Axess Law Professional Corporation v. Sood, 2018 ONSC 744
CITATION: Axess Law Professional Corporation v. Sood, 2018 ONSC 744
DIVISIONAL COURT FILE NO.: 460/16
DATE: 20180201
ONTARIO SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
AXESS LAW PROFESSIONAL CORPORATION
Respondent (Plaintiff)
– and –
JITENDRA KUMAR SOOD
Appellant (Defendant)
COUNSEL:
Amanda Deveaux, for the Respondent (Plaintiff)
Self-represented
HEARD at Toronto: December 21, 2017
MATHESON J.
[1] This is an appeal of the order of the Small Claims Court dated August 15, 2016. Twohig J. ordered that the appellant repay his lawyer the $10,168 that the law firm had paid for the Municipal Land Transfer Tax on the appellant’s residential real estate transaction, plus costs.
Background
[2] The appellant is himself a lawyer. He retained the respondent as his real estate counsel on his purchase of a condominium after he was advised by the builder that he could not represent himself. The condominium was a new build in Toronto. The purchase price was about $750,000.
[3] Two land transfer taxes were due on the purchase: Ontario Land Transfer Tax and Municipal Land Transfer Tax.
[4] Mr. Morris, a lawyer from the respondent law firm who worked on the transaction, testified at the later trial that while he could not speak to this particular transaction in their high-volume practice, the respondent’s general process was to inform clients of both land transfer taxes in the discussion with the client. There was no testimony from the appellant, contradictory or otherwise.
[5] The Trust Ledger Statement provided to the appellant in preparation for closing included the requirement to pay Ontario Land Transfer Tax but overlooked the Municipal Land Transfer Tax. An automatic update to the computer software used by the firm introduced, that very day, an additional step in order to have both land transfer taxes included on the Trust Ledger Statement. This automatic software change, and the resulting omission from the Trust Ledger Statement, went unnoticed. The same incorrect inputs affected further versions of the Trust Ledger Statement. As a result, the respondent did not receive the funds for the Municipal Land Transfer Tax from the appellant.
[6] The transaction closed on June 2, 2015. The Transfer document included both land transfer taxes. Under the Teranet system, the required amount for the Municipal Land Transfer Tax was automatically withdrawn from the respondent law firm’s bank account in favour of the taxing authority.
[7] About three months later, after a reconciliation had taken place, the respondent noticed the error. Mr. Morris called the appellant, said that there had been a mistake and explained what had happened. He requested repayment of the tax amount. The appellant refused to pay. The respondent then commenced a claim in the Small Claims Court.
[8] The appellant defended the claim on the basis that the respondent has misrepresented his tax obligations to him, relying on the Trust Ledger Statement.
[9] The claim went to trial. Mr. Morris was the only witness. The appellant did not testify.
[10] In final argument, the appellant raised, for the first time, s. 2(1) of the Solicitors Act, R.S.O. 1990, c. S.15. Subsection 2(1) requires that an account be rendered before a solicitor can commence an action for certain amounts.
[11] The respondent had rendered an account for its services after the real estate transaction, which was paid. It did not render another account when it discovered that the funds for the Municipal Land Transfer Tax had automatically been withdrawn from its bank account.
[12] The trial judge permitted the appellant to advance his s. 2(1) argument, and ruled against him. The trial judge concluded that the tax payment was a unique situation that did not fall under s. 2(1) of the Act. The trial judge ordered that the appellant pay the respondent back for the Municipal Land Transfer Tax.
[13] The appellant appealed.
Analysis
[14] Although other grounds of appeal were raised at earlier stages, at the hearing of the appeal the appellant limited his appeal to the issue of whether s. 2(1) of the Act applied.
[15] Subsection 2(1) provides as follows:
2 (1) No action shall be brought for the recovery of fees, charges or disbursements for business done by a solicitor as such until one month after a bill thereof, subscribed with the proper hand of the solicitor, his or her executor, administrator or assignee or, in the case of a partnership, by one of the partners, either with his or her own name, or with the name of the partnership, has been delivered to the person to be charged therewith, or sent by post to, or left for the person at the person’s office or place of abode, or has been enclosed in or accompanied by a letter subscribed in like manner, referring to such bill. [Emphasis added.]
[16] There are two related issues that arise from the appeal:
(1) as raised by the appellant, whether this tax is a “disbursement” under s. 2(1) of the Act, and,
(2) as raised by the respondent, whether this tax is a “disbursement” “for the business done by a solicitor as such” as required under s. 2(1) of the Act.
[17] In oral argument, the appellant submitted for the first time that the tax was also a “charge” under s. 2(1), but made no further submissions in that regard. Given that he made no submissions in support of that argument, and gave no notice of it, I conclude that it is not properly raised on this appeal.
[18] If the tax payment is caught by s. 2(1), there is no issue that the claim was premature and the order appealed from is a nullity: Kostyniuk v. Burnell, 2013 ONSC 6705 (Div. Ct.).
[19] The standard of review is as set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235: for questions of law the standard of review is correctness; for questions of fact, palpable and overriding error; and for questions of mixed law and fact, the standard varies. Where a legal principle can be extracted from the question of mixed law and fact, the standard for that question is correctness. Where the issue is the application of correct legal principles to the facts, the standard is palpable and overriding error.
[20] I conclude that the standard of review is correctness because this question is an extricable legal principle.
[21] The ordinary rules of statutory interpretation require that s. 2(1) be interpreted in its entire context and in its grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of the Legislature.
[22] The purpose of the Act is to protect the public in their dealings with members of the legal profession and in that regard to provide a fair procedure for the assessment of a solicitor’s account: Cheadles LLP v. Zanewycz, 2015 ONSC 7166, at para. 102, citing Kostyniuk v. Burnell; McCarthy Tétrault LLP v. Guberman, 2012 ONCA 679, at para. 13.
[23] In keeping with this objective, the Act gives clients not only the right to receive an account but the right, in turn, to assess that account. The appellant relies on the importance of the right to assess an account, but had no answer to the question of what he expected an assessment officer could do about an independent tax obligation to pay Municipal Land Transfer Tax. He submitted only that he believed he could engage the taxing authority itself in a dialogue about the tax obligation. The tax obligation arises from City of Toronto By-Law No. 1423-2007, made under subsection 267(1) of the City of Toronto Act, 2006, S.O. 2006, c. 11, Schedule A.
[24] Subsection 2(1) of the Solicitors Act must be interpreted in view of the Act’s purpose, which is not served by the appellant’s position. This independent tax obligation is not imposed by the lawyer and the amount is not set by the lawyer or the subject of a useful assessment. As noted by the trial judge, the impact of its inclusion under s. 2(1) and the related assessment regime would be a lengthy delay in its repayment to the law firm by the appellant because of the lengthy delay to get an assessment hearing.
[25] The appellant did not succeed in his negligent misrepresentation defence at trial. He did not testify at trial and did not displace Mr. Morris’ evidence that the firm’s process was to discuss both land transfer taxes with clients. This situation was a mistake caused by automatic updates to computer software.
[26] Moving to the appellant’s main argument, the appellant relies on the use of the word “disbursement” by both the respondent and the trial judge in reference to the tax payment. The trial judge did call this payment a disbursement, although not with specific reference to the Solicitors Act. The respondent did as well, again not in the context of the Act. Mr. Morris testified about his use of his phrase “external disbursement” in his cross-examination, drawing a distinction between disbursements that are incurred by the law firm and those that are incurred externally by the appellant personally. He put this tax obligation in the latter category.
[27] I conclude that the use of the word “disbursement” by the trial judge and the respondent reflects an ordinary meaning of that word, more specifically, monies paid out. In that general way, a payment for remittance to the taxing authority could be a disbursement.
[28] However, s. 2(1) does not use the word “disbursement” in isolation. The relevant phrase is, “disbursements for business done by a solicitor as such”. This payment was not for “business done by a solicitor as such”. This was an independent land transfer tax obligation of the appellant arising not from the legal work done by the respondent but from the City of Toronto By-Law coupled with the appellant’s own agreement to buy the property. Further, this amount would ordinarily appear on the Trust Ledger Statement, not in the account.
[29] I conclude that this independent obligation to pay Municipal Land Transfer Tax does not fall within s. 2(1) of the Act. The trial judge did not err. I therefore dismiss the appeal.
[30] If the parties cannot agree on costs, brief written submissions shall be made as follows: the respondent shall make brief written submissions with any related material by February 15, 2018; the appellant may reply by brief written submissions with any related material by March 8, 2018. The costs submissions shall be filed by leaving a copy to my attention at Room 170, 361 University Avenue, Toronto.
___________________________ MATHESON J.
Date of Release: February 1, 2018
CITATION: Axess Law Professional Corporation v. Sood, 2018 ONSC 744
DIVISIONAL COURT FILE NO.: 460/16
DATE: 20180201
ONTARIO SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
AXESS LAW PROFESSIONAL CORPORATION
Respondent (Plaintiff)
– and –
JITENDRA KUMAR SOOD
Appellant (Defendant)
REASONS FOR DECISION
MATHESON J.
Date of Release: February 1, 2018