Last Week’s Court Rulings from the Alberta Court of Queen’s Bench, Court of Appeal and SCC.
Edited by Steven Graham
Kostic v Thom, 2021 ABCA 406
Negligence | Legal Representation | Summary Dismissal | Standard of Care
The Appellant (Kostic) was a stockbroker and financial advisor who was sued by one of her clients for alleged negligence, breaches of fiduciary duties, and fraud. Kostic was insured by AIG who retained counsel to defend her in that action (“the Piikani Action”).
In the course of the Piikani action, Kostic denied the allegations of fraud and expressed concern that they were having a negative impact on her reputation and ability to work in her profession. She requested her counsel to apply to summarily dismiss those allegations, but her counsel indicated such an application would not be successful.
Eventually, counsel for Kostic became aware that the allegations of fraud against Kostic were false or without merit. Kostic sought to have the action dismissed as against her, but again her counsel responded that such an application would not succeed and the insurer would not authorize the application. Nearly one year later, the Plaintiff offered to discontinue the action against Kostic on a without-cost basis. While AIG was in favour of accepting this offer, Kostic was not, as she believed she was entitled to costs. As a result of the disagreement her counsel withdrew. Kostic then sued her counsel, Thom, for negligently representing her in the Piikani action.
The Defendant, Thom, applied before a case management judge and the claim against him was dismissed. Kostic appealed.
The Court of Appeal considered whether Thom had met the burden of proof to succeed with his summary dismissal application and whether expert evidence is required to establish the standard of care to which a lawyer is held:
[15] Per Hyrniak v Mauldin, 2014 SCC 7 and Weir-Jones Technical Services Inc v Purolator Courier Ltd, 2019 ABCA 49, the applicant on a motion for summary dismissal must establish on a balance of probabilities that there is no merit to the claim and no genuine issue requiring a trial: Weir-Jones at para 47. In this case, where Kostic alleged professional negligence and malpractice, there would be no genuine issue requiring a trial if Thom could establish he met the standard of care expected of lawyers in the conduct of such matters. Generally, expert evidence is required to establish the standard of care to which a lawyer will be held. Although not an absolute rule;
There is a strong presumption that expert evidence is required to prove the standard of care expected of a professional: Tran v Kerr, 2014 ABCA 350, at paras 21-3, 584 AR 306; Mraz v. Herman, 2016 ABCA 313 at paras 47-8, 42 Alta LR (6th) 1; Krawchuk v Scherbak, 2011 ONCA 352 at paras 130-1, 106 OR (3d) 598. In the absence of such evidence, trial judges should be cautious about attempting to determine if the professional was negligent: Canadian Natural Resources Ltd v Wood Group Mustang (Canada) Inc, 2018 ABCA 305 at para 31. See also Mraz v Herman, 2016 ABCA 313 at paras 42-48.
The Court of Appeal noted that Thom’s bare assertions that a dismissal application would not succeed were insufficient to meet the burden of proof that Kostic’s claim against him had no merit:
[16] There are exceptions to this presumption. For example, expert evidence is not needed where the judge may take judicial notice of an obvious fact or where events have overtaken and justified counsel’s conduct of the case. To illustrate, if the underlying Piikani Action had proceeded to trial and the trial judge found that the Piikani Nation proved the allegations of fraud, Thom could rely on that finding as evidence that his decision not to seek summary dismissal met the standard of care. But that is not this case. The facts here are so ambivalent that Thom’s mere assertion that a summary dismissal application would not succeed and could not meet his burden of proof to establish that Kostic’s claim was without merit and that there was no genuine issue requiring a trial.
The Court of Appeal noted that Thom both knew that Kostic wanted the fraud allegations dismissed, and that the fraud allegations were vulnerable based on admissions to him by Piikani’s counsel. The decision of the case management judge to dismiss Kostic’s claim without expert evidence establishing that Thom had met his standard of care was found to be an error:
[19] The foregoing information at least suggests that the allegations of fraud in the Statement of Claim were suspect and that a proper application for summary dismissal of those allegations was viable. In such circumstances, expert evidence was required to establish that the decision not to apply for a summary dismissal met the standard of care. With respect, the case management judge erred in granting summary dismissal of Kostic’s claim without such evidence.
The Court of Appeal rejected Thom’s argument that the onus was on Kostic to provide the expert evidence, given that summary applications require both parties to put their “best foot forward”:
[20] Thom’s counsel argues the onus was on Kostic to provide this evidence as she alleged that Thom’s conduct failed to meet that standard. Relying on this court’s statements in Weir-Jones at paragraph 47, counsel asserts that once Thom established there was no genuine issue requiring a trial, it fell to Kostic to put her “best foot forward” and demonstrate there was in fact a genuine issue requiring a trial.
[21] With respect, this argument misinterprets the parties’ obligations in summary judgment applications for two reasons. First, the obligation to put the “best foot forward” is on both parties, not just the respondent. As the Supreme Court noted in Canada (Attorney General) v Lameman, 2008 SCC 14 at para 11:
Each side must “put its best foot forward” with respect to the existence or non-existence of material issues to be tried: (emphasis added).
Likewise, in Weir-Jones, this court stated at para 37:
Even before Hryniak v Mauldin it was established that the parties to a summary disposition application must “put their best foot forward”: (citations omitted, emphasis added).
[22] Second and more fundamentally, the burden of proof on a summary judgment application is on the applicant to establish on a balance of probabilities there is no genuine issue requiring a trial. The circumstances of this case did not allow the case management judge to make that finding without expert evidence that Thom’s decision met the standard of care. Put simply, on the record before the case management judge, Thom failed to discharge his burden of proof. Accordingly, Kostic’s obligation to put her best foot forward did not arise.
The Court of Appeal also found error in the Case Management Judge’s faulting Kostic for not instructing Thom to bring a summary application on a timely basis. The evidence was clear that Thom was aware Kostic wanted to have the allegations against her dismissed, and she should not have been faulted for not pressing when her counsel repeatedly told her such an application would not succeed:
[27] In conclusion, we find that the case management judge erred in granting the application for summary dismissal without reference to or evidence of the appropriate standard of care. Further, we conclude he made a palpable and overriding error when he granted the application because Kostic failed to formally instruct Thom to bring the summary dismissal application until March 2013, after he had told her numerous times it would not succeed, that the insurer would not pay for it and that he would not take instructions from her.
[28] However, we agree with the case management judge that Kostic’s allegation Thom failed to seek “save harmless” relief was without merit and properly dismissed on the summary judgment application. Subject to that, the appeal is allowed and the summary dismissal of Kostic’s Statement of Claim is set aside.
As such, the appeal was partially granted and the order dismissing Kostic’s claim was set aside, save the ‘save harmless’ allegations.