Luft v Zinkhofer, 2016 ABQB 182

Court of Queen ’ s Bench of Alberta Citation: Luft v Zinkhofer, 2016 ABQB 182 Date: 20160324 Docket: 0401 02937 Registry: Calgary Between: Donald Vance Luft and Susan Anne Luft Plaintiffs - and - Taylor, Zinkhofer & Conway and Frederick Zinkhofer Defendants And between: Frederick Zinkhofer Plaintiff by Counterclaim - and- Donald Vance Luft and Susan Anne Luft Defendants by Counterclaim ______________________________________________________

Reasons for Judgment of the Honourable Madam Justice S.L. Martin _______________________________________________________ Table of Contents 1. Introduction . 5 2. Framework Facts, Procedure and Evidence . 5 A. The Parties . 5 B. Mr. Zinkhofer’s Retainer 5 C. Claims in this Litigation . 10 D. Procedure and Evidence in this Trial 10 3. Issues . 11 4. Has Mr. Zinkhofer Breached Duties Owed to the Lufts? . 11 A. A Lawyer’s Duty to Clients . 11 B. The Position of the Parties . 13 C. A Timeline for the Woods Litigation . 14 D. Master Waller’s Order 16 E. Breaches of the Duty of Candour 19 i.

Breaches of Candour Admitted by Mr. Zinkhofer 20 a. Orchestrating a fake examination of Mrs. Wood . 20 b. Lying about being in Case Management 21 c. Lying about the steps taken on the file . 21 d. Lying about filing amended statements of claim .. 22 e. Lying about examining people other than Mrs. Wood . 23 f. Futile activities . 25 ii. Further Failures of Candour 27 iii. Deceit, Fraud and Fiduciary Obligations . 28 F. Failure to Follow His Clients’ Instructions . 30 i. Admitted Breaches . 30 ii. Credibility and Reliability . 31 iii. Did the Lufts authorize the Counsel Agreement? . 32 a.

A document in the form of an affidavit dated September 15, 1999 . 34 b. A document in the form of an affidavit dated only October, 1999 . 35

c. A document in the form of an affidavit dated May 9, 2001 . 35 G. Breaches of the Duties of Competence and Diligence . 37 i. Failing to Plead Defamation . 38 ii. Failing to Examine Mrs. Wood and Others . 39 iii. Mr. Zinkhofer’s Delay of the Action . 40 iv. Mr. Zinkhofer Never Giving the Lufts what he said was his True Opinion . 40 v. Mr. Zinkhofer’s Advice Concerning the Release Signed by Mr. Luft When Leaving CWNG 41 vi. Mr. Zinkhofer’s Advice Concerning Mortgage Payments to the Bank Owed by the Lufts . 44 vii. Conclusion . 45 5. The Loan and Retainer Agreement 45 A.

How Much Money Was Advanced to the Lufts? . 46 B. Did TZC Fail to Fulfill a Contractual Obligation to Advance the Full $30,000? . 48 C. Can Mr. Zinkhofer Recover on his Counterclaim for any Monies Advanced? . 48 6. Damages . 49 A. Did the Lufts Lose Something of Value in the Woods Defamation Litigation? . 50 i. Principles Governing a Trial within a Trial 50 ii. The Defamation Action . 51 iii. The Lufts Lost Something of Value . 52 a. The statements made by Mrs. Wood were defamatory . 54 b. Defences asserted on behalf of Mrs.

Wood . 56 The Defence of Truth . 56 The Defences of Qualified Privilege and Fair Comment 58 c. Quantifying the Losses from the Defamation . 59 General Damages in a Defamation Action . 59 Employment Damages: Mr. Luft’s claim against the Woods . 63 d. Conclusion . 66 iv. Were the Plaintiffs Obliged to Conduct a Binding JDR after Master Waller’s Order? . 66 B. Are Other General Damages Owing from Mr. Zinkhofer’s Multiple Breaches? . 68 C. Did Mr. Zinkhofer Cause any Loss of Employment? . 72 i. Mr. Luft’s Employment History . 72 ii. Expert Reports . 73 For the Plaintiff . 73 For the Defence . 74 a. The Report of Dr.

Boissevain. 74 b. Brown Economic Consulting Inc. 75 c. PETA Consultants . 76 d. Comparison of the Two Reports . 77 e. Findings and Conclusions . 78

D. What is the Correct Amount of Punitive Damages? . 79 7. Costs . 84 8. Conclusion . 84 1. Introduction [ 1 ] Every day people turn to lawyers to help them with disputes or problems they cannot solve themselves. Every day lawyers work diligently in service of their clients and in the larger public interest. In rare cases lawyers abuse the trust reposed in them, often with wide ranging and serious consequences to the very people they have sworn to represent. This is such a case, in which a lawyer lied to his clients and failed to fulfill his duties of candour, competence, diligence and zealous advocacy. 2.

Framework Facts, Procedure and Evidence [ 2 ] This case spans almost 20 years. It involves a complex set of facts and allegations about how Mr. Zinkhofer, a lawyer, handled various legal matters for his clients, the Lufts. Unfortunately, despite a request, an Agreed Statement of Facts was not made available to the court. [ 3 ] The following framework of facts is intended as a general overview to help understand the sweep of events. They explain who the parties are, explore the scope of Mr. Zinkhofer’s retainer, set out the various causes of action, and the procedure and evidence in the case at bar.

A more detailed review of particular events, disputed facts, and credibility findings will be undertaken in later sections and in relation to particular issues. A. The Parties [ 4 ] The Plaintiffs, Mr. Don Luft and Mrs. Susan Luft (collectively the "Lufts") first retained the lawyers from the law firm Taylor, Zinkhofer & Conway (“TZC’), made up of Mr. Thoms Taylor, Mr. Fred Zinkhofer and Mr. Brian Conway, to deal with a motor vehicle accident. They hired another lawyer at that firm, Mr. Frederick Zinkhofer, to deal with disputes with their new neighbours, the Woods. [ 5 ] Mr.

Zinkhofer represented the Lufts from October 1997, until he was fired in April 2002. At the time, Mr. Zinkhofer was a practising barrister and solicitor and a partner, at TZC. Under the Partnership Act, RSA 2000, c P-3, this law firm would also be liable for Mr. Zinkhofer’s actions. B. Mr. Zinkhofer’s Retainer [ 6 ] Over the course of his four and a half year retainer, the Lufts relied heavily on the advice of Mr. Zinkhofer on many matters. [ 7 ] In 1994, the Lufts moved into a new home with their young family. They hired Mr. Conway and then Mr.

Zinkhofer in relation to difficulties with their neighbours, the Woods. Initial questions over grading and property lines evolved into an acrimonious relationship. In dealing with a problem about the relative grading of their adjoining properties, they discovered a portion of the Woods’ driveway infringed on the Lufts’ property and a city right-of-way. When the developers came to remove the offending piece of concrete, Mr. Luft and Hanna Luft, their daughter, testified that Mrs. Wood lay across the driveway and prevented them from doing their work.

The developer left and returned at a later date to complete the task. Mrs. Wood testified that she did not remember doing that and offered how such conduct would be unlike her. [ 8 ] The Lufts and Woods all admitted they had repeated run-ins with each other. Mr. Luft said the Woods would “stir something up” and the Woods believed they were the victims of the Lufts. From very early in their relationship all parties could go from zero to shouting and swearing very quickly.

The relationship between these neighbors deteriorated so much that the Lufts began taking meticulous notes of occurrences and installed security cameras and Mrs. Wood walked around with a tape recorder in her pocket to capture any offending conduct. [ 9 ] The Lufts attribute the following conduct to the Woods: throwing garbage in their back yard, graffiti on the side of their house, turning off the outside gas meter in the winter to their home when they were not there, and damage to their outdoor hot tub. [ 10 ] The Woods admit they contacted Mr.

Luft’s employer, Canadian Western Natural Gas (CWNG) and the police about Mr. Luft’s conduct on numerous and varied occasions. They also made complaints to Animal Services twice, the City of Calgary’s Engineering Traffic and Planning Department and other departments twice, and the City of Calgary’s By-law Department. [ 11 ] Many incidents between these families involved Alex Wood, the son of Mr. and Mrs. Wood. The Lufts claimed Alex had injured children, including their own, damaged their property and was generally a trouble-maker.

The Lufts and the Luft children spoke from direct experience of Alex using a rope to choke the Luft girls and cause welts, throwing rocks down on Stephen’s head and smashing a glass bottle on a rock and cutting a child. [ 12 ] The Lufts said that when they called Alex on his bad behavior he reacted negatively: sometimes swearing at them or running to tell his parents that he was the victim of something the Lufts did to him. Alex’s accusations about what the Lufts said or did to him would often result in confrontations between the Woods and the Lufts.

As one example on December 1, 1994 the Lufts saw Alex kicking in the locked gate on their property. In forceful terms, they told him to stop and asked why he continued this behavior even though he

had been told in the past not to touch the fence. Alex went and reported his version of events to his mother, who came over and started screaming at Mr. Luft. The police were then called by the Woods, and the police questioned the Lufts. [ 13 ] The Lufts believed Mr. and Mrs. Wood always took the side of their son and failed to discipline or control his problematic behavior. Mrs. Luft reports that Alex raised his middle finger to her when she was returning home. Mrs. Luft reported that Alex ran into the back yard, told something to his mother and that Mrs. Wood attempted to confront her, but that she ignored her.

Later in that month, within earshot of his mother Alex called Mr. Luft “a bastard.” [ 14 ] On June 9, 1997, Alex Wood told his mother that when he was walking home from school for lunch, Mr. Luft pulled out of the corner Petro-Canada gas station “drove slowly past Alex, watching him the whole time and giving him menacing looks.” When Mr. Luft reached the break in the median, he made a U-turn so that he could follow Alex again. The allegation is that Mr. Luft made three such U-turns. In this litigation this allegation was referred to as the “Alex incident.” [ 15 ] That same day Mrs. Wood wrote to Mr.

Luft’s employer, CWNG, outlining her particular allegations and concluding: Given the history of Mr. Luft’s previous actions toward Alex and myself you can appreciate my concern for the safety of my son. I find it very difficult to understand that CWNG can allow one of their employees to act in this manner. This is the fourth time Mr. Luft has harassed our family while in possession of your company’s vehicle or has used CWNG’s resources. It will be of very little help, if harm comes to my son by Mr. Luft’s actions to say that he has denied his actions and therefore CWNG has not been able to do anything.

Surely a mother should not have to worry that a CWNG employee is stalking her child during working hours. [ 16 ] As indicated in this excerpt from the letter, both Mr. and Mrs. Wood had made previous complaints to CWNG about Mr. Luft. Mrs. Wood testified that they did not like Mr. Luft bringing his truck home for lunch or after work. [ 17 ] On June 9, 1997, Mrs. Wood also wrote a similar letter to the Principal of the neighbourhood school Alex attended, again outlining what she said occurred and stating: Given the history of Mr.

Luft’s previous actions toward Alex and myself I am very concerned about my son’s safety. I have been in contact with CWNG and they are looking into the matter. I have contacted the police and they said that since Mr. Luft did not talk to Alex or stop they cannot investigate this matter. Mr. Luft’s behaviour in the past has been of concern to our entire cul-de-sac and we believe he is unstable. This incident however is the first time he has stalked my child. I would very much appreciate it if you could warn your staff to watch for a CWNG van in the school vicinity.

I will update you as I receive more information from CWNG. Thank you for your understanding in this very disturbing matter. [ 18 ] Mrs. Wood then posted a notice at the Petro-Canada gas station which stated: On Monday, June 9 a man in a Canadian Western Natural Gas Van (V@649) followed my son as he was walking home from school at lunch time. The van was parked in the Petro-Canada parking lot so that the driver could watch the children as they turned on to Edgebrook Drive NW.

When my child came onto Edgebrook Drive, this man drove slowly by him, turned at the median breaks on Edgebrook Drive to make a total of three slow drives by my child. My son was wearing blue jeans, a blue and grey patterned t-shirt and a Nike ball cap. If anyone can place this CWNG van in the Petro-Canada parking lot or can recall seeing this CWNG van following a boy please contact me as I need your help to stop this man’s actions. [ 19 ] While Mr.

Luft was not named in this notice, the Woods testified that he was the only person in the neighbourhood who drove a CWNG van in that neighbourhood, especially with that vehicle number. [ 20 ] It is also admitted by the Woods that Mrs. Wood spoke to their neighbours about this incident. [ 21 ] On June 11, 1997, Mrs. Wood saw Mr. Luft at the same Petro-Canada gas station. She became very upset, started shouting at people nearby about Mr. Luft and what she says he had done. She called CWNG demanding to speak to Mr. Luft’s superior. Mr.

Littke, a CWNG manager, testified that he was pulled out of a meeting and he spoke with a hysterical person. He and a security person from CWNG interviewed Mrs. Wood at a local coffee shop. These two men then interviewed Mr. Luft at his home. [ 22 ] The next day Mr. Luft was called into a meeting at work to discuss the Alex incident. Mr. Luft denied the allegations, and testified that he did not believe that his employer wanted to hear both sides of the story. After that interview his employer told him to go home. He returned to work the next day. [ 23 ] On June 24, 1997 Mr.

Littke sent him a letter in the following terms: I am very concerned about the conflicts that occurred between you and one of our customers, during your working hours, over the past few years. In an attempt to eliminate these conflicts, you have been previously instructed to refrain from taking your company vehicle to your residence. Unfortunately, a recent incident between you and our customer, Mrs. Judy Wood, has resulted in the need for further action. The incident occurred on June 11, 1997 within a few blocks of your Edgemont residence, while you were on company business.

As we discussed at our meeting on June 12, 1997, effective immediately, you were instructed that you must not take your company vehicle into the Edgemont subdivision, except in emergency situations, such as responding to emergency calls in Edgemont or in the case a family crises. You will no longer be scheduled for regular work in the Edgemont district. Should a family emergency require you to go into Edgemont, I ask that you advise us via phone, CAD or radio. If you wish to meet with your family during working hours including

your lunch break it is expected that the meeting will occur outside of Edgemont or over the telephone. Don, it is important that you understand the seriousness of this issue. Continuing disputes between you and our customer, during working hours, will not be tolerated as these situations have a negative impact on Canadian Western. I expect that you will abide by these instructions, and that you will take every action necessary to ensure that no further conflicts occur with this customer, or with any other customer, during working hours.

Any future altercations, which involve or adversely affect the company, will be grounds for further disciplinary action, up to and including dismissal. I am confident your scheduled work outside of the Edgemont area will ensure future conflicts involving our company, yourself and our customer, Mrs. Judy Wood, will be eliminated. [ 24 ] As this letter indicates, CWNG chose to characterize Mrs. Wood’s allegations as a complaint from a customer, rather than as a private dispute between feuding neighbours. When asked why, Mr.

Littke testified that because CWNG was a utility, everyone was their customer. [ 25 ] On June 13, 1997, Mrs. Wood sent another letter to the school Principal. This time she also included allegations against Mrs. Luft, who worked at another school and was at Heritage Park as part of her work duties, This letter stated: This letter is to reconfirm my concerns for Alex’s safety from Mr. Donald Luft. I have been assured by Mr. Bruce Littke, Operations Manager of CWNG Crow Foot that Mr. Luft will no longer be given job orders in the Edgemont area. However, Mr.

Luft did not have a job order for the Edgemont area on June 11, 1997. Mr. Luft arrived at the Petro-Canada on Edgemont Blv at around 12:00 noon. He again backed his CWNG van in the parking spot so he could observe those children who leave the school playground and walked down Edgebank Circle onto Edgebrook Dr. As such Mr Luft may again try to intimidate and scare Alex should the opportunity afford itself. As you are aware from our conversation yesterday afternoon, Mrs. Susan Luft was at Heritage Park during the school patrol picnic. Sometime during the morning Mrs.

Luft found the opportunity when the children she was accompanying were out of hearing range and Alex’s companions had gone ahead to swear at Alex, call him names and shake her fist at him. Alex did not know she was close by until she spoke to him. Alex went to one of the police officers in the area and pointed out Mrs. Luft to the officer. Alex explained that she had harassed him and the officer said that he would keep a watchful eye on the situation. He also told Alex that this was the kids’ day and he should just have a good time because the officers were now aware that something had happened. Mrs.

Luft did not approach Alex again but stayed close enough by to make Alex uncomfortable. Alex also pointed out Mrs. Luft to Miles Kelly with whom he went on rides. Alex did not get the name of the officer he spoke to. I do not know why Mrs. Luft was at Heritage Park. She does not have children that would be of school patrol age. I suspect she was there as a CBE employee or as a volunteer for children other than her own. I have contacted the police and informed them of all incidents concerning Mr. Donald Luft and Mrs. Susan Luft. I again would like to thank you for your support at this truly stressful time.

Yours truly, Judy Roth-Wood [ 26 ] Mr. Zinkhofer was initially retained to deal with the damage to Mr. Luft from these statements. A statement of claim was filed by Mr. Zinkhofer’s partner, Mr. Conway in August 1997. Only when the Woods filed their affidavit of records did the Lufts come into possession of the written text of these letters and the notice. [ 27 ] The Lufts believed their relationship with their other neighbours changed as a result of these statements, with the Luft children no longer being welcome or allowed to play with other children.

Steven Luft testified to similar effect: his best friend’s mother would no longer allow his friend to play with him. [ 28 ] Mr. Luft claimed that the damage to his reputation caused by Mrs. Wood’s statements directly to his employer altered his work environment. He eventually accepted a severance package, even though he had worked with the gas company for twenty one years, had rejected two previous offers of severance and had intended to remain with CWNG until retirement. [ 29 ] Mr. Zinkhofer provided legal advice about that severance package, including a widely worded release that meant Mr.

Luft could take no action against his former employer. The Lufts had asked Mr. Zinkhofer whether the changes CWNG had made in the terms of his employment amounted to constructive dismissal. [ 30 ] Mr. Luft could then not find comparable work, and the family fell into financial difficulty and eventually lost their home. Mr. Zinkhofer hired Mrs. Luft to help provide care to another of his clients, a dependent adult requiring assistance. Mr. Zinkhofer provided advice about their mortgage and their relationship with creditors. [ 31 ] Mr.

Zinkhofer also entered into what was called a “Loan and Retainer Agreement” and advanced the Lufts certain money under its terms. The amount advanced is in dispute, but ranges from between $16,000-$35,000. [ 32 ] Over the course of his approximately four and a half year retainer, Mr. Zinkhofer was very involved in the Lufts’ lives and disputes. Mr. Zinkhofer had conduct of the Woods litigation, acted in relation to Mr.

Luft leaving his employment, provided advice when Social Services became engaged with the family over the conduct of their eldest daughter, dealt with the bank holding their mortgage when the Lufts were in financial difficulty, gave Mrs. Luft a job, and eventually entered into a loan agreement with the Lufts. [ 33 ] The Lufts eventually terminated the services of Mr. Zinkhofer in April 2002 for failing to advance their case against the

Woods. Mrs. Luft had checked the court generated record on two occasions and found that Mr. Zinkhofer was not actually taking thesteps he told them he was taking. More specifically, Mr. Zinkhofer was not advancing their claim to trial. [34] Their new lawyer found out that Mr. Zinkhofer entered into a counsel agreement with counsel for the Woods that effectivelygave away the Lufts’ right to go to trial, question Mrs. Wood or others, and to plead defamation. [35] Mr. Zinkhofer admitted he lied to his clients on many matters and over an extended period of time.

During the time Mr.Zinkhofer was counsel, the underlying damage to Mr. Luft’s reputation flowing from Mrs. Wood’s statement was never redressed. [36] Eventually, the Lufts separated and Mr. Luft has suffered from serious health issues that have left him legally blind andunemployable. Tragically, their eldest daughter died in 2006. C. Claims in this Litigation [37] The Lufts now sue their former lawyer for damages arising from his admitted and alleged misconduct. Essentially, the Lufts’claim against Mr. Zinkhofer and TZC relate to three underlying matters: 1. Litigation between the Lufts and the Woods; 2. When Mr.

Luft left his employment with CWNG in May 1998 and signed a release; and 3. The Lufts’ financial difficulties with the Bank of Montreal ("BMO") which resulted in foreclosure proceedings against their home. [38] Mr. Zinkhofer has also counterclaimed seeking reimbursement and interest on the funds he says he advanced to the Luftsunder the “Loan and Retainer Agreement.” Mr. Zinkhofer sued personally and represented himself on the counterclaim. [39] The Lufts claim various damages, including the loss of the Woods litigation, general damages, employment related losses,aggravated damages and punitive damages. D.

Procedure and Evidence in this Trial [40] Procedurally, this matter was scheduled to be heard in 2014 but there was no judge available to hear the case. The trial wasadjourned to 2015 and the trial did not proceed at that time as there was a power outage in the court. [41] This trial took three full weeks to hear, sitting extended hours, to accommodate various witnesses. There was over 200 agreedexhibits, admitted as authentic but not for the truth of their contents, and a further forty exhibits tendered during trial. Argument took afurther three days. [42] The Plaintiffs called Mrs. Luft, Mr.

Luft, their son Stephen and their daughter Hannah. These individuals were cross-examined by the defense and some were also cross-examined by Mr. Zinkhofer in respect of his counterclaim. [43] The Plaintiffs also called Mr. Littke, a manager with CWNG at the time of Mr. Luft’s employment; Dr. Boissevain as anexpert on vocational matters; and Ms. Cara Brown as an economist to assist with the calculation of damages. [44] The Defendants called Mr. Zinkhofer and Dr. Taunton, an economist with PETA Consultants. 3. Issues [45] The following main issues arise in relation to this complex matter: 1. Has Mr.

Zinkhofer breached duties owed to the Lufts? 2. Can Mr. Zinkhofer recover on his counterclaim for monies he says he advanced to the Lufts? 3. What damages, if any, arise from Mr. Zinkhofer’s breach of duties? 4. Has Mr. Zinkhofer Breached Duties Owed to the Lufts? [46] In this section, I first canvass a lawyer’s duty to his or her clients, outline the position of the parties, provide a brief time-linefor the Luft v Woods litigation and discuss the counsel agreement at the core of many of the Lufts’ allegations against Mr. Zinkhofer.

Ithen make findings in respect of breaches of candour, acting without instructions, and breaches of the duty of competence and diligence. A. A Lawyer’s Duty to Clients [47] Lawyers play an important role in the advancement of justice. Fundamental to that role is the requirement that lawyersconduct themselves in an ethical and professionally responsible manner. The lawyer client relationship is complex and multi-faceted.While lawyers owe duties to their clients, the courts, the profession and society at large, at the core of this important relationship is trustand candour.

Lawyers are privy to confidential information and often see clients at their most vulnerable. [48] An overview of a lawyer’s duties was nicely stated: in Barlot v Dudelzak, 2005 ABQB 793 at para 15, citing Riley J inMillican v Tiffin Holdings Ltd, (ON CA), 50 WWR 673 at 674, 49 DLR (2d) 216 aff’d (SCC),[1967] SCR 183, 60 DLR (2d) 469:

The obligations of a lawyer are, I think, the following:

(1) To be skilful and careful.

(2) To advise his client on all matters relevant to his retainer, so far as may be reasonably necessary.

(3) To protect the interests of his client.

(4) To carry out his instructions by all proper means.

(5) To consult with his client on all questions of doubt which do not fall within the express or implied discretion left to him.

(6) To keep his client informed to such an extent as may be reasonably necessary, according to the same criteria. [49] Expectations and obligations are set out in the law of contract, tort and equity, as well as professional codes of conduct. [50] A key feature of the lawyer client relationship is that the lawyer may speak for the client in and out of court and can affecttheir rights. The underlying concept is one of agency. The lawyer seeks instructions from the client.

Such instructions should be theproduct of a well-informed client who has received the benefit of the lawyer’s competent advice: outlining and explaining the strengthsand weaknesses of a proposed course of conduct. As it is the client’s rights at stake, it is the client’s instructions that govern.

Lawyerswho fail to inform or consult their clients, or to carry out their instructions are in breach of their retainer, principles of contract and tortlaw, and are violating their professional responsibilities. [51] A lawyer’s duties under the retainer, and contract and tort law, are to exercise the standard of care of a reasonably competentmember of the profession in similar situations: Central Trust Co. v. Rafuse, (SCC), [1986] 2 SCR 147.

In a professionalmalpractice suit, the plaintiff must demonstrate that a lawyer's failure was not merely an error of judgment, but must constitute actionablenegligence: see Folland v Reardon (2005), 74 OR (3d) (CA), at para 44 [Folland v Reardon]. [52] In addition to actionable negligence, it is also possible, although more rare, for clients to allege that the conduct of theirlawyer amounts to the tort of fraud and deceit.

According to the Supreme Court in Bruno Appliance v Hryniak, [2014] 1 SCC 126, 2014SCC 8, there are four elements of the tort of civil fraud: (1) a false representation made by the defendant; (2) some level of knowledge ofthe falsehood of the representation on the part of the defendant (whether through knowledge or recklessness); (3) the false representationcaused the plaintiff to act; and (4) the plaintiff's actions resulted in a loss: [Bruno Appliance v Hryniak] at para 21. [53] Lawyers also owe certain fiduciary obligations to their clients under the law of equity.

Obligations characterized as fiduciaryinvolve three essential principles. A lawyer must represent a client with undivided loyalty, preserve a client’s confidence, and make fulldisclosure of all relevant and material information relating to a client’s interests. See Perez v Galambos, 2009 SCC 48.

In 3464920Canada Inc v Strother, 2007 SCC 24, Justice Binnie, speaking for the majority stated at paragraph 1: A fundamental duty of a lawyer is to act in the best interest of his or her client to the exclusion of all other adverse interests, except thoseduly disclosed by the lawyer and willingly accepted by the client. […] [54] A lawyer’s fiduciary obligations are separate from the common law duties arising in contract and tort, but there are parallelsbetween them.

This means a single course of conduct by a lawyer may give rise to liability both as a fiduciary and in negligence orbreach of contract: see Canada Trustco Mortgage Co v Bartlet & Richards, (1991) (ON SC), 3 OR (3d) 642, 26ACWS (3d) 1355 (Ont Gen Div), aff’d [(1996) (ON CA), 28 OR (3d) 768, 62 ACWS (3d) 1222 (Ont CA). The test ofliability in each category, however, is different. [55] Lawyers, as part of a self-governing profession, are also expected to conduct themselves with high ethical standards. Theconduct of lawyers in Alberta is regulated by the Law Society of Alberta Code of Professional Conduct.

The Code of Conduct providespractical guidance about the rules governing ethical behaviour. There may be overlap between civil liability and professionalresponsibility. For example, a

section of the Code can set out conduct which is also part of the retainer and/or forms the standard of careof a reasonable lawyer in like circumstances. Similarly, the professional obligation may inform the content of a fiduciary duty. However,they remain separate.

Although conformity or non-conformity with an ethical rule may influence a court's decision of whether acontractual, fiduciary or negligent breach has occurred, such breaches are still distinct from breaches of the applicable code ofprofessional conduct. [56] The Alberta Code of Conduct requires that a lawyer must perform all legal services undertaken on a client’s behalf to thestandard of a competent lawyer: The Law Society of Alberta, Code of Conduct, Edmonton: LSA, 2015 (“Alberta Code of Conduct”).Section 2.02 (1) provides: A lawyer has a duty to provide courteous, thorough and prompt service to clients.

The quality of service required of a lawyer is servicethat is competent, timely, conscientious, diligent, efficient and civil. [57] The commentary pursuant to

section 2.02 (1) provides some examples of expected behavior including inter alia, keeping aclient reasonably informed and taking appropriate steps to do something promised to a client. [58] When advising a client, a lawyer must be honest and candid and must inform the client of all information known to thelawyer that may affect the interests of the client in the matter. A lawyer has a duty to maintain, respect and strengthen this trust. TheCode provides further that a lawyer must obtain instructions from the client on all matters not falling within the express or impliedauthority given by the client. B. The Position of the Parties

[ 59 ] The Plaintiffs claim that Mr. Zinkhofer and TZC breached their “contractual, legal and fiduciary duties to act with utmost good faith in the best interest of the Plaintiffs and provide competent legal advice and services.” [ 60 ] In this case, the Lufts contend that Mr. Zinkhofer breached implied contractual obligations and express professional duties by failing to meet the requisite standard of care of a reasonably competent and diligent lawyer. The Lufts say Mr. Zinkhofer lied to them, committed civil fraud and deceit, and breached his fiduciary duties.

They further claim he entered into a counsel agreement without their authority that took away their rights. They allege he failed to keep them informed on their matters and breached various provisions of the Law Society of Alberta’s Code of Conduct. These are grave allegations of serious misconduct. [ 61 ] The Defendants admit that Mr. Zinkhofer owed the Lufts various duties and that he failed to satisfy some of them. The Defence states that legal services were provided to the Plaintiffs on a professional and competent basis. They admit a certain lack of candour but argue that Mr.

Zinkhofer did not enter into a counsel agreement on the terms found in Master Waller’s order. The Defendants main claim is that only minimal losses are attributable to Mr. Zinkhofer. Much of the Defendants’ argument did not focus of the allegations of professional misconduct against Mr. Zinkhofer, but rather on the weaknesses of the Lufts’ litigation claim against the Woods. C. A Timeline for the Woods Litigation [ 62 ] This timeline provides an overview taken from the court record in the Luft v Woods litigation, as supplemented by facts that are not in dispute. [ 63 ] Mr.

Zinkhofer was originally hired to pursue an action by the Lufts against the Woods in relation to various personal and property issues. He took over the Woods file from his partner, Mr. Tim Conway, who filed the statement of claim in August 1997. The only Plaintiff in that statement of claim was Mr. Luft. The original claim referred to nuisance, harassment, invasion of privacy, interference with use and enjoyment of land, and interference with Mr. Luft’s contract of employment.

There is no reference to defamation, publication, or malice and no damages claimed for reputational interests. [ 64 ] The statement of defence and counterclaim was filed September 24, 1997. The Woods answered the property portions of the claim. They also listed the complaints about the Lufts they had made to the Calgary police, the By-law Enforcement Authorities, Animal Services, the City of Calgary, and Mr. Luft’s employer. [ 65 ] The Woods also filed a counterclaim and joined Mrs. Luft and Mr. Luft’s employer, CWNG as Defendants. In the counterclaim they allege harassment: that Mr.

Luft was abusive and threatening and that, on June 9, 1997, he followed their son Alex home from school. They claimed Mr. Luft made menacing and intimidating gestures while wearing his work uniform and driving the company truck. The Woods alleged that CWNG failed to properly supervise or control Mr. Luft. The Woods also complained that the Lufts installed video cameras in July 1997 that infringed their privacy. [ 66 ] The statement of defence of CWNG was filed October 1, 1997, denying any vicarious liability or damages attributable to it as an employer. [ 67 ] Mr.

Zinkhofer stated that at the outset he believed there were two types of problems: issues concerning their property and the incident involving Alex. He sought to hire a surveyor in respect of the property issues and testified that the relative importance of the property issues dissipated as the Woods moved at the end of November 1997, and the Lufts declined to sue their new neighbors. Therefore, after November 1997, the key part of the litigation was recognized as being the consequences of Mrs. Wood’s various statements about the Lufts. [ 68 ] Questioning of both Mr. and Mrs. Wood was scheduled for November 1998.

The Woods filed their affidavit of records shortly before that examination. It was at that time that the Lufts saw the actual copies of letters sent to Mr. Luft’s employer, Alex Wood’s school and posted in the local gas station. Only then did they know that Mrs. Wood claimed that Mr. Luft “stalked” and “harassed” the boy with “intimidating” and “menacing” looks and gestures, and that Mr. Luft was “mentally unstable.” [ 69 ] In November 1998, Mr. Zinkhofer planned to question Mr. and Mrs. Wood at an examination for discovery. In fact he only examined Mr. Wood because Mrs. Wood became too emotional and upset. Mr.

Zinkhofer never in fact questioned Mrs. Wood, the author of the allegedly defamatory statements. [ 70 ] After the examination of Mr. Wood, Mr. Zinkhofer prepared an Offer for Judgement to be presented as a settlement to the Woods, approved by Mr. Luft on December 11, 1998. The offer was for an apology with an admission that the statements were not true, $75,000 and restrictions on the behaviour of Alex and the Woods. Mr. Zinkhofer sought a fee of $25,000 from this proffered settlement. [ 71 ] The court record indicates that between November 21, 1997 and July 1998 the only thing filed was an affidavit of Mr.

Luft, but such affidavit did not support any underlying filed motion. [ 72 ] A civil contempt motion was filed on October 5, 1998, with an affidavit of Mrs. Luft. However, from the testimony it would appear that this was adjourned sine die and nothing came of it. [ 73 ] The next step on the court record instigated by Mr. Zinkhofer was a request for a pre-trial conference for April 1999, which was adjourned subsequently by Mr. Zinkhofer four times. When finally scheduled to be heard in court on June 8, 1999, no-one appeared. [ 74 ] A further pre-trial conference was requested March 29, 2001.

It was also adjourned by Mr. Zinkhofer and then no-one appeared in court on April 11, 2001. [ 75 ] Mr. Zinkhofer filed an appointment for an examination for discovery on December 5, 2001 and six appointments on February 25, 2002.

[ 76 ] The evidence and exhibits show that the Lufts had become concerned about the absence of progress on their litigation against the Woods. Mrs. Luft conducted a search of the court record on February 16, 2001, and discovered that Mr. Zinkhofer had misrepresented what he had done on their behalf. Mrs. Luft confronted Mr. Zinkhofer about his failings and she made inquiries about transferring the file to another lawyer. However, Mr. Zinkhofer promised to do better and they could not afford another lawyer’s retainer. They therefore continued on with Mr. Zinkhofer until Mrs.

Luft’s second review of the court file in April 5, 2002. The Lufts discovered that despite his promises, Mr. Zinkhofer had again not advanced the matter to trial. The Lufts fired Mr. Zinkhofer in April 2002. [ 77 ] In April 2002, the Lufts were experiencing financial difficulties, especially in relation to their mortgage and all their matters were transferred first to one lawyer and eventually to Mr. Halyn, their counsel from that time, who represented them in the case at bar. [ 78 ] When Mr.

Halyn took over this file in 2002, and after the immediate matter of the mortgage and foreclosure was addressed, he attempted to get the Woods litigation to trial. He was met by an argument from Mr. Briggs, the lawyer for the Woods, in a letter dated June 19, 2003, that Mr. Briggs and Mr. Zinkhofer had entered into a counsel agreement that committed the Lufts to a binding JDR rather than a trial; prevented the Lufts from examining Mrs. Wood or others; and prevented the Lufts from amending their pleadings to include defamation. [ 79 ] This alleged counsel agreement arose over the course of dealings between Mr.

Zinkhofer and Mr. Briggs. Mr. Briggs sent Mr. Halyn his notes and correspondence with Mr. Zinkhofer in relation to the alleged counsel agreement. Mr. Briggs also claimed that by this point of time any claim for defamation was barred by virtue of the Limitation Act . [ 80 ] The Lufts say they did not know of or authorize Mr. Zinkhofer to enter into this counsel agreement on their behalf. At this trial, Mr. Zinkhofer testified that the Lufts agreed to attend a binding JDR but subsequently changed their minds. He also denied any other part of the counsel agreement. [ 81 ] Mr.

Halyn took a motion, returnable February 13, 2004, to test whether such a counsel agreement existed and whether it bound the Lufts. Mr. Luft provided an affidavit in support of that motion stating they had “no knowledge of any such counsel agreement for this action to proceed by way of binding mediation without further discoveries or other steps.” Mr. Luft said that while Mr. Zinkhofer broached the subject of possibly proceeding with judicial dispute resolution rather than trial, they explicitly instructed him they were not amenable to that approach because they wanted to discover Mrs.

Wood, preferred a public hearing and a process with a right of appeal. Exhibits to Mr. Luft’s affidavit included correspondence between Mr. Briggs and Mr. Zinkhofer, some notes taken by Mr. Briggs contemporaneously with conversations he had with Mr. Zinkhofer, and communications between Mr. Briggs and Mr. Halyn. D. Master Waller’s Order [ 82 ] Master Waller heard the motion on February 13, 2004 and his decision gave rise to the following order: The counsel agreement made between Frederick Zinkhofer as previous counsel for Donald Luft and Susan Luft and Michael D.

Briggs as counsel for Leonard Wood and Judy Wood to proceed in this action by way of binding judicial mediation without further discoveries or other steps with Frederick Zinkhofer waiving or abandoning any claims by Donald Luft relating to defamation in this action against Leonard Wood and Judy Wood is hereby confirmed and the plaintiffs are bound by that counsel agreement. [ 83 ] Master Waller found that there were three separate parts of this counsel agreement. First, the parties commit to attend a binding JDR and have given up the ability to go to trial. Second, there was to be no questioning of Mrs.

Wood or further steps before the binding JDR. Third, the pleadings would not be amended to expressly include a claim for defamation, and as such was waived or abandoned. [ 84 ] It is common ground that every aspect of Master Waller’s order binds the Lufts to a course of action agreed to by Mr. Zinkhofer. Thus, the only course open to the Lufts on the Woods litigation is to proceed to a binding JDR without further steps, without questioning Mrs. Wood, and without claims based in defamation. [ 85 ] There is, however, a dispute about the use that can be made of those findings in this proceeding.

The Plaintiffs state this order should be taken as a found fact that there was such a counsel agreement and that its terms are as stated by Master Waller. The Lufts argue that there can be no collateral attack on Master Waller’s order, and that issue estoppel and res judicata apply such that this court should accept all three parts of Master Waller’s findings. [ 86 ] Mr. Zinkhofer takes a different view of the law and the facts. In his evidence at this trial Mr. Zinkhofer stated that Master Waller’s order can be treated as “a found fact in those particular proceedings between those particular parties.

It has nothing to do with me.” [ 87 ] Mr. Zinkhofer claims he was not a party to that application and his evidence and arguments were not before Master Waller. He argues that res judicata and issue estoppel do not apply. The Defendants cite Toronto (City) v C.U.P.E., Local 79 , 2003 SCC 63 , [2003] SCR 77, to urge this court to go behind Master Waller’s order and make findings about the currently disputed underlying facts now that the court has heard Mr. Zinkhofer’s testimony. [ 88 ] In my view, Mr. Zinkhofer is engaged in a collateral attack on Master Waller’s order.

According to the principles stated in Grenon v Canada (Attorney General), 2007 ABQB 403 , at paragraph 28 : [...] A collateral attack occurs when a litigant commences a proceeding (including a constitutional challenge), other than one expressly provided for the purpose of attacking a judicial order, that would have the result of varying, nullifying or rendering nonsensical an order or decision made in a prior proceeding involving the litigant.

The case law indicates that when determining if a proceeding is a collateral attack, the court is not limited to the stated purpose of the second proceeding; it can examine the result of that proceeding.

[ 89 ] The result of Mr. Zinkhofer’s testimony is to suggest that two parts of Master Waller’s order are not valid, even though they operate to bind the Lufts. This is a variance, a nullification and leads to a nonsensical result that prejudices the Lufts and offends the rule against collateral attack. [ 90 ] I also accept that issue estoppel and res judicata apply in the circumstances, such that Master Waller’s order confirming the counsel agreement in the Wood’s litigation bars Mr. Zinkhofer from claiming he never agreed to two of its three parts.

Where a final judicial decision has been pronounced by a court of competent jurisdiction over the parties, a party is estopped from subsequent litigation. In 420093 BC Ltd v Bank of Montreal, 1995 ABCA 328 at paragraph 17 the Court of Appeal cited Sopinka, Bryant, and Lederman, The Law of Evidence in Canada , at p 997 in defining issue estoppel: ... any action or issue which has been litigated and upon which a decision has been rendered cannot be refuted in a subsequent suit between the same parties or their privies.

This principle prevents the contradiction of that which was determined in the previous litigation, by prohibiting the relitigation of issues already actually addressed. [Emphasis in original] [Footnote omitted.] [ 91 ] There are essentially three elements for issue estoppel. These include: (

i) there must be a final decision of the court (ii) the parties privy to the action and the current action must be the same parties or their privies and (iii) generally speaking, the issues must be the same: Bank of Montreal v Cochrane , 2011 ABQB 259 at para 18 . All three are met in the case at bar. Mr. Zinkhofer acted as an agent or privy as he was the lawyer in the Woods litigation, indeed he was the cause of the agreement. [ 92 ] In addition, while Mr. Zinkhofer was not formally a party to the application before Master Waller, there is no unfairness to Mr.

Zinkhofer in the circumstances as I find that he had notice of the controversy and the hearing. [ 93 ] On December 23, 2003, Mr. Halyn wrote to Mr. Zinkhofer about the alleged counsel agreement. Mr. Halyn inquired about Mr. Briggs’ assertions and enclosed copies of the correspondence exchanged between Mr. Halyn and Mr. Briggs on this topic. I find such a letter was sent and received based on the fax confirmation page, which confirms that 17 pages were sent by Mr. Halyn and received by Mr. Zinkhofer. I make this finding, even though Mr.

Zinkhofer could not recall if he received that letter and those documents. [ 94 ] Mr. Halyn never received a reply from Mr. Zinkhofer. Thus, without a response from Mr. Zinkhofer, the Lufts did not know if their former lawyer entered into any part of this alleged agreement on their behalf. [ 95 ] Mr. Halyn then sent Mr. Zinkhofer a copy of the notice of motion before Master Waller and the supporting affidavit of Mr. Luft. Mr. Zinkhofer admitted that he was served with a copy of the application and the supporting materials placed before Master Waller.

Those materials provided a full and clear picture of the three parts of the counsel agreement asserted by Mr. Briggs. [ 96 ] At this trial, Mr. Zinkhofer testified he received the documents but placed them, unread, on his file. Mr. Zinkhofer says that he “read the style of cause and saw that it didn’t involve me and put it in my file.” He also denied reading the notice of motion to see what relief was being sought. It strains credulity that Mr.

Zinkhofer did not read documents which spoke directly about his alleged actions in litigation he not only conducted, but which he has admitted in this proceeding that he mishandled. At a minimum, this evidence shows that he was given the full opportunity to participate, but chose not to respond. [ 97 ] Mr. Zinkhofer also elected not to be present in Masters Chambers at the appointed time, even though Mrs. Luft said she saw him in the courthouse that day. [ 98 ] A copy of Master Waller’s order was sent to Mr.

Zinkhofer shortly after it was filed and he conceded that he did nothing to object to Master Waller’s order. Mr. Zinkhofer claims because he was not a party to the application, there were no steps for him to take. However, Mr. Zinkhofer could certainly have answered Mr.

Halyn’s letter requesting information about what occurred at this later time if he believed Master Waller was in error. [ 99 ] In the alternative, e ven if it the matter has not already been decided, or if I went behind Master Waller’s order as urged by the Defendants, I would make the same findings as Master Waller on the record before me, even taking into account the contrary testimony of Mr. Zinkhofer on these issues. [ 100 ] On the underlying facts, Mr. Zinkhofer admitted he signed a document, dated June 16, 1999, tendered by Mr. Briggs, committing the Lufts to a binding JDR.

This written communication was in evidence and was signed by Mr. Zinkhofer on July 12, 1999. [ 101 ] However, Mr. Zinkhofer vehemently denies that he waived or gave up the ability to plead defamation, examine Mrs. Wood or take further steps in the Woods litigation. Mr. Zinkhofer testified only that he agreed to what is in the agreement letter he signed: namely a binding JDR. He denies these others because, I have yet to see a written counsel agreement that says such a thing. I believe Mr. Briggs is wrong. Mr. Briggs sent me a written agreement would contained the terms that we had discussed, full stop.

I signed it. With respect, it’s nonsense to suggest that Mr. Briggs would make an agreement with me and not put it in writing and have me sign it. [ 102 ] While part of the counsel agreement was in writing and signed by Mr. Zinkhofer, the other parts of the agreement could be binding even though they were not part of a signed written document. It is common practice for lawyers and other professionals to make oral agreements and enter into undertakings on the strength of their word and reputation alone.

It is also common for lawyers to make notes of conversations or actions taken in respect of the matters they are involved with. [ 103 ] Mr. Zinkhofer testified at this trial that it was not his practice to keep any such notes and he produced none, not only on the counsel agreement, but on any contentious issue. Conversely, Mr. Briggs kept records of his conversations and meetings and he provided correspondence and notes between himself and Mr. Zinkhofer on the Luft v Woods litigation to Mr. Halyn. Such documentation was also before Master Waller as it was attached to the affidavit Mr.

Luft swore for the motion before Master Waller.

[ 104 ] In respect of pleading defamation, Mr. Zinkhofer acknowledged that early in the litigation, Mr. Briggs took the position that if Mr. Zinkhofer wanted to allege defamation, the pleadings were deficient and required amendment. At that stage in the proceedings, any such amendment would require the consent of Mr. Briggs or a court order. [ 105 ] Mr. Briggs’ handwritten notes on firm stationery indicate that as of February 24, 1998 Mr. Luft’s main concern was that the Woods had ruined his career and Mr. Zinkhofer was intending to amend the statement of claim to plead defamation. Mr.

Briggs’ memo to file dated July 13, 1998, indicates that Mr. Zinkhofer repeated his intention to amend the pleadings on that date and include allegations that the Woods had caused Mr. Luft to lose his job. At this point Mr. Zinkhofer was also proposing to interview the neighbours using Rule 266. Mr. Briggs said that all this was fine but if discoveries were to commence in October 1998, all necessary pre-discovery steps were required to be completed before that time. [ 106 ] On October 7, 1998 Mr. Briggs wrote Mr. Zinkhofer indicating that none of the pre-discovery steps discussed by Mr.

Zinkhofer on July 13, 1998, had been taken, and as such he was of the view discoveries would not proceed. Mr. Zinkhofer telephoned Mr. Briggs that same day and expressly confirmed that a claim in defamation was not being made. A record of conversation on Mr. Briggs’ firm stationery, dated October 7, 1998, notes that Mr. Zinkhofer wanted the examinations for discovery to proceed. Mr. Briggs indicated that he asked for and received a confirmation that there would be no amendment to plead defamation and that “FZ says not pursuing any defamation claim.” This is obviously a reference to Mr. Fred Zinkhofer. Mr.

Briggs also received Mr. Zinkhofer’s verbal confirmation that no Rule 266 examinations would be held before the discovery. [ 107 ] Mr. Briggs also supplied documentary support for the part of the counsel agreement that no further steps would be taken after the discovery of Mr. Wood and before the binding JDR. Mr. Zinkhofer wrote Mr. Briggs on February 26, 2001, saying that his clients are insisting that this matter proceed to conclusion and that he was instructed to conclude examinations for discovery. In that letter, Mr. Zinkhofer was asking Mr. Briggs for available dates to continue discoveries. Mr.

Briggs replied on February 27, 2001, reminding Mr. Zinkhofer that on May 18, 2000, he sent another letter in which he confirmed with Mr. Zinkhofer that they agreed to attend a binding dispute judicial mediation, “without further discovery or trial.” [ 108 ] In

summary, on February 13, 2004, Master Waller found there was an enforceable counsel agreement between Mr. Zinkhofer and Mr. Briggs and that it had three parts: the Lufts could only attend a binding JDR and could not proceed to trial; the Lufts could not question Mrs. Wood or others before that binding JDR; and the Lufts could not amend their statement of claim to plead defamation because they had waived or abandoned this claim. This order limited any future steps that could be taken by the Lufts in their litigation with the Woods. Master Waller’s order binds Mr. Zinkhofer and even if it did not, I also find that Mr. Zinkhofer entered into this three

part counsel agreement. I accept the documentary evidence of Mr. Briggs over the recollection of Mr. Zinkhofer. Whether Mr. Zinkhofer breached his professional responsibilities by entering into this counsel agreement will be canvassed in a subsequent section. E. Breaches of the Duty of Candour [ 109 ] The cornerstone of the lawyer-client relationship is trust. Candour is essential. As stated in

section 2.02 (2) of the Alberta Code of Conduct: When advising a client, a lawyer must be honest and candid and must inform the client of all information known to the lawyer that may affect the interests of the client in the matter. [ 110 ] The Defendants accepted that candour was an essential element in the lawyer-client contract. Mr. Zinkhofer admitted that he lied to the Lufts. [ 111 ] The Lufts claim that not only did Mr. Zinkhofer breach his duty of candour, his conduct also amounts to civil fraud, deceit and a breach of his fiduciary duties. [ 112 ] In this section, I first outline Mr.

Zinkhofer’s admissions. I then turn to further findings in respect of candour and conclude that Mr. Zinkhofer engaged in an elaborate series of fraudulent and deceptive acts that gave priority to his interests over his clients. i. Breaches of Candour Admitted by Mr. Zinkhofer [ 113 ] At the outset of the examination in chief, Mr. Zinkhofer admitted in very general terms that he failed to give candid advice to the Lufts. According to his version of events, the Lufts agreed to attend a binding JDR, but then changed their minds.

His failure to be candid arose, he said, when the Lufts subsequently instructed him to go to trial against the Woods, around October 1999. In essence, he admits he did not tell the Lufts they could not resile from their agreement to go to a binding JDR and by leading the Lufts to believe he was going to trial when he was not. Mr. Zinkhofer further admitted that he prepared an affidavit to resile from a binding JDR, but never took any steps to get the matter to trial. Throughout, Mr.

Zinkhofer pretended he was doing many things, while not informing the Lufts of his multiple failures to act. [ 114 ] There is a dispute in the evidence as the Lufts said they never consented to a binding JDR, either at all or on the terms in the counsel agreement. I address their knowledge and instructions later in this judgment. [ 115 ] In this section, I review the breaches of the duty of candour admitted by Mr. Zinkhofer.

At the time these admitted falsehoods took place it matters little whether the Lufts agreed to a binding JDR and then wanted a trial, or never agreed to a binding JDR and always wanted a trial. In October 1999, Mr.

Zinkhofer admitted he had instructions to go to trial, and instead of taking any necessary steps to try to do so, he engaged in an elaborate set of actions to convince the Lufts he was preparing for a trial that would never take place. [ 116 ] In a thorough cross-examination, Mr, Zinkhofer made admissions that particularize and demonstrate how, and how often, he failed in his obligation to be candid with the Lufts.

[ 117 ] Indeed, Mr. Zinkhofer admitted that after Exhibit 74, being a letter he wrote to the Lufts dated November 17, 1999, everything he did was a lie until he was fired in April, 2002. [ 118 ] Specifically, Mr. Zinkhofer arranged a fake examination of Mrs. Wood; lied to his clients about being in case management; pretended to file amended statements of claim and examine a long list of people; and repeatedly asked the Lufts to prepare and review multiple documents that were futile and were never used in any filed court proceeding. a. Orchestrating a fake examination of Mrs.

Wood [ 119 ] The Lufts were continually pressing Mr. Zinkhofer to examine or question Mrs. Wood, the author of the alleged defamation, at what was then called an examination for discovery. [ 120 ] Mrs. Luft testified that Mr. Zinkhofer told her that he had scheduled a date for discovery of Mrs. Wood and sent the requisite appointment mandating her attendance: being January 27, 2002. Before that date, Mr. Zinkhofer compiled a set of questions to ask Mrs. Wood that was sent to Mrs. Luft. She provided the requested comments and suggestions and faxed them back to Mr. Zinkhofer. [ 121 ] Mrs.

Luft testified she attended the questioning at the appointed time and place and there was a court reporter in the room. Mr. Zinkhofer testified that on that day he “grabbed the file and headed over to the court reporter’s.” [ 122 ] When Mrs. Luft and Mr. Zinkhofer were in the examination room, they waited for Mrs. Wood to appear. Mrs. Wood did not attend. After some time, Mr. Zinkhofer purported to make or receive a phone call informing him that Mrs. Wood would be unable to attend the questioning as she was ill. [ 123 ] In cross-examination, Mr. Zinkhofer admitted that he had not served an appointment on Mrs.

Wood, and Mrs. Wood confirmed in her testimony she was never so served. [ 124 ] Notwithstanding that Mr. Zinkhofer knew full well that Mrs. Wood would not be in attendance, he invited Mrs. Luft to come to what he represented was a formal questioning of Mrs. Wood. In a piece of pure theater, Mr. Zinkhofer had also booked a court reporter, as a prop, for a questioning he knew would never occur. This charade conveys the lengths to which Mr.

Zinkhofer was prepared to go to try to convince the Lufts he was doing something on their case and moving their matter to trial. [ 125 ] The fabrications about the questioning of Mrs. Wood did not end there. When Mr. Zinkhofer drafted a letter on January 28, 2002, to all witnesses advising them of the cancellation of their supposedly scheduled interviews, he wrote: “we require to examine Judy Wood before we examine you. The examinations we scheduled were canceled as a result of her refusal to attend.” b. Lying about being in Case Management [ 126 ] Mr.

Zinkhofer told the Lufts that they were part of a court based case management program and that their litigation was being managed by Justice Cairns. That was not true. [ 127 ] Later, around February 7, 2002, Mr. Zinkhofer sent the Lufts a list of the judges on the Queen’s Bench, seeking their views concerning which other judge they should ask to replace Justice Cairns, who for some unstated reason was no longer available. Mr.

Zinkhofer provided them with his suggestions about preferable candidates for this non-existent role. [ 128 ] Whether this second charade was to buy time or placate their request for action is not clear, but it is obvious none of it was ever true. c. Lying about the steps taken on the file [ 129 ] In cross-examination, Mr. Zinkhofer admitted that he lied to his clients over a very long period of time.

When asked about pretending to file a particular affidavit in November 1999, he admitted that he “didn’t file the affidavit and most of the correspondence after this date is not honest, it’s a lie.” [ 130 ] The extent of his deceit, delay, misconduct and failure to act became apparent during cross-examination when Mr. Halyn took Mr. Zinkhofer through the court record: a document generated from the Court of Queen’s Bench that outlines what steps were actually taken on the record during the course of the Woods litigation. It became clear that Mr. Zinkhofer was telling the Lufts he was doing things he was not doing.

He was directed to get things to trial but the court record indicates a startling dearth of activity. [ 131 ] There were so many different lies, and different type of lies, between November 1999 and April 2002 that I have chosen to provide a sampling only and to group them into general categories. I refer to admissions by Mr. Zinkhofer that he: pretended to the Lufts that he had filed amended statements of claim, misrepresented who, other than Mrs. Wood, he was examining and when; and had the Lufts prepare numerous documents in the form of affidavits for court proceedings that never took place. d.

Lying about filing amended statements of claim [ 132 ] From early on and for many years, Mr. Zinkhofer told the Lufts he was amending the original statement of claim. That statement of claim did not plead defamation or claim damages for reputational interests, even though Mr. Zinkhofer understood how the gravamen of the complaint was the injury to Mr. Luft’s reputation. For example, on February 24, 1998, Mr. Zinkhofer wrote to Mr.

Briggs that the Woods defamed his client and that the allegations of stalking were “utterly horrendous and caused permanent lost opportunities at work and substantial personal stress.” [ 133 ] Mr. Zinkhofer admitted that Mr. Briggs was of the view that the original statement of claim was deficient to advance such defamation based claims. Pursuant to the counsel agreement, Mr. Zinkhofer agreed to amend the statement of claim before the scheduled

discovery of Mr. and Mrs. Wood, but did not. [ 134 ] On May 3, 1998, Mr. Zinkhofer had drafted and sent a draft amended statement of claim to the Lufts that added Susan Luft as a Plaintiff, (for the second letter Mrs. Wood sent to the Principal), the child Alex Wood as Defendant and made express and specific allegations of defamation. Paragraph 9 of that amended statement of claim read; 9.

The defamatory statements made by the Defendants were: that Donald Luft was stalking the Defendants, in particular the Son. that the Plaintiffs were abusive, hostile and mentally unstable. that Donald Luft is a poor employee and ought not to be employed by his employer; that Donald Luft makes rude and obscene gestures to the Woods; that Donald Luft trespasses on the Woods’ property; the Plaintiff is unstable emotionally and may harm the Woods of their family (sic) [ 135 ] Paragraph 10 of the draft amended statement of claim alleged personal malice against the Woods. In addition, Mr.

Luft pled that he suffered actual damages in his career and employment. The claim sought, among other remedies, general damages of $50,000, punitive damages of $100,000, special damages and various orders in respect of the property. [ 136 ] Mr. Zinkhofer never filed this amended statement of claim. [ 137 ] On January 31, 2000 Mr. Zinkhofer sent the Lufts a second draft version of the claim. This second draft version did many things. It: -added Mrs.

Luft as a Plaintiff; -added Alex Wood, the child, as a Defendant; -added CWNG as a Defendant; -made allegations against CWNG in three new paragraphs, alleging, among other claims, that they had constructively dismissed Mr. Luft; and -increased the general damages claim to $250,000 and the punitive and exemplary damages to $1 million. [ 138 ] Such changes would indicate to the Lufts that their claim was a serious one, was becoming more financially viable, and that it was being pursued on their behalf. [ 139 ] In respect of the January 2000 amendments, the read-ins from the questioning of Mr.

Zinkhofer reflect the following exchange: Q Were you telling the Lufts that you in fact were taking steps to implement those amendments? A Yes. Q Did you do so? A I don’t believe I did. Let’s put it this way, I took steps, I didn’t complete them. Q Did you ever inform the Lufts that you had taken steps, but had not completed them? A Not specifically, no. [ 140 ] Further, at this time Mr. Zinkhofer solicited comments from the Lufts on this second version and sent them a fax that stated: “please call tomorrow a . m. with any changes. I leave for court at 9:30.” There is no indication Mr.

Zinkhofer was in court on this matter on that date. This second draft claim was also never filed. Mr. Zinkhofer admitted this document was produced and presented to the Lufts as he was “placating the clients.” [ 141 ] About eighteen months later, on June 22, 2001, Mr. Zinkhofer again sent the Lufts a third version of a draft amended statement of claim, complete with a Notice of Motion. Mr. Zinkhofer told the Lufts he was going to court to ask that the document be filed, as well as asking for an order to enter on the Defendants’ lands, and costs.

Such motion was never filed and no such application was made. [ 142 ] On December 11, 2001, Mr. Zinkhofer also told the Lufts he was advancing a separate claim against CWNG for wrongful dismissal. Mr. Zinkhofer never told the Lufts that such claim has not been filed. [ 143 ] On February 4, 2002, Mr. Zinkhofer prepared a statement of claim against the Bank of Montreal in relation to financial matters that was never filed. [ 144 ] In conclusion, there was never any amendment to the original statement of claim despite many drafts sent to the Lufts and many representations that such would be filed.

Indeed, under the counsel agreement, the time for any such amendments had passed and no steps were taken to get the court’s permission to proceed. Each subsequent version of the claim created by Mr. Zinkhofer expanded the

claim and increased the damages sought, suggesting a strong and serious claim. e. Lying about examining people other than Mrs. Wood [ 145 ] In addition to staging a fake discovery with Mrs. Wood, Mr. Zinkhofer also told the Lufts he was questioning other people. He did in fact speak to several neighbours but overstated what he was doing. [ 146 ] Around May 18, 2000, Mr. Zinkhofer sent the Lufts a letter concerning Rule 266 appointments he prepared. Mr.

Zinkhofer filed Rule 266 appointments at the court but never served anyone with them, testifying that he chose instead to “interview” certain neighbours in 2000 and 2001. He stated he wanted them to co-operate rather than be subject to an appointment. However, such steps were likely not permitted under the counsel agreement, and serving Rule 266 appointments would have brought them to the attention of Mr. Briggs. Mr. Zinkhofer also provided the Lufts with a list of questions he proposed asking and sought their comments on his approach. [ 147 ] Mr. Zinkhofer wrote Mr. Briggs on February 16, 2001.

On February 27, 2001, Mr. Zinkhofer received a letter from Mr. Briggs stating: I note that you are requesting that we do something immediately when you have done nothing since May 18, 2000. Further, on that date you contacted me and indicated that you wish to proceed immediately despite not having contacted me since August 13, 1999. On May 18, 2000 I reminded you that we had (and still have) an agreement that this matter would proceed by way of binding judicial mediation through the dispute resolution process available at the Court of Queen’s Bench, and not to further discovery or trial.

I refer you to my letter of June 16, 1999. [ 148 ] After receiving this communication from Mr. Briggs that he had agreed to a binding judicial mediation without further discovery or trial, Mr. Zinkhofer nevertheless sent a letter to Mrs. Luft on March 20, 2001, outlining his extensive plans to gather information of their behalf. Mr.

Zinkhofer wrote: My examination plans are: -Examine and re-examine both Woods on one day; -on another day, examine neighbors (and he gives three names); -on another day examine outside witnesses such as Dave Semple, and Constable Crawford, City of Calgary Police Service, any officer or employee of Enmax and Mr. Zimmerman. [ 149 ] Mr. Zinkhofer further stated that he planned to examine Mrs. Wood, Mr. Wood, and other neighbors. He stated that “and at one point I told you I was unwilling to break up the examinations and wish to book a solid week to get this done. I was wrong.

It was part of my ongoing reluctance to proceed. It simply is more manageable if I can spend the day at a time for some weeks doing this.” [ 150 ] In addition, under separate cover, Mr.

Zinkhofer sent the Lufts a detailed list of questions he proposed asking these people, with a request for comments and suggestions on the following dates: -for three neighbours on June 4, 2000; and again on May 3, 2001; -for Third Parties, being the City, CBOE and the Police on May 6, 2001; -for CWNG on May 13, 2001 and again on November 14, 2001; and -for Judy Wood on January 27, 2002. [ 151 ] While some interviews of neighbours took place, there were never any examinations filed, scheduled or conducted in relation to the City, Calgary Board of Education, the City of Calgary Police or Mr.

Luft’s employer CWNG. [ 152 ] Mr. Zinkhofer also admitted that he told the Lufts he scheduled examinations and that they were canceled, but that was not true. [ 153 ] This appears to be another type of charade: questions produced and reviewed for unscheduled and non-existent questioning. f. Futile activities [ 154 ] In some respects this larger category can also be used to describe some of the above conduct. However, there were many other things Mr.

Zinkhofer asked of the Lufts that did not seem to support any particular step in the litigation and can be treated under this heading. [ 155 ] The Lufts had complained repeatedly, and over an extended period of time to Mr. Zinkhofer about the lack of real progress on their file. The evidence contains many letters in which Mrs. Luft lamented the pace of their litigation, how Mr. Zinkhofer canceled meetings with them on short notice, and provided one excuse after another. [ 156 ] Many pieces of correspondence from Mr. Zinkhofer to the Lufts suggested that the delay was the result of the other parties.

He also provided a variety of explanations and excuses, even lies. For example, Mr. Zinkhofer advised the Lufts that he had a court appearance on the matter on January 17, 2001. He sent them a letter stating:

I have nothing for you. I have no secretary until Monday and am only able to accomplish minimal work. You do not need more talk; you need paper and I have not got it. I am mad with frustration too. I adjourned court today as I had nothing to tell the judge except I have no secretary. [ 157 ] Mr. Zinkhofer admitted in this trial that he had not gone to court that day and that he lied to the Lufts in this letter. [ 158 ] Mr. Zinkhofer was trying to create the appearance of movement on the file but no real steps were taken. There were many documents, in various forms that had no real litigation purpose.

For example, Mr. Zinkhofer prepared and sent the Lufts a lengthy document called an affidavit outlining their various concerns and arguments. It is not clear what the intended purpose of this document was, as it was not used. [ 159 ] Between November 1999, when Mr. Zinkhofer said everything was a lie, and April 2002, Mr. Zinkhofer also had the Lufts review and sign affidavits he had drafted, telling them that such affidavits were necessary for steps he was taking in the Woods’ litigation.

Cross-examination disclosed that such affidavits were not truly in contemplation of any step taken, and these documents were never used, filed and/or served. My review of all the exhibits indicates that during this particular time frame there were at least 8 instances of this behavior: including: 1. April 2000, an unfiled affidavit signed by Mrs. Luft; 2. May 9, 2000, an unfiled affidavit sworn by Mr. Luft; 3. October 2, 2000, an unfiled signed affidavit by Mr. Luft; 4. March 2001, an unfiled unsigned affidavit of Mr. Luft; 5. May 9, 2001, an unfiled sworn affidavit of Mr. and Mrs. Luft; 6.

July 6, 2001, an unfiled sworn affidavit of Mr. Luft; 7. February 11, 2002, an unfiled sworn affidavit of Mr. Luft; and 8. March, 2002 an unsigned affidavit of Mrs. Luft. [ 160 ] The content of some of these affidavits will be mentioned later but what is startling is the number of times the Lufts were asked to participate in activities that served no legitimate litigation end. [ 161 ] Mr. Zinkhofer explained his process by saying he would draft affidavits or statements of claim and then decide what to do, or not do with them. Mr.

Zinkhofer admitted that it was common for him to prepare affidavits for the Lufts to sign that would not then be sworn and endorsed by him. He claimed to prepare affidavits before determining whether he would take an application and that quite often, or from time to time “they simply weren’t used.” He admitted “there’s no question there’s delay inherent in what I was doing.” [ 162 ] I find that these documents are more than time wasting futilities. Mr. Zinkhofer did not inform the Lufts that these were examples of what might happen: he led them to believe that such documents were necessary to pursue their claim.

These documents seem to have been acts of communication with the Lufts themselves, trying to show them that steps were being taken, while reinforcing their view that their case was a serious one that merited substantial damages. Such communications served a strategic purpose for Mr. Zinkhofer, whether to placate the clients; hide the counsel agreement; or pretend he was advancing their claim and doing his job. [ 163 ] On February 16, 2001, Mrs. Luft had become so concerned about Mr.

Zinkhofer that she conducted her own search of the courthouse record to ascertain what had actually been done in the Luft v Woods litigation. To her horror she discovered that the court record indicated that no steps had been taken since June 1999. Indeed, in 1999 there was only one motion filed for a pretrial conference. It was supported by another affidavit from Mr. Luft. There is no indication that it was served on Mr. Briggs. Such application was adjourned to May 4, then to May 17, then to May 25 to June 3. It was continually adjourned and ultimately never held. [ 164 ] Mrs. Luft confronted Mr.

Zinkhofer about his failings and she made inquiries about transferring the file to another lawyer. However, Mr. Zinkhofer promised to do better and they could not afford another lawyer’s retainer. They therefore continued on with Mr. Zinkhofer. [ 165 ] Despite an initial flurry of activity after this confrontation, Mr. Zinkhofer subsequently fell back into his pattern of behavior on this file and nothing of substance was subsequently accomplished. His second bout of inactivity was confirmed when Mrs.

Luft, again became both frustrated and suspicious and conducted a second search of the court house record on April 5, 2002. [ 166 ] On March 21, 2001, Mr. Zinkhofer filed a further application for a pretrial conference. The notice of motion also asked for directions concerning the trial and an order striking the counterclaim in this action for want of prosecution [ 167 ] Mr. Zinkhofer had Mr. Luft sign an affidavit on March 20, 2001, in support of this application that makes for interesting reading. Mr.

Luft avers, inter alia : -we wish to examine Judy Wood, -the Plaintiffs have been attempting to arrange and hold continued examinations for discovery and the solicitors for the Defendants refused to commit to a date, -no one has examined the Lufts, and -“counsel for the Defendants have advised by telephone that he is instructed to refuse even to book a date for examinations until all of

our examinations of his clients are complete.” [ 168 ] This affidavit said it was “in support of the direction that Judy Wood attend for examinations, the documents be formally demanded and produced and that the issues between the Plaintiffs and the Defendants be sent to trial as soon as reasonably possible with directions accordingly.” [ 169 ] The counsel agreement prevented these steps from being taken and yet Mr. Zinkhofer is, through the vehicle of this affidavit, suggesting that setting a trial date and examining Mrs. Wood are options open to the Lufts. [ 170 ] Mr.

Zinkhofer must also have told the Lufts that the Defendants “refused to commit to a date” and that opposing counsel “refuses to book a date for examinations until all our examinations are complete.” None of this is true. The only evidence on such matters is that Mr. Briggs was reminding Mr. Zinkhofer of the terms of the counsel agreement. There is no evidence that such statements were made and it is more likely they were Mr. Zinkhofer’s creation to evade blame for his inactivity and delay. [ 171 ] By giving the Lufts this document Mr. Zinkhofer is creating a false impression in their minds. As Mr.

Luft is signing a document based on the information and belief he received from Mr. Zinkhofer, Mr. Zinkhofer is also asking Mr. Luft to sign a document only he knows is inaccurate. [ 172 ] On April 3, 2001, Mr. Zinkhofer wrote the Lufts to say: this is just to remind you that I first set the matter of an order for final exams and scheduling for March 29, 2001. That was in open court on a fully filed motion and was adjourned to permit all parties to consider a realistic timeframe.

I attach the order I am presenting tomorrow if you have any comments please advise. [ 173 ] The attached order purports to have all parties file updated affidavit of records, schedules examinations for: Leonard Wood and Judy Wood, a representative from CWNG, all other persons required to attend, requesting the Police and City of Calgary to produce documents in respect of the both the Lufts and Woods property, and setting examinations for the Lufts for May 15, 2001. [ 174 ] Again, there was never any court appearance on that day and none of the above-mentioned steps were ever taken, or could be taken as long as the counsel agreement was in place.

The court record indicates that this application was adjourned sine die, brought back, then adjourned, adjourned again, and then eventually was taken off the list on April 5, 2001, when no one attended. This suggests the parties opposite were never served with this application. Again, such documents and statements may reasonably lead the client to believe that steps are being taken towards a trial. [ 175 ] Mr. Zinkhofer prepared another affidavit on May 9, 2001, that was signed by both Mr. and Mrs. Luft. The affidavit was never used and does not sa

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