SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: CV-10-412872

DATE: April 18, 2013

IN THE MATTER OF THE SOLICITORS ACT

RE: 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

• and -

Bennett Jones LLP

Respondents/Solicitors

BEFORE: Justice Moore

COUNSEL:
Jennifer L. King and Alexa Sulzenko, for the Applicants

Ruth Promislow and Nathan Shaheen, for the Respondent

HEARD: 7 January and 5 April 2013

E N D O R S E M E N T

Moore J.

[1] It has often been said that the person with nothing to hide has nothing to fear. This adage may be particularly true where it applies to the process of scrutinizing accounts rendered by law firms to their clients.

[2] This is an Application, brought by Pedram Ghaeinizadeh (“Pedram”) and his fourteen co-applicants for an order referring accounts rendered by their former solicitors, Bennett Jones LLP (“BJ”), for an assessment.

[3] The applicants are all members of Pedram’s family, companies controlled by his family or family friends.

[4] In response, BJ raises a number of objections and argues that the applicants have offered too little in support of their Application and brought it too late. BJ also insists that to order an assessment in this matter would amount to an abuse of process and, in any event, would prejudice BJ.

Background

[5] The essential facts in this matter are not in dispute. The applicants loaned over $2 million by way of mortgage investments, but by May 2009, the mortgagees had defaulted upon their payment obligations. The mortgages are still in default status and proceedings are underway seeking collection of arrears and other relief.

[6] The applicants retained BJ in July 2009 to investigate and advise upon their rights and their options, including access to legal proceedings. BJ commenced an action for the applicants in August 2009.

[7] BJ moved for interlocutory relief in September 2009. Code J. made an interim order and adjourned the full hearing of the interlocutory injunctive motion.

[8] The motion was heard on July 20, 2010 by Perell J. who found in favour of the applicants and later awarded the applicants the costs of the motion on a substantial indemnity basis. The underlying lawsuit continues and the costs awarded by Perell J. remain unpaid.

The BJ Accounts

[9] BJ rendered four accounts to the applicants. The first three were interim accounts delivered between August 21 and October 16, 2009 and together totaled $205,833 in fees, $21,460.14 in disbursements and $11,211.77 for GST.

[10] The applicants decided to terminate their retainer with BJ because of they could not afford the accounts. Subsequent to termination, BJ delivered a final account to the applicants on November 5, 2009. It called for the payment of $63,762.50 in fees plus $5,581.72 in other charges and disbursements and $3,439.13 for GST.

[11] The four BJ accounts, including disbursements and GST, total over $300,000.

[12] The applicants paid all four accounts in full and in a timely fashion and the BJ file was transferred to the applicants’ new counsel, Adair Morse LLP (“AM”). Between the time of file transfer in November 2009 and the hearing of the injunction application on July 20, 2010, AM requested, and freely received, BJ’s assistance in regards to the complexities of the underlying injunction matter and costs-related issues.

[13] Perell J. released his decision on the injunction on July 26, 2010, the applicants delivered written submissions on costs on August 29, 2010, and Perell J. released his decision on costs on September 2010.

[14] Importantly, the costs award included reference to the services rendered and disbursements both BJ and AM incurred in connection with the injunction application.

Application for an Assessment

[15] BJ was notified of the applicants’ intention to have the BJ accounts assessed on August 27, 2010. The application was commenced on October 22, 2010 and served on BJ on December 7, 2010. The Notice of Application was not simply a standard boilerplate or bare notice but, rather, spanned seven pages and addressed with particularity the issues to be addressed by this court. This application came on before me on January 7, 2013.

[16] In anticipation of the hearing of the matter, the parties filed volumes of materials, including competing records, affidavits, cross-examination transcripts, factums and books of authorities. The applicants also delivered a supplementary affidavit, sworn by Pedram who was cross-examined on its content, and the parties each filed supplementary factums and books of authorities. This relatively straightforward motion has necessitated the felling of forests, as it has generated enough paper to fill two banker’s boxes. Surely the volume of work produced for this motion makes little economic sense and is beyond the means of the average person.

The Issues

[17] The issues are:

• Can the court receive and consider the supplementary affidavit that Pedram swore on 7 March 2013?

• Is this application statute barred by operation of section 4 of the Solicitors Act?[1]

• Is this application barred by operation of section 11 of the Solicitors Act?

• Is this application an abuse of the court’s process?

Analysis

[18] When assessing solicitor’s accounts, the starting point, as recently and cogently stated by Rosenberg J.A.[2], is a focus on the perspective of the client, not the solicitor. He cited with approval the following comment from Murray J. in Andrew Feldstein & Associates Professional Corp. v. Keramidopulos[3], at para. 63:

At a time when access to justice is such an important issue, and when lawyers’ fees are getting so far out of reach for many ordinary people, it is crucial that an individual's right to a fair procedure for assessment of lawyers’ fees exists. As Justice Sharpe said in Price v. Sonsini, [(2002), 2002 41996 (ON CA), 60 O.R. (3d) 257 (C.A.)] 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 assessment of a solicitor’s bill. His admonition that solicitors should facilitate the assessment process when a client objects to a solicitor’s account rather than frustrating the process is more than just a guideline for law firms. It is essential. Clients must be able to assess their lawyers’ accounts or they will be or will perceive themselves to be powerless in the face of unfair billing practices. There can be little doubt that if the courts permit lawyers to avoid scrutiny of accounts in appropriate cases, the administration of justice will be brought into disrepute.

[19] In this case, BJ required its ongoing financial retainer to be replenished at regular intervals and in such situations, this court has held the solicitors should not, in good conscience, raise the fact of full payment as a defense to the assessment[4]. I share this view.

[20] BJ argues that the accounts it rendered to the applicants between August 2009 and November 2009, which called for payment of well over $300,000 in fees and other charges, were reasonable. BJ has declined to facilitate the process of allowing the client and an assessment officer of this court to test that assertion, and has instead raised procedural and statutory objections to the assessment application.

[21] The first issue BJ raised was that Pedram’s supplementary affidavit is inadmissible for its failure to meet what it described as the mandatory test provided by rule 39.02(2) of the Rules of Civil Procedure,[5] which states that

A party who has cross-examined on an affidavit delivered by an adverse party shall not subsequently deliver an affidavit for use at the hearing or conduct an examination under rule 39.03 without leave or consent, and the court shall grant leave, on such terms as are just, where it is satisfied that the party ought to be permitted to respond to any matter raised on the cross-examination with evidence in the form of an affidavit or a transcript of an examination conducted under rule 39.03.

[22] I find that BJ’s assertion overstates the intent and content of the rule. The rule is designed to retain the discretion of the court to give leave to file a further affidavit on such terms as are just and the court is mandated to grant leave where it is appropriate.

[23] BJ’s assertion that the subsequent affidavit fails to meet the test in rule 39.02(2) also overlooks the provisions of rule 1.04 which provides that the rules are to be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

[24] This is a dispute between solicitors and former clients. The cases cited in support of BJ’s position involve different, more complex issues requiring an immediate outcome. In contrast, this is a dispute over money. BJ has neither raised nor established a need for an immediate finality to the entitlement to the money potentially at issue.

[25] While it is true to say[6] that rule 39.02 has been designed to place finite limits on the evidentiary elements of litigation, the intent of the rule is to oblige the moving party to put evidence forward before embarking upon cross-examination of an opposing party’s witnesses. Here the court adjourned the matter to permit the parties to re-focus their positions and records. The new evidence is relevant. It has been considered and tested through cross-examination. BJ has not sought to put forward any evidence in opposition to it nor did it seek an adjournment to obtain and deliver opposing evidence.

[26] In any event, the special relationship that existed between the parties, the very basis upon which BJ rendered its accounts, calls for a determination of the merits of the claimed entitlement to an assessment of those accounts.

[27] The supplementary affidavit has therefore been received and considered on this application.

[28] Turning next to the next issue, the question is whether this application is time-barred for the applicants’ failure to have BJ’s accounts referred for assessment. I find that BJ’s interpretation of the provisions of section 4(1) of the Solicitors Act in support of this objection is not supported by case law or by a fair reading of the section.

[29] Section 4(1) provides:

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 12 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.

[30] BJ argues that the applicants exceeded the 12 month limitation period provided by this section, implying that the client must not only notify the solicitor of an intention to seek an assessment, but must initiate legal proceedings and follow them through to the point where a referral is made by a judge of this court to an assessment officer – all within 12 months from the time the last bill was delivered. I disagree with that interpretation of the section.

[31] In my view, the client must only initiate an application within 12 months of the last bill in order to preserve a right to pursue that application. It is impractical and unreasonable to expect that a client, more often than not unrepresented by counsel through some or all of the 12 month period, to not only bring an application forward but also have it steered through the legal process to a judicial determination in a timeframe so short.

[32] In any event, if I am wrong on this point, I quote and rely upon the views of Doherty J.A. who has determined that the two year limitation set out in s. 4 of the Limitations Act[7] governs and trumps the shorter timeframe set out in the Solicitors Act.[8]

[33] Therefore, I find that because the BJ final account was delivered on November 5, 2009 and this application was commenced on October 22, 2010, the application is not time barred by section 4(1). In any event, even if the application is deemed to have been brought after 12 months following November 5, 2009, the Court of Appeal has confirmed, in the passages I have referenced, that a client retains the right to have solicitors’ accounts assessed provided that the application is brought within two years. However, if the accounts have been paid, as they have in this case, Solicitors Act in section 11 states that a client can bring its application if the client can show special circumstances.[9]

[34] Section 11 of the Solicitors Act reads:

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.

[35] Rosenberg J.A. said this of that section:

The section has been interpreted as giving the court a broad discretion to be exercised on a case-by-case basis. As such, this court will defer to the decision of the application judge absent an error in principle or a clearly unreasonable result…[10]

[36] So, have the applicants shown special circumstances? I find that they have.

[37] While it is not possible to give an exact meaning to the words “special circumstances” this court has ruled that it includes “circumstances of an exceptional nature” and that this is a broad, inclusive definition.[11]

[38] That same case determined that although the amount of the fees alone would not necessarily constitute a special circumstance, the amount of the fees in the context of the contractual obligations of the parties does constitute a special circumstance.[12]

[39] I accept the uncontroverted evidence of Pedram that he felt that the applicants were overcharged on the BJ accounts in that he was surprised by the size of the accounts. He also stated that he was shocked and concerned and felt that there were too many BJ timekeepers working on the file and that he called BJ to express his concern immediately upon receiving the first account.

[40] While it is true that he did not call BJ to complain, Pedram stated that he thought that he ought not do that, out of politeness and because he has a hard time being rude to people. He testified and I accept that it was his practice to be polite in his correspondence with counsel.

[41] The fact that an account has been paid before an assessment is sought is not determinative of the question of whether the client agrees with the account in all respects. In this case, Pedram had not yet retained AM when he received and paid the three interim accounts and he paid the final account before AM had given the applicants a legal opinion on the situation.

[42] Pedram is an experienced businessman but he is not a solicitor. After he received the first account, Pedram spoke with a lawyer and fellow plaintiff, Mehran Yazdani. Thereafter, Pedram continued to be concerned that the bill was too high but he only learned that he could challenge a lawyer’s account after he consulted with AM.

[43] Pedram felt that everything in the case was time-sensitive. He felt he did not have much of a choice but to pay the BJ accounts, for which the firm demanded prompt payment, because he was already committed to BJ and hoped that ongoing work would generate lower bills over time, as Ms. Promislow had told him was generally the case.

[44] In addition, I find that the special circumstances of this case include:

• The pressure Pedram felt from BJ to make financial arrangements and pay its accounts immediately upon receipt or risk slippage of work on a time-sensitive file;

• Pedram knew he had retained an expensive Bay Street firm for the applicants, but the size of the accounts generated over a short span of time surprised and concerned him;

• He 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;

• The value of the BJ services could not be appreciated until after Pedram retained AM and after the outcome of the injunction motion and its costs consequences were known; and,

• BJ has vigorously opposed the application for an assessment of its accounts.

[45] I accept the applicants’ position that the fees and other charges 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.

[46] This said, however, I am troubled by the fact that the applicants sought costs from Perell J. without alerting him to the fact that they were at all concerned about the size of the accounts that BJ had rendered to them in connection with the motion for injunctive relief. The injunctive relief motion represents a portion, but by no means the whole, of the legal services undertaken overall.

[47] 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.

[48] 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.

[49] In Bosanac,[13] 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 Bosanic 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.[14]

[50] Given my finding that the applicants in this matter actively asserted to this court that the BJ hours and rates referenced within the bill of costs placed before Perell J. were reasonable, I find the present situation to be distinguishable from that apparent in Bosanac.

[51] 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.

[52] 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.

[53] In any event, Bosanac also confirms that the assessment process is not barred even when the court has fixed costs prior to the assessment process, contrary to the concerns BJ raised regarding issue estoppel and abuse of process.

[54] As to issue estoppel, the court in Bosanac pointed out:

The doctrine of issue estoppel prevents a party from re-litigating an issue already decided in an earlier proceeding. The requirements for issue estoppel are well settled. One of these requirements is that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel was raised. A privy is a person having an identity of interest with the party.

In an action, the solicitor, although not a party to the action, he is allied in interest with his client when costs are fixed at the conclusion of proceedings. The interest of a party at the conclusion of proceedings is to maximize them. On a solicitor-and-client assessment they are opposed in interest. On an assessment, the interest of that party-as the client-is to minimize obligations for solicitor-and-client costs. The parties or their privies are not the same and, thus, at least one of the requirements for issue estoppel is not met.[15]

[55] As for the issue of abuse of process, the court held:

The doctrine of abuse of process is also inapplicable… 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 un-fair to allow the client to have a solicitor’s bill assessed although costs had been fixed and awarded at trial.[16]

[56] While prejudice to the solicitors can arise in cases such as this, just like the prejudice that can arise from the unavailability of the lawyer who worked extensively on the file,[17] but no prejudice to BJ has been established in this case. Here, the lawyer with carriage of the file at BJ and the person who dealt personally with Pedram was Ms. Promislow and it was she who briefed and argued this application for her firm, demonstrating in the process an excellent recollection of the circumstances at issue. Fading memories or absent witnesses are not a concern here.

Disposition

[57] 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.

[58] As success on this application has been divided and as both sides invested far more time, effort and paper in this matter than was warranted, there shall be no costs awarded for this application.

Moore J.

DATE: 18 April 2013