Plazavest Financial Corporation et al. v. National Bank of Canada et al. [Indexed as: Plazavest Financial Corp. v. National Bank of Canada]

47 O.R. (3d) 641

[2000] O.J. No. 1102

No. C30641

Court of Appeal for Ontario

Doherty, Laskin and Moldaver JJ.A.

April 5, 2000

Professions -- Barristers and solicitors -- Fees -- Assessment -- As term of loan agreement borrower agreeing to pay lender's actual legal fees relating to loan transaction -- Borrower refusing to pay solicitors' bills -- Lender paying bills from funds held in borrower's account -- Borrower bringing application for order directing that bill be referred for assessment pursuant to Solicitors Act -- Section 11 of Act applying as bills had been paid prior to application for assessment -- Borrower required to demonstrate that special circumstances of case appeared to require assessment -- Language of agreement between borrower and lender not determinative of whether special circumstances existed -- Public interest requiring that court maintain supervisory role over disputes relating to payment of lawyers' fees -- Borrower having been provided with almost no information concerning work done by solicitors when it brought application -- Borrower demonstrating special circumstances -- Borrower entitled to order directing assessment -- Solicitors Act, R.S.O. 1990, c. S.15, s. 11.

The appellant borrowed money from the respondent in 1997. As a term of the loan agreement, the appellant agreed to pay the respondent's legal fees relating to the loan transaction. Under a previous loan agreement, the appellant was required to pay the respondent's "reasonable" legal fees and expenses incurred in relation to the transactions described in that agreement. Under the 1997 agreement, the appellant was obligated to pay "the actual fees and expenses" of the respondent's solicitors. The agreement also provided that the respondent could pay those fees and expenses from funds held in the appellant's account with the respondent. The respondent's solicitors submitted five bills to the respondent. The respondent asked the appellant to pay the total amount owing and provided the appellant with a copy of the fifth account, which provided some details of the work done by the solicitors over a one-month period. The material provided to the appellant did not provide any details with respect to the four previo us accounts other than the amount owing on each account. When the appellant declined to pay the bills, the respondent paid them from funds held in the appellant's account. The appellant brought an application for an order directing that the respondent deliver copies of the solicitors' bills to the appellant and an order directing that the bills be referred for assessment pursuant to the Solicitors Act. The application judge held that the appellant had paid the bills prior to seeking an assessment and was required under s. 11 of the Act to demonstrate that the special circumstances of the case appeared to require the assessment. She examined the language of the agreement between the appellant and the respondent and concluded that as the appellant was required to pay "all legal expenses actually charged" to the respondent, it could not demonstrate special circumstances justifying an order directing an assessment. The appellant appealed.

Held, the appeal should be allowed.

The rendering of legal services and the determination of the appropriate compensation for those services is not solely a private matter to be left entirely to the parties. There is a public interest component relating to the performance of legal services and the compensation paid for them. That public interest component requires that the court maintain a supervisory role over disputes relating to the payment of lawyers' fees. Section 9(1) of the Act put the appellant in the same position as the respondent in so far as the assessment of the solicitors' bill was concerned. If an agreement between the solicitors and the respondent to pay the firm's actual fees could not pre-empt an application by the respondent to assess those fees, it followed that the same agreement between the respondent and the appellant to pay actual legal fees did not place those fees beyond the pale of the assessment process.

Where a payment is authorized by the payor, it is a payment for the purposes of s. 11 of the Act. In the circumstances of this case, the payment was authorized by the appellant under the terms of the 1997 agreement and was a payment for the purposes of s. 11. The appellant was, therefore, entitled to an assessment only if it could show that the special circumstances of the case appeared to require an assessment.

Three factors were particularly significant in determining whether special circumstances existed here. First, the payment to the solicitors was made on the appellant's behalf by the respondent over the express objection of the appellant. The appellant had made it clear that it did not agree with the amounts claimed in the bills provided to the respondent by the solicitors. In this circumstance, the normal inference concerning the propriety of the bills flowing from the payment of the bills could not be made. Second, when the appellant initiated the application, it had virtually no information concerning the work done by the solicitors. In effect, the respondent took the position that the appellant was obligated to pay the legal fees but was not entitled to any information concerning the work done to earn those fees. The respondent's refusal to give the bills to the appellant before paying the legal fees from the appellant's account, and its subsequent providing of only edited bills to the appellant, were im portant factors which told in favour of directing an assessment. A third party who has agreed to pay a client's legal bills is entitled, subject to any sustainable solicitor- client privilege claim, to information in the client's possession which is relevant to the determination of whether the legal bills are properly payable by the third party. The third factor was the wording of the terms of the agreement between the appellant and the respondent. The appellant agreed to pay actual legal fees and expenses incurred in relation to the transactions arising out of the loan agreement. Given the respondent's position, the appellant had no way, other than through the assessment process, of determining whether the amounts claimed in the bills met those two criteria. These factors combined to constitute special circumstances within the meaning of s. 11 of the Act.

APPEAL from a judgment dismissing an application for an order for an assessment of solicitors' bills.

Borden & Elliot v. Barclays Bank of Canada (1993), 1993 5450 (ON SC), 15 O.R. (3d) 352 (Gen. Div.); Randell and Robins and Robins (Re) (1979), 1979 1921 (ON SC), 22 O.R. (2d) 642 (H.C.J.); Tory, Tory, DesLauriers and Binnington v. Concert Productions International Inc. (1985), 7 C.P.C. (2d) 54 (Ont. H.C.J.), consd Other cases referred to Enterprise Rent-a-Car Co. v. Shapiro, Cohen, Andrews, Finlayson (1998), 1998 1043 (ON CA), 38 O.R. (3d) 257, 157 D.L.R. (4th) 322, 80 C.P.R. (3d) 214 (C.A.); Krigstin v. Samuel (1982), 31 C.P.C. 41 (Ont. H.C.J.); Minkarious v. Abraham, Duggan (1995), 1995 7253 (ON SC), 27 O.R. (3d) 26, 129 D.L.R. (4th) 311, 44 C.P.C. (3d) 210 (Gen. Div.); Peel Terminal Warehouses Ltd. v. Wootten, Rinaldo & Rosenfeld (1978), 1978 1655 (ON CA), 21 O.R. (2d) 857, 10 C.P.C. 160 (C.A.) Statutes referred to Solicitors Act, R.S.O. 1990, c. S.15, ss. 1-36

Bernard Burton, for appellants. Anne C. Sonnen, for respondent, National Bank of Canada. Kenneth A. Dekker, for respondent, Kelly Affleck Greene.

The judgment of the court was delivered by

DOHERTY J.A.: --

I.

[1] The appellant ("Plazavest") borrowed money from the respondent, the National Bank of Canada ("National"). As a term of that loan agreement, Plazavest agreed to pay National's legal fees relating to the loan transaction. National retained the respondent, Kelly Affleck Greene ("Kelly Affleck") who provided legal services and eventually submitted their bill to National. National requested that Plazavest pay the bill, and when Plazavest declined, National, pursuant to a term of the loan agreement with Plazavest, paid the bill from funds held in Plazavest's account. Plazavest then brought an application seeking an order directing that National deliver copies of Kelly Affleck's legal bills to Plazavest and an order directing that the bills be referred for assessment pursuant to the Solicitors Act, R.S.O. 1990, c. S.15 (the "Act").

[2] Sanderson J. held that Plazavest had paid the bills prior to seeking an assessment and was required under s. 11 of the Act to demonstrate that "the special circumstances of the case . . . appear to require the assessment". She examined the language of the agreement between Plazavest and National and concluded that as Plazavest was required to pay "all legal expenses actually charged" to National, it could not demonstrate "special circumstances" justifying an order directing an assessment. Having reached this conclusion, it was unnecessary for her to decide whether National should be required to give copies of the legal bills to Plazavest.

[3] Plazavest appeals.

[4] I agree with Sanderson J. that s. 11 of the Act applies and that Plazavest was required to show "special circumstances". With respect, however, I do not agree that the language of the agreement between Plazavest and National was determinative of whether "special circumstances" existed. I think that the entirety of the circumstances, including but not limited to the terms of the agreement, should have been considered in deciding whether Plazavest had established "special circumstances". On the view I take of the entirety of the circumstances, Plazavest demonstrated "special circumstances" and was entitled to an order directing an assessment.

II.

[5] Plazavest and National initially entered into a loan agreement in 1990. Under the terms of that agreement, Plazavest was required to pay National's "reasonable" legal fees and expenses incurred in relation to the transactions described in the agreement. In April and May of 1997, Plazavest and National entered into a new agreement restructuring Plazavest's loan arrangements with National (the "1997 agreement"). The 1997 agreement called for a loan in the amount of $2,235,000. Under the terms of the 1997 agreement, Plazavest was obligated to pay "the actual fees and expenses" of National's solicitors incurred in relation to the transactions described in the agreement. Under the terms of the 1997 agreement, not only was Plazavest liable to pay the actual legal fees and expenses incurred by National, but National could pay those fees and expenses from funds held in Plazavest's account with National.

[6] Kelly Affleck performed legal services in connection with the transactions described in the 1997 agreement between December 1996 and July 1997. It submitted five bills to National totalling $32,564.24. The fifth bill was sent to National in July 1997.

[7] On October 21, 1997, National wrote to Plazavest requesting that Plazavest pay the amount owing ($32,564.24) directly to Kelly Affleck at Plazavest's "earliest convenience". A copy of the fifth account (July 15, 1997) in the amount of $1,499.61 was enclosed in the October 21 letter. That account provided some details of the work done by Kelly Affleck between June 1, 1997 and June 30, 1997. That account also referred to the amounts owing on the four previous accounts that had been submitted to National. The material sent to Plazavest did not, however, provide any details with respect to the four previous accounts other than the amount owing on each account.

[8] At some unspecified date after Plazavest received the letter of October 21, 1997, Mr. Phillip Meretsky, the solicitor for Plazavest, asked National for copies of the first four accounts. National refused to provide the copies. Mr. Meretsky advised National that Plazavest could not agree with the quantum of the bills and would assess the accounts if no agreement could be reached.

[9] On December 19, 1997, National wrote to Plazavest stating:

Please be advised that we have incurred legal fees in the total amount of $34,000 for the Borrowers' account in respect of this matter. Payment of this amount is requested prior to December 31, 1997, failing which we shall deduct same from the $154,616.10 payment made by the Borrowers in accordance with Article 7.4 of the Loan Agreement.

[10] The affidavit of Mr. Kennedy filed by National on the application contains the following assertion:

The Moving Parties [Plazavest] did not pay the outstanding Kelly Affleck Greene accounts. Accordingly, on December 18, 1998, [See Note 1 at end of document] the Bank applied a portion of monies received by it on account of the Moving Parties' indebtedness, pursuant to the terms of the Loan Agreement, on account of the outstanding Kelly Affleck Greene accounts. The Bank remitted these monies to Kelly Affleck Greene in satisfaction of its accounts.

[11] In oral argument, counsel for National indicated that in fact the funds owed to Kelly Affleck had been segregated from the other funds held on behalf of Plazavest as of December 18, 1997, but were not paid to Kelly Affleck until some subsequent unspecified date. I do not read Mr. Kennedy's affidavit as drawing the distinction made by counsel. In my view, the affidavit must be read as indicating that National exercised its rights under the 1997 agreement to pay the amounts owed to Kelly Affleck on December 18, 1997, while at the same time indicating that payment would not be made until December 31. It does not appear, however, that National's precipitous action prejudiced Plazavest. There is no suggestion that Plazavest would have moved to assess the bill between December 19 and December 31. This application was not commenced until July 1998.

[12] Prior to the return of the application, National did deliver copies of the first four accounts to Plazavest. These accounts provide details of the work done by Kelly Affleck. Several entries in each of the accounts were, however, "blacked-out" in the copies provided to Plazavest. National claimed client-solicitor privilege with respect to the edited entries.

III.

[13] Counsel for National submitted that the 1997 agreement constituted a waiver by Plazavest of any right it may have had to an assessment of the legal accounts. In advancing this position, she placed considerable reliance on Plazavest's agreement to pay all "actual" legal fees and expenses relating to the transaction. She contrasted this commitment with Plazavest's agreement in 1990 to pay "reasonable" legal fees and expenses. She argued that while a commitment to pay "reasonable" legal fees contemplated a review by a neutral arbiter of the fees claimed, a promise to pay "actual" legal fees did not envision any such review. It does not appear that this argument was made before Sanderson J.

[14] The rendering of legal services and the determination of appropriate compensation for those services is not solely a private matter to be left entirely to the parties. There is a public interest component relating to the performance of legal services and the compensation paid for them. That public interest component requires that the court maintain a supervisory role over disputes relating to the payment of lawyers' fees. I adopt the comments of Adams J. in Borden & Elliot v. Barclays Bank of Canada (1993), 1993 5450 (ON SC), 15 O.R. (3d) 352 (Gen. Div.) at pp. 357-58, where he said:

The Solicitors Act begins with s. 1 reflecting the legal profession's monopoly status. This beneficial status or privilege of the profession is coupled with corresponding obligations set out in the Act and which make clear that the rendering of legal services is not simply a matter of contract. This is not to say a contract to pay a specific amount for legal fees cannot prevail. It may. But even that kind of agreement can be the subject of review for fairness: see s. 18 of the Solicitors Act.

[15] The observation of Adams J. that the rendering and payment of legal accounts is not "simply a matter of contract" finds support in a long established line of authority which recognizes, apart entirely from the Act, that a superior court has an inherent jurisdiction, as part of its disciplinary authority over lawyers, to direct the assessment of lawyers' fees: Peel Terminal Warehouses Ltd. v. Wootten, Rinaldo & Rosenfeld (1978), 1978 1655 (ON CA), 21 O.R. (2d) 857 at p. 861, 10 C.P.C. 160 (C.A.); Minkarious v. Abraham, Duggan (1995), 1995 7253 (ON SC), 27 O.R. (3d) 26 at pp. 55-56, 44 C.P.C. (3d) 210 at p. 242 (Gen. Div.).

[16] The provisions of the Solicitors Act also offer full support for the conclusion reached by Adams J. Sections 16 to 36 of the Act recognize that clients and solicitors may enter into written agreements concerning payments for legal services. These sections do not, however, suggest that those agreements oust the assessment process. To the contrary, they provide detailed provisions for the assessment of legal fees rendered pursuant to written agreements between lawyers and their clients.

[17] Although I would reject the contention that an agreement between a client and a lawyer may preclude the client from resorting to the Act or the inherent power of the court to seek an assessment of the lawyer's fees, I do not mean to suggest that the existence of such a contract and the terms of that contract are of no significance. As Adams J. said, the terms of the agreement may in the end prevail and dictate the fees to be paid. Furthermore, where the party seeking an assessment must show special circumstances, the terms of the agreement may figure prominently in the determination of whether those special circumstances exist: Borden & Elliot v. Barclays Bank of Canada, supra, at pp. 358-59.

[18] The agreement relied on in this case is not between the client (National) and the solicitor (Kelly Affleck), but rather, is between the client (National) and the borrower (Plazavest). Under the terms of that agreement, Plazavest is liable to pay National's actual legal fees and expenses. Section 9(1) of the Act is directly applicable to Plazavest. The relevant words provide:

9(1) Where a person, not being chargeable as the principal party, is liable to pay or has paid a bill . . . to the solicitor . . . the person so liable to pay or paying . . . may apply to the court for an order referring to assessment as the party chargeable therewith might have done, and the same proceedings shall be had thereupon as if the application had been made by the party so chargeable.

[19] Section 9(1) of the Act puts Plazavest in the same position as National in so far as the assessment of Kelly Affleck's bill is concerned. If an agreement between National and Kelly Affleck to pay the firm's actual fees could not pre- empt an application by National to assess those fees, it must follow that the same agreement between the client and a third party to pay actual legal fees does not place those fees beyond the pale of the assessment process should the third party seek to resort to that process.

[20] Apart entirely from the general question of whether those liable to pay legal fees can waive a right to assess a lawyer's bill, the actual terms of the agreement between Plazavest and National do not provide any evidence of a waiver. Plazavest agreed to pay National's actual fees and legal expenses relating to the transactions encompassed in the loan agreement. Certainly, there is no express agreement to waive any right to assess those costs. Nor can I accept that it was implicit in Plazavest's agreement to pay actual legal fees relating to the transactions that it would not challenge whether the fees were "actual" or whether the fees related to transactions encompassed by the loan agreement. An agreement to pay "actual" legal fees cannot be read as an agreement to pay all fees "actually charged". Actual fees refer to fees for work done within the scope of the retainer. For example, if Kelly Affleck's bill inadvertently included charges for work done on a file unrelated to the 1997 loan agreement, thos e charges would not be part of the "actual" legal fees referred to in the 1997 agreement even though they would be part of the fees "actually charged" by Kelly Affleck.

[21] In my view, the 1997 agreement between Plazavest and National described the scope of Plazavest's obligation to pay National's legal bills, but said nothing about Plazavest's entitlement to challenge the propriety of those bills. Even if Plazavest could waive its right to seek an assessment under the Act, it did not do so in the 1997 agreement.

[22] In an alternative but related submission, the respondent argued that Plazavest could not seek an assessment under the general provisions of the Act (ss. 1-14) as it did, but could only rely on the provisions governing assessment where there is an agreement as to the fee to be paid (ss. 15-33). The respondent contends that the 1997 agreement constitutes an agreement for the purposes of ss. 15 to 33 of the Act. This argument was also not advanced before Sanderson J.

[23] Sections 15 to 33 of the Act speak to situations in which there is a written agreement between the lawyer and a "client" respecting the manner and amount of payment of the lawyer's fees. While Plazavest is a "client" under the expanded definition of that word in s. 15 of the Act, there was no written agreement between Kelly Affleck and Plazavest. Nor, for that matter, was there any evidence of a written agreement between Kelly Affleck and National concerning Kelly Affleck's fees. I do not think that ss. 15 to 33 have any application, direct or by analogy, to written agreements to pay legal fees to which the lawyer claiming the fees is not a party. The sections are intended to reflect and manifest the court's supervisory power over agreements involving lawyers for the payments of lawyers' fees. The sections do not reach arrangements between clients and third parties referable to the payment of the client's legal fees. [See Note 2 at end of document]

IV.

[24] Having concluded that the 1997 agreement did not preclude Plazavest's resort to the Act, I must now determine which section of the Act applies. By operation of s. 9(1) of the Act, Plazavest's entitlement to an assessment is the same as that which would be available to the actual client (National) in the same circumstances.

[25] Counsel for Plazavest submitted that s. 3(a) or (b) of the Act applies and that since the application was brought within 12 months of the delivery of the bills, Plazavest is entitled to an assessment and need not demonstrate special circumstances. [See Note 3 at end of document]

[26] National and Kelly Affleck submit that the bill was paid prior to, but within 12 months of the application for an assessment, and that s. 11 of the Act applies. It provides:

11. The payment of a bill does not preclude the court from referring it for assessment, if the application is made within twelve months after payment, and if the special circumstances of the case, in the opinion of the court, appear to require the assessment.

[27] It is Plazavest's position that the phrase "the payment of a bill" in s. 11 refers to payments made voluntarily by the party responsible for the payment. It contends that the payment made from Plazavest's account to Kelly Affleck by National was not a voluntary payment, but was in fact made in the face of Plazavest's objection to payment of the bill.

[28] Plazavest relies on Re Randell and Robins and Robins (1979), 1979 1921 (ON SC), 22 O.R. (2d) 642 (H.C.J.). In Re Randell, the solicitors obtained a judgment for their client. They deducted the amount owing on their fees and remitted the balance of the judgment to the client. After receipt of those funds, the client moved for an assessment of the bill. The law firm argued that the bill had been paid and, therefore, under s. 10 (now s. 11) of the Act, the client was required to show "special circumstances" justifying an assessment. While it would appear there was no specific agreement between the client and the firm permitting the firm to deduct its fees from the judgment, Eberle J. made it clear that it was not suggested that the solicitors acted improperly in doing so.

[29] Eberle J. acknowledged that for many purposes, payment of the account had been made. He then said, at p. 643:

However, when I consider the intention of s. 10 [now s. 11], it seems clear to me that the reason why a client who has paid an account is required to show special circumstances in order to have the account taxed, is because the payment of the account indicates that the client accepts the amount of the account as being proper. That is, that payment is an implied acceptance of the reasonableness of the account. Can one make that implication in the circumstances of this case -- circumstances of payment which are not uncommon? In my view "no"; one cannot make that implication, and I am, therefore, driven to the conclusion that although, for many purposes, the solicitors' account has been paid, for purposes of s. 10 a voluntary action on the part of the client on making the payment is required before one can infer an acceptance by the client of the propriety of the bill. Therefore, in my view, the special circumstances required by s. 10 of the Solicitors Act where there has been pay ment of a bill need not here be shown.

(Emphasis added)

[30] I agree with Eberle J.'s description of the purpose underlying s. 11 of the Act. Payment of the bill is generally seen as an implied acceptance by the payor of the propriety of the bill. Absent special circumstances, the payor should not be allowed to resile from its implied acceptance of the propriety of the bill. I think, however, that the purpose underlying s. 11 is not served by attempting to distinguish between voluntary and involuntary payments. The distinction is not an easy one to make. Plazavest argues that the payment of the bill was not voluntary because National made the payment from Plazavest's account over Plazavest's objection. National argues that Plazavest agreed, as part of the 1997 agreement, that National could unilaterally make the payment. National contends that a payment made pursuant to an agreement, the validity of which is not challenged, is a voluntary payment.

[31] I would avoid any attempt to characterize a payment as voluntary and involuntary, but instead distinguish between payments that are authorized by the payor and those that are not authorized. Where the payment is authorized by the payor, I would hold that it is a payment for the purposes of s. 11 of the Act. Plazavest agreed that it would pay National's actual legal fees and expenses. It also agreed that National could unilaterally pay those fees and expenses from Plazavest's account if Plazavest did not pay them. These were two terms of a complex bargain struck between National and Plazavest by which Plazavest gained access to financing in excess of $2 million. There is no suggestion that the agreement does not reflect the bargain made between National and Plazavest or that there is any reason why the court should not enforce that bargain. Indeed, I do not understand Plazavest to contend that National was not entitled to pay the bill.

[32] In my opinion, the payment was authorized by Plazavest under the terms of the 1997 agreement and is a payment of the bill for the purposes of s. 11 of the Act. Plazavest's objection to paying the bill could not make the payment unauthorized since Plazavest had agreed in advance that National could unilaterally make the payment. Plazavest was, therefore, entitled to an assessment only if it could show that the special circumstances of the case appeared to require an assessment.

V.

[33] Section 11 refers to "special circumstances", which "in the opinion of the court appear to require the assessment." This language clearly implies that assessment after payment will be the exception rather than the rule. It further contemplates that in determining whether to order an assessment, the court has a broad discretion to be exercised on a case-by-case basis and with an eye to all of the relevant circumstances. As was said in Minkarious v. Abraham, Duggan, supra, at p. 49 O.R., p. 236 C.P.C.:

. . . exceptional circumstances of either a contractual or an equitable nature could lead a court to find that an assessment is necessary or essential on general principles or is called for as being appropriate or suitable in the particular case.

[34] In deciding whether special circumstances exist, the court may take into consideration the fact that payment was made by a third party and not by the client. Section 9(2) of the Act provides in part:

9(2) . . . the court may take into consideration any additional special circumstances applicable to the person making it [the payment], although such circumstances might not be applicable to the party chargeable with the bill [the client] if he, she or it was the party making the application.

[35] Section 9(2) of the Act reflects the reality that a third party required to pay a legal bill will often not be in as good a position as the client to determine the propriety of that bill. In Tory, Tory, DesLauriers and Binnington v. Concert Productions International Inc. (1985), 7 C.P.C. (2d) 54 (Ont. H.C.J.), Steele J. considered a case in which a borrower committed to pay the lender's legal fees as part of the financing arrangements. The borrower subsequently sought to assess those fees. Steele J. said, at p. 57:

A third party under s. 8 [now s. 9] can be in no higher status than the party itself, and therefore, in my opinion, special circumstances are required to be shown by the applicant herein. However, s. 8(2) [s. 9(2)] allows the Court to consider any extra circumstances. A third party is not per se automatically entitled to be said to have special circumstances, although it should be given more favourable consideration than the party who paid the account. The facts in each case must be considered on their merits.

[36] Bearing in mind the comments of Steele J. and the need to consider all of the circumstances of the case, three factors are particularly significant in determining whether special circumstances exist here. First, the payment to Kelly Affleck was made on Plazavest's behalf by National over the express objection of Plazavest. Plazavest had made it clear that it did not agree with the amounts claimed in the bills provided to National by Kelly Affleck. In this circumstance, the normal inference concerning the propriety of the bills flowing from the payment of the bills cannot be made. It cannot be said that Plazavest is seeking to challenge legal bills which, by its earlier conduct, it had accepted as appropriate. To the contrary, in bringing this application, Plazavest was maintaining the same position it had taken from the time it was first advised of the amount of the bill. Denying an assessment in these circumstances does not further the purpose underlying s. 11 of the Act: see Enterprise Rent-a-Car v. Shapiro, Cohen, Andrews, Finlayson, supra, at p. 265.

[37] Second, when Plazavest initiated this application, it had virtually no information concerning the work done by Kelly Affleck for which the law firm was claiming fees in excess of $32,000. Plazavest was not the client and could not have first hand knowledge of what work Kelly Affleck had done on the relevant transactions. Plazavest requested the bills when National demanded payment. National provided one bill referable to a very small part of the overall amount claimed by Kelly Affleck but refused to provide the remaining bills. In effect, National took the position that Plazavest was obligated to pay the legal fees but was not entitled to any information concerning the work done to earn those fees. National eventually modified its position somewhat and did provide Plazavest with the bills given to it by Kelly Affleck. The bills given to Plazavest were, however, edited on the basis of solicitor-client privilege and gave Plazavest only partial information as to the work done by Kelly Affleck. The edited bills were provided long after National had paid the bill from Plazavest's account.

[38] National's refusal to give the bills to Plazavest before paying the legal fees from Plazavest's account, and its subsequent providing of only edited bills to Plazavest are important factors which tells in favour of directing an assessment. A third party who has agreed to pay a client's legal bills is entitled, subject to any sustainable solicitor- client privilege claim, to information in the client's possession which is relevant to the determination of whether the legal bills are properly payable by the third party.

[39] I would think that in the normal course, a client in the position of National should provide copies of the legal bills to the third party who was responsible for paying those bills. If the client has legitimate concerns that the bills will reveal information protected by the solicitor-client privilege, the client should provide the third party with a description of the legal work done and the fees charged for that work which will protect the privilege but still allow the third party to make an informed decision as to its obligation to pay that bill.

[40] Had National been more forthcoming in providing details as to the services rendered by Kelly Affleck, it may well have avoided this application altogether. At a minimum, it would have been in a much better position to argue that Plazavest could not demonstrate "special circumstances".

[41] The third factor to be considered is the wording of the terms of the agreement between Plazavest and National. This was the factor which Sanderson J. regarded as determinative against Plazavest on the special circumstances inquiry.

[42] Plazavest argued that a term requiring that the legal fees be reasonable should be implied into the 1997 agreement. I cannot accept that submission. The 1990 agreement referred to "reasonable" legal fees and expenses. The parties chose to change that term in the 1997 agreement and Plazavest agreed to pay "actual" legal fees and expenses. I see no reason why the court should ignore the change in the language made by the parties.

[43] I do not, however, accept National's submission that the language of the agreement tells against an assessment. Plazavest agreed to pay actual legal fees and expenses incurred in relation to the transactions arising out of the loan agreement. Given National's position, Plazavest had no way, other than through the assessment process, of determining whether the amounts claimed in the bills met these two criteria. I see nothing in the language of the 1997 agreement which should foreclose Plazavest's resort to an independent arbiter to determine whether the fees claimed in fact came within the description of the fees which Plazavest had agreed to pay. The analysis of Adams J. in Re Borden & Elliot v. Barclays Bank of Canada, supra, at pp. 358-59, although directed to an agreement requiring that the third party pay "reasonable" fees, seems to me to have equal application to the 1997 agreement. Plazavest agreed to pay actual legal fees and expenses incurred in relation to the loan transaction. It did not agree to pay any and all fees claimed by Kelly Affleck. The terms of the 1997 loan agreement may well limit the arguments available to Plazavest on an assessment, but in my view they should not preclude that assessment.

[44] Plazavest was entitled to satisfy itself that the legal fees and expenses which were claimed met the criteria set out in the 1997 agreement. National chose to deny Plazavest the relevant information and to pay Kelly Affleck's fees from Plazavest's account over Plazavest's express objection. Absent an assessment by Plazavest, there will be no independent review of the fees and no way of knowing whether they are truly covered by the 1997 agreement. In my view, these factors combine to constitute special circumstances within the meaning of s. 11 of the Act. This is a case where an assessment should be ordered.

VI.

[45] As I would order an assessment, I must address the solicitor-client privilege claim made by National. National contends that many of the entries in the bills provided by Kelly Affleck are protected by solicitor-client privilege. National cannot, of course, have the final say on this issue. The unedited accounts should be produced to the assessment officer who may examine them and determine what part, if any, should be protected by the solicitor-client privilege. The assessment officer may also have to consider whether the terms of the 1997 agreement constitute a waiver of any solicitor- client privilege claim in so far as it relates to Plazavest's obligation to pay National's legal bills. Any bill or part of a bill which is not protected by the privilege should be turned over to Plazavest. The assessment officer may, if he or she can do so without compromising the privilege, also provide Plazavest with a summary of any of the information which has been determined to be protected by the solicitor- client privilege.

VII.

[46] I would allow the appeal, set aside the order below, and direct an assessment subject to the conditions set out above. Plazavest is entitled to its costs here and below.

Appeal allowed.

Notes

Note 1: The parties agree that this is a typographical error and should be December 18, 1997.

Note 2: Even if ss. 15 to 33 applied, s. 25 would appear to put Plazavest in virtually the same position it would be in if s. 11 applied. Section 25 would allow Plazavest to apply to "re-open" the agreement under which the legal fees were paid. If Plazavest could demonstrate "special circumstances" the court could order the agreement re-opened and the fees assessed.

Note 3: Given the conclusion I have reached, I need not decide whether Plazavest's application does fall within s. 3(a) or (b) of the Act. Arguably, it is an application brought more than one month after delivery of the bill and less than 12 months after delivery of the bill and therefore falls into the "gap" in the Act recognized by this court in Peel Terminal Warehouses Ltd. v. Wootten, Rinaldo & Rosenfeld, supra: see also Krigstin v. Samuel (1982), 31 C.P.C. 41 (Ont. H.C.J.); Enterprise Rent-a-Car Company v. Shapiro, Cohen, Andrews, Finlayson (1998), 1998 1043 (ON CA), 38 O.R. (3d) 257 at p. 260, 157 D.L.R. (4th) 322 (C.A.).