



COURT OF APPEAL FOR ONTARIO

CITATION: Mason v. Perras Mongenais, 2018 ONCA 978

DATE: 20181205

DOCKET: C65236

Watt, Miller and Nordheimer JJ.A.

BETWEEN

Michael Mason

Plaintiff (Appellant)

and

Perras Mongenais
, Blumberg Segal LLP and
    Scott D. Chambers

Defendants (
Respondent
)

Jeffrey Radnoff and Charles Haworth, for the
    appellant

Michael R. Kestenberg and Aaron Hershtal, for
    the respondent Perras Mongenais

Susan Sack and Jenny Bogod, for Blumberg Segal LLP
    and Scott D. Chambers
[1]

Heard: November 15, 2018

On appeal from the order of
    Justice Frederick L. Myers of the Superior Court of Justice, dated March 6,
    2018, with reasons reported at 2018 ONSC 1477.

Nordheimer J.A.:

[1]

The plaintiff appeals from the summary judgment granted by the motion
    judge that dismissed the plaintiffs claim against the defendant law firm,
    Perras Mongenais, for professional negligence.

Background

[2]

The appellant was involved in divorce proceedings with his spouse, Lise
    Mason. He retained the defendant, Chambers, to act for him. Issues of
    equalization and spousal support had to be determined. The appellant and his
    spouse owned a business through a corporation. Each of the spouses owned shares
    of the corporation. As part of resolving the equalization issue, the appellant
    was going to buy the shares owned by his spouse.

[3]

As the trial approached and settlement discussions occurred, it became
    apparent to Chambers that the appellant required tax advice with respect to the
    impact that any terms of a settlement might have on the appellants tax
    position. Chambers and his law firm, Blumberg Segal LLP, were not in a position
    to provide that advice so Chambers advised the appellant to obtain tax advice
    from another lawyer.

[4]

The appellant had previously used the tax and corporate legal services
    of Pierre Perras of the respondent in connection with the family business. He chose
    to use the services of Perras for the tax advice he required and so advised
    Chambers. Chambers got in touch with Perras for that purpose. It was undisputed
    that the appellant did not want to be involved in the details of the tax
    planning. He apparently recognized that he was unsophisticated in such matters
    and he preferred to leave it to the lawyers to protect him.

[5]

At this point, I will recite, in slightly more detail, the key events
    that occurred and that led to this claim, borrowing extensively from the motion
    judges reasons (at paras. 37-51).

[6]

At about noon on March 13, 2014, the Thursday before the scheduled
    commencement of the trial on Monday, March 17, 2014, Chambers sent an email to Perras
    to introduce himself and to seek Perras' advice. Chambers enclosed two
    competing offers to settle the matrimonial proceedings. He explained that the
    settlement being discussed contemplated that the appellant would cause the
    family corporation to redeem or buy Ms. Mason's shares. Chambers wrote:

We want to understand the tax
    implications, consequences and if there are any tax opportunities available to Michael
    or the corporation in such a transaction.

[7]

Perras left a voicemail for Chambers asking for more specific
    instructions. Chambers responded by email as follows:

Further to your telephone message this afternoon, we have asked
    Mike to contact you to provide you with instructions. However, what we are
    looking for is some tax advice as follows:

1. How to structure the your [
sic
]

proposed offer
    to buy or redeem Lise's shares in [the corporation] in the most effective
    manner from a tax standpoint for you and the business; and

2. To understand the tax implications on Lise's offer to you and
    to the business; and,

3. Get suggestions on an
    alternative means to structure an offer to settle that is more tax advantageous
    than the offers as they stand.

[8]

Perras responded by email later that afternoon. He pointed out to
    Chambers that he had acted for both spouses in the past. He said that he
    "can offer the following general advice at this time." Perras then
    gave the following advice:

Any resolution of the matter which involves a transfer of
    shares by Lise to Mike and a payment by Mike to Lise will be somewhat
    inefficient from an income tax point of view as Mike will require after
    personal tax dollars to make the payments (at Mike's marginal rate, he will
    need well in excess of $3M pre tax to pay $1.75M).

On the other hand, if, prior to divorce, Lise were to transfer
    her shares to a holding corporation, and such shares were redeemed by [the
    corporation], no immediate tax liability would arise. Lise would only be
    subject to tax as she withdrew the funds (by way of dividends) from the holding
    corporation. Depending on the rate at which the funds were personally withdrawn
    by Lise, a low rate of tax (and possibly no, or a negligible amount) would
    apply.

The preceding are just general observations,
    based, in part, on CRA Technical Interpretations. The matter would need further
    review and recommendation.

[9]

Two central points emerge from this email. First, Perras told Chambers
    that, if the appellant agreed to pay Ms. Mason $1.75 million for her shares by
    way of equalization, he would incur at least another $1.25 million in personal
    tax obligations (over $3 million in total outlay) as he drew money from the
    company to fund the purchase.

[10]

Second,
    Perras advised Chambers that the purchase could be carried out by another route
    involving redemption of Ms. Masons shares with no adverse tax consequence to the
    appellant and perhaps only minimal tax obligations for Ms. Mason. This second
    approach has been referred to by the parties as the "redemption
    approach". There was no tax hit to the appellant from this approach
    because the corporation would pay Ms. Mason's holding company for her shares.
    Under the redemption approach, the appellant would not have to personally draw
    money from the corporation and pay tax on that money to fund the redemption, as
    he would have to do if he bought the shares personally.

[11]

The
    next Perras heard from Chambers was in an email dated March 17, 2014 at 2:34 p.m.
    In that email, Chambers forwarded draft minutes of settlement to Perras and
    asked him to "review these draft minutes of settlement and get back to us
    as soon as possible."

[12]

About
    30 minutes later, the appellant called Perras and immediately put Chambers on
    the phone. Perras told Chambers that, on reviewing the minutes of settlement,
    he saw that the redemption approach that he had recommended was not being used.
    Chambers told Perras that Ms. Mason refused to accept the redemption approach.
    She wanted to receive all cash and did not want the tax burden to be on her.
    Instead, Chambers advised that he had negotiated a "tax discount" on
    the share purchase price to take into account the negative tax outcome caused
    by the appellant buying the shares personally. The idea of the appellant taking
    a discount in the purchase price of the shares to reflect his potential tax liability
    had not been raised with Perras previously. Perras did not make any inquiries
    about the tax discount.

[13]

Chambers
    next told Perras that he and the appellant were in a settlement conference
    ready to sign the minutes of settlement but they needed advice on para. 1 (c)
    of the draft minutes of settlement that provided for a spousal rollover of the
    family corporation's shares. Para. 1 (c) of the minutes of settlement dealt
    with the elections available under the
Income Tax Act
when one spouse
    transfers shares to another. Under the settlement terms proposed, based on the
    elections agreed upon, the appellant was assuming liability for all taxes on
    any future disposition of the shares that he would be buying.

[14]

By
    email sent just over one hour after receiving the minutes of settlement, Perras
    explained that in para. 1 (c) the parties were electing to take a tax free
    rollover of Ms. Mason's shares on the transfer to the appellant. Perras then
    explained how the tax attribution rules would apply to the revenue earned on
    the transferred shares in the appellant's hands. He concluded, "From
    Mike's perspective, that is fine." The email concluded, "Let me know
    if you need more from me."

[15]

The
    parties proceeded to settle the equalization issue and entered into minutes of
    settlement that were incorporated into a court order. At 6:30 that evening, Chambers
    responded by email, "Thanks Pierre. This information was very
    helpful."

[16]

While
    equalization was settled, the trial proceeded on the issue of spousal support. The
    trial judge ultimately ordered the appellant to pay a large amount for spousal
    support. The appellant was unhappy with that result and retained Mr. Mongenais
    of the respondent to appeal the support order. Ultimately, because of the
    issues that arose in this matter, the appellant retained different counsel.  He
    was successful on his appeal, as this court ordered a significant reduction in
    the amount of spousal support that he was required to pay:

Mason v.
    Mason
, 2016 ONCA 725, 132 O.R. (3d) 641
.

[17]

There
    is no dispute that the appellant settled the equalization issue by agreeing to personally
    buy Ms. Masons shares. He has or will incur tax of approximately $1.3 million
    as a result. It is the incurrence of this tax liability that led the appellant
    to sue the respondent, together with the defendants Chambers and Blumberg Segal
    LLP, for professional negligence.

The decision below

[18]

The
    respondent brought a motion for summary judgment to dismiss the claim against
    it. On the motion, various affidavits were filed, including affidavits from the
    appellant and from Perras. In addition, Chambers was examined pursuant to r.
    39.03 of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194, as a
    witness on a pending motion. There was also an affidavit filed by the appellant
    from a lawyer providing an expert opinion on whether Perras and Chambers met
    the standard of care in advising the appellant. She concluded that they had
    not. There was no expert evidence filed by the respondent. Cross-examinations
    took place on the affidavit of the appellant and the affidavit of Perras, among
    others.

[19]

The
    motion judge concluded that summary judgment should be granted dismissing the appellants
    claim against the respondent. The motion judge began his reasons by reviewing
    the Supreme Court of Canadas decision in
Hryniak v. Mauldin
, 2014 SCC
    7, [2014] 1 S.C.R. 87, regarding when it is appropriate to grant partial
    summary judgment.

[20]

The
    motion judge concluded that summary judgment should be granted because he found
    that Perras had given correct advice to Chambers regarding the potential tax
    consequence to the appellant, if the payment was made in the way that it
    ultimately was. The motion judge found that any concern regarding whether the
    appellant understood the tax advice given by Perras was an issue between the
    appellant and Chambers since he had directed Chambers to deal with Perras on
    the issue. While the motion judge said that he was not rejecting the expert
    evidence that Perras had failed to meet the standard of care of a prudent
    lawyer, it is clear that he did, in fact, reject it through his finding that
    summary judgment should be granted.

Analysis

[21]


A motion judges decision
    to grant summary judgment is a finding of mixed fact and law, reviewable for
    palpable and overriding error. However,
where the motion judge errs in principle or with regard to an
    extricable legal question, the decision will be reviewed on a correctness
    standard
:
Hryniak
,
at paras. 81-84
. Both forms of error are
    engaged in this case.

[22]

In
    my view, the motion judge erred in principle in granting partial summary
    judgment, in the context of this litigation as a whole. In doing so, the motion
    judge failed to heed the advice given by this court in
Baywood Homes
    Partnership v. Haditaghi
, 2014 ONCA 450, 120 O.R. (3d) 438, about the
    risks associated with granting partial summary judgment. Those risks were
    repeated in this courts decision in
Butera v. Chown, Cairns LLP
, 2017
    ONCA 783, 137 O.R. (3d) 561. As Pepall J.A. said in
Butera
, at para.
    34:

A motion for partial summary
    judgment should be considered to be a rare procedure that is reserved for an
    issue or issues that may be readily bifurcated from those in the main action
    and that may be dealt with expeditiously and in a cost effective manner.

[23]

The
    potential liability of the respondent to the appellant is not an issue that can
    be readily bifurcated from the rest of the appellants claim. The nature of the
    appellants claim is such that it is inextricably linked to the claim against
    the other defendants, especially Chambers. Indeed the motion judge appears, at
    one point, to recognize this problem when he says, at para. 99:

I recognize that nothing is
    certain and there are risks of both duplication and that a judge could look at
    the same undisputed facts that I have reviewed and possibly see them
    differently.

[24]

There
    are serious issues raised in this case about the duties of a lawyer in advising
    his/her client. Principal among those is whether a lawyer can rely on another
    lawyer as a conduit for providing advice to a client. One crucial fact in this
    case is that the respondents client was the appellant. It was not Chambers.

[25]

Perras
    professional obligations had two aspects. One was to ensure that his advice was
    correct. There does not appear to be any dispute that Perras advice about the
    tax implications for the appellant personally buying his ex-spouses shares was
    correct. The other was to ensure that the advice was communicated to, and
    properly understood by, his client. At least on the appellants view of the
    matter, that did not occur.

[26]

There
    is some authority for this second aspect of a lawyers professional obligations
    in a case referred to by the motion judge, namely,
Turi v. Swanick
(2002), 61 O.R. (3d) 368 (S.C.). In that case, Spiegel J. said, at p. 390:

What I derive from the totality of
    Mr. Gray's [expert witness] evidence on this issue is that while the best practice
    is to provide the advice in writing, a failure to do so would not constitute a
    breach of the standard, provided that the solicitor is satisfied on reasonable
    grounds
that the advice had been effectively brought home to the client
.
    [Emphasis added.]

[27]

The
    motion judge avoids this issue by concluding that any concerns about whether
    the appellant understood the advice is an issue between the appellant and
    Chambers. It is unclear to me, on this record, that one can safely come to that
    conclusion. It is an open question, in my view, whether it was sufficient for
    Perras to simply communicate his advice to Chambers in order to satisfy his
    professional obligations. It is also an open question, even assuming that Perras
    could rely on that communication, whether Perras made the necessary inquiries
    to ensure that his advice had been communicated to, and understood by, the
    appellant. The state of the appellants knowledge was especially important
    after Perras was told by Chambers that the appellant was proceeding in a fashion
    that was going to incur the very tax liability that Perras had cautioned about.

[28]

On
    this point, the motion judge held, at para. 36:

Whether or how Mr. Chambers
    explained the tax advice received from Mr. Perras to Mr. Mason is of no
    consequence on this motion and is relevant only to the negligence claim as
    between them.

[29]

I
    do not agree with that blanket statement. There was an obligation on Perras to
    ensure that his advice was understood by the client. The client was the
    appellant. There is no evidence that Perras took steps to get that assurance.

[30]

In
    addition,  the expert opinion that the motion judge had on the standard of care found that  Perras had failed to meet that standard in at least two respects. One was the  failure of Perras to reinforce to Chambers, at the time that the settlement was  being entered into, of the tax consequences for Mason. The other was the  failure of Perras to make any inquiries regarding the tax discount and its  implications as they related to his advice. While the expert may have been  mistaken about whether Perras repeated his advice to Chambers, she is not  mistaken about the lack of inquiries. The record does not reveal any inquiries  by Perras of Chambers as to whether the appellant was aware of the tax  implications inherent in the proposed settlement and that he understood
    them.

[31]

I
    note, on this latter point, that there was no challenge to the qualifications
    of the expert and no apparent challenge to her opinion. Yet the motion judge fails
    to reconcile his conclusions with the contents of that opinion.  In failing to
    do so, the motion judge made a palpable and overriding error.

[32]

It
    also does not appear that Perras made any inquiries of Chambers regarding the
    tax discount that Chambers said that he had negotiated to offset the tax
    liability and whether it, in fact, accomplished that objective. Indeed, the
    motion judge appears to recognize that gap when he says, at para. 55:

However, there is no indication
    before me that this deduction was intended to address or redressed at all the
    taxes that Mr. Perras had identified and warned Mr. Chambers would be incurred
    by Mr. Mason if he bought his spouse's shares personally now.

[33]

Yet
    the motion judge ultimately avoids the impact of that absent inquiry by
    concluding that the respondent was not retained for that purpose. The motion
    judge said, at para. 88:

But nothing in the circumstances
    of the email and telephone call on March 17, 2014 put that question on Mr.
    Perras' plate or ought reasonably to have alerted Mr. Perras that anyone was
    seeking his advice on the nature and quantum of the tax discount. No one was.

[34]

It
    is impossible to reconcile that conclusion with the inquiries that were made of
    Perras when this matter started. It must be remembered that the sole reason for
    retaining Perras was because Chambers was not qualified to provide tax advice
    regarding the proposed settlement. In the initial retainer, Perras was
    expressly asked to advise on the proposed offers to settle and, in particular, provide
    suggestions on an alternative means to structure an offer to settle that is
    more tax advantageous than the offers as they stand. Perras does so by
    recommending the redemption approach. Subsequently, Perras is told that the
    redemption approach is not being utilized but that a tax discount has been
    negotiated to offset the tax liability that Perras has warned about. Yet,
    Perras makes no inquiry as to whether that tax discount is more or less
    advantageous in contrast to the redemption approach that he had recommended. It
    seems to me to be at least arguable that, in not doing so, Perras has failed to
    fulfill one of the aspects of his professional obligations. I note that that
    conclusion is consistent with the expert opinion that was before the motion
    judge on this same question.

[35]

In
    response to this point, the respondent contended, during the hearing, that
    there were two separate and distinct retainers  the first to address the settlement
    proposals and the second to provide advice on the spousal rollover. There is
    nothing in the record to substantiate that contention nor does that appear to
    have been the position taken before the motion judge. Rather, it seems clear
    that Perras was retained to provide tax advice with respect to the proposed
    settlement and that is what he did on these two occasions. I would also note
    that, if there is an issue as to the nature of Perras retainer, that is an
    issue that ought not to have been resolved on a summary judgment motion in
    these circumstances.

[36]

The
    fact remains that there was a tripartite arrangement surrounding the advice to
    be given to the appellant. How that advice was sought and provided will be the
    subject of evidence from all three participants. It is inevitable that there
    will be disagreements as to how that unfolded. The motion judges finding that
    the plaintiffs entire claim against Perras Mongenais is captured in five
    contemporaneous emailsand one telephone call (para. 76) does not accord with
    the factual record.

[37]

Further,
    the result of the motion judges conclusion is that one side of that tripartite
    arrangement has been removed from review and consideration at the trial. That
    result appears to directly conflict with the interest of justice element of
    the summary judgment approach laid out in
Hryniak
. In particular, I
    point to the following observation of Karakatsanis J. at para. 60:

For example, if some of the claims
    against some of the parties will proceed to trial in any event, it may not be
    in the interest of justice to use the new fact-finding powers to grant summary
    judgment against a single defendant. Such partial summary judgment may run the
    risk of duplicative proceedings or inconsistent findings of fact and therefore
    the use of the powers may not be in the interest of justice.

[38]

Those
    concerns loom large in this case, especially regarding the terms of Perras
    retainer and whether he fulfilled his professional obligations in that regard. The
    answers to those questions are inextricably connected to the dealings that took
    place between the appellant, Perras and Chambers. One simply cannot separate
    those dealings into discrete compartments and pretend that a determination of
    one does not have any impact on the others.

[39]

Further,
    there does not appear to be any advancement achieved in terms of the action as
    a whole by rendering partial summary judgment in this case. Indeed, the motion
    judge acknowledges this when he says, at para. 95:

There is no doubt that the
    questions of whether Mr. Chambers acted prudently in dealing with Mr. Mason's
    tax issues will be one of the important issues in the case. The same facts that
    I deal with above -- the five emails and the telephone call on March 17, 2014
    -- will be put into evidence. Mr. Perras could be called as a witness although
    his evidence is fixed in emails including his May 2, 2014 email that recites
    his recollection of the telephone call which is not disputed by Mr. Chambers.
Granting
    summary judgment therefore saves little evidence or time at trial.
The
    trial will not be significantly shortened. But the parties will not be the
    same. Perras Mongenais will not be there as a party. Costs may be reduced as
    the focus of the claim sharpens on Mr. Chambers and his firm. [Emphasis added.]

[40]

The
    motion judge also appears to recognize that there is a risk of inconsistent
    findings at trial, including on the issue of Perras retainer. He notes that
    Mr. Chambers will likely be blaming Mr. Perras (para. 96). However,
    ultimately, the motion judge dismisses those concerns in favour of speedier
    justice and concludes, at para. 103:

I am not prepared to accept a
    bright line rule that consigns to the delays, distress, and inefficient costs
    of the trial process, every case that might possibly have a risk of duplication
    or inconsistent verdicts when partial summary judgment is sought.

[41]

The
    motion judges conclusion, on this point, is inconsistent with this courts
    decisions in
Baywood
and in
Butera
. I note, with some
    concern, what appears to be an effort by the motion judge (paras. 23 to 30) to
    isolate the decision in
Butera
and thus apparently limit its
    precedential effect. If that was his intention, then it was an inappropriate
    effort.
Butera
addresses, in a comprehensive fashion, the problems
    that arise when partial summary judgment is sought. Indeed, the decision here
    invokes all of the concerns identified in
Butera
in that respect, including
    delay, added expense, the unproductive use of scarce judicial resources, and
    the reality of a limited record.

[42]

For
    all of these reasons, in my view, the determination of whether Perras failed to
    meet the standard of care as a lawyer, in these circumstances, cannot properly
    be determined summarily, as the motion judge did. Proceeding summarily also
    does not achieve the fundamental purposes of the summary judgment process, that
    is, to provide a more expeditious and less expensive means to achieve a just
    result:
Hryniak
,
at para. 49.

[43]

Before
    concluding, I would add one further observation. The motion judge spent
    considerable effort in his reasons describing what he believed to be the
    culture shift mandated by the decision in
Hryniak
. In particular, he
    appears to adopt the view that, not only are trials not the preferred method
    for the resolution of claims, they should be viewed as the option of last
    resort. The motion judge proceeds from this view to his conclusion, at para.
    33:

The shift required is an
    understanding that judges will be deciding cases summarily as much as possible
    to avoid the expense and delays of the trial process that put civil justice
    beyond the reach of most Canadians.

[44]

With
    respect, the culture shift referenced in
Hryniak
is not as dramatic or
    as radical as the motion judge would have it. The shift recommended by
Hryniak
was away from the very restrictive use of summary judgment, that had developed,
    to a more expansive application of the summary judgment procedure. However,
    nothing in
Hryniak
detracts from the overriding principle that summary
    judgment is only appropriate where it leads to a fair process and just
    adjudication:
Hryniak
at para. 33. Certainly there is nothing in
Hryniak
that suggests that trials are now to be viewed as the resolution option of last
    resort. Put simply, summary judgment remains the exception, not the rule.

Conclusion

[45]

In
    light of my conclusion, it is unnecessary to address the appeal of the motion
    judges award of costs, which is set aside with the allowing of the appeal. However,
    on that point, I should note the fair admission by the respondent that the
    motion judge erred in not reducing the rates underlying that costs award to
    properly reflect a partial indemnity scale.

[46]

The
    appeal is allowed and the summary judgment is set aside. The respondent will
    pay to the appellant the costs of the appeal in the agreed amount of $12,000
    inclusive of disbursements and HST. I would reserve the costs of the summary
    judgment motion for disposition by the trial judge or such other judge who
    finally disposes of this action.

Released: November 5, 2018 DW

I.V.B.
    Nordheimer J.A.

I
    agree.  David Watt J.A.

I
    agree.  B.W. Miller J.A.





[1]

While counsel for Blumberg Segal LLP and Scott D. Chambers
    appeared on the appeal, they did not file any material nor did they participate
    in the hearing.


