July 2017

You wish to buy land and develop some improvement(s) on it.  You complete your purchase, take title and apply for a building permit to your local municipal government.  The government responds by insisting that as a condition of the issuance of a building permit, you and your adjacent neighbour or neighbours enter into a "conforming construction agreement".  You are told that this type of an agreement ("Conforming Agreement") requires one or both of the following:

(i)            a minimum separation distance be established between a wall (or building face) and your lot line; and/or

(ii)           providing public access ("thoroughfares") from the building exists to "public streets" through the "use of neighbouring parcels".

Alternatively, you wish to buy an already improved property, but when you search the title to same, you discover that the local government has already caused your predecessor in title and one or more of the neighbouring property owners to enter into a Conforming Agreement, with the result that the title to the property you are interested in is subject to a caveat giving notice of the existence of the Conforming Agreement, and the restrictions it imposes on your property.

The above-described scenarios are now more likely possibilities with the enactment by the Manitoba Legislature of an Act entitled "THE CITY OF WINNIPEG OF WINNIPEG CHARTER AMENDING, PLANNING AMENDMENT AND REAL PROPERTY AMENDMENT ACT (CONFORMING TO CONSTRUCTION STANDARDS THROUGH AGREEMENTS)" (the "Conforming Construction Act").  The entitlement of a local government to extract Conforming Agreements from property owners as a condition of the issuance of building permits constitute land use restrictions in addition to those contained in zoning by-laws, planning schemes, zoning agreements, development agreements and subdivision agreements.  The Conforming Construction Act was given royal assent and came into effect on June 1, 2017.  The objective of a Conforming Agreement is to ensure that improvements on land are set back far enough from their boundaries, so as to ensure that persons who are living, working or otherwise present in a building have sufficient "access space" within which to exit the building in the event of a calamity, most typically, but certainly not limited to, fire.  Additionally, maximizing the space between buildings on neighboring properties will decrease the likelihood of damage - again, typically, fire damage - spreading from one building to the neighbouring buildings.  Where buildings are built - on both sides - typically right up to the property line between them, a Conforming Agreement can ensure that persons from either one or both of the affected buildings are able to escape calamity by passing over or through the neighbouring building or property.

Where neighbouring property owners do not seek a building permit, the local government does not have the ability to unilaterally foist a Conforming Agreement on either one (or both) of them.  Remember however that building permits are needed, not only to initially construct a building or other improvement, but also to effect most additions and alterations to existing buildings.

The need for a local government to extract Conforming Agreements pretty much disappears in the newer areas of settlement where the initial location and development of improvements results in the establishment of fairly substantial "separation distances" between neighbouring buildings/improvements.  However, in "older" areas where buildings - commercial or residential - are built close to and sometimes right up to the dividing property lines, one can expect that local governments will now seriously consider compelling neighbouring property owners (seeking to improve their properties), to enter into Conforming Agreements pursuant to the Conforming Construction Act. 

If you or your client:

(a)          contemplate acquiring ownership of land where you (or your client) wish to initially improve or add improvements to the property, your due diligence should include a discussion with the local government as to whether or not it will require you (and one or more of your neighbours) to enter into a Conforming Agreement; and

(b)          wish to acquire ownership of land that is already subject to a Conforming Agreement caveat, you should ensure that your purchase and sale agreement makes it clear that you can "back out" if, after investigation, and discussion with the local government and perhaps as well your anticipated neighbouring property owners, you decide that your plans for the property will not be practically possible due to the restrictions imposed by the existing Conforming Agreement.

Another matter which should be kept in mind when considering a local government's requirement for the imposition of a Conforming Agreement on property your client owns (or wishes to acquire) is the fact that the Conforming Construction Act does not provide any effective remedy where one of the property owners - not being the owner upon whom land use restrictions will be imposed under a government requested Conforming Agreement - simply refuses to sign the agreement. Consider this scenario:  your client wishes to add an addition to the building currently existing on your client's property, and when your client applies for a building permit, she or he is told that no permit will be issued unless your client and the neighbouring property owner enter into a Conforming Agreement.  Such agreement is to provide access over or through your property for the benefit of the neighbouring property owner. Assume that your client is willing to enter into the Conforming Agreement, but the neighbour refuses to do so, even though virtually all of the benefits under the agreement will accrue to the neighbour. It appears that all that can be done (by the local government) is to refuse to issue permit to your client!  Your client does not appear to have any right to require the neighbouring owner to enter into the proposed Conforming Agreement. A variation in this scenario would be where the neighbouring property owner is willing to sign the proposed Conforming Agreement, but will only do so upon your client paying an outrageously high consideration therefor. There appears to be nothing that you can do to alleviate this situation. It might be useful for the Legislature to amend the legislation so as to provide relief for a property owner who is faced with this dilemma.

March 2018

One of the first things that law students learn in Law School is that, as a matter of public policy, the "authorities" (usually the Courts) will, one way or another, enforce promises for value in exchange for other promises (also made for value).  In other words, promises made in a "commercial setting", usually in the form of a contract.  So if I promise you that I will pay you $1,000.00 in exchange for you promising me that you will provide or transfer goods or services to me, and I pay you (or "tender" or offer to pay you), but you fail to provide me with the goods and/or services you undertook to give me (or you provide shoddy goods or services to me), I will, generally speaking, have the right to ask a Court to either order you to fulfill your part of our deal, or compensate me for my loss resulting from my failure to get what I bargained for.  But in addition to enforcing promises made in a "commercial setting", our legal system has for many years also enforced certain promises made either in a non-commercial setting, or in a commercial setting where the person receiving the benefit of the promise (the "promisee") does not provide any immediate or direct benefit (ie, "value") to the party making the promise (the "promisor").

Generally, when a Court enforces a promise, it orders the recalcitrant promisor either to do what it originally promised to do, or orders the recalcitrant promisor to pay damages to the party who suffers (sustains a loss) by reason of the promisor's failure to fulfill.  In a non-commercial or an "indirect" commercial setting where a Court must adjudicate the unsatisfied promisee's complaint regarding the promisor's failure to fulfill its promise, the Court will, generally, not directly order the promisor to fulfill its promise (or pay damages to the promisee), but rather will order or restrain the promisor from going back - or continuing to go back - on its previously made promise.  In legal jargon, the promisor is said to have been "estopped" from going back (or continuing to go back) on its promise.  The legal doctrine concerning under what circumstances a promisor is held back from breaking its promise is known as "estoppel".  The "policy" behind why a Court will sanction a promisor who breaks its promise arises out of the perceived unfairness that occurs where the promisee, relying on the promise, acts - or fails to take certain action - and the promissee then suffers loss or other hardship which it wouldn't have suffered if the promisor had kept its promise.

In a recent case (Cowper-Smith v Morgan, Supreme Court of Canada, judgment given December, 2017, hereinafter, the "Cowper Case"), the Court dealt with a promise made in a non-commercial setting.  The promisor was the daughter of a deceased mother and the promisee was one of the deceased's sons.  The promisee was induced by his sister to move his family from Ireland to Canada where he then commenced to look after his and his sister's ailing and aged mother.  The promisee was so induced by the promisor assuring him that on the mother's death, he would acquire ownership of the family home.  Prior to his mother's death, the promisee learned that title to the family home had been transferred from his mother's name to his sister's (the promisor's name), but when questioned about this arrangement, the promisor assured the promisee that the title change had been arranged solely for the purpose of facilitating administration of the mother's estate.  After the mother's death, the promisor changed her "story" and took the position that the property had been transferred to her by the mother in the form of a gift, so that the promisor alone was entitled to ownership of the home. 

The promisee challenged the promisor's position in Court, thus the Cowper Case.  At the trial Court level, the Court held that the promisor was estopped from going back on her promise, and that accordingly, the promisee was entitled to acquire the interest in the home which he would have been entitled to acquire had the promisor not broken her promise.  At the initial appellate Court level, the Court held that, under the "traditional" legal concept of promissory estoppel, the promisee was not entitled to hold the promisor to her promise, because at the time she made the promise, she did not then hold any interest in the property (title was transferred from the mother to the daughter only after she made her promise to her brother).  The Supreme Court of Canada reversed the lower appellate Court and held that the promisor's promise was legally enforceable against her, notwithstanding that she held no interest in the property when she induced her brother to come back to Canada to look after the ailing mother.

Arguably, the Supreme Court's holding in the Cowper Case broadens the area in which non-commercial setting promises - when relied upon by the promisee to its detriment - will be enforced.  If one believes that, as a matter of public policy (or "morality"), those who make promises should be required to fulfil them (or suffer the consequences), this holding should be considered a positive development.

Going beyond the particular facts in the Cowper Case, counsel should be aware generally of the fact that their clients may be required to uphold their promises even though a promisor may not have strictly or clearly received "value" in exchange for a promise. Or where it is difficult to establish that "value" was received by the promisor. 

November 2018

Updated November, 2018

1. THE PROBLEM

Persons and businesses acquiring and disposing of interests in real property (including mortgagees) and their counsel are used to seeing - and frequently glossing over - the existence of utility and similar easements recorded either directly (or by way of caveat) against the titles to the lands with which they are concerned.  The rights and interests ("Utility Easements") given to holders of such interests ("Utilities") - who are usually, but not always, government, or government owned, created or regulated, entities authorized and tasked with the power and entitlement to provide services such as electricity, natural gas, water and sewage removal ("Utility Services") - require that landowners ("Landowners") grant them rights to enter on a Landowner's property and to install, operate, utilize and maintain the facilities and equipment required in order to create, transport and distribute the Utility Services.  Because a Utility will need to maintain its Utility Easements notwithstanding changes in ownership of the underlying lands, Utility Easements are constituted as interests in land so as to enable the Utility to continuously provide its Utility Services without interference from any Landowner succeeding the original granting Landowner in title.

In the past, original Utility Easement granting Landowners and others acquiring interests in the owner's property (including mortgagees and subsequent owners) did not usually consider the existence of an Utility Easement (and the Utility's right to maintain its Utility Easement rights in priority to all other land interests and rights in the property), as a substantial or material burden on the property's ownership.  This was because earlier versions of Utility Easement grants or agreements specifically limited the Utility's Utility Easement rights to a particular or defined area (or areas) over, along, above and/or below the Landowner's soil.  The area covered by a Utility Easement might be typically described as a strip of land 20 feet wide and running parallel to the northern boundary of the Landowner's property.  In more recent iterations of this scenario, the Utility Easement rights would be specified and limited to be those referable to a parcel of land shown outlined in a particular colour on a particular plan (an easement or right-of-way plan) registered (with its own unique registration number) in a particular Land Titles Office.  Thus, if I wanted to buy your land, and upon searching your title, I noted that a Utility had recorded a Utility Easement against it, I would know - before committing to close, or perhaps even before entering into a purchase and sale agreement - what were the limitations that I would "inherit" under the Utility Easement, and in particular, exactly where those rights applied. Thus, at the outset, I would know whether or not the Utility's Utility Easement rights would interfere with - or perhaps render impossible - my intended use, or future anticipated use, of the Landowner's property.  If my intended use of your property was completely incompatible with the Utilities Easement, I would simply "pass" on buying or completing the purchase of your property.  On the other hand - and this is usually what happened - I would conclude that the Utilities Utility Easement rights would not materially affect my intended use of the property, and thus I would be quite willing to buy (and my financier would be quite willing to lend against) the property subject to the Utility's prior easement rights.

More recently, Utilities have commenced taking Utility Easements which entitle them to enter and install, operate and maintain the Utility's facilities and equipment anywhere on the Landowner's property, in some place or places to be determined by the Utility in the future.  Thus, at the time of the creation of the Utility Easement, the Landowner does not then know, and may not know for some time, exactly where in her, his or its land the Utility Easement (and the rights and restrictions referable thereto) will be applicable within the boundaries of the Landowner's property.  It is this writer's understanding that the practice amongst at least some Utilities is to eventually "narrow" the application of the Utility Easement rights to a specified area or areas - no doubt delineated by a new plan recorded in the Land Titles Office.  But this will only happen at some initially unknown time in the future.  Presumably, the Utility's rationale for wanting this extreme flexibility is because that while, at the outset, it knows in principle that it will want and need Utility Easement rights somewhere over the owner's property, until future growth and development plans for the property - and in particular, the surrounding area - are actually known and substantially finalized, the Utility itself doesn't really know where its facilities and equipment will need to be located.  In the meantime, the result for the Landowner is that it can't really make any effective use of and can't practically make any concrete plans for the future use and development of the property.

Utility Easements of this nature ("Indefinite Area Utility Easements") have become popular (amongst Utilities) since the recent amendments to The Real Property Act (Manitoba) (the "MRPA") which sanction the creation of "statutory easements".  The primary differences between the "traditional" form of easement and a statutory easement are:

(a)          the holder of a statutory easement can enjoy it without itself owning an adjacent or nearby particular parcel of real estate to be benefitted by the easement (ie, no "dominant tenement" is required);

(b)          a statutory easement is not effective to create an interest in land, ie, binding the current and all successive owners, unless and until it is registered at the Land Titles Office*;

(c)          with a few exceptions, only government owned or government regulated and controlled Utility Services providers can hold a statutory easement; and

(d)          the holder of a statutory easement may, if it so desires, obtain a title to its easement, which then enables it to more easily and efficiently deal with its easement, whether by way of transfer, mortgage or other disposition.

The following are examples of the breadth of the wording in Indefinite Area Utility Easements which the writer has reviewed in two recently created (within the last 5 years) statutory easements:

(i)            First, the easement agreement recites the fact that the Landowner owns two parcels of land (Lots 1 and 2 in a specified registered plan), and then, in the "body" of the agreement, specifies that the Landowner grants to the Utility the right and easement "to enter into the right-of-way, and to use, excavate, construct, maintain, repair, etc. its overhead and/or underground equipment and facilities in, over and upon the "right-of-way", then, the agreement further provides that the Utility has the right and easement to "enter onto the land" for the purpose of cutting trees and bush which, in the Utility's opinion, may "interfere" with (its equipment).  The agreement further provides that without the Utility's prior consent in writing, the Landowner is not entitled to "excavate, drill, place, install, erect or permit to be executed, drilled, placed, installed or erected, any pit, well, foundation, pavement, material, fence, structure or other thing on or over the Land which will extend more than 12 feet above ground level or within 2 feet of underground cable".  What is particularly noteworthy concerning this easement granting language is the fact that the "right-of-way" is NOT, unlike aforementioned previously crafted easement agreements, in any way defined, other than with reference to the TOTALITY OF THE LANDOWNER'S LAND.  Thus the whole of the Landowner's property appears to be subject to the Utility's right to place and maintain its equipment anywhere of the Utility's choosing at some indefinite point in the future.

(ii)           A similar easement agreement but with a different Utility, (again) recites the fact that the Landowner owns particular parcels of land, and then goes on to provide for a grant to the Utility of a right and easement, being "…those portions of the said lands                  meters in width…", and the word "blanket" has been filled in (presumably by the Utility) in the indicated blank space.  Again, the Landowner is prohibited from effecting any improvements to the property without the Utility's prior written consent, thus effectively "sterilizing" (for an indefinite period of time into the future) the Landowner's property.

Lest there be any doubt about it, this writer does not find fault with easement agreements which, in addition to providing for a defined right-of-way, additionally grant the Utility certain "subsidiary or supporting rights and easements", in particular:

(a)          the right to enter other portions of the Landowner's property for the purpose of gaining access to and bringing equipment to the defined right-of-way area or areas; and

(b)          the right of the Utility to enter upon the Landowner's property for the purpose of cutting down trees, brush, etc. which interferes with the proper installation, operation and maintenance of the Utility's equipment;

provided that such "subsidiary" or "supporting" rights are exercised reasonably and don't interfere with or damage the property and other improvements on the property.

The "problem" is the virtual total emasculation of the Landowner's property rights when the property becomes subject to an Indefinitely Area Utility Easement.

1. THE NATURE OF STATUTORY EASEMENTS UNDER THE MANITOBA REAL PROPERTY ACT

As noted above, there are significant differences between the "traditional" or common law concept of an easement and a statutory easement.  Statutory easements have been contemplated and sanctioned under the MRPA for quite some time, but the provisions in the legislation dealing with them were expanded and strengthened in 2011, in part to make it clear that a statutory easement was, except as otherwise provided in the MRPA, an easement of the same nature and character as the "traditional" or common law easement.  This is reflected in Section 111.1(1) of the MRPA which provides, in effect, that once registered, a statutory easement "is an easement for all purposes", and, "is an interest in land", and, "runs with the land notwithstanding that the benefit of the right is not appurtenant or annexed to any land of the (grantee) in whose favour the right was granted".  Additionally, Section 111.1(1) provides that "…and the conditions and convenants expressed in the instrument (creating the easement) apply to and bind the respective successors, personal representatives and assigns of the grantor and grantee, except to the extent that a contrary intention appears in the instrument". (The underling here is for emphasis purposes).

Could a Utility successfully argue that an Indefinite Area Utility Easement created as a statutory easement is binding on the original grantor and all successors in title to the original Landowner's property, on the basis of the above-quoted provisions in Section 111.1(1), notwithstanding that there is no clear demarcation of the boundaries and/or location of the easement rights?  In this writer's opinion, while there may be a possibility of success for such an argument, it is unlikely that a Court would so interpret the statute in that manner.  This is because Section 111.1(1) appears to strengthen and emphasize the nature and effect of statutory easements by emphasizing that they are akin to "traditional" or common law easements.  The statute's language does not purport to do away with or exclude all of the previous law pertaining to easements generally.  Just the opposite.  The Courts have - and continue to be - wary of interpreting a statute on the basis that all common law related to the subject matter of the enactment is extinguished or excluded unless the statutory language specifically says so.

1. THE TRADITIONAL OR COMMON LAW APPLICABLE TO EASEMENTS

So what does the traditional/common law say about easements where the location of an easement is unknown, indefinite, unclear or is to be determined by the holder of the easement at some future time or times?  In reviewing the applicable law, the writer had hoped to find an unambiguous statement by Court to the effect that an easement of this nature is, in short, void for uncertainty.  In fact, the writer has not been able to find such a clear statement.  However, the case law and academic commentary does reveal certain general principles.  A sample of these are the following:

(a)          From Gale on Easements, Nineteenth Edition ("Gale"):

(1)        "It is necessary for an easement that there should be a servient tenement that can be defined and pointed out."

"Difficulty in identifying the servient tenement, though not any doubt as to its existence, may arise where, for instance, a house is granted with the right to receive water, or discharge drainage, through a pipe in an adjoining property retained by the grantor.  In such a case the servient tenement may be thought to consist of the adjoining property or some part of it, or of the pipe itself, if this is not part and parcel of the dominant land, or of the adjoining property and the pipe." 

"For most practical purposes the question is of little importance, where it is clear that the right is an easement, and that, whatever the servient tenement may be, the pipe is entitled to protection from interference, including presumably, interference by withdrawal of support.  Furthermore, in cases of doubt the deed will be construed against the Grantor.  In other similar cases the identity of the servient tenement may bear on the question of whether the so-called easement is not repugnant to the proprietary rights of the servient owner."

(2)        "It is obvious that the identity of the servient tenement is, at least in theory, a relevant consideration.  "If Blackacre had a right to receive water through a pipe laid under A's field, the right is clearly not repugnant to A's proprietary rights in the field, and if the servient tenement is considered to be the field, there is no difficulty on principle in establishing an easement.  A, however, could sell the greater part of the field to entirely free from the easement; the servient tenement must, it is thought, consist at most of the space occupied by the pipe and so much of the soil on each or one side as is necessary for access for repair.  Of the servient tenement so constituted A is very nearly (and certainly of the space occupied by the pipe) deprived of possession; yet the validity of an easement of this kind is undoubted."

(3)        "The question of whether the right granted or claimed by prescription is too extensive to be an easement has been considered in a large number of decided cases.  Unfortunately, the law is not clear and precise as to the boundary between a right which can be an easement and a right which is too invasive of the rights of the owner of the land to be an easement."

(4)        Quoting from the recent (2007) UK House of Lords Judgment in Moncrieff v. Jamieson, "Every servitude prevents any use of the servient land, whether ordinary or otherwise, that would interfere with the reasonable exercise of the servitude.  There will always be some such use that is prevented.  The servient land in relation to a servitude or easement is surely the land over which the servitude or easement is enjoyed, not the totality of the surrounding land of which the servient owner happens to be the owner." 

(5)        "…it would be fairly meaningless in relation to either easement to speak of the whole estate as the servient land."

(6)        "I do not see why a landowner should not grant rights of a servitudal character over his land to any extent that he wishes." 

(7)        "I would, for my part, reject the test that asks whether the servient owner is left with any reasonable use of his land, and substitutes for it a test which asks whether the servient owner retains possession and, subject to the reasonable exercise of the right in the question, control of the servient land."

(8)        "In the case of an express grant of a right of way, the extent of the right granted depends on the express (wording) of the grant.  Those terms must be construed in accordance with the general rules as to the interpretation of legal documents."

(9)        "A right of way should, generally speaking, … be bounded and circumscribed to a place certain, but (in a 1905 English Court of Appeal judgment) the Court was of the opinion that the fact that the occupiers of a tenement to which a way by user was claimed had used, not a definite road marked out between (specified or clearly delineated geographical lines) but a number of tracks indifferently, did not prevent the right from being acquired."

(10)      "If the right in question did amount to a right to use the whole of the area to the complete exclusion of the owner, it could not be an easement"  A right to park a car on a forecourt capable of taking two or more other cars is, however, certainly capable of being an easement and falls on the easement side of what has been called the "ill-defined lined" between rights in the nature of an easement and rights in the nature of an exclusive right to possess or use."

(11)      "An easement that stops short of exclusive possession, even if it deprives the owner of much of the use of his land, or indeed of all reasonable use of it, should be valid."

(b)          From Chapter 17 of Anger and Honsberger, Law of Real Property, 3^rd edition

"(One of the requirements for the constitution of a valid easement is (that) the right must be reasonably definite." "It seems, however, that the standard of certainty is not a stringent one. In one application to have a right-of-way struck down as too vague, the court stated: "A document will not be set aside for vagueness unless, after the application of legal reasoning and legal analysis, it is impossible to decide the meaning that should be given to the document.".

(c)          From Chapter 17 INCORPOREAL HEREDITAMENTS in the Canadian Encyclopedia Digest 4^th (online) Easements:

(1)          "An easement may grant a right to construct and use a swimming pool on the servient land, but the extent of the right will be limited by the proprietary rights of the servient owner.".

(2)          "…a reciprocal parking agreement granting rights to park on "first come/first serve" basis (is) not...

July 2019

It is unlikely that any lawyer - or indeed any other professional person, or for that matter, any "layperson" - would knowingly/intentionally refer someone to another person for advice when the referring person knew or suspected that the referee was incompetent and/or untrustworthy.  But what if you don't know anything - or very much - about a possible referee, except for the fact that he or she holds himself/herself out as a person with a particular skill set and/or particular knowledge, qualifications and experience?  To what extent should you - morally and legally - be obliged to make inquiries (or conduct "due diligence") concerning the proposed referee's actual knowledge, experience, qualification(s) or reputation?

For most people and in most situations, it is unlikely that these questions will arise.  Or if they do, it is unlikely that the person being referred to a referee will suffer loss, or if he/she does suffer loss, that he/she will seek legal redress against the person making the reference.  But if the person contemplating a reference is a lawyer and the person to be referred to a contemplated referee is a client of that lawyer, then, the lawyer may have a significant obligation to take at least some care in making the reference.

Consider the case of a lawyer who commences to practice in a place different from where he/she previously practiced, say a small city of about 20,000 people.  In fairly short order, the lawyer would probably become familiar with at least the names and occupations of other professionals in the city, including other lawyers, financial planners, accountants, lenders and builders.  But for at least some time, the lawyer would not likely be familiar with the reputations and the skill sets - or lack thereof - of such other professionals.  Where a client of that lawyer requests the lawyer to "recommend" the services of another professional, just how far does the lawyer have to go in order to attempt to comprehend a proposed referee's ability, and the likelihood (or otherwise) that the proposed referee will provide a reasonable level of competence and is trustworthy?  Should the lawyer expend copious time and effort trying to "drill down" on the likelihood - or the non-likelihood - of the proposed referee's ability to properly service the client's needs?

These questions were considered - in the context of a lawyer's legal responsibilities - in the recent Supreme Court of Canada case Salomon v. Matte-Thompson, 2019 SCC 14, judgement issued February 28, 2019, hereinafter, the "Salomon Case".

The "facts" in the Salomon Case were that in 2003, a lawyer recommended and introduced his client to a financial adviser - who happened to be a personal friend of the lawyer - and recommended that the client consult with that adviser.  Over the next four years, the client invested in excess of $7,500,000.00 with that adviser's investment firm, and, over the course of that period, the lawyer repeatedly endorsed and recommended the adviser as a financial adviser and encouraged his client to make and retain certain investments with the investment firm.  In 2007, the adviser disappeared with the savings of approximately 100 investors, including those of those of the lawyer's client.  The client commenced an action against the lawyer and the lawyer's law firm for damages.

The Court held that the lawyer was liable to the client.  The Court emphasized that the lawyer had done substantially more than just referring his client to the adviser.  Over the period of four years, the lawyer had made repeated positive recommendations of the adviser's capabilities to his client, including urging the client to invest (through the adviser and his investment firm) in "risky" investments.  The client had specifically, at the outset, advised the lawyer that the client's needs were to place her funds in investments which would tend to protect her capital.  When the investments started to deteriorate in value, the lawyer - who had placed some of his own monies in those investments - did not suggest to the client that she reduce her holdings with the adviser and his investment firm.  Indeed, just the opposite occurred - the lawyer gave repeated assurances to his client that the investments were, and continued to be, safe and good investments.  Although the judgement doesn't unequivocally hold that the lawyer had received remuneration from the adviser for referring clients - including Mrs. Matte-Thompson - to the adviser, the facts presented to the Court strongly suggested that that was in fact the case.  Taken as a whole, the Court determined that the lawyer owed a duty to provide proper advice to the client as well as a duty of loyalty to the client.  The lawyer had not conducted any "due diligence" whatsoever pertaining to the adviser and his investment firm.  The Court held that had the lawyer done so and advised his client, his client would have almost certainly not made any investments with the adviser and his investment firm.

The Court emphasized that when a lawyer makes a reference of a client to another person for advice and guidance, the lawyer does not thereby guarantee to the client that the referred to adviser will achieve a particular result or objective or that the adviser will turn out to be wholly trustworthy and competent.  However, in the Salomon Case, the lawyer's conduct - which led to his client's losses - was far more than a mere reference.  The lawyer's course of conduct over the entire time period had to be taken into account.

What then does the Salomon Case suggest to practicing lawyers?  Consider the following:

(i)            if you know absolutely nothing about a contemplated referee, either don't make the reference - and explain to your client that that is the reason you are not making any reference - or:

(a)          conduct at least some "due diligence" with respect to the contemplated referee (for example, if the contemplated referee is a financial planner, inquire as to his/her credentials and whether or not he/she is registered or recorded with an organization whose members are regulated, either voluntarily or by government mandate, as to their conduct, competency, etc.); or

(b)          make the reference but get a written acknowledgement from your client that you have no knowledge and have not conducted any due diligence with respect to the contemplated referee, suggesting that the client seek the recommendations of one or more other persons in the community who might have more knowledge of the contemplated referee's reputation;

(ii)           if you either know or have certain information which would lead you to suspect that the contemplated referee is incompetent and/or untrustworthy, either decline to make the reference or before making it, or where you have "suspicious", conduct - and document that you have conducted - some "due diligence". Where your due diligence removes your "suspicions", make the reference, if you feel comfortable in doing so.

Readers will appreciate that there is a marked difference between the hypothetical fact scenario suggested at the beginning of this paper and the facts of the Salomon Case.  The Salomon Case deals with of a rather "extreme" situation.  Clearly, the lawyer there had a conflict of interest and a conflict of duty arising from his dual relationships with his client and with the financial adviser. There was a pattern of ignoring the ramifications of those conflicts over a long period of time.  While this writer's first reaction upon reading the Salomon Case was to fear that the Court had extended the duties and responsibilities of lawyers making referrals, the writer is now convinced that this is not so.  As stated at the outset, most lawyers will not intentionally refer a client to someone who they know - or suspect - to be incompetent and/or untrustworthy.  And where a lawyer contemplating a reference for a client has any suspicions concerning same, she or he will most likely either "diplomatically" not make the reference or not make it until sufficient "due diligence" has been conducted by the lawyer so as to assure herself/himself that making the reference to the particular client in the particular circumstances is reasonable.