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Solicitor’s Negligence in Estates and Trusts Context – No. 15: Case Reviews fromPrince Edward Island

We will now review a few cases out of Prince Edward Island.

While these touch on solicitor’s negligence in the general context and not necessarily the estates and trust context, guidance can still be gleaned from these decisions on how the courts in PEI are adjudicating solicitor’s negligence cases.

MacDonald Construction Co. Ltd. [1980] PEIJ No. 45 (SC)

After a client lost his home in a fire, a solicitor failed to settle an insurance claim, or take the appropriate steps within the required timeframe. The one-year limitation period provided in the Insurance Act, RSPEI 1974, Cap 1-5, section 113, expired without any action being taken; even though he told his client he would take make the claim. The client sued to recover the full amount he would have been owed under his fire policy and claimed it against his lawyer as damages in solicitor’s negligence.

The Court cited Halsbury’s Laws of England that “where an action is brought by the client against his solicitor for negligence, the client must prove two things, namely, (1) that there was a want of skill or care, and (2) that owing to such want of skill or care he has suffered damage. The liability, if any, arises out of breach of contract.” Here it was admitted that the lawyer, through inadvertence or otherwise, permitted the limitation period to expire without initiating action, thus depriving the client of his right of action against the insurance company. To permit a limitation period to expire creates liability in negligence. The lawyer was found liable to pay the amount the client would reasonably have expected to receive on the settlement of the fire loss had the claim been made in time.

Taylor v. The Law Society of Prince Edward Island 1992 CanLII 2848 (PE SCAD)

This is a professional misconduct case before the Law Society of Prince Edward Island but is still relevant to the topic of solicitor’s negligence. A solicitor assisted a widow regarding her husband’s estate and with respect to an attempt to sell some property. The widow and a prospective buyer of the property attended the lawyer’s office. They spent over two hours going over the documents and discussing the property. During this time the lawyer disclosed certain problems with the title to the property.  Despite this, the buyer agreed to retain the lawyer to act for her for the purchase of the property. The lawyer made it clear that he would be acting for the purchaser and would not be charging the widow seller. When the lawyer later forwarded a plan of the property to the purchaser, he did not draw her attention to a particular encroachment.  After the purchase was complete, the buyer refused to pay the lawyer’s bill, complaining about the description of her property. The lawyer sued the purchaser for payment, and she made a complaint to the Law Society, alleging professional misconduct for acting for both the purchaser and the widow seller as there was a conflict of interest.

The Law Society found the lawyer’s actions amounted to professional misconduct for acting for both the purchaser and seller where there was a conflict of interest. However, on appeal the Court concluded that based on the evidence there was no solicitor/client relationship between the lawyer and the widow seller; therefore, there was no conflict of interest.

Tignish v. Murphy 1996 CanLII 3669 (PE SCAD)

The Court concluded that this solicitor’s negligence case was not suitable to be determined on a summary judgment motion. The plaintiff alleged that her lawyer was negligent and breached his fiduciary duty by failing to recommend that she seek independent legal advice (ILA) with respect to certain mortgages placed on her matrimonial home. The mortgages were obtained to finance a company that the wife and husband owned. The husband left the business and the couple separated. When the wife defaulted on the mortgages she alleged that she did not understand what she was signing. The lawyer had also acted for the company, the husband, and the bank.

The wife argued that the lawyer’s failure to advise her to obtain ILA amounted to negligence. The lawyer’s evidence was that he advised her of her rights under the family law legislation and her obligations under the mortgages, and that “she appeared to understand her position”. He did not, however, set out in specific terms what the contents of his advice was. Ultimately the Court concluded that a number of issues were raised that required a full trial including: does acting for both husband and wife in a mortgage of the matrimonial home, where the proceeds are to be used for business purposes, put the solicitor in a conflict of interest, as between husband and wife? Is the solicitor’s position different if the wife also participates in the business? The motion for summary judgement to dismiss the claim against the solicitor was dismissed. Unfortunately, there is no reported trial decision.

McEachern v Webster and Fraser 2000 PESCTD 82

A lawyer failed to testify in his defence in this solicitor negligence case, which played a role in the finding of his liability. The lawyer had made a mistake when making an offer on behalf of his client to sell certain land owned by her to her brother. The brother accepted the offer thinking he was purchasing the entire property as outlined in the offer. However, the lawyer made a mistake; the sister had only instructed the lawyer to offer to sell a portion of the property.

The Court relied on the equitable remedy of rescission based on either unilateral mistake or agency. The Court found that the contract entered into should be rescinded and the parties to the contract be restored to their previous positions. The Court also found that the actions of the “solicitor clearly constitute professional negligence”.[1] The lawyer offered to the brother something entirely different than what the sister was willing to sell. The lawyer did not testify at trial, which the Court found to be “unfortunate”. Also, the Court noted that “a conveyancing practice is not a counsel of perfection. Mistakes happen. Upon being discovered, management of the situation by the solicitor is predictably very important to the consequences. In this case, the only evidence before the Court is that the matter was not dealt with and that this exacerbated the problem”.[2]

Gillis & Gallant v. Schurman 2003 PESCTD 55 (CanLII)

A lawyer was sued in negligence regarding a transaction involving the purchase and sale of a business. After the transaction closed, the purchasers were advised that a large amount of money was owed by the business to the Canada Revenue Agency. This was the lawyer’s first commercial transaction in his legal career. The purchasers were unsophisticated in the world of business and they relied on their lawyer for their legal advice. To determine the extent of the duty of care of a reasonably competent solicitor as it applied to this case the plaintiffs presented expert evidence of one of PEI’s most experienced solicitors. The principal issue was lawyer’s failure to request and receive the appropriate information from the CRA. In addition to completing a GST search (which the defendant did not do) the purchasers could have been protected by an indemnification from the vendor. An indemnification was not signed by the vendor. The Court concluded on the evidence that while the lawyer breached his duty to the plaintiffs in failing to complete the searches ordinarily performed, prior to the trial the CRA provided a letter stating that as of the date of closing the company had no outstanding GST returns. Therefore even if the defendant had completed the necessary searches, nothing would have been uncovered prior to closing. The plaintiffs’ loss could not be attributed to any breach of duty by the lawyer.

Pye v. Metro Credit Union & Ors 2005 PESCTD 47

The lawyers in this solicitor’s negligence case denied having acted for the plaintiffs. However, several letters were introduced into evidence whereby the lawyers referred to the plaintiffs as “our clients”.  The firm gave legal advice, billed for legal services, and provided the plaintiffs with documents related to the real estate transaction they completed. The Court found the associate of the law firm was negligent in his dealing with the plaintiffs. Particulars of the negligence included the following: the basic documents were defective in form; some documents were not even signed; the wrong people signed the documents; etc. The Court stated, “put bluntly, it is difficult to find anything that was done right”. However, although the lawyer and law firm were negligent, it did not automatically follow that they were liable for the plaintiffs’ damages. Ultimately, the plaintiffs were able to prove negligence but were unable to prove damages resulted. The plaintiffs’ financial ruin and loss was not caused by the lawyers’ negligence but by their own financial downfall. The lawyer and law firm’s negligence was, “negligence in the air”[3] it did not make things worse

See you next Blog!

[1] McEachern v. Webster and Fraser 2000 PESCTD 82 at para. 41

[2] Ibid at para. 44

[3] Pye v. Metro Credit Union & Ors 2005 PESCTD 47 at para.19

This paper is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This paper is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

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