Solicitors Negligence in Family Law – 2007

The classic statement of a lawyer’s duty of care is set out in the seminal Supreme Court of Canada case, Central Trust Co. v. Rafuse¹:

A solicitor is required to bring reasonable care, skill and knowledge to the performance of the professional service which he has undertaken… 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… 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.

There are aspects of solicitor negligence claims specific to family law that have proved constant over the years. Despite this, the wary family law lawyer knows that solicitor’s negligence claims are protean and rooted in an undulating landscape of caselaw. When acting for a client, the lawyer must navigate the contours of this landscape with constant regard for developments lest he/she find himself/herself faced with a Lawpro deductible.

In the past couple of years there have been developments in family law and in solicitor’s negligence law that should fill the family law lawyer with a healthy sense of trepidation. This paper guides the reader through four recent decisions that the family law bar should take careful note of. Although the following cases are all distinct, there are certain themes that are central. These include: the standard of care required of the family law practitioner; the availability of the limited retainer defence; the attention required by a client’s emotional state; and the requisite structure of independent legal advice.

Ristimaki v. Cooper

The overwhelming majority of family law cases settle before trial. The experienced family law lawyer is always looking to settle disputes privately and quickly without recourse to the courts. While this may require a strong hand on the part of the lawyer, care must be taken to ensure that the client is in control and properly informed before participating in any significant decision-making. Family law proceedings are replete with emotions generally absent from other legal disputes. Parties are not functioning at their best and can be driven by grief and revenge instead of reason and pragmatism.

Ristimaki v. Cooper²
is a recent Ontario Court of Appeal decision that discusses the standard of care applicable to a family law lawyer when negotiating a settlement for a client. Viewed as a barometer reading, this decision should resonate with all family law lawyers.

Law Leading to Ristimaki

Folland v Reardon³
was decided prior to Ristimaki and proved a decisive case in relation to the standard of care applicable to barristers. Before Folland v. Reardon, barristers were held to the standard of “egregious error”.

Folland was convicted of sexual assault and sentenced to five years in prison though fresh evidence later proved exculpatory for Folland. Folland sued Reardon, his counsel in the criminal trial for solicitor’s negligence in failing to order certain DNA testing and in not properly conducting the examinations at trial. Folland had been found guilty and incarcerated for sexual assault. Evidence not led at trial, would have exonerated him.

On appeal in the criminal proceeding, the new evidence was admitted and the conviction set aside. Folland then sued Reardon. Counsel for Reardon brought a summary judgment motion, claiming that the failure to introduce the evidence did not offend the egregious error test. The Court of Appeal examined whether Reardon’s defence of Folland fell below the requisite standard of care, and if so, whether those failings led to Folland’s incarceration.

Doherty J.A. outlined the tendency in solicitor’s negligence cases arising out of the conduct of litigation to hold the lawyer to a more forgiving standard than other professionals. Such pronouncements tend to hold that the litigator will only be found negligent where it can be said that the lawyer committed an “egregious error”. Doherty J.A. noted that this standard flies in the face of other professionals being held to the higher standard of reasonableness and suggests it prudent that Reardon be held to the standard of a “reasonably competent counsel acting in a criminal proceeding”.

The court takes the opinion that lawyer’s should not be given the benefit of being adjudicated on a standard apart from other professionals. The “egregious error” standard creates the appearance that when an allegation of negligence is made against a lawyer, judges will evaluate that lawyer’s conduct with the forgiving hand reserved only for that judge’s former profession. Doherty J.A. states:

I see no justification for departing from the reasonableness standard … Without diminishing the difficulty of many judgments that counsel must make in the course of litigation, the judgment calls made by lawyers are no more difficult than those made by other professionals. The decisions of other professionals are routinely subjected to a reasonableness standard in negligence lawsuits. I see no reason why lawyers should not be subjected to the same standard.

…

An individual being defended in a criminal case is entitled to expect that his lawyer will perform as a reasonably competent defence counsel. Courts should avoid using phrases like “egregious error” and “clearest of cases” when describing the circumstances in which negligence allegations will succeed against lawyers. These phrases invite the application of an inappropriately low standard of care to the conduct of lawyers.

This decision is instructive to all litigation counsel. No longer will negligence claims against them be subject to less vigorous scrutiny than claims made against other professionals.

In Van Duzen v. Lecovin⁴ the British Columbia Supreme Court gave a clear outline of the accepted elements necessary in order for a claim of lawyer’s negligence in the conduct of family law litigation. A plaintiff must prove the following essential elements, on the balance of probabilities:

a. that the defendant committed an act or omission in the conduct of litigation that fell below the standard of care required by law; and,

b. that the plaintiff suffered some loss as a result of the said conduct of the defendant⁵

In light of Folland v. Reardon, the question then begged is: what is the “standard of care required by law” in the context of family law? In Simanek v. Lamourie, a 2001 family law decision⁶, Keenan J. answers this question by stating that “in order to constitute conduct for which the solicitor is liable, the conduct must be egregious. Ristimaki will revisit this issue.

The Ristimaki Facts and Reasoning

Ristimaki
is the first application of the Folland v. Reardon principle to the family law bar. Here, the Ontario Court of Appeal explored the standard of care applied to a family law lawyer’s advice in recommending settlement. When making “judgment calls” for clients, the court found that family law lawyers should be held to the same standard applicable to other professionals. Accordingly, family law lawyers no longer can benefit from the “egregious error” standard and will now be held to a standard of reasonableness.

Ron Ristimaki was a very successful businessman, which afforded him and Leah a very extravagant lifestyle. Suddenly, after 33 years of marriage, Ron informed Leah that he was leaving her. Shortly after separation, Leah retained Cooper, a family law specialist. From the outset and on many occasions, Leah told Cooper that Ron would sell his company and try to flee without providing adequately for her. Cooper knew from the outset that Ron was a flight risk. Nonetheless, Cooper repeatedly responded to Leah’s concern by telling her she would have more money that she would ever need.

Shortly after the separation, the sale of Ron’s company was announced. Ron refused to disclose the particulars of the sale. Cooper prepared a petition for divorce. Cooper strategized a two-step litigation plan. The first step was a motion for particulars of the sale of Ron’s business. After the receipt of the particulars, the second step was to bring a motion for interim preservation of the sale proceeds.

Cooper served the divorce petition together with a notice of motion for particulars. The motion was adjourned on two occasions and was ultimately returnable in September of 1994. In Leah’s affidavit filed in support of the motion she deposed:

[Ron] has been saying for several years that he wished to sell his interest in [his business]. I believe that he will retire upon the closing of the sale to Allied. Once that occurs, [Ron] will have no reason to remain in Ontario, and I do not believe that he will. It is therefore urgent that my solicitors be advised forthwith of the particulars of the payments to [Mr. Ristimaki] for his interest in [ATH], so that they may then take steps to protect my position by seeking reasonable security to protect my entitlement to the equalization payment which will be found to be owing to me by [Mr. Ristimaki].

Evidenced by correspondence and memos to file, it was plain that Cooper was aware that Ron had already purchased a house in Florida, was spending a lot of time in the Caribbean and Mexico, had substantial funds in the Cayman Islands and was generally a flight risk.

Cooper retained a business valuator to assist in the appraisal of Ron’s business assets. On the day before the disclosure motion was to be argued, the business valuator opined to Cooper that Leah was owed an equalization payment in the neighbourhood of $8,000,000.00. Later that day, Cooper settled the motion on the terms that Ron would provide Leah with $2,500,000 as an advance on the equalization payment, that Ron would put an additional $1,500,000 in trust pending the outcome of the family law proceedings, and significantly, that Leah would not bring any motion to have further of Ron’s monies secured prior to judgement.

Prior to the settlement Cooper did not tell Leah the recommendation concerning the required security for the equalization payment, the need for a preservation order in respect of other monies at risk of leaving the jurisdiction, and the fact that, under the terms of the settlement, she would be giving up any further claim for security prior to judgment at trial. Without being fully informed of the terms, Leah agreed to settle the motion.

Following the settlement, Cooper brought a motion for interim support in May 1995 at which time it was agreed that trial would commence on January 26, 1996. Cooper did nothing to get the case ready for trial. He continued to procrastinate, even after being told confidentially that Revenue Canada was going to attach the trust fund. In January of 1997, Revenue Canada filed a certificate in an amount of over $7,000,000 in the Federal Court against Ron representing unpaid taxes, penalties and interest due. This certificate has the effect of a judgement. Revenue Canada also filed a writ of execution with the sheriff in Toronto. The Crown thus became a judgment creditor of Ron with its claim taking priority over any judgment received by Leah pursuant to the Crown prerogative.

By this time, Ron had taken flight to Costa Rica and his pleadings had been struck. Cooper obtained default judgment for the balance of the equalization payment, in excess of $3,000,000. The default judgment was never paid.

In the action by Leah against Cooper, the trial judge found some negligence on the part of Cooper but found no negligence by Cooper in making the settlement, and advising his client. Where there was negligence, the trial judge found no causal connection between Cooper’s negligence and Leah’s damages. Leah appealed the “egregious error” standard applied by the trial judge to Cooper’s settlement recommendations. The Court of Appeal followed Folland and held that the appropriate standard was not “egregious error” but rather “reasonableness” and that the matter should therefore go back to trial to be properly adjudged.

Speaking for the court, Armstrong J.A. affirmed the reasoning in Folland stating that “there is no justification for holding lawyers to a different and lower standard than other professionals.” Armstrong J.A. further outlines that although frequently forced to make difficult judgment calls with serious consequences, the judgment calls made by lawyers are no more difficult than those made by other professionals.

What to Take From Ristimaki

A direct application of Ristimaki tells us that like all barristers, family law lawyers can no longer take comfort in the “egregious error” standard. They now will be held to a standard of “reasonable care” when acting on behalf of their clients and in advising them, in relation to family law matters. When this standard is applied within the emotional rubric of family law, the lawyer is well advised to act with particular precaution.

In Ristimaki, Cooper’s disclosure motion was ill conceived. Section 8 of the Family Law Act made disclosure a statutory obligation. A more prudent motion would have been a section 12 application for interim preservation. Under the former egregious error standard, Cooper’s decision may have been within the standard of care. Under the reasonableness standard it would be hard to justify the decision. Similarly, Cooper’s decision to settle on the basis that no further preservation motion could be brought is one that would be hard to rationalize on a standard of reasonableness. Knowing that Ron was a flight risk, Cooper should have been attuned to the risks. As well, Cooper should have advised his client of the risk in agreeing to the settlement.

In Lenz v Broadhurst Main (see below) Himel J. states,” It is the lawyer’s duty to warn the client about potential risks.” In Ristimaki, the solicitor failed to do so.

The lesson to be learned from Ristimaki is this. When advising your client, make sure your client is informed of all material facts. A prudent lawyer will want the client to know all reasonable options, and prospects. In our view, it is your duty to ensure that a decision by the client is an informed decision. In Van Duzen v. Lecovin, the court stated that “an error made by a lawyer in the exercise of judgement will not amount to negligence, unless the error constitutes a marked departure from the standard of care.”⁷Ristimaki should then serve to caution the family law lawyer. A marked departure from a standard of “egregious error” is far more difficult to satisfy than a similar departure from a standard of reasonableness.

Lenz v. Broadhurst Main

Dissatisfied clients have often questioned the extent to which a lawyer is obliged to give unsolicited advice or recommend preventative action. Lenz v. Broadhurst Main⁸ looks at a family law lawyer’s obligation beyond the retainer. The following quote is an apt statement of the case’s principle:

“The foundation for solicitor’s negligence cannot be the failure to advise the plaintiffs in respect to steps or options which were not, in any event, practical with a view to resolving the impediment”⁹

Courts recognize that lawyers are not necessarily required to deal with each and every of a client’s issues. However, the limited retainer defence is narrow and can be a dangerous keel on which to stage a defence.

The Lenz Reasoning

Lenz, a successful music composer and active member of the Baha’i faith had been married for 19 years when a stranger to the marital relationship became pregnant with his child. For religious reasons, he immediately commenced a campaign for an expedited divorce to avoid having the child born out of wedlock.

Enter Mitchell Houzer, a family law lawyer then from the Toronto firm of Broadhurst Main. Lenz retains Houzer in October of 1992 and instructs that he needs to be divorced by December 20, 1992, in order to marry his girlfriend. There was no written retainer agreement. Lenz’s wife had drafted a separation agreement which Lenz provided to Houzer three weeks later.

The draft separation agreement included child support, spousal support and pension benefit payments weighted to the advantage of the wife. In addition to this, the agreement stipulated that 25% of Lenz’s music royalties would be paid to the wife for an indefinite time period.

Houzer advised Lenz that the terms of the draft agreement were overly onerous and tipped heavily to the wife’s advantage. Houzer maintained that he required an immediate divorce and signed the agreement against Lenz’s advice. Lenz was divorced in December of 1992 and remarried two weeks later. The child was born to a husband and wife team.

Subsequently, at great expense, Lenz undertook a lengthy variation proceeding which ended in the terms of the agreement being altered in 1996 to cap the wife’s entitlement to royalties.

Lenz then launched a solicitor negligence suit against Houzer claiming that while Houzer advised that the separation agreement was unfair, he failed to provide alternative options and created the appearance that signing the agreement was the only means of obtaining a speedy divorce. Houzer pleads that his retainer was to quickly secure a divorce and not to negotiate a separation agreement. Lenz took the position that Houzer fell below the standard of care required by the situation.

The court found that despite the lack of a written retainer, Lenz’s instructions to Houzer were unequivocal and constituted the scope of the implied retainer: obtain a divorce by December 20. Himel J. stated that “the options of negotiating the separation agreement or litigating were not realistic in light of both the time frame imposed and Lenz’s clear instructions to avoid entering into any conflict with his wife.” Accordingly, Himel J. continues that while Lenz espouses a standard of care for the general practitioner practicing family law at a level approaching perfection she “cannot agree that Mr. Houzer was retained to do what would have met that standard.”

The Court of Appeal affirmed the trial judge’s decision in Lenz¹⁰ and noted the following:

All the findings of the trial judge are well supported by the evidence. In particular, the evidence supports the findings that:

the client was under pressure to obtain a divorce and marry his new partner;
the retainer was to obtain a speedy divorce so that he could marry;
the client did not want any terms changed in the agreement because he needed his wife’s cooperation in securing the divorce;
the client signed the separation agreement after being advised by the solicitor that it was unfair; and
the evidence of the solicitor’s expert witness was the appropriate standard of care.

What to Take From Lenz

Houzer’s professional obligation to work within the confines of his retainer was pitted against his duty to protect the broader interests of his client. This is an unenviable position. While Houzer was able to walk away with his professional credentials intact, the prudent family law lawyer should seek to avoid this situation all together.

The proper application of this decision should not be a starting point but rather a last ditch defence. The court made clear in Lenz that if a dispute as to a retainer arises and it is not in writing, the onus rests on the lawyer. A retainer letter is of critical importance. Along with the fee structure, the retainer should exhaustively set of the particulars of the service to be provided so that the client clearly signs an acknowledgement of the scope of services to be provided. As a corollary, if the client seeks only a consultation, a confirming letter to that effect can serve to stymie any unwanted reliance.

Himel J. buttressed her decision with jurisprudence suggesting the general rule that a solicitor is not required to provide services outside the scope of the retainer:

“In judging the standard of care exercised by a solicitor, caution must be taken to ensure that the standard is judged within the confines of the retainer”¹¹

“Where a solicitor’s duties are specifically prescribed by a written retainer, the solicitor is under no contractual obligation to report beyond the terms of the retainer.”¹²

These pronouncements however, must be balanced against the solicitor’s duty to act in the best interest of the client. Although Houzer wassuccessful, Himel J cautioned him by pointing out case law in which limited retainer defence was ineffective. In ABN Amro Bank v. Gowling, Strathy & Henderson¹³ a limited retainer defence was rejected in part because there was nothing in writing to confirm the limitation. Lenz can be seen as the rare case where a limited retainer was found, even though there was nothing in writing to confirm it. Absent a limitation, the family law lawyer will be governed by the broader obligations that flow from a general retainer. In the family law context that will inevitably mean that the solicitor is under a general duty to protect the client’s interests. In addition to the lesson learnedin Ristimaki, the duty to properly advise and protect the client is set out in Graybriar Industries Ltd. v. Davis & Co. ¹⁴ which required a solicitor to warn his client of risks based on a reasonable knowledge of the law, facts and practical implications of
the results.

Apart from family law, generally law firms have a positive duty to advise their clients about potential legal problems and consequences of transactions whether such advice may fall outside of the retainer. In Fasken Campbell-Godfrey v. Seven-Up Canada Inc. et al.,¹⁵, a law firm failed to warn its client that a transaction was susceptible to attack from a third party. The court held that regardless of the firm’s retainer or mandate which could have excluded the necessity of the advice, the lawyer failed to notice the problem which gave rise to liability. The court came to a similar determination in Fellowes, McNeil v. Kansa General International Insurance Co.,¹⁶ where a law firm failed to advise its client, an insurance company, of a coverage problem.

The family law lawyer should take from Lenz a few points that may serve to distinguish his/her situation from Graybriar, FaskenFellowes or ABN Amro Bank:

always try to have a written retainer that is as clear as possible;
regardless of the retainer, warn clients of all possible issues and foreseeable problems;
you cannot expect to rely on the defence of limited retainer; rather seek to give comprehensive advice.

McClenahan v. Clark & Wright¹⁷

This decision reads like a checklist of what not do when trying to avoid a negligence claim and should be required reading for any family law lawyer. The decision covers many issues in family law solicitor negligence including those dealt with in Ristimaki and Lenz.

Heather Billes was born into exceptional wealth and at the time of her marriage to David McClenahan had trusts accounts totalling over $15 million. McClenahan had minimal assets. At the time of separation, Billes hired Colin Wright to represent her. By this point she was not enjoying perfect health and was entirely broke as a result of her husband’s profligacy and her domineering father’s conduct. Billes’ primary instruction to Wright was to maintain the custody of her children. However, client-solicitor communication was often confused by the seemingly constant presence of an overbearing father. In an apparent state of turmoil, Billes signed a separation agreement against the wishes of her father. She soon found herself alone, penniless, unable to work due to illness and dependant on social assistance.

The McClenahan Reasoning

Billes sued Clark for solicitor negligence relating to a variety of issues. The court found that while each act alone may not have led to a finding of negligence, taken in their totality the various shortcomings combining omissions and incorrect advice did not meet the standard of care required of Wright. Specifically, Wright had been negligent in advising Billes to sign the separation agreement which waived spousal support, in advising her against seeking financial disclosure, in failing to consider the emotional health of Billes and its impact on her decision making, by failing to warn Billes of the implications of temporarily changing the primary residence of the children and by allowing the involvement of Billes’ father in a too integral and impactful way.

This case deals with a host of family law solicitor negligence issues but within the scope of this paper, the standard of care required of a family law lawyer and the regard to the emotional state of a client required in a family law proceedings are discussed.

Standard of Care

The discussion concerning the standard of care when viewed in conjunction with Ristimaki gives a very good idea of what standard is required of a family law lawyer. Aitken J. states at paragraph 48:

There is no dispute that the standard of care to which Colin Wright must be held is that of a reasonably competent, prudent and diligent generalist lawyer practicing family law in eastern Ontario in 1994. He was required to bring reasonable care, skill and knowledge to the performance of the professional service which he had undertaken.

Wright gave a similar limited retainer defence to that employed in Lenz v. Broadhurst Main but the court was unwilling to accept it. In this regard, this case is an example of the narrowness with which the court will recognize this defence. The court found that Wright was operating under a “general matrimonial retainer” and under such a retainer did not meet the standard of care required of him. His failure stemmed from numerous errors and omissions which were sufficiently significant in terms of potential consequences to indicate knowledge lacking of basic family law principles. Resultantly, Wright’s conduct fell “below what would be expected of the reasonably competent, prudent and diligent lawyer.”

Emotional State of the Client

Aitken J. found that the emotional state of Billes to be of paramount importance. The average lawyer is trained in neither human psychology nor counselling. Despite this, McClenahan requires of the family law lawyer adeptness at evaluating a client’s emotional state their abilityto make rational and lucid decisions accordingly. This is a heavy and somewhat foreign burden that the family law lawyer must be familiarized with. In McClenahan, inadvising whether to sign a separation agreement, it was held that the lawyer needed to consider whether the client was emotionally able to appreciate the impact of the agreement on her future and that of her children.

At trial, Wright described Billes as being on one occasion “distraught and extremely emotional”. Aitken J. found that Wright was “shocked at the state of emotional collapse of Ms. Billes, and her apparent inability to cope with the conflict with Mr. McClenahan.” The court concluded that the knowledge Wright had, or should have had, concerning the relationship between Billes and McClenahan should have acted as a red flag. Wright was under a duty to have made more of an effort to ensure that Billes fully understood the consequences of what she was signing and was doing so of her own free will.

The judge acknowledges that Wright had a challenging task trying to represent his client, a very passive individual with low self esteem, in the shadow of her powerful, opinionated and domineering father. Regardless, certain basics had to be addressed, and they were not.

The required concern for the emotional state of Billes was only exemplified by the constant presence of Billes’ father who she described as being strict, demanding, temperamental and whom she had been afraid of as a child. Billes’ father would call Wright, attend at meetings and purport to speak for Billes. Wright’s retainer was with Billes and not her father. There were certain discussions Wright should have had with Billes in the absence of her father to make certain she understood everything she was agreeing to and was the recipient of legal services that she was in fact requesting. It was Billes’ marriage, her children, her separation, her divorce, and her future that was of concern.

While there was nothing wrong with the father’s attendance at the meetings and participation in the file, based on the readily apparent father-daughter dynamic, it was Wright’s duty to ensure that it was Billes’ instruction that he was following. The effective family law lawyer must employ extra caution to ensure that instructions received from or decisions taken on behalf of a client in fact reflect the true wishes of the client.

In summary McClenahan offers the family law lawyer the following guidance:

the defense of a limited retainer is going to be viewed with caution by the court when assessing the standard of care;
the family law lawyer should be attuned to the emotional state of a client.

LeVan v. LeVan¹⁸

LeVan v. LeVan¹⁹
was a family law dispute that involved a marriage contract that had been negotiated by the parties with each having the benefit of counsel. Nonetheless, upon separation, that marriage contract was successfully challenged and it was set aside. This case should serve as a serious warning to family law practitioners when negotiating marriage contracts both in terms of the requisite disclosure and the requirement of independent legal advice.

Prior to Bruce and Erika LeVan’s June 1996 wedding, Bruce required a marriage contract to protect his share of his family’s successful business. The family business had long used Gowling Lafleur Henderson LLP as their corporate counsel. As such, Gowlings had significant knowledge and expertise with respect to the corporate structure and holdings of the LeVan family.

Bruce hired Karen Bales, a Gowlings family law lawyer to prepare a marriage contract in anticipation of the upcoming nuptials. The marriage contract was prepared and Bales referred Erika to a friend practicing family law, for independent legal advice.

Upon the breakdown of the marriage, Erika brought a claim against Bruce under section 56(4) of the Family Law Act to set aside the marriage contract on the basis that Bruce failed to disclose significant assets and that Erika didn’t fully understand the nature and consequences of the marriage contract. Backhouse J. found that there was a deliberate failure to disclose financial information by Bruce and the marriage contract was set aside. Erika was awarded an equalization payment of over $3,000,000 in addition to other substantial spousal and child support benefits.

The Disclosure Requirement

At trial there was no disclosure whatsoever of Bruce’s income, though Bales testified than in the more than 300 marriage contracts she had done, she had always sought financial disclosure. Compounding this was that fact that Gowlings had represented the LeVan family business for years and was privy to all of their financial information. If Bales had a duty to ensure that the contract was sound, then the question arises as to whether she had a duty to ensure that all of the relevant financial disclosure should have been made. Bruce was entitled to presume that his marriage contract wasenforceable. It turned our not to be. The question arises as to who bears responsibility for the contract being set aside. The decision in LeVan leave his family law counsel exposed to a claim from Bruce that he was not properly represented.

Independent Legal Advice

There are some significant points regarding the conduct of Erika’s lawyer that we can take from the LeVan reasons. Backhouse J. set out the potential negligence of Erika’s counsel. The trial judge found that Erika’s counsel represented Erika is a cursory fashion. When giving evidence at trial, she did not even recognize Erika in the courtroom. Other noted symptoms of hasty independent legal advice included:

Erika’s counsel had represented Bales on her own family law matter and had not disclosed this to Erika;
the file contained few notes, no dockets and no account;
Erika’s counsel did not know that Bruce had told Erika that if the contract was not signed, there would be no wedding;
Erika’s counsel misstated Erika’s support rights under the marriage contract in her reporting letter and only learned when pointed out at trial that there was a significant restriction on Erika’s right to support;
Erika’s counsel had no idea as to the nature and extent of Bruce’s assets; and finally,
There was no actual evidence that Erika’s counsel had offered Erika an opinion on whether the contract was fair or whether she should sign it.

What to Take from LeVan v. LeVan

Marriage contracts have always presented a problem for family law lawyers. A soon to be married couple present themselves to a family lawyer generally either due to familial pressure or far-sighted precaution. LeVan exemplifies this situation. At the time the contract is negotiated, the parties are not in an adverse position and seek a fast and painless marriage contract. After drafting an agreement, the lawyer spends some time with the couple explaining the terms. Often, one of the two is sent to a friend or colleague of the lawyer for independent legal advice.

The new lawyer spends a perfunctory amount of time with the soon to be newlywed, explaining the terms of the contract without necessarily fully understanding the background of the situation. The contract is signed and when there is a marriage breakdown years down the road the contract and both lawyers are attacked.

In Gurney v. Gurney²⁰, the British Columbia Supreme Court stated:

In the family law context, providing independent legal advice must mean more than being satisfied that a party understands the nature and the contents of the agreement and consents to its terms. The solicitor should make inquiries of the party so as to be fully apprised of the circumstances surrounding the agreement. The party should be advised of his or her legal rights and obligations in relation to the subject matter of the agreement and advised of the consequences associated with a refusal to sign. The solicitor should offer his or her opinion on the question of whether it is appropriate for the party to sign the agreement in all of the circumstances. It is only with that kind of advice that the party can make an informed decision about the advisability of entering into the agreement as opposed to pursuing some other course.

LeVan
illustrates that the family law lawyer is well advised to proceed cautiously when undertaking to provide independent legal advice. If a couple comes in and requires a marriage contract, do not choose a second lawyer for independent legal advice. You are better off providing a list of qualified family law lawyers from which the spouse can decide him/herself. When appropriate, do not draft a marriage contract alone but rather seek to make it a collaborative effort between two parties and two lawyers. A “Joint Preparation” clause can then be inserted into the contract that will serve to protect the lawyer should the contract come under fire. The contra proferentum doctrine sets out that the preferred interpretation of a contract will be the one that aids the party that drafted it the least. Don’t put yourself into this position. Lastly, it pays to make perfectly clear to the understanding of your client the meaning of section 56(4) of the Family Law At and the importance of financial disclosure.

The lesson to be learned from LeVan is not yet clear. The case is presently under appeal. One side or the other (or both) were reasonably entitled to presume that their lawyer would protect them. If Mr. LeVan is successful on appeal, then the wife can look to her lawyer for failing to protect her. If the wife is successful, then the husband can look to his lawyer for acting on an agreement that proved to be invalid.

May 25, 2007

The classic statement of a lawyer’s duty of care is set out in the seminal Supreme Court of Canada case, Central Trust Co. v. Rafuse¹:

Ristimaki v. Cooper

Law Leading to Ristimaki

Folland v Reardon³
was decided prior to Ristimaki and proved a decisive case in relation to the standard of care applicable to barristers. BeforeFolland v. Reardon, barristers were held to the standard of “egregious error”.

Folland was convicted of sexual assault and sentenced to five years in prison though fresh evidence later proved exculpatory for Folland. Folland suedReardon, his counsel in the criminal trial for solicitor’s negligence in failing to order certain DNA testing and in not properly conducting the examinations at trial. Folland had been found guilty and incarcerated for sexual assault. Evidence not led at trial, would have exonerated him.

The court takes the opinion that lawyer’s should not be given the benefit of being adjudicated on a standard apart from other professionals. The“egregious error” standard creates the appearance that when an allegation of negligence is made against a lawyer, judges will evaluate that lawyer’s conduct with the forgiving hand reserved only for that judge’s former profession. Doherty J.A. states:

…

An individual being defended in a criminal case is entitled to expect that his lawyer will perform as a reasonably competent defence counsel. Courtsshould avoid using phrases like “egregious error” and “clearest of cases” when describing the circumstances in which negligence allegations will succeed against lawyers. These phrases invite the application of an inappropriately low standard of care to the conduct of lawyers.

This decision is instructive to all litigation counsel. No longer will negligence claims against them be subject to less vigorous scrutiny than claimsmade against other professionals.

In Van Duzen v. Lecovin⁴ the British Columbia Supreme Court gave a clear outline of the accepted elements necessary in order for aclaim of lawyer’s negligence in the conduct of family law litigation. A plaintiff must prove the following essential elements, on the balance of probabilities:

a. that the defendant committed an act or omission in the conduct of litigation that fell below the standard of care required by law; and,

b. that the plaintiff suffered some loss as a result of the said conduct of the defendant⁵

The Ristimaki Facts and Reasoning

Ristimaki
is the first application of the Folland v. Reardon principle to the family law bar. Here, the Ontario Court of Appeal explored the standard ofcare applied to a family law lawyer’s advice in recommending settlement. When making “judgment calls” for clients, the court found that family law lawyers should be held to the same standard applicable to other professionals. Accordingly, family law lawyers no longer can benefit from the “egregious error” standard and will now be held to a standard of reasonableness.

Ron Ristimaki was a very successful businessman, which afforded him and Leah a very extravagant lifestyle. Suddenly, after 33 years of marriage, Roninformed Leah that he was leaving her. Shortly after separation, Leah retained Cooper, a family law specialist. From the outset and on many occasions, Leah told Cooper that Ron would sell his company and try to flee without providing adequately for her. Cooper knew from the outset that Ron was a flight risk. Nonetheless, Cooper repeatedly responded to Leah’s concern by telling her she would have more money that she would ever need.

Shortly after the separation, the sale of Ron’s company was announced. Ron refused to disclose the particulars of the sale. Cooper prepared apetition for divorce. Cooper strategized a two-step litigation plan. The first step was a motion for particulars of the sale of Ron’s business.After the receipt of the particulars, the second step was to bring a motion for interim preservation of the sale proceeds.

Cooper served the divorce petition together with a notice of motion for particulars. The motion was adjourned on two occasions and was ultimatelyreturnable in September of 1994. In Leah’s affidavit filed in support of the motion she deposed:

[Ron] has been saying for several years that he wished to sell his interest in [his business]. I believe that he will retire upon the closing of thesale to Allied. Once that occurs, [Ron] will have no reason to remain in Ontario, and I do not believe that he will. It is therefore urgent that mysolicitors be advised forthwith of the particulars of the payments to [Mr. Ristimaki] for his interest in [ATH], so that they may then take steps toprotect my position by seeking reasonable security to protect my entitlement to the equalization payment which will be found to be owing to me by [Mr.Ristimaki].

Evidenced by correspondence and memos to file, it was plain that Cooper was aware that Ron had already purchased a house in Florida, was spending a lotof time in the Caribbean and Mexico, had substantial funds in the Cayman Islands and was generally a flight risk.

Cooper retained a business valuator to assist in the appraisal of Ron’s business assets. On the day before the disclosure motion was to beargued, the business valuator opined to Cooper that Leah was owed an equalization payment in the neighbourhood of $8,000,000.00. Later that day, Coopersettled the motion on the terms that Ron would provide Leah with $2,500,000 as an advance on the equalization payment, that Ron would put an additional$1,500,000 in trust pending the outcome of the family law proceedings, and significantly, that Leah would not bring any motion to have further ofRon’s monies secured prior to judgement.

Prior to the settlement Cooper did not tell Leah the recommendation concerning the required security for the equalization payment, the need for apreservation order in respect of other monies at risk of leaving the jurisdiction, and the fact that, under the terms of the settlement, she would begiving up any further claim for security prior to judgment at trial. Without being fully informed of the terms, Leah agreed to settle the motion.

Following the settlement, Cooper brought a motion for interim support in May 1995 at which time it was agreed that trial would commence on January 26,1996. Cooper did nothing to get the case ready for trial. He continued to procrastinate, even after being told confidentially that Revenue Canada wasgoing to attach the trust fund. In January of 1997, Revenue Canada filed a certificate in an amount of over $7,000,000 in the Federal Court against Ronrepresenting unpaid taxes, penalties and interest due. This certificate has the effect of a judgement. Revenue Canada also filed a writ of executionwith the sheriff in Toronto. The Crown thus became a judgment creditor of Ron with its claim taking priority over any judgment received by Leahpursuant to the Crown prerogative.

What to Take From Ristimaki

In Lenz v Broadhurst Main (see below) Himel J. states,” It is the lawyer’s duty to warn the client about potential risks.” InRistimaki, the solicitor failed to do so.

Lenz v. Broadhurst Main

Dissatisfied clients have often questioned the extent to which a lawyer is obliged to give unsolicited advice or recommend preventative action.Lenz v. Broadhurst Main⁸ looks at a family law lawyer’s obligation beyond the retainer. The following quote is an apt statement of the case’s principle:

The Lenz Reasoning

Houzer advised Lenz that the terms of the draft agreement were overly onerous and tipped heavily to the wife’s advantage. Houzer maintained that he required an immediate divorce and signed the agreement against Lenz’s advice. Lenz was divorced in December of 1992 and remarried two weeks
later. The child was born to a husband and wife team.

Subsequently, at great expense, Lenz undertook a lengthy variation proceeding which ended in the terms of the agreement being altered in 1996 to cap the wife’s entitlement to royalties.

The Court of Appeal affirmed the trial judge’s decision in Lenz¹⁰ and noted the following:

All the findings of the trial judge are well supported by the evidence. In particular, the evidence supports the findings that:

the client was under pressure to obtain a divorce and marry his new partner;
the retainer was to obtain a speedy divorce so that he could marry;
the client did not want any terms changed in the agreement because he needed his wife’s cooperation in securing the divorce;
the client signed the separation agreement after being advised by the solicitor that it was unfair; and
the evidence of the solicitor’s expert witness was the appropriate standard of care.

What to Take From Lenz

Himel J. buttressed her decision with jurisprudence suggesting the general rule that a solicitor is not required to provide services outside the scope of the retainer:

“In judging the standard of care exercised by a solicitor, caution must be taken to ensure that the standard is judged within the confines of the retainer”¹¹

“Where a solicitor’s duties are specifically prescribed by a written retainer, the solicitor is under no contractual obligation to report beyond the terms of the retainer.”¹²

These pronouncements however, must be balanced against the solicitor’s duty to act in the best interest of the client. Although Houzer was successful, Himel J cautioned him by pointing out case law in which limited retainer defence was ineffective. InABN Amro Bank v. Gowling, Strathy & Henderson¹³ a limited retainer defence was rejected in part because there was nothing in writing to confirm the limitation. Lenz can be seen as the rare case where a limited retainer was found, even though there was nothing in writing to confirm it. Absent a limitation, the family law lawyer will be governed by the broader obligations that flow from a general retainer. In the family law context that will inevitably mean that the solicitor is under a general duty to protect the client’s interests. In addition to the lesson learned in Ristimaki, the duty to properly advise and protect the client is set out in Graybriar Industries Ltd. v. Davis & Co.¹⁴ which required a solicitor to warn his client of risks based on a reasonable knowledge of the law, facts and practical implications ofthe results.

The family law lawyer should take from Lenz a few points that may serve to distinguish his/her situation from Graybriar, Fasken,Fellowes or ABN Amro Bank:

always try to have a written retainer that is as clear as possible;
regardless of the retainer, warn clients of all possible issues and foreseeable problems;
you cannot expect to rely on the defence of limited retainer; rather seek to give comprehensive advice.

McClenahan v. Clark & Wright¹⁷

The McClenahan Reasoning

Standard of Care

The discussion concerning the standard of care when viewed in conjunction with Ristimaki gives a very good idea of what standard is required
of a family law lawyer. Aitken J. states at paragraph 48:

Emotional State of the Client

Aitken J. found that the emotional state of Billes to be of paramount importance. The average lawyer is trained in neither human psychology nor counselling. Despite this, McClenahan requires of the family law lawyer adeptness at evaluating a client’s emotional state their ability to make rational and lucid decisions accordingly. This is a heavy and somewhat foreign burden that the family law lawyer must be familiarized with. InMcClenahan, in advising whether to sign a separation agreement, it was held that the lawyer needed to consider whether the client was emotionally able to appreciate the impact of the agreement on her future and that of her children.

In summary McClenahan offers the family law lawyer the following guidance:

the defense of a limited retainer is going to be viewed with caution by the court when assessing the standard of care;
the family law lawyer should be attuned to the emotional state of a client.

LeVan v. LeVan¹⁸

The Disclosure Requirement

At trial there was no disclosure whatsoever of Bruce’s income, though Bales testified than in the more than 300 marriage contracts she had done, she had always sought financial disclosure. Compounding this was that fact that Gowlings had represented the LeVan family business for years and was privy to all of their financial information. If Bales had a duty to ensure that the contract was sound, then the question arises as to whether she had a duty to ensure that all of the relevant financial disclosure should have been made. Bruce was entitled to presume that his marriage contract was enforceable. It turned our not to be. The question arises as to who bears responsibility for the contract being set aside. The decision inLeVan leaves his family law counsel exposed to a claim from Bruce that he was not properly represented.

Independent Legal Advice

Erika’s counsel had represented Bales on her own family law matter and had not disclosed this to Erika;
the file contained few notes, no dockets and no account;
Erika’s counsel did not know that Bruce had told Erika that if the contract was not signed, there would be no wedding;
Erika’s counsel misstated Erika’s support rights under the marriage contract in her reporting letter and only learned when pointed out at trial that there was a significant restriction on Erika’s right to support;
Erika’s counsel had no idea as to the nature and extent of Bruce’s assets; and finally,
There was no actual evidence that Erika’s counsel had offered Erika an opinion on whether the contract was fair or whether she should sign it.

What to Take from LeVan v. LeVan

In Gurney v. Gurney²⁰, the British Columbia Supreme Court stated:

May 25, 2007