Toronto law firm hit with $40,000 damages for negligence

Toronto law firm Bennett Best Burn LLP has been ordered to pay its former client $40,000 partly for its failure to advise her about the option of investing the trust funds it held for her.

Despite the firm’s lawyers’ argument that they “are not investment counselors,” Justice Edward Morgan ruled this week that they should have at least let Dianne Kehoe know about the option of investing the $1.1 million they held in trust for her.

Kehoe, the former owner of a Perth, Ont. pharmacy, retained Paul Mahaffy and David Burn of the firm during the sale of her pharmacy to Shoppers Drug Mart in October 2006.

The firm had no obligation to invest Kehoe’s money, but “that said, it is a lawyer’s duty to render some advice to a client,” the judge said in Kehoe’s Pharmacy Ltd. v. Bennett Best Burn LLP. “Mr. Burn’s statement that, ‘We are not investment counselors’ is, with respect, far too curt.”

“Ms. Kehoe testified with credibility that as a business person she would have assumed that if over $1 million was to be held in a bank account for her for an extra couple of months, there would be some interest earned on that money. Since her lawyers failed to tell her otherwise, she was under an understandable misapprehension.”

Morgan added: “The defendant here expected Ms. Kehoe to not only instruct them with respect to the trust funds, but to know that it was up to her to instruct them. That, however, was an expectation too far.”

Morgan also found the firm had held the trust funds longer than it needed to and ordered Bennett Best to pay Kehoe $3,400 in foregone interest.

Reached by Legal Feeds, Adam Pantel, counsel for Bennett Best, says he cannot comment on the case.

“I’m not going to give any comment because I’m not sure if we’re appealing it or not,” he says.

The court also found the firm was negligent in other matters relating to Kehoe’s file. After selling her pharmacy to Shoppers, Kehoe entered into an agreement with the company to work as a consultant for eight weeks. But after getting into an argument with an employee at Shoppers, she took the next day off and called her lawyer about concerns she was having. At that point, Mahaffy told her Shoppers was terminating her employment, Kehoe told the court.

Surprised, Kehoe said she told Mahaffy that could not be possible since her consulting agreement said the company could only terminate her by a letter sent via registered mail. “It was then, she indicated, that Mr. Mahaffy told her for the first time that Shoppers never signed the consulting agreement,” Morgan wrote.

Although Mahaffy denied telling Kehoe she had been terminated, the court did not believe his evidence due to its inconsistency, according to the ruling. The judge also found the firm was negligent for failing to finalize a lease agreement for a business software program Kehoe had sought to assign to Shoppers.

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