Borden Ladner Gervais LLP v. Cohen, 2005 CanLII 21114 (ON SCDC)

COURT FILE NO.: Divisional Court 426/04 Superior Court File: 03-CV-259125 SR DATE: 2005-06-14

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: Borden Ladner Gervais LLP Plaintiff, Respondent -and- Rodney Cohen Defendant, Appellant

HEARD: May 17, 2005

BEFORE: Cunningham, A.C.J.S.C., Lane and Molloy JJ.

COUNSEL: Yan David Payne, for the Appellant; Elissa Goodman, for the Respondent.

REASONS FOR DECISION

BY THE COURT:

1Rodney Cohen appeals from the judgment of Herman J. dated June 23, 2004, granting summary judgment against him in favour of the plaintiff in the amount of $19,058.15 plus interest and costs and dismissing his counterclaim in which he sought referral of the plaintiffs’ claim for unpaid legal fees to an assessment.

2BLG acted for the appellant in two actions which, like the motion judge, we will call the POI action and the Amati action.

3The POI action was begun in the Superior Court by the appellant’s former employer seeking some $17,000 and BLG was retained in July 2000 to defend it. The sum claimed was the total advances made against commissions by POI and the appellant had claims for commissions to set against it of at least $8,000. In September POI admitted it was not owed more than $9563.10. At the pre-trial in October 2001 the judge suggested transferring the action to the Small Claims Court and this was finally done on February 1, 2002 upon terms that after judgment in the Small Claims Court, either party could apply to the Superior Court to deal with the costs of the action. The Small Claims Court directed an accounting reference and during that proceeding a settlement was reached and Mr. Cohen signed minutes recording that he would pay POI $9,000 “inclusive of all costs.” The articling student who represented the appellant at the settlement expressed concern to his principal that he had not expressly discussed with the appellant the matter of possible recovery of costs in the Superior Court pursuant to the terms of the transfer to the Small Claims Court. The principal felt that he had made the costs situation clear and the appellant could not think that such a recovery would be possible. The motion judge held that it would have been preferable for the student to have specifically discussed the issue with the appellant but the appellant had read and signed the settlement with its reference to costs. Further he had previously been warned of the possibility that he would not recover all of his costs. There was no negligence on BLG’s part.

4Following the settlement, the appellant expressed disappointment at the result and that a student had been sent. At a lunch meeting, BLG offered to write off the student’s time and their evidence was that the appellant accepted the compromise and agreed to pay the bill so reduced. However, a bill sent April 30, 2003 reflecting the compromise was not paid. In an email, dated September 15, 2003, the appellant told BLG that it was irrelevant whether he had agreed or not to accept the reduction as a final settlement as he could change his mind. The motion judge found that after the April 30 bill was sent, the one month limitation period in the Solicitors Act began to run and BLG had no responsibility to advise the appellant of his right to have the bill assessed because they thought it was agreed to. As to the firm’s duty to advise the appellant as to his right to call for an assessment after the firm knew he was dissatisfied, between August 13 2003 (when he copied his complaint to the Law Society to BLG’s accounts payable) and September 15, 2003, (when an exchange of emails made the lack of agreement clear) the motion judge reasoned that the appellant would “have been no further ahead” because the one month period had long since passed.

5The amount outstanding and sued for was $3740.08, but the appellant asserted that he had paid some $15,000 and so was charged approximately $18,000 to defend the claim.

6The Amati application, made pursuant to the Business Corporations Act, was commenced in January 2002 by BLG as solicitors for the appellant against his employer Amati Bambu Ltd. and two of its directors, to recover wages, expenses, vacation pay and severance pay of some $187,500. It appears from the evidence that Amati was in financial difficulty in January 2002, and it only got worse. Because of this problem, BLG advised the appellant on February 5, 2002 that he ran a serious risk that if he were successful there would be no money in the company or in the directors. The firm also warned that there would be significant legal fees, as much as $10,000 just to get to the stage of cross-examining the Amati people. There are numerous other messages of the same general tenor in the exhibits. An offer was received to pay $8,000 which BLG recommended that the appellant accept. He did not and negotiated further on his own behalf, obtaining an offer of $11,000, but he received no money because Amati became bankrupt in April 2002. BLG invoiced the appellant $20,198.03 in fees and disbursements in relation to the Amati application of which only the first invoice, $5451.36, was paid.

7In his counterclaim, the appellant pleaded that the facts of these two litigations and his relationship with BLG constituted ‘special circumstances’ within the Solicitors Act and pleaded that the Court had jurisdiction to order an assessment. Before the motion judge, the major point argued by counsel for the appellant was that the matter should be referred to assessment. The motion judge held that she was not to assess the bills herself as if she was an assessment officer, and that she would not direct a referral to assessment because there was no cross-motion to do so, nor had the appellant asked for BLG’s consent and been refused.

8In our view, the motion judge erred in the position that she took as to these points. As to her inquiry being limited to whether the hourly rate was reasonable and whether the hours docketed were actually spent, she relied on Nemetz v. Kotsalidis [1995] O.J. No. 2386 (Gen. Div.). This was a decision of a Deputy Judge sitting in Small Claims Court and the references relied on to the authority vested in him have simply no application to the authority vested in a Superior Court judge. No doubt as a result of reliance on this case, the motion judge did not consider the matter of “special circumstances” raised by the appellant. On a motion for summary judgment, the pleadings are before the court and they contained a clear request from the appellant to refer the matter for assessment. In our view, no cross-motion was necessary, the court had authority to do so and ought to have considered the issue in the light of the points discussed hereafter.

9The counterclaim should have been regarded as a request to refer which clearly was refused by BLG. Long before this litigation began, the appellant sent a copy of his complaint letter to the Law Society to BLG and later sent a second copy with a note asking if they wished to meet or go to assessment. These were opportunities for BLG to consent to an assessment, albeit the appellant did not ask directly for their consent. Ordinarily, solicitors ought to consent to assessment even if it is asked for tardily.

10Finally, in dealing with the effect of the passage of the one month time limit, the motion judge reasoned, as noted above, that the appellant did not lose through the failure of BLG to advise him of his right to have the bill assessed because the one month period had already passed. But there is another time period of importance: the twelve month limit provided by section 4(1) of the Solicitors Act and the inherent jurisdiction of the court during the eleven months from the end of the first month to the twelfth month. The POI bill was rendered April 30, 2003 and by September the firm knew of the appellant’s dissatisfaction with their accounts. That was well within the eleven month period during which there was no need to show ‘special circumstances’ to obtain a referral to assessment: see Fellowes, McNeil v. Kansa Canadian Management Services Inc. (1997), 34 O.R. (3^rd) 301 (C.A.) at 303, where the court said:

The Solicitors Act also does not provide for the referral to assessment of unpaid accounts rendered between one and twelve months prior to the application. However, here too, the court has an inherent jurisdiction. In the usual circumstances, little is required for that jurisdiction to be exercised. (emphasis added)

11The inherent jurisdiction of the court to refer to assessment unpaid bills rendered in the eleven month period as to which the Solicitors Act is silent was also acknowledged in Enterprise Rent-a-Car Co. v. Shapiro, Cohen, Andrews, Finlayson (1998), 38 O.R. (3^rd) 257 (C.A.) in which the court cited with approval the passage just quoted from Fellowes. See also: Minkarious v. Abraham, Duggan (1995), 27 O.R. (3^rd) 26 (Gen. Div.). In our view, the failure of BLG to advise the appellant of his right to request an assessment played an important role in the development of the controversy over the bills and is sufficient to entitle the appellant to call on the inherent jurisdiction of the court to refer the bills for assessment notwithstanding the passage of time.

12The right of a client to have the solicitor’s account assessed is an important right and not to be taken away except in compelling circumstances. Its importance is emphasized by the Commentary to Rule 2.08 of the Rules of Professional Conduct:

A lawyer should inform a client about his or her rights to have an account assessed under the Solicitors Act.

13In the present case, the motion judge erred in granting summary judgement when the fairness of the accounts was not conceded and was not considered by her for reasons noted already. Solicitor’s accounts are subject to the professional obligation of the solicitor to charge only fair and reasonable amounts. Efforts by solicitors to avoid assessment are not to be encouraged and in an action on a solicitor’s account, the issues of fairness and reasonableness must be considered if pleaded, as they were here. A Superior Court judge has the jurisdiction to do so, but also has the option of referring the bills for assessment.

14For these reasons, the case was not a suitable one for summary judgment. The judgment in appeal is set aside and the bills are referred to the Assessment Officer at Toronto for assessment. The appellant will have his costs here and before the motion judge. If the parties cannot agree the costs, they may make written submissions not exceeding three typed pages within ten days for the appellant and a further ten for the respondent.