COURT FILE NO.: CV-10-415469-00 & CV-10-416638-00 DATE: 20130211 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Gowling Lafleur Henderson LLP, Plaintiff AND: Harold Stephen Springer, Defendant
RE: Gowling Lafleur Henderson LLP, Plaintiff AND: Sara Springer and Harold Stephen Springer, Defendants
BEFORE: Himel J.
COUNSEL: Christopher Stanek, for the Plaintiff Fred A. Platt, for the Defendants
HEARD: January 30, 2013 and February 7, 2013
ENDORSEMENT
[1] Gowling Lafleur Henderson LLP brought an action against Harold Stephen Springer to collect unpaid accounts delivered to him from August 13, 2009 to September 16, 2010 in the amount of $219,697.07. Mr. Springer filed a statement of defence in the action pleading equitable set-off. Gowlings filed a reply. Gowlings now brings a motion under Rule 21.01(1)(a) of the Rules of Civil Procedure, R.R.O. 1990,O-Reg 194, for a determination of a point of law and to strike paragraph three of the statement of defence for being statute-barred. Mr. Springer asks that the motion be dismissed and that the action proceed to trial.
[2] In a separate action brought by Gowlings against Sara Springer and Harold Springer, Gowlings has claimed $108,727.88 for unpaid accounts for legal services rendered in an action involving a dispute with a neighbour. Gowlings also brings a motion under Rule 21.01(1)(a) to strike paragraph three of the statement of defence filed in that action on the same grounds and argues that even if the entire amount paid by the defendants was set off against what they owe, the defendants would still owe Gowlings more than $75,000.
[3] The issue before me is whether the limitation period in the Solicitors’ Act, R.S.O. 1990, c. S.15, applies and whether it bars a claim for equitable set-off. If so, should paragraph three of the statement of defence be struck out in each of the statements of defence?
FACTUAL BACKGROUND:
[4] Harold Springer was called to the Ontario Bar in 1986 and practised law in the area of insolvency and restructuring. He retained Gowling Lafleur Henderson LLP (“Gowlings”) to represent him in an action against his former employer Aird Berlis LLP. The case was tried over 12 days in 2009. During the years 2002 to August 13, 2009, Mr. Springer received and paid periodic accounts from Gowlings. Mr. Springer was unsuccessful at trial and retained Gowlings to appeal the decision. The appeal was unsuccessful. After the appeal was dismissed by the Ontario Court of Appeal on April 20, 2010, Gowlings rendered a final account on September 16, 2010. Accounts since August 13, 2009 remain unpaid.
[5] Gowlings commenced an action on December 16, 2010 to collect $219,697.07 for unpaid accounts for legal services provided during the appeal of the trial decision. Mr. Springer has defended the action alleging that he was overcharged on these accounts. He does not claim any issue with the legal services provided.
[6] He has also alleged that he was overcharged on accounts from 2002 to August 13, 2009 which he had already paid and which totalled $704,296.34. Mr. Springer asserted a right to set off the amount he says he was overcharged on the accounts from 2002 to 2009 against the amount owing for legal services on the appeal. Gowlings has pleaded reliance on the one year limitation period in the Solicitors’ Act in its reply.
[7] In the second action, Gowlings represented the defendants in a litigation file involving a dispute with a neighbour. The defendants retained Gowlings in September 2006 and received periodic accounts which they paid for the period prior to May 15, 2009. Gowlings rendered accounts from May 15, 2009 until September 16, 2010 which total $108,727.88. Some of these accounts remain unpaid. Gowlings made a demand for payment and issued a claim on December 16, 2010. In a statement of defence dated December 6, 2011, Mr. and Mrs. Springer allege that they were overcharged on accounts that they paid totalling $31,125. They claim the right to set off the amounts they were overcharged on the accounts from 2006 to May 15, 2009 against any amount they owe to Gowlings. They do not allege that the services were substandard in any way. Gowlings has pleaded reliance on the one year limitation period in the Solicitors Act in its reply.
POSITIONS OF THE PARTIES:
[8] Gowlings moves to strike paragraph three of the statement of defence filed by Harold Springer which reads as follows:
Prior to August 13, 2009, the plaintiff has sent invoices for services performed and expenses incurred. The aggregate amount of these invoices (sent prior to August 13, 2009) was excessive for the services performed and the expenses incurred. Without knowing the aggregate amount of the invoices (sent prior to August 13, 2009) was excessive, these invoices (sent prior to August 13, 2009) were paid. The aggregate amount of the invoices dated on or after August 13, 2009 (for which payment is being claimed by the plaintiff) is, in all circumstances, excessive for the services performed and expenses incurred. When the excessive amount paid to the plaintiff in connection with the invoices (sent prior to August 13, 2009) is set—off against a fair and reasonable amount for the services performed and the expenses incurred (for which payment is being claimed by the plaintiff), there is no balance owing to the plaintiff.
[9] Gowlings also moves to strike paragraph three of the statement of defence filed in the action against Sara and Harold Springer which is identical to the above-mentioned paragraph except that the date for the sending of invoices refers to prior to May 15, 2009.
[10] The plaintiff takes the position that Mr. Springer has raised an issue that is statute-barred and that he is attempting to obtain indirectly something that he cannot obtain directly. In the action against Mr. Springer, paragraph three of the statement of defence would require a judge to conduct an assessment of all of the accounts rendered since 2002 and totalling more than $900,000. In the action against Mr. and Mrs. Springer, Gowlings claims that paragraph three of the defence would require a court to conduct an assessment of all of their legal accounts since 2006.
[11] Gowlings argues that the defendants have failed to pay accounts owing and that the portions of the statement of defence which allege overcharging and excessive fees should be struck out. Sections 4(1) and 11 of the Solicitors Act, provide that absent special circumstances, an assessment of accounts rendered and paid more than 12 months prior is statute barred. In light of Mr. Springer’s expertise as an insolvency lawyer for many years, he should be aware of these provisions. No special circumstances are pleaded in the statement of defence and there are no special circumstances that would permit the defendants to set-off such amounts. The plaintiff asks that parts of paragraph three of the statement of defence that refer to accounts rendered and paid prior to August 13, 2009, in the action against Mr. Springer and those accounts rendered and paid prior to May 15, 2009, in the action against Mr. and Mrs. Springer should be struck.
[12] The Springers argue that the motion brought under Rule 21.01(1) should be dismissed because (1) the defence pleaded in paragraph three of the statement of defence raises questions of fact that must be determined before a court is in a position to determine any question of law; and (2) the defence of equitable set-off pleaded in paragraph three is a valid defence to the claim and is not barred by the Solicitors’ Act. The first action refers to accounts rendered for the trial and appeal of the law suit against Mr. Springer’s former employer. In the second action, the issue is the accounts rendered by Gowlings concerning a dispute with a neighbour. In fact, three invoices had already been paid. While the plaintiff argues that the allegation that the accounts were excessive is a bald allegation, Gowlings had never made a demand for particulars concerning the alleged overcharging and, instead, delivered a reply to the statement of defence.
[13] The defendants argue that both proceedings are actions commenced by Gowlings to recover unpaid fees and are not applications under the Solicitors Act for an order referring the accounts for assessment. Counsel takes the position that the Solicitors Act does not apply. He argues that the defendants raise the issue of equitable set-off as a defence in the actions commenced by Gowlings and, as such, the limitation in the Solicitors Act does not apply.
[14] The defendant further alleges that in the action involving the former employer of Mr. Springer, Gowlings’ action was a claim for fees in six accounts. The defendant says that for two invoices (August 13, 2009 and December 31, 2009), there is no amount outstanding. In the action involving the neighbour, Gowlings commenced a claim representing eight accounts that it says were owing but did not include copies of the accounts in its motion record. The defendants submit that one account was rendered on December 8, 2008, more than two years before the action was commenced. Furthermore, Gowlings is seeking to recover payment where three invoices had been paid (May 15, 2009, August 13, 2009, and December 31, 2009). All of these issues demonstrate that there are material facts in dispute.
[15] The defendants submit that the accounts rendered on a periodic basis were interim accounts rather than final accounts and that the client should not be prevented from reviewing all the accounts in the file. The presumption that the payment of an account by a client means that the client has accepted the account as fair and reasonable is rebuttable depending upon the facts of the case. Here, there are factual issues in dispute: the Springers argue the accounts were not reasonable, that the accounts were interim and not final and they do not agree that payment of the accounts constituted their acceptance of these accounts as reasonable. This is in contrast to Gowlings position that the accounts were reasonable, that they were final and that the presumption applies. The defendants argue that the court should not make a determination of law under Rule 21.01(1)(a) when the court does not have a complete factual basis on which to determine the issue and there are disputed facts.
[16] Although the defendants argue that the limitation in the Solicitors Act does not apply to their defence of an action, should the court think otherwise, they seek leave to amend their statement of defence to plead special circumstances.
[17] Finally, the defendants take the position that the plaintiff did not raise the question of a motion under Rule 21 until September 28, 2012 (seven and one half months after the defence was served). Counsel argues that the failure to bring this motion “promptly” as is required by Rule 21.02 should be considered by the court in exercising its discretion and the motion should be dismissed on the basis of delay.
THE LAW:
The Test under Rule 21
[18] Rule 21.01(1)(a) of the Rules of Civil Procedure states:
21.01(1) A party may move before a judge,
(a) for the determination, before trial of a question raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs.
[19] The determination of whether a limitation period bars a claim for set off may be resolved on a motion under Rule 21.01(1)(a) where the material facts upon which such a determination depends are not in dispute: see Charlton v. Beamish (2004) 2004 35934 (ON SC), 73 O.R. (3d) 119 (Sup. Ct.) at paras. 48-9; Whittaker v. Great-West Life Assurance Company 2008 13376 (ON SC), [2008] O.J. No. 1194 (Sup. Ct.) at paras. 33-41.
[20] In Toronto Dominion Bank v. Deloitte Haskins & Sells (1991) 1991 7366 (ON SC), 5 O.R. (3d) 417(Gen. Div.) at para. 3, R.A. Blair J. listed the following principles or tests to be applied on a motion under Rule 21.01(1) as follows:
(i) The allegations of fact in the statement of claim, unless patently ridiculous or incapable of proof, must be accepted as proven;
(ii) the moving party in order to succeed, must show that it is plain, obvious, and beyond doubt the plaintiff could not succeed;
the novelty of the cause of action will not militate against the plaintiff; and,
(iii) the statement of claim must be read generously with allowance for inadequacies due to drafting deficiencies.
[21] In Toronto Dominion Bank, he also wrote at para. 54: “I am of the view that these same principles or tests apply whether the motion is brought under rule 21.01(a) or (b). Both involve a consideration of legal principles applied to facts as set out in the pleadings.”
[22] The test to be applied on a motion to strike a pleading under Rule 21 is, assuming that the facts as stated in the statement of claim can be proven, whether it is “plain and obvious” that the pleading discloses no reasonable cause of action : see Hunt v. Carey, 1990 90 (SCC), [1990] 2 S.C.R. 959 at para. 33. Only if the action is certain to fail because it contains a radical defect should it be struck (Hunt at para. 33). On such a motion, no evidence is admissible. The motions judge is to read the pleadings generously with allowance for inadequacies due to drafting deficiencies: Toronto-Dominion Bank v. Deloitte Haskins & Sells, supra, at para. 3.
[23] Rule 21.01(1)(a) is designed to shorten proceedings by determining legal issues before trial where the law is clear, the law is not hypothetical, the law is not dependent upon disputed facts and the legal conclusion is plain and obvious. The court should not at this stage of proceedings dispose of matters of law that are not fully settled in the jurisprudence: see R.D. Belanger &Associates Ltd. v. Stadium Corp. of Ontario Ltd. (1991), 1991 2731 (ON CA), 5 O.R. (3d) 778 (C.A.) at para. 14.
The Application of the Solicitors Act to a solicitor’s action for unpaid accounts
[24] Where a lawyer claims payment of outstanding invoices for services rendered, the lawyer may either sue for the amount owing under the Rules of Civil Procedure or obtain an assessment under section 3 of the Solicitors Act. The Solicitors Act contains provisions which apply to both the assessment process and to actions. While the assessment process set out in the Solicitors Act is much more prominent in the legislation, there are provisions relating specifically to a civil action.
[25] For example, section 2 of the Solicitors Act relates specifically to an action and prohibits a solicitor from bringing any action for the recovery of fees, charges or disbursements until one month after the bill has been given to the client. There is nothing in the statute that provides that the Solicitors Act only applies to actions where the plaintiff is seeking an assessment. The clear words of the statute indicate that the legislation applies to any claim for the recovery of fees, charges or disbursements for work done for a client. Furthermore, the jurisprudence confirms the application of the Solicitors Act to both assessments and actions, although assessment of solicitors’ accounts is the more prevalent practice. In Borden & Elliot v. Barclays Bank of Canada 1993 5450 (ON SC), [1993] O.J. No.1946 (Gen. Div.) Adams J. wrote at para. 15: “The Solicitors Act reflects a clear bias against ordinary civil actions as the mechanism to protest the appropriateness of legal fees.” However, this does not mean that the courts are unable to hear cases commenced outside of the assessment system for the recovery of fees and that the Solicitors Act will not apply.
[26] In the case of Jean Estate v. Wires Jolley LLP 2009 ONCA 339,[2009] O.J. No. 1734, the court dealt with the application of the Solicitors Act to an arbitration agreement and the assessment of contingency fees. The court wrote at para. 68:
…the Superior Court has the exclusive jurisdiction to resolve fee disputes between Ontario solicitors and their clients. The application judge correctly held that public policy does not permit contracting out of the protections of the Solicitors Act including who conducts the assessment.
[27] In Gaska v. Anderson 2010 ONSC 1156, [2010] O.J. No. 896, Lauwers J. applied the provisions of the Solicitors Act and concluded that special circumstances existed and referred the matter for assessment rather than permitting a Small Claims Court action to proceed. In the decision, the court cited the case of Arnoldi v. Tremaine [1925] O.J. No. 53(Ont. Sup. Ct. Appellate Division), where a solicitor brought an action to recover bills of costs and a promissory note. The trial judge referred two of the bills to the Taxing Officer to tax them. The appellant relied on the Solicitors Act and took the position that the bills should not have been referred to taxation as they had been delivered more than 12 months before the action was brought. Middleton J.A. applied decisions which had held that the court had discretion to direct a taxation quite apart from the provisions of the Solicitors Act. Exercising its inherent jurisdiction, the court held that a taxation is necessary “to enable justice to be done.”
[28] Sections 4(1) of the Solicitors Act states:
4(1) No such reference shall be directed upon an application made by the party chargeable with such bill after a verdict or judgment has been obtained or after twelve months from the time that 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.
[29] Section 11 of the Act states:
- 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.
[30] In Mark M. Orkin’s text, The Law of Costs, 2nd ed., looseleaf, (Aurora, Ont: Canada Law Book Inc., 2004), Orkin defined “special circumstances” at 3-22 as follows:
It is not possible to give an exact definition of the term “special circumstances” as used in the Solicitors Act. Formerly the term meant either pressure on the part of the solicitor or gross overcharges amounting to fraud, but the term has been interpreted as including any circumstances of an exceptional nature affecting the matter of costs or the liability of a client which a judge, in the exercise of judicial discretion in each particular case, may consider as justifying an assessment.
[31] In Rooney v. Jasinski, 1952 115 (ON CA), [1953] 1 D.L.R. 225 (Ont.C.A.) at para. 15, “special circumstances” was interpreted to include “any circumstances of an exceptional nature affecting the matter of costs or the liability of a solicitor’s client which a judge, in the exercise of his judicial discretion in each particular case, may consider to justify a taxation.”
[32] In the case of Davies, Ward & Beck v. Union Industries, 2000 5722 (ON CA), [2000] O.J. no. 1769 (C.A.), the Court of Appeal wrote at paras. 23-4 about “special circumstances”:
In my view, the payment of accounts is a factor to be considered in deciding whether or not there are “special circumstances”. The totality of the circumstances must be considered. No single factor needs to be a special circumstance by itself. I find support for this conclusion in the wording of s. 11 of the Act which specifically deals with the payment of bills and special circumstances.
The phrase “special circumstances”, as it appears in s. 3 of the Solicitors Act was considered by this court in Rooney et al. v. Jasinki, 1952 115 (ON CA), [1952] O.R. 869 (C.A.). It was said to include “any circumstances of an exceptional nature affecting the matter of costs or the liability of a solicitor’s client which a judge, in the exercise of his judicial discretion in each particular case, may consider and justify a taxation.” As the court noted, if special circumstances are present, the solicitor (or the client) may apply to the court, on notice, for an order for assessment.
[33] Payment of the account implies that the client accepted that the account was proper and reasonable: see Enterprise Rent-a-Car v. Shapiro, Cohen, Andrews, Finlayson (1998) 1998 1043 (ON CA), 38 O.R. (3d) 257 (C.A.). This presumption that the client considered the account fair and reasonable was also discussed in Echo Energy Canada Inc. v. Lenczner Slaght Royce Smith Griffin LLP, 2010 ONCA 709, 325 D.L.R. (4th) 518, leave to appeal to SCC refused [2010] S.C.C.A. No. 484, where the court held that the client must demonstrate special circumstances in order to have solicitors accounts that have already been paid referred for assessment. Evidence may be led to rebut the presumption that the client accepted the account as proper and reasonable and the court must consider the evidence from the perspective of the client.
[34] In Slan v. Passarelli [1993] O.J. No. 1350 (Gen. Div.), an action was brought by a lawyer to recover unpaid fees where the client’s claim was outside the statutory limitation to seek an assessment. The client was arguing that the fees charged by the lawyer were excessive as a result of the lawyer’s conduct at trial. The court applied s. 2 of the Solicitors Act and held that the claim complied with its provisions. However, it refused to allow an assessment because of section 4 and section 11 of the earlier statute which was similar to the modern Solicitors Act in terms of the limitation period. The court conducted the same analysis of considering whether special circumstances existed where it was more than one year since the account was delivered and, finding there were no special circumstances, denied the assessment.
[35] There is a long line of cases that have recognized the inherent jurisdiction of the court to assess a lawyer’s fees: see Storer & Co. v. Johnson and Weatherall (1890), 15 App. Cas. 203 at p. 206; Peel Termninal Warehouses Ltd. and Wootten, Rinaldo and Rosenfeld (1978) 1978 1655 (ON CA), 21 O.R. (2d) 857 (C.A.); Woods v. Chamberland (1991) 1991 7186 (ON SC), 6 O.R. (3d) 419, 5 C.P.C. (3d) 217 (Gen. Div.) In Ladner Downs v. Thauberger (1983), 1980 504 (BC SC), 149 D.L.R. (3d) 21 (B.C. S.C.), the court said at para. 36:
The inherent jurisdiction of the court may be exercised by the court whenever it is “ just and equitable” to do so, and in particular, “to do justice between the parties” which, of necessity involves ensuring “that the solicitor, as an officer of the court, is remunerated properly and no more, for the work he does as a solicitor.
[36] Despite this inherent jurisdiction, it is often preferred to have an assessment officer undertake such a task given their considerable expertise in doing so. In Morris Rose Ledgett LLP v. Crisolago [2001] O.J. No. 4235 (Small Claims Ct.), the plaintiff law firm sued for unpaid bills for legal services and the defendant was asserting, among other things, that the lawyer’s fees were excessive. The time frame for an assessment had expired and there were no special circumstances demonstrated. The court held at para. 10 that the power to order an assessment is not derived exclusively from the Solicitors Act and is also founded on the court’s inherent jurisdiction over solicitors as officers of the court. The court ordered an assessment despite the client’s failure to specifically request an assessment in his defence to the solicitor’s action on the basis that the assessment officer was better qualified to “do justice between the parties.”
[37] The question of whether the account in question was an interim bill or a final account will affect the running of the limitation period for applications for the assessment of an account under s. 11: see Enterprise Rent-A-Car Co. v. Shapiro, Cohen, Andrews, Finlayson, supra at paras. 11-14.
The Defence of Equitable set-off
[38] The defence of equitable set-off was discussed by the Supreme Court of Canada in the case of Telford v. Holt, 1987 18 (SCC), [1987] 2 S.C.R. 193 (S.C.C.) at para. 33 as follows:
A defendant must show some equitable ground to be protected from the plaintiff’s claim;
That ground must go to the root of the plaintiff’s claim;
The claims must be so closely connected that it would be clearly unjust to allow the plaintiff to enforce payment without consideration of the cross-claim;
The claims need to arise from the same contract;
The claims need not be liquidated claims.
[39] The defence of equitable set-off does not need to be pleaded as a separate claim or counter-claim; rather it can be asserted in a statement of defence: see Spiral Aviation Training Co. LLC. v. Canada (Attorney General), 2010 ONSC 2581, 2010 CarswellOnt 2985 at para. 6. As a defence, equitable set-off is not affected by the expiration of a statutory limitation period: see Pierce v. Canada Trust Co. Mortgage Co., (2005)2005 15706 (ON CA), 197 O.A.C. 369, 254 D.L.R. (4th) 79 (C.A); application for leave to appeal to SCC dismissed [2005] S.C.C.A. No. 336. In this case, the Ontario Court of Appeal cited the leading decision of Henriksens Rederi A/S v. Rolimpex [1973] 3 All E.R. 389 (C.A.) per Lord Denning at para. 46 and held at para. 43 :“However, there is clear authority in the United Kingdom that equitable set-off is a substantive defence to which a statutory limitation period is inapplicable.”
[40] There is nothing in the Solicitors Act that treats the defence of set-off differently than other defences. In the case of Holmes v. Lerners LLP, 2012 ONSC 3140, [2012] O.J. No. 2357, the court held that any costs of the assessment would be set off against amounts owing to the lawyers by the client. Here, the plaintiff argues that equitable set off is barred by the limitation period. The defendants argue that the defence of equitable set-off is not barred by any limitation period. The limitation period in section 4(1) of the Solicitors Act places a limit on requests for orders assessing a lawyer’s fees. The Act does not impose any limitation period on when an individual can assert a particular defence: see: Slan v. Passarelli, supra.
DECISION:
[41] The motion brought under Rule 21.01(1)(a) by the plaintiff is for a determination of law and to strike paragraph three of the statements of defence. Gowlings argues that the pleadings raise issues which are barred by the limitation period under the Solicitors Act. There is a presumption that because the client paid the accounts, the client considered the accounts to be fair and reasonable.
[42] The plaintiff argues that Mr. Springer is required to show “special circumstances” before the accounts rendered to him and paid by him a year prior to his request for set-off may be assessed by an assessment officer or by a judge. In Burt v. Johnstone (1996), 1 C.P.C. (4th) 319 (Gen. Div.), at para. 41, Cumming J. held where the client did not pay her bill and applied after 12 months to assess it, that she must “meet a higher onus as the solicitors, for reasons of equity deserve to be informed at some earlier point that the client takes issue with the account.” Justice Cumming discussed the power of the court to order an assessment outside the terms of the Act by exercising its inherent jurisdiction. He also noted that where the client has paid the account, the presumption arises that the client had considered the account to have been fair and reasonable. Nothing was pleaded in either statement of defence to rebut that presumption. No complaint was made concerning the earlier paid accounts until December 6, 2011, when the defendants pleaded the issue of set-off in the statement of defence.
[43] Gowlings further submits that because Mr. Springer is a lawyer who is familiar with insolvency matters, he would have been aware of the limitation provisions of the Solicitors Act. Gowlings relies on the decision of Coventree Inc. v. Stockwoods LLP, 2012 ONSC 2737, [2012] O.J. No. 2107 where Lederman J. commented at paras. 59-61 that the plaintiff and its advisors were sophisticated parties who could have scrutinized and reviewed the time and work performed by the solicitors and “…the only conclusion that can be reached is that Coventree’s attempt to assess the accounts that had been paid over the years was motivated by the litigation brought against it by Tai.”
[44] Similarly, in the case at bar, Gowlings had represented the defendants over many years and the complaint about the accounts only arose after Gowlings brought the actions to collect on the accounts. Gowlings also submits that there is merely a bald allegation that the accounts were excessive and no explanation of when or by how much the clients were overcharged. It relies on the case of Tory, Tory, Deslauriers & Binnington v. Concert Productions International Inc., (1985), 7 C.P.C. (2d) 54 (Ont. H.C.J.) at 58 where Steele rejected an application seeking an order for assessment of paid accounts and wrote:” The mere fact that a solicitors’ account is higher than what was expected does not constitute special circumstances.”
[45] Counsel for the defendants takes the position that the Solicitors Act does not apply to the two actions commenced by Gowlings and that the limitation period that the plaintiff seeks to invoke in order to have the motion succeed is not applicable.
[46] I now apply the principles and the tests laid out in the jurisprudence to this motion brought under Rule 21.01(1)(a). I conclude that the motions to strike out paragraph three of the statements of defence should be dismissed for the following reasons:
- I am to accept the allegations of fact as set out by the plaintiff as proven. The plaintiff rendered accounts on a periodic basis and the client paid most of the bills without complaint. The courts have recognized that the practice of sending periodic bills makes good commercial sense. In Enterprise Rent-a-Car, supra at para. 13, the court wrote:
The issue is not whether a solicitor can send periodic bills—that is beyond controversy—but whether those bills are interim or final. Again, that is a question of fact. It must be recognized that some periodic bills can be final. A periodic bill can be final if it was clear intention of both parties that the bill be final, the bill was one to which the solicitor had committed himself or herself and was one that can be assessed.
[47] In the case of Fellowes, McNeil v. Kansa Canadian Management Services Inc. 1997 733 (ON CA), [1997] O.J. No. 2655 (C.A.) at para. 7, the Ontario Court of Appeal held:
…the right to assess prior accounts on a file just because the final account is being assessed is not absolute. It is a question of fact as to whether the prior accounts are, in the circumstances, to be treated as final for the purposes of the limitation period for seeking assessment: see Re Romer and Haslam [1893] 2 Q.B. 286 and Re Lang Michener and Newell (1985), 29 A.C.W.S. (2d) 184, aff’d. 36 A.C.W.S. (2d) 144.
[48] In the two actions commenced by the plaintiff, the court would have to consider matters such as whether the accounts relate to one piece of litigation, whether they are part of a continuum, whether the client was led to believe that the work was done on an interim basis and other circumstances to decide whether the accounts were interim or final and when the limitation set out in the Solicitors Act would run.
[49] If the trial judge decides that the limitation applies, the court may consider whether “special circumstances” exist as set out in s. 11 of the Solicitors Act. In deciding that issue, the court may consider any circumstances of an exceptional nature. In Echo Energy, supra at paras. 30-4, the court held that a judge in deciding whether special circumstances are made out must look at the presumption that the account was accepted as proper and reasonable from the client’s perspective. Factual matters which are in dispute will have to be determined by the court.
While the presumption exists that payment of a bill constitutes implied acceptance of its reasonableness, particularly when accounts are rendered on a regular basis and paid over the course of several years, the presumption is a rebuttable one which “depending upon the circumstances, is “refuted to some extent” by the fact that “clients cannot be expected to bring assessment applications while a solicitor is still representing them because they would not wish to alienate the solicitor ….”Again, whether the presumption is rebutted will depend upon the facts adduced. Furthermore, the determination of what constitutes payment is a mixed question of fact and law: see Gillette Canada Inc. (Appellant) v. Her Majesty the Queen (Respondent) 2001 DTC 895, [2001] T.C.J. No. 699 at para. 14.
That fact that bills are excessive may constitute special circumstances. As the court wrote in Enterprise Rent-a-Car, supra at para. 22:
Furthermore, in my view, the evidence of special circumstances is overwhelming. The fees and disbursements may be entirely justified but they exceed by such a considerable margin the most generous estimate that they warrant the scrutiny of an assessment officer. The task of determining the propriety of bills should not be left to solicitors who may, from time to time, make adjustments to their bills to reflect their own assessment of the value of their work. Only an assessment officer can determine whether or not the accounts rendered are fair and reasonable in relation to the result obtained.
- The defence of equitable set-off, if proven, is not affected by the expiry of the limitation period. Whether the defence will succeed is a matter for the trial judge to decide. The respondent is not statute barred from bringing a defence of equitable set-off.
[50] Even if the limitation period applies under the Solicitors Act, the court retains its inherent jurisdiction to order an assessment of a lawyer’s fees in the interest of fairness which is separate and apart from the provisions in the Solicitor’s Act: see Glanc v. O’Donohue & O’Donohue, 2008 ONCA 395, [2008] O.J. No. 1946 at para. 44 citing Re Park (1889), 41 Ch.D. 326 (C.A.); Arnoldi v. Tremaine, supra at 915-6 and Storer & Co. v. Johnson (1890), 15 App.Cas.203 (H.L). It is not clear whether a court would exercise its inherent jurisdiction in these circumstances.
[51] In summary, Gowlings argues that paragraph three of the statement of defence refers to accounts sent prior to August 13, 2009, (more than one year prior to the issuance of the statement of defence) were already paid and that there are no material facts in dispute. Gowlings also argues that Mr. Springer is required to show special circumstances before the accounts rendered to and paid by him a year prior to his request for set-off may be assessed by an assessment officer or by a judge. For the reasons outlined above, I find that (1) there are material facts in dispute; (2) the limitation period may or may not apply under the Solicitors Act; (3) that the presumption that where the accounts have been paid demonstrates the client’s acceptance that the accounts are reasonable may be rebutted; (4) it is not clear that the defence of equitable set-off will be affected by the limitation period.
[52] The test to be applied on a motion to strike a pleading under Rule 21 is, assuming that the facts as stated in the statement of claim can be proven, is it plain and obvious that the court can determine before trial a question of law raised in the pleading where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs? Where the question of law was neither hypothetical, contingent upon disputed facts or raised a novel point of law requiring a full record, disposition under this rule has been held to be appropriate: see Gokstorp v. TD Insurance Meloche Monnex (2009), 2009 92122 (ON SC), 102 O.R. (3d) 235 (Sup.Ct.), aff’d 2010 ONCA 313, 102 O.R. (3d) 239 (C.A.).
[53] Having reviewed the pleadings and assuming the facts as stated in the claim are true or capable of being proven, I am of the view that it is not plain and obvious at this stage, that the limitation period set out in the Solicitors Act will apply to this case, that it has expired and that the defence of equitable set-off cannot succeed. The issue is not crystal clear as to the application of the limitation period. Further, it is possible that a court may exercise its discretion and apply its inherent jurisdiction to allow a review of accounts dating back to the beginning of the solicitor-client relationship. I also find that there are material facts in dispute and a full factual record is necessary on which to base the legal conclusions.
[54] The defendants have raised Rule 21.02 which provides that a motion under rule 21.01 must be made promptly and failure to do so may be taken into account by the court in awarding costs. Counsel submits that the rule also allows the court to exercise its discretion and dismiss the motions for failure to bring the motions promptly: see Fleet Street Financial Corp. v. Levinson (2003) 31 C.P.C. (5th) 145 (Sup. Ct.). Here, the delay was of seven and one half months following the filing of the statement of defence. Given that it took the defence one year to file a statement of defence and that the counsel were in settlement discussions for part of the time, I do not consider these to be appropriate circumstances to invoke Rule 21.02 and dismiss the motions on that basis.
RESULT:
[55] For the reasons outlined above, I conclude that the motion to strike out pleadings under Rule 21.01(1)(a) must be dismissed. The parties have agreed on what an appropriate quantum of costs should be in this case. I exercise my discretion pursuant to section 131 of the Courts of Justice Act, R.S.O. 1990, c. C. 43, and Rule 57.01 and deem it fair and reasonable in the circumstances of this case to fix costs of this motion in the amount of $7,500. inclusive of disbursements and HST payable to the defendants within 30 days, an amount agreed upon by the parties.
Himel J.
Date: February 11, 2013