Todd Family Holdings Inc. et al. v. Gardiner et al.; Gardiner, Third Party Plantiff; Todd et al., Third Party Defendants

[Indexed as: Todd Family Holdings Inc. v. Gardiner]

Ontario Reports

Ontario Superior Court of Justice,

McIsaac J.

October 23, 2015

127 O.R. (3d) 714 | 2015 ONSC 6590

Case Summary

Professions — Barristers and solicitors — Removal from record — Client retaining solicitors shortly before peremptory trial date — Agreement between client and solicitors purporting to permit solicitors to seek court approval for their removal as counsel of record for non-payment of legal fees — Solicitors seeking permission to withdraw following 13 days of trial and five-month adjournment — Permission denied — Proposed withdrawal would cause serious prejudice to client.

After losing two law firms, and in the face of a fast-approaching peremptory trial date, the client retained the solicitors. The agreement between the parties purported to permit the solicitors to seek court approval for their withdrawal as counsel of record for non-payment of legal fees. The client received independent legal advice before signing the agreement. After 13 days of trial, during a five-month adjournment, the solicitors threatened to enforce payment of fees by way of power of sale proceedings under two mortgages that the client had given them on his home and cottage or to seek court permission to withdraw. The client retained L to seek an injunction preventing the proposed sale and to resist any motion for removal of counsel. The solicitors moved for permission to be removed from the record. [page715]

Held, the motion should be dismissed.

Despite the client's prior consent to the removal of the solicitors from the record, the court retained a discretion to refuse to grant permission. The proposed withdrawal would cause serious prejudice to the client. It was not feasible for the client to act for himself in this complex commercial case, and it was doubtful that he could retain another lawyer mid-trial. He had already paid approximately $425,000 to the law firm that initiated the litigation, and was effectively abandoned by his second lawyer on the eve of a previous trial date. The solicitors accepted security on the client's two properties during the course of the first stage of the trial, and had failed to establish that there was no, or insufficient, equity in that security to see their outstanding accounts paid. The client had not irreparably damaged the solicitor-client relationship by retaining L to seek an injunction and resist the motion for permission to withdraw.

Cases referred to

Children's Aid Society (Region of Halton) v. K. (D.), [2012] O.J. No. 3644, 2012 ONCJ 502, 26 R.F.L. (7th) 251, 218 A.C.W.S. (3d) 344; Kovinich v. Kovinich, [2008] O.J. No. 5917, 58 C.P.C. (6th) 78 (S.C.J.); R. v. Cunningham, [2010] 1 S.C.R. 331, [2010] S.C.J. No. 10, 2010 SCC 10, 399 N.R. 326, 2010EXP-1163, J.E. 2010-626, EYB 2010-171414, 317 D.L.R. (4th) 1, 73 C.R. (6th) 1, 254 C.C.C. (3d) 1, 283 B.C.A.C. 280, 87 W.C.B. (2d) 70; Sandhu v. Household Realty Corp., [2013] B.C.J. No. 244, 2013 BCSC 192; Seaway Consultants Inc. v. J.D. Irving Ltd., [2013] N.B.J. No. 450, 2013 NBQB 234, 420 N.B.R. (2d) 1; Todd Family Holdings Inc. v. Gardiner, [2015] O.J. No. 3718, 2015 ONSC 4432 (S.C.J.); Tri-Link Consultants Inc. v. Saskatchewan Financial Services Commission, [2012] S.J. No. 225, 2012 SKCA 41, 393 Sask. R. 90; Williams v. Halifax (City), [2011] N.S.J. No. 107, 2011 NSSC 84, 300 N.S.R. (2d) 264, 198 A.C.W.S. (3d) 286

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 15.01(2)

MOTION by counsel for permission to withdraw from the record.

David A. Taub and Robert S. Choi, for moving party Robins Appleby LLP.

Jaan E. Lilles, for respondents Todd Family Holdings Inc. and Future Image Holdings Corporation, plaintiffs; and Lance Todd, Barefoot Science Products & Services Inc. and 2215535 Ontario Inc., third party defendants.

Jonathan L. Rosenstein and Sahram Goudarzi, for defendants Roy John William Gardiner, Barefoot Science Technologies Inc., Dayl Marie Armstrong, Barefoot Science Holdings Inc., Barefoot Science Direct Inc., Barefoot Science Group Marketing Inc. and Advanced Barefoot Technologies Inc.; and the third party plaintiff Roy John William Gardiner.

[1] McISAAC J.: — On November 17, 2014, following a five-month adjournment of a lengthy and complicated commercial litigation trial, counsel for the plaintiffs sought permission of the [page716] court to withdraw from that representation. The motion for leave to withdraw was vigorously opposed by the clients. I dismissed the motion two days later and directed that the representation of the plaintiffs and third party defendants continue and that reasons for that ruling would follow in due course. These are those reasons.

[2] The trial resumed on November 24, 2015 and concluded on December 4, 2015. Following written submissions, judgment in favour of the plaintiffs was delivered on July 8, 2015: see [2015] O.J. No. 3718, 2015 ONSC 4432 (S.C.J.).

Background

[3] For convenience sake, the protagonists in this protracted litigation can be referred to as the "Todd Group" for the plaintiffs and the "Gardiner Group" for the defendants. Roy Gardiner had invented and patented a footwear insole system based on the concept of progressively more demanding inserts. Unfortunately, he did not possess the business acumen to exploit these devices and his companies were either failing or in dire need of investment. Lance Todd saw this opportunity to invest his fortune; however, the investment was an abject failure due to, on his part, a failure to conduct due diligence and, on the part of the Gardiner Group, misrepresentation and oppressive conduct.

[4] The Todd Group eventually launched various proceedings against the Gardiner Group to recover the investment and all of these actions were eventually consolidated into one trial before me. During the course of this protracted litigation, the Todd Group had retained and lost two law firms before hiring Robins Appleby LLP ("Robins") in the face of a fast-approaching judicially imposed peremptory trial date. Given this solicitor-client "track record", Robins extracted an "engagement" from the Todd Group dated December 10, 2013, whereby it undertook to become lawyers of record for them in this action and to "prepare for and conduct the trial of this action". There is no suggestion of any form of limited retainer in this documentation. Part and partial of this engagement was a draft order and consent executed by Lance Todd on behalf of the Todd Group purporting to permit Robins to seek court approval of its removal as counsel of record for the non-payment of legal fees. Lance Todd received independent legal advice from previous counsel before signing this consent. The peremptory trial date had been fixed for the Oshawa civil sittings set for May 2014, and had been estimated to last eight to ten days. [page717]

[5] On April 8, 2014, Robins extracted a further agreement from the Todd Group requiring the immediate payment of $160,000 by way of trial retainer as of May 5, 2014. Despite having received only $125,000 from Lance Todd by the date the trial began on May 26, 2014, Robins continued its representation of the Todd Group until all available time had been exhausted at that sittings and the trial was adjourned to the fall 2014 sittings. Thirteen days of trial had been used up to that point. Again there was no suggestion to the court of any form of limited retainer applying to this litigation.

[6] During this hiatus, prolonged and tortured negotiations took place between Robins and Lance Todd. Although Lance Todd had provided some security to Robins by way of mortgages on his home and cottage in June 2014, he had failed to pay down the retainer indebtedness from certain accounts receivable nor to pledge certain penny stocks that he said were available to him. Eventually, based on the failure to honour the retainer agreement, Robins threatened two courses of action: first, to enforce payment by way of power of sale under the two mortgages; and, second, to seek court permission to withdraw from its representation of the Todd Group.

[7] In the face of these threats, Lance Todd retained Jaan Lilles of the law firm of Lenczner Slaght LLP ("Lenczner") to seek an injunction preventing the proposed sale and to resist the motion for removal of counsel. Robins eventually agreed to hold the sale in abeyance but insisted on proceeding with the removal motion on October 31, 2014 before Lack J. who, quite properly, referred it to me as the trial judge. As already noted, that motion was heard on November 17, 2014, and I disposed of it two days later. At the time of the motion, the amount owing to Robins net of any unbilled time was just short of $250,000.

Positions of the Parties

[8] Robins advances two discreet arguments in support of the motion:

(i) in light of the executed consent for removal that was obtained after independent legal advice, this court has no discretion other than to grant the relief sought; and

(ii) given the defaults and misrepresentations practised by Lance Todd towards Robins in failing to provide the promised retainer along with the accusations of professional misconduct launched by Jaan Lilles against it, there has been a fundamental breakdown of the solicitor-client relationship which can only be resolved by a withdrawal of counsel. [page718]

[9] On the other hand, the Todd Group insists that Robins does not have an unfettered right to obtain removal from the record and that the discretion of the court should be exercised in favour of the clients given the fact that this is a mid-trail request that would cause significant prejudice to their interests if allowed.

Analysis

(i) Consent

[10] Robins suggests that given the "irrevocable" nature of the consent obtained from Lance Todd for its removal from the record, it should be allowed to retire on the basis of the application of straightforward principles of contract law. Since the Todd Group agreed in a free and informed manner to this removal, there is no unfairness in enforcing Robins' part of the bargain. There is no claim of mistake, misrepresentation, fraud or any other ground which would vitiate this contract.

[11] I agree with counsel for the Todd Group that the principles governing the exercise of my discretion transcend the simple canons of contractual interpretation. That discretion is informed by the applicable Rules of Professional Conduct propounded by the Law Society of Upper Canada and, more importantly, governed by recent pronouncements by the Supreme Court of Canada. A lawyer is not permitted to withdraw if serious prejudice would result to the client: see rule 3.7-3 of the Rules of Professional Conduct.

[12] In R. v. Cunningham, [2010] 1 S.C.R. 331, [2010] S.C.J. No. 10, 2010 SCC 10, the Supreme Court of Canada listed, at para. 50, a number of factors that should influence the exercise of the discretion, at least in the context of criminal proceedings. Despite a comment by the Saskatchewan Court of Appeal that the observations by the Supreme Court of Canada in that case may not apply in the civil context (see Tri-Link Consultants Inc. v. Saskatchewan Financial Services Commission, [2012] S.J. No. 225, 2012 SKCA 41, at para. 15), I am of the view that the weight of Canadian authority suggests that they do apply: see Williams v. Halifax (City), [2011] N.S.J. No. 107, 2011 NSSC 84, at para. 11; Sandhu v. Household Realty Corp., [2013] B.C.J. No. 244, 2013 BCSC 192, at para. 17; Seaway Consultants Inc. v. J.D. Irving Ltd., [2013] N.B.J. No. 450, 2013 NBQB 234. See, as well, Children's Aid Society (Region of Halton) v. K. (D.), [2012] O.J. No. 3644, 2012 ONCJ 502, at para. 8, in the context of child protection proceedings. In my view, the pertinent factors in this case are the following: [page719]

it is not feasible for Lance Todd to properly advocate the issues in this complex commercial litigation on his own;

it is doubtful he could retain alternative representation at this late date and at the mid-trial juncture;

he has already paid in full approximately $425,000 to the law firm that initiated this litigation;

he was found by Lack J. to have been, in effect, abandoned by his second lawyer on the eve of a previous trial date;

Robins accepted security on Lance Todd's two properties in the amount of $250,000 during the course of the first stage of the trial; and

Robins has failed to satisfy me that there is no or insufficient equity in this security to see their outstanding accounts paid.

[13] Given this combination of circumstances, I am satisfied that need for the retention of present counsel significantly outweighs the interest of Robins in withdrawing from this course on the basis of non-payment of legal fees.

(ii) Relationship breakdown

[14] Robins seeks to justify their withdrawal from the representation of the Todd Group on the alternative basis that Lance Todd has unraveled the solicitor-client relationship by practising deceit, by acting in bad faith and by accusing it, through the medium of Mr. Lilles, of breaching the Rules of Professional Conduct in its treatment of him. Specific reliance is placed on the decision in Kovinich v. Kovinich, [2008] O.J. No. 5917, 58 C.P.C. (6th) 78 (S.C.J.), where R. Pelletier J. found that loss of confidence by the client justified the removal of counsel along with other circumstances related to the non-payment of a retainer. However, at para. 34, he noted that the expressed disappointment with counsel had been found to be unsupported when investigated by a senior member of the law firm and, in fact, the client had been "very well represented" by Ms. Cooligan.

[15] In this case, I find the complaints of Mr. Lilles against Robins to be well-founded in that its proposed retirement mid-trial on the basis of non-payment of legal fees was improper and unprofessional. In my view, such a development would have caused serious, if not irremediable, damage to the clients who would have been forced to complete the trial on their own. The first step in this process would have been the cross-examination [page720] of the principal defendant, Roy Gardiner. As well, the plaintiffs and corporate third party defendants would require leave of the court to continue to be represented by Lance Todd, assuming new counsel could not be found which I predict would have been virtually impossible: see rule 15.01(2) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194]. Permitting counsel to withdraw at this stage of the proceedings would not only cause significant prejudice to the clients but, in my view, would bring the administration of justice into serious disrepute.

[16] Robins takes particular umbrage with the fact that the clients elected to retain Lenczner to defend this motion rather than pay down their indebtedness to it. The suggestion is that this is yet another aspect of the bad faith practised by them. This submission, of course, presumes that the Todd Group did, in fact, advance funds by way of retainer to Mr. Lilles. I am not privy to that arrangement. For all I know, Lenczner could be prosecuting this case pro bono in the spirit of upholding the honour of the profession. In any event, I see nothing wrong with the clients retaining separate counsel to vindicate a manifest injustice where they have been professionally abandoned halfway through this trial.

[17] Before leaving my consideration of this aspect of this motion, I must note that Robins' effort to clothe this dispute as a fundamental breakdown of the solicitor-client relationship is nothing more than a thinly veiled attempt to elevate it beyond a straightforward fee dispute.

Conclusion

[18] For all of these reasons, I am satisfied that the clients have met the high threshold imposed by the case law and the motion permitting the law firm to withdraw mid-trial is dismissed. The issue of costs for this motion can be addressed at the hearing to be fixed in the main cause.

Motion dismissed.

End of Document