Davy Estate v. Egan et al., (2009) 255 O.A.C. 165 (CA)

• Judge: Laskin, Sharpe and MacFarland, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: August 25, 2009
• Jurisdiction: Ontario
• Citations: (2009), 255 O.A.C. 165 (CA);2009 ONCA 763

Davy Estate v. Egan (2009), 255 O.A.C. 165 (CA)

MLB headnote and full text

Temp. Cite: [2009] O.A.C. TBEd. NO.028

Deborah Marie Davy as Estate Trustee of the Estate of James Edward Davy also known as Ted Davy (plaintiff) v. Joan Egan also known as Joan Davy, CIBC World Markets Inc., and Grant Neuber (defendants/appellants) and Robert Henry (third party/respondent)

(C50108; 2009 ONCA 763)

Indexed As: Davy Estate v. Egan et al.

Ontario Court of Appeal

Laskin, Sharpe and MacFarland, JJ.A.

November 4, 2009.

Summary:

The plaintiff was the estate trustee for her father (Davy), who had an account with CIBC World Markets Inc. Her claim for damages against CIBC WM and its investment advisor arose from their handling of shares that Davy owned; specifically, that despite their knowledge of Davy's mental incapacity, they accepted his instructions to transfer the shares into a joint account that Davy had with his wife, and then accepted her instructions to transfer the shares into her account. After the shares were transferred into the joint account, the plaintiff's solicitor (Henry) wrote to CIBC WM to freeze the account. CIBC WM refused to do so without a court order. CIBC WM denied liability but also pleaded that to the extent they were liable, the plaintiff failed to mitigate by failing to move for a freezing order. CIBC WM obtained leave to commence third party proceedings against Henry and claimed that he breached his fiduciary duties and duties of care to the plaintiff. Henry moved to strike out the third party claim on the ground that it disclosed no valid cause of action. The motion judge struck out the claim under Rule 21. CIBC WM appealed, arguing that it was not plain and obvious that they had no claim against Henry.

The Ontario Court of Appeal dismissed the appeal. The defendants had no claim in law against Henry for advice given to the plaintiff as to how to mitigate the loss.

Barristers and Solicitors - Topic 1506

Relationship with client - Lawyer as joint tortfeasor - The defendants complained that the plaintiff failed to take post-loss steps to reduce her loss and commenced third party proceedings against the plaintiff's solicitor, claiming that he breached his fiduciary duties and duties of care to the plaintiff with respect to mitigation - The Ontario Court of Appeal held that the motion judge did not err by striking out the third party claim at the pleading stage as disclosing no cause of action - If the defendants had a claim, it could only arise under the Negligence Act - Even if the plaintiff relied upon advice that was negligent, the solicitor's fault with respect to mitigating the loss could not trigger a claim under the Act for having jointly caused the loss - The alleged damages were not "caused or contributed to by the fault or neglect of two or more persons" (s. 1), but solely by the defendants - As the fault of the solicitor related to the reduction of the loss after it was suffered, the solicitor was not "jointly and severally liable to the person suffering loss or damage" and not "liable to make contribution and indemnify" the defendant - Likewise, no claim arose under s. 2, as this was not a claim by one tortfeasor who had settled; in any event, the solicitor was not a "tortfeasor who is, or could if sued have been, liable in respect of the damage" - Finally, s. 5 was purely procedural in nature - See paragraphs 19 to 21.

Barristers and Solicitors - Topic 1506

Relationship with client - Lawyer as joint tortfeasor - The Ontario Court of Appeal observed that statements of principle suggested that a plaintiff who relied on a solicitor's advice might be found to have acted reasonably for the purposes of satisfying the duty to mitigate, even where the solicitor's advice was negligent - However, there was no basis in law for allowing the defendant to assert a claim against the plaintiff's solicitor - There were strong underlying policy reasons that supported that result - "The defendant is, after all, a wrongdoer who caused the plaintiff loss, and a plea of mitigation does not excuse or justify the wrong, nor does it rest on the attribution of partial responsibility for the wrong to some other party. Obvious mischief arises from allowing one party to sue another party's solicitor. Such claims invade the sanctity of the solicitor-client relationship. The solicitor's loyalty to the client is undermined. Difficult issues regarding solicitor-client privilege are bound to arise in relation to the solicitor's defence" - In the present case, the policy coincided with the strict letter of the law - However, the policy reasons could not prevail in cases where the defendant had a valid legal claim against a solicitor for contribution and indemnity - See paragraph 28.

Barristers and Solicitors - Topic 1554

Relationship with client - Duty to client - General - Duty to inform or advise client - On oral discovery, the plaintiff stated that she did not move for a freezing order on the advice of her solicitor - The defendants complained that the plaintiff failed to mitigate her damages and commenced third party proceedings against the solicitor, claiming that he breached his fiduciary duties and duties of care to the plaintiff with respect to mitigation - The Ontario Court of Appeal stated that "[w]hen considering a solicitor's advice on the steps to be taken by way of mitigation, the solicitor will have to be accorded considerable latitude. A plaintiff is required only to act reasonably in mitigation ... The standard for reasonableness articulated in the case law is relatively low ... as not requiring the plaintiff to do anything other than in the ordinary course of business ... [A] plaintiff whose rights have been violated is not required to undertake burdensome or risky measures to mitigate the loss he or she has suffered. No doubt, a solicitor would take that into account when advising a plaintiff and indeed, a solicitor who failed to do so would be negligent" - In the end result, the court held that the motion judge did not err in striking out the third party claim - The defendants could not claim indemnity - See paragraphs 24 to 26.

Barristers and Solicitors - Topic 2506

Negligence - Obligations or duties of a lawyer when acting for a client - [See Barristers and Solicitors - Topic 1554 ].

Damages - Topic 1002

Mitigation - General principles - Duty to mitigate - [See Barristers and Solicitors - Topic 1554 , first Practice - Topic 1121 and Practice - Topic 2230 ].

Damages - Topic 1006

Mitigation - General principles - Excuses for failure to mitigate - [See Barristers and Solicitors - Topic 1554 ].

Practice - Topic 1121

Parties - Third party or subsequent party procedure - When available - Claim for contribution or indemnity - In the context of an appeal involving a motion to strike a third party claim at the pleading stage, the Ontario Court of Appeal stated that "A claim for contribution or indemnity under s. 1 arises 'where damages have been caused or contributed to by the fault or neglect of two or more persons'. The Negligence Act does not diminish the amount that the plaintiff can recover from either wrongdoer on account of the fault of the other, but allows the wrongdoer named as a defendant to claim contribution by way of third party proceedings against the other wrongdoer based upon their respective degrees fault. A plea that the plaintiff failed to mitigate is not embraced by this provision. It is a defence to the plaintiff's initial claim that reduces the amount that the plaintiff may recover from the defendant by shifting some portion of the responsibility for the wrong to the plaintiff" - See paragraph 19.

Practice - Topic 1121

Parties - Third party or subsequent party procedure - When available - Claim for contribution or indemnity - [See Practice - Topic 2230 ].

Practice - Topic 2230

Pleadings - Striking out pleadings - Grounds - Failure to disclose a cause of action or defence - This appeal involved a motion to strike the defendants' third party claim at the pleading stage under Rule 21 as disclosing no cause of action - The defendants submitted that if the trial judge were to find that it was reasonable for the plaintiff to rely on the third party's (the plaintiff's solicitor's) advice, the plaintiff would not be found to have failed to mitigate, leaving open the possibility that the plaintiff would recover full damages against them and that they therefore had a third party claim for contribution and indemnity against the solicitor under the Negligence Act - The solicitor relied on Adams v. Thompson, Berwick, Pratt & Partners et al. (1987) (B.C.C.A.) holding that because mitigation was the plaintiff's obligation, any fault alleged against a solicitor in advising a client was wholly attributable to the plaintiff - The Ontario Court of Appeal agreed that "Adams" should be followed - There was a clear distinction to be drawn between a plea of mitigation in defence to a plaintiff's claim and a claim against a third party implicated in the loss - "A plea of failure to mitigate arises after the loss has been suffered and relates to events or conduct unrelated to the cause of the initial loss" - Accordingly, the defendants had no claim against the solicitor for advice given to the plaintiff as to how to mitigate the loss caused by the defendants' own wrong - See paragraphs 11 to 18.

Torts - Topic 7377

Joint and concurrent tortfeasors - Contribution between tortfeasors - Claim for - General - [See Practice - Topic 1121 ].

Cases Noticed:

Adams v. Thompson, Berwick, Pratt & Partners et al. (1987), 39 D.L.R.(4th) 314; 15 B.C.L.R.(2d) 51; 22 C.P.C.(2d) 102 (C.A.), folld. [para. 12].

HSBC Securities (Canada) Inc. v. Davies, Ward & Beck et al. (2005), 194 O.A.C. 1; 74 O.R.(3d) 295 (C.A.), refd to. [para. 21].

478649 Ontario Ltd. v. Cocoran et al. (1994), 74 O.A.C. 152; 20 O.R.(3d) 28 (C.A.), dist. [para. 22].

Cardar Investments Ltd. et al. v. Thorne Riddell (1989), 36 O.A.C. 280; 71 O.R.(2d) 29 (Div. Ct.), dist. [para. 23].

Pentland et al. v. Anderson et al., [2001] O.T.C. Uned. 353 (Sup. Ct.), dist. [para. 23].

Macchi S.p.A. v. New Solution Extrusion Inc. et al., [2008] O.A.C. Uned. 410; 2008 ONCA 586, appld. [para. 23].

Banco de Portugal v. Waterlow & Sons, [1932] A.C. 452 (H.L.), refd to. [para. 25].

British Westinghouse Electric et al. v. Underground Electric Railways Co. of London Ltd., [1912] A.C. 673 (H.L.), refd to. [para. 25].

Dunkirk Colliery Co. v. Lever (1878), 9 Ch. D. 20, refd to. [para. 25].

Statutes Noticed:

Civil Procedure Rules (Ont.) - see Rules of Civil Procedure (Ont.).

Negligence Act, R.S.O. 1990, c. N-1, sect. 1, sect. 2, sect. 5 [para. 13].

Rules of Civil Procedure (Ont.), rule 21 [para. 2].

Authors and Works Noticed:

Waddams, Stephen M., The Law of Damages (2008 Looseleaf Ed.), para. 15.140 [para. 25].

Counsel:

Laura Paglia and Gillian Dingle, for the appellants;

J. Brian Casey and R. Murtha, for the respondent.

This appeal was heard on August 25, 2009, by Laskin, Sharpe and MacFarland, JJ.A., of the Ontario Court of Appeal. Sharpe, J.A., delivered the following judgment of the court, released on November 4, 2009.