances, given the nature of the pre-trial discussions and what occurred thereafter, Mr. Butler did not act unreasonably or imprudently by failing to confirm the “offer.” Further, he did not follow-up with MOECC because he was instructed by Coco Paving not to do so.
IV. Did Mr. Butler fall below the standard of care by taking instructions from AIG, being in a conflict of interest, or by sending AIG privileged settlement discussions and confidential assessments of the defence to AIG, thereby prejudicing Coco Paving’s insurance coverage? Did he breach his retainer in doing so?
[91] Coco Paving alleges that Mr. Butler fell below a reasonable standard of care by his conduct vis-à-vis AIG in a number of other ways. Coco Paving submits that Mr. Butler’s sole duty as a lawyer was to Coco Paving and that he breached this duty. A more specific claim is that he provided the Memorandum to AIG, a non-client to whom he owed no duty of care, without Coco Paving’s explicit instructions. The breach of contract claim involves the same particulars as the tort claim.
[92] On these issues, neither party adduced any expert evidence.
[93] The first observation I make about these claims is that they are not found in the Amended Statement of Claim dated June 1, 2017. There are no allegations about Mr. Butler being negligent by being in a conflict of interest, providing the Memorandum to AIG without explicit instructions, and only favoring AIG’s interest. These issues were raised in Coco Paving’s factum and in oral submissions. Since Mr. Butler was prepared to address these issues on the summary judgment motion, I will deal with them on the merits.
[94] First, in my view, even if the allegations were substantiated, Coco Paving has not suffered any damages caused by any negligent acts by Mr. Butler. AIG capped Coco Paving’s coverage, not Mr. Butler. Coco Paving has not sued AIG. After receiving his instructions from Coco Paving, Mr. Butler was preparing to go to trial. Mr. Butler was not taking his trial instructions from AIG. The fact that AIG made a decision to limit coverage did not impact upon Mr. Butler’s ability or willingness to defend his client, Coco Paving. Given this, Coco Paving did not suffer any damages from any failure arising from an alleged conflict of interest, preferring AIG, or Mr. Butler providing AIG the Memorandum. In this regard, if there is claim to be had, Coco Paving has it against AIG.
[95] Despite this, the Plaintiff argues that the damages resulted from AIG’s decision to cap coverage. However, I find that the reason for that decision depended upon AIG’s view of the settlement discussions Mr. Butler conveyed to Mr. Taylor right after the pre-trial. This was done with AIG’s approval. AIG’s decision to limit coverage was not based upon Mr. Butler’s assessment of the likelihood of success at trial. In Mr. Taylor’s view, even if successful, the economic cost of a trial would outweigh a fine imposed upon a settlement. The Plaintiff in the course of oral submissions had to concede that it all comes back to the alleged misrepresentation. It is on the basis of this misrepresentation of the Crown’s offer that Coco Paving claims that AIG capped coverage. If no such misrepresentation occurred, then no damages were caused by any negligent action by Mr. Butler.
[96] Even were I to be wrong on this, alternatively, I find no merit to Coco Paving’s claim that Mr. Butler committed professional negligence. I will explain.
(i) Conflict of Interest
[97] Coco Paving submits that Mr. Butler was in a conflict of interest in his dealings with AIG and itself over the settlement negotiations and the conduct of the trial. In short, Coco Paving submits that this conflict arose because its best interest was to take the matter to trial while it was AIG’s best interest to settle the case as the more economic resolution.
[98] To analyze this claim, the nature of the legal relationship must first be recognized. In Liability Insurance in Canada, 5th ed (Markham, ON: LexisNexis Canada, 2011), at pp. 161-162, Gordon Hilliker wrote:
The relationship of insurer, insured and defence counsel is unique. Although to the world at large it will appear that counsel is representing only the insured in the action, the fact is that in the course of that representation counsel will give advice to and take instructions from the insurer. Thus most American courts considering the question have held that defense counsel appointed by the insurer to defend the insured has two clients, the insurer and the insured...
In Canada the issue was dealt with in Chersinoff v. Allstate Insurance Co., in which the court held that counsel appointed to defend a wrongful death action on behalf of the insured must be regarded as having been jointly retained, the scope of the retainer being the defence of the insured in respect of the claim for damages.
[99] In Chersinoff v. Allstate Insurance Co. (1968), 1968 CanLII 671 (BC SC), 69 D.L.R. (2d) 653, counsel was retained under an insurance policy to defend the insured in a wrongful death action. Aikins J. held at para. 27:
The starting point now must be that the solicitors were acting as solicitors for both insurer and insured in respect to the claims for damages brought against the latter. Although the insured did not select the solicitors himself but was represented by them and became their client because of the contractual right of the insurer to conduct the defence and select the solicitors, the insured agreed as a condition of being indemnified that the insurer should have the right to select solicitors so I think the insured may properly be taken to be a party to employment of the solicitors selected. While the employment of the same solicitors for both parties came about because of the condition, the position of the solicitors in my view is that they must be regarded as having been jointly retained to represent both parties on the issues of whether or not the insured was liable to pay damages in respect to the motor accident and the amount of the damages.
[100] Thus, contrary to Coco Paving’s position, Mr. Butler had two clients in this case, and he owed duties to both.
[101] I recognize that Mr. Butler was initially retained by Coco Paving and was not selected by the insurer, AIG. However, I do not see this as making a difference in concluding that there was a joint retainer. The policy in issue specifically provided AIG with the right to defend and even appoint counsel. The fact that AIG agreed to counsel that was initially retained by Coco Paving does not fundamentally alter this state of affairs. Whether a solicitor-client relationship was created between Mr. Butler and AIG can be tested by posing the question that if a third party wished to seek the communications between Mr. Taylor and Mr. Butler, including the Memorandum, would such communications be protected by solicitor-client privilege? In my view, it would: see Caputo v. Novak, 2016 ONSC 4176, 268 A.C.W.S. (3d) 50, at para. 84; Grant, Rothstein & Campbell, Lawyers’ Professional Liability, 3^rd^ ed. (Toronto, ON: LexisNexis, 2013), at p. 3.
[102] Alternatively, even if there was no formal solicitor-client relationship between AIG and Mr. Butler, Mr. Butler nevertheless owed duties as a reasonably prudent lawyer to both Coco Paving and AIG. When a lawyer acts pursuant to a liability insurance policy, the lawyer has duties to both the insured and the insurer. The lawyer must provide to the insurer all relevant information concerning the conduct of the action against its insured. This requirement applies whether the lawyer is appointed by the insurer or the insured. Failure to provide an insurer with relevant information can lead it to deny coverage and expose the insured to liability.
[103] The mere fact that Mr. Butler had duties to both Coco Paving and AIG does not by itself place him in a conflict of interest. Furthermore, the fact that it was in AIG’s interest to accept an offer to settle for economic reasons and it was Coco Paving’s interest to refuse such an offer and go to trial did not inherently place Mr. Butler in a conflict of interest. I agree with this observation made by D.S. Ferguson in Conflict Between Insured and Insurer: An Analysis of Recent Canadian Cases, 12.2 Adv. A. (1990), at p.142:
It is commonplace for there to be “conflicts” or adverse interests between the insurer and the insured in the course of defending a third party’s claim on such issues as tactics, whether or not to settle and for how much, and how much to spend on investigation and defence preparation. These are not unacceptable conflicts; as stated in Fredrickson,[^1] they are inherent in the relationship.
[104] Thus, in order to establish that Mr. Butler fell below the standard of care by being in a conflict of interest or by failing to advise Coco Paving of a conflict of interest, there must be something more. While Mr. Butler may have considered the issue of a potential conflict of interest when he learned that Master’s Insurance was misrepresenting his views on the likelihood of success, he ultimately did not view that he had such a conflict of interest. In my opinion, this was correct. Neither Coco Paving nor AIG absolutely ruled out the possibility of a reasonable settlement as a potential option in litigation. In following Coco Paving’s instructions not to undertake further settlement discussions and to proceed to trial, Mr. Butler complied with his duties to Coco Paving. At the same time, this did not compromise his duty owed to AIG to ensure that it was provided with accurate and relevant information it required to assess risk and other factors in its consideration to apply the settlement clause in the policy.
[105] In sum, I do not see any conflict of interest arising on the evidence.
[106] I further observe that even if there was potential for a conflict of interest, Coco Paving received substantial protection from any adverse consequences resulting from it. Coco Paving chose Mr. Butler as its lawyer. Mr. Butler took instructions from Coco Paving. Mr. Butler did not divulge confidential information without instruction from Coco Paving. Mr. Butler did not give any coverage advice or report information pertinent to coverage other than what he was instructed to. Put another way, Coco Paving received its own independent counsel.
[107] In the final alternative, even if Mr. Butler owed no duties to AIG and only to Coco Paving, I conclude that Mr. Butler was appropriately taking his instructions in the conduct of the defence from Coco Paving. When Mr. Butler was instructed by Coco Paving not to further pursue settlement discussions or divulge defence information to the Crown, he did not. Even when AIG capped coverage and Coco Paving instructed Mr. Butler to proceed to trial, Mr. Butler did so.
[108] While Mr. Butler had some knowledge of the coverage policy by November 5^th^, I wish to emphasize that Mr. Butler was not involved in providing coverage advice to AIG or Coco Paving. He was not consulted about Coco Paving’s response to Mr. Taylor’s November 25^th^ letter advising that if settlement was not further pursued, AIG was going to limit coverage. Mr. Butler appropriately stayed in his role to provide opinions about the likelihood of success at trial and the status of settlement negotiations.
(ii) Acting Only in AIG’s Best Interest
[109] Coco Paving submits and relies upon several emails to argue that Mr. Butler was taking instructions from AIG and was primarily concerned about acting in AIG’s best interest rather than Coco Paving’s. I reject this submission.
[110] First, I accept Mr. Butler’s testimony that he was not doing this.
[111] Second, these email exchanges must be viewed in context. The emails must be assessed based upon who the exchange is between, the nature of what is being discussed, and what is happening in the litigation at the time. Extracting isolated sentences as Coco Paving has done, can be misleading.
[112] For instance, Coco Paving relies upon an email between Mr. Butler and a partner in his firm where he states he wished to avoid the “risk of looking bad in front of AIG.” This email was written on February 24, 2015, after AIG capped coverage and Mr. Butler had taken Coco Paving’s instructions to proceed to trial. This email was written in response to his law partner asking about the status of getting trust funds from Coco Paving since the first deposit had not arrived as scheduled. The partner advised to do no further work on the file until they received trust funds from Coco Paving. In reply, Mr. Butler updated his law partner on what was happening in the file including the fact that Ms. Coco wished an adjournment of the trial. He then raised his concern that they should not stop work altogether and they had a professional obligation to attend a confirmation hearing in March. He advised that they slowed their work on the file but objected that they could not just stop dead. It was here that he stated they would “run the risk of looking bad in front of AIG.” Mr. Butler then advised he would follow-up with Coco Paving about the retainer the next day.
[113] In my view, I do not see this email as supportive of Coco Paving’s position or as inconsistent with Mr. Butler’s testimony. I accept his testimony that he wished to look good in front of all clients or potential clients. Further, it strikes me that Mr. Butler raised this point as just another way to push back on his law partner’s advice to stop working until the firm receives money. It would hardly be persuasive for Mr. Butler to suggest that by stopping work it would make them look bad in front of Coco Paving since Coco Paving was the client who was not providing the deposit, thereby creating the difficulty for the firm.
[114] Another email relied upon by Coco Paving is one in which Mr. Butler states “this was a great opportunity to impress the pants off of AIG.” Again, this must be viewed in context. This email was written on May 2, 2014, even before the retainer with Coco Paving was signed. Mr. Butler wrote this in response to receiving an email from Mr. Pendergrast, in-house counsel for Coco Paving, advising that AIG was going to pay the legal fees. Mr. Butler was writing to his junior and a partner in his firm raising his concern that this was another issue to deal with and he had not previously worked with AIG. The partner wrote back that he too had not worked for AIG in the past, but that he had worked with insurance companies before and their involvement changed the dynamic significantly, often challenging hourly rates. The partner responded they should wait to see what happened. Mr. Butler replied that when he was working at a different law firm, he had lost a few files in that way when the insurance company fired the firm due to its rates. Mr. Butler stated it happened to him twice with a different insurance company. He stated that the firm needed to keep Coco Paving happy so that they tell AIG to keep them, if the policy allowed. He advised he would keep the partner posted about AIG. He ended by saying “great opportunity to impress the pants off AIG.”
[115] Again, I do not view the sentence relied upon by Coco Paving as evidence that Mr. Butler preferred the interests of AIG. This email came very early on, before knowing how AIG’s involvement could affect the retainer with Coco Paving. In my opinion, the “impress the pants” comment is brief and innocuous. It was likely meant to place a positive perspective on the involvement of AIG, which was viewed as a potential problem that could lead to being discharged from the file. It is not probative evidence of a motive to fabricate a settlement offer. It does not cause me to question the testimony given by Mr. Butler. It certainly is not reflective of some greater strategy to prefer AIG’s interests over Coco Paving’s.
[116] Other post-termination email exchanges between Mr. Butler and Mr. Taylor are also innocuous, professional, and do not support Coco Paving’s position on this motion. They too must be seen in context. For instance, on March 15, 2018, when Mr. Butler referred to the Crown’s offer to settle following the pre-trial, the context was Mr. Butler seeking payment of their legal bills and was unconnected to any legal advice. In my view, this was simply a short-hand form reference to those pre-trial discussions. There was no need for Mr. Butler to adhere to an accurate or fulsome description.
[117] Finally, I do not see it as being ethically problematic or below the standard of care for Mr. Butler to want to impress the insurer, to avoid looking bad in front of a potentially lucrative client, or to follow-up with AIG as business development. I have little doubt that given self-interested attitudes prevail amongst the bar. Indeed, it can often motivate counsel to excel in their field. It only becomes problematic if it impedes upon counsel’s ability to discharge their obligations and duties ethically and competently. I find Mr. Butler was not so affected.
(iii) Providing the Memorandum to AIG
[118] Then there is the more specific claim made by Coco Paving that Mr. Butler’s provision of the Memorandum to AIG fell below the standard of care.
[119] Mr. Butler testified that he was uncomfortable with withholding the Memorandum from AIG. Mr. Butler agreed to withhold it for a time but upon further follow-up by Mr. Taylor, he sent the Memorandum to AIG.
[120] Of course, Mr. Butler was retained by Coco Paving and not AIG. That said, Mr. Butler testified that he was required to act in a manner consistent with AIG’s litigation guidelines. Also, Mr. Butler was acting under instructions from Coco Paving to cooperate and communicate with AIG. He testified that he was expected to respond to AIG’s direction. I accept Mr. Butler’s evidence on this. This makes sense as AIG was providing coverage.
[121] Mr. Butler was acting for a client in defending a charge where an insurer was involved. He had an obligation to report any significant developments and settlements to the insurer. The facts of this case show active involvement of the insurer beyond merely paying the bills. That involvement was known to Coco Paving.
[122] Mr. Butler had provided a draft of his Memorandum to Coco Paving’s in-house counsel prior to giving it to AIG and had specifically advised he would be providing it to AIG. I accept Mr. Butler’s evidence that he let Mr. Lewinberg know he was going to send it to AIG before doing so. I accept Mr. Butler’s evidence that he had instructions to do so prior to sending the email with the Memorandum to Mr. Taylor on November 25^th^. His conduct was reasonable and prudent given the following circumstances: Mr. Lewinberg knew that Mr. Butler was asked by Mr. Taylor to send the memo; Mr. Lewinberg raised no concern about it and only asked to see it in advance; and Mr. Lewinberg raised no objections after being given an opportunity to review it before Mr. Butler’s sending it to Mr. Taylor. I further accept Mr. Butler’s testimony that he considered sending the Memorandum to be required by the coverage guidelines.
[123] I find that Mr. Butler did not fall below the standard of care of a reasonably prudent lawyer in the circumstances in providing the Memorandum to AIG. I find that Mr. Butler sent the Memorandum pursuant to Coco Paving’s instructions.
[124] Furthermore, the Memorandum falls within the scope of what is owed to the insurer in such circumstances. Those circumstances included a duty on Coco Paving to cooperate with AIG and to report all significant developments in the case. On this point, Canadian Newspapers Co. v. Kansa General Insurance Co. (1996), 1996 CanLII 2482 (ON CA), 30 O.R. (3d) 257 (C.A.), is instructive. In that case, CNCL, a publisher, had been sued for defamation by a law firm. CNCL was insured by Kansa to indemnify it for legal costs. The defamation suit went to trial. Afterwards, Kansa refused to indemnify CNCL on the grounds that it had breached its duty to cooperate and had violated the insurer’s right to defend. On the facts as found by the trial judge, the in-house counsel for CNCL failed to report to Kansa a number of developments in the litigation. Weiler J.A. held that CNCL failed in its duty to cooperate with its insurer:
Here, as part of the duty to co-operate, the arrangement between the parties required that, after a claim resulting in litigation was made, material information concerning significant developments in the litigation be given by the insured to the insurer.
The non-reporting, particularly between December 1985 and September 1986, was material and significant because information concerning the offer to settle in May 1986, the development of the plaintiff's position concerning malice and lack of good faith, and the greatly increased legal fees for an anticipated lengthy trial, all significantly affected the risk to the insurer.
In summary, the trial judge did not give effect to the general duty of co-operation contained in the opening words of cl. 6 or interpret this general duty in the context of the reporting arrangement and the settlement clause. The duty of co-operation in the context of this case required CNCL to provide sufficient information to Kansa concerning developments in the litigation which would enable Kansa to decide whether the risk to it had increased such that it wished to invoke the settlement clause.
[125] In line with these comments in Kansa, I find that the Memorandum falls within the duty to disclose and cooperate. As stated in the Memorandum, the purpose of it was to summarize the strengths and weaknesses of Coco Paving’s due diligence defence in light of the recently obtained expert opinion and comments made by the Justice of the Peace at the pre-trial, as well as updating the potential fines that could be incurred upon conviction. While it is true that this goes beyond merely reporting settlement offers, the updates on the litigation, the information, and opinions provided by Mr. Butler in this thorough Memorandum are all information that AIG would require in order to assess the risk of going to trial as opposed to negotiating a settlement; information it required in deciding whether to take further steps in potentially invoking the settlement clause in the policy.
[126] I recognize that the comments in Kansa relate to a lawyer who was acting as an agent of the insured. Such is not the case here. Mr. Butler was retained by Coco Paving as litigation counsel. He was not acting in Coco Paving’s stead or as its authorized representative. That said, I find he acted reasonably and prudently in the circumstances by forwarding the Memorandum to AIG. I note that he initially did not forward it to AIG after he was told to hold on to it. This demonstrates that he was sensitive to the fact that he was Coco Paving’s lawyer and not AIG’s lawyer to command as AIG saw fit. Mr. Butler did testify though that he would not have been comfortable in holding onto it forever. In the circumstances, this was reasonable given that he owed duties to AIG as well as to Coco Paving. As I have indicated above, I accept that Mr. Butler acted upon the instruction of Coco Paving to forward it to AIG. This was fortunate because not only did this avoid Mr. Butler being placed in a difficult situation, it also protected Coco Paving from potential exposure to a complaint by AIG that Coco Paving failed to honour its obligation to cooperate.
V. Other Allegations
[127] Other more minor allegations of professional negligence are made, such as the failure to confirm the offer in writing and failing to pursue the offer made at the pre-trial. I find these claims have no merit. Mr. Butler cannot be faulted for failing to confirm an offer as this was not an offer that could be accepted. Further, he was specifically instructed by Coco Paving not to pursue this further. With respect to Coco Paving’s overarching complaint that Mr. Butler failed to act in Coco Paving’s best interest, I will say this. Hindsight is always 20/20. It is easy after the fact to criticize counsel’s conduct in litigation or to parse the choice of language he has used in proffering legal advice.
VI. Conclusion
[128] In this case, based upon the whole of the evidence, I find that Mr. Butler acted professionally, competently, and conducted himself in the best interests of Coco Paving. His opinion about the chances of success at trial proved to be mistaken. But this would not be the first time a litigation lawyer finds themselves in such a situation. I also appreciate that given the success at trial and on appeal, Coco Paving is disgruntled with Mr. Butler’s opinion; an opinion that in its view caused AIG to cap coverage. However, disliking a lawyer’s assessment of a litigation scenario does not mean the lawyer was negligent in how he handled the case.
[129] In conclusion, I grant summary judgment in favour of the Defendants. The action is dismissed.
[130] If the issues of costs cannot be resolved between the parties, I will entertain written submissions, each one limited to two pages. The Defendants shall file within ten days of this decision. The Plaintiff shall file within seven days thereafter. There will be no reply submissions without leave of the court.
Nakatsuru J.
Released: November 29, 2019
COURT FILE NO.: CV-17-576350
DATE: 20191129
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
COCO PAVING INC.
Plaintiff /Responding Party
– and –
WILLMS & SHIER ENVIRONMENTAL LAWYERS LLP and RICHARD BUTLLLER
Defendants / Moving Parties
REASONS FOR JUDGMENT
NAKATSURU J.
Released: November 29, 2019
[^1]: Fredrikson v. I.C.B.C. (1990), 1990 CanLII 3814 (BC SC), 69 D.L.R. (4^th^) 399 (B.C.S.C.).