COURT FILE NO.: 10-24577

DATE: 2012-04-27

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Scott Paul Holmes et al., applicants

AND: Lerners LLP, respondent

BEFORE: Mr Justice Ramsay

COUNSEL: Mr Marc A. Munro for the applicants

Ms Liza C. Sheard for the respondent

HEARD: 2012-04-26 at Hamilton

ENDORSEMENT

[ 1 ] This is an application under Rule 14.05. The applicant asks for an order that the respondent law firm’s bill be assessed. The materials on the motion were sealed by Gordon J. to protect solicitor/client privilege. They remain sealed. This endorsement need not be sealed, as I have not found it necessary to quote privileged communications.

[ 2 ] The applicant was sued for fraud by his employer, Canadian National Railway Company. The action is outstanding. On August 8, 2008 Lederman J. issued a Mareva injunction. Under that order and subsequent interlocutory orders, the applicant’s assets were from then on controlled by a monitor or a receiver.

[ 3 ] In order to enable the applicant to pay his lawyers to defend him, on November 27, 2008 C. Campbell J. ordered, on consent or unopposed by the various parties, that a fee assessor be appointed to receive, review and approve Lerners’ bills. The order provided that the assessor would take into account the factors that would be considered in an assessment between a solicitor and his own client under the Solicitors Act . Lerners provided summaries of the work done. CN was allowed to see redacted summaries and make submissions to the assessor.

[ 4 ] Paragraph 13 of Campbell J.’s order provides

This Court orders that the fee determination shall be treated as a final order with respect to the payment of the accounts of the monitored parties, and that the monitor shall pay all accounts reasonably promptly thereafter from such funds as shall then be available to do so.

[ 5 ] Three sets of fees were submitted to the assessor, the Honourable John Ground, QC. In three reports, he approved the accounts, subject to the reduction of two of them by 10% on the basis that too much time was spent handling documents.

[ 6 ] The order of November 27, 2008 was made in the context of an order made by the same judge on November 4, 2008. The November 4 order gave the court’s sanction to a protocol that was negotiated by the parties. The protocol was designed to allow the applicant to participate in the civil action without giving statements that could be used in any criminal prosecution.

[ 7 ] On November 30, 2008 the applicant e-mailed his lawyers to express concern about the fees he was paying and the conciliatory approach that the lawyers were taking. The lawyer wrote back explaining the reasons for the chosen tactics. I infer that the applicant accepted this advice because he did not discharge Lerners for another six months and when he did, he told the judge that he was discharging them because he could not afford them.

Assessment of a legal bill

[ 8 ] The Solicitors Act provides:

3. Where the retainer of the solicitor is not disputed and there are no special circumstances, an order may be obtained on requisition from a local registrar of the Superior Court of Justice,

(a) by the client, for the delivery and assessment of the solicitor’s bill;

(b) by the client, for the assessment of a bill already delivered, within one month from its delivery;

(c) by the solicitor, for the assessment of a bill already delivered, at any time after the expiration of one month from its delivery, if no order for its assessment has been previously made. R.S.O. 1990, c. S.15, s. 3 ; 2006, c. 19 , Sched. C, s. 1 (1).

4. (1) No such reference shall be directed upon an application made by the party chargeable with such bill after a verdict or judgment has been obtained, or after twelve months from the time such bill was delivered, sent or left as aforesaid, except under special circumstances to be proved to the satisfaction of the court or judge to whom the application for the reference is made. R.S.O. 1990, c. S.15, s. 4 (1) .

5. No bill previously assessed shall be again referred unless under the special circumstances of the case the court thinks fit to direct a reassessment thereof. R.S.O. 1990, c. S.15, s. 10 .

6. 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. R.S.O. 1990, c. S.15, s. 11 ; 2002, c. 24 , Sched. B, s. 46 (1).

[ 9 ] The applicant submits that upon proof of special circumstances he is entitled to an assessment under s.4 of the Solicitors Act .

[ 10 ] The respondent submits that the applicant has already had the assessment to which he is entitled in view of the terms of Campbell J.’s order.

[ 11 ] I do not take Campbell J.’s order to reiterate the applicant’s rights under the Solicitors Act or derogate from them. Campbell J. had a specific purpose. He was setting up a mechanism that would allow the applicant to retain counsel in spite of the Mareva injunction. A way had to be found to allow the applicant access to his frozen assets without the ability to dissipate them unduly to the detriment of the plaintiff, who was claiming a constructive trust. In the assessment by the fee assessor, the applicant and Lerners both had the same interest in demonstrating why any particular amount was necessary to the applicant’s defence. In an assessment under the Solicitors Act , the applicant and the solicitor would have opposing interests. I think that the fact that the applicant has had the benefit of a review of the bills by an independent assessor is a relevant circumstance, to be considered as part of the circumstances as a whole when I am deciding whether there are special circumstances within the meaning of the Solicitors Act . I do not accept, however, that the court-ordered assessment prevents the applicant from resorting to the Act .

[ 12 ] Sections 4 and 11 of the Act do not permit me to refer the matter for assessment in the present case unless there are special circumstances for two reasons:

a. The application was filed beyond the time specified in s.4 (which is 12 months after delivery of the final bill); and

b. The bill has been paid.

When were the bills final?

[ 13 ] The three sets of accounts that were sent to Mr Ground consisted of 10 monthly bills, nine of which were sent to the applicant by email between August 22, 2008 and June 8, 2009. The last bill was mailed to the applicant on August 7, 2009. The applicant deposes that he did not receive this last bill because it was mailed to the wrong address. I do not believe him. The bill was mailed to the same address that appears on the notice of intent to act in person that he signed and filed with the court. Lerners drafted the form. I infer that the address on the form was the address that the applicant gave to Lerners.

[ 14 ] A bill is final when it is not subject to adjustment. I do not take the monthly bills to be final bills even though the retainer agreement required the applicant to pay them as they were delivered. It was clear from the order of Campbell J. that the bills would not be paid until the assessor reviewed them, and the receiver would only pay them in accordance with the assessor’s report. Lerners accepted this. When the assessor reduced some of the accounts, they did not attempt to collect the balance from the applicant. I think the bills became final when Mr Ground issued his assessments.

[ 15 ] Mr Ground released his assessments on April 16, 2009, June 30, 2009 and September 16, 2009, respectively. The application was filed on December 24, 2010. The delay exceeded the 12 months, then, by about three months, six months and nine months, as the case may be.

Do special circumstances exist?

[ 16 ] The applicant has suggested a number of special circumstances. I find no merit in many of them.

[ 17 ] The applicant submits that the accounts are excessive on their face. I do not agree. The bills are substantial, but the summaries speak of hundreds of hours of work.

[ 18 ] I find no merit in the allegation of conflict of interest. The junior lawyer for Lerners had worked for CN previously as a member of a different law firm. He had received no information with any pertinence to the applicant. If anyone had reason to be concerned about the previous retainer, it was CN, not the applicant. CN did express concern. As a result, the senior lawyer for Lerners assured CN that knowledge of CN’s operations acquired in confidence would not be used against CN. I find nothing wrong with any of this or with the fact that the applicant was not told. It did not affect him. For that reason, I do not believe his testimony that if he had known, he would not have retained Lerners.

[ 19 ] Finally, I reject the applicant’s contention that Lerners was not authorized or instructed to perform all of the work in question. The documentary evidence and the applicant’s own cross-examination contradict this suggestion.

[ 20 ] The purpose of the Solicitors Act is to make lawyers readily accountable to their clients for the amounts that they charge in fees. See Echo Energy Canada Inc. v. Lenczner, Slaight , 2010 ONCA 709 . At the same time, it recognizes the public interest in allowing lawyers to have a degree of certainty in their billings.

[ 21 ] The Court of Appeal set out important principles in Price v. Sonsini, 2002 41996 (ON CA) , [2002] O.J. No. 2607:

Public confidence in the administration of justice requires the court to intervene where necessary to protect the client's right to a fair procedure for the assessment of a solicitor's bill. As a general matter, if a client objects to a solicitor's account, the solicitor should facilitate the assessment process, rather than frustrating the process. See Orkin, The Law of Costs, 2nd ed. (2001), at p. 3-13. In my view, the courts should interpret legislation and procedural rules relating to the assessment of solicitors' accounts in a similar spirit. As Orkin argues, "if the courts permit lawyers to avoid the scrutiny of their accounts for fairness and reasonableness, the administration of justice will be brought into disrepute". The court has an inherent jurisdiction to control the conduct of solicitors and its own procedures. This inherent jurisdiction may be applied to ensure that a client's request for an assessment is dealt with fairly and equitably despite procedural gaps or irregularities. …

Accepting the respondent's [the solicitor’s] position would also be contrary to the principle that the law will prevent prejudice resulting from delay in asserting claims or legal arguments. This principle is applied through the doctrines of estoppel, laches, waiver and acquiescence. Rule 2.02 (b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 limits the right of a party to attack a proceeding or a step, document or order in a proceeding for irregularity if the party has taken a further step in the proceeding after obtaining knowledge of the irregularity. In Chippewas of Sarnia Band v. Canada (Attorney General) (2000), 2000 16991 (ON CA) , 51 O.R. (3d) 641 , leave to appeal to S.C.C. dismissed, reconsideration dismissed, [2001] S.C.C.A. No. 63 , this court held at p. 722 that "[a] party cannot claim entitlement to the mechanical grant of an automatic remedy without regard to the consequences to the rights of others that might flow by reason of the complaining party's own conduct, including any delay in asserting the claim".

[ 22 ] A client who acts promptly can have an assessment on requisition, without the intervention of a judge. If the bill has been paid, however, special circumstances are required, on the theory that a person who has paid the bill can be taken to have accepted that it is reasonable: Plazavest Financial Corp. v. National Bank of Canada , 2000 5704 (ON CA) , [2000] O.J. No. 1102 (CA).

[ 23 ] In the present case, the bill was paid, but not by the applicant. It was paid by a court-appointed receiver. That circumstance is sufficient to rebut the presumption that by paying the applicant admitted that he thought that the bill was reasonable.

[ 24 ] The Act also requires special circumstances if the bill has not been assessed within 12 months of delivery. Again, in ordinary circumstances a person who has waited so long to dispute a bill can be taken to have accepted it. Furthermore, easy access to review after substantial delay would make it difficult for lawyers to do business.

[ 25 ] Looking at the circumstances of the case in their entirety from the point of view of the client, are there special circumstances that should lead me to order an assessment in spite of the delay?

[ 26 ] With respect to the three sets of bills, the delay runs from 15 to 21 months, although from the client’s point of view, it was 15 months after he learned the total amount he would have to pay. During most of that time, the applicant was no longer represented by Lerners. Lerners was removed from the record on June 9, 2009, at which time the applicant told the court that he could not afford them. The applicant did not have to worry about compromising a continuing relationship.

[ 27 ] On the other hand, the bill is very significant. The total is in the neighbourhood of $650,000. Given the relatively short delay, I do not see any prejudice to the solicitors that could not be compensated by appropriate directions for costs.

[ 28 ] I conclude that there are special circumstances within the meaning of the Solicitors Act . I direct that the 10 monthly bills be assessed. The parties agree in this event that the assessment should take place in Toronto, and I so order.

[ 29 ] The parties may make submissions in writing to the costs of this motion and to any order I might make under subsection 4(2) of the Act with respect to the costs of the assessment. The applicant’s submissions are due 14 days from the release of this endorsement. The respondents are due in 14 further days.

J.A. Ramsay J.

Date: 2012-04-27