Ontario – no forgiving liability or forgetting facts when counsel apologizes in court on client’s behalf

In Pollard Windows Inc. v. 1736106 Ontario Inc., 2019 ONSC 4859, Ontario’s Divisional Court held a litigant to submissions made by its counsel in court, determining that the provisions of Ontario’s Apology Act, 2009, SO 2009, c 3 did not serve to exclude the apology and admission of liability.  Because the Apology Act expressly stipulates that it applies to arbitration, the Court’s reasons regarding the combined effect of counsel’s ostensible authority and the characteristics of an apology apply to arbitration as well.

The dispute involved a claim by Pollard Windows Inc. (“Pollard”) against 1736106 Ontario Inc. (“173”) for balance of payment owing for windows sold and delivered.  As security for judgment, Pollard also claimed a lien against the property on which its windows had been installed. 

Pollard obtained a September 16, 2010 judgment in its favour for payment of the balance as well as a declaration that its lien was valid. Later, on April 10, 2014, Pollard obtained an order for judicial sale of the property.  The sale produced $358,000.00 in proceeds which, at the time of the 2019 appeal, were still held for distribution.

Another corporation, 1746878 Ontario Inc. (“174”), was the assignee of a mortgage taken out against the property in 2000.  Both 173 and 174 were controlled by defendant Mr. Andrew Ferri.  174 had been on notice of Pollard’s litigation against 173.  Thought not listed in the title of proceedings, 174 was made a statutory party under section 57 of the Construction Act, RSO 1990, c C.30.

Despite (i) notice of Pollard’s litigation and the lien, (ii) the judicial sale ordered by the court and (iii) an October 29, 2014 order and a January 13, 2017 order that no further steps be taken to sell the property without a court order, counsel for 174 on January 24, 2018 notified counsel for Pollard that 174 had registered a caution on title with respect to a notice of sale dated March 10, 2010.  The court held that, in doing so, 174 had taken steps to sell the property and on May 23, 2018 held 174 in “flagrant and deliberate” contempt of court, fining it $10,000.00.  See paras 43-44 for the judge’s handling of 174’s unsuccessful arguments on notice and not being bound by the original orders.

174 appealed to the Divisional Court under section 71(1) of the Construction Act and section 19(1)(a) of the Courts of Justice Act, RSO 1990, c C.43. (Note: the relevant agreements had been entered into before the July 1, 2018 coming into force of changes, including a name change, to the Construction Lien Act.  The reasons therefore refer to the legislation as the “CLA”. See Great Northern Insulation Services Ltd. v. King Road Paving and, 2019 ONSC 3671, para. 9.)

On appeal, the Divisional Court had to consider the effect of submissions made by counsel for 174 at the hearing on contempt.  The parties characterized the submissions as either an admission of liability or an apology and disputed whether counsel could bind 174 with his submissions.  See para. 49 for the exchange between the court and counsel in first instance.

The Divisional Court therefore considered two (2) issues: whether facts and liability admitted by counsel could be withdrawn; and, the role of Ontario’s Apology Act.

Submissions by counsel – 174 filed an affidavit by a new representative in which she sought to distance 174 from submissions made to the court in first instance by Mr. Ferri and by counsel for 174.  The Divisional Court refused to accept the attempt, stating that counsel’s admissions bound the client. It underlined the importance of being able to rely on submissions made by counsel, citing Boyadjian v Durham (Regional Municipality), 2016 ONSC 6477 para. 44 as an example.  In that case, at paras 40-43, the Superior Court reviewed earlier case law, including Srajeldin v Ramsumeer, 2015 ONSC 6697 and Dugal v. Manulife Financial Corporation, 2011 ONSC 6761 which dealt with “ostensible authority”.

[44] The above cases stand for the proposition that what a lawyer says on behalf of their client in court is binding on that client.  Whether the representation is made orally by way of a submission or whether it is to effect a settlement.  If the ostensible authority of counsel cannot be accepted by the court or by other lawyers, the result would be absurd.  That is, actual authority would have to be obtained by counsel for each and every action required during the course of their representation. It is therefore clear that the defendants are entitled to rely on the representations made by Mr. Apel and the plaintiff is bound by them.

The Divisional Court stated that, without obtaining leave to withdraw an admission, facts and liability admitted by counsel cannot be challenged on appeal.

Apology Act – Ontario’s brief, four (4) section legislation defines an apology as “an expression of sympathy or regret, a statement that a person is sorry or any other words or actions indicating contrition or commiseration, whether or not the words or actions admit fault or liability or imply an admission of fault or liability in connection with the matter to which the words or actions relate.

Section 2 stipulates the effect of an apology on liability.  The apology can be made “by or on behalf of a person”, does not in law constitute an express or implied admission of fault or liability regarding that matter and cannot be taken into account in “any determination of fault or liability” regarding that matter.

A key passage in the Apology Act provides for the subsequent role of an apology as evidence in dispute resolution.  Section 2(3) prohibits the admission of an apology as evidence in, among other proceedings, arbitration.

2(3)  Despite any other Act or law, evidence of an apology made by or on behalf of a person in connection with any matter is not admissible in any civil proceeding, administrative proceeding or arbitration as evidence of the fault or liability of any person in connection with that matter.

The Apology Act does provide an exception to section 2(3).

2(4) However, if a person makes an apology while testifying at a civil proceeding, including while testifying at an out of court examination in the context of the civil proceeding, at an administrative proceeding or at an arbitration, this section does not apply to the apology for the purposes of that proceeding or arbitration.

The Divisional Court observed that “[a]n admission of liability is not required to make an apology. It could have been worded with a reservation.”  The Court also observed that the Apology Act provides that “non-testimonial apologies cannot be used to imply liability”.

It seems apparent from the definition in s.1 of the statute that an apology is not be the same thing as an admission of liability. The section makes clear that a statement of regret remains an apology even if it contains or implies an admission of liability. The section therefore contemplates that some apologies may not imply any admission of fault, but says that even where they admit or imply fault, the words remain protected apologies.

The Divisional Court then combined its appreciation of the binding force of counsel’s submissions with the role of apologies given during a proceeding.  The Divisional Court considered that the submissions by counsel at the sentencing in court qualified within the meaning of section 2(4) as a proxy for the client’s testimony.

I do not need to undertake a contextual analysis however, because in my view, the statute does not apply to the admission of liability and apology in this case in any event. I say this principally due to the exception in s. 2(4) of the statute which exempts from the statute apologies made under oath in legal proceedings. In my view, counsel’s admission before the court is a proxy or a substitute for his client’s evidence under oath. All admissions are a proxy for other evidence. Just as courts frequently receive clients’ undertakings in damages from counsel, when they are properly the subject of evidence, so too in this case, counsel’s apology and admission was offered in place of his client’s testimony. Frankly, it is probably a better practice to have the client offer the apology and any related admission from the witness box or in an affidavit under oath rather than muting the client’s very personal expression of sincerity by offering the evidence through counsel. However, the exemption from the statute cannot be avoided by giving an apology through counsel rather than through the client’s evidence.

The Court determined that counsel’s submissions at the sentencing hearing went beyond “a simple expression of sympathy or regret regardless of fault” but were “formally and advisedly made to court to mitigate the contempt already found and to try to ameliorate sentencing.”  Because the admission and the apology were given in a solemn manner with the intent that the court act on them, they could not be withdrawn later.

urbitral note – The decision reminds arbitration practitioners that certain jurisdictions, such as Ontario with its Apology Act and B.C. with its Apology Act, SBC 2006, c 19, add welcome but less common laws to their “applicable laws”.  Such legislation is drawn into the dispute resolution process when parties to the arbitration agreement expressly adopt the laws of Ontario or of B.C. as the substantive law applicable to their disputes.  In such cases, arbitration practitioners must anticipate the limited evidentiary role prior statements can have in the arbitration if those statements qualify as an “apology”. 

While the Apology Act of both Ontario and B.C. apply to arbitration, B.C.’s version includes no express statement similar to section 2(4) of the Ontario version regarding apologies given in court.  The B.C. legislation draws no distinction between an apology made in or out of court.  See also Newfoundland and Labrador’s Apology Act, SNL 2009, c A-10.1, Nova Scotia’s Apology Act, SNS 2008, c 34, Manitoba’s Apology Act, CCSM c A98 and the Northwest Territories’ Apology Act, SNWT 2013, c 14 for a similar omission to specify the role of an apology made in court.