Law Times

PAGE 4 Case to consider lawyer's fiduciary duty to client he had 'spousal relationship' with NEWS BY KENDYL SEBESTA Law Times involving the fi duciary duty of a Davis Moldaver LLP lawyer to- wards a client who would later become his romantic partner and, in his view, his spouse. It' T litigator suggests could have lawyers on the hook indefi nitely for claims of breach of fi duciary duty. "It could certainly open the door for clients who are look- ing to bring actions against their former counsel who then rely on the pre-2004 time period to bring their motions for breach of fi duciary duty, s a case that one Toronto son, a litigator at McMillan LLP. Writing in Kastner v. Davis, " says Brett Harri- Superior Court Justice Th omas Lederer determined that al- he Superior Court of Justice has delivered an unusual decision in a decade-old legal dispute though a motion for summary judgment was brought almost 10 years aſt er the event occurred, the nature of the relationship be- tween lawyer Milton Davis and his former client, Rhonda Kast- ner, raised important questions about fi duciary duties, the time limit placed on actions under the Limitations Act, and whether any duty was in fact owed. "Th e action was begun almost 10 years aſt er the events on which it relies occurred, would anticipate it to be out of time. Th e plaintiff says that, taken from when she discovered the claim, the action was com- menced in time but that, even if she is found to be wrong in this, her relationship with the defen- dant was such that he owed her a fi duciary duty which he had breached. Th is is signifi cant be- cause, at the time, there was no limitation period directly ap- "In the normal course, one " wrote Lederer. plicable to a claim for breach of fi duciary duty and the plaintiff would, in such circumstances, be free to proceed with the action." According to Lederer' the matter began when Kast- ner met Davis in 1999 aſt er she started managing her deceased father' s ruling, representing her father's business s business. Davis had been in ongoing litigation, and Kast- ner sought his legal advice on other matters as well. Th e pair would become ro- sist a friend with the purchase of a cottage. Kastner also gave Da- vis almost $360,000 to help him renovate his law offi ce. In return, Davis transferred a 50-per-cent interest in the cot- tage lot to Kastner and made unspecifi ed plans to provide her with free legal advice. According to Lederer' mantically involved from 1999 to 2002, although Kastner denied there was any spousal relation- ship. During that period, Kast- ner and Davis exchanged money, property, and services. Among the most signifi cant exchanges was a $125,000 loan from Kast- ner to Davis to pay taxes he owed; a $102,700 loan from Kastner to Davis to purchase a lot next to his cottage; and a $30,000 loan from Kastner to Davis to help him as- Davis has since repaid the three loans and Kastner has returned the interest in the cottage. But Kastner argues Davis s ruling, should repay the outstanding $360,000 that she describes as a loan. She maintains the money is repayable within the terms of the fi duciary duty Davis owed to her and meets the two-year time limit under the Limitations Act. According to Kastner' vit, she "was suddenly in the pre- carious position of having to take over management of the business on [her] own" and told Davis she would be "completely dependent s affi da- Reach one of the largest Canada! legal and business markets in upon him to provide [her] advice and guidance for dealing with the Kaiser litigation." Davis, however, argued the money was a giſt . Davis also argued that if the money was a loan, any applicable limitation period had long since expired. But while Lederer breach of fi duciary duty would be impossible to determine with- out a trial, he alluded to what he suggests are bigger concerns. "While it is not for me to de- ruled a cide, it may be that the suggested failure to ensure that the plain- tiff obtained independent legal advice, in respect of each of the transactions, will be the larger concern," wrote Lederer. He later added: "It could be April 30, 2012 • lAw Times that, as in Central Trust Co. v. Ra- fuse, the core of the case runs to the professional responsibility of the defendant as a lawyer. Th ese responsibilities may arise where there is a fi duciary duty, even if the contribution to the offi ce renovations was a giſt . Lederer determined that if Kast- ner issued the statement of claim on Aug. 13, 2010, there was an overall agreement to repay the money for the offi ce renovations, and that agreement was breached in March 2010 when Davis re- fused to act for her, the two-year limitation period would apply but wouldn't have expired. At the same time, if Kastner didn't become aware that there was a fi duciary duty owed to her until April 2010, she still would have made the discovery less than two years before issuing the state- ment of claim. "Simply put, $359,866.35 is a great deal of money," wrote Le- As for the limitation period, " derer. "For such an amount to be given as a giſt in any circum- stance would be unusual. Where the recipient is a lawyer, who acts for the donor, or for any other reason stands as a fi duciary, it may be that there is a responsi- bility to be sure that the donor understands the impact of what is being done. rison, could become particularly important for lawyers if clients are able to circumvent traditional limitation periods in the future. "If that is the case, it seems Th at duty, according to Har- " With more than 250,000 page views a month, canadianlawlist.com captures your market The all-new canadianlawlist.com features: — A fresh new look, designed for improved user experience — Effective new ways to reach the legal market — Gold and silver advertising packages For more information contact: Colleen Austin at 416-649-9327 or toll free at 1-800-387-5351 colleen.austin@thomsonreuters.com www.lawtimesnews.com CLL Web promo - CLL Dir..indd 1 12/8/11 10:58 AM that lawyers would need to be- come more aware of the limi- tation period, particularly if clients are able to bring actions more than 10 years old success- fully, may be troublesome for lawyers, the courts have considered relat- ed issues before. Lederer noted that in Piccolo v. DiBenedetto, the court found that a fi duciary obligation can exist, if not on a solicitor-client basis, then on the grounds of a relationship of close proximity to a solicitor-client one. Similarly, in Cassey v. Mor- rison, the court ruled a lawyer owed a fi duciary duty to a client with whom he had an intimate and friendly relationship. But while the repercussions " he says. LT Online Print and in

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