Court File No. 54101/12
Date: June 25, 2013
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF THE SOLICITORS ACT, R.S.O. 1990, c. S.15
AND IN THE MATTER OF CASSELS BROCK & BLACKWELL LLP,
also known as CASSELS BROCK LAWYERS
BETWEEN: )
CASSELS BROCK & ) Helder M. Travassos,
BLACKWELL LLP, also known as ) for Cassels Brock Lawyers
CASSELS BROCK LAWYERS )
Lawyers )
─ and ─ )
1578838 ONTARIO INC. ) Marc A. Munro,
) for the Client
Client )
) HEARD: April 18, 2013,
) at St. Catharines
J.W. Quinn J.: ─
I INTRODUCTION
[1] In 2005, 1578838 Ontario Inc. (“mortgagor”) mortgaged property in Welland, Ontario (“mortgage”) to Scotia Mortgage Corporation (“Bank”).
[2] Five years later, the mortgagor commenced an action (“Action”) against the Bank alleging, among other complaints, the negligent performance of banking duties. The Bank counterclaimed to enforce its mortgage which was in default. The Action is ongoing.
[3] Power of sale proceedings were commenced under the mortgage in 2011, with the law firm of Cassels Brock & Blackwell LLP, also known as Cassels Brock Lawyers (“Cassels Brock”), acting for the Bank.
[4] The Notice of Sale Under Mortgage claimed costs of $155,983.24 from the mortgagor. Additional legal costs of $34,458.02 were incurred in respect of the sale, bringing the total to $190,441.26. It is alleged, on behalf of the mortgagor, that those costs, and more, were charged to the mortgagor and are excessive.
[5] Pursuant to s. 3 of the Solicitors Act, R.S.O. 1990, c. S.15 (“Solicitors Act”), counsel for the mortgagor requisitioned an ex parte Order for Assessment from the Registrar requiring Cassels Brock to produce copies of their legal accounts to be assessed. In dispute is what accounts have been charged to the mortgagor. Cassels Brock insists that most of the $190,441.26 in legal fees and disbursements relate to costs incurred in the Action and have not been charged to the mortgagor.
[6] There are three motions before me: (1) the mortgagor moves against Cassels Brock for a finding of contempt, alleging that they have refused to comply with the Order for Assessment; (2) Cassels Brock brings a motion against the mortgagor, asking that the Order for Assessment be declared a nullity, as the mortgagor was not a “client” under s. 3 of the Solicitors Act; and (3) the mortgagor moves, pursuant to s. 9 of the Solicitors Act, for an order that Cassels Brock deliver their power-of-sale accounts for assessment.
[7] A swirl of issues surrounds the motions: (1) Was s. 3 of the Solicitors Act available to the mortgagor? (This issue leads to considerations of whether the mortgagor is a “client,” as contemplated by s. 3, whether the retainer is “disputed” and whether “special circumstances” exist.) (2) If s. 3 was not available to the mortgagor, is the Order for Assessment a nullity? (3) If the Order for Assessment is a nullity, were Cassels Brock obliged to comply? (4) Did Cassels Brock move to set aside the Order for Assessment in a timely manner? (5) Has contempt been established? (In other words: Is the Order for Assessment clear and unequivocal? Was the breach, if any, deliberate and wilful? Has contempt been proved beyond a reasonable doubt?) (6) Is the information-and-belief affidavit in support of the contempt motion improper? (7) What legal accounts of Cassels Brock should be assessed? (8) What procedure should be invoked to make that assessment come about? (9) Does the Mortgages Act, R.S.O. 1990, c. M.40 have any application?
II BACKGROUND
[8] The initial background facts relate to the Action.
1. The Action
2010
Oct.13
The mortgage matured and the mortgagor commenced the Action seeking damages from the Bank for “loss of sale” and for “inducing breach of contract, negligent performance of banking duties and tortuous interference with economic relations.” Briefly put, the Action concerns the prior refusal of the Bank to consent to a proposed change of use for the property or to a postponement of the mortgage.
Unknown
The Bank served a statement of defence and a counterclaim.
2011
Feb.9
The mortgagor served a defence to the counterclaim and counterclaimed against the Bank[^1] for an injunction restraining the Bank “from . . . molesting or annoying any individuals that [the mortgagor] does business [with] or rents property to” and “restraining the Bank from Power of Sale or foreclosure proceedings.”
Jun.7
Henderson J. heard: a motion by the Bank for (1) summary judgment on its counterclaim against the mortgagor and (2) summary dismissal of the Action; and a motion by the mortgagor for (3) a stay of enforcement of the summary judgment and (4) injunctive relief.
Justice Henderson dismissed (2), (3) and (4) but allowed (1), giving judgment to the Bank for the amount owing on the mortgage and for possession of the property. Costs of the motions were reserved to the trial judge in the Action.
This means that the Action is alive as to the claim for damages against the Bank.
Jun.7
A judgment was taken out by the Bank, in accordance with (1) above, the monetary terms of which required the mortgagor to pay the sum of $1,395,338.21, comprised of “the full amount due under the mortgage, including principal, interest and property tax arrears.” Costs were not included. The property taxes were $190,881.61.
2. Notice of Sale Under Mortgage
[9] The next relevant background event is the issuance of a Notice of Sale Under Mortgage (“Notice of Sale”):
2011
Jul.27
The Bank, by its solicitors Cassels Brock, issued a Notice of Sale indicating that if the sum of $1,369,981.41[^2] was not paid by September 6, 2011, the Bank would sell the property. The amounts showed as owing in the Notice of Sale were: [Bold emphasis added]
Principal $1,158,608.62
Accrued interest from Oct. 1, 2010 to July 27, 2011 50,539.27
Tax Certificate 25.00
Property management costs 4,075.28
Legal costs paid 153,483.24
Administration costs 750.00
Costs (. . . up to and including . . . this Notice . . . .) 2,500.00
TOTAL: $1,369,981.41
[10] Of particular interest in the numbers above are: “Legal costs paid” ($153,483.24); “Costs” ($2,500.00); and “TOTAL” ($1,369,981.41).
[11] The combined costs of $155,983.24 ($153,483.24 + $2,500.00) are described by counsel for the mortgagor as “an extraordinary claim for legal costs.”
[12] However, Cassels Brock maintains that $155,983.24 is part of a larger figure, with the latter representing legal costs incurred in respect of the Action. According to Cassels Brock (and I will address this point later), “the Bank decided that the [larger] sum . . . would not be taken from the sale proceeds and charged to the mortgagor,” recognizing that “the liability for all legal costs in connection with the Action has been reserved to the trial judge.”
2011
Sept.6
This was the due date for payment under the Notice of Sale. The payment was not made.
2012
Apr.16
The sale of the property was completed.
Jun.20
Cassels Brock rendered an account to the Bank for $23,096.64 “re: . . . Mortgage Loan to 1578838 Ontario Inc.”
Aug.24
Cassels Brock rendered an account to the Bank for $11,361.38 “re: . . . Mortgage Loan to 1578838 Ontario Inc.”
Sept.17
Cassels Brock provided to counsel for the mortgagor a Power of Sale Accounting which showed “paid legal accounts” of $34,458.02 and a surplus of $797,756.54: [Bold emphasis added]
Power of Sale Accounting
Proceeds of sale $2,586,267.35
Deposit 100,000.00
Paid tax arrears $259,685.55
Paid balance of real estate commission 140,346.00
Interest on deposit 254.18
Funds from property manager 16,834.42
Insurance refund 6,489.72
Paid first mortgage 1,477,543.81
Paid water account 55.75
Paid legal accounts 34,458.02
Surplus 797,756.54
$2,709,845.67 $2,709,845.67
[13] The “Paid legal accounts” of $34,458.02 is the combined total of the accounts dated June 20, 2012 and August 24, 2012 ($23,096.64 + $11,361.38).
[14] The accounts of June 20, 2012 and August 24, 2012 are important because Cassels Brock has repeatedly insisted that they (actually, portions thereof) are the only accounts that have been charged to the mortgagor. These two accounts will surface many times in my Reasons.
3. Order for Assessment and Appointment for Assessment
[15] Counsel for the mortgagor obtained from the Registrar, pursuant to an ex parte requisition, an Order for Assessment, under s. 3 of the Solicitors Act, naming Cassels Brock as “lawyers” and the mortgagor as “client.” A fundamental issue that arises is whether the mortgagor was a “client” of Cassels Brock and had the right to such an order. Section 3 reads: [Emphasis added]
- 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.
[16] The key features of s. 3 are that: (1) it is available only to solicitors or their clients; (2) the retainer of the solicitor must not be “disputed”; and (3) there must be no “special circumstances.”
[17] Specifically, the Order for Assessment here was obtained pursuant to s. 3(a).[^3]
2012
Dec.4
The Order for Assessment was obtained by counsel for the mortgagor from the Registrar at St. Catharines. It reads:
IT IS ORDERED THAT the solicitor deliver to the client its accounts within fourteen (14) days in accordance with section 6(1) of the Solicitors Act,[^4] with respect to the power of sale proceedings regarding Scotia Mortgage Corporation loan to 1578838 Ontario Inc. on the security of 100-304 Brownleigh Avenue, Welland, Ontario, as described in the Power of Sale Accounting attached hereto as Schedules “A” and “B”.
IT IS ORDERED THAT the accounts of fees, charges and disbursement to be delivered by the said Solicitor to the said client in accordance with paragraph (1) above be referred to an Assessment Officer at St. Catharines to be assessed, the retainer of the solicitor not being in dispute, and there being no special circumstances.
Schedule “A” to the order is as follows: [Bold emphasis added]
Power of Sale Accounting
Proceeds of sale $2,586,267.35
Deposit 100,000.00
Paid tax arrears $259,685.55
Paid balance of real estate commission 140,346.00
Interest on deposit 254.18
Funds from property manager 16,834.42
Insurance refund 6,489.72
Paid first mortgage 1,477,543.81
Paid water account 55.75
Paid legal accounts 34,458.02
Surplus 797,756.54
$2,709,845.67 $2,709,845.67
Schedule “B” to the order is a copy of the actual Notice of Sale and, therefore, shows the amounts that I have set out opposite July 27, 2011 above.
[18] The Power of Sale Accounting is the same as that which was provided to counsel for the mortgagor in the letter from Cassels Brock on September 17, 2012.
[19] The relevant items in the Power of Sale Accounting are: “Paid first mortgage ($1,477,543.81)”; “Paid legal accounts ($34,458.02)”; and “Surplus ($797,756.54).”
[20] The legal accounts in the Power of Sale Accounting (Schedule “A” to the Order for Assessment), are those dated June 20, 2012 ($23,096.64) and August 24, 2012 ($11,361.38), to which I referred earlier. Cassels Brock contends that only $19,621.69 of the $34,458.02 has been charged to the mortgagor.
[21] It will be recalled that Schedule “B” to the Order for Assessment (being the Notice of Sale) contains legal costs totalling $155,983.24.
[22] Counsel for the mortgagor points out that the sum of $1,477,543.81 is $107,562.40 higher than the sum of $1,369,981.41 in the Notice of Sale;[^5] and, he further highlights the fact that the legal costs of $34,458.02 are in addition to the $155,953.24 ($153,483.24 + $2,500.00) in the Notice of Sale, making a total of $190,441.26 for costs.
[23] Counsel for the mortgagor goes further and submits that “upon closer scrutiny of the numbers it appears that Cassels Brock may have billed up to $297,503.66.” His supporting calculations are:
Gross value of sale $2,586,267.35
Tax arrears (259,665.55)
Real estate commission (140,846.00)
Mortgage without deduction for legal costs (1,213,998.17)
Water (55.75)
Surplus without deduction for legal costs 1,095,260.20
Alleged surplus after deduction for legal costs (797,756.54)
Apparent legal costs $297,503.66
[24] I do not grasp these calculations. For example, I cannot replicate the figure of $1,213,998.17.
2012
Dec.4
An Appointment for Assessment was issued at St. Catharines, returnable January 31, 2013.
Dec.11
The Appointment for Assessment and the Order for Assessment were served upon Cassels Brock. The covering letter from counsel for the mortgagor asked, “Please forward the accounts referred to in the Order for Assessment by December 31, 2012.”
4. Cassels Brock letter of December 21, 2012
[25] A letter from Cassels Brock, dated December 21, 2012, identifies some of the issues that ultimately found their way to my court:
2012
Dec.21
Having received the letter of December 11th, the Appointment for Assessment and the Order for Assessment, Cassels Brock wrote to counsel for the mortgagor and to DH Professional Corporation,[^6] saying, in part:
Re: Bank of Nova Scotia et al. ats 1578838 Ontario Inc. Court File No. 1616/10[^7]
Canadian Equity Builders (In Trust) v. 1578838 Ontario Inc. Court File No. CV-09-376981
. . . With respect to the Order for Assessment, we note that at no time was [the mortgagor] the ‘client’ of [Cassels Brock] and accordingly the statement that the ‘retainer of the solicitor not being in dispute’ is inaccurate. This Order appears to have been improperly obtained and notably no notice of such application was provided to our firm . . .We would invite [counsel for the mortgagor] to provide an explanation for this and the legal basis . . .
Consequently, at this early date, Cassels Brock correctly identified the problem with the Order for Assessment. Both sides should have been considering their procedural options (Cassels Brock – moving to set aside the Order for Assessment; and, the mortgagor – applying for an assessment under s. 9 of the Solicitors Act or arranging for an assessment under the Mortgages Act).
Counsel for the mortgagor was invited to convince Cassels Brock that the Order for Assessment was not improperly obtained.
The letter continues:
With respect to the surplus funds, as you are aware, we provided [counsel for the mortgagor] with a Power of Sale Accounting in August 2012[^8] indicating the surplus funds were in the amount of $797,756.54. Our client has at all times been prepared to release such surplus funds . . .
The letter proceeds to make a suggestion as to how the surplus funds should be handled:
While we can continue to hold the funds in trust . . . in the interest of efficiently resolving all matters concerning the surplus funds we have instructions to pay the greater amount of $986,283.88 into [counsel for Canadian Equity Builder’s] Trust Account to the credit of [the Second Action]. The amount proposed to be paid includes investment interest of $4,890.99 (to December 19, 2012) as well as the disputed legal fees. In the result, the only legal fees and disbursements charged to the mortgage account are as itemized on Schedule “A” to this letter (with relevant accounts redacted for privilege attached).
. . . Our client’s unresolved costs claim [in the Action, including the motions heard by Henderson J.] must be taken into account with respect to the surplus funds . . .
Kindly provide your agreement in writing to the payment of $986,283.88 . . . on the terms proposed above . . .
[26] Schedule “A” to the letter consists of the legal accounts dated June 20, 2012 ($23,096.64) and August 24, 2012 ($11,361.38). However, in Schedule “A” there are redactions (for privilege) and, according to the letter, only a portion of the legal accounts has been charged to “the mortgage account” ($12,689.91 and $6,931.78, respectively, totalling $19,621.69).
[27] Cassels Brock contends (and has done so repeatedly) that $19,621.69 is the only sum that has been charged to or paid by the mortgagor, notwithstanding the other, much higher, figures bandied about.
[28] Cassels Brock emphasizes that the redacted items in the two accounts “are not in respect of legal fees deducted from the net sale proceeds, but in respect of legal fees incurred [in] the Action and, as a result, are protected by solicitor-client privilege between Cassels Brock and the Bank.”
5. Subsequent correspondence
[29] Thereafter, the parties engaged in some jousting by correspondence, as Cassels Brock purported to attempt to clarify, or at least identify, the legal accounts captured by the Order for Assessment:
2013
Jan.4
Counsel for the mortgagor wrote to Cassels Brock:
My client is entitled to assess your legal accounts in accordance with section 9 of the Solicitors Act.[^9] As in the case of an ordinary assessment of a solicitor’s bill, no notice is required to be given to [Cassels Brock]. On the first return date, the practice is that a hearing date will be scheduled for a later date.[^10]
I note that in addition to your accounts of June 20 and August 24, 2012, totalling some $34,000.00, the claim for legal costs paid in the amount of $153,483.24 was referred to in the notice of sale under mortgage dated July 27, 2012. We will be requiring the production of all accounts for services rendered to your client[^11] but charged to mine[^12] in connection with the mortgage proceedings. [Emphasis in original]
The letter highlights the dilemma faced by Cassels Brock. The Notice of Sale identifies “legal costs paid” of $153,483.24 (and a further $2,500.00 for “costs”), yet Cassels Brock insists only $19,621.69 has been charged to the mortgagor. Counsel for the mortgagor wants all of the accounts produced that were “charged” to the mortgagor and does not believe the assertion by Cassels Brock that only $19,621.69 is involved.
The letter continues:
Please comply with the Order for Assessment and forward copies of all accounts rendered by your firm in this matter. [Emphasis in original]
This demand does not include the qualifier found earlier in the letter that it is the accounts charged to the mortgagor that are to be produced. Presumably, the qualifier is implied.
The letter concludes:
With regard to the trust funds, I suggest that the existing court order be complied with.
Jan.10
Cassels Brock sent a letter to counsel for the mortgagor and to the solicitor for the plaintiff in the Second Action:
. . . it appears to me that there remains some confusion as to the legal fees that have been charged to the mortgage debt.[^13]
To be clear, Schedule ‘A’ to my letter of December 21, 2012 identifies two accounts and provides a breakdown of fees, taxes and disbursements deducted from the surplus and charged to the mortgage debt. These amounts total $19,621.69, as indicated. Copies of both accounts, which include a detailed narrative of the work completed, are also attached to this letter. As previously indicated, these are the only legal fees and disbursements charged to the mortgage account and deducted from the sale proceeds.
Separate and apart from the $19,621.69 . . . the Bank has incurred additional fees on account of [the Action], as well as the counterclaim brought by the Bank against [the mortgagor] . . . Three motions were heard in May 2011 [in the Action] . . . and it was ordered that costs be reserved to the judge who ultimately tries the Action.
Consequently, [the Bank] continues to have substantial and unresolved legal costs claims . . .
The letter seeks clarification of the accounts to be produced and those to be assessed (I do not know the basis for this distinction):
With reference to [the] letter of January 4, 2013 [from counsel for the mortgagor] and prior correspondence of December 11, 2012 . . . it is unclear to me which accounts [the mortgagor] is seeking an assessment of, and which accounts it is seeking production of.[^14] Again, copies of the two accounts charged to the mortgage debt were previously provided as an attachment to my letter of December 21, 2012 . . . I would be grateful if [counsel for the mortgagor] would clarify as to whether his client is proposing to assess these two accounts . . .
Jan.10
Counsel for the mortgagor replied to the above letter from Cassels Brock:
I am content that you pay the surplus to counsel for [the plaintiff in the Second Action, in trust].
With regard to the balance of your letter, it is clear that the bank has already taken payment for legal fees and expenses charged by your firm in connection with the [Action] and the sale proceedings. In other words, you have made the decision of costs reserved to the trial judge a moot point.
Counsel for the mortgagor makes a good point. He is relying on the Notice of Sale and the Power of Sale Accounting which, on their face, suggest that legal fees totalling $190,441.26 ($153,483.24 + $2,500.00 + $34,458.02) were billed to the Bank and charged to the mortgagor.
The letter concludes:
Please disclose all of the accounts rendered by your firm to the [Bank] for purposes of assessment. [Emphasis in original]
This demand does not distinguish between accounts billed to the Bank and accounts charged to the mortgagor, which distinction was made in the letter of January 4, 2013.
Jan.14
Cassels Brock responded to the above letter, saying, in part:
. . . Again, you already have copies of all accounts for services rendered to the [Bank] that have been charged to your client in connection with the mortgage proceedings. [Emphasis in original]
The accounts are attachments to my letter to you of December 21, 2012. As is apparent from the first full paragraph on page 2 of that letter, the decision to pay the greater sum of $986,283.88 into court represents a concession in the interests of resolving the dispute related to the surplus accounting . . .
[30] In what I will later identify as the Ward affidavit (delivered on behalf of Cassels Brock), the following explanation is given, at paragraph 13, for the decision to increase the surplus from $797,756.54 to $986,283.88:
- In the [letter of December 21, 2012], Cassels Brock explained that the Bank was prepared to pay the surplus amount of $986,283.88 into trust (as opposed to the initially calculated lower surplus amount of $787,756.54), which decision[^15] was made subsequent to preparation of the notice of sale/power of sale accounting. Essentially, upon further consideration and in the interests of compromise, the bank agreed not to add litigation fees and disbursements totalling $183,636.35 to the mortgage debt or deduct these from the net proceeds of sale, and instead only deduct the $19,621.69 real estate solicitor fees and disbursements described in the [letter of December 21, 2012]. In doing so, the Bank reserved its rights to claim its costs in relation to the ongoing Action.
[31] The figure of $986,283.88 is calculated by Cassels Brock in this manner:
Surplus noted in Power of Sale Accounting $797,756.54
Legal fees in the Action 153,483.24
Legal fees incurred by Cassels Brock after issuance of Notice of Sale
but before the sale of the property 15,316.78
Further legal fees incurred by Cassels Brock in the Action 14,836.33
Investment interest 5,483.92
TOTAL $986,876.81
[32] I do not comprehend these calculations. What happened to the costs of $2,500.00 referred to in the Notice of Sale? And to the accounts of June 20, 2012 and August 24, 2012?
Jan.18
In the Second Action, O’Marra J. ordered that the surplus from the power-of-sale proceeds was to be paid to the solicitors for the plaintiff in the Second Action, in trust.
Jan.18
The surplus from the power-of-sale proceeds, then being the sum of $986,876.81, as calculated by Cassels Brock, was paid in accordance with the order of O’Marra J.
Jan.20
Counsel for the mortgagor wrote to Cassels Brock:
I acknowledge receipt of your letter of January 14 last.
My client is entitled to assess all solicitor and client accounts you have rendered to your client and which have been charged to my client’s account. This includes accounts for uncontested as well as contested matters.
Please forward copies of all accounts. [Double emphasis in original]
Once more, counsel for the mortgagor properly qualifies his request for all accounts by saying that he wants production and assessment of those that have been charged to the mortgagor.
Jan.23
Cassels Brock replied to the letter of January 20th:
. . . I confirm, once again, that you have copies of all Cassels Brock’s accounts rendered to the Bank which have been charged to your client’s account . . .
Cassels Brock, of course, is referring to the accounts dated June 20, 2012 and August 24, 2012.
This letter also addresses an adjournment of the assessment:
As well, kindly advise as to whether or not you intend to proceed with an assessment of the accounts forwarded to you December 21, 2012. If so, I am prepared to discuss dates for such an assessment as I understand from your correspondence of January 4, 2013 that the appointment date is preliminary and that a later hearing date will be scheduled . . . I would ask that you provide me with some available dates in February or March.
Jan.30
Cassels Brock, not having received a reply regarding the adjournment of the assessment, again wrote to counsel for the mortgagor:
May I please have a response to my letter of January 23, 2013, copy attached.
6. Appointment for Assessment and the three motions
[33] Finally, I come to the first return date of the Appointment for Assessment followed by the three motions now before the court:
2013
Jan.31
On the first return date of the Appointment for Assessment, counsel for the mortgagor attended. Cassels Brock did not attend; neither did anyone on their behalf. The assessment was adjourned to February 28.
[In what I will soon be referring to as “the Ward affidavit,” it is explained, at paragraph 19, that “no response to [the Cassels Brock] correspondence [of January 23, 2013 and January 30, 2013] was received . . . and Cassels Brock understood that the appointment would not proceed until a new date had been set.” Paragraph 20 of the Ward affidavit continues:
- . . . on January 31, 2013, Cassels Brock received a telephone call from [the assessment officer at St. Catharines] and was surprised to learn that the appointment was still scheduled to proceed that morning . . . Cassels Brock explained its understanding based on prior correspondence with [counsel for the mortgagor] that the appointment date was going to be rescheduled, and [the assessment officer] adjourned the appointment date to February 28, 2013.]
Feb.28
On this, the adjourned date of the Appointment for Assessment, both sides were present and counsel for the mortgagor asked for an adjournment sine die, returnable upon seven days notice, for the purpose of the mortgagor bringing contempt proceedings against Cassels Brock.
Mar.14
The mortgagor served a motion, returnable March 21st, seeking an order finding Cassels Brock in contempt for refusing to comply with the Order for Assessment and for an order “that Cassels Brock be fined . . . or for such other sanction as this Honourable Court may deem just.”
The supporting affidavit for the contempt motion was that of Dawn Allison Gilbert, a law clerk in the offices of counsel for the mortgagor (“Gilbert affidavit”).
The contempt alleged is that “Cassels Brock has failed or refused to deliver, within fourteen days, all of its accounts with respect to the power of sale proceedings” as required by paragraph 1 of the Order for Assessment. However, throughout the correspondence, counsel for the mortgagor has acknowledged that only those accounts of Cassels Brock charged to the mortgagor were to be produced for assessment. The Order for Assessment does not make such a distinction.
I observe that this contempt motion was brought three months after the Order for Assessment and at a time when the mortgagor should have known that its validity was highly vulnerable.
Mar.15
Cassels Brock wrote to counsel for the mortgagor:
I acknowledge receipt of your motion record seeking a contempt order . . . Cassels Brock will retain counsel to respond to the motion . . .
Mar.21
This was the first return date of the contempt motion by the mortgagor. It was adjourned to April 4th.
Apr.4
The contempt motion of the mortgagor was further adjourned, at the request of Cassels Brock, to permit the latter to deliver responding material and to bring a motion to set aside the Order for Assessment.
Apr.4
Cassels Brock served a responding motion record that included an affidavit from David S. Ward, a lawyer with Cassels Brock (“Ward affidavit”).[^16] I already have mentioned the Ward affidavit more than once.
Apr.9
Four months after the Order for Assessment, Cassels Brock served a motion seeking to set it aside and asking for a declaration that it “is a nullity.” The notice of motion states that the mortgagor is not the client of Cassels Brock and, accordingly, did not have standing to obtain relief under s. 3 of the Solicitors Act.
The supporting affidavit is the Ward affidavit.
The delay in bringing the motion is not expressly explained (although inferences as to the basis for the delay are possible from the contents of the correspondence exchanged between December 21, 2012 and April 9, 2013).
The notice of motion goes on to deal with the availability of s. 9 to the mortgagor, stating that “the mortgagor needed to make an application to a judge of the Superior Court rather than a requisition to a registrar . . . an application to a judge . . . under s. 9(3) for delivery of a bill and under s. 9(1) for assessment of that bill.”
The notice of motion further states that the mortgagor “is using the Order for Assessment, improperly, as a basis for a contempt order against [Cassels Brock]” and “[the mortgagor] can only do so on the basis of a valid order.”
Apr.10
The mortgagor served a motion for an order, pursuant to s. 9 of the Solicitors Act, directing Cassels Brock “to deliver their accounts with respect to the power of sale proceedings . . . and thereafter attend an assessment of the aforementioned accounts.”
The motion does not qualify the request for accounts to include only those that have been charged to the mortgagor.
The supporting affidavit is the Gilbert affidavit.[^17]
This motion seems to be a reaction to the motion by Cassels Brock, which intimated that the proper course for the mortgagor to follow was to apply to the court under s. 9(3) of the Solicitors Act for delivery of a bill or bills and under s. 9(1) for the assessment of same.
The notice of motion also states that “as part of its disciplinary authority over solicitors, this Honourable Court possesses the inherent jurisdiction to direct an assessment of a legal bill should such a reference appear just and reasonable.”
Apr.18
The three motions were argued and I reserved my decision. As counsel for Cassels Brock was relying, in part, upon the decision of an assessment officer, I asked both sides for written submissions on the issue of the deference, if any, to be accorded decisions of assessment officers.
Apr.24
Counsel for Cassels Brock delivered written submissions.
Apr.29
Counsel for the mortgagor delivered written submissions.
May 2
Counsel for Cassels Brock delivered additional written submissions.
May 3
Counsel for the mortgagor delivered further written submissions.
May13
I requested submissions on 10 points that I did not have the presence of mind to raise on April 18th.
May16
Counsel for Cassels Brock delivered additional written submissions.
May27
Counsel for the mortgagor delivered further written submissions.
May28
Counsel for Cassels Brock delivered additional written submissions.
III THE ARGUMENTS OF COUNSEL
[34] Rather than attempt to paraphrase the positions taken on the issues, I am going to set out the arguments of counsel in their own words wherever possible.
1. Mortgagor
(a) the amount of the legal costs is excessive
▪ The Notice of Sale contains “an extraordinary claim for legal costs in the amount of $155,983.24.”
▪ In the Power of Sale Accounting (Schedule “A” to the Order for Assessment), “the Bank claimed a further $34,458.02 in legal costs.”
▪ Therefore, “it is clear that Cassels Brock billed a minimum of $190,441.26 [$155,983.24 + $34,458.02]. Yet, upon closer scrutiny of the numbers, it appears that Cassels Brock may have billed up to $297,503.66.”
▪ “The gross amount recovered in the power of sale was $2,586,267.35. According to the Power of Sale Accounting, there is a surplus of $797,756.54. However, when the accounting is considered without any allowance for the payment of legal costs, there is a surplus of $1,095,260.20. Thus, since there is a difference of $297,503.66 between the purported surplus in the accounting and the apparent surplus prior to the deduction of legal costs, it would appear that Cassels Brock billed a total of $297,503.66:
Gross value of sale $2,586,267.35
Tax arrears (259,685.55)
Real estate commission (140,846.00)
Mortgage without deduction for legal costs (1,213,998.17)
Water (55.75)
Surplus without deduction for legal costs 1,095,260.20
Alleged surplus after deduction for legal costs (797,756.54)
Apparent legal costs $297,503.66”[^18]
▪ “Cassels Brock has only provided accounts totalling $34,458.02.”
▪ “According to Cassels Brock, the legal costs in total are allegedly $203,258.04, being $183,636.35 plus $19,621.69. Yet, this creates an obvious discrepancy of $94,245.62 since the surplus without deduction for legal costs is $1,095,260.20 while the alleged surplus after a deduction for legal costs is $797,756.54.”
(b) no steps taken to set aside Order for Assessment
▪ Cassels Brock did not move to set aside the Order for Assessment until after the contempt motion was brought in March of 2013, “despite being served with the Order for Assessment on or about December 11, 2012.”
▪ Although Cassels Brock “claims that the order is wrong, the law is clear. An order must be complied with until it is set aside. It is not a defence to assert that an order is incorrect, null, or under appeal, and thus ineffective. The order stands, and commands respect, until it is reversed or varied”: see Boily v. Carleton Condominium Corp. 145, 2013 CarswellOnt 2523 (S.C.J.), at para. 39.
(c) Cassels Brock is in contempt
▪ “Pursuant to rule 59.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“Rules of Civil Procedure”), an order is effective from the date on which it is made, unless it provides otherwise.”
▪ “In accordance with rule 60.05, an order may be enforced, against the person refusing or neglecting to obey, by a contempt order.”
▪ On a contempt motion, “it is not necessary to prove that the respondent intended to disobey the order. The offence consists of the intentional doing of an act which is in fact prohibited by the order. The absence of contumacious intent is not exculpatory, but only a mitigating factor”: see Sussex Group Ltd. v. 3933938 Canada Inc., 2003 CarswellOnt 2789 (S.C.J.), at para. 52.
▪ Cassels Brock should be found in contempt, but “with the opportunity to purge their contempt within 10 days, failing which they should be fined $20,000.00 and a further $2,000.00 for each day they remain in breach of the Order for Assessment.”
(d) mortgagor is the “client”
▪ “Pursuant to s. 15 of the Solicitors Act . . . a ‘client’ includes a person who is or may be liable to pay the bill of a solicitor for any services.”[^19]
▪ The mortgagor is a “client” under s. 3(a) of the Solicitors Act and is entitled to an order for assessment on requisition.
(e) deference not owed to decision of an assessment officer
▪ As for the decision of an assessment officer, “deference ends with issues of law or matters of principle”: see Rabbani v. Niagara, 2012 ONCA 280, [2012] O.J. No. 1868 (C.A.), at para. 6; Samuel Eng & Associates v. Ho, 2009 ONCA 150, [2009] O.J. No. 6405 (C.A.), at para. 1; and Labelle v. Howe, [1996] O.J. No. 759 (Div. Ct.), at para. 22.
(f) section 9 of the Solicitors Act does not require a court application
▪ “Under s. 9, where a person has paid a bill they may apply to the court for an order referring to assessment as the party chargeable therewith might have done.”
▪ “Although [Cassels Brock] submits that an assessment order can only be granted by way of application under s. 9 of the Solicitors Act, where a statute merely enables a person to ‘apply’ for specified relief, the law does not mandate one particular form of proceeding”: see Chilian v. Augdome Corp, 1991 CanLII 7335 (ON CA), 1991 CarswellOnt 422 (Ont. C.A.), at paras. 38-39.
(g) inherent jurisdiction of the court
▪ “Legal costs are a matter of public interest. With this in mind, the Court of Appeal has observed that the professional obligations codified within the Solicitors Act impose a peremptory obligation upon lawyers to justify the fees charged”:[^20] see Plazavest Financial Corp. v. National Bank of Canada (2000), 2000 CanLII 5704 (ON CA), 47 O.R. (3d) 641 (C.A.), at paras. 14-15, 17 and 31; Teplitsky, Colson v. Daniels, 2006 CarswellOnt 51 (S.C.J.), at paras. 12-13; Raithby v. Fraser & Beatty (2000), 2000 CanLII 22332 (ON SC), 47 O.R. (3d) 245 (S.C.J.), at paras. 23-26.
▪ “This Honourable Court possesses the inherent jurisdiction to direct an assessment of a legal bill should such a reference appear just and reasonable”:[^21] see Plazavest Financial Corp. v. National Bank of Canada, ibid; Teplitsky, Colson v. Daniels, ibid; Raithby v. Fraser & Beatty, ibid.
▪ “The Court of Appeal has noted that the proper administration of justice requires that billing disputes are dealt with fairly and equitably. Thus, the inherent jurisdiction of the Superior Court should be exercised whenever procedural gaps or irregularities arise which could hinder the right to assess an account whenever the propriety of a bill is questioned”: see Price v. Sonsini (2002), 2002 CanLII 41996 (ON CA), 60 O.R. (3d) 257 (C.A.), at para. 19.
▪ “The starting point in any dispute over the assessment of an account ought to be the perspective of the client. The basic legislative purpose of the Solicitors Act is to counter-balance the privileged position lawyers enjoy within the judicial system . . . Thus the assessment provisions within the Solicitors Act are, in essence, consumer protection provisions”:[^22] see Echo Energy Canada Inc. v. Lenczner Slaght Royce Smith Griffin LLP (2010), 2010 ONCA 709, 104 O.R. (3d) 93 (C.A.), at paras. 36-37; Andrew Feldstein & Associates Professional Corp. v. Keramidopulos, 2007 CarswellOnt 6193 (S.C.J.), at paras. 60 and 63; Plazavest Financial Corp. v. National Bank of Canada, supra, at paras. 15 and 17.
▪ “In order to maintain public confidence in the administration of justice, this Honourable Court must intervene whenever a client’s right to a fair procedure for the assessment of a solicitor’s bill is threatened or compromised”:[^23] see Price v. Sonsini, ibid; Javornich v. McCarthy, 2007 CarswellOnt 4107 (C.A.), at paras. 22-24; Andrew Feldstein & Associates Professional Corp. v. Keramidopulos, ibid.
▪ “The law is clear, Cassels Brock has an obligation to account, but, in breach of this obligation, it has failed to do so.”
(h) Mortgages Act
▪ “In accordance with s. 43 of the Mortgages Act, R.S.O 1990, c. M.40, a mortgagee’s costs of and incidental to the exercise of a power of sale may, without an order, be assessed by an assessment officer at the instance of any person interested.”[^24]
2. Cassels Brock
(a) numerical misunderstanding by mortgagor
▪ The contempt motion “is premised on a fundamental numerical misunderstanding of the Power of Sale Accounting.”
▪ The mortgagor, in using the figure of $1,213,998.17, “appears to have under-calculated the mortgage amount . . . by basing its calculation on the Notice of Sale Under Mortgage dated July 27, 2011 . . . [when it] ought to have used the Power of Sale Accounting to properly calculate the mortgage amount ($1,308,243.79).”[^25]
▪ “The mortgage amount listed in the Notice of Sale has been updated since July 27, 2011. The property was sold [nine months later, on April 16, 2012] and, as a result, the Notice of Sale fails to take into account any other charges or disbursements incurred by the Bank after July 27, 2011, in connection with the sale of the property, such as accruing interest and appraisal and insurance costs.”
▪ Although the Notice of Sale sets out legal fees of $153,483.24,[^26] that amount includes fees and disbursements in the Action, and only $19,621.69 “was charged to the [mortgagor] by the Bank and collected by Cassels Brock from the sale proceeds . . .”[^27]
▪ Even when the legal fees had grown to $183,636.35, only $19,621.69 was charged to the mortgagor, the rest being for services rendered for the Bank in the Action.
(b) contempt not established
▪ The requirements for a finding of contempt are absent: (1) the order that was breached must state clearly and unequivocally what should and should not be done; (2) the party who disobeys the order must do so deliberately and wilfully; and, (3) the evidence must show contempt beyond a reasonable doubt: see Bell ExpressVu Limited Partnership v. Torroni, 2009 ONCA 85, [2009] O.J. No. 356 (C.A.), at para. 21; Royal Bank of Canada v. Yates Holdings Inc., 2008 ONCA 474, [2008] O.J. No. 2343 (C.A.), at para. 3; Hobbs v. Hobbs, 2008 ONCA 598, [2008] O.J. No. 3312 (C.A.), at para. 26.
▪ The burden of proof is on the party seeking to establish contempt: see Bell ExpressVu Limited Partnership v. Torroni, supra, at paras. 21 and 29.
▪ The party who is alleged to be in contempt is entitled to the most favourable interpretation of the order: see Melville v. Beauregard, [1996] O.J. No. 1085 (Gen. Div.), at para. 13.
▪ The mortgagor must show that Cassels Brock “deliberately or wilfully or knowingly did some act which was designed to result in the breach of a court order”: see Geremia v. Harb, 2007 CanLII 1893 (ON SC), [2007] O.J. No. 305 (S.C.J.), at para. 31.
▪ “This is a dispute over the production of documents. [The contempt] motion is an attempt to misuse the court’s contempt powers to obtain documentary disclosure it is not entitled to.”
(c) accounts to be produced and assessed are not specified
▪ The Order for Assessment “does not specify what accounts are to be produced, it does not denote any invoice numbers, any timeframe that the relevant accounts fall into or the total amount of fees incurred charged to [the mortgagor].”
(d) any further productions would violate solicitor-client privilege
▪ “Any further production [by Cassels Brock beyond the legal accounts totalling $19,621.69] would necessitate a breach of privilege because the accounts that have not been produced relate to litigation fees incurred by the Bank in connection with the Action.”[^28]
(e) mortgagor is not the client
▪ “The only parties who may obtain an Order for Assessment on requisition by the local registrar, in accordance with s. 3 of the Solicitors Act, are the client or the solicitor . . . [The mortgagor], not being a client of Cassels Brock . . ., did not have standing under s. 3 of the Solicitors Act to requisition the Order for Assessment.”
▪ The Bank is, and was, the client of Cassels Brock.
▪ A mortgagor, in power of sale proceedings, is not the client of the solicitors who represented the mortgagee: see Petersons v. Shepherd, Osyany & King LLP, [2010] O.J. No. 5636 (S.C.J.), at para. 7, a decision of an assessment officer; and James & Associates v. Lall, [2002] O.J. No. 1592 (S.C.J.), at para. 3.
(f) section 9 of Solicitors Act should have been utilized
▪ “Once a mortgagor becomes liable to pay a portion of the mortgagee’s legal costs, the correct way to assess the accounts of the lawyer would be to proceed under the Mortgages Act, R.S.O. 1990, c. M. 40 or to proceed by way of s. 9 of the Solicitors Act.”
▪ The mortgagor, “as a non-client, but as an interested party, ought to have commenced an application before a judge, pursuant to s. 9 of the Solicitors Act. Such an application would have required notice and on the return of same, the parties would have had the opportunity to make arguments regarding the scope of production . . .”: see James & Associates v. Lall, [2002] O.J. No. 1592 (S.C.J.), at para. 4; and Petersons v. Shepherd, Osyany & King LLP, [2010] O.J. No. 5636 (S.C.J.), at para. 7.
▪ “The effect of s. 9 is to ensure that a lawyer has the opportunity, in court, to defend claims made by a mortgagor or alternatively to seek clarification in regards to the scope of any production order ultimately made.”
▪ The mortgagor, “as a non-client, but a paying party under the mortgage . . . could only seek an Order for Assessment pursuant to s. 9 of the Solicitors Act.” The mortgagor, “as an interested party, ought to have commenced an application before a judge.”
▪ Under s. 9, the mortgagor could only apply to assess the legal bills of the Bank that the mortgagor “is liable to pay.” The Bank “has not charged the mortgagor anything beyond $19,621.69.”
(g) deference owed to decision of an assessment officer
▪ The decision of an assessment officer, on a solicitor-client assessment, “is entitled to considerable deference . . . because (i) an appellate judge may only interfere when an assessment officer has made an error in law, misapprehended the evidence, has made a palpable and overriding error on a factual matter or has reached an assessment amount that is so unreasonable that it constitutes an error in principle and (ii) in general, the courts give deference to a specialized administrative tribunal interpreting its own governing statute”: see Rabbani v. Niagara, 2012 ONCA 280, [2012] O.J. No. 1868 (C.A.), at para. 6; Samuel Eng & Associates v. Ho, 2009 ONCA 150, [2009] O.J. No. 6405 (C.A.), at para. 1; Labelle v. Howe, [1996] O.J. No. 759 (Div. Ct.), at para. 27, leave to appeal to S.C.C. refused, [1996] S.C.C.A. No. 514; and Canada (Canadian Human Rights Commission) v. Canada (Attorney General), 2011 SCC 53, at para. 16.
(h) contempt affidavit improperly sworn on information and belief
▪ Subrule 60.11(3) of the Rules of Civil Procedure provides that “an affidavit in support of a motion for a contempt order may contain statements of the deponent’s information and belief only with respect to facts that are not contentious . . .” The Gilbert affidavit “is based entirely on information and belief with respect to all facts in support of the contempt motion.” The statements made in the Gilbert affidavit are contentious and, therefore, “the affidavit is improper and should be struck.”
IV DISCUSSION
1. Timeliness in setting aside an order of a Registrar
[35] Faced with what they believed to be an invalid order of a Registrar, Cassels Brock had two options: move to set it aside or comply. Either option must be exercised in a timely manner. What is timely in respect of the former?
[36] Clause 37.14(1)(c) of the Rules of Civil Procedure addresses timeliness in moving to set aside an order of a Registrar:
37.14 (1) A party or other person who,
(c) is affected by an order of a registrar,
may move to set aside or vary the order, by a notice of motion that is served forthwith after the order comes to the person’s attention and names the first available hearing date that is at least three days after service of the notice of motion.
[37] The Order for Assessment came to the attention of Cassels Brock on December 11, 2012, but they did not move to set it aside until April 9, 2013. An explanation for this four-month delay was not expressly offered in the Ward affidavit. But there was a steady stream of correspondence between both sides during those four months, and counsel for the mortgagor knew, as of December 21, 2012, that Cassels Brock took issue with the validity of the Order for Assessment. From that date, until the commencement of the contempt motion, I would categorize the conduct of Cassels Brock as an attempt to convince counsel for the mortgagor that portions of only two accounts (those dated June 20, 2012 and August 24, 2012) had been charged to the mortgagor and that only those two accounts should be produced and assessed.
[38] Clause 37.14(1)(c) provides for a timeline that, in my opinion, is too rigid and truncated for this case. Fortunately, flexibility is possible as there is discretion to extend the time under this clause pursuant to rule 2.03: see Wellwood v. Ontario Provincial Police (2009), 2009 CanLII 1476 (ON SCDC), 66 C.P.C. (6th) 48 (Ont. Div. Ct.), reversed on other grounds 2010 ONCA 386, 319 D.L.R. (4th) 412 (Ont. C.A.).
[39] Rule 2.03 states:
2.03 The court may, only where and as necessary in the interest of justice, dispense with compliance with any rule at any time.
[40] The delay in moving to set aside the Order for Assessment is attributable to the efforts by Cassels Brock to reason (or, more charitably perhaps, to negotiate) with counsel for the mortgagor.
[41] It is noteworthy that the mortgagor has not presented evidence of prejudice caused by the delay.
[42] The Order for Assessment was so clearly a nullity that Cassels Brock cannot be faulted for initially attempting to deal with the matter by corresponding with counsel for the mortgagor, rather than immediately moving to set it aside.
[43] After considering all of the evidence, I think that the motion to set aside the Order for Assessment was brought with tolerable (and understandable) delay. In the interest of justice, Cassels Brock need not comply with clause 37.14(1)(c).
2. Section 3 of the Solicitors Act
[44] The Order for Assessment was obtained pursuant to s. 3(a) of the Solicitors Act. I will set out s. 3 again for convenience: [Emphasis added]
- 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.
[45] The essential features of s. 3 are that: it is for use by a “solicitor” or by “the client” of that solicitor; the retainer must not be “disputed”; and, there are to be no “special circumstances.”
[46] I find that the Order for Assessment must be set aside on either of two grounds.
(a) “retainer of the solicitor is not disputed”?
[47] There is, and was, no solicitor-client relationship between Cassels Brock and the mortgagor. How it could have been thought otherwise is puzzling. Cassels Brock did not perform any services for the mortgagor and there was no retainer agreement, written or oral, pursuant to which Cassels Brock was required to do so. Although “client” is not defined in s. 3 of the Solicitors Act, there is no acceptable definition of that term by which the mortgagor could be construed as the client of Cassels Brock.[^29]
[48] With the mortgagor not being a client of Cassels Brock, it follows that the retainer of the solicitor is disputed and that s. 3 of the Solicitors Act is unavailable for use by the mortgagor. Accordingly, the Order for Assessment must be set aside on that basis alone. (I add here the observation that the Registrar would have had no reason to doubt the assertion of counsel for the mortgagor that the latter was the client of Cassels Brock.)
[49] My decision on this point is not without precedent. Counsel for Cassels Brock cites the decision of assessment officer R. Ittleman in Petersons v. Shepherd, Osyany & King LLP, [2010] O.J. No. 5636 (S.C.J.) which involved similar facts. There, a mortgagor obtained an order under s. 3(a) of the Solicitors Act for the delivery and assessment of a bill of fees, charges and disbursements of the lawyers for the mortgagee in power of sale proceedings. As a preliminary matter on the assessment (and on consent), the proceedings were reconstituted under s. 43(4) of the Mortgages Act, R.S.O. 1990, c. M. 40, with the parties thereafter shown in the title as “mortgagee” and “mortgagor” rather than “lawyer” and “client.” Assessment Officer Ittleman stated, at para. 6, “. . . it goes without saying that a ‘client’ is a person who has entered into a relationship with a solicitor via a retainer agreement or has otherwise retained the solicitor to perform services” and “only a solicitor and a client may obtain an order on requisition from the Registrar pursuant to s. 3.”
[50] Although the question-of-law finding by assessment officer Ittleman that a mortgagor, in power of sale proceedings, is not the “client” under s. 3 of the Solicitors Act, is not binding upon me, it seems illogical to suggest that one who toils daily in the Solicitors Act, his “home statute,” should not have the ear of this court.[^30]
[51] The opinion of the assessment officer in the Petersons case commands consideration even if, in law, it does not demand deference.
[52] Having a less provocative pedigree is the decision of Hill J. in James & Associates v. Lall, [2002] O.J. No. 1592 (S.C.J.), a brief endorsement of six paragraphs, mined by counsel for Cassels Brock only recently. There, faced with facts similar to those at bar, Justice Hill, a formidable jurist, held, at paragraph 1, that the mortgagee (not the mortgagor) is the client of the solicitors and, therefore, the order obtained on requisition from the Registrar, under s. 3 of the Solicitors Act, was set aside.
(b) “no special circumstances”?
[53] I have not found a definition of “special circumstances” that is sufficiently precise or on point to be of any use in this case.[^31] (The words “special circumstances” also appear in s. 11 of the Solicitors Act,[^32] but there they have a narrow meaning and “relate to the underlying principle that payment of the account implies that the client accepted that the account was proper and reasonable”: see Echo Energy Canada Inc. v. Lenczner Slaght Royce Smith Griffin LLP (2010), 2010 ONCA 709, 104 O.R. (3d) 93 (C.A.), at para. 30.)
[54] The discrepancy between the legal accounts that, based upon the Notice of Sale and the Power of Sale Accounting, appear to have been charged to the mortgagor and those that, according to Cassels Brock, were actually charged raises a pre-assessment issue to be resolved and constitutes a special circumstance (of which the Registrar would have been unaware). On this basis, as well, s. 3 is not applicable here and the Order for Assessment must be set aside.
3. Contempt
(a) supporting affidavit sworn on information and belief
[55] On behalf of Cassels Brock, an objection is taken to the Gilbert affidavit.
[56] Subrule 60.11(3) of the Rules of Civil Procedure provides limitations on the supporting affidavit in contempt proceedings: [Emphasis added]
60.11(3) An affidavit in support of a motion for a contempt order may contain statements of the deponent’s information and belief only with respect to facts that are not contentious, and the source of the information and the fact of the belief shall be specified in the affidavit.
[57] The Gilbert affidavit (delivered in support of the contempt motion) consists entirely of statements made on information and belief. Yet, has the Ward affidavit (delivered on behalf of Cassels Brock) raised any facts that contradict those contained in the Gilbert affidavit? If “yes,” only then has subrule 60.11(3) been breached by the mortgagor.
[58] The Gilbert affidavit, as I see it, is merely a vehicle for the mortgagor to get before the court the Order for Assessment, the Appointment for Assessment, the Notice of Sale, the Power of Sale Accounting and miscellaneous correspondence, all of which are what they are and say what they say. The Gilbert affidavit does not raise contentious facts as contemplated by subrule 60.11(3).
[59] The Gilbert affidavit, therefore, does not offend subrule 60.11(3) and is not improper.
(b) three-pronged test for contempt
[60] In Prescott-Russell Services for Children and Adults v. G. (N.) (2006), 2006 CanLII 81792 (ON CA), 82 O.R. (3d) 686 (C.A.), at para. 27, a three-pronged test for contempt was articulated: (1) “the order that was breached must state clearly and unequivocally what should and should not be done”; (2) “the party who disobeys the order must do so deliberately and wilfully”; (3) “the evidence must show contempt beyond a reasonable doubt.”
[61] Has this test been met?
(c) is the Order for Assessment clear and unequivocal?
[62] The following legal principles are two of the more obvious ones that apply when considering whether an order is clear and unequivocal:
▪ “It must be clear to a party exactly what must be done to be in compliance with the terms of an order”: see Bell ExpressVu Limited Partnership v. Torroni (2009), 2009 ONCA 85, 94 O.R. (3d) 614 (C.A.), at para. 22, citing Hobbs v. Hobbs (2008), 2008 ONCA 598, 54 R.F.L. (6th) 1 (Ont. C.A.), at paras. 26-28.
▪ “The person who is alleged to be in contempt is entitled to the most favourable interpretation of the order”: see Melville v. Beauregard, [1996] O.J. No. 1085 (Gen. Div.), at para. 13.
[63] Paragraph 1 of the Order for Assessment, stripped to its key provisions, reads:
- IT IS ORDERED THAT the solicitor deliver to the client its accounts . . . with respect to the power of sale proceedings . . . as described in the Power of Sale Accounting attached hereto as Schedules “A” and “B”.
[64] As the reader now knows, Schedule “A” is titled “Power of Sale Accounting” and refers to “paid legal accounts” of $34,458.02. Schedule “B” consists of a copy of the Notice of Sale, which contains $153,483.24 and $2,500 for “legal costs paid” and “costs,” respectively.
[65] Consequently, the accounts in the Order for Assessment have been specified: they consist of the accounts that make up the sums of $34,458.02, $153,483.24 and $2,500.00. Although the Order for Assessment incorrectly does not distinguish between accounts billed to the Bank by Cassels Brock and accounts so billed but not charged to the mortgagor, it, nevertheless, is clear and unequivocal.
[66] In letters such as the one dated January 10, 2013, Cassels Brock purport to be uncertain as to which accounts are sought for assessment and which for production. However, the Order for Assessment, on its face, does not suggest such a distinction.
[67] I do not regard the correspondence between the parties as evidence that there is scope for confusion about the requirements of the Order for Assessment. The correspondence, effectively, as I have said, is merely an attempt by Cassels Brock to negotiate a mutually acceptable form of compliance with the Order for Assessment.
(d) deliberate and wilful?
[68] Three legal principles are particularly apt at this stage of the contempt discussion:
▪ “The strength of a finding of deliberate disobedience of an order weakens progressively with the lack of clarity in the terms of the order against which the disobedience must be measured”: see Bell ExpressVu Limited Partnership v. Torroni, supra, at para. 24.
▪ Contempt “consists of the intentional doing of an act which is in fact prohibited by the order. The absence of the contumacious intent is a mitigating but not an exculpatory circumstance:” see Re Sheppard (1976), 1976 CanLII 710 (ON CA), 12 O.R. (2d) 4 (C.A.), at p. 8.
▪ “It is not a defence to argue that an order is wrong or ineffective in law”: see Sussex Group Ltd. v. 3933938 Canada Inc., 2003 CarswellOnt 2789 (S.C.J.), at para. 54, citing numerous supporting authorities.
[69] The Ward affidavit seems to put forth two different defence theories. The first one is that there has been compliance with the Order for Assessment. This is seen, for example, at paragraph 5:
- Cassels Brock has fully complied with the [Order for Assessment] and has provided accounts totalling a $19,621.69 charge.
This defence has no merit, as the Order for Assessment refers to more than accounts totalling $19,621.69.
[70] The second defence theory is that the Order for Assessment is wrong. This is evident at paragraph 6:
- [The Order for Assessment] is premised on an outdated (and subsequently revised and fully explained) notice of sale/power of sale accounting. This has been repeatedly explained to [counsel for the mortgagor] . . .
The incorrectness of an order is not a valid excuse for non-compliance.
[71] My take on the conduct of Cassels Brock is that they temporarily formed the intention not to comply with the Order for Assessment, while sensibly attempting to convince counsel for the mortgagor that the order was a nullity and, apart from that, too broad. Once it became obvious that the attempt would not succeed, Cassels Brock brought their motion. This temporary intention does not represent the deliberateness and wilfulness needed for a finding of contempt.
(e) has contempt been established beyond a reasonable doubt?
[72] The requirement of the criminal burden of proof speaks to the seriousness of a contempt motion.
[73] Because of my finding regarding “deliberate and wilful,” I am not satisfied that the mortgagor has proved the intent necessary for contempt beyond a reasonable doubt.
4. Section 9 of the Solicitors Act
[74] There can be no doubt that s. 9 of the Solicitors Act is available to the mortgagor. Section 9(1) reads: [Emphasis added]
9(1) Where a person, not being chargeable as the principal party, is liable to pay or has paid a bill either to the solicitor, his or her assignee, or personal representative, or to the principal party entitled thereto, the person so liable to pay or paying, the person’s assignee or personal representative, 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.
[75] And, where the person liable to pay a legal bill has not been given a copy, this may be ordered under s. 9(3):
9(3) For the purpose of such reference [for assessment], the court may order the solicitor, his or her assignee or representative, to deliver to the party making the application a copy of the bill upon payment of the costs of the copy.
[76] A mortgagor is eligible to obtain an Order for Assessment, pursuant to s. 9(1), “as the party chargeable to pay the solicitors’ bill might have done”: see James & Associates v. Lall, [2002] O.J. No. 1592 (S.C.J.), at para. 1. However, “it is apparent that an application pursuant to s. 9(1) . . ., by a party properly standing in the place of the immediate client, must be on notice to the solicitor returnable before a judge of the Court or Master, as the case may be”: see James & Associates v. Lall, supra, at para. 4.
[77] Further precedential support for the availability of s. 9(1) to the mortgagor is found in the Petersons case where, at paragraph 6, the assessment officer, after holding that a mortgagor is not a client who may requisition an Order for Assessment under s. 3, states: “Any other person who is liable to pay the solicitor’s bill may apply to the Court pursuant to section 9 for an order referring the bill to an assessment officer for an assessment.” And, at paragraph 7: “Upon the obtaining of such an Order from a judge, the assessment is to be conducted in the same fashion as an assessment which is ordered by the Registrar under section 3.”
[78] Counsel for the mortgagor argues that both Hill J. and the assessment officer mistakenly focused on the verb “apply,” in s. 9(1), and erred in holding it to mean an application to the court. It is argued that “apply” does not require a particular form of proceeding. Counsel states that the mere use of the verb “apply” in a statutory provision does not mandate commencement of a civil proceeding by way of application: see Chilian v. Augdome Corp., 1991 CanLII 7335 (ON CA), 1991 CarswellOnt 422 (C.A.), at paras. 38-39.[^33]
[79] I agree that “apply,” when mentioned in a piece of legislation, does not necessarily mean an application as defined by the Rules of Civil Procedure. However, here it does. (The application would be commenced pursuant to clause 14.05(2) of the Rules of Civil Procedure: “A proceeding may be commenced by an application to the Superior Court of Justice or to a judge of that court, if a statute so authorizes.”)
[80] Counsel for the mortgagor further submits that, in s. 9(1), the phrase, “may apply to the court for an order referring to assessment as the party chargeable therewith might have done” [Emphasis added] means that because the party chargeable may obtain an order on requisition under s. 3 then so too may the mortgagor who, although not chargeable as the principal party, is liable to pay the bill of the solicitor.
[81] I respectfully disagree with such an interpretation of s. 9(1) of the Solicitors Act. The phrase “as the party chargeable therewith might have done,” refers to the right or entitlement to have an account assessed, not to the procedure by which the assessment comes about.
[82] Counsel for the mortgagor relies upon Plazavest Financial Corp. v. National Bank of Canada (2000), 2000 CanLII 5704 (ON CA), 47 O.R. (3d) 641 (C.A.), a case where a customer borrowed money from a bank pursuant to a loan agreement by which the customer was obliged to pay the legal fees of the bank related to the loan. The customer refused to pay the bill submitted by the law firm representing the bank. In proceedings commenced by the customer for delivery and assessment of the legal fees it was said, at paragraph 19:
[19] Section 9(1) of the Act puts [the customer] in the same position as [the bank] in so far as the assessment of the [legal fees] is concerned.
[83] I do not read this passage as supporting the argument that s. 3 is available to a non-client. It simply means that a non-client is entitled to have the account of a solicitor assessed, a proposition with which Cassels Brock does not disagree. Again, I make the distinction between the right or entitlement to have an account assessed and the procedure by which the assessment comes about.
[84] Cassels Brock are not suggesting that their accounts should be spared an assessment; and I do not understand the other side to be saying that accounts not charged to the mortgagor should be assessed. The contentious point seems to be: what accounts have been charged to the mortgagor? I cannot make that determination based upon the Gilbert affidavit or the Ward affidavit, neither of which was the subject of out-of-court cross-examination. Oral evidence from a representative of the Bank is necessary to resolve that issue.[^34]
5. The Mortgages Act
[85] Section 43(4) of the Mortgages Act, R.S.O. 1990, c. M.40, provides for an assessment of the legal costs of a mortgagee by “any person interested”:
43(4) A mortgagee’s costs of and incidental to the exercise of a power of sale, whether under this Part or otherwise, may, without an order, be assessed by an assessment officer at the instance of any person interested.
[86] This provision would seem to be the most logical avenue for a mortgagor to follow but here the mortgagor does not seek an assessment under the Mortgages Act and so I will not consider the matter further.
V CONCLUSION
[87] As I have indicated, the motion by Cassels Brock is allowed and the Order for Assessment is set aside. The contempt motion of the mortgagor is dismissed. If the parties are unable to agree on the costs of these two motions, they should advise the trial co-ordinator and, at that time, also propose a timetable for the delivery of written submissions.
[88] This leaves outstanding the motion by the mortgagor for an assessment under s. 9 of the Solicitors Act (“the s. 9 motion”) for which, as I have said, I will require oral evidence from a representative of the Bank.
[89] Rather than require the mortgagor to commence an application (for what I consider to be proper compliance with s. 9(1)), it would be more efficient and in the interest of justice if we were to make use of the s. 9 motion which is still before the court. All that must be done is to reconfigure the motion to permit viva voce evidence.
[90] The mortgagor is entitled to an assessment of all legal accounts rendered to the Bank by Cassels Brock which have been charged to the mortgagor or for which it is said that the mortgagor is responsible in the power of sale proceedings. Those accounts must be identified and the Gilbert and Ward affidavits are insufficient for that purpose.
[91] Counsel should obtain a date from the trial co-ordinator for the completion of the s. 9 motion, at which I will require oral testimony from a representative of the Bank to rebut the practical presumption that the legal accounts that appear (from the Notice of Sale and from the Power of Sale Accounting) to have been charged to the mortgagor were so charged.
[92] If, beforehand, counsel require an order under subrule 39.03(1) – examining a person as a witness before the hearing of a motion – and it is disputed, they should arrange an attendance before me. I expect counsel for the mortgagor will want to examine a representative of the Bank.
[93] Should counsel wish to proceed pursuant to subrule 39.02(1) – by conducting out-of-court cross-examinations on the affidavits delivered – an order is unnecessary.
[94] If counsel are unable to agree on the orders needed, or the procedure to follow, they may seek directions and should contact the trial co-ordinator to determine if a personal court attendance is necessary. I remain seized of the s. 9 motion and all needed directions.
The Honourable Mr. Justice J.W. Quinn
RELEASED: June 25, 2013
COURT FILE NO.: 54101/12
DATE: June 25, 2013
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CASSELS BROCK & BLACKWELL LLP, also known as CASSELS BROCK LAWYERS
Lawyers
- and -
1578838 ONTARIO INC.
Client
REASONS FOR JUDGMENT
J.W. Quinn J.
Released: June 25, 2013
[^1]: I do not think that this is procedurally possible. How does the mortgagor, the plaintiff in the Action, get to counterclaim against the Bank, a defendant in the Action and plaintiff by counterclaim? For pleadings, is the plaintiff not limited to a statement of claim, a defence to counterclaim and a reply? If there is another remedy sought by the plaintiff, is it not advanced by means of an amendment to the statement of claim? Am I missing something? Should I be wrong, somebody send word.
[^2]: As explained on behalf of Cassels Brock, this amount is less than the summary judgment figure because it does not include outstanding property tax arrears, as they had yet to be paid. I do not understand this explanation because the Notice of Sale figure is $25,356.80 less than the summary judgment amount, but the tax arrears were $190,881.61 as of June 7, 2011.
[^3]: I think that an order under s. 3(a) should be described as an “Order for Delivery and Assessment.” An order pursuant to s. 3(b) or (c) would be an “Order for Assessment.”
[^4]: Section 6(1) states, in part: “Where a client . . . obtains an order for the delivery and assessment of a solicitor’s bill . . . the bill shall be delivered within fourteen days, from the service of the order.”
[^5]: This is to be expected. Nine months separated the Notice of Sale and the completion of the sale. The accumulating property tax arrears alone account for $68,803.94 of the increase.
[^6]: I cannot escape this digression. On April 14, 2008, the mortgagor, as vendor, entered into an agreement to sell the property to Canadian Equity Builders (In Trust), as purchaser. The transaction did not close. Canadian Equity Builders (In Trust) sued the mortgagor, in Court File No. CV-09-376981 (the “Second Action”), and obtained default judgment on May 25, 2010. The default judgment was set aside on January 18, 2012 by O’Marra J., on terms. One of the terms was that the Bank was directed to pay into court (in the Second Action) the surplus funds from the power of sale of the property. As an alternative, the Bank was permitted to pay those funds either to the mortgagor or to Canadian Equity Builders (In Trust), who then was required to pay the funds into court. Canadian Equity Builders (In Trust) is represented by the law firm DH Professional Corporation.
[^7]: The Action.
[^8]: Actually, it was September 17, 2012.
[^9]: But counsel for the mortgagor obtained his Order for Assessment under s. 3 of the Solicitors Act, not s. 9. I do not know why he raised s. 9. He did not move for an order pursuant to s. 9 until April (and then, I suspect, only at the prompting of Cassels Brock).
[^10]: This is an important point, because it is relied upon by Cassels Brock to support their expectation that the assessment would be adjourned on the first return date.
[^11]: A concession that the Bank, not the mortgagor, is the client of Cassels Brock?
[^12]: This appears to be an acknowledgement that only accounts charged to the mortgagor are to be produced for assessment.
[^13]: There is no confusion. Counsel for the mortgagor simply does not believe the statement by Cassels Brock that only $19,621.69 has been charged to the mortgagor.
[^14]: This alleged lack of clarity is relevant to the issue of whether Cassels Brock deliberately and wilfully breached the Order for Assessment. However, I do not regard the Order for Assessment as creating a distinction between accounts to be assessed and accounts to be produced.
[^15]: This decision by the Bank is curious. Certainly, at no point after the judgment of Henderson J. on June 7, 2011 could the Bank have thought that it was proper to charge to the mortgagor legal fees and disbursements associated with the motions in the Action.
[^16]: The Ward affidavit contains a number of paragraphs that lapse into legal argument (including the quoting of statutory provisions). No. No. No. An affidavit must be confined to evidence.
[^17]: The parties are getting good mileage out of the Gilbert and Ward affidavits, with each doing double duty.
[^18]: I explained earlier that I do not grasp these calculations.
[^19]: It is true that, in s. 15 of the Solicitors Act, “client” is defined to include “a person who is or may be liable to pay the bill of a solicitor for any services.” But the definition applies only to sections 16-33 (which deal with agreements between solicitors and clients). I do not know how counsel for the mortgagor could think that this definition in s. 15 advanced his position.
[^20]: Cassels Brock are quite prepared to “justify the fees charged” once those fees have been properly identified as relevant (with relevant fees being those charged to the mortgagor).
[^21]: Again, Cassels Brock do not oppose an assessment so long as the correct accounts are assessed.
[^22]: Yet this does not mean that lawyers are without rights or that those rights should be trampled in a stampede to protect the public.
[^23]: No one is suggesting otherwise.
[^24]: I do not know why counsel for the mortgagor would make this submission, as the mortgagor has not sought an assessment under the Mortgages Act.
[^25]: I thought that the mortgage balance in the Power of Sale Accounting was $1,477,543.81.
[^26]: In fact, the figure from the Notice of Sale is $155,983.24 ($153,483.24 + $2,500.00).
[^27]: But the fees of $153,483.24 were set out in the Notice of Sale as having been paid by the Bank and charged to the mortgagor. The Notice of Sale postdates the judgment of Henderson J. Consequently, the Bank was aware that the costs in the Action were reserved to the trial judge.
[^28]: If there are legal fees that Cassels Brock has billed to the Bank that have not been charged to the mortgagor, their non-production is warranted more because of irrelevance than privilege.
[^29]: I pointed out previously that “client” is defined in s. 15 of the Solicitors Act, but this definition is restricted to sections 16-33.
[^30]: Counsel for the mortgagor was dismissive of the importance of a decision of an assessment officer suggesting, effectively, that it is no more binding upon me than an ill-fitting undergarment.
[^31]: For example, statements in Rooney v. Jasinski, 1952 CanLII 115 (ON CA), [1952] O.R. 869 (C.A.) are too general to be helpful.
[^32]: Section 11 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.”
[^33]: The analysis relied upon in the Chilian case was in the context of originating processes and it was held that the right to “apply” for relief under s. 247 of the Business Corporations Act, 1982, S.O. 1982, c. 4, included the right to proceed by way of action or application.
[^34]: It seems that the Bank got caught with its hand in the cookie jar. But I am unable to determine, from the affidavits filed, how many cookies were taken and how many were put back.