Legal Blog

Whipping Boy

We do not often take major issue with a judge’s decision. In the case of Turi v. Swanick (2002), 61 O.R. (3d) 368, a decision of Spiegel J. of the Superior Court of Justice, we do. We also usually do not mention the judge who wrote a decision that we do not like. In this case, we do, for two reasons – to note that we are not related to the deciding judge and to point out that it was not the decision of Speigel J.

Bare Bones

The client was a high-risk client. He was unsophisticated and was entering the high-risk retail trade. He retained his lawyer to ensure that he would not be personally liable if the business failed. The lawyer set up a relatively complicated scheme by which a corporation was incorporated, a family trust was created to hold the shares, and a GSA was given and registered.

The client opened his business but the business failed. A supplier sued the client personally because the client had ordered goods without notifying the supplier that the corporation was the real entity ordering the goods. After a trial, the supplier was successful. The solicitor who acted for the supplier then commenced an action on behalf of the client against the client’s lawyer, alleging that the lawyer did not advise the client of the necessity of using the corporate name at all times and did not advise of the consequences of not doing so.

Facts Found

The lawyer testified that he had orally informed the client of the need to use the corporate name and the consequences of not using it. The lawyer had written a note that set out specific advice regarding the use of the name and some of the aspects that the lawyer and the client had discussed. The note did not mention the consequences of not using the corporate name.

The client denied that the lawyer had discussed with him the use of the corporate name and hotly disputed the circumstances surrounding the creation of the note. The lawyer did not mention the use of the corporate name in his reporting letter.

The judge decided that the lawyer had made the note as he had claimed. However, the judge indicated that the note cut both ways; just as it supported the conclusion that what was in the note was discussed, it supported the conclusion that what was not in the note was not discussed. Accordingly, the judge decided that the lawyer did discuss the use of the corporate name but did not discuss the consequences of its non-use.

The judge then reflected on the fact that the client swore that the lawyer did not discuss the name, contrary to the judge’s finding of fact. This, the judge said, was not an attempt to deceive the court; rather, it showed that the advice simply did not register with the client. The judge stated this despite the client’s testimony that “he understood everything the defendant told him.” It was, the judge said, evident to him that the client did not understand it.

Logic

We cannot understand the judge’s logic. The conversation with the client took 40 minutes. During the discussion, the lawyer used a whiteboard and all sorts of pretty diagrams to explain the consequences of the organisation that he was creating. His note contained only 6 lines. How could a 40-minute conversation be accurately summarised in 6 lines? Obviously, more was discussed than was contained in the note.

Further, how could the testimony of the client be given any credence when the note contradicted it and the judge found that the lawyer made the note contemporaneously? If the client could not even remember that the use of the name was discussed, he could hardly remember whether the consequences of the non-use of the name were discussed.

More

But wait, the judge went even further. He stated that even if he found that the lawyer had discussed with the client the consequences of the non-use of the corporate name, it would not have been enough. Since this client was high risk, the lawyer had to put the consequences in writing. Even if given orally “the advice was not effectively brought home to the plaintiff and the defendant had no reasonable grounds for believing that it had been.” The fact that, years later, the client testified that he understood everything that the lawyer told him was, of course, no reason for the lawyer to believe that the client understood what the lawyer had said.

So, now lawyers have a new standard of care. Everything must be in writing because all clients are idiots. Why should lawyers bother meeting with clients at all? Lawyers will have to put everything in writing anyway. Then judges can parse the writing to determine whether every contingency has been adequately met and explained.

Damages

The lawyer argued that even if he was negligent, the damages did not flow from his negligence. The client had testified that he knew that he had to mention the corporation when he signed a credit application. He stated, however, that the document that he signed for the supplier was not a credit application because it was entitled “new account.” This, of course, was a ridiculous statement. The judge accepted the argument that had the client named the corporation in the credit application, he would not have been liable to the supplier.

However, the judge noted that the client incurred liability to the supplier because the purchase orders made no mention of the corporation. The judge then relied on the case of Athey v. Leonati [1996] 3 S.C.R. 458 to decide that as long as the lawyer’s conduct materially contributed to the loss, the lawyer was liable for the loss.

The Athey case dealt with a situation in which the court was deciding whether the injuries suffered arose from a previous condition or the latest trauma. The case dealt with the thin-skulled rule.

The Turi case, we suggest, deals not with the apportionment of damages between tortious and non-tortious causes; rather, it should deal with contributory negligence. The client, by his own negligence, put himself in a position in which he could be held personally liable; he knew he ought to have included the corporation on the credit application. We understand that, in solicitors’ negligence cases, contributory negligence is not usually a factor; we suggest, however, in this case, it ought to have been.

Moral

There are three morals to this case:

1.   Put it in writing. If the lawyer did not have the note, he would not have had even a hope of contesting the client’s allegation.

2.   Amend your standard form reporting letters to include the necessity for the use of the corporate name and the consequences of not using it. When you do report, do not just rely on standard form reporting letters. Review your file to determine if there are any new wrinkles and report on them.

3.   If you have a solicitor’s negligence case that is coming before the trial judge in Turi, try to adjourn it. Perfection is not always possible, yet he seems to demand it.