27 February 2018By Cynthia Spry
In Aird & Berlis LLP v. Oravital Inc., the Court of Appeal recently overturned a decision: (1) granting summary judgment to a law firm for unpaid fees and disbursements; and (2) dismissing the counterclaim by the law firm’s former clients (two corporations) alleging negligent provision of legal advice and representation. The decision emphasizes that, even where all parties agree that an action is appropriate for summary judgment, it is nonetheless open to the courts to disagree and order a matter proceed to trial.
Background: In the action underlying the motion for summary judgment, the law firm sued for over $100,000 in unpaid fees and disbursements. The clients (the corporations) counterclaimed for $600,000 in damages, alleging that the law firm had failed to provide them with a meaningful assessment of potential damages in their action, which would have allowed for an earlier conclusion of the litigation and avoided most of the fees and disbursements. Both the plaintiff law firm and defendant clients moved for summary judgment.
The Test for Summary Judgment: Under Rule 20.04(2) of the Rules of Civil Procedure, the court shall grant summary judgment if: (a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or (b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment.
In Hryniak v. Mauldin, the Supreme Court of Canada held that there will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process: (1) allows the judge to make the necessary findings of fact; (2) allows the judge to apply the law to the facts; and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
Summary Judgment Granted at First Instance: The motion judge granted summary judgment in favour of the law firm for the full amount of the outstanding fees and disbursements, and dismissed the corporations’ counterclaim for negligent advice and representation. In doing so, her Honour noted that, despite the significant amount of money at issue and nature of the professional negligence issues raised (including the requirement for the court to make credibility assessments of the witnesses), all parties took the position that the entire dispute should be determined by summary judgment.
On the motion, the corporations argued they had only pursued the original action because the law firm led them to believe that the case was worth significant damages. They argued that they should have been told by an expert, and counsel, that provable damages were low. They claimed that, had this been done, the corporations would have altered their strategy and settled or dropped the case.
The motion judge did not accept this evidence. Rather, her Honour found that there was no causal link between the failure of the law firm to obtain a formal damages assessment at an earlier stage, and the continuation of the proceedings.
Her Honour held that the reasonableness of a lawyer’s conduct is to be judged in light of surrounding circumstances, including the experience and sophistication of his or her client. Lawyers are entitled to assume that sophisticated clients will use their knowledge and experiences to reasonably interpret aspects of their business and their related legal rights. On the facts, her Honour found that no one understood the value of the damages better than the corporations’ principals. They were educated and sophisticated individuals with extensive experience in the particular industry, and in finance, and were involved in all aspects of the litigation. Her Honour also found that the litigation was personal, and was driven largely by the bitter animosity of the corporations’ principals towards the defendant.
The motion judge found that the law firm was not liable for negligent representation and advice because, even if the law firm had breached the duty of care (the corporations provided expert evidence on this point, while the law firm did not), the client must prove that the conduct caused the loss, and (s)he suffered damages as a result. In other words, the client must show that, if properly advised, (s)he would have acted differently, and would thereby have avoided the damages suffered.
The Court of Appeal disagreed. In a brief decision, the Court of Appeal overturned the lower court’s decision, setting aside the summary judgment in favour of the law firm and the dismissal of the counterclaim. It held that the motion judge erred in law in finding that the appellants’ principals, as sophisticated business people, were aware of the value of the damages and the risks of the litigation. The Court of Appeal also held that the motion judge’s findings concerning the appellants’ dominant purpose for carrying on the litigation and the assessment of their damages claim were not available on the record.
In fairness to the motion judge, the Court of Appeal noted that the parties had agreed that the matter was appropriate for summary judgment; however, it held that they were mistaken. It remitted the claim and counterclaim to trial.
The Takeaway: This decision emphasizes that even where the parties agree that a matter is appropriate for summary judgment, the Court may not find it so. As such, it highlights the inherent tension between the Supreme Court’s emphasis on summary judgment as a tool to promote access to affordable, timely and just adjudication of claims, and the (possibly significant) risk that the costs incurred in such a motion will be thrown away.