COURT OF APPEAL FOR ONTARIO

CITATION: Ghaeinizadeh v. Bennett Jones LLP, 2014 ONCA 267

DATE: 20140404

DOCKET: C57201

Rosenberg, MacPherson and LaForme JJ.A.

BETWEEN

Pedram Ghaeinizadeh, Armon Ghaeinizadeh, Payam Ghaeinizadeh, Azeta Ghaeinizadeh, Manouchehr Ghaeinizadeh, Ilinaz Naeli, Ila Naeli, Jaclyn Orsetto, Bahieh Sharifi, Arash Sharifi, Masoumeh Abbasian, Mehran Yazdani, Lerpon Paul Greenspoon, Armonico Corp. and 6740197 Canada Corp. operating as Dux Holdings

Applicants/Clients (Appellants)

and

Bennett Jones LLP

Respondent/Solicitors (Respondent)

Jerome R. Morse, for the appellants

Ruth Promislow and Nathan Shaheen, for the respondents

Heard: January 10, 2014

On appeal from the judgment of Justice J. Patrick Moore of the Superior Court of Justice, dated April 18, 2013.

Rosenberg J.A.:

[1] The appellant clients appeal from the judgment of Moore J. allowing an application in part for an order referring accounts rendered by its former solicitors, Bennett Jones LLP, for an assessment. In its starkest form the issue presented is whether clients, having represented to a court for the purpose of fixing party and party costs that the accounts rendered by its former solicitors were reasonable, can apply to another court for an order permitting assessment of those costs. In careful reasons, the application judge refused to permit this change in approach and, in effect, eliminated the assessment of the costs. For the following reasons, I would allow the appeal. In my view, the decision of this court in Harper Jaskot LLP v. Bosanac (2002), 2002 CanLII 17640 (ON CA), 62 O.R. (3d) 635, is dispositive of the appeal.

THE UNDERLYING FACTS AND THE ORDER OF PERELL J.

[2] The appellants loaned over $2 million to an individual and corporation whom I will refer to simply as KDT. KDT failed to make payments as required under the loan arrangements and the appellants retained Bennett Jones in July 2009. Bennett Jones began an action against KDT in August 2009 and obtained a Mareva injunction to prevent KDT from dissipating the appellants’ funds. On October 29, 2009, the appellants transferred the file to their present counsel Adair Morse LLP. The appellants apparently had no complaint about the quality of work by Bennett Jones but they were concerned about the fees they were charged. By October 29, Bennett Jones had rendered three interim accounts totalling approximately $240,000 for fees and disbursements. The appellants paid those accounts and two further accounts on November 4, 2009, said to be the final account for $72,783.25, and November 9, 2009 for disbursements of $1,537.52. In all, Bennett Jones provided five accounts totalling $312,825.78 inclusive of taxes and disbursements for its work over the approximately three months that it was retained by the appellants.

[3] Adair Morse continued the action and obtained an order from Perell J. on July 26, 2010 continuing the Mareva injunction. His reasons are reported at 2010 ONSC 4169 and demonstrate the complexity of the proceedings.

[4] On August 27, 2010, Adair Morse notified Bennett Jones that it had instructions from the appellant to commence an application for an assessment of the accounts rendered by Bennett Jones. On August 29, 2010, the appellants filed written costs submissions with Perell J. The appellants sought their costs of the injunction in written costs submissions. They sought an award of costs on a substantial indemnity basis as follows:

• $199,536.50 exclusive of taxes for Bennett Jones’ fees
• $150,850.00 exclusive of taxes for Adair Morse’s fees
• $22,850.64 exclusive of taxes for disbursements

[5] Thus, the appellants sought a total of $350,386.50 in fees and $22,850.64 in disbursements from the KDT defendants. In support of their submissions, the appellants filed the Bennett Jones accounts in the amount of $269,595.50 exclusive of taxes for fees referable to the injunction.

[6] In reasons dated September 14, 2010 and reported at 2010 ONSC 4983, Perell J. agreed that because of their conduct, the KDT defendants should be required to pay costs on a substantial indemnity basis. He divided the award, related to fees, into two parts: $102,000 in the cause and $100,000 to be paid within 60 days. He dealt expressly with the amounts sought by the appellants in relation to the Bennett Jones fees at paras. 22-23:

While I think there are good reasons that the Plaintiffs should have costs on a substantial indemnity basis given the Defendants Ku De Ta Capital Inc.'s and Bashir Syed's confessed fraudulent activities and the weakness of their defence to the Mareva injunction motion, the quantum of costs claimed for the interlocutory relief must still be reasonable in the particular circumstances of the case. The overriding principle in assessing costs is reasonableness: Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ON CA), [2004] O.J. No. 2634 (C.A.). Recalling that the Plaintiffs' ultimate claim is around $2 million, $200,000 for costs for an interim interlocutory motion is disproportionate and excessive.

In my opinion, in all the circumstances, the appropriate award is to award $100,000 exclusive of disbursements but inclusive of GST for the services of Bennett Jones LLP and to make this portion of the costs award payable to the Plaintiffs in the cause.

[7] Perell J. dealt with the fees sought by the appellants in relation to the Adair Morse firm at paras. 24-25:

As I have already noted, the Plaintiffs changed their lawyers, and Adair Morse LLP assumed carriage of the file for the cross-examinations and for the argument of the motion to continue the Mareva injunction. A senior lawyer, Jerome R. Morse (call 1981) and a junior lawyer, Jennifer L. King (call 2007) did the work. Mr. Morse docketed 91.8 hours and Ms. King docketed 328 hours. The claim for this work is $81,330 on a partial indemnity basis and $150,850 on a substantial indemnity basis.

In my opinion, in all the circumstances, the appropriate award is to award $100,000 exclusive of disbursements but inclusive of GST/HST for the services of Adair Morse LLP and to make this portion of the costs award payable to the Plaintiffs in 60 days.

[8] In seeking to uphold the decision of the application judge, the respondents rely upon the costs submissions that Adair Morse made to Perell J. on behalf of the appellant. Those submissions included the following:

The plaintiffs seek their costs of their successful motions against the KDT Defendants, payable forthwith, as set out [in] the costs outlines attached as Schedules “C”, “D” and “E”. It is respectfully submitted that the costs sought by the plaintiffs are fair and reasonable, and are supported by the general principles and relevant factors governing such awards.

The proceedings to finally obtain the interlocutory relief against the KDT Defendants were difficult, lengthy and expensive. The plaintiff had to engage in lengthy and expensive investigations and litigation procedures.

The plaintiffs’ path in obtaining this relief was difficult, lengthy and expensive. Due to the KDT Defendants’ conduct, the motion was heard over three attendances, and required six cross-examinations. In the circumstances, the amount sought by the plaintiffs is reasonable.

[9] Aside from these general submissions, the appellants made no specific representations as to the accounts rendered by Bennett Jones. More specific representations were made about the accounts of Adair Morse. For example: “The time expended by both Mr. Morse and Ms. King [his junior] was reasonable given the volume of the materials filed.”

[10] On October 22, 2010, the appellants brought their application for an order referring the Bennett Jones accounts for assessment. They served Bennett Jones on December 7, 2010.

REASONS OF THE APPLICATION JUDGE

[11] The application judge dealt with a number of objections raised by the respondent to the order for assessment of its account. Two of those issues, although no longer in dispute, provide some of the context. First, the application judge considered whether the application was out of time because of s. 4 of the Solicitors Act, R.S.O. 1990, c. S.15. Section 4 provides that no reference shall be directed, among other things, after twelve months from the time the bill was delivered, sent or left, except under special circumstances. The application judge held that the client need only initiate an application within 12 months of the last bill. In this case, the last Bennett Jones account was delivered on November 5, 2009. The application was commenced on October 22, 2009 and was therefore within 12 months. In any event, this court had held in Guillemette v. Doucet, (2007), 2007 ONCA 743, 88 O.R. (3d) 90, that the limitation period in s. 4 was now subject to the Limitations Act two-year limitation.

[12] However, because the appellants had paid the accounts, the appellants had to show special circumstances in accordance with s. 11 of the Act:

The payment of a bill does not preclude the court from referring it for assessment if the special circumstances of the case, in the opinion of the court, appear to require the assessment.

[13] As this court held in Guillemette, at para. 14, the requirement of special circumstances “reflects the common sense inference that payment of an account implies an acceptance of the reasonableness of the account”. The application judge found that there were special circumstances, which can be summarized, in part, as follows:

• Early on the appellants expressed concern about the number of people working on the file and they expressed their concern to Bennett Jones upon receiving the first account;
• The appellants continued to be concerned about the size of the accounts but paid the accounts before they had received an opinion from new counsel at Adair Morse;
• The appellants believed that everything in the case was time sensitive and they did not have much of a choice but to pay the accounts;
• The appellants believed they were being pressured to pay the accounts as they were rendered;
• The appellants changed law firms because they could not afford the accounts from Bennett Jones;
• The value of the services could not be appreciated until after the appellants retained Adair Morse.

[14] The way that the application judge dealt with one of the special circumstances is worth particular emphasis. He said the following at para. 44 in listing some of the special circumstances:

He [Pedram Ghaeinizadeh] changed law firms because the applicants could not afford BJ’s accounts and he implemented this change before the injunction motion was heard, an indication to me that his concern over the size of the accounts was a real and present concern and certainly not an acceptance of the reasonableness of the accounts in all respects.

[15] The application judge concluded that the fees were “so high in the face of the terms of the retainer and the results achieved that the scrutiny of an assessment officer is warranted”. Notwithstanding that conclusion, the application judge severely limited the scope of the assessment because the appellants had not alerted Perell J. that they were concerned about the size of the accounts. He held as follows at paras. 47-48:

The applicants chose to remain silent and, went further by presenting to this court that the BJ dockets and rates, as described in the costs arguments placed before Perell J., were fair and reasonable in the context of support for a costs award against the respondents in the injunction motion. As such, I will not allow that portion of the BJ accounts to be reviewed by the assessment officer. Only the work done, services rendered and disbursements incurred that were not made the subject of claims in the costs in submissions to Perell J. will be reviewed on the assessment now ordered.

The fact that the applicants have not recovered payment on account of the award of Perell J. is irrelevant. What is relevant is that the applicants supported the reasonableness of BJ's work on the motion and cannot now take a different position before this court. [Emphasis added.]

[16] The application judge went on to consider this court’s decision in Bosanac and interpreted it as holding the following:

In Bosanac, the Court of Appeal dealt with a situation where a solicitor claimed as his fee the amount of the solicitor-and-client costs awarded by a trial judge. The appeal court concluded that the fact that the assessment of costs to be awarded by the assessment officer could be less than the award of costs at trial does not change the client's entitlement to have his or her account assessed as against his or her solicitor. The court did not, however, find that the situation in Bosanac actually did lead to a circumstance in which the client would be obligated to refund some of the amount that had been paid as a result of the assessment.

[17] He found Bosanac was distinguishable because the appellants had actively asserted before Perell J. that the Bennett Jones bill of costs was reasonable. The application judge therefore said the following at paras. 51-52:

In the result, BJ will be entitled to solicitor/client fees, disbursements and other charges in amounts equal to the costs awarded by Perell J. This award becomes the floor, not the ceiling, of the exposure the applicants will face on the BJ accounts in the assessment process.

By allowing the portions of the BJ accounts that were not before Perell J. to be assessed, the applicants will no longer be in the position going forward to claim BJ's costs on the one hand, yet challenge them on the other. As such, it will not produce an abuse of the process of the court to allow partial assessment of the accounts.

[18] The parties have interpreted this part of the application judge’s reasons as holding that any of the Bennett Jones accounts that were put before Perell J. cannot be assessed. This view is confirmed by the application judge’s disposition summarized at para. 57 of his reasons:

The four BJ accounts in this matter shall be assessed but the services rendered by BJ in connection with the injunction motion that were the subject of the applicants' claim for partial and/or substantial indemnity costs before Perell J. shall not be assessed.

[19] The total amount for fees and disbursements, inclusive of taxes, claimed by Bennett Jones and paid by the appellants was $312,825.78. The appellants placed before Perell J. Bennett Jones accounts for fees totalling $269,595.50, exclusive of tax. However, they only sought approximately $200,000 in fees from the defendants on a substantial indemnity basis, being about 75 percent of the $269.595.50 in Bennett Jones fees placed before Perell J. It is not entirely clear what amount the application judge intended to be immune from assessment. The respondents submit that the entire $312,825.78 is not referable for assessment. The appellants appear to accept that interpretation of the application judge’s holding.

ANALYSIS

[20] As this court observed in Price v. Sonsini (2002), 2002 CanLII 41996 (ON CA), 60 O.R. (3d) 257, at para. 19 and Glanc v. O’Donohue & O’Donohue, 2008 ONCA 395, 90 O.R. (3d) 309, at para. 42, public confidence in the administration of justice requires that courts intervene to protect the client’s right to a fair procedure in respect of assessments of accounts. The courts will ensure that the client’s request for an assessment is dealt with fairly. In this case, the solicitors object to the assessment on a fundamental basis beyond simply a question of fair procedure. They argue that to permit the assessment would constitute an abuse of the court’s process.

[21] Abuse of process is a broad and flexible concept. As Goudge J.A. observed in dissent in Canam Enterprises Inc. v. Coles (2000), 2000 CanLII 8514 (ON CA), 51 O.R. (3d) 481, at para. 55, in a passage quoted with approval by Arbour J. in Toronto (City) v. Canadian Union of Public Employees (C.U.P.E.), Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at para. 37, the doctrine of abuse of process engages the court’s power to prevent misuse of its procedure in a way that would be unfair to a party. That element of abuse of process is not engaged in this case. There was nothing unfair in the way that the appellants pursued the assessment. They paid their accounts and notified the solicitors of their intent to pursue the assessment before the costs issue was dealt with by Perell J.

[22] But abuse of process also prevents a party from pursuing litigation that would bring the administration of justice into disrepute. As Arbour J. observed at para. 43 of C.U.P.E.: “In all of its applications the primary focus of the doctrine of abuse of process is the integrity of the adjudicative functions of courts.” The focus is on the “integrity of judicial decision making as a branch of the administration of justice”. Thus, one of the principal incidents of abuse of process is to prevent repeated litigation of the same issue. That aspect of this case was directly addressed in Bosanac where the court held that the doctrine of abuse of process does not prevent a client from having the solicitor’s bill assessed even though the solicitor’s costs have previously been fixed by the trial court. This court explained the inapplicability of abuse of process at para. 4:

In this case, the duty of care that a solicitor owes to his or her client and the ability of a client to pay and any special arrangements are factors in an assessment of the solicitor's account that would not be raised in the party-and-party proceedings before the trial judge. It is therefore not unfair to allow the client to have a solicitor's bill assessed although costs had been fixed and awarded at trial.

[23] The issue in this case is whether that holding applies where the client has submitted in the previous court for the purpose of obtaining costs from the defendants that the accounts of their previous solicitor were reasonable. In my view, it does. While abuse of process is a broad doctrine, it is important that it not be stretched beyond the core interests of protecting the integrity of the adjudicative functions of the courts. As explained in Bosanac, because of the different interests engaged, the integrity of the decision-making process is not undermined by a subsequent assessment of the solicitor’s account. A client’s submission that the solicitor’s account was reasonable for the purpose of party and party costs is not a concession that the account was reasonable in the different context of assessment between solicitor and client. Not only do the two contexts engage unique interests and considerations, the amounts in question invariably differ: even where costs are ordered on a substantial indemnity basis, they will rarely if ever reach the amount clients must pay their own solicitor. And as this court pointed out at para. 5 of Bosanac, if the assessment reduces the fees below what was ordered by the trial court, the client could be obligated to refund some of the amount that had been paid as a result of the party and party costs order.

[24] It is particularly apparent in this case that the integrity of the decision-making process is not engaged. Perell J. was required to consider the issues for party and party costs as set out in Rule 57. He determined that for those purposes the Bennett Jones accounts were excessive. In the face of that holding it would undermine public confidence in the administration of justice if the clients were not entitled to have those costs assessed. We also note that the appellants did not seek the entire amount billed by Bennett Jones.

[25] The respondent relies upon Angelini v. Angelini (2008), 2008 CanLII 151 (ON SC), 47 R.F.L. (6th) 368 (Ont. S.C.). In that case, the husband and wife executed a separation agreement that dealt with division of property between the parties. In 2001, the husband brought a claim in which he sought specific performance of the separation agreement. He executed two affidavits in which he referred to the separation agreement and relied upon its terms in order to obtain possession of his personal possessions. That action was settled with the husband executing certain documents and in return receiving his possessions. However, in 2007, the husband brought another action for support and equalization and sought to set aside the separation agreement on the basis of, among other things, lack of disclosure, duress and undue influence. The wife brought an application to dismiss that part of the claim dealing with equalization on the basis of abuse of process because the husband in the prior action had applied to enforce the terms of the separation agreement.

[26] In the course of finding that there was no abuse of process, Herman J. referred to a number of cases that fall within the category of approbation and reprobation. The principle has generally been applied, as argued in Angelini, to prevent a party from accepting and rejecting the same instrument. As Herman J. observed, the principle can be applied more broadly to prevent a person, having received benefits from a course of conduct, from pursuing later an inconsistent course of conduct: see e.g. Enquist v. Hass, [1979] B.C.J. No. 464 (S.C.), referred to by Herman J. at para. 41 of Angelini. Alternatively, it can be generalized as a theory that where there are inconsistent courses of action, a party having chosen one of those actions cannot later elect another option: Angelini at para. 46, referring to Malva Enterprises Inc. v. Rosgate Holdings Ltd. (1993), 1993 CanLII 8675 (ON CA), 14 O.R. (3d) 481 (C.A.).

[27] In my view, Bosanac is a complete answer to the suggestion that the appellants engaged in approbation and reprobation by seeking an assessment of the accounts placed before Perell J. Given the different objectives and considerations arising in the two contexts of party and party costs and solicitor account assessments, parties availing themselves of both are not pursuing inconsistent options.

[28] The respondent attempts to distinguish Bosanac on the basis that in that case the same lawyer who made the costs submissions before the trial judge was the lawyer whose costs were later sought to be assessed. They argue that it would be unfair to hold the client in Bosanac to a position put forward by the lawyer whose account it now sought to assess. In this case, by the time the submissions were made to Perell J., the appellants had changed counsel. In my view, this is not a significant difference. Bosanac determined that it is not unfair to allow the client to assess the solicitor’s bill after costs are fixed and awarded because the client’s interests in the two processes are different. These interests remain distinct even if the client retains new counsel prior to the costs submissions. Put somewhat differently, a change of counsel does not change the fact that the client advances different interests in making party and party costs submissions and assessing the solicitor’s account. Accordingly, application of this court’s decision in Bosanac cannot turn on the identity of counsel making costs submissions.

[29] There is a further problem with the order made by the application judge. The application judge purported to order assessment of some part of the Bennett Jones accounts. However, the effect of the order was to prevent any meaningful assessment of the accounts, since, with the exception of a final account for disbursements, they were all before Perell J.

DISPOSITION

[30] Accordingly, I would allow the appeal and order that the five Bennett Jones accounts be assessed. The appellants are entitled to their costs before the application judge fixed at $15,000 and in this court fixed at $10,000, both inclusive of disbursements and HST.

Released: “MR” April 4, 2014

“M. Rosenberg J.A.”

“I agree. J.C. MacPherson J.A.”

“I agree. H.S. LaForme J.A.”