Heydary Hamilton Professional Corporation v. Hanuka, 2010 ONCA 881
CITATION: Heydary Hamilton Professional Corporation v. Hanuka, 2010 ONCA 881
DATE: 20101221
DOCKET: C52130
COURT OF APPEAL FOR ONTARIO
Simmons, Cronk and MacFarland JJ.A.
BETWEEN
Heydary Hamilton Professional Corporation
Plaintiff (Appellant)
And
Thakar Baweja, Rajiv Baweja, also known as Roger Baweja, 6369162 Canada Inc., Ben Vladlen Hanuka and Davis Moldaver LLP
Defendants (Respondents)
Douglas Elliott and Ruzbeh Hosseini, for the appellant
David Silver, for the respondents Ben Vladlen Hanuka and Davis Moldaver LLP
Heard: November 24, 2010
On appeal from the judgment of Justice James Spence of the Superior Court of Justice, dated April 23, 2010.
By the Court:
[1] The appellant is a law firm that was retained on a contingency fee basis to act for clients in relation to a dispute between the clients and their franchisor. While litigation was ongoing between the clients and their franchisor, the clients retained the respondents, Ben Vladlen Hanuka and Davis Moldaver LLP (the “successor lawyers”), to act for them in place of the appellant.
[2] The main issue on appeal is whether the motion judge erred in striking out the appellant’s claim against the successor lawyers for inducing breach of contract and intentional interference with economic interests for failing to disclose a reasonable cause of action.
[3] For the reasons that follow, we would dismiss the appeal.
Background
[4] The appellant’s statement of claim sets out the following basic chronology:
On October 19, 2007, the appellant was retained on a contingency fee basis to act for Thakar Baweja, Rajiv Baweja and 6369162 Canada Inc. (the “former clients”) in relation to a dispute between the former clients and their franchisor.
Among other things, the October 19, 2007 retainer agreement between the appellant and the former clients required that the former clients pay the appellant $50,000 up front plus 27% of any future judgment or settlement proceeds. The retainer agreement also provided that it could be terminated within 15 days of the date of the agreement, and “[t]hereafter ... only by agreement between the parties or, if required, in accordance with the Law Society of Upper Canada Rules of Professional Conduct.”
On October 27, 2007, the appellant issued a statement of claim on behalf of the former clients against the former clients’ franchisor.
The appellant carried out the former clients’ instructions without complaint for approximately two years.
On September 25, 2009, the former clients instructed the appellant to renegotiate their sublease. On September 29, 2009, the appellant notified the former clients that advising them on matters pertaining to their sublease was outside the scope of the original retainer agreement but offered to enter into a further retainer agreement for that purpose.
On October 29, 2009, the appellant entered into settlement negotiations with the solicitors for the former clients’ franchisor.
On November 6, 2009, the appellant received a copy of a letter written by the successor lawyers to the franchisor’s solicitors concerning the sublease. The appellant wrote to the successor lawyers and expressed concerns that the letter also dealt with matters pertaining to the ongoing litigation between the former clients and their franchisor. The appellant demanded that the successor lawyers retract and clarify their statements to the franchisor’s solicitors or serve a notice of change of solicitors.
On November 8, 2009, the former clients sent the appellant an e-mail inquiring as to the fees and disbursements incurred to date and demanded a copy of the appellant’s dockets. Thereafter, the former clients failed to respond to the appellant’s numerous inquiries concerning the former clients’ intentions.
On November 16, 2009, the successor lawyers served a notice of change of solicitors on the appellant with respect to the subject matter of the retainer agreement.
During the period between October 2007 and November 2009, the appellant accrued approximately $63,998.70 in recorded legal fees and actual disbursements including GST in relation to the retainer agreement. The appellant delivered an invoice in that amount to the former clients on December 7, 2009. As of December 9, 2009, the invoice remained unpaid.
[5] On December 9, 2009, the appellant issued a statement of claim against the successor lawyers and the former clients. As against the successor lawyers, the appellant claimed damages for conspiracy, inducing breach of contract and unlawful interference with economic interests, and unjust enrichment. In particular, the appellant asserted that the successor lawyers’ November 6, 2009 correspondence to counsel for the former clients’ franchisor “improperly engages in correspondence in connection with the litigation proceedings which were the subject of [the appellant’s] retainer.”
[6] Further, the appellant asserted that the former clients retained the successor lawyers “to escape any liability to [the appellant] as a result of the termination of the [October 19, 2007 retainer agreement]” and that the successor lawyers “clandestinely enticed and assisted the [former clients] to terminate the [October 19, 2007 retainer agreement] without paying the amounts due and payable to [the appellant].”
[7] In response to the appellant’s statement of claim, the successor lawyers moved to strike the appellant’s statement of claim under Rules 21.01(1)(b) and 25.11 of the Rules of Civil Procedure as failing to disclose a reasonable cause of action.
The Motion Judge’s Decision
[8] In a brief endorsement, the motion judge concluded that this case is controlled by the decision in Manning v. Epp, 2006 CanLII 24126 (ON S.C.), affirmed by the Court of Appeal at 2007 ONCA 390. He therefore dismissed the appellant's claim against the successor lawyers on the basis that it could not possibly succeed.[^1]
[9] In Manning, the plaintiff lawyer sued, among others, a mayor and a municipal councillor for inducing breach of contract and intentional interference with economic relations. The solicitor alleged that the mayor and the municipal councillor wrongfully persuaded the municipality to terminate the lawyer’s retainer because the lawyer refused to change an opinion he had given to the municipality about a particular issue.
[10] Lax J. struck the lawyer’s claim. At para. 20 of her reasons, she held that a client has “an absolute and unfettered right to discharge a lawyer” and that a “solicitor’s sole economic interest in a retainer is having his fees paid for the work he has performed”. Moreover, at para. 21 of her reasons, she stated that “[a]ny conduct by [the municipality’s representatives] that may have contributed to or influenced the decision cannot give rise to a cause of action for harm to economic interests where no economic loss exists.”
Discussion
[11] On appeal, the appellant indicated its intention to abandon its conspiracy claim and focus on its claim for inducing breach of contract and intentional interference with economic relations.
[12] The appellant argues that, particularly in the context of a contingency fee arrangement, a cause of action exists against the successor lawyers for causing economic loss to the appellant through an unlawful act. As framed in oral argument, the unlawful act alleged is the knowing and deliberate participation by the successor lawyers in a scheme to assist the former clients in avoiding their obligation to properly compensate the appellant for services legitimately rendered under the retainer agreement. The appellant contends that the motion judge erred in holding that its cause of action as pleaded against the successor lawyers could not possibly succeed. In the alternative, the appellant argues that the motion judge erred in failing to grant leave to amend.
[13] We do not accept the appellant's arguments. Even assuming that a cause of action as described by the appellant may exist, the appellant has failed to plead particulars of any conduct on the part of the successor lawyers capable of giving rise to an inference that such a cause of action exists in this case.
[14] An examination of the successor lawyers’ November 6, 2009 letter to counsel for the former clients’ franchisor’s solicitor, reveals that the appellant’s allegation that the successor lawyers “improperly engage[d] in correspondence in connection with the litigation proceedings which were the subject of [the appellant’s] retainer” is without foundation.
[15] Further, there are no facts pleaded in the statement of claim that are reasonably capable of supporting an inference that the successor lawyers “clandestinely enticed and assisted the [former clients] to terminate the [October 19, 2007 retainer agreement] without paying the amounts due and payable to [the appellant].” The fact that the former clients changed counsel without paying or securing outstanding fees is not, in itself, capable of supporting that inference. Although it may be generally desirable that successor law firms co-operate in protecting a predecessor law firm’s account, to hold that a successor law firm’s failure to make arrangements to do so, standing alone, could found a cause of action would trench on a client’s unfettered right to change counsel.
[16] We see no basis for holding that the motion judge erred in failing to grant leave to amend. The allegations made by the appellant are serious allegations of professional misconduct. No facts were pleaded that are capable of supporting those allegations. On the contrary, the statement of claim contained bald, unsupported assertions of professional misconduct. Further, the appellant has not tendered a draft amended pleading capable of supporting its alleged cause of action. The appellant also failed to cite facts in oral argument that would support what has been alleged. Leave to amend is not justified in these circumstances.
[17] Having regard to the former clients’ absolute right to terminate their retainer with the appellant and our conclusions concerning the appellant’s claim for inducing breach of contract and intentional interference with economic relations, we see no merit in the appellant’s claim for unjust enrichment.
[18] The appeal is therefore dismissed with costs to the successor lawyers on a substantial indemnity basis, fixed in the amount of $8,488.25, inclusive of disbursements and applicable taxes.
Signed: “Janet Simmons J.A.”
“E. A. Cronk J.A.”
“J. MacFarland J.A.”
RELEASED: “JS” December 21, 2010
[^1]: The formal order dismisses the action. However, it is undisputed that the successor lawyers were the only moving parties on the motion.