



COURT OF APPEAL FOR ONTARIO

CITATION: Goldentuler Estate v. Crosbie, 2017 ONCA 591

DATE: 20170707

DOCKET: C62635

MacPherson, Cronk and Benotto JJ.A.

BETWEEN

The Estate of Henry Goldentuler

Plaintiff/Appellant

and

Robert
    Crosbie, Olga Leyenson, Mark Koskie,

Gail Yattavong and KLC Law
    Firm (Corporation)

Defendants (Defence struck)

Ray Thapar, for the appellant

No one appearing for the defendants (defence struck)

Heard: July 4, 2017

On appeal from the judgment of Justice C.A. Gilmore of
    the Superior Court of Justice, dated August 9, 2016, with reasons reported at
    2016 ONSC 5071.

REASONS FOR DECISION

[1]

The appellant estate appeals from the trial judges damages assessment
    at an undefended trial to prove damages conducted on June 17, 2016 in the
    Superior Court of Justice.  The damages trial was undefended because the
    defendants statement of defence and counterclaim was struck by order of
    Ferguson J. of the Superior Court, dated January 8, 2008.  The defendants
    pleading having been struck by court order, this appeal also proceeded on an
    undefended basis.

[2]

The trial judge found that the defendants are liable to the appellant
    for damages arising from breaches by them of their duties of loyalty, good
    faith and avoidance of conflict of interest and self-interest during the course
    of their employment with Henry Goldentuler, a deceased lawyer (the Deceased). 
    She awarded the appellant damages in the sum of $344,513.87, after various
    deductions, plus $145,662.19 prejudgment interest.  The breaches arose from the
    defendants wrongful removal and transfer to a competing law firm of 120 client
    files from the Deceaseds law offices.

[3]

The appellant argues, on various grounds, that the trial judge erred in
    her quantification of general and special damages, and by refusing to award punitive
    damages in the circumstances of this case.

[4]

We agree that the trial judge erred in her damages assessment in three
    respects, as next described.  In all other respects, the trial judges calculation
    of damages was well within her domain and supported by the governing
    authorities and evidentiary record.  Accordingly, save as set out below, we see
    no basis for appellate interference with it.

General Damages

[5]

The trial judges first error concerns her reduction, by 44 percent, of
    the general damages she found were otherwise appropriate to account for overhead
    expenses notionally attributed to the files wrongfully removed by the
    defendants.  The trial judge did not explain the basis for this percentage
    reduction, although it appears to be the mid-point between the percentage
    reductions to general damages imposed in
Edgar T. Alberts Ltd. v. Mountjoy
,
    1977 CanLII 1026 (Ont. S.C.), 16 O.R. (2d) 682 (50 percent reduction) and
W.J.
    Christie & Co. v. Greer
(1981), 121 D.L.R. (3d) 472 (Man. C.A.) (37
    percent reduction).

[6]

The difficulty with this reduction in this case is that, on the trial
    judges findings, the agreed arrangement between the parties contemplated that
    any fees generated on completion or settlement on the disputed files were to be
    shared on an equal, 50/50 basis between the parties, with the appellant bearing
    sole responsibility for overhead expenses, the provision of the services of a
    receptionist and the furnishing of office space for two of the defendants and
    an assistant.

[7]

Yet, the trial judge both reduced the general damages otherwise owed to
    the appellant by 44 percent on account of overhead expenses and further reduced
    the general damages awarded by an additional 50 percent to reflect the fees-sharing
    arrangement agreed by the parties.  This resulted, in effect, in
    double-counting because the fees-sharing arrangement between the parties
    already took account of the appellants responsibility for overhead expenses,
    including the costs of the services of lawyers and support staff.  In other
    words, the agreed fees-sharing arrangement contemplated that the fees payable
    to the defendants were net of overhead expenses incurred to earn gross
    revenues.

[8]

In these circumstances, we agree with the appellant that the 44 percent
    reduction in general damages imposed by the trial judge should be set aside. 
    Given the agreement between the parties and on this evidentiary record, the
    proper reduction for overhead expenses should have been the sum of $120,000, on
    account of actual fixed costs (including proportionate rent).  Based on the
    uncontradicted expert evidence at trial, this is the approximate amount that would
    have been incurred to progress the client files to completion or settlement.

[9]

Adjusting the trial judges general damages award for these factors
    yields the following (a  b  c = d):



(a)

Gross general damages of $14,204.22 per file (80 x
          $14,204.22) =

$1,136,337.60



MINUS



(b)

Proportionate fixed costs for progressing the files in
          question to completion or settlement

-

120,000.00

_______________

$1,016,337.60



MINUS



(c)

50 percent of net general damages on account of agreed fees-sharing
          arrangement

-

$508,168.80



(d)

Net adjusted
          general damages =


$508,168.80



Punitive Damages

[10]

The trial judge declined to award punitive damages in this case
    primarily on the ground that the claim for these damages was based on the
    inordinate delay caused by the defendants in the progress of the litigation. 
    With respect, this was an error.  The appellants punitive damages claim was
    not solely related to litigation delay caused by the defendants.  Rather, it
    focused on the defendants egregious pre-litigation behaviour in effecting the
    wrongful removal of the relevant client files from the Deceaseds offices, the
    transfer of those files to a competing law firm, and the persistent failure to
    return the removed files.

[11]

In our opinion, the compensatory damages awarded by the trial judge, as
    adjusted in accordance with these reasons, are insufficient to account for the
    defendants misconduct.

[12]

On the trial judges findings, the defendants stole 120 client files
    from the Deceased, removing them from his offices surreptitiously, in the dead
    of night.   Eighty of those files would have generated fees for the appellant,
    but for their wrongful removal prior to completion or settlement.  In defiance
    of a court order, the defendants refused to return the files.  Moreover, they attempted
    to alter the appellants computer records to remove the information pertaining
    to each file.

[13]

And there is more.  As a result of the defendants wrongful conduct and
    mismanagement of some of the removed files, the Deceased was named as a
    defendant in multiple solicitors negligence suits.  Throughout, he was
    deprived of access to the client files in order to reconstruct the files and
    properly defend himself.

[14]

The trial judge found that the defendants acted in a high-handed manner,
    that their conduct went far beyond anything that would be acceptable within
    the parameters of the administration of justice (at para. 412), and that they
    breached foundational duties owed to the Deceased, including their duty of
    loyalty.

[15]

These findings are fully justified on the evidentiary record.  The
    defendants conduct was indeed outrageous and high-handed.  It reflects highly
    reprehensible misconduct that departs to a significant degree from the ordinary
    standard of decent behaviour.  As a result, it cries out for sanction by the
    courts.

[16]

For these reasons, compensatory damages alone are not sufficient to
    achieve the goals of deterrence and denunciation.  In contrast, an award of
    punitive damages would serve the rational purpose of deterring and denouncing
    the defendants egregious misconduct.  We would, therefore, award punitive
    damages, fixed in the amount of $80,000.

Special Damages

[17]

Finally, the trial judge awarded special damages equal to two-thirds of
    the disbursements incurred by the Deceased in respect of the disputed files
    ($26,339.32).  In our view, the Deceased was entitled to payment of all
    disbursements actually incurred by him, as proven at trial, in the amount of
    $39,509.29.  The disbursements were a real, out-of-pocket expense incurred by
    the Deceased, and established on the evidence at trial.  On any successful completion
    or settlement of each of the stolen files, the applicable disbursements would
    have been fully recoverable by the Deceased.

[18]

Accordingly, the appellant is entitled to the additional sum of
    $13,169.97 ($39,509.29 - $26,339.32) as special damages on account of
    disbursements paid.

[19]

In the result, after adjustments for the three errors outlined above, the
    appellant is entitled to damages from the defendants as follows:



(a)

net general damages:

$508,168.80



(b)

special damages
          (disbursements):

$39,509.29



(c)

punitive damages:

$80,000.00





Total:


$627,678.09



[20]

The appellant is also entitled to prejudgment interest on the general
    and special damages set out above (but not on the punitive damages), at the
    rate of 4.5 percent, as awarded by the trial judge.

[21]

For the reasons given, the appeal is allowed in part, in accordance with
    these reasons.  The appellant is entitled to its costs of this appeal, fixed in
    the amount of $5,000, inclusive of disbursements and all applicable taxes.

J.C. MacPherson J.A.

E.A. Cronk J.A.

M.L. Benotto J.A.


