Neutral Citation: 2008 ONFSCDRS 53

FSCO A07-000078

BETWEEN:

MIKE ZARAVELLAS

Applicant

and

TTC INSURANCE COMPANY LIMITED

Insurer

MOTION DECISION

Before: Arbitrator John Wilson

Heard: July 17 and October 29, 2007, at the offices of the Financial Services Commission of Ontario in Toronto, Ontario.

Appearances: Ms. Jewan Desai for Murray Tkatch, solicitor of record Mr. Zaravellas on his own behalf Gustavo Garrido for TTC Insurance Company Limited

Issues:

The Applicant, Mike Zaravellas, was injured in a motor vehicle accident on August 30, 2003. He applied for and received statutory accident benefits from TTC Insurance Company Limited (“TTC”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Zaravellas applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

A pre-hearing in the above arbitration was scheduled to be held on Tuesday, July 17, 2007. Prior to the pre-hearing, the solicitor for Mr. Zaravellas, Mr. Tkatch, wrote to the Commission to ask to be removed as solicitor of record for Mr. Zaravellas. Mr. Zaravellas did not consent to the removal.

Consequently, instead of holding a pre-hearing on July 17, 2007, I dealt with a motion brought on behalf of Mr. Tkatch for an order removing him from the record. Ms. Jewan Desai appeared on behalf of Mr. Tkatch, while Mr. Garrido represented the TTC. Mr. Zaravellas appeared on his own behalf.

Although I issued both an oral decision, and a subsequent letter, Mr. Tkatch requested that these be embodied in a formal written decision.

The issues before me were whether the pre-hearing should be adjourned, and whether Mr. Tkatch should be removed as solicitor of record. A subsidiary issue was whether conditions should be placed on Mr. Tkatch’s removal, and on the adjournment.

Having heard submissions from both Mr. Zaravellas and Ms. Desai, I found that there had arisen significant differences between Mr. Zaravellas and Mr. Tkatch and that the solicitor-client relationship appeared to be at an end.

This matter had not yet proceeded to the hearing stage, and a withdrawal of counsel, although inconvenient, should have little prejudice to either side.

Rule 9.8 of the Dispute Resolution Practice Code provides:

Where the party represented provides written consent to the representative’s request for withdrawal, the Registrar or an adjudicator shall permit the representative’s withdrawal. Otherwise, an adjudicator may permit the representative to withdraw, subject to such terms as the adjudicator considers just.

Although the Dispute Resolution Practice Code does not deal with the circumstances in which a representative should be permitted to withdraw, both the common law and the Rules of Professional Conduct issued by the Law Society of Upper Canada provide some guidance.

Fish J.A., speaking for the Quebec Court of Appeal, considered some of the policy questions involved in the withdrawal of counsel during a proceeding:

Permission to withdraw at the outset or in the course of a trial is not lightly granted by the courts. Withdrawal will normally be permitted only where counsel and client are irreconcilable. So fundamental is the disagreement, that counsel is presumed incapable of properly representing the accused.²

Likewise in Ontario, the Courts have observed:

The mantle of solicitor of record may not be discarded except in accordance with the Rules of Civil Procedure. The client may deliver a notice of intention to act in person, pursuant to rule 15.03(3), or a notice of change of solicitors, pursuant to rule 15.03(1), or the solicitor of record may move under rule 15.04 for an order removing him as solicitor of record. Until a notice permitted by rule 15.03(1) or (3) is delivered, the responsibility remains with the solicitor of record. While the solicitor of record may expect to be served with one of the two notices, it is up to him to monitor the situation and, in the absence of such a notice, to move for an order in a timely fashion.³

In this matter, although Mr. Zaravellas’ claim had advanced to the pre-hearing process, there remained time to bring new counsel on board without necessarily prejudicing the timely hearing of the substantive issues in this arbitration.

In civil matters, as opposed to criminal matters, Rule 2.09 of the Rules of Professional Conduct makes it clear that a lawyer may withdraw from representing a client for just cause. The rules include as justifiable cause a loss of confidence, deception by the client, the failure to pay fees, or the refusal of a client to accept and act upon the lawyer’s advice on a significant point.

The Commentary on Rule 2.09 states:

No hard and fast rules can be laid down about what will constitute reasonable notice before withdrawal. Where the matter is covered by statutory provisions or rules of court, these will govern. In other situations, the governing principle is that the lawyer should protect the client’s interests to the best of the lawyer’s ability and should not desert the client at a critical stage of a matter or at a time when withdrawal would put the client in a position of disadvantage or peril.

While the lawyer should protect the client’s interests, it is not at all clear that a refusal to grant an order removing Mr. Tkatch as counsel would be an appropriate way of addressing this problem. Granted, Mr. Zaravellas wanted Mr. Tkatch to remain, presumably to move this matter on promptly without the further delay and cost triggered by a change of counsel. Notwithstanding Mr. Zaravellas’ expressed wish, it is clear even from his own comments that there is now an element of anger and distrust affecting his relations with Mr. Tkatch. Master Dash commented in a similar situation:

The test is not whether the client wants the solicitor to continue to act for him. The test is whether there has been such loss of confidence that justifies the solicitor’s withdrawal. In my view it is obvious that the solicitor-client relationship has broken down. Mr. Nicolardi does not have confidence in Davis’s competence, integrity or opinion. It was reasonable for Davis to ask to withdraw. It is asking the impossible of the solicitor to continue to represent a client in light of such criticism about theservices that he has provided.⁴

While Mr. Zaravellas evidently felt dismayed and disappointed by what he perceived as abandonment on the eve of the pre-hearing, the fact remains that he and Mr. Tkatch were at odds over the appropriate handling of his case. While it is at times difficult and perhaps duplicative to engage a new solicitor in an action that is already underway, I can see no advantage to Mr. Zaravellas continuing to retain counsel with whom he is in fundamental disagreement.

One of the concerns Mr. Zaravellas had in retaining a solicitor to replace Mr. Tkatch was whether or not his file would be available to the new representative. While the Dispute Resolution Practice Code is silent as to the responsibility of a solicitor to pass on the file or supporting documents in the event of a change of solicitors, the Rules of Professional Conduct attempt to address this issue.

Commentary

Although the client has the right to terminate the lawyer-client relationship at will, the lawyer does not enjoy the same freedom of action. Having undertaken the representation of a client, the lawyer should complete the task as ably as possible unless there is justifiable cause for terminating the relationship.

No hard and fast rules can be laid down as to what will constitute reasonable notice before withdrawal. Where the matter is covered by statutory provisions or rules of court, these will govern. In other situations, the governing principle is that the lawyer should protect the client's interests to the best of the lawyer's ability and should not desert the client at a critical stage of a matter or at a time when withdrawal would put the client in a position of disadvantage or peril.

2.09 (8) When a lawyer withdraws, the lawyer shall try to minimize expense and avoid prejudice to the client and shall do all that can reasonably be done to facilitate the orderly transfer of the matter to the successor licensee. 2.09 (9) Upon discharge or withdrawal, a lawyer shall

(a) subject to the lawyer's right to a lien, deliver to or to the order of the client all papers and property to which the client is entitled,

(b) give the client all information that may be required in connection with the case or matter,

(c) account for all funds of the client then held or previously dealt with, including the refunding of any remuneration not earned during the representation,

(d) promptly render an account for outstanding fees and disbursements, and

(e) co-operate with the successor licensee so as to minimize expense and avoid prejudice to the client.

[Amended - June 2007]

Commentary

The obligation to deliver papers and property is subject to a lawyer's right of lien. In the event of conflicting claims to such papers or property, the lawyer should make every effort to have the claimants settle the dispute.

A lawyer acting for several clients in a case or matter who ceases to act for one or more of them should co-operate with the successor lawyer or lawyers to the extent required by the rules and should seek to avoid any unseemly rivalry, whether real or apparent.

Where upon the discharge or withdrawal of the lawyer, the question of a right of lien for unpaid fees and disbursements arises, the lawyer should have due regard to the effect of its enforcement upon the client's position. Generally speaking, the lawyer should not enforce the lien if to do so would prejudice materially the client's position in any uncompleted matter.

The Solicitors Act, R.S.O. 1990, c. S.15, also deals with the issue of client files:

6.(6) Upon payment by the client or other person of what, if anything, appears to be due to the solicitor, or if nothing is found to be due to the solicitor, the solicitor, if required, shall deliver to the client or other person, or as the client or other person directs, all deeds, books, papers and writings in the solicitor’s possession, custody or power belonging to the client. R.S.O. 1990, c. S.15, s. 6 (6).

In addition to the provisions of the Solicitors Act, there is significant common law jurisprudence relating to the retention of a client’s file by a former (and unpaid) lawyer. Urquhart J. in Re Solicitor ⁵summarized the earlier jurisprudence, pointing out some of the peculiarities of a claim for a solicitor’s lien on a file.

He noted the statement in Halsbury’s⁶ that:

The general rule is that the solicitor has a lien on the books and papers of his client which have come into his possession in the course of his employment and in his capacity as solicitor, with his client’s sanction and which are his client’s property.

As well, he traced jurisprudence throught the nineteenth century that found that the lien is “mere right to retain such documents until the costs are paid but such right cannot be actively enforced”⁷, and that “If the solicitor refuses to act for the client, it is of little, if any, value, as he cannot in that case deprive the client of the full use of the papers for the purposes of the suit.”⁸ Urquhart J. concluded: “It will be seen from the above and from the earlier cases that there is a distinction between whether the client discharges the solicitor or the solicitor discharges the client.”

In this matter Mr. Tkatch, the solicitor, took steps to withdraw as representative, a step that was

strongly opposed by Mr. Zaravellas. While the Solicitors Act provisions address the situation where a client has paid their bill or has nothing owing, it does not specifically address the situation referred to by Urquhart J. discussed above. That section 6 of the Solicitors Act is not a complete Code encompassing all situations when a solicitor holds papers from a former client is evident from Rule 15.03 (4) of the Rules of Civil Procedure, which provides inter alia for a motion for an order determining whether or not there is a solicitor’s lien. Clearly, however, there is no comparable provision in Rule 9 of the Practice Code, which deals with representation at arbitrations.

There was no question that Mr. Tkatch had performed services in filing for arbitration on behalf of Mr. Zaravellas, and would normally be entitled to a solicitor’s lien for any unpaid fees. There was also no question that without the delivery of the arbitration file by Mr. Tkatch, Mr. Zaravellas would have some difficulty in proceeding promptly with his claim, and could have been forced to duplicate steps already taken by Mr. Tkatch.

While courts retain supervisory jurisdiction over lawyers, the same cannot be said for administrative tribunals. The Rules of Professional Conduct apply to appearances by lawyers before all tribunals and all tribunals possess an inherent jurisdiction⁹ to control their own process and to deal with parties and counsel appearing before them, but the Statutory Powers Procedure Act, R.S.O. 1990, C. S.22, (SPPA), specifically restricts the jurisdiction of administrative tribunals with over lawyers.

While admittedly, all counsel appearing before a court or tribunal owe duties to the court quite apart from any duty owed to a client or the profession or the public¹⁰, it is clear that the powers of tribunals in this regard are somewhat restrained in comparison with courts.

The problem as Mr. Zaravellas saw it was that without a settlement of his dispute with the TTC, he would not be in a position to pay Mr. Tkatch and have his file released to new counsel. It was not even apparent at that point just what Mr. Tkatch’s bill would be for his services to date. Certainly Mr. Tkatch had not delivered a Bill of Costs. Nonetheless, Mr. Tkatch wanted an order “protecting his account.”

The concept of a solicitor’s lien has developed both through common law and through legislation such as the Solicitors Act.

A solicitor’s “lien” on the fruits of an action was only a right to ask the Court to intervene and charge the proceeds of an action when it was probable that the solicitor would otherwise be deprived of his costs. This was distinct from the true lien on papers and property of the client in the possession of the solicitor, which lasted until his bill was taxed.

The request in this forum for an order protecting Mr. Tkatch’s account was novel and one that I am not convinced that I have any authority to make. While there is jurisdiction under the Insurance Act and its regulations to deal with costs or expenses between parties to an arbitration, the field of costs between a solicitor and its client is occupied by the Solicitors Act and the common law neither of which provides for the powers of statutory arbitrators.

Indeed, the Solicitors Act specifically provides for charging orders to be made only by judges, and only in relation to matters before the Superior Court. The charging provision of the Solicitors Act reads as follows:

(1) Where a solicitor has been employed to prosecute or defend a proceeding in the Superior Court of Justice, the court may, on motion, declare the solicitor to be entitled to a charge on the property recovered or preserved through the instrumentality of the solicitor for the solicitor’s fees, costs, charges and disbursements in the proceeding. R.S.O. 1990, c. S.15, s. 34 (1); 2006, c. 19, Sched. C, s. 1 (1).

By specifically empowering judges to make charging orders the legislature has implicitly restricted this power to those listed in the statute.¹¹ Such a conclusion would be consistent with the absence of such powers in the sections dealing with arbitration in the Insurance Act, and those dealing with the powers of tribunals in the SPPA. The Solicitors Act also addresses the issue of the client’s file in the hands of the former solicitor:

(6) Upon payment by the client or other person of what, if anything, appears to be due to the solicitor, or if nothing is found to be due to the solicitor, the solicitor, if required, shall deliver to the client or other person, or as the client or other person directs, all deeds, books, papers and writings in the solicitor’s possession, custody or power belonging to the client.

The Solicitors Act does, however, provide for solicitor-client agreements with regard to the amount and the timing of payment of any past or future services:

Agreements between solicitors and clients as to compensation

(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.

Consequently, before considering making any order as to the production of any documents in Mr. Tkatch’s possession or with regard to releasing Mr. Tkatch as solicitor of record, I requested that counsel and Mr. Zaravellas’ attempt to reach an agreement as to the solicitor’s file and the lien claimed as to any outstanding fees.

Following these discussions, I was advised that an agreement had been reached as to the disposition of the file in this matter. Therefore, given the clear lack of confidence between Mr. Zaravellas and Mr. Tkatch, I ruled that Mr. Tkatch should be released from his obligations as solicitor of record, notwithstanding Mr. Zaravellas’ objections.

In accordance with Rule 9.8 of the Practice Code which provides that an order allowing for the withdrawal of a representative may be made “subject to such terms as the adjudicator considers just”, I made the withdrawal order subject to conditions.

As provided for in Rule 9.8, the ordering of conditions is within the discretion of an arbitrator, a discretion that must be exercised lawfully, fairly or equitably, and within the jurisdiction of the arbitrator.

In this matter, I have no hesitation in accepting that Mr. Zaravellas will be gravely handicapped in moving his claim forward if he does not have access to his solicitor’s file. He will either have to withdraw his claim, or duplicate efforts already made by Mr. Tkatch, incurring additional costs as a result.

Mr. Tkatch, on the other hand, has a claim against his former client for his reasonable costs in this matter, and has seen fit to protect himself through the agreement referenced above. In all, the balance of prejudice analysis strongly favours an order that the file be released forthwith as a condition for Mr. Tkatch’s withdrawal.

I noted, however that Mr. Tkatch did not provide Mr. Zaravellas with a final bill of costs at the time of the requested withdrawal, as provided for in the Rules of Professional Conduct. Therefore, the conditions on the withdrawal order included a requirement that Mr. Tkatch provide an amount that would be the maximum for any claim of costs against Mr. Zaravellas.

I am advised that this cost ceiling was included as one of the elements of the Tkatch/Zaravellas agreement relating to the disposition of the file.

The conditions as identified at the motion hearing were:

Mr. Tkatch is to provide to Mr. Zaravellas forthwith his complete file relating to this arbitration.
Notwithstanding his release as solicitor of record, Mr. Tkatch’s potential responsibility for any costs award arising pursuant to section 282(11.2) of the Insurance Act for actions taken during the period while he had carriage of the file will remain open.

I also recorded my understanding that Mr. Zaravellas’ agreement with Ms. Desai contained a provision whereby any payment made by TTC Insurance to Mr. Zaravellas arising from this arbitration shall be subject to a first charge in favour of Mr. Tkatch to secure his account.

I am further advised that such a partial assignment of the proceeds of this arbitration was subject to a maximum of $7,500 for fees and $1,400 for disbursements, or a lesser amount of fees and disbursements should a lesser amount be billed or taxed under the Solicitors Act and was without prejudice to the right of Mr. Zaravellas to challenge any amount billed by Mr. Tkatch.

I note that the above observations as to fees and the provision of the file are only a record of what I was advised by Mr. Zaravellas and Ms. Desai as to their agreement, and, for the reasons indicated above, do not represent either an order or a determination made pursuant to section 20 (2) of the Insurance Act.

Mr. Zaravellas advised at the time of the motion hearing that he was trying to obtain new counsel but consented to setting a new date for a pre-hearing. I note that since the motion hearing Mr. Zaravellas has retained new counsel, Mr. Sacks, who now has carriage of this arbitration.

EXPENSES:

Given the nature of this motion I make no order as to expenses at this time.

March 28, 2008

John Wilson Arbitrator

Date

Financial Services Commission of Ontario / Commission des services financiers de l’Ontario