King Line Investments Inc. v. 973976 Ontario Limited, 2010 ONCA 345, just released on-line, stands for the proposition that in certain limited circumstances legal costs are a proper head of damages:
[6] The trial judge’s error was in concluding (at para. 15 of his costs endorsement) that legal costs are not a proper head of damages. The decision of this court in Toronto Industrial Leasehold Ltd. v. Posesorski, [1994] O.J. No. 2691 stands for the principle that when a client must sue a third party because of its lawyer’s negligence, the client’s costs of suing may be claimed as damages against its lawyer.
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