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| G. Walker, counsel for the Plaintiff,
Applicant. J.R. Pollard, counsel for a Law Firm. |
GIBBS J. (orally):— On June 24th, 1986, in Division 2 chambers, I dismissed an application by the Plaintiff for interim relief, and awarded costs on the solicitor and client scale to be paid to the Defendants prior to July 22nd, 1986. I also gave leave to bring a further application for the second part of the interim relief requested on a further and better affidavit provided that the further application be set down for hearing prior to July 22, 1986.
No further application was made. No appeal was taken from the Order I made. The solicitor and client bills of costs have been taxed by District Registrar J.L. Jordan whose written reasons for decision were issued on March 18th, 1987.
On May 26th, 1987 the Plaintiff applied before me for a type of "Bullock Order" directing that the taxed bills of costs be paid by the solicitors who made the application on his behalf on June 24th, 1986, on the grounds that the fault giving rise to the disposition of costs on a solicitor and client scale was that of his then solicitors and that he should not be held liable for that fault.
The Notice of Motion before me on May 26th, 1987, does not make it clear that it is a kind of "Bullock Order" which is sought, although it does contain the words that "the fault giving rise to a finding of solicitor/client costs as against the Plaintiff should have been made against the Plaintiff's solicitors." However, as Mr. Pollard, appearing for the solicitors, signified his willingness to proceed on the basis of the material filed as if the Notice of Motion clearly spelled out what the Plaintiff was seeking, there seemed little point to adjourning so that a further and more specific Notice of Motion could be filed. Accordingly, I heard argument from both counsel and adjourned judgment to today.
The jurisdiction of the Court to make the Order requested is to be found in Rule 57(30) of the Rules of Court which provides:
| "57.(30) If it appears to the court that costs have been incurred improperly or without reasonable cause, or that by reason of undue delay in proceeding under an order or of any misconduct or default of the solicitor, any costs properly incurred have proved fruitless to the person incurring them, the court may order the costs, disallowed as between the solicitor and his client, and also that the solicitor repay to his client any costs which the client may have been ordered to pay to any other person, or may make such order as the justice of the case may require. The court may refer the matter to the registrar for inquiry and reports and such notice of the proceedings or order shall be given to the, solicitor and the client as the court may direct." |
Since hearing argument I have had the opportunity thoroughly to review the file. The reason for the solicitor-client award of costs became readily apparent during the course of the review. It was because the affidavit in support of the application heard on June 24th, 1986 was so hopelessly deficient that the Defendants should not have been brought into Court to answer for it. The Defendants were forced to incur substantial preparation costs to no purpose, although they cannot be faulted for incurring those costs as they could not risk appearing without being prepared to speak to the merits, if called upon to do so. Then, as it turned out, the first and most substantive, head of interim relief requested, was abandoned when the case was called so that, even if the affidavit had not been defective, the costs referrable to that head would have been thrown away in any event.
The affidavit was in support of a two part application for an order: (1) in the nature of an interim injunction restraining the Defendants from carrying on certain business activities; and (2) that the Defendants pay royalties to the Plaintiff or any other person appointed by the Court, pursuant to an agreement which is the subject matter of the litigation, pending trial. Both of those requested orders fall within the category of what Mr. Justice Estey of the Supreme Court of Canada described as "execution before judgment", at page 166 of Aetna Financial Services v. Feigelman et al (1985) 15 DLR (4th) 161, a decision pronounced on January 31st, 1985, almost 18 months prior to the date when the application came before me at the end of June 1986.
Mr. Justice Estey said this:
| "As a general proposition, it can be fairly stated that in the scheme of litigation in this country, orders other than purely procedural ones are difficult to obtain from the court prior to trial. Where the injunction maintains the status quo in a way which is fair to both sides, the order is attainable; but, simply because the order would not injure the "defendant is not sufficient reason to move the court to grant what is generally regarded as an extraordinary intervention. In Law Society of Upper Canada v. MacNaughton et al., [1942] O.W.N. 551, Rose C.J.H.C. stated at p. 551: | ||
| 'I have always understood the rule to be that the question is not whether the injunction will harm the defendant, but whether it is probable that unless the defendant is restrained, wrongful acts will be done which will do the plaintiff irreparableI injury.' |
A second and much higher hurdle facing the litigant seeking the exceptional order is the simple proposition that in our jurisprudence, execution cannot be obtained prior to judgment and judgment cannot be recovered before trial. Execution in this sense includes judicial orders impounding assets or otherwise restricting the rights of the defendant without a trial. This was enunciated by Cotton L.J. in Lister & Co. v. Stubbs, [1886-90] All E.R. Rep 797 at p. 799, as follows:
| 'I know of no case where, because it is highly probable if the action were brought the plaintiff could establish that there was a debt due to the defendant, the defendant has been ordered to give a security till the debt has been established by the judgment or decree.'" |
Then at page 167, after referring to the abhorrence which the common law has felt toward allowing execution before judgment, Mr. Justice Estey listed four "obvious exceptions" to the general proposition:
| (1) | For the preservation of assets the very subject matter in dispute, where to allow the adversarial process to proceed unguided would see their destruction before the resolution of the dispute. | ||
| (2) | Where generally the processes of the Court must be protected even by initiatives taken by the Court itself. | ||
| (3) | To prevent fraud both upon the Court and on the adversary. | ||
| (4) | Quia timet injunctions under extreme circumstances which include a real or impending threat to remove contested assets from the jurisdiction. |
Finally, emphasizing, in a sense, the heavy burden upon an applicant seeking orders impounding assets or restricting defendants' rights pending trial, at page 186 Mr. Justice Estey said:
| "There is still, as in the day of Lister, a profound unfairness in a rule which sees one's assets tied up indefinitely pending trial of an action which may not succeed, and even if it does succeed, which may result in an award of far less than the caged assets. The harshness of such an exception to the general rule is even less acceptable where the defendant is a resident within the jurisdiction of the Court and the assets in question are not being disposed of or moved out of the country or put beyond the reach of the courts of the country. This subrule or exception can lead to serious abuse. A plaintiff with an apparent claim, without ultimate substance, may, by the Mareva exception to the Lister rule, tie up the assets of the defendant, not for the purpose of their preservation until judgment, but to force, by litigious blackmail, a settlement on the defendant who, for any one of many reasons, cannot afford to await the ultimate vindication after trial. |
Faced with these very firm principles pronounced by the highest court in the land, it must have been obvious, in my opinion, to a competent counsel preparing the application material, that very persuasive and compelling evidence would be required to convince the chambers judge that the case fell within one of the four exceptions or within some other equally important exception overlooked by Mr. Justice Estey. And yet there is nothing in the supporting affidavit which even remotely addresses these considerations. Similarly, in respect of the injunction relief, which one must assume was a serious objective when the application material was prepared, there is nothing in the affidavit which addresses the tests laid down by the House of Lords in American Cyanamid Co. v. Ethecon Ltd. (1975) AC 396. And the American Cyanamid case has been adopted and followed on innumerable occasions in this Province since it was reported over 10 years ago.
It is for these reasons that I have described the supporting affidavit as hopelessly deficient. On that evidence the application could not have been successful, even if the Defendants had not appeared at all. The Plaintiff's solicitors had two choices: if the evidence necessary to make out at least an arguable case could not be produced the application ought never to have been made; alternatively if an arguable case could be made out, there was a duty to ensure that the evidence to support the argument was contained within the supporting affidavit. The solicitors did not select either alternative. Instead they proceeded to file application material which comes perilously close to being deserving of the description of frivolous. In any event, regardless of the choice of descriptive adjective, in my opinion, the solicitors were negligent in the performance of their duty to their client, and in that connection I rely upon the very erudite judgment of the Supreme Court of Canada in Central Trust v. Rafuse et al. (1986), 37 C.C.L.T. 117, delivered by Mr. Justice LeDain on October 9, 1986.
The standard required of solicitors in the performance of their duties to their clients is described by Mr. Justice LeDain in these words, starting at page 167:
| A solicitor is required to bring reasonable care, skill and knowledge to the performance of the "professional service which he has undertaken. See Hett v. Pun Pong (1890), 18 S.C.R. 290 at 292 (S.C.C.). The requisite standard of care has been variously referred to as that of the reasonably competent solicitor, the ordinary competent solicitor and the ordinary prudent solicitor. See Mahoney, Lawyers - negligence - standard of Care (1985), 63 Can. Bar Rev. 221. Hallett J., in referring to the standard of care as that of the 'ordinary reasonably competent' solicitor, stressed the distinction between the standard of care required of the reasonably competent general practitioner and that which maybe expected of the specialist. It was on the basis of this distinction that he disregarded the evidence of one of the expert witnesses concerning the practice in real estate transactions involving corporations. |
The requirement of professional competence that was particularly involved in this case was reasonable knowledge of the applicable or relevant law. A solicitor is not required to know all the law applicable to the performance of a particular legal service, in the sense that he must carry it around with him as part of his 'working knowledge', without the need of further research, but he must have a sufficient knowledge of the fundamental issues or principles of law applicable to the particular work he has undertaken to enable him to perceive the need to ascertain the law on "relevant points. The duty in respect of knowledge is stated in 7 Am. Jur. 2d, 'Attorneys at Law' 3] 200 in a passage that was quoted by Jones J.A. in the Appeal Division as follows [[at p. 269070] p. 269, 147 D.L.R.]:
| 'An attorney is expected to possess knowledge of those plain and elementary principles of law which are commonly known by well-informed attorneys and to discover those additional rules of law which, although not commonly known, may readily be found by standard research techniques.' |
See Charlesworth and Percy on Negligence (7th ed., 1983), pp. 577-78 to similar effect, where it is said:
| 'Although a solicitor is not bound to know the contents of every statute of the realm, there are some statutes, about which it is his duty to know. The test for deciding what he ought to know is to apply the standard of knowledge of a reasonably competent solicitor.' |
The duty or requirement of professional competence in respect of knowledge is put by Jackson and Powell, Professional Negligence (1982), at pp. 145-46 as follows:
| 'Although a solicitor is not "bound to know all the law," he ought generally to know where and how to find out the law inso far as it affects matters within his field of practice. However, before the solicitor is held liable for failing 'to look a point up, circumstances must be shown which would have alerted the reasonably prudent solicitor to the point which ought to be researched.'" |
In my opinion the conduct of the Plaintiff's solicitors in this case fell far short of the reasonable care, skill and knowledge which the Plaintiff was entitled to expect. The American Cyanamid principles ought by now to be part of the working knowledge of a competent counsel in this jurisdiction. If they are not, then any counsel contemplating an injunction application ought to be able to perceive the need to research the law before preparing the material to be filed. It may be that the Aetna Financial case is not as well known, however a moderate amount of research would quickly have brought it to light, and that research should have been undertaken as part of the preparation for a bid for what are known to competent counsel to be extraordinary remedies not lightly granted by the Court. It is for these reasons, and in accordance with the principles I have read from the Rafuse case that I conclude that the Plaintiff's solicitors were negligent in the performance of their duty to him. That negligence led to the aware of solicitor-client costs.
Mr. Pollard says negligence is not sufficient, that there must be a greater degree of culpability in the solicitors, and he relies upon two decisions of the Court of Appeal in England: Abraham v. Justin, [1963] 2 All E.R. 402; and R & T Thew Ltd. v. Reeves (No. 2), [1982] 3 All E.R. 1086.
The Abraham case does not assist the solicitors very much. The central issue there was the right of the solicitor to be heard in his own defence before being compelled to pay the costs personally. That issue does not arise here. Secondarily, there was an issue over whether a solicitor could be required to pay costs for losing on an arguable point. That is another issue which does not arise here. To be sure, Lord Denning used the expression "misconduct" in the sense of "dishonesty", but on the other hand, Lord Harmon spoke of "misconduct or negligence" which, he said, "is only a negative form of misconduct". One of the three judges therefore equated negligence with misconduct. The third judge, Lord Pearson, did not address the kind of conduct which would justify requiring the solicitor to pay the costs personally.
As I read it, the Thew case does not help the solicitors much either. Two judges gave reasons. In addressing what conduct was sufficient to invoke what he called "the compensatory jurisdiction", Lord Denning, at page 1089, said: "The cases show that it is not available in cases of mistake, error of judgment or mere negligence. It is only available where the conduct of the solicitor is inexcusable and such as to merit reproof," and he quoted brief excerpts from Myers v. Elman (1939) 4 All E.R. 484. Lord Justice O'Connor, however, spoke at greater length on the conduct aspect and, at page 1090, quoted the following words of Lord Wright, reported at page 508 of Myers v. Elman:
| "The cases of the exercise of this jurisdiction to be found in the reports are numerous, and show how the courts were guided by their opinion as to the character of the conduct complained of. The underlying principle is that the court has a right and a duty to supervise the conduct of its solicitors, and visit with penalties any conduct of a solicitor which is of such a nature as to tend to defeat justice in the very cause in which he is engaged professionally, as was said by Lord Abinger, C.B., in Stephens v. Hill ((1842) 10 M & W 28, 152 ER 368.) The matter complained of need not be criminal. It need not involve peculation or dishonesty. A mere mistake or error of judgment is not generally sufficient, but a gross neglect or inaccuracy in a matter which it is a solicitor's duty to ascertain with accuracy may suffice. Thus, a solicitor may be held bound in certain events to satisfy himself that he has a retainer to act, or as to the accuracy of an affidavit which his client swears. It is impossible to enumerate the various contingencies which may call into operation the exercise of this jurisdiction. It need not involve personal obliquity. The term 'professional misconduct' has often been used to describe the ground on which the court acts. It would perhaps be more accurate to describe it as conduct which involves a failure on the part of a solicitor to fulfil his duty to the court and to realise his duty to aid in promoting, in his own sphere, the cause of justice. This summary procedure may often be invoked to save the expense of an action. Thus, it may, in proper cases, take the place of an action for negligence, or an action for breach of warranty of authority brought by the person named as defendant in the writ. The jurisdiction is not merely punitive, but compensatory. The order is for payment of costs thrown away or lost because of the conduct complained of. It is frequently, as in this case, exercised in order to compensate the opposite party in the action." |
If these English Court of Appeal cases apply, I consider that the conduct of the solicitors here fall within the ambit of Lord Wright's description in Myers v. Elman, and within Lord Harmon's "negligence which is a negative form of misconduct" description in Abraham v. Justin. Accordingly, in my view, neither of the two cases relied upon by Mr. Pollard support his position.
And in any event, it is the very broad wording of our Rule 57(30) which is to be applied. Such expressions in the rule as "costs ... incurred improperly," "misconduct or default of the solicitor," and "costs (which have) proved fruitless to the person incurring them" embrace what occurred here.
Lord Wright, in the above quote, said: "This summary procedure may often be invited to save the expense of an action. Thus, it may, in proper cases, take the place of an action for negligence ...". The solicitors here did not bring, in the words of Mr. Justice LeDain, "reasonable care, skill and knowledge to the performance of the professional service which [was) undertaken." It would be pointless to require the Plaintiff to pay the taxed bills of costs and then go to the time and expense of an action, in a clear case of default, to obtain reimbursement from his former solicitors. He is therefore entitled to have the discretion vested in the Court under Rule 57(30) exercised in his favour.
The application is allowed. There will be an Order that the Plaintiff's former solicitors pay the amount of the taxed bills of solicitor-client costs to his present solicitor, and a further Order that immediately upon receipt thereof, the Plaintiff's present solicitor pay the monies out in satisfaction of the said taxed bills of solicitor-client costs and obtain appropriate acknowledgments or releases.
Anything further from counsel?
| MR. WALKER: | Yes, my lord, with respect to costs. |
(SUBMISSIONS RE COSTS)
THE COURT: In that this is in a sense a substitute for an action for negligence under which normally the costs award would be on a party-and-party basis, there will be costs on this application taxed on the party-and-party scale to the Applicant and to be paid in any event in the cause.
MR. POLLARD: There is one other matter and I don't know whether it really arises but I believe your lordship does have jurisdiction to provide that the law firm not be named. Now I know that in the Style of Cause it is not named and I would just ask that.
THE COURT: Well, I very carefully avoided naming the law firm in my reasons.
MR. POLLARD: Perhaps I could just ask with regard to the Court Reporter where the parties are referred to that my appearance be on behalf of the law firm?
THE COURT: Would you ensure that that is the designation in the reasons, Mr. Reporter.
(CONCLUDED)