NEWMARKET

COURT FILE NO.: FC-13-42571-00

DATE: 20150915

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Hana Macmull

Applicant

– and –

Roni Hai Macmull

Respondent

– and –

Stephen M. Labow Respondent

Tilda Roll, Counsel for the Applicant
(not participating in this Motion)

Nadine Waldman, Counsel for the Respondent
Martin Z. Rosenbaum, Counsel for the Respondent

HEARD: July 22, 2015

ENDORSEMENT

mCgEE j.

Award of Costs Against a Lawyer Personally

[1] Rule 24 (9) of the Family Law Rules allows the court to order a lawyer to reimburse a client for monies that he or she has paid in legal fees and disbursements, and for costs paid to the other party. It is a rare and exceptional remedy that I find to be appropriate in these circumstances. Mr. Stephen Labow is ordered to pay to his former client the amount of $14,500 in costs.

Background

[2] In 2007, Mr. Macmull separated from his spouse of 18 years. For the next five years they sorted out most of the issues arising from their separation; but by 2012 there remained important and pressing problems.

[3] In the spring of 2013 Ms. Macmull retained counsel and served an Application. On July 8, 2013 the parties attended a limited case conference. Mr. Macmull was at that time self-represented. An agreement was reached on a mortgage renewal. The next event was to be a settlement conference.

[4] Counsel for Ms. Macmull heard nothing further from Mr. Macmull. Nothing at all. No Answer was filed and there was no request for late filing. By the end of October 2013, it seemed prudent to proceed by way of an uncontested trial, and a Form 23C was deposed on November 4, 2013. The Justice hearing the motion for uncontested trial asked for further submissions within endorsements of November 27, 2013 and March 13, 2014.

[5] Unbeknownst to Ms. Roll or to the court, Mr. Macmull had counsel throughout this period. Mr. Labow was retained on July 29, 2013, just a few weeks after the case conference of July 8, 2013. It is agreed that Mr. Macmull and Mr. Labow had a solicitor and client relationship that continued without interruption until the end of August 2014.

[6] In the weeks following Mr. Labow’s retainer, Mr. Macmull provided significant material for the preparation of a Financial Statement. He had no reason to believe that his counsel was not representing him in the ordinary course, and completing all necessary work on his behalf.

[7] Ms. Macmull’s counsel, Ms. Roll, never contacted Mr. Macmull after the case conference. Mr. Labow knew that he was not to deal with his wife’s counsel directly, as that was the role of his lawyer.

[8] Mr. Labow didn’t contact Ms. Roll. He wrote no letter of introduction after being retained. He did not pick up the phone, or send an email. In no manner could Ms. Roll have known that Mr. Macmull had retained counsel, or that a Financial Statement was in the process of being prepared.

[9] Mr. Labow’s Affidavit of March 10, 2015 states at paragraph 12, that on August 27, 2013 he told Mr. Macmull that he would not “go on record” with Ms. Roll until “I had the financial disclosure material and until we were ready to serve the Financial Statement and other material.”[^1] He did not bring to his client’s attention that he was in default of the Application, or the consequences of a default. He took no steps to protect his client from being in default.

[10] Counsel and client continued to meet over the next few months. Mr. Macmull believed that he had delivered all the disclosure requested by his counsel. Mr. Labow emailed a note to his client on October 29, 2013 which expressed frustration with the complexity of the case, the need for full disclosure, and the lack of organization of the materials. He reiterated that he would not be in a position to file material on his behalf until “I fully understood the matter and we had your position backed up with appropriate documentation.” Mr. Macmull responded to his lawyer’s concerns.

[11] By the end of November, Mr. Macmull was starting to wonder what was happening on his file. He sent emails to his lawyer on December 2, 2013, January 21, 2014, February 4, 2014 and March 6, 2014. The January 21, 2014 email is representative of these inquiries. It reads, “Good Morning. Anything new happening, it seems weird that Hana’s lawyer is not going further and it all just stop, please let me know what is happening.”

[12] There were other exchanges between solicitor and client. Mr. Labow apologised for delays resulting from his busy court schedule, computer problems and a March vacation. He assured his client that all was progressing and that there was no reason to be concerned. On two occasions he wrote to Mr. Macmull for further information, again reflecting on the complexity of his financial situation. Ultimately, he never did complete a Financial Statement for his client.

[13] Mr. Labow wrote to Ms. Roll for the first time on June 27, 2014. His letter of that date begins,

Please be advised that I have been retained by Mr. Roni Macmull, and that I am presently dealing with putting together financial disclosure in this matter.

The letter goes on to address the mortgage on the former matrimonial home, and to ask for Ms. Roll’s assistance to ensure a timely renewal. It makes no mention of an Answer to the Application.

[14] The rest, as they say, is history. Ms. Roll replied that the matter was now before the courts as an uncontested trial. Mr. Labow relayed the information to his client. Mr. Macmull panicked, and it took a few weeks for him to figure out what had happened. By the end of August he paid a reduced final account of $18,000 to Mr. Labow, discharged him, and was looking for new counsel.

[15] On December 10, 2014 Mr. Macmull’s new counsel served his Answer, Financial Statement and a 35.1 Parenting Affidavit, with a proposal to pay Ms. Macmull $2,000 in costs thrown away for a consent to late filing. Ms. Macmull was unwilling to accept the amount of $2,000 and sought all of her costs. The issue was decided on a motion heard March 25, 2015. Justice Rogers ordered that Mr. Macmull pay $3,950 plus HST in fees and $220.25 plus GST in disbursements by May 27, 2015; plus $1,000 for the costs of the motion. Mr. Macmull paid all the amounts and filed his Answer on May 28, 2015.

The Legal Test

[16] These have been very expensive steps for Mr. Macmull. He seeks to recover his costs against Mr. Labow, per Rule 24 (9) which states:

24(9) COSTS CAUSED BY FAULT OF LAWYER OR AGENT - If a party’s lawyer or agent has run up costs without reasonable cause or has wasted costs, the court may, on motion or on its own initiative, after giving the lawyer or agent an opportunity to be heard,

(a) order that the lawyer or agent shall not charge the client fees or disbursements for work specified in the order, and order the lawyer or agent to repay money that the client has already paid toward costs;

(b) order the lawyer or agent to repay the client any costs that the client has been ordered to pay another party;

(c) order the lawyer or agent personally to pay the costs of any party; and (d) order that a copy of an order under this subrule be given to the client.

[17] Rule 24 (9) of the Family Law Rules has its parallel in Rule 57.07 in the Rules of Civil Procedure. Both are based on the court's authority to provide a summary remedy to a party who has been put to wasted or unnecessary costs. Compensation may be appropriate even if discipline is not. Orders are intended to relieve a litigant of his or her costs, not necessarily to punish the lawyer.

[18] It is well settled that courts must be extremely cautious in awarding costs personally against a lawyer.[^2] Costs against a solicitor are an exceptional remedy. The wording of Rule 24 (9) as it refers to “fault” within the heading, requires a finding of negligence, inappropriate conduct, or abuse of process on the part of the lawyer, even if the conduct does not amount to bad faith.[^3]

[19] There is a two-stage analysis.[^4] In the first stage, the court must determine whether the lawyer's conduct falls within the rule, in the sense of causing costs to be incurred unnecessarily. In assessing the conduct, a lawyer may not rely on a client’s instructions as a defence when a lawyer acts in a manner inconsistent with the goals of the justice system.[^5]

[20] Most examples of acting in a manner inconsistent with the goals of the justice system reference overzealous advocacy, breaches of rules or sharp practice. In my view, acting in a manner inconsistent with the goals of the justice system can also include the failure to take a necessary step within a proceeding.

[21] At the second stage, the court must determine whether it should exercise its discretion to award costs. The court must consider all of the relevant circumstances and must exercise extreme caution before awarding costs against a solicitor.

[22] In family law cases, the relevant circumstances must include a reference to the primary objective of the rules — that cases are dealt with justly.[^6] Rule 2(3) of the Family Law Rules clarifies what “dealing with a case justly” includes, listing:

(a) ensuring that the procedure is fair to all parties;

(b) saving expense and times;

(c) dealing with the case in ways that are appropriate to its importance and complexity; and

(d) giving appropriate court resources to the case while taking account of the need to give resources to other cases.

Rule 2 (4) places a duty on counsel to help the court promote the primary objective. A lawyer has a duty per Rule 1.03 (1) (a) to carry on the practice of law and discharge all responsibilities to clients, tribunals, the public, and other members of the profession honourably and with integrity.

Analysis

[23] The submissions on this motion largely focussed on the preparation of a Financial Statement for Mr. Macmull, and whether all the necessary documents had been provided to counsel. This is not the correct focus.

[24] Rather, it is Mr. Labow’s failure to protect his client’s ability to answer the Application that calls for the court’s attention. When he was retained on July 29, 2013, Mr. Macmull was already in default. The task of preparing a Financial Statement was secondary to securing counsel’s consent to late filing, or an order for same. At a minimum, he ought to have asked Ms. Roll to not proceed by uncontested trial without notice.

[25] Without any indication that Mr. Macmull was taking further steps in the proceeding, it was entirely reasonable that Ms. Roll would move for uncontested trial.

[26] Mr. Macmull was never advised of the consequences of being in default, nor of the importance of placing his pleadings into good standing. In contrast, he was assured that matters were progressing.

[27] Counsel for Mr. Macmull suggests that Mr. Macmull would have been, or ought to have been independently aware of the need to file an Answer, given the plain reading of the caution on the first page of the Application.

[28] In this regard, it is significant that Mr. Labow’s final account for $18,000[^7] in July 2014 was the only account ever rendered. Even if Mr. Macmull ought to have independently known of the jeopardy of being in default, he had no opportunity to see an account that might have alerted him to the fact that there was no contact between counsels, or the preparation (in any manner) of an Answer.

[29] I find that Mr. Labow’s failure to take steps to protect Mr. Macmull’s ability to answer the Application caused costs to be incurred unnecessarily. Within the second stage of the analysis, should the court exercise its discretion to award costs in these circumstances?

[30] Motions for uncontested trial take up an enormous amount of unscheduled judicial resources. Almost all of the litigation steps of the last two years might well have been avoided by the delivery of a pleasant, one paragraph letter to Ms. Roll in August 2013. Such letters are standard fare amongst counsel.

[31] Valuable court time and resources have been lost, as well as personal financial losses, and the costs of delay to each of Mr. and Ms. Macmull. Some of the costs to Ms. Macmull were transferred to Mr. Macmull as adjudicated on March 25, 2014. Those costs of $5,712[^8] ought to fully fall to Mr. Labow. There was no reason for Ms. Macmull to have incurred the costs of an uncontested trial, but for Mr. Labow’s failure to give any indication that his client intended to answer the Application.

[32] With the balance of costs sought: $8,177 in new counsel fees at $315 and $285 per hour, and disbursements of $662, the total amount sought is $14,551. I note that the hourly rates of new counsel are less than those charged by Mr. Labow.

[33] Even within an extremely cautious view, there is no basis to shift to Mr. Macmull the responsibility to give notice to opposing counsel; or to take a mixed view of his failure to file an Answer. Mr. Macmull retained counsel promptly after the case conference, and took a proper view that he was not to contact his wife’s counsel directly. But for his counsel’s concerns that “he would not go on the record[^9],” he received assurances that all was going well. When Mr. Macmull came to understand that he was in default, he discharged counsel, retained new counsel and took immediate steps to bring his pleadings into good standing.

[34] I find that compensation, that is, costs in the form of a relief against fees is appropriate in these circumstances pursuant to Rule 24 (9) of the Family Law Rules. The amount of fees and disbursements sought are reasonable and were necessary within the factors set out in Rule 24 (11). Order to go that Mr. Labow shall forthwith pay to Mr. Macmull the rounded amount of $14,500 in costs.

Justice H. McGee

Released: September 15, 2015

[^1]: This statement is denied by Mr. Macmull. As I cannot assess credibility within a motion, I have accepted Mr. Labow evidence for the purposes of this motion.
[^2]: See Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3.
[^3]: Ben Lolo v. Wang, 2012 ONSC 453 (Div. Ct.).
[^4]: Carleton v. Beaverton Hotel, [2009] O.J. No. 2409 (Div. Ct.).
[^5]: See Bailey v. Barbour, 2014 ONSC 3698 and Sangha v. Sangha, 2014 ONSC 4088.
[^6]: Sambasivam v Pulendrarajah, 2012 ONCJ 211, Sherr J.
[^7]: Mr. Labow’s prebilling report for July 25, 2013 to September 5, 2014 is for 70.20 hours @ 435.90 per hour for a total of $34,578 inclusive of HST. Approximately 30 hours were billed for the preparation of a Financial Statement. It appears that charges after July 29, 2014 were withdrawn.
[^8]: In permitting Mr. Macmull to late file, Justice Rogers ordered him to pay $3,940 in fees and $220.25 in disbursements, plus GST/HST, and $1,000 in costs to Ms. Macmull – which amounts have been paid in full.
[^9]: Again, this is disputed by Mr. Macmull, but even if true, does not address the failure to insure that Mr. Macmull could answer the Application.