Gilbert’s LLP v. David Dixon Inc., 2017 ONSC 1345
CITATION: Gilbert’s LLP v. David Dixon Inc., 2017 ONSC 1345
DIVISIONAL COURT FILE NO’s.: 98/16 & 182/16
DATE: 20170302
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SACHS, NORDHEIMER & SPIES JJ.
BETWEEN:
GILBERT’S LLP
Appellant
– and –
DAVID DIXON INC.
Respondent
M. Diskin & M. Frontini, for the appellant
K. Jolley, for the respondent
AND BETWEEN:
GILBERT’S LLP
Appellant
– and –
GLENN DIXON, DAVID DIXON and DAVID DIXON INC.
Respondents
M. Diskin & M. Frontini, for the appellant
K. Jolley, for the respondents
HEARD at Toronto: February 13, 2017
REASONS FOR JUDGMENT
NORDHEIMER J.:
[1] This is an appeal from the order of Dunphy J. dated January 28, 2016, dismissing the appellant’s application pursuant to s. 23 of the Solicitors Act, R.S.O. 1990, c. S. 15.[^1]
[2] The appellant commenced the applications to obtain a declaration that two written retainer agreements, for the provision of legal services to the respondent, were fair and reasonable, and for an order that the respondent pay for the legal services rendered by the appellant in accordance with those retainer agreements.
[3] The respondent has never disputed the terms of the retainer agreements nor the amount of the outstanding account. It has simply failed to pay.
[4] The application judge dismissed the application on the basis that the appellant could only enforce its retainer via an assessment before an assessment officer, and that the application pursuant to s. 23 of the Solicitors Act was improper. The application judge concluded that the appellant could not resort to s. 23 absent a bona fide dispute as to the terms or effect of the written retainer agreements.
[5] I should note two things before embarking on my analysis of the issue raised by this appeal. One is that the respondent appeared through counsel at the hearing but did not take any position on the appeal. The other is that the appellant advised us that, subsequent to the appeal being launched, the outstanding fees had been resolved between the appellant and the respondent. The issue was therefore moot as between the parties. However, counsel for the appellant invited us to still deal with the issue, because of its importance to the profession generally, and we agreed.
Issue and Analysis
[6] This case raises an important procedural issue respecting the avenues of recourse that are available to a lawyer for the purpose of pursuing a client for payment of his/her fees. It involves a consideration of the Solicitors Act, and its various provisions that purport to address this issue. As I will explain below, the issue arises from the outdated and impractical processes contemplated by the Solicitors Act for the collection of legal accounts, which have been compounded by the failure of the Ministry of the Attorney General to properly resource the assessment process, that is provided for in the Solicitors Act. The problem is further compounded by the confusing and problematic language used in the Solicitors Act, that renders any coherent understanding of the objectives of that statute virtually impossible. On that latter point, I note the following statement from the covering letter of the Ontario Law Reform Commission that enclosed its 1973 Report on the Solicitors Act. The Commission said:
The Solicitors Act is based on English legislation and practice which in some respects is no longer suitable to the needs of current Ontario practice. In many instances, the language used in the present statute is archaic and obscure, and has caused difficulty in interpretation.
[7] As prior decisions of this court demonstrate, the difficulties with the language used in the Solicitors Act do not provide lawyers (or clients for that matter) with a clear route to the determination of a client’s liability for payment of legal accounts. In that regard, one must appreciate that the provisions of the Solicitors Act, with which we are concerned here, date back to 1909. As already noted, those provisions are based on English legislation that was adopted in Ontario without any apparent consideration for the fact that the English and Ontario court systems differ in certain important aspects.
[8] The adoption of the English legislation also failed to take into account that English legislation drew a distinction between contentious work (i.e. court proceedings) and non-contentious work (e.g. real estate transactions, commercial matters). In England, of course, there is a marked distinction drawn between solicitors and barristers. That distinction is not made in Ontario. These two categories of legal work were combined in the Solicitors Act but without, it appears, a lot of thought as to the consequences of doing so as it related to the practice of law in this Province. Nevertheless, the distinction between these categories appears in the Solicitors Act. For example, s. 17 maintains a prohibition that applies only to contentious work. 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.
[9] As will be seen, this section purports to prohibit the recovery by a lawyer of any fees payable under a written fee agreement, dealing with court proceedings, unless and until an assessment officer has examined and allowed the agreement. It will come as no surprise to anyone that this provision has been largely, if not totally, ignored by the profession. Indeed, in its 1973 Report, the Law Reform Commission of Ontario noted, at p. 51:
At the present time, hundreds of agreements, oral, confirmed by letter, or signed by the client are entered into each week relating to fees in contentious matters, and no approval is sought from the taxing officer. The client is not aware that the solicitor has violated the provisions of The Solicitors Act, and often pays the agreed fee. In our view it is impractical to continue to require that such agreements be approved prior to payment.
Remarkably, more than forty years later, and notwithstanding that admonition in the Report, the provision remains in the Solicitors Act.
[10] In the case at bar, the appellant had accounts with the respondent, pursuant to written fee agreements, that were unpaid. While those written fee agreements were included in the record, because portions of the fee agreements had been blacked out to protect privileged material, it is not clear whether the legal services related to contentious or non-contentious work. In either event, the written fee agreements were straight forward. They provided that the client would be billed for the work done on an hourly basis; they set out the hourly rates that would be charged for the lawyers involved; they provided for the billing of disbursements; and they provided that accounts would be rendered monthly. Accounts were rendered pursuant to these agreements, but they were not fully paid. The appellant then brought an application, pursuant to s. 23 of the Solicitors Act, to enforce those agreements, and recover the amounts owed. Section 23 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.
[11] The respondent appeared in person on the return of the application, but did not make any submissions. The application judge dismissed the motion, first by way of a handwritten endorsement, and then by a more fulsome typed supplementary endorsement.[^2] In doing so, the application judge held that there needed to be a bona fide question, respecting the validity or effect of the retainer agreement, before resort could be had to s. 23. Without that bona fide question, the application judge found that the appellant had to proceed to an assessment in order to collect its accounts. While the application judge mentioned, in his handwritten endorsement, that there was no evidence that s. 17 had been complied with, there is no reference to that issue in his supplementary endorsement. Of course, s. 17 would only have to be complied with if the legal services were for contentious work.
[12] While I am sympathetic to the dilemma that led the application judge to reach for an interpretation of s. 23 that restricted its application, and while I agree that the section should be so restricted, I do not agree with the route that the application judge took to accomplish that goal. In my view, the plain words of the section do not set up, as a precondition to its application, that a dispute as to the “validity or effect” of the written fee agreement must exist. I note, in passing on this point, that it would not necessarily be known if any such dispute existed before the application was actually brought and responded to. All that the lawyer might know is that the accounts were not paid. In any event, the language of s. 23 is broad. It allows for the validity or effect of a written retainer agreement to be examined and determined, and it allows for the enforcement of a written retainer agreement. There is nothing in the plain wording of the section that requires the former to exist before the latter can be obtained.
[13] That conclusion does not address, however, the impact of s. 17. As I have noted above, the wording of s. 17 would appear to prohibit the recovery of any fees, pursuant to any written fee agreement relating to contentious work, unless the lawyer has first had the agreement examined and allowed by an assessment officer. While I reiterate that there is no evidence whether the written fee agreements related to contentious or non-contentious work, I am proceeding on the basis that they related to contentious work, as the application judge appears to have done, given his reference to s. 17.
[14] If that is the meaning of s. 17, the impact on the Bar in this Province would be dramatic. The current backlog in the assessment offices in this Province are well known, especially in the City of Toronto. It has been the subject of commentary in various decisions, including by the application judge in this case, when he said, at para. 3:
I fully recognize that the profession is currently experiencing a degree of frustration with the delays cropping up in the assessment process under the Solicitors Act. If the profession is frustrated, clients seeking to utilize the assessment system to adjust accounts from their solicitors are experiencing a similar degree of frustration. The delay required to obtain a hearing is, by all accounts, unacceptably long.
[15] In a later decision, the same application judge noted that it had taken almost three years for a lawyer to obtain an appointment for an assessment of accounts.[^3] This is the current state of affairs, without adding a requirement that every written fee agreement, for contentious work, must be reviewed by an assessment officer, before a lawyer can “receive” the amount payable. If that is the actual result of s. 17, then, as observed by Master Albert in Loudon and Sterling v. Bazos, [1999] O.J. No. 289 (M.C.) at para. 8, “the Assessment Office would grind to a halt”. I note that observation was made more than seventeen years ago. The situation in the Assessment Office has deteriorated since that time, while the number of lawyers in the Province has increased, as has the amount of legal services being provided and also, presumably, the number of written fee agreements being entered into.
[16] What then is the proper interpretation of these various provisions of the Solicitors Act? The question was addressed in yet another decision of this court that has tried to wrestle with this issue, namely, Cozzi v. Heerdegen, [2016] O.J. No. 2510 (Div. Ct.). In that case, Dambrot J. considered some of the history of these provisions from the Solicitors Act. He was faced with the same argument regarding the effect of s. 17, and its apparent blanket prohibition against the recovery of fees under any written fee agreement, without approval of an assessment officer. Dambrot J. considered the meaning and effect of s. 17, along with the other related provisions in the Solicitors Act. He rejected the interpretation of s. 17 that would lead to a blanket prohibition on the recovery of fees. In doing so, he said, at para. 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] In order to fully understand Dambrot J.’s analysis, I should set out the contents of s. 16(1) of the Solicitors Act. It 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.
[18] Section 16(1) is the section that triggers the application of the balance of the provisions that are in issue, that is, ss. 17 to 33. However, unlike s. 17, s. 16(1) does not distinguish between contentious and non-contentious work. That said, if, as Dambrot J. found, only certain types of written fee agreements fall within the scope of s. 16(1), then two results occur. One is that the prohibition against commencing an action to recover fees set out in s. 23 would only apply to written fee agreements that fall within the scope of s. 16(1). The other is that the requirement, under s.17, for an assessment officer to review a written fee agreement, respecting contentious work, before any receipt of fees, would also only apply to that subset of written fee agreements.
[19] There is a potential problem with the interpretation adopted by Dambrot J. because, on its face, s. 16(1) could be seen as applying to all written fee agreements. First, the language of s. 16(1) would not appear to draw any distinctions regarding the types of written fee agreements to which it applies. Second, a broad interpretation of s. 16(1) might find some support in s. 17 that refers simply to “the agreement”. In other words, s. 17 appears to begin from a premise that all written fee agreements are covered by these sections of the Solicitors Act, but then carves out the application of s. 17 only to contentious work. Third, a broad interpretation might also find some support in s. 23 that says “No action shall be brought upon any such agreement …”, but then, of course, that provision becomes ambiguous given its reference to “such” agreements.
[20] If the proper interpretation of s. 16(1) brings all written fee agreements within its scope, then the outcome will be a complete breakdown of the only process that would then be available for the purpose of lawyers collecting accounts, that is, the assessment process, because of the absolute prohibition against actions under s. 23. The repercussions, of that interpretation, will affect both lawyers and clients. Lawyers will be effectively precluded from collecting accounts, because the demands on the assessment process will cause such a backlog of assessments that the system will collapse. Clients will equally find that they have no ready process for challenging the reasonableness of fees charged, which, I would note, may have already been collected by the lawyer, in whole or in part, through the application of a retainer.
[21] The issue then is what is meant by s. 16(1) when it refers to agreements for the payment of services:
… 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.
[22] This wording is yet another example of the problematic language contained within the Solicitors Act. For one thing, the reference to rates greater or lesser than that at which the lawyer would otherwise be entitled to be remunerated, as the Law Reform Commission pointed out, has no application in Ontario. It is based on the English system that set various tariffs for fees that could be charged by lawyers for certain types of work. Ontario has never had any such tariffs.
[23] Another example is the reference to payment by percentage. An agreement for fees, based on a percentage, mirrors a contingency fee agreement and such agreements, until relatively recently, were prohibited in Ontario. Nevertheless, the section has always referred to agreements involving fees calculated by the use of a percentage. I note that there are separate provisions within the Solicitors Act, that deal with contingency agreements, that were added in 2002.
[24] Dambrot J. found that the other references in s. 16(1) (i.e. gross sum, commission, percentage) describe unusual or extraordinary fee arrangements. He concluded, as a result, that s. 16(1) only applies to written fee agreements that are “out of the ordinary”. I agree with that conclusion. In doing so, however, I recognize that the use of the words “or otherwise”, in s. 16(1), could be seen to be broad enough to expand the coverage of the section to all written fee agreements. Two things argue against that conclusion, however. One is that the punctuation used in the section clearly links “or otherwise” to salary, and not to the other enumerated forms of payment. That fact suggests that the words were not intended to sweep into the section all other forms of written fee agreements. I would also make the salient point that, if the Legislature had intended to include all written fee agreements within the scope of s. 16(1), it could have said so in plain and simple terms.
[25] The other is the reality that, if that broad interpretation is to be put on the section because of those words, the practical effect of the interpretation leads to the functional equivalent of an absurdity. In making that point, I am aware that there is only one governing principle regarding the interpretation of a statute, that is, that “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”: Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27 per Iacobucci J. at para. 21.
[26] However, that governing principle does not require a court to interpret a statute in a manner that defeats the purpose of the statute or leads to an absurdity. This point is made in R. v. Paul, [1982] 1 S.C.R. 621 where Lamer J. quoted, with approval, the following principle from Maxwell on Interpretation of Statutes:
Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity which can hardly have been intended, a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence. This may be done by departing from the rules of grammar, by giving an unusual meaning to particular words, or by rejecting them altogether, on the ground that the legislature could not possibly have intended what its words signify, and that the modifications made are mere corrections of careless language and really give the true meaning.
[27] In considering whether an absurdity does result, context is important in the interpretation exercise. Context includes the practical realities that exist, and to which the purpose of the statute is directed. As was observed in Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, by Iacobucci J. at para. 27:
The preferred approach recognizes the important role that context must inevitably play when a court construes the written words of a statute: as Professor John Willis incisively noted in his seminal article “Statute Interpretation in a Nutshell” (1938), 16 Can. Bar Rev. 1, at p. 6, “words, like people, take their colour from their surroundings”.
[28] I have already set out above the fact that the assessment system cannot handle the demands that are currently made of it, and the problems that would be created if every written fee agreement, for contentious work, had to be reviewed, through that system, before a lawyer could receive his/her fees. That reality, and the consequential effects that would be visited on the profession, and on the public, from such an interpretation must be considered in the overall interpretative process. They are part of the context.
[29] In reaching my conclusion, I am mindful of the fact that the provisions, regarding a review of written fee agreements, were originally enacted to ensure that clients were protected from potentially agreeing to terms that were not fair or advantageous, at a time when they were especially vulnerable. However, interpreting s. 16(1) (and thus the other related provisions) as applying only to unusual or extraordinary fee agreements, does not eliminate the protections for clients who sign usual or normal fee agreements.
[30] For one, clients still retain the right to have an account assessed under s. 3 of the Solicitors Act, and the one month prohibition on a lawyer commencing an action to recover payment remains under s. 2, so that the client has that time to seek an assessment. For another, the client retains the right, in any action commenced to enforce a written fee agreement, to plead all of the common law defences that might be applicable, such as unconscionability, undue influence, non est factum, and the like.
[31] Before concluding, I should mention one other authority, and that is my own decision in Jane Conte Professional Corp. v. Smith, 2014 ONSC 6009, [2014] O.J. No. 5033 (Div. Ct.), since it appears to have added to the confusion surrounding this issue.
[32] The decision in Jane Conte dealt with a contingency fee agreement. As I have already pointed out, contingency fee agreements enjoy their own special provisions within the Solicitors Act. Thus, under the terms of the statute, such agreements are treated, separate and apart, from other written fee agreements. However, insofar as the language I used in my reasons in Jane Conte can be seen as applying to all written fee agreements, then I acknowledge that they are in error. With the benefit of the more comprehensive material filed in this case, and the reasons in Cozzi, I have reached a different view regarding the proper approach to the provisions of the Solicitors Act.
[33] I conclude, therefore, that a simple or usual written fee agreement does not fall within the scope of s. 16(1); it is not covered by the requirement of review under s. 17; and it is not subject to the prohibition against an action being commenced to enforce it under s. 23. A lawyer, who has a simple or usual fee agreement, is entitled to have resort to the assessment process if s/he wants to, but the lawyer is also entitled to commence an action to recover his/her fees as contemplated by s. 2. As I have said, the client retains the right to require an assessment as provided for in s. 3.
[34] I should add that this conclusion is not intended, and should not be taken, as any approval of, or excuse for, the failure of the Ministry of the Attorney General to properly resource the assessment process. The problems that arise from that failure, both for the Bar and for the public, remain. It should also be apparent to the Ministry of the Attorney General that the time has long since passed when it ought to engage in a thorough review, and modernization, of the Solicitors Act, and all of its provisions.
[35] In the end result, the appeal is dismissed.
[36] No costs were sought and none are ordered. I would be remiss if I did not express the court’s appreciation to counsel for the appellant, who provided us with very helpful material on these complicated issues, including authorities that did not, necessarily, support their position.
NORDHEIMER J.
SACHS J.
SPIES J.
Date of Release: March 2, 2017
CITATION: Gilbert’s LLP v. David Dixon Inc., 2017 ONSC 1345
DIVISIONAL COURT FILE NO’s.: 98/16 & 182/16
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SACHS, NORDHEIMER & SPIES JJ.
BETWEEN:
GILBERT’S LLP
Appellant
– and –
DAVID DIXON INC.
Respondent
REASONS FOR JUDGMENT
NORDHEIMER J.
Date of Release:
[^1]: While there were two applications involved in this matter, since they involve essentially the same parties and raise the same issue, I will refer to them as if they were a single application.
[^2]: Gilbert’s LLP v. David Dixon Inc. (2016), 2016 ONSC 753, 129 O.R. (3d) 395 (S.C.J.)
[^3]: Zeppieri & Associates v. Gupta, 2016 ONSC 6491, [2016] O.J. No. 5355 (S.C.J.)