Court File and Parties
CITATION: Chavdarova v. Hanuka, 2018 ONSC 2047
Divisional Court File No.: 741/17
DATE: 20180329
SUPERIOR COURT OF JUSTICE – ONTARIO
DIVISIONAL COURT
RE: Lyudmila Chavdarova and LC Luxury Homes Inc, Appellants
AND:
Ben Hanuka and Law Works PC, Respondents
BEFORE: P. Smith, Thorburn and Matheson JJ.
COUNSEL: Self-represented
HEARD at Toronto: March 27, 2018
Endorsement
BY THE COURT
[1] Lyudmila Chavdarova appeals the decision of Justice Koehnen dated November 17, 2017, dismissing the Appellant’s application for an order for an assessment of the Respondents’ accounts under the Solicitor’s Act, R.S.O. 1990, c S.15.
[2] The Appellant retained Mr. Hanuka and his law firm Law Works to represent her and paid $16,000 for legal services. The Appellant claims that the Respondents terminated the retainer shortly after she paid those funds and that she did not receive the documents prepared on her behalf (although she did receive a draft statement of claim). The Appellant proceeded to successfully represent herself in her litigation.
[3] After the retainer was terminated, the Appellant took a number of steps against the Respondents:
In September 2014, the Appellant filed a complaint against Mr. Hanuka with the Law Society. The Law Society investigated and concluded that the evidence did not support further regulatory steps. The Appellant requested a review of that decision, and the Complaints Review process upheld the decision.
In September 2014, the Appellant also brought an action against the Respondents in Small Claims Court for the return of the $16,000. In December of 2014 and later, the Respondents notified the Appellant that the correct procedure for her complaint about the legal fees she paid was an assessment in the Ontario Superior Court, not a Small Claims Court claim. The Respondents brought a motion in the Small Claims Court and that claim was stayed in January 2015 for lack of jurisdiction. The endorsement of the Deputy Judge expressly noted that the stay was without prejudice to any assessment undertaken in the proper forum.
On February 6, 2015, the Appellant brought an action against the Respondents in the Superior Court in Milton for the repayment of the $16,000 and for $10,000 in punitive damages, alleging wrongful termination of the agreement for legal services. The Respondents counterclaimed for further unpaid legal services.
In the Milton action, the Appellant brought a number of unsuccessful motions and costs were awarded against her totalling $6,000. The action was stayed on January 6, 2016, pending payment by the Appellant of the outstanding cost awards.
[4] In April 2016, the Appellant filed a consumer proposal under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3.
[5] On July 6, 2016, the Appellant brought a motion to lift the stay of the Milton action on the basis that her impecuniousness was the reason for the outstanding costs awards.
[6] The Respondents learned about the consumer proposal, although they had not been listed as creditors. On July 21, 2016, the Respondents brought a motion to adjourn the Appellant’s motion to lift the stay of the Milton action so that it could apply in the bankruptcy proceedings to annul the Appellant’s consumer proposal.
[7] The parties had settlement negotiations, culminating in the signing of settlement documentation and the consent dismissal of the Milton action. A mutual release was signed on July 22, 2016. The release stated that the Respondents released the Appellant from her obligation to pay the outstanding cost awards and agreed not to challenge her consumer proposal, and the Appellant released all claims arising from the agreement for legal services with the Respondents and all claims arising from the Milton action.
[8] The mutual release also provided that the parties had the opportunity to obtain independent legal advice. However, the Appellant told the Respondents at the time that she was not going to actually get independent legal advice because she could not afford to do so. She got advice from her trustee in bankruptcy.
[9] The Appellant now submits that she signed the mutual release because Mr. Hanuka was intimidating her by stating that he would attempt to nullify her consumer proposal.
[10] On July 28, 2016, Justice Emery dismissed the Milton action and counterclaim, on consent, as a result of the settlement.
[11] About a year later, in 2017, the Appellant commenced an application seeking a court order for an assessment under s. 4 of the Solicitor’s Act in order that she could proceed to assess the accounts pursuant to which she paid the $16,000.
[12] On the application, the Appellant submitted that s. 22 of the Solicitor’s Act meant that the settlement was not binding on her. Section 22 voids a provision in a retainer agreement to the effect that a lawyer is not liable for negligence or for other responsibilities. This argument was not accepted. The application judge found that the Solicitor’s Act did not prevent a client from settling a dispute with her lawyer.
[13] The issue of the mutual release being “forced” was raised in the notice of application but it does not appear that it was a main focus of the application. The reasons for decision do indicate that the Appellant acknowledged that she had an opportunity to obtain independent legal advice but was impecunious and therefore had no ability to obtain legal advice. She did received advice from her trustee in bankruptcy.
[14] The application judge was not satisfied that there were the requisite special circumstances to make an order for an assessment, because of the settlement, including the release signed by the Appellant. He dismissed the application.
Issues
[15] On this appeal, the Appellant raises these issues:
Did the application judge err by enforcing the mutual release contrary to s. 22 of the Solicitor’s Act?
Did the application judge err by not finding special circumstances?
[16] With respect to standard of review, in Guillemette v. Doucet, 2007 ONCA 743 at para. 4, the Court found that a judge’s finding of “special circumstances” “turns on a fact driven exercise of judicial discretion” and that the court “will defer to that discretion absent an error in principle or a clearly unreasonable result.”
Analysis
[17] With some exceptions, a client can requisition an assessment of a lawyer’s account without the need of a court order pursuant to s. 3 of the Solicitor’s Act. However, that process must be invoked within 12 months after delivery of the bill, as set out in s. 4. After 12 months, a court order is required. Here, the accounts had been rendered in 2014 and no assessment was sought until 2017.
[18] Section 4 of the Solicitor’s Act requires special circumstances to grant an order after 12 months. That section provides as follows:
4 (1) No such reference shall be directed upon an application made by the party chargeable with such bill after a verdict or judgment has been obtained, or after twelve months from the time such bill was delivered, sent or left as aforesaid, except under special circumstances to be proved to the satisfaction of the court or judge to whom the application for the reference is made. [Emphasis added.]
Section 22
[19] The Appellant submits that the application judge erred by approving the validity and enforceability of the mutual release despite s. 22 of the Act. Section 22, and the related provision in s. 16(1), provide as follows:
16 (1) 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.
(2) For purposes of this section and sections 20 to 32, “agreement” includes a contingency fee agreement.
22 (1) A provision in any such agreement that the solicitor is not to be liable for negligence or that he or she is to be relieved from any responsibility to which he or she would otherwise be subject as such solicitor is wholly void. … [Emphasis added.]
[20] The Appellant has demonstrated no error in the application judge’s interpretation of s. 22 of the Solicitor’s Act. Section 22 does not prevent a client from settling litigation that they have brought against their lawyer for negligence or breach of the retainer agreement.
[21] The Appellant further submits that because the retainer agreement is referred to in the mutual release, the release is an extension of that retainer agreement and covered by s. 22. However, as shown by the wording of the mutual release itself, it is a release of claims, not an extension of the retainer agreement.
Special Circumstances
[22] The Appellant submits that the application judge erred by failing to find that there were special circumstances in any event. The Appellant submits that the application judge failed to recognize that the Appellant signed the release against her will and under duress. The Appellant further relies on the fact she did not obtain independent legal advice. The Appellant also claims that the settlement was not fair and reasonable and submits that she received no benefits from it.
[23] It is apparent from the record that at the time of the settlement the Appellant said she was not going to get independent legal advice because she could not afford it. She got advice from her trustee in bankruptcy. These facts were considered by the application judge and not found to amount to special circumstances. The Appellant now submits that she was also given insufficient time to get legal advice. This is inconsistent with the change to the form of release, which arose from her position at the time, indicating that the parties “had an opportunity to obtain independent legal advice.”
[24] The Appellant submits she was also under duress with respect to the potential impact on her consumer proposal. However, she did get advice from her trustee in bankruptcy. These facts were considered by the application judge.
[25] With respect to benefits from the settlement, the Appellant has had the benefit of being relieved from the costs orders against her totalling $6,000, and the counterclaim against her, which has been dismissed.
[26] The Appellant also submits that the Respondent lawyer breached the Rules of Professional Conduct by terminating the lawyer/client relationship and otherwise engaging in unprofessional conduct. These submissions overlap in part with the above submissions regarding the settlement. We recognize that the Appellant is unhappy with the legal representation that she received, questions the value of the services and wants her money back. However, the Appellant has not demonstrated that the application judge made an error of principle or reached a clearly unreasonable result in dismissing the application.
[27] This appeal is therefore dismissed. There shall be no order as to costs.
P. Smith J.
Thorburn J.
Matheson J.
Date: March 29, 2018