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$1-million crossclaim against firm heads to trial

|Written By Alex Robinson
$1-million crossclaim against firm heads to trial
Geoff Hall says a recent Ontario Court of Appeal decision sends a clear message that it is part of a lawyer’s duty to explain to clients the risks of litigation and the proper quantification of potential damages.

The Ontario Court of Appeal is letting a $1-million counterclaim against Aird & Berlis LLP proceed to trial.

A former client — Oravital Inc. — filed the counterclaim after the firm brought a claim against the company for $182,569 in unpaid accounts. A motions judge summarily dismissed the cross-claim and granted Aird & Berlis’ claim, but the Court of Appeal found the matter should go to trial.

The Court of Appeal overturned a finding by the motion judge that the plaintiffs were aware of the value of damages and risks of litigation as they were sophisticated businesspeople.

In Aird & Berlis LLP v. Oravital Inc., the court said this finding was “a misapprehension of the solicitor’s duty of care to advise the clients about the legal basis for damages and the risks of litigation.”

Lawyers say the motion judge’s ruling would have had implications for the profession if upheld, as it could have meant that practitioners would not have a duty to provide advice on certain issues a client was knowledgeable about.

In 2010, Oravital retained Aird & Berlis to represent it in an action against a number of corporations and individuals, claiming the defendants had wrongfully misappropriated its system, which is used to diagnose and treat oral infections.

The firm represented Oravital for five years in the matter, which the motion judge described as “acrimonious and protracted” litigation.

Aird & Berlis then launched its claim against Oravital in 2015 after the client retained new counsel, contending the company still owed $182,569 to the firm in unpaid fees.

In the counterclaim it then filed, Oravital alleged the firm was negligent in its carriage of the retainer and had failed to provide a meaningful assessment of potential damages that would be recoverable in the action. This failure led to elongated litigation and unnecessary fees and disbursements charged by Aird & Berlis, the client argued.

Oravital also claimed that Aird & Berlis failed to meet the standard of care expected of “reasonable and prudent solicitors” by failing to reassess and adjust its litigation strategy when one of the defendant corporations ceased operations, “which significantly reduced the recoverable damages,” the counterclaim said.

The client also alleged that the firm had “pursued a course of conduct that achieved little to advance the litigation on its merits, and instead ran up exorbitant costs on procedural motions.”

In its reply and defence to the counterclaim, Aird & Berlis said it had advised Oravital that the proceeding would be “complicated, lengthy and expensive” and denied it was negligent in respect of its alleged failure to advise on potential damages that could be recovered.

The firm contended that Oravital did not request a preliminary assessment of recoverable damages, but that if it had, the firm acted appropriately in the advice it gave, and that the firm had carefully considered the client’s strategy when one of the defendants went out of business.

The firm also submitted that Oravital’s principals were experienced businessmen who were familiar with the risks of advancing the action and had provided instructions and strategy throughout the proceeding.

When Aird & Berlis moved for summary judgment, the motion judge found that there was no causal link between the firm’s failure to obtain a formal damages assessment at an earlier stage and the continuation of the Oravital action.

Lawyers say the takeaway from the Court of Appeal’s decision is that lawyers have to meet the standard of care in providing advice on damages issues even if clients are very sophisticated businesspeople.

Geoff Hall, a partner with McCarthy Tétrault LLP, who, along with Anu Koshal, represented Oravital in the appeal, says the decision sends a clear message that it is part of a lawyer’s duty to explain to clients the risks of litigation and the proper quantification of potential damages.

“I think the real lesson here is that litigators have to keep in mind what damages can be recovered and not lose sight of that because clients deserve to understand that directly and need to understand what their cases are worth to determine whether they should be pursuing them or not,” says Hall.

The Court of Appeal also found that the motion judge erred by determining the claim and counterclaim on a summary judgment motion, as there were “highly contentious inconsistencies about these issues that required a trial to resolve.”

While both parties agreed that the issues in the action and counterclaim could be dealt with through a summary judgment motion, the Court of Appeal found that was not the case.

“They were mistaken,” said the decision.

Lawyers say the decision serves as a reminder of the limits of summary judgment and what is an appropriate use of that kind of motion.

Bryan Rumble, a partner with Falconeri Munro Tucci LLP, says the decision shows that courts are not always going to agree that a case is appropriate for summary judgment even if both parties agree it is.

 “Even when the parties agree it’s a case for summary judgment, the judge needs to actually look behind that and make sure that is in fact the case,” says Rumble, who was not involved in the case.

The lawyers representing Aird & Berlis declined to comment as the case is ongoing.

The case will now go back to the Ontario Superior Court for trial.

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