CITATION: Cozzi v. Heerdegen, 2016 ONSC 3082
DIVISIONAL COURT FILE NO.: 602/15
DATE: 20160516
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N :
PETER B. COZZI
Appellant
– and –
IAN HEERDEGEN
Respondent
Peter Cozzi, in person
Ian Heerdegen, in person
HEARD: May 9, 2016
M. DAMBROT J.:
[1] The appellant, who is a lawyer, brought an action in Small Claims Court against the defendant seeking damages in the amount of $14,933.22 for breach of contract. The contractual obligation arose from a written retainer agreement in relation to legal work performed by the plaintiff for the defendant. The agreement was a very simple one. It sets out the work to be done by the solicitor and certain other obligations of the parties. However, with respect to fees, it does nothing more than stipulate an hourly rate.
[2] The defendant did not defend the action, and was noted in default. The appellant proceeded to an assessment hearing.
[3] Upon the assessment hearing, Deputy Judge Gannage, on his own initiative, questioned the jurisdiction of the Small Claims Court to grant judgment to the appellant. After hearing the argument, he stayed the action for want of jurisdiction. The appellant appeals from that decision.
The Reasons of the Small Claims Court Judge
[4] The deputy judge concluded that he was bound to refuse to grant judgment by the decision of Nordheimer J. in Jane Conte Professional Corporation v. Joseph Smith, 2014 ONSC 6009, 329 O.A.C. 96 (Div. Ct.). In that case, the respondent appealed a decision of a deputy judge dismissing a motion to dismiss an action to recover a sum of money pursuant to a contingency fee agreement. Nordheimer J. allowed the appeal and dismissed the claim. Relying on the provisions of the Solicitors Act, R.S.O. 1990, c. S.15, Nordheimer J. concluded that when a claim is made by a lawyer based on a written fee agreement, including a contingency fee agreement, the Small Claims Court has no jurisdiction.
The Argument of the Appellant
[5] In essence, the appellant argues that his claim falls with s. 23(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, which gives the Small Claims Court jurisdiction to hear an action for money where the amount of the claim does not exceed the prescribed amount, currently $25,000. He further argues that this jurisdiction is not ousted by the provisions of the Solicitors Act. More specifically, he argues that the decision of Nordheimer J. in Jane Conte should be restricted to contingency fees, and, in any event, does not reach simple retainer agreements like the one in issue here.
Analysis
[6] I begin my analysis with an examination of the decision of Nordheimer J. in Jane Conte. In that case, as I have said, Nordheimer J. concluded that when a claim is made by a lawyer based on a written fee agreement, including a contingency fee agreement, the Small Claims Court has no jurisdiction. As I have also said, the deputy judge was of the view that the decision in Jane Conte was controlling, and was binding on him. As a judge of co-ordinate jurisdiction, if this judgment is indeed controlling, I may only depart from it in limited circumstances.
[7] In reaching his decision, Nordheimer J. relied, in part, on s. 23 of the Solicitors Act, which reads:
No action shall be brought upon any such agreement, but every question respecting the validity or effect of it may be examined and determined, and it may be enforced or set aside without action on the application of any person who is a party to the agreement or who is or is alleged to be liable to pay or who is or claims to be entitled to be paid the costs, fees, charges or disbursements, in respect of which the agreement is made, by the court, not being the Small Claims Court, in which the business or any part of it was done or a judge thereof, or, if the business was not done in any court, by the Superior Court of Justice.
[8] This provision is found in a section of the Solicitors Act entitled “Agreements between Solicitors and Clients,” which commences with s. 15. When viewed in context, the reference in s. 23 to “any such agreement” is quite clearly a reference to an agreement described in section 16(1) of the Act, which reads:
Subject to sections 17 to 33, a solicitor may make an agreement in writing with his or her client respecting the amount and manner of payment for the whole or a part of any past or future services in respect of business done or to be done by the solicitor, either by a gross sum or by commission or percentage, or by salary or otherwise, and either at the same rate or at a greater or less rate than that at which he or she would otherwise be entitled to be remunerated.
[9] Strictly speaking, the judgment in Jane Conte concerned only the jurisdiction of the Small Claims Court to entertain an action brought on a written contingency fee agreement. But the reach of the judgment cannot be limited to written contingency fee agreements, because the reasoning in Jane Conte depends on the language of s. 23, which relates more broadly to written agreements falling within s. 16(1).
[10] For the most part, the decisions that have considered sections 16 to 23 of the Solicitors Act throw little light on the issue. The decisions that concern s. 23 in particular are contingency fee cases, and treat the section as if it related only to contingency fee agreements. For example, Jean Estates v. Wires Jolley LLP, 2009 ONCA 339, 265 O.A.C. 1, Weiler J.A. stated, at para. 8:
… There are two rights in ss. 23 and 24 of the Solicitors Act. One is the right to have a Superior Court judge decide a contingency fee dispute. By their agreement the parties chose to have an arbitrator as opposed to a judge resolve any disputes. In Dell, at para. 160, the Supreme Court held that the right to arbitration is a substantive right and that the parties' choice should be respected. I would apply Dell. The second right contained in ss. 23 and 24 is the right to an assessment of whether the contingency fee is fair and reasonable. (Emphasis added.)
[11] But statements such as this are not determinative. After all, only a contingency fee agreement was in issue in Jean Estates.
[12] Ironically, the only case that I am aware of that considers this issue directly is a decision of mine: Feldman and Weisbrot v. Surgeoner, 1997 12425 (ON SC), [1997] O.J. No. 4723, 154 D.L.R. (4th) 170 (Gen. Div.). In that case, the applicant law firm brought an application for enforcement of a consent to judgment executed by the respondent in relation to work done in court by the solicitors pursuant a written agreement. The respondent resisted the application, and brought a counter-application to set aside the consent to judgment.
[13] In support of her position, the respondent relied on sections 16(1) and 17 of the Solicitors Act, which permit a solicitor to make an agreement in writing with a client respecting the amount and manner of payment for past or future services by a gross sum, by commission or percentage, by salary or otherwise, but do not permit the solicitor to receive the amount payable under such agreement if it relates to business done, or to be done, in court, until the agreement has been examined and allowed by an assessment officer.
[14] I have already set out the terms of s. 16(1). For completeness, I will set out the terms of s. 17. It reads:
Where the agreement is made in respect of business done or to be done in any court, except the Small Claims Court, the amount payable under the agreement shall not be received by the solicitor until the agreement has been examined and allowed by an assessment officer.
[15] I did not accept the argument made by the respondent in Feldman and Weisbrot, and enforced the settlement. I said the following, at paras. 12 to 17:
12 … The Applicant argues that this consent to judgment is not an agreement within the contemplation of s. 16(1), which, he says is concerned with agreements for the payment of fees at other than an hourly rate, but also points to no cases in support of his position. While there are cases which have discussed these sections, they are not of great assistance in considering the issue here. A review of the history of these provisions, however, is helpful.
13 The present sections 16(1) and 17 were originally enacted, in substantially the same terms, as sections 24 and 25 of The Law Reform Act, 1909. The legislature was apparently reacting to the judgment of Chancellor Boyd in Re Solicitor (1907), 14 O.L.R. 464, in an appeal from the decision of a Master on a taxation of a bill of costs. The lawyer had entered into a written agreement with his client which provided for the payment of a percentage of a judgment obtained in an action for damages in addition to his ordinary costs. The Master had allowed this item, but Boyd C. set it aside. He stated, at 465:
The confidential relation between lawyer and client forbids any bargain being made by which the practitioner shall draw a larger return out of litigation than is sanctioned by the tariff and the practice of the Courts. Especially does the law forbid any agreement for the lawyer to share in the proceeds of a litigated claim as compensation for his services.
14 Much of the remainder of the judgment is devoted to a strongly and colourfully worded attack on the developing practice in the United States of conducting cases on the basis of contingency fees. The Legislature's response quite obviously was not intended to introduce contingency fees into Ontario. But it equally clearly overturned Chancellor Boyd's view that the law forbade agreements for fees greater than tariff.
15 In responding to Re Solicitor, the Legislature borrowed the language of the English Attorneys' and Solicitors' Act, 1870, although that Act had already been replaced, in England, by the somewhat different Solicitors Remuneration Act of 1881. Section 4 of the 1870 Act is almost identical to the present s. 16(1). Its purpose was explained by Lord Alverstone C.J. in Clare v. Joseph, [1907] 2 K.B.D. 369 (C.A.). He noted that prior to 1870, agreements as to costs were often made, and upon the application of the client, were examined by the Courts and not infrequently held to be binding. The inquiry was always directed to the question whether the agreement was fair and reasonable. Having regard to the prior state of affairs, he described the effect of the section as follows, at 374: “In my view the section made it necessary that an agreement should be in writing if it bound the client to pay the solicitor on a different scale of remuneration from the ordinary scale.”
16 Having regard to the reason that the sections became necessary in Ontario, and the purpose of the English provisions upon which they were based, it seems clear to me that the consent to judgment agreed to in this case falls outside these provisions. It was not an agreement respecting an extraordinary scale of remuneration...
[16] I remain of the view that an agreement within the meaning of s. 16(1) of the Act is a fee agreement that is out of the ordinary, such as contingency fee arrangements. At any rate, a simple retainer agreement in writing setting out a solicitor’s hourly rate does not fall within s. 16(1). If a simple written retainer agreement setting out an hourly rate does not fall within s. 16(1), then it escapes the prohibition against action in s. 23 of the Solicitors Act.
[17] My earlier analysis is consistent with the modern approach to statutory construction, which has been repeatedly endorsed by the Supreme Court of Canada since 1999. While the words “or otherwise” in s. 16(1) might appear to be broad enough to encompass a simple retainer agreement setting out an hourly rate, statutory interpretation cannot be founded on the wording of a provision alone.
[18] In Alberta Union of Provincial Employees v. Lethbridge Community College, 2004 SCC 28, [2004] 1 S.C.R. 727, at paras. 25 and 26, Iacobucci J. said the following:
25 The prevailing approach to statutory interpretation is that proposed by E. A. Driedger, wherein "the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament" (Construction of Statutes (2nd ed. 1983), at p. 87). This approach has been widely endorsed by this Court; see, as illustrations, Québec (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours, 1994 58 (SCC), [1994] 3 S.C.R. 3, at p. 17; Rizzo & Rizzo Shoes Ltd. (Re), 1998 837 (SCC), [1998] 1 S.C.R. 27, at para. 21; R. v. Sharpe, [2001] 1 S.C.R. 45, 2001 SCC 2, at para. 33, per McLachlin C.J.; Chieu, supra, at para. 27; Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, 2002 SCC 42, at para. 26; Barrie Public Utilities v. Canadian Cable Television Assn., [2003] 1 S.C.R. 476, 2003 SCC 28, at para. 20; and Parry Sound, supra, at para. 41. This principle is supported by the Alberta Interpretation Act, R.S.A. 2000, c. I-8, s. 10, which states that "[a]n enactment shall be construed as being remedial, and shall be given the fair, large and liberal construction and interpretation that best ensures the attainment of its objects".
26 As held in Bell ExpressVu, supra, at para. 27, context in the construction of statutory language is invaluable. The modern approach recognizes that statutory interpretation cannot be founded on the wording of the provision alone. Indeed, the words of the particular provision must be considered in light of the legislation as a whole.
[19] I note that my decision in Feldman and Weisbrot was followed by Case Management Master Albert in Loudon and Sterling v. Bazos, [1999] O.J. No. 289 (Gen. Div.). She stated, at para. 8:
I further find that section 17 of the Solicitors Act does not apply. Counsel for the client suggests that section 17 requires every agreement for the settlement of a solicitor's account to be scrutinized and approved by the Court through the assessment process. If that were the case, then the Assessment Office would grind to a halt. I agree with the analysis of Dambrot J. as stated in Feldman and Weisbrot v. Surgeoner (1997) 1997 12425 (ON SC), 154 D.L.R. (4th) 170 at page 175 that the purpose of section 17 is to deal with fee agreements that are out of the ordinary, such as contingency fee arrangements.
[20] The impracticality of requiring every written retainer agreement setting out an hourly rate to be assessed has only increased in the intervening seventeen years.
[21] Finally, I see no inconsistency between my conclusion and the conclusion reached by Nordheimer J. in Jane Conte. I agree with him that by virtue of s. 23 of the Solicitors Act, the Small Claims Court has no jurisdiction to hear a claim made by a lawyer based on a “written fee agreement.” But this limitation on jurisdiction relates only to written agreements falling within s. 16(1) of the Solicitors Act. As a result of my interpretation of s. 16(1), I do not consider a simple retainer agreement setting out an hourly rate to be a written fee agreement as that phrase was used by Nordheimer J. In other words, an action may be brought by a lawyer upon any such agreement.
[22] I recognize that excluding a simple retainer agreement setting out an hourly rate from the scope of s. 16(1) and from the prohibition on actions in s. 23 also means that an application under s. 23 to determine questions relating to the validity or effect of a written fee agreement is unavailable for simple retainer agreements. But a client who enters into a simple retainer agreement can raise these issues in any action brought by a lawyer to recover fees. In addition, a client who makes such an agreement may still obtain an order for assessment of a bill pursuant to s. 3 of the Act where the retainer is not disputed and there are no special circumstances, and, by virtue of s. 4(4), no action may be taken or prosecuted by the solicitor pending the reference without leave of the court or a judge.
[23] For these reasons, this appeal must be allowed. There remains only to be determined the order that I should make. As I have noted, the defendant did not defend the action, and was noted in default. The appellant proceeded to an assessment hearing. The retainer agreement was proved, as were the hours expended. The only impediment to judgment was the jurisdictional issue raised by the deputy judge. As a result, I see no reason not to award damages to the appellant in the amount of $14,933.22 for breach of contract.
Disposition
[24] The appeal is allowed, and damages in the amount of $14,933.22 are awarded to the appellant. I note once again that this appeal resulted solely from the jurisdictional issue raised by the deputy judge of his own initiative. Although the self-represented respondent attended the hearing of the appeal, he filed no material and effectively made no argument. In the circumstances, I make no order as to the costs of the appeal. The appellant may settle the order without the consent of the respondent.
M. DAMBROT J.
RELEASED: May 16, 2016
CITATION: Cozzi v. Heerdegen, 2016 ONSC 3082
DIVISIONAL COURT FILE NO.: 602/15
DATE: 20160516
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N :
PETER B. COZZI
Appellant
– and –
IAN HEERDEGEN
Respondent
– and –
REASONS FOR JUDGMENT
M. DAMBROT J.
RELEASED: May 16, 2016