Court File and Parties

COURT FILE NO.: CV-17-00002919-0000

DATE: 2021-12-22

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 833137 ONTARIO LIMITED, Plaintiff

AND:

TORONTO-DOMINION BANK, Defendant

THIRD PARTY

1605007 ONTARIO LTD., 1799121 ONTARIO LTD., 1837225 ONTARIO LTD., 1865088 ONTARIO LTD., 1837228 ONTARIO LTD., 1865100 ONTARIO LTD., 1865099 ONTARIO LTD., RON MCGOWAN, 2355849 ONTARIO LTD. and LAURA PHILP.

BEFORE: Kurz J.

COUNSEL: R. Whittaker – Principal of Plaintiff, for the Plaintiff

M. Kestenberg and K. Schoenfeldt, for the Defendant

HEARD: December 8, 2021

ENDORSEMENT

[1] This is a motion by the defendant Toronto-Dominion Bank (“TD”) for an order enforcing a settlement entered into by the parties. TD seeks to dismiss or stay this action. In the alternative, it seeks summary judgment, dismissing the action.

[2] The Plaintiff, 833137 Ontario Limited (“833”) opposes the motion. 833 says that it should not be bound by the settlement negotiated by its lawyer at the time, under the instructions of its principal, Robert Whittaker. In his affidavit of November 1, 2021, Mr. Whittaker asserts that:

a. There is no agreement between the parties because 833’s former lawyer, David Milosevic was “instructed … to stand down and not settle the case” and “was dismissed when he suggested he would act unilaterally to settle it”;

b. Mr. Milosevic violated his duty of loyalty to 833. He allowed himself to be “directed” by TD’s lawyer “to advocate for TD rather than 833”;

c. Mr. Milosevic failed to advise 833 that by settling and signing a release, it had “forfeited … the protection” of a previous $5,000 costs award in this action, when Fitzpatrick J found this action to be an abuse of process’.

d. Attempted to pay that costs award by an unauthorized withdrawal from its principal’s credit card.

[3] The settlement reached between counsel for the parties on April 1, 2021 called for the dismissal of this action without costs and a continuation of 833’s liability for the $5,000 costs award previously granted to TD by Fitzpatrick J. Just over three weeks after the settlement was reached, Mr. Whittaker signed a release of TD (the “TD release”) on behalf of 833, which Mr. Milosevic delivered to counsel for TD, Mr. Kestenberg. Mr. Whittaker later changed his mind, fired Mr. Milosevic, and refused to agree to dismiss this action in accord with the parties’ settlement. Hence this motion.

[4] On September 29, 2021, Miller J. gave Mr. Whittaker permission to represent 833 in this motion.

[5] For the reasons set out below, I find that the settlement between the parties is valid. At all material times, Mr. Milosevic acted competently, loyally, and upon Mr. Whittaker’s express, informed instructions. Finding no reason to exercise my discretion to refuse to enforce the settlement between the parties, I grant TD’s motion.

Background

[6] In this action, 833 sues TD, claiming that it improperly allowed other parties to stop payment on several cheques and/or remove funds from accounts prior to their cheques being honoured. The cheques and accounts in question came from all of the Third Parties named in this action, except Laura Philp (the “McGowan parties”).

[7] Prior to suing TD, 833 sued the McGowan parties in a separate action. That lawsuit was based on the same factual matrix that comprises 833’s claim in this action. 833 ultimately settled with the McGowan parties. As part of that settlement, it signed a standard form full and final release of McGowan parties (“the McGowan release”).

[8] The McGowan release included a broad term that prohibited 833 from commencing an action against “any other party” based on anything arising in that action, who may claim contribution and indemnity against the McGowan parties. That term is reproduced below, with underlining provided by Justice Dale Fitzpatrick, in TD’s motion to stay this action, described in greater detail below:

[9] Fitzpatrick. J. found that release term is unambiguous and broader than the usual contribution and indemnity clause found in most releases.

[10] Following its settlement with the McGowan parties, 833 commenced this action against TD. In defending this action, TD brought a third-party claim against the McGowan parties and Ms. Philp. Relying upon the McGowan release, both TD and the Third Parties moved to have this action stayed as an abuse of process.

[11] On January 19, 2021, Fitzpatrick J. found this action to be an abuse of process, requiring him to stay it. That is because 833 had sued TD for a cause of action for which TD claimed contribution and indemnity against the Third Parties. Thus, this action violated the terms of the McGowan release. As Fitzpatrick J. wrote:

[25] 833’s claims against TF in the Current Action largely rest upon establishing misconduct by McGowan that formed the subject of the First Action. 833’s claims against TD, as pleaded, are not independent of the alleged wrongdoings by McGowan. In other words, the Current Action could not be decided without revisiting and determining the allegations made in the First Action. The latter are covered and precluded by the Release regardless of the specific damages pleaded.

[26] The Current Action and the 3rd Party Claim constitute an abuse of process and must be stayed pursuant to the Court’s discretion under s. 106 of the CJA [Courts of Justice Act] and Rule 21.01(3) of the Rules of Civil Procedure.

[12] That being said, Fitzpatrick J. gave 833 leave to file an amended statement of claim by March 22, 2021 which did not offend the terms of the McGowan release. The parties to that motion, through counsel, settled the costs of the motion, agreeing in part that 833 would pay costs of $5,000 to TD, payable within 90 days, following which interest would be payable at a 2% annual rate (the “costs award”).

[13] 833 then changed lawyers, retaining David Milosevic. The court is aware of the contents of numerous solicitor and client consultations between Mr. Milosevic and Mr. Whittaker because the latter has placed their correspondence and even transcripts of his surreptitious recordings of their conversations on the record. Mr. Whittaker has clearly waived solicitor and client privilege between Mr. Milosevic and 833.

Mr. Milosevic’s Consultations with 833 and its Instructions to Settle

[14] After his retainer, Mr. Milosevic obtained the consent of Mr. Kestenberg, counsel for TD, to extend the time for 833 to serve its amended statement of claim to April 2, 2021.

[15] On March 29, 2021, Mr. Milosevic wrote a lengthy opinion letter in the form of an email to Mr. Whittaker. In that email, Mr. Milosevic offered his analysis of 833’s potential claims against TD in the face of Fitzpatrick J.’s findings regarding the effect of the McGowan release. Mr. Milosevic analysed both the claims and the potential damages available to 833 in such a potential suit, from both a strictly legal and a cost-benefits point of view. His conclusion is summarized in the following paragraph of his opinion email:

I’m sorry to say, but I just don’t see an economically viable claim here. The claim raises some interesting issues that as a lawyer I could try to pursue. But it is just out of academic interest to me as a lawyer. In terms of recommending a case to pursue for a client, this case is highly unlikely to succeed and expensive to pursue.

[16] On March 30, 2021, Mr. Milosevic spoke with Mr. Whittaker and engaged in an email exchange with him regarding potential settlement. The exchange began when Mr. Whittaker, apparently in response to the opinion email, emailed to Mr. Milosevic at 9:12 a.m., requesting a call with himself and his partner. In his email, Mr. Whittaker offered his view of the theory of the case, including areas where he felt that 833 did have valid claims against TD. That opinion was based in part on what appears to be a transcript of a recording of a conversation between someone from 833 and someone from TD.

[17] Mr. Whittaker and Mr. Milosevic spoke at 1:00 p.m. that afternoon. The evidence before me does not disclose whether Mr. Whitaker’s partner participated in the call. After the call, Mr. Milosevic emailed to Mr. Whittaker at 1:45 p.m. to confirm both the call and the opinion that he had offered. He stated:

Ron, thanks for you [sic] time on the call just now.

To confirm we discussed my opinion on the chances for success on your revised claim against TD. I noted that much of what happened to 833 in this case was improper and that TD’s actions in servicing 833 raise potential issues of liability.

That being said, the release in the original McGowan claim severely limits what claims you can make against TD now. The few remaining areas we might claim for in particular the failures to collect for 833 properly, or the bad faith conduct leave little scope for monetary damages. Essentially the litigation would cost more than we could ever hope to recover.

As we discussed, the best option now would be to try to negotiate with Kestenberg and attempt to reduce the fees they would hope to recover from this litigation to date. Perhaps we could reduce the costs award. I suspect that there is not much we could do on the NCL[^1], but if you have any additional information, please let me know.

If you would like me to reach out to Kestenberg, please let me know.

[18] In response, Mr. Whittaker wrote “[r]egarding the NCL, if they could just chase 833 and drop [Mr. Whittaker’s partner] Suzann and I, that would be helpful. Mr. Milosevic wrote back a minute later to say “I will check. Should I contact Kestenberg and proceed?” Mr. Whittaker’s reply, four minutes later, was “Ok”.

[19] Mr. Whittaker then wrote to Mr. Milosevic to say “Justice Fitzpatrick (motion) also called out Tds [sic] action as an abuse of process. Td could pay McCown.” Here he was referring to the costs for the motion before Fitzpatrick J. that 833 was ordered to pay to the Third Parties

[20] Twenty-nine minutes later, at 2:26 p.m., Mr. Milosevic wrote to Mr. Whittaker to say :

Rob, best offer I can realistically make is for TD to waive costs of the litigation and the costs award. I have spoken to Marc [Kestenberg], and this is the most realistic offer to make. Should I proceed?

[21] At 3:04 p.m. Mr. Milosevic wrote to Mr. Whittaker, saying:

Thank you for the call, Rob. As discussed, I will proceed to make that offer and we will see what happens. I will keep you informed.

[22] Two minutes later, Mr. Milosevic wrote to Mr. Whittaker, clarifying his earlier email, and presumably referencing an earlier discussion about non-civil remedies that may be available to 833, stating:

Rob, to be clear, the offer would include a release against TD. But a release does not include a criminal complaint.

[23] On March 30, 2021 at 4:47 p.m., Mr. Milosevic wrote to Mr. Kestenberg with thanks for the extension of the time to serve an amended statement of claim and an offer as follows:

Thank you, Marc. The client offers to settle based on a no costs withdrawal of the action and waiver of costs, with a release in favour of TD.

[24] Mr. Kestenberg replied on April 1, 2021 at 9:36 a.m., to state that his client would accept the dismissal without costs but would insist that the costs award, which had already been determined, be paid. He asked Mr. Milosevic to let him know whether there was a deal, failing which he expected an amended statement of claim.

[25] Mr. Milosevic responded ten minutes later, stating that he will check with his client and get back. He added “I’d hate to see this break down over a few thousand dollars”. Mr. Kestenberg responded: “I agree. Do your magic.”

[26] Mr. Milosevic then wrote to Mr. Whittaker, reporting on his contact with Mr. Kestenberg. He wrote:

Rob, TD is agreeing to no costs of the action but $5k for the cost award. Given that 833 is not likely to ever pay this, but paying me to continue will cost much more. I would say take the deal and leave this behind you.

As discussed, the claim has no reasonable prospect of success, so we would just be going in circles with a motion to stay again, and then the litigation itself would be prohibitively expensive, require expert testimony, etc. None of this is ideal, but the reality of that initial release makes all of this uneconomic and unrealistic to pursue. Please let me know if you’d like to discuss.

[Emphasis added]

[27] Mr. Whittaker’s response, providing instructions to Mr. Milosevic was clear:

Hi David, that sounds like the best we can achieve, as such I agree on behalf of 533. Will Marc write it up?

[Emphasis added]

[28] At 3:30 p.m. that day, April 1, 2021, Mr. Milosevic wrote back to Mr. Kestenberg to state:

Well magic accomplished.

We have an agreement. Perhaps them [sic] you can circulate Full and Final? Instead of me circulating something your client will want changed.

[29] With that email, the parties, though counsel acting on informed instructions, had agreed to settle this action by dismissing it without costs, that the costs award stay in place, and that 833 would sign a release of TD (the “TD release”).

[30] On April 14, 2021, Mr. Whittaker and Mr. Milosevic had a lengthy conversation about the draft TD release. Mr. Whittaker surreptitiously recorded and transcribed that conversation. Mr. Whittaker’s transcript of the conversation shows that Mr. Milosevic fully explained the terms of the TD release to Mr. Whittaker and answered all of his questions. Mr. Whittaker wanted more time to review the TD release.

[31] Six days later, on April 20, 2021, Mr. Whittaker and Mr. Milosevic had a second lengthy conversation about the draft release, Once again, Mr. Whittaker secretly recorded and transcribed it. There is no evidence that Mr. Milosevic was aware that his client was secretly recording him during either conversation. During the call, Mr. Milosevic answered more of Mr. Whittaker’s questions about the length and breadth of the draft TD release’s terms. He also responded to Mr. Whittaker’s complaint that 833 had paid him $7,500 to explore whether it had a claim against TD in light of Fitzpatrick J.’s order, only to be told that the answer is no. Mr. Whittaker then railed against 833’s four previous lawyers and the manner in which they acted in behalf of 833. Mr. Milosevic was, not surprisingly, unable to comment in the work of previous counsel. As the conversation concluded, Mr. Milosevic advised his client:

Looking to find a point for you, and I don’t think there’s a viable one left in this situation.

[32] The conversation ended with Mr. Whittaker stating: “Yeah. Okay. All right, so, I will get the release back to you, and we’ll move on with our lives.” Mr. Milosevic then concurred, adding “You think that would be the dismissal and all that ?[^2] I’ll get back to you.” Mr. Whittaker responded “Ok, great. All right. Thanks, David.”

[33] While that conversation seemed to end the matter, that turned out to be far from the case. On April 22, 2021, Mr. Whittaker wrote to Mr. Milosevic, questioning his integrity and loyalty to his client, 833. Mr. Whittaker stated that he had come across the April 1, 2021 correspondence between Mr. Kestenberg and Mr. Milosevic regarding settlement. It is hard to imagine how he would have come across that correspondence had Mr. Milosevic not sent it to him.

[34] Mr. Whittaker’s specific concern was the April 1, 2021 exchange between counsel, regarding Mr. Milosevic doing his “magic” to obtain settlement instructions. Recall that Kestenberg suggested that Mr. Milosevic “[d]o your magic” to obtain instructions to settle and Mr. Milosevic later wrote back to confirm settlement, stating “[w]ell magic accomplished. We have an agreement”. Mr. Whittaker asked Mr. Milosevic to explain that exchange.

[35] Somewhat dramatically, Mr. Whittaker ended his email with the assertion that:

From my perspective, it looks like you were advocating for TD rather than 833 at my expense, and on my dime. I’m feeling like a mouse laid at the feet of the cat’s master.

[36] Mr. Milosevic offered a very measured response in the face of a clear accusation of disloyalty to a client:

Rob, part of getting as good a deal as possible for a client requires good rapport with opposing counsel. If someone is upset and digs in, then the deal just gets worse. If you review my correspondence with Marc, I think you will see how thorough I was in protecting your interests and how detailed my negotiations were over what we would accept in a release. The cordial banter between counsel is to keep a good tone and get a good result. In the circumstances, I think that negotiations and result do speak for themselves.

My role is to protect your interest ahead of anything else. As I mentioned, I could bill you to draft a defence, continue working on the file and do that for my benefit. But my role is to put your interest first in all things. I am sorry that you would question all that but I hope that you take a look at all communications on your matter (below) you will see that your interests were the primary driver.

[37] Obviously satisfied by Mr. Milosevic’s response, Mr. Whittaker signed the TD release and emailed it back to Mr. Milosevic the following day, April 23, 2021. Mr. Milosevic then emailed a copy of the signed TD release to Mr. Kestenberg. The TD release included the following statement in the certificate of independent legal advice signed by Mr. Milosevic:

I explained the significance of this Full and Final Release dated April 23, 2021 to Robert Whittaker, an individual whom I certify to be an Authorized Signing Officer to Claimant Corporation and, in my judgment, I do verily believe that they understood the significance of the Full and Final Release and were under no incapacity or any nature when it was executed and explained to him or her.

[38] Once again, one would have thought that the signing of the release after the exchange about Mr. Milosevic’s release would have been the end of matters in this action. Once again that turned out to be far from the case.

[39] After receiving the TD release from Mr. Whittaker, Mr. Milosevic wrote to his client to say:

Thank you, Rob. Next step is to pay the cost award (which you can forward to me, in trust). Then we take out the dismissal order.

[40] On April 23, 2021, Mr. Milosevic wrote to Mr. Kestenberg stating that he was still waiting for the $5,000 cheque from his client but that it should not be long. He stated that his assistant would get back when it was received.

[41] On May 3, 2021, Mr. Kestenberg wrote to Mr. Milosevic to state that if the payment is not received immediately, he would seek instructions on next steps. Soon afterwards, Mr. Milosevic wrote to Mr. Whittaker, forwarding Mr. Kestenberg’s email. He added that he has “some accounts outstanding on your invoice”. He asked whether he could charge Mr. Whittaker’s charge card, whose number he had on file.

[42] The next day, May 4, 2021, Mr. Whittaker gave Mr. Milosevic permission, writing “you may charge my card accordingly”. He then asked to speak to Mr. Milosevic.

[43] Later that afternoon, Mr. Milosevic reported that the credit card was not working. He requested confirmation of card details. Mr. Whittaker responded that he did not see any problem with the card or the number. He asked as well whether they could speak the next morning.

[44] On May 6, 2021, Mr. Milosevic wrote to Mr. Whittaker to again report that he could not seem to get the credit card to work. Mr. Whittaker replied that the card was a business card and should have sufficient credit. He asked Mr. Milosevic to confirm that the charge was only $600. Mr. Milosevic responded that the amount that he was seeking was $1,309 plus HST (as set out in an attached document) plus the $5,000 costs award. Recognizing a potential misunderstanding, he added:

Perhaps it was my misunderstanding. I took it that I was going to bill the cost award to this card and then issue cheque to the opposing counsel.

I would recommend getting that paid asap. They could very well decide to bring a motion to enforce it at which point that could incur more costs unnecessarily.

[45] Mr. Whittaker wrote back to complain that his card had been charged for $2,136.13, when he had expected that the figure would be $600 (although that is not what Mr. Milosevic had stated). Mr. Whittaker added that he had contacted VISA to stop payment on the card to Mr. Milosevic and that the addresses in the lawyer’s last two invoices were incorrect.

[46] On May 10, 2021, Mr. Milosevic wrote to Mr. Whittaker about the outstanding costs award, without reference to the stop payment. He stated that he will have to advise Mr. Kestenberg whether the costs award will be paid or not. He warned his client that “[t]hey may bring a motion to enforce. That will be an unnecessary cost for you. Please let me know”.

[47] Mr. Whittaker responded that the Fitzpatrick J. order called for costs to be paid by April 21, 2021, failing which interest at 2% would be charged. He apparently felt that this term could be treated as an agreement; one which gave 833 licence to treat the outstanding costs award as a loan, to be paid as he saw fit, at a favourable 2% annual interest rate. He stated that he “was unaware that you had overridden this agreement” and then referred to 833’s financial distress due to Covid. I see nothing in Mr. Whittaker’s communications with Mr. Milosevic that would lead him to that conclusion, either with regard to the costs award or Mr. Milosevic’s actions.

[48] Mr. Milosevic wrote back to patiently explain the situation, warn of the consequences of non-payment, and sympathize with his client’s situation. He wrote:

Rob, the Release was to end the case and TD to waive any cost in exchange for payments of the costs award (which is overdue even under Justice Fitzpatrick’s Order) The fact that costs incur interest when not paid on time does not mean that the court order has not been breached by the failure to pay.

However the court order is no longer the issue, what is at issue is the signed release which requires payment. I will state again. TD may bring a motion, in which case they will seek costs for preparing the motion, which the court will grant them. I can only provide the advice. It is up to you to decide how you would like to proceed. …

[49] Mr. Whittaker’s response, a week later, on May 17, 2021 was that he would represent 833 himself, effectively firing Mr. Milosevic. In response, Mr. Milosevic wrote back to offer advice about Mr. Whittaker’s intention to represent 833 and to warn that “I do not see the case as viable at this point and further steps are likely to lead to costs against you.”

[50] Later that day, Mr. Milosevic wrote to advise Mr. Whittaker that the TD release required him to take out an order dismissing the action and that he felt that he had to do that before getting off of the record. Mr. Whittaker angrily responded:

The release was signed by me without fully understanding of the terms. You did not explain the release required immediate payment. 833 cannot pay at this time due to COVID and other circumstances as explained several times previously. As such you are not authorized to do anything more on 833’s behalf including filing with the court. Do not act on anything until you hear otherwise from me

[51] Later that day, Mr. Milosevic wrote to inform Mr. Kestenberg that he did not have instructions to consent to the dismissal of this action. I note that the TD release allowed TD to move for the dismissal on its own but that it is standard practice to bring such motions on consent. Mr. Whittaker ultimately moved for leave to represent 833 in opposing this motion. As set out above, Miller J. granted him the right to do so, limited to this appearance only.

Issues

[52] The sole issue in this motion is whether the settlement between the parties, including the TD release, should be enforced by this court, whether by dismissing the action or taking another step that has the same effect. In considering that issue, I will look to whether I should exercise my discretion to refuse to enforce the settlement between the parties in light of the allegations raised by Mr. Whittaker.

Law Regarding Enforcement of Settlements

[53] Rule 40.09(a) of the Rules of Civil Procedure grants the court the jurisdiction to enforce a settlement when one of the parties refuses to comply with its terms. It reads as follows:

Failure to Comply with Accepted Offer

49.09 Where a party to an accepted offer to settle fails to comply with the terms of the offer, the other party may,

(a) make a motion to a judge for judgment in the terms of the accepted offer, and the judge may grant judgment accordingly; …

[54] In Lumsden v. Toronto (City) Police Services Board, 2019 ONSC 5052, Schabas J. reviewed a number of authorities to find that

A settlement will be enforced where (a) there is a binding settlement agreement, and (b) there is no reason for the court to exercise its discretion not to enforce the settlement.

[55] In Bogue v. Bogue, 1999 CanLII 3284 (ON CA), [1999] O.J. No. 4310, 126 O.A.C. 236, Rosenberg J.A., writing for the Ontario Court of Appeal wrote:

14 As McEachern C.J.B.C. pointed out in Fieguth at p. 123, many settlements are very complicated and the deal is usually struck before the documentation can be completed. In such cases, the settlement will be binding if there is agreement on the essential terms.

15 Generally speaking, litigation is settled on the basis that a final agreement has been reached which the parties intend to record in formal documentation and "parties who reach a settlement should usually be held to their bargains".

[Citations omitted.]

[56] Here, there was clearly offer, acceptance, and consideration sufficient to comprise a binding agreement to settle. The consideration included no further costs of this action against 833, despite the fact that the action was, as constituted, an abuse of process. The costs award dealt only with the motion before Fitzpatrick J., not the action as a whole.

[57] Further, the terms of the settlement were crystal clear.

[58] Thus, the only question is whether the arguments raised by Mr. Whittaker on behalf of 833 should vitiate the settlement or cause the court to exercise its discretion not to enforce it. In doing so, I will consider Mr. Whittaker’s arguments and in particular, whether:

a. Mr. Milosevic acted contrary to Mr. Whittaker’s instructions;

b. Mr. Milosevic violated his professional obligations to 833;

c. Mr. Milosevic failed to advise 833 that it must pay the costs award despite the settlement; and

d. there is any other reason to refuse to enforce the agreement between the parties.

Did Mr. Milosevic Settle this Action Contrary to 833’s Instructions?

[59] The evidence set out above makes clear that at all materials times, Mr. Milosevic was acting upon the express instructions of Mr. Whittaker, the principal of 833. From the beginning of his discussions with Mr. Kestenberg regarding settlement, and at every step of the path towards settlement, he was obtaining instructions from Mr. Whittaker to move forward.

[60] For example, when on March 30, 2021, Mr. Milosevic described his preliminary discussions with Mr. Kestenberg, he candidly advised him that he believed that the best result he could achieve was a dismissal without costs. In response, Mr. Whittaker stated “Ok, so I guess, yeah, we understand each other. You can try and work that out with Marc”.

[61] In other words, Mr. Whittaker instructed Mr. Milosevic to settle with Mr. Kestenberg in a manner that best reduced 833’s potential financial liability to TD. So, when Mr. Milosevic spoke to Mr. Kestenberg, he was acting on the instructions of 833, to try end the litigation without 833 having to pay anything further to TD.

[62] Mr. Whittaker had also instructed Mr. Milosevic to “push the envelope a bit” if he could. That appears to be a reference to ending the action without having to pay any costs at all to TD, including the costs award.

[63] Mr. Milosevic broached such a costs-free settlement with Mr. Kestenberg. Again, Mr. Milosevic was doing what he was instructed to do. In response, Mr. Kestenberg was clear that TD would not waive the requirement to pay the $5,000 in costs already awarded in the costs award.

[64] The two counsel spoke again on April 1, 2021. I will have more to say about their exchange below, in regard to the reference to Mr. Milosevic doing his “magic”. But the point made during their exchange was that TD would not budge on collecting the $5,000 costs award.

[65] Mr. Milosevic then reported to Mr. Whittaker that TD was holding the line on the costs award, refusing to waive payment in any settlement. In response, Mr. Whittaker’s instruction was: “Ok. All right. Yeah. Ok, so let’s drop the hammer on it. So, OK, good take. Take it away. All right. Ok. Ok, thank you”.

[66] I see those as clear instructions to accept TD’s final offer, including the payment of the costs award. The term “good take” implies satisfaction with the best deal that Mr. Milosevic could negotiate on 833’s behalf.

[67] Even when the issue of the TD release was broached, Mr. Milosevic had two separate and lengthy discussions with Mr. Whittaker. They then had an email exchange about the references to Mr. Milosevic doing his “magic”. The following day, Mr. Whittaker signed the TD release, emailed it to Mr. Milosevic and wrote:”” [r]elease attached. Please advise as to next steps.”

[68] Nothing in the evidence before me demonstrates that Mr. Milosevic acted in any manner than under informed instructions from Mr. Whittaker on behalf of 833.

Did Mr. Milosevic Violate his Professional Obligations to 833?

[69] Mr. Whittaker’s argument that Mr. Milosevic violated his obligations, particularly his duty of loyalty to 833, arise from a fundamental misunderstanding of the role of counsel.

[70] All lawyers in Ontario have duties of loyalty, honesty, and candour in representing their clients. Those and many other duties of lawyers are enshrined in the Rules of Professional Conduct (“RPC”) of the Law Society of Ontario (“LSO”).

[71] The duty of loyalty to a client requires the lawyer to avoid conflicts of interest. The term, conflict of interest, is defined as follows in at RPC 1.1-1’ s definition section:

“conflict of interest” means the existence of a substantial risk that a lawyer’s loyalty to or representation of a client would be materially and adversely affected by the lawyer’s own interest or the lawyer’s duties to another client, a former client, or a third person. The risk must be more than a mere possibility; there must be a genuine, serious risk to the duty of loyalty or to client representation arising from the retainer;

[72] The commentary to that definition offers a definition of the term, substantial risk, as follows:

In this context, "substantial risk" means that the risk is significant and plausible, even if it is not certain or even probable that the material adverse effect will occur.

[73] RPC 3-4-1 defines the scope of the duty to avoid conflicts of interest as follows:

3.4-1 A lawyer shall not act or continue to act for a client where there is a conflict of interest, except as permitted under the rules in this Section.

[74] The commentary to that rule sets out the scope of that obligation in greater detail, as follows:

[1] As defined in rule 1.1-1, a conflict of interest exists when there is a substantial risk that a lawyer's loyalty to or representation of a client would be materially and adversely affected by the lawyer's own interest or the lawyer's duties to another client, a former client, or a third person. Rule 3.4-1 protects the duties owed by lawyers to their clients and the lawyer-client relationship from impairment as a result of a conflicting duty or interest. A client's interests may be seriously prejudiced unless the lawyer's judgment and freedom of action on the client's behalf are as free as possible from conflicts of interest.

[2] In addition to the duty of representation arising from a retainer, the law imposes other duties on the lawyer, particularly the duty of loyalty. The duty of confidentiality, the duty of candour and the duty of commitment to the client's cause are aspects of the duty of loyalty. This rule protects all of these duties from impairment by a conflicting duty or interest.

[3] A client may be unable to judge whether the lawyer's duties have actually been compromised. Even a well-intentioned lawyer may not realize that performance of his or her duties has been compromised. Accordingly, the rule addresses the risk of impairment rather than actual impairment. The expression "substantial risk" in the definition of "conflict of interest" describes the likelihood of the impairment, as opposed to its nature or severity. A "substantial risk" is one that is significant and plausible, even if it is not certain or even probable that it will occur. There must be more than a mere possibility that the impairment will occur. Except as otherwise provided in Rule 3.4-2, it is for the client and not the lawyer to decide whether to accept this risk.

[Emphasis added.]

[75] The lawyer’s duty of candour towards their client is set out in RPC 3-2-2, as follows:

3.2-2 When advising clients, a lawyer shall be honest and candid.

[76] Commentary to that Rule states:

[1.1] A lawyer has a duty of candour with the client on matters relevant to the retainer. This arises out of the rules and the lawyer's fiduciary obligations to the client. The duty of candour requires a lawyer to inform the client of information known to the lawyer that may affect the interests of the client in the matter.

[77] As Commentary 2 to RPC 3-2-2 sets out, a lawyer is required to offer the client the unvarnished truth about their case, even if it is not what the client wishes to hear. The Commentary states:

[2] The lawyer's duty to the client who seeks legal advice is to give the client a competent opinion based on a sufficient knowledge of the relevant facts, an adequate consideration of the applicable law, and the lawyer's own experience and expertise. The advice must be open and undisguised and must clearly disclose what the lawyer honestly thinks about the merits and probable results.

[78] Further, in his dealings with other counsel, counsel is required to be courteous and civil. As the LSO’s RPC state:

7.2-1 A lawyer shall be courteous, civil, and act in good faith with all persons with whom the lawyer has dealings in the course of their practice.

[79] The Commentary to that rule states:

[1] The public interest demands that matters entrusted to a lawyer be dealt with effectively and expeditiously, and fair and courteous dealing on the part of each lawyer engaged in a matter will contribute materially to this end. The lawyer who behaves otherwise does a disservice to the client, and neglect of the rule will impair the ability of lawyers to perform their function properly.

[80] Here, reviewing the correspondence and even the transcripts of the surreptitious recordings made by Mr. Whittaker of his dealings with Mr. Milosevic reveal a lawyer who is following his obligations of loyalty and candour to his client.

[81] He would have every interest in encouraging his client to fight with TD, as his client wished, so that he could charge him a sizable legal fee. But he did not follow that course.

[82] As the transcript of Mr. Milosevic’s call with Mr. Whittaker of March 30, 2021 shows, the lawyer advised his client that he would be better off settling with TD in a manner that cuts 833’s losses than continuing the battle. He was consistent in offering the client-centred advice that the candle was not worth the fight.

[83] Furthermore, he did not attempt to hide that he knows, has a friendly relationship with and has worked with Mr. Kestenberg on opposite sides of cases before. He was candid about both those facts and his hope that his knowledge of Mr. Kestenberg could assist in obtaining a good deal. For 833 that meant an end to its financial liabilities in this action; a dismissal without costs. 833 ran the risk of further costs if the action continued and TD again moved to dismiss.

[84] Recall as well that the $5,000 costs award only covered the motion before Fitzpatrick J. It did not cover the costs of the action. The costs of the action, if granted to TD could have been a multiple of that $5,000.

[85] This led to the lawyers’ exchange of April 1, 2021 and Mr. Kestenberg’s reference to Mr. Milosevic doing his “magic” with his client. That comment came at the end of an exchange in which Mr. Kestenberg was clear that TD would not negotiate the waiver of the costs award. In response, Mr. Milosevic stating that he would “hate to see this break down over a few thousand dollars”. Here, he was attempting to ensure that the deal, which he had been instructed to pursue, did not go off the rails for the sake of a $5,000 costs award that had already been granted. That is what led to Mr. Kestenberg’s “magic” comment.

[86] Mr. Kestenberg’s comment meant in effect that it was in Mr. Milosevic’s hands to convince his client to accept a deal which they both knew to be as advantageous as possible in the circumstances for 833. Mr. Kestenberg’s comment was nothing more that a light-hearted turn of a phrase; “casual banter” in Mr. Milosevic’s words to his client. But the intent was clear, if Mr. Milosevic felt that a settlement that saw the action dismissed without costs was in his client’s interests, it was up to him to convince his client. There was nothing untoward there on the part of either lawyer. As stated above, part of a lawyer’s duty of candour is telling clients the truth as best they can, even if the client does not wish to hear it. There was no conflict of interest or breach of a duty of loyalty.

[87] Mr. Milosevic’s response to Mr. Kestenberg, “magic accomplished”; meaning that they were settled, continued their good-natured banter. Far from being nefarious, it signalled exactly what Mr. Milosevic explained to his client: a rapport with the other counsel that led to an agreement which extracted 833 from a losing action without incurring further costs.

[88] At all stages of his retainer by 833, Mr. Milosevic, maintained his duties of loyalty and candour to his client. I add that even after Mr. Whittaker fired him and reversed the retainer charge on his VISA card, Mr. Whittaker exhibited his loyalty to his client’s interests rather than his own. Rather than complain about Mr. Whittaker’s termination of his retainer and reversing his payment, Mr. Milosevic reminded his client of the risks that he was taking by violating the terms of the parties’ agreement and release. He could have been in high dudgeon. Instead he was trying to protect his client’s interests.

[89] In sum, Mr. Milosevic honourably upheld his professional duties to 833 throughout and even after the end of the term of his retainer. Nothing that Mr. Milosevic did or failed to do would call for the court to vitiate the agreement between the parties.

Did Mr. Milosevic Fail to Advise 833 that it Would Still be liable for the $5000 Fitzpatrick J. Costs Award?

[90] There is no credible argument that Mr. Milosevic failed to inform Mr. Whittaker that a term of any settlement with TD included 833’s ongoing obligation to pay the $5,000 costs award. As the exchanges set out above demonstrate, Mr. Whittaker knew that TD’s position was that it would not include a waiver of the requirement that 833 pay the $5,000 costs award in any settlement. Mr. Milosevic explicitly told him so on April 1, 2021, writing: “Rob, TD is agreeing to no costs of the action but $5k for the cost award.” Then, when Mr. Milosevic tried but failed to get TD to waive the costs award, he informed him Mr. Whittaker that TD would not budge from its position, Mr. Whittaker acknowledged TD’s position and instructed 833’s lawyer: “sounds like the best we can achieve, as such I agree on behalf of 533.” He could not have been more clear.

[91] There is no question that Mr. Whitaker instructed Mr. Milosevic to settle with Mr. Kestenberg upon terms that included the obligation to pay the $5,000 costs award.

[92] I add that nothing in the record before me shows that Mr. Milosevic advised Mr. Whittaker that he could treat the costs award as a $5,000 loan by TD to 833 at a 2% interest rate, or that 833 could pay the costs award as it saw fit. The fact that Mr. Milosevic advised Mr. Whittaker that TD would not waive the costs award as part of a settlement demonstrates that Mr. Whittaker knew or should have known that 833 had to pay the $5,000 to TD.

Is There any other Reason to Refuse to Enforce the Agreement between the Parties?

[93] As set out above the decision as to whether to enforce an agreement carries an element of discretion. Here, 833 understood the agreement into which it entered. It was well served and fully informed by a lawyer looking out for its interests rather than his own. The settlement was reasonable for 833 as it risked further costs should the action continue in the face of Fitzpatrick J.’s order. 833’s own counsel advised it that it had little chance of success if it were to pursue this action. It would cost more to pursue this action than it could hope to recover.

[94] Mr. Whittaker argues that there is a public interest in allowing this action to proceed because it would expose wrongdoing by TD. Based on the results of the McGowan action and the Fitzpatrick J. order, there is little reason to believe that an action already found to be an abuse of process could be in the public interest. 833’s own lawyer did not feel that it was worthwhile to pursue this action any further.

[95] I have no reason to believe that continuing this action despite a fairly negotiated settlement by two competent lawyers, properly instructed and protecting their client’s interests, is in the public interest. In fact, allowing it to proceed when there is little to no chance of success and at a time that our court’s resources are stretched to their very limits would be contrary to the public intertest.

[96] Thus, I see no reason to exercise my discretion other than to enforce the parties’ agreement. For the reasons cited above, I dismiss this action.

Costs

[97] At the end of argument of this motion I asked for costs submissions from each side, should they succeed. Mr. Kestenberg referred to his costs outline. Mr. Kestenberg requested costs of this motion on a full indemnity basis of $12,454.74 or a substantial indemnity basis of $11.253. Its partial indemnity costs are $8,371.65. Mr. Kestenberg argues that TD should receive full indemnity costs because 833 engaged in “reprehensible behaviour” by refusing to honour their agreement and allow this action to be dismiss without costs. He also points to his client’s success in this motion, the unreasonable conduct of 833, its failure to pay the costs award, and the fact that TD had already compromised in settling the costs of the motion before Fitzpatrick J. Further TD settled this action without obligating 833 to pay the costs of this action. Mr. Kestenberg indicated that TD’s solicitor and own client costs of the action were substantial.

[98] Mr. Whittaker stated that TD is a very large corporation and 833 is a small one. He referred to what he saw as the propriety of 833’s position and the manner in which he felt that TD had wronged 833. He stated that he would leave the issue of costs in my hands. He later emailed a costs outline to the court, in which it seems that he seeks costs in amounts similar to those sought by Mr. Kestenberg.

[99] Section 131 of the Courts of Justice Act grants this court the discretion to determine the costs of a proceeding or step in a proceeding.

[100] The Court of Appeal for Ontario has stated that "[m]odern cost rules are designed to foster three fundamental purposes: (1) to indemnify successful litigants for the cost of litigation; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behaviour by litigants": Fong v. Chan (1999), 1999 CanLII 2052 (ON CA), O.J. No. 4600 (Ont.C.A.) at para. 22..

[101] In 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (Ont. S.C.J.), at para. 10 Perell J. of this court reformulated and supplemented those purposes as follows: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements. (See also: Talwar v. Grand River Hospital Board of Directors, 2018 ONSC 6645 (Ont. Div. Ct.).

[102] Under r. 57.01(7) of the Rules of Civil Procedure, the court is to "... devise and adopt the simplest, least expensive and most expeditious process for fixing costs ..."

[103] Under r. 57.03(1), a court that hears a non-exceptional contested motion shall fix the costs and order that it be paid within 30 days unless it is satisfied that a different order would be more just.

[104] The general principles for the exercise of my discretion in determining costs are set out in r.57.01(1). They include:

• The result of the proceeding; i.e. success. It is trite that there is a presumption that the successful party is entitled to their costs.
• However, a court is entitled to award costs against the successful party in the appropriate circumstances (r. 57.01(2)). That may particularly be so when the court grants an indulgence to a party. In the oft-repeated comment of Hawkins, D.C.J., in Fox v. Bourget, [1987] O.J. No. 2326 (Ont. D.C.): “the price of a granted indulgence is the payment of the costs of those who have sought, unsuccessfully, to prevent its being granted.”
• offers to settle,
• the principle of indemnity,
• the reasonable costs expectations of the unsuccessful party for the step for which costs are claimed,
• the amounts claimed and recovered in the proceeding,
• the apportionment of liability,
• the complexity of the proceeding,
• the importance of the issues,
• the conduct of any party that tended to shorten or unnecessarily lengthen the proceeding,
• whether any step in the proceeding was taken improperly, vexatiously, unnecessarily, through negligence, mistake, or unnecessary caution;
• a party's denial or refusal to admit anything that should have been admitted,
• whether the dispute between the parties had been unnecessarily divided into more than one proceeding;
• any other matter relevant to the determination of costs.

[105] Those factors lead to the general principle set out in Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ON CA), [2004] O.J. No. 2634 (O.C.A.). There, the Ontario Court of Appeal stated at para. 24 that costs awards should reflect "what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties."

[106] More recently, in Beaver v. Hill 2018 ONCA 840 at para. 10, the Court of Appeal for Ontario clarified that proportionality and reasonableness are the touchstone considerations to be applied in fixing costs in family law matters. While the Family Law Rules “embody a philosophy peculiar to a lawsuit that involves a family" (Frick v. Frick, 2016 ONCA 799, at para. 11), the principle in Beaver v. Hill should apply equally in non-family civil litigation matters.

Application of Legal Principles to the Facts of this Case

[107] This motion should not have been necessary. As I found, there was a clear settlement that I have enforced with this endorsement. TD was completely successful. The conduct of 833 was unreasonable in refusing to complete the terms of the settlement requiring a dismissal of this action, without good reason. There were two attendances in this matter. Mr. Kestenberg had to prepare both affidavit materials and a detailed factum.

[108] Nonetheless I do not find that this is an appropriate case for full indemnity costs. Unreasonable behaviour may lead to enhanced costs, but more is required for the scale of costs that is sought here.

[109] In the circumstances, I find that costs of $10,000 are fair reasonable and proportionate. I also find that they fulfil the reasonable expectations of 833, which complained of the amounts that they paid to their lawyers in this action (described by Mr. Whittaker as $100,000 to date) and previous offers to settle the Fitzpatrick J, motion.

[110] The $10,000 shall be paid within 90 days.

“Marvin Kurz J.”

Electronic signature of Justice Marvin Kurz,

Date: December 22, 2021

[^1]: The evidence does not disclose what the reference to “the NCL” means. [^2]: Although Mr. Whittaker inserted a question mark at this point of his self-made transcript, and I have reproduced it as such, the sentence makes more sense without it.