Case Summary:
Legal profession — Barristers and solicitors — Retention of counsel — Retainer — Negligence — In real estate transactions — Relationship with others — Duty to third parties — Application by lawyer for summary judgment dismissing third party claim against him allowed — Carlucci and 605 brought third party claims against law firm and unrelated lawyer, claiming that they provided negligent advice regarding ability to sell shares in property — There was no genuine issue for trial — Absence of statement by law firm that it intended to engage lawyer to provide legal opinion was sufficient to grant summary judgment.
Professional responsibility — Self-governing professions — Duties — Negligence — Professions — Legal — Barristers and solicitors — Application by lawyer for summary judgment dismissing third party claim against him allowed — Carlucci and 605 brought third party claims against law firm and unrelated lawyer, claiming that they provided negligent advice regarding ability to sell shares in property — There was no genuine issue for trial — Absence of statement by law firm that it intended to engage lawyer to provide legal opinion was sufficient to grant summary judgment.
Application by a lawyer for summary judgment dismissing a third party claim against him. Carlucci, 605 and DeFilipis entered into a joint venture agreement under which they owned a property as tenants in common. Title was registered in the name of 751, whose shares were owned by the three in proportion to their respective interests. 751 agreed to sell the property to DeRosa, but DeFilipis opposed the sale. Carlucci and 605 retained the lawyer to commence an arbitration proceeding seeking authorization for the sale, but were unsuccessful and the lawyer's retainer ended. Carlucci and 605 agreed to sell their shares to DeRosa's company. The agreement included a condition in favour of Carlucci and 605 that completion of the transaction was conditional on their providing notice to DeFilipis and obtaining his consent. Carlucci and 605 engaged a law firm that was unrelated to the lawyer who acted in the arbitration proceeding. Carlucci asked the law firm to ask the lawyer to whom the notice should be sent. The lawyer responded that it should be sent to DeFilipis and his trustee in bankruptcy. DeFilipis did not consent to the transaction. The law firm advised Carlucci and 905 that they could sell their shares without DeFilipis' consent. Carlucci and 605 waived the condition in the agreement. DeRosa's company brought an action against Carlucci and 605 to enforce the agreement, taking the position that DeFilipis' consent was required. Carlucci and 605 brought third party claims against the law firm and the lawyer, claiming that they provided negligent advice regarding the ability to sell.
HELD: Application allowed.
There was no genuine issue for trial. The absence of any statement by the law firm that it intended to engage the lawyer to provide a legal opinion was sufficient to grant summary judgment. The lawyer did not provide legal advice with respect to the agreement or even know of its contents. He was asked a factual question and responded with a factual answer. He did not send either an account or a reporting letter and was not asked to do so. The lawyer did not owe duty to Carlucci and 605 as non-clients. There was no basis to conclude that he knew or reasonably should have known that they were relying on him. He had no conversation with them
Statutes, Regulations and Rules Cited:
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 20
Counsel:
Michael R. Kestenberg, for the Third Party (Moving Party) Nicholas C. Tibollo.
Ronald G. Chapman, for the Defendants Angelo Carlucci and 605446 Ontario Ltd.
Endorsement:
1 The Third Party, Nicholas Tibollo (the "applicant"), seeks summary judgment under Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as amended, in the form of an order dismissing the claim brought against him by Angelo Carlucci ("Carlucci") and 605446 Ontario Ltd. ("605") (collectively, the "respondents").
Background:
2 Carlucci, 605 and Giulio DeFilipis ("DeFilipis") own a piece of property (the "Property") as tenants in common that is governed by a joint venture agreement among them dated November 20, 1987 (the "JVA"). Title to the Property is registered in the name of 751518 Ontario Limited ("751"), whose shares are owned by DeFilipis, Carlucci and 605 in proportion to their respective joint venture interests in the Property.
3 Section 8.03 of the JVA contains a right of first refusal provision in respect of any proposed sale of an interest in the Property. Section 8.01 of the JVA appears to require, among other things, that the consent of all three members of the JVA is required to the sale of any shares of 751. The significance of these provisions is described below.
4 In 2002, 751 entered into an agreement to sell the Property to Vince DeRosa ("DeRosa"). DeFilippis opposed the sale. The applicant was retained by Carlucci and 605 to commence an arbitration proceeding seeking authorization for the sale. This resulted in a number of proceedings in which the applicant, as counsel or co-counsel, unsuccessfully sought a means to complete the sale of the Property as an entirety to DeRosa without DeFilipis' consent under section 8.01 of the JVA. The applicant's retainer on these matters ended in January 2006 when he rendered his final account and closed his file.
5 On October 3, 2006 LDR Properties Inc. ("LDR"), which is owned by DeRosa, entered into an agreement for the purchase of a 75% interest in the Property, being the undivided interests owned collectively by Carlucci and 605 (the "Agreement"). A condition of closing was delivery of the shares of 751 owned by Carlucci and 605, together with a board resolution of 751 consenting to such transfer.
6 Schedule "A" to the Agreement included a condition in favour of the sellers to the effect that completion of the transaction was conditional on the sellers providing notice to DeFilipis and obtaining his consent to the Agreement. The relevant portion of the condition reads as follows:
7 This condition was apparently agreed between the parties to the Agreement without the involvement of a solicitor on behalf of Carlucci and 605. It is significant that this condition does not refer specifically to either section 8.01 or 8.03 of the JVA. The condition required DeFilipis' consent to the sale of the undivided interests of Carlucci and 605 in the Property, not just to the sale of their shares in 751. Mr. Chapman, who represents the respondents, says that this provision is a reference to a notice in respect of the right of first refusal under section 8.03 of the JVA. Section 8.03 provides for deemed consent in the event that a joint venture partner does not exercise his right of first refusal, which as a bankrupt, Defilipis was not in a position to do. However, it is not clear that section 8.03, and therefore any deemed consent under that provision, extends to any shares in 751 to be sold as part of any proposed transaction. To the extent that section 8.03 does not extend to any shares in 751, a further consent would be required to comply with section 8.01. Whatever the intention regarding satisfaction of this condition in Schedule "A" to the Agreement, however, it is relevant that that the nature and content of the notice to be provided to DeFilipis under this condition is not specified in the Agreement.
8 Carlucci and 605 engaged Tibollo & Associates in respect of the transaction. This firm is unrelated to the applicant. On September 22, 2006, prior to execution of the Agreement, Carlucci forwarded a copy of the draft Agreement to Michael Tibollo at this firm with a covering note which read, "Mike, I am sending you a copy of the Offer for Innisfil, please speak to Nick in regards to the Notice [sic] that have to be sent. Call me once you have spoken to Nick".
9 John Rizakos ("Rizakos"), a lawyer at that firm, telephoned the applicant on September 28, 2006. The only evidence regarding this telephone call is found in the applicant's affidavit evidence and in a short note of Rizakos which confirms the applicant's description of the call. In a brief conversation, Rizakos asked the applicant to whom he should send the notices required by section 8.03 of the JVA in respect of the right of first refusal. The applicant responded that, based on his recollection, the notices should be sent to DeFilipis personally and to his trustee in bankruptcy, as DeFilipis was bankrupt at the time. The applicant then provided Rizakos with the contact information for DeFilipis and for the solicitor acting for his trustee in bankruptcy. Rizakos did not state that he was retaining the applicant on behalf of Carlucci and 605, or on behalf of his law firm, to provide a legal opinion regarding the notices.
10 Subsequently, after apparently learning that DeFilipis would not consent to the transaction, the solicitors acting for Carlucci and 605 on the real estate transaction, Rizakos and Michael Tibollo, advised these parties that they could transfer the shares of 751 without DeFilipis' consent. On the basis of this advice, Carlucci and 605 waived the condition in Schedule "A" to the Agreement in their favour and the Agreement became binding.
11 LDR has taken the position that, contrary to the advice of Rizakos and Michael Tibollo, Carlucci and 605 cannot transfer their shares of 751 without DeFilipis' consent because the provisions of section 8.01 of the JVA apply to the sale of shares of 751 and require unanimous consent.
12 LDR then commenced this action against Carlucci and 605 seeking to enforce the Agreement or, alternatively, seeking damages. Carlucci and 605 commenced third party claims against Rizakos, Michael Tibollo and the applicant alleging negligent advice regarding their contractual ability to sell their interests in the Property. In doing so, Carlucci and 605 are taking the position that LDR is correct and Rizakos and Michael Tibollo are wrong regarding the applicable provisions pertaining to a sale of shares of 751 in the circumstances.
13 Carlucci says that, prior to this litigation, he and 605 were not aware that section 8.01 required DeFilipis' consent to transfer their shares in 751 to a third party. Carlucci also says that, if he had been informed by the applicant that such consent was necessary, he would have instructed their solicitors to delete "that part of the draft 2006 Agreement", failing which they would not have executed the Agreement. Whether or not this is accurate, Carlucci and 605 were nevertheless protected under the condition in Schedule "A" to the Agreement until the consent requirement under that condition was waived.
Analysis and Conclusions:
14 The test for summary judgment is set out in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764 at para. 44 [Combined Air]. In the present case, the material facts are clear and undisputed. There are no issues of credibility requiring viva voce evidence. I am satisfied that the Court can meet the "full appreciation" test in Combined Air in making a determination on this motion.
15 The applicant's motion for summary judgment is granted for the reason that the applicant was not retained as a solicitor to provide legal advice. There is, in fact, no evidence of the respondents upon which the Court could conclude that a genuine issue requiring a trial exists.
16 The simple issue in respect of the respondents' third party claim against the applicant is whether Rizakos engaged him as a solicitor on behalf of Carlucci and 605, or on behalf of Tibollo & Associates, to provide advice to any of them. The only circumstance in which that could have occurred is the conversation between Rizakos and the applicant. The only evidence of the content of that conversation is set out in the applicant's affidavit and in Rizakos' short note. The respondents do not dispute that evidence. In addition to the further reasons set out below, I think the complete absence of any statement by Rizakos that he intended to engage the applicant to provide a legal opinion to Carlucci and 605, or to his law firm, is sufficient on its own to grant summary judgment in favour of the applicant.
17 Two additional circumstances reinforce this conclusion.
18 First, it is important that the applicant had no conversation with Carlucci. It is quite possible that a court would have found that a retainer arose if Carlucci had called the applicant directly, particularly if Carlucci and 605 were not represented at the time of contact. However, those are not the present circumstances. The applicant was contacted by Rizakos alone. Neither Carlucci, nor any representative of 605, directly held out that the applicant was their solicitor in this matter in any conversation directly with him. Whatever Carlucci may have intended in his fax of September 22 to Michael Tibollo regarding speaking to the applicant is irrelevant. For the same reason, Carlucci's affidavit stating his intentions and expectations regarding this matter is of no assistance to the respondents on this motion.
19 The significance of this consideration is illustrated by asking who the respondents allege actually engaged the applicant. If Rizakos had intended to engage the applicant on behalf of Carlucci and 605, he had an obligation to tell the applicant of this engagement and invite him to send an account to them for his services. This did not occur. In the absence of such action, the only party that could have engaged the applicant is the firm of Tibollo & Associates. However, for the reasons set out above, it is clear that Rizakos did not purport to engage the applicant on behalf of his firm either.
20 Second, the applicant's four year involvement as litigation counsel to the respondents in respect of this Property and the JVA is not sufficient, on its own, to have established a retainer when Rizakos contacted the applicant. The fact that the applicant had acted for Carlucci does not create a solicitor-client relationship in respect of all future dealings with the Property. Carlucci chose to engage another firm of solicitors in respect of the transaction contemplated by the Agreement. They can read the JVA as well as the applicant. If Carlucci had intended to engage the applicant, he should have ensured that Rizakos did so. This would have required Rizakos to indicate the nature of the retainer, which he did not do in this case. The respondents' position is inconsistent with the reality of practice that clients choose different lawyers for different transactions, even involving the same property, asset or corporation.
21 There are two particular aspects of the circumstances in this case that reinforce this conclusion.
22 First, the nature of the issues involved in respect of the Agreement were substantially different from those involved in the earlier litigation for which the applicant acted as counsel to Carlucci and 605. This reflects the fact that the structure of the transaction contemplated by the Agreement was fundamentally different from the structure of the transaction contemplated by the earlier agreement entered into in 2002. The latter contemplated a sale of all interests in the Property; the former contemplated a sale of only Carlucci's and 605's interests. Accordingly, the latter involved the operation of 8.01 of the JVA, whereas the former involved issues concerning the operation of section 8.03 of the JVA and the condition in Schedule "A" to the Agreement in addition to the possible engagement of section 8.01.
23 Second, and in any event, the mere possession of a copy of the JVA was not sufficient to trigger a retainer in the absence of any knowledge of the proposed transaction and a copy of the Agreement. Both parties knew that DeFilipis was the other party to the joint venture. Rizakos asked to whom notices should be given under section 8.03 and received a correct answer. As put to the applicant, the question was a factual one regarding who should receive a notice under section 8.03 on behalf of DeFilipis and the applicant responded with a factual answer. It should also be noted that section 8.01 does not expressly contemplate any notice, merely a written consent. If Rizakos had intended to ask a legal issue regarding the nature of the consents required under the JVA for the proposed transaction, he had to put the question to the applicant in terms that indicated that he was seeking the applicant's opinion on a legal question, particularly as Rizakos was a solicitor himself. There is, however, no evidence that Rizakos gave the applicant a description of the proposed transaction, much less a copy of the Agreement, or that he indicated that he was seeking legal advice. Not having done so, I do not see how it could be suggested that Rizakos could reasonably have asked the applicant for a legal interpretation regarding the operation of the JVA in the circumstances of the transaction contemplated by the Agreement.
24 In summary, none of the indicia of a solicitor-client relationship set out in Weitzman v. Hendin (1989), 69 O.R. (2d) 678 (Ont. C.A.) at para. 54 are present. The applicant did not provide legal advice regarding the Agreement. He was not even made aware of its contents. The applicant could hardly be engaged as a solicitor to advise on what notices had to be sent, as opposed to asked to whom should any notices go, unless he was given a copy of the Agreement so that he could understand the nature of the transaction, which was substantially different from the transaction in which he was involved earlier. He was asked a factual question and he responded with a factual answer. He did not send either an account or a reporting letter. He was not invited or asked to send such an account or a reporting letter.
25 In support of its position, the respondents have served an expert report of Paul Dollak, a litigation lawyer who has represented many clients in matters involving interests in real estate. His report addresses a number of issues. With respect to the present issue, he addresses the question of whether "the applicant's duties as a lawyer were engaged when Mr. Rizakos called him in". His conclusion is as follows:
Clearly, then, Mr. Tibollo's professional duties were engaged: He was asked to provide assistance based on knowledge acquired while acting as counsel, and he responded by providing assistance. It was a professional engagement, however formally or informally it may have been commenced and carried out.
26 This conclusion is a conclusion of law or mixed fact and law. That is the domain of this Court, not of an expert, who can only address the issue of a standard of care of a duty that has been established. I decline to accept the report on this issue for this reason. I also think it is wrong for the reasons stated above. The remainder of the report addresses issues that are not relevant given the Court's determination that the applicant was not engaged as a solicitor to provide legal advice.
27 The further question remains whether the applicant owed any duty to the respondents as non-clients. I agree with the applicant that any such duty can only arise if the non-client reasonably relies upon the solicitor and the solicitor knew or should have known that this was the case.
28 In the present circumstances there is no basis in the facts for concluding that the solicitor knew or reasonably should have known that the respondents were relying on him. There was no conversation between the applicant and either Carlucci or another representative of 605. The only information the applicant had relative to what was being asked of him came from Rizakos. That information does not ground any conclusion of reliance. As mentioned, in particular, Rizakos did not even mention the Agreement, let alone forward him a copy. Nor did he raise the operation of sections 8.01 and/or 8.03 of the JVA. There was also no mention of Carlucci's intention to rely upon the applicant's knowledge of the JVA and presumably to pay him for that knowledge and advice.
29 I should note that both parties addressed the scope of the applicant's engagement in the event the Court were to find that the applicant had been engaged as the solicitor of Carlucci and 605. It is unnecessary to address this question. To do so requires an assumption of hypothetical events which I have expressly found have not been demonstrated in the present circumstances. It would be inappropriate for the Court to speculate as to other circumstances under which the applicant might have been engaged and, accordingly, I make no determination on this issue.
Conclusion:
30 Based on the foregoing, summary judgment is granted in favour of the plaintiff and the Third Party action against the applicant is dismissed.
Costs:
31 The Court has received written costs submissions of the applicant. The respondents shall have twenty days from the date of this Endorsement to provide written responding submissions, after which the applicant shall have a further ten days to provide any reply submissions.
H.J. WILTON-SIEGEL J.