CITATION: Calin A. Lawrynowicz Barristers & Solicitors v. Marino Estate, 2016 ONSC 2065

COURT FILE NO.: 07-CV-333171

DATE: 20160324

ONTARIO

SUPERIOR COURT OF JUSTICE

IN THE MATTER OF THE Solicitors Act and in the matter of:

CALIN A. LAWRYNOWICZ BARRISTERS & SOLICITORS

Applicant/Solicitor

– and –

THE ESTATE OF DOMENICO MARINO, deceased, by its representative JOSEPH MARINO, MARIA MARINO, JOSEPH MARINO and GREGORY MARINO

Respondents/Clients

William L. Roland

for the Applicant/Solicitor

Gregory M. Sidlofsky

for the Respondents/Clients

HEARD: February 19, 2016

PERELL, J.

REASONS FOR DECISION

A. INTRODUCTION

1. Overview

[1] Nine years ago, on March 23, 2007, I ordered that all accounts rendered to the Plaintiffs by Calin A. Lawrynowicz, Barristers & Solicitors (the “Law Firm”), be referred for an assessment under the Solicitors Act, R.S.O. 1990, c. S.15. The Plaintiffs were Maria Marino, the Estate of Domenico Marino, and Joseph Marino, in his personal capacity and as representative of the Estate of Domenico Marino, (the “Marinos”).

[2] On 24 dates, between January 2008 and June 14, 2010, there was an assessment hearing before Assessment Officer C.M. Chiba. Written submissions were received in February 2011. Then, four-years-and-three-months passed. On July 17, 2015, the Assessment Officer signed a Certificate of Assessment and released Reasons for Decision. She concluded that the accounts paid by the Marinos totaled $588,500.46. She assessed the value of the legal services to be $nil plus $7,500 for disbursements.

[3] She ordered the Law Firm to refund the Marinos $662,455.98 comprised of $581,000.46 for the overpayment of legal fees, pre-judgment interest of $31,455.52, and substantial indemnity costs of $50,000.

[4] The Assessment Officer held that the Law Firm failed to prove on a balance of probabilities that the legal accounts were fair and reasonable. She concluded that the fees charged and paid for by the Marinos were so grossly excessive as to amount to fraud. As I read her decision, in addition to her finding that the quantum of the accounts amounted to fraud, she found that Calin Lawrynowicz of the Law Firm perpetrated a fraud on both the Marinos and the court with respect to the separate issue of how much the Marinos had paid to the Law Firm on account of legal fees.

[5] As I will explain below, the Assessment Officer’s decision about fraud are the main items of the agenda and of the hidden agenda of the matter now before the court.

[6] The Law Firm moves to oppose confirmation of the Certificate of Assessment. It seeks to set aside the Certificate for five reasons: (1) the Assessment Officer exceeded her jurisdiction by assessing accounts that were not before her and by determining the nature of the retainers associated with those accounts; (2) the Assessment Officer exceeded her jurisdiction by holding that an assessment officer can make findings of fraud and then by finding fraud to have been proven; (3) the Assessment Officer was biased and the conduct of the assessment hearing contravened the principles of natural justice; (4) the delay in the Assessment Officer’s delivery of Reasons undermined the integrity of the assessment; and (5) the Assessment Officer made errors in principle and palpable and overriding errors of fact in reaching her assessment decision.

[7] For the reasons that follow, I conclude that the Assessment Officer made errors in principle and, therefore, the Certificate of Assessment should not be confirmed.

[8] Rather than prolonging this execrable matter by referring the matter to another Assessment Officer, I will instead substitute my own determination of what sum should be refunded to the Marinos. I, therefore, order the Law Firm to pay the Marinos $475,000, all inclusive of overpayment of legal fees, disbursements, pre-judgment interest, and substantial indemnity costs.

[9] My decision to order this payment to the Marinos can be justified on the basis that the Assessment Officer made errors in principle about the quantification of the Law Firm’s accounts. As the discussion below will reveal, the fundamental error made by the Assessment Officer was her conclusion that all of the services of the Law Firm were valueless. Some of the services were without value and some and perhaps all of the charges for those services were grossly excessive, but the appropriate exercise of the Assessment Officer’s jurisdiction was to reduce the charges to their real value, which was not $nil.

[10] Having regard, to my finding that the Assessment Officer made an error in principle about the quantum of the Law Firm’s fees, it is not strictly necessary for me discuss whether an Assessment Officer has jurisdiction to make findings of fraud and whether in the immediate case the Assessment Officer exceeded her jurisdiction by actually making findings of fraud.

[11] Nevertheless, I shall address this ground of appeal and explain that an assessment officer has an attenuated, circumscribed and delicate jurisdiction to address such matters as solicitor’s negligence, solicitor’s breach of fiduciary duty, or solicitor’s fraudulent conduct and that the Assessment Officer did not exceed this subtle jurisdiction in the circumstances of the immediate case because she confined her findings to the two substantive issues that were before her; namely: (1) how much the client had paid on account of fees; and (2) what should have been the value of those fees. The Assessment Officer’s decision in the immediate case did not decide the issue of whether the refund to the Marinos in the immediate case is a liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity.

[12] With respect to the other grounds of appeal advanced by the Law Firm for setting aside the Certificate, although I will in the discussion below decide the merits of some of these grounds of appeal, including the matter of whether the Assessment Officer exceeded her jurisdiction by assessing accounts that were not before her (she did not), generally speaking, I am not to be taken as deciding the merits of the other grounds of appeal.

[13] Thus, while I will discuss the conduct of the hearing for the purpose of determining whether the Assessment Officer made an error in principle, I will not determine the grounds of appeal based on the principles of natural justice, the law about a reasonable apprehension of bias, and the law about the significance of the dismal four-year delay between the completion of the hearing and the delivery of a Certificate of Assessment.

[14] About these other grounds of appeal, I will just say that while there is a reasonably strong argument that the Assessment Officer made a reviewable error, there is also a reasonably strong counterargument, and there is an argument that it was the Law Firm that is solely to blame for what was a deplorable hearing.

2. Methodology

[15] By way of methodology to explain my decision that the Law Firm should refund the Marinos $475,000, first, with a few flash-forwards and a few flashbacks, and with a few factual matters that I shall discuss in the analysis section of this decision, I shall describe the factual background. I shall begin the narrative at a time before the commencement of the retainer and end the narrative with the delivery of the Assessment Officer’s decision. In the factual background section of these Reasons for Decision, with a few exceptions, I will not describe or explain why there were delays throughout the assessment hearing, although some of the reasons will become readily apparent.

[16] Second, in the discussion and analysis portion of these Reasons for Decision, I shall: (1) explain the standard of appellate review on a motion to oppose confirmation of an Assessment Certificate; (2) explain the nature of an assessment officer’s jurisdiction on an assessment of a lawyer’s accounts under the Solicitors Act, R.S.O. 1990, c. S.15; (3) describe several problematic aspects of the assessment hearing and the Assessment Officer’s decision; and (4) apply the law about the appellate review of an assessment decision to the particular facts of this case and explain why the Law Firm should refund $475,000 to the Marinos.

3. The Agenda and the Hidden Agenda of this Appeal

[17] Before this methodology gets underway, it is necessary to make transparent the hidden agenda or motivations of the Law Firm that explain why what was scheduled to be a one-week assessment hearing became an almost decade-long descent into hearings’ purgatory.

[18] The normal agenda of an assessment of a solicitor and client bill of account is that the assessment officer determines the value of the lawyer’s services and determines how much the client has paid for those services. If the value of the lawyer’s professional services is less than the amount paid by the client, then the client will be ordered to pay the difference. If the value of the services is less than the amount paid by the client, the lawyer will be ordered to refund the difference.

[19] For the normal agenda, typically, there is no dispute about how much the client has paid to the lawyer, and the time of the assessment hearing will be taken up on the issue of the value of the lawyer’s services. The Marinos versus the Law Firm assessment, however, was far from normal, because an enormous amount of time, attention, and animosity was spent on the issue of how much the Marinos had paid the Law Firm.

[20] In this regard, there was not much doubt that the Law Firm had received approximately $600,000 in payments associated with the Marinos’ affairs. Those funds had been received from a lender, L-Jalco Holdings Inc. (“L-Jalco”), making advances on a mortgage loan to the Marinos in order for them to pay for the legal services being performed by the Law Firm. These payments were noted in the accounting ledgers of the Law Firm.

[21] Since the purpose of the Marinos having their accounts assessed was to obtain a refund of some portion of the $600,000 in payments, it was obviously in the Law Firm’s interest to attribute all or part of the $600,000 as not being payments by or for the Marinos. As the tortured narrative below will reveal, the Law Firm tried in three ways to disassociate the Marinos from the $600,000 in payments. The Law Firm’s efforts to establish these three means to avoid or reduce its liability to make a refund constituted the hidden agenda of the assessment hearing.

[22] The Law Firm’s first means to reduce the refund was to deny that the Marinos were its clients. The motivation or hidden agenda here was that if only L-Jalco was the client and the payments were made just by L-Jalco - which was not seeking a refund - then there should be no refund to the Marinos.

[23] The Law Firm’s second means to reduce any refund was to object to the number of accounts for assessment. Ultimately, the Assessment Officer assessed almost 100 account invoices, but the Law Firm pleaded, to the point of begging or imploring, that the number of accounts should be determined by somebody other than the Assessment Officer. The Assessment Officer, however, refused to refer the matter back to the court for an opinion, and she considered for assessment all of the Marino accounts, including accounts addressed to Charlotte Marino, Joseph Marino’s sister.

[24] The Law Firm’s third means to reduce any refund was to attempt to prove that within the $600,000 received by the Law Firm was a $166,348.78 loan made by L-Jalco to the Law Firm. The Assessment Officer disbelieved the Law Firm and made a finding of fraud about this factual matter.

[25] These three hidden agenda items of the assessment hearing, particularly the last one, in turn, led to a hidden agenda item for the motion now before the court, which is an appeal of the decision of the Assessment Officer.

[26] It is necessary to make transparent this hidden agenda item about the appeal, which concerns Mr. Lawrynowicz’s bankruptcy, which was revealed by paragraph 113 of the Marinos’ factum, where the Marinos state:

113. The fact is that the delay did not prejudice the solicitor at all. The solicitor had the benefit of the monies he billed and collected for over a decade. The Clients lost everything and must now deal with the solicitor’s assignment in bankruptcy, which was made in the intervening period.

[27] The hidden agenda, which was not mentioned by either party during the argument, but which agenda did not escape me, is that it is in Calin Lawrynowicz’s interest to have a ruling that the Assessment Officer does not have the jurisdiction to make a finding of fraud because s. 178(1)(d) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B.3 provides that: “an order of discharge does not release the bankrupt from any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity.”

[28] Conversely, it is in the interest of the Marinos, seeking to collect their refund, to keep alive the circumstances that the bankrupt Mr. Lawrynowicz has a liability arising out of a fraud while acting in a fiduciary capacity.

B. FACTUAL BACKGROUND

1. Introduction

[29] This motion to oppose the confirmation of the Certificate of Assessment is the third occasion that I have been involved in the drawn-out litigation between the Marinos and the Law Firm. The first occasion was March 23, 2007 (9-years ago), when I ordered the assessment of accounts that is the cursed subject matter now before the court. See Marino v. L-Jalco Holdings Inc., [2007] O.J. No. 1066 (S.C.J.).

[30] The second occasion, which occurred in 2011 during the course of the assessment hearings and which occasion I need not discuss in any detail below, was to determine the effect of a foreclosure judgment that is a part of the factual background associated with the legal services that were being assessed. See L-Jalco Holdings Inc. v. Marino, 2011 ONSC 710, aff’d 2011 ONCA 639, leave to appeal to the S.C.C. refused [2011] S.C.C.A. No. 534. For present purposes, the point to note is that the foreclosure judgment meant that L-Jalco had no claim to the refund of legal fees because by foreclosing, it had accepted the Marinos’ properties in lieu of repayment of the mortgage loan.

[31] As the following account of the factual background will reveal, my decision to refer the Marinos’ accounts for an assessment and the meaning of that decision became part of the factual and procedural background. Because the Law Firm disputed its retainer and what accounts had been referred to assessment, the referral to assessment decision was the source of acrimonious debate at the assessment hearing and is an aspect of the Law Firm’s objections to the confirmation of the Certificate of Assessment.

[32] The factual history is complex and covers almost two decades of events, but these events are largely documented in court proceedings. Indeed, the narrative of this case is largely concerned about the conduct and the outcomes of mortgage enforcement proceedings that were being resisted by the Marinos.

2. The Circumstances of the Mortgage Loan Retainer

[33] Joseph Marino is the son of Maria Marino and the late Domenico Marino and the father of Gregory Marino. Joseph also has a sister Charlotte, who was not one of the Plaintiffs when I made my 2007 Order referring the Marinos’ accounts for assessment, but whose connection to the Law Firm became an issue during the assessment.

[34] In March 1998, Joseph Marino mortgaged a commercial property located at 372 Gilmore Rd., Fort Erie, Ontario, as security for a $50,000 loan. Joseph was operating the property as an adult entertainment facility, known as "GTR Gentlemen's Club". By assignment of mortgage, the lender became DBM Capital Corp., and in September 2001, DBM Capital commenced power of sale proceedings because Joseph was not keeping the mortgage in good standing.

[35] As will shortly be seen, it was around the time of DBM Capital’s mortgage enforcement proceedings that the Law Firm began doing work for the Marinos. Three recent calls to the bar comprised the Law Firm; namely: Calin Lawrynowicz (called 2000), Bhupinder Nagra (called 2002), and Angelo Gianneta (called 2002). A fourth lawyer, Ben Rutherford (called 2002) was at the firm for a very short time. All the lawyers testified at the assessment hearing. The firm’s practice focused on real estate and mortgage transactions. In addition to the four lawyers, at least six law students and law clerks worked on the Marinos’ matters.

[36] In November 2001, DBM Capital commenced a mortgage enforcement action in the Superior Court, and on November 28, 2001, it commenced a private power of sale proceeding by serving Power of Sale Notices by registered mail on all mortgagors, guarantors, and those subsequent encumbrancers that had registered their interests against the title of the property.

[37] On February 8, 2002, DBM Capital obtained a consent default judgment for possession and for payment of $128,470.97. Under the consent judgment, Joseph was given a short extension of the time to redeem until February 15, 2002, but he failed to redeem, and on February 20, 2002, the sheriff took possession of the 372 Gilmore Rd. property. Joseph and the GTR Gentlemen’s Club were out of business.

[38] In March 2002, Joseph approached John Lawrynowicz, who is the principal of L-Jalco for a loan, to redeem the 372 Gilmore Rd. property. John Lawrynowicz is the father of Calin Lawrynowicz, the founder of the Law Firm.

[39] The Marinos and John Lawrynowicz had done lending business before, and indeed his corporation, L-Jalco, already held a third mortgage on the 372 Gilmore Rd. property. On this occasion, L-Jalco agreed to make a one-year mortgage loan of up to $850,000 to Joseph's corporation, 118464 Ontario Limited. The security for the loan included personal guarantees and: (a) a mortgage on South Side Garrison Rd., a property owned by Domenico Marino, Joseph's father; (b) a mortgage on 767 Garrison Rd., a property jointly-owned by Domenico and his wife Maria (Joseph’s mother); (c) a mortgage on 1267 Garrison Rd., a property owned by Gregory Marino (Joseph’s son); and (d) a new mortgage on 372 Gilmore Rd., which was the property imperiled by the DBM Capital power of sale proceedings.

[40] L-Jalco made it a stipulation of the $850,000 loan that the Law Firm be retained to complete the loan transaction and that the Law Firm be retained to commence proceedings to redeem the 372 Gilmore Rd. property, which, as already noted, DBM Capital was in the process of selling pursuant to power of sale. This stipulation in the L-Jalco loan to the Marinos is the commencement of the Marinos’ retainer of the Law Firm.

[41] For what follows in the history of events, it is important to keep in mind that the Law Firm was to be paid from the proceeds of the L-Jalco loan. This is important because years later, the main issues at the assessment hearing concerned the Law Firm’s services with respect to this $850,000 mortgage loan and who paid for those services and how much was paid by the Marinos for the legal services. And, as will appear, the assessment hearing was besmirched by the Law Firm’s untenable arguments aimed at distancing itself from having a retainer with the Marinos.

3. The Marino’s Dispute with DBM Capital

[42] On April 5, 2002, pursuant to its power of sale proceeding, DBM Capital signed an agreement of purchase and sale to sell 372 Gilmore Rd. to Charles Storrie, in trust, for a company to be incorporated, with a closing scheduled for April 30, 2002.

[43] On April 27, 2002, the Marino family members signed a so-called limited retainer agreement with the Law Firm. The retainer provided that Calin Lawrynowicz and his law firm would perform the legal work for the mortgage transactions with L-Jalco "and for legal work against other parties that serves L-Jalco Holdings Inc.'s interests." The retainer agreement contained the following conflict of interest provision:

The undersigned hereby acknowledges that you have advised me that you are acting on behalf of L-Jalco Holdings in connection with this transaction and related litigation and are protecting its interests and its interests alone. The purpose of signing this retainer is strictly to guarantee payment of legal fees, GST and disbursements by me. I acknowledge that in the event of a conflict of interest between L-Jalco Holdings Inc. and the undersigned(s), you will have to disclose the conflict to L-Jalco Holdings Inc. and may not be able to continue to act on my (our) behalf, although I (we) specifically consent to allowing you to act for L-Jalco Holdings Inc. as I (we) have agreed to full disclosure and further consent to your knowledge of my (our) affairs. I nevertheless authorize you to proceed forthwith to act on my behalf while at the same time acting on L-Jalco's behalf and for so doing, they shall be your good, sufficient and irrevocable authority and direction.

[44] As I was years later to hold, when the motion for a referral of the Marinos’ accounts to assessment came before me, this so-called limited retainer agreement rather proved than disproved that the Marinos were clients of the Law Firm. This so-called limited retainer, which guaranteed payment of legal fees, did not negate the existence of a solicitor and client relationship, and if the Marinos were acknowledging that the Law Firm might not be able to continue to act for them, the Law Firm was acknowledging it had a solicitor and client relationship while acting for the Marinos. A joint retainer does not negate a retainer, and in this particular joint retainer, it was the Marinos who were going to be paying the legal fees from the moneys being lent to them.

[45] Bluntly, in my opinion, the position later taken by the Law Firm that L-Jalco was the only client it had for the mortgage loan and for the redemption proceedings was obnoxious.

[46] On April 29, 2002, after issuing a statement of claim on behalf of Joseph Marino and his corporation, the Law Firm obtained an ex parte order restraining DBM Capital from completing the power of sale proceedings. The motion was successful, but by this time, DBM Capital had already entered into its agreement to sell 372 Gilmore, and notwithstanding the injunction, about which there was to be a controversy about the awareness of DBM Capital, the sale was completed on May 3, 2002.

[47] In the summer of 2002, the Law Firm, on behalf of Joseph Marino and his corporation, brought another motion with the aim of quashing DBM Capital’s original writ of possession and of determining whether Joseph’s corporation had a lease and therefore was entitled to notice of the power of sale proceeding.

[48] On September 5, 2002, Justice Matheson ruled that the Writ of Possession had not been properly issued but that Joseph Marino’s company had no leasehold interest in 372 Gilmore Rd. and, therefore, it was not entitled to receive notice of the mortgage enforcement proceedings. Because the 372 Gilmore Rd. property had already been sold, this motion, which the Assessment Officer described as “Motion 1,” may be described as a victory, albeit a partial and pyrrhic one.

[49] The pyrrhic victory about the writ of possession, however, was to be short-lived because DBM Capital brought “Motion 2” and “Motion 3” to have the writ of possession re-issued and to have the Marinos’ counterclaim, which included a damages claim of in excess of a million dollars, dismissed. The Law Firm responded with a motion on the Marinos’ behalf to have the sale set aside, but on November 27, 2002, Justice Marshall dismissed the Marinos’ counterclaim, because he concluded that the mortgagee had never been given notice of the ex parte injunction.

[50] If Mr. Lawrynowicz is to be believed, Justice Marshall made an error about what DBM Capital knew of the injunction, because Mr. Lawrynowicz says he personally served the mortgagee’s lawyer. However, Mr. Lawrynowicz also says that he did not prepare an affidavit of service. In any event, on November 27, 2002, Justice Marshall granted DBM Capital’s motions, and he approved the sale of 372 Gilmore Rd. Justice Marshall ordered that a writ of possession be issued against Joseph Marino and his company. See DBM Capital Corp. v. Marino, [2002] O.J. No. 5723 (S.C.J.).

[51] On the Marinos’ behalf, and with Joseph Marino’s instructions, the Law Firm launched an appeal. It seems that the Law Firm also prepared, but did not file an appeal (“Motion 4”) from the earlier order with respect to Joseph Marino’s company having a leasehold interest. And it seems that the Law Firm prepared but did not serve a motion (“Motion 5”) to have DBM Capital’s lawyer disqualified.

[52] In 2003, while the appeal from Justice Marshall’s order was pending, the L-Jalco loan was renewed by the Marinos. At this time, subject to the appeal, Joseph's action to redeem his property at 372 Gilmore Rd. had failed and the Marinos no longer had an ownership interest in 1267 Garrison Rd.

[53] At the time of the mortgage renewal, inclusive of the fees for the renewal of the mortgage, the Law Firm had been paid $405,905.14 from the mortgage funds advanced by L-Jalco for the Marinos.

[54] On May 8, 2003, the Marino family members signed the agreements amending the mortgages, which were registered against the title of the Garrison Rd. properties. The mortgage renewal was for a one-year term. The principal amount of the loan was increased to $880,000 and the interest rate was set at 16% per annum.

[55] On December 23, 2003, the Court of Appeal upheld Justice Marshall’s order refusing to set aside the sale of the 372 Gilmore Rd. property. In its reasons, the Court of Appeal noted that the finding that DBM Capital was not aware of the injunctive relief was fatal to the appeal.

[56] On April 2, 2004, L-Jalco paid $166,348.78 to the Law Firm. The money was credited to the outstanding Marino accounts. In other words, it seemed to be another advance on L-Jalco’s $880,000 loan. As the discussion below will reveal, this payment was to prove controversial to the point of being incendiary, because during the assessment hearing, the Law Firm attempted to prove that it was not an advance on the loan made to the Marinos but rather was a loan made by L-Jalco to the Law Firm, which the Law Firm purported to repay in October 2008, which was after the Marinos’ accounts had been referred to assessment, and indeed the repayment was made 10 months after the assessment hearing had commenced.

[57] Returning to the narrative, there was another development in the spring of 2004 that was to prove controversial. At the assessment hearing, Calin Lawrynowicz testified that in March–April 2004, around the time of this $166,348.78 payment, and around the time that the one-year renewed mortgage had come to the end of its term, there were discussions between L-Jalco and the Marinos to put together a joint venture that would keep Joseph Marino and his family in business. At the assessment hearing, the Marinos acknowledged that there were discussions about a joint venture, but these discussions went nowhere, and they submitted that the idea that the $166,348.78 was connected to the joint venture discussions was a fabrication made up by Calin Lawrynowicz to defraud them and the court. I will return to this topic in the discussion and analysis below.

[58] Continuing the history, on April 16, 2004, the Supreme Court of Canada dismissed the Marinos’ application for leave to appeal with costs against Joseph Marino.

[59] It seems that Joseph Marino was out of the country at the time when the leave to appeal material was prepared and filed, and the Assessment Officer held that the motion for leave to appeal to the Supreme Court of Canada had been brought without instructions from the Marinos.

[60] On June 30, 2004, the Law Firm withdrew from its retainer with the Marinos, and on July 14, 2004, it brought a motion, which was granted, to be removed as the solicitors of record in the DBM Capital mortgage enforcement proceedings.

[61] Up until its removal from the record in the action against DBM Capital, the Law Firm was charging legal fees for its ultimately unsuccessful efforts to save the 372 Gilmore Rd. property. The accounts were submitted to L-Jalco, which paid them treating the payments as advances on the $880,000 loan. It seems that the Marinos were not given copies of the Law Firm’s legal accounts that were being charged against the mortgage loan. The accounts were addressed to L-Jalco.

4. The Dispute between the Marinos and L-Jalco and the Dispute between the Marinos and the Law Firm

[62] Meanwhile, the mortgages on the remaining Garrison Rd. properties went into default and were not repaid on maturity, and on July 26, 2004, L-Jalco commenced foreclosure proceedings. The statement of claim in the foreclosure action indicated that the mortgage debt was then $1,270,672. Of this sum, approximately $600,000 was for payment for the Law Firm’s services.

[63] A few days after the commencement of the foreclosure action, on July 30, 2004, the Marinos commenced an action against L-Jalco and the Law Firm for a declaration that the mortgages were void, an accounting of the funds advanced, and damages of $1.5 million against the Law Firm for solicitor's negligence. The Marinos made allegations of fraud and breaches of fiduciary duty against the Law Firm. The Marinos also asked for a referral of the legal accounts for assessment by an assessment officer.

[64] The years 2004 and 2005 and almost half of 2006 were devoted to completing pleadings and completing examinations for discovery in the Marinos' action against L-Jalco and the Law Firm.

[65] However, on May 19, 2006, there was a substantial change in the theatre of war between the Marinos and the Lawrynowiczs. The Marinos decided to discontinue all claims against L-Jalco and the Law Firm except for the request for an assessment of the Law Firm's legal fees by an Assessment Officer.

[66] Meanwhile, on May 26, 2006, L-Jalco obtained a foreclosure judgment with respect to the remaining Marino properties. As I discussed in my 2011 decision, this purposeful decision discharged the Marinos’ indebtedness to L-Jalco, which now owned the Marinos’ properties in lieu of repayment of the debt. (See L-Jalco Holdings Inc. v. Marino, 2011 ONSC 710.)

[67] With the negligence action being discontinued, the Law Firm, whose defence was provided by the Lawyers Professional Indemnity Company (“LawPRO”), brought a motion for payment of substantial indemnity costs in the amount of $116,281.53 with respect to the discontinued part of the Marinos’ action, in which there was now abandoned allegations of fraud and breach of fiduciary duty. The Marinos brought a counter-motion for an order referring the Law Firm’s accounts for assessment.

5. The Motion for a Referral of the Law Firm’s Accounts for Assessment

[68] The competing motions were heard on March 15, 2007, and on March 23, 2007, I released my Reasons for Decision, in which I held that there were “special circumstances” and that the Law Firm’s accounts should be assessed pursuant to the Solicitors Act and that the Marinos were liable to pay costs of $116,281.53 to the Law Firm (practically speaking the payment was to LawPRO) forthwith. I ordered the Marinos to pay costs on a substantial indemnity basis because of the unproven allegations of fraud and breach of fiduciary duty.

[69] In the motion record for the 2007 competing motions, there were 67 accounts from the Law Firm, of which only one was specifically addressed to the Marinos. The accounts were addressed to L-Jalco.

[70] All of the accounts, however, had been charged to the Marinos’ mortgage account as advances on the $850,000-$880,000 mortgage loan, and although it was to become a matter that the Law Firm disputed later at the assessment hearing, I clearly intended that all these accounts be referred to the Assessment Officer, in large part precisely because the expense of the legal services was being charged to the Marinos. It is to oversimplify, but it was the Marinos’ money that was being used to pay for the services and much of that money was used to pay for litigation services in which the Marinos were a party and the Law Firm was their lawyer of record.

[71] It is both remarkable and deplorable that the Law Firm persisted before the Assessment Officer in its attempt to distance itself from having a retainer with the Marinos. On the motion for the referral to assessment, I considered but rejected the argument that the legal services were actually performed for and paid by L-Jalco and, therefore, it would be a windfall for the Marinos to obtain a refund should a refund be ordered by the Assessment Officer. At paragraphs 52-54 of my Reasons for Decision, I stated:

52. In the case at bar, I have already ruled that there are special circumstances that justify an assessment, and thus the proposition relied on by Mr. Lawrynowicz has been rebutted. Further, in my opinion, the proposition does not apply at all to the circumstances of this case. The mortgagors were not standing in the shoes of the mortgagee, which might have been the case if Mr. Lawrynowicz's accounts concerned legal expenses incurred by the mortgagee with respect to the mortgage account, but in the circumstances of this case, the legal expenses were more an actual advance of principle than an expense associated with placing or enforcing the mortgage.

53. It was submitted to me that the Marinos would achieve a windfall if Mr. Lawrynowicz were required to refund any portion of the legal fees because the mortgagee had paid those costs and no longer had an interest in recovering them because it had foreclosed on the securities and discharged the mortgage debt.

54. There is no windfall. It was the proceeds of the loan; i.e., the principal portion of a mortgage loan, that was used to pay the lawyer's bills. It was the mortgagors' money to use. That the debt is discharged and the mortgagee no longer has to account because it took the security in lieu of repayment of the debt does not mean that the mortgagors cannot have an assessment of the legal services that were paid for with their money. The mortgagee has realized on its security by foreclosure and but for that would have had to account for the amount of the mortgage indebtedness. The mortgagors are simply seeking to have what they paid for in legal services assessed. If there is a windfall it would be Mr. Lawrynowicz to keep fees that he has not earned, which will be a matter for the assessment officer to determine.

[72] On the motion to refer the accounts to an Assessment Officer, I rejected the Law Firm’s submission that the Marinos were not its clients. In my Reasons for Decision, I stated:

13. In his affidavit, Mr. Lawrynowicz states that at no time did he ever represent Gregory, Domenico, or Maurizia. In my opinion, that is clearly not the case. They signed a retainer agreement with him. Limited or not, the retainer establishes a lawyer and client relationship, and he provided legal services for them, and he received payments from their proceeds from a mortgage loan.

14. The first sentence of the first paragraph of the retainer states: "I hereby authorize and retain you to act on my behalf with respect to the following matters: ..." The conflict of interest provision continues the theme that Mr. Lawrynowicz is acting on behalf of the Marinos, and it is a tautology that to have a conflict of interest Mr. Lawrynowicz must be representing more than one interest.

15. In any event, on April 29, 2002, clearly acting on behalf of Mr. Joseph Marino, Mr. Lawrynowicz brought an ex parte motion for an injunction to restrain any sale of 372 Gilmore until a motion could be brought to set aside the foreclosure judgment and redeem the mortgage.

16. …. Mr. Lawrynowicz acted for both sides in the mortgage transaction and he acted for the borrower with respect to regaining a property that was part of the security for the loan. He acted for borrowers; namely Joseph's parents and son, who may have been not more than accommodation parties, and his accounts were paid by the mortgagee corporation, who in addition to being a client was owned by a member of Mr. Lawrynowicz's family. The cost of the legal services he rendered is high and disproportionately high compared to the value of the property that was the subject of his services. There is a dispute about whether the borrowers were fully informed about the services and about the cost of them.

[73] The Law Firm commenced but abandoned an appeal from the Order referring the accounts to an assessment.

6. The Assessment Hearing and Decision

[74] After my referral order in March 2007, a year-and-a-half passed before the assessment hearing began. It commenced on January 14, 2008. There were 24 attendances; i.e., January 14-16, 2008; December 2-4, 8-12 and 15, 2008; May 11-15, 2009; June 5, 2009; March 22-26, 2010; and June 14, 2010. Written submissions were completed in April 2011. Then, over four years passed, and on July 17, 2015, the Assessment Officer released her Reasons for Decision.

[75] At the hearing, the witnesses were Joseph Marino, Gregory Marino, Charlotte Marion, Calin Lawrynowicz, Bhupinder Nagra, Angelo Giannetta, and Ben Rutherford.

[76] William Roland appeared as the Law Firm’s counsel on or about October 3, 2009, after about 18 days of hearing had already taken place and some months after the Law Firm’s lawyers had finished with their viva voce evidence. Up until Mr. Roland’s appearance, Calin Lawrynowicz was acting as counsel for his Law Firm.

[77] The Assessment Officer was not impressed with Calin Lawrynowicz as a witness and ultimately found him to not be na credible witness.

[78] The Marinos’ position at the assessment hearing was that the Law Firm’s accounts were grossly excessive and included time that it should not be permitted to recover. More precisely, the Marinos submitted that: (1) the time docketed for the work conducted was grossly excessive; (2) substantial time was billed for steps that were taken without instructions, including the application for leave to appeal to the Supreme Court of Canada; (3) substantial time was billed for steps that were taken without good legal reason or justification and for which the client received no benefit; (4) there was substantial and unnecessary duplication of lawyers' time; (5) clerical work was conducted by lawyers and others and improperly billed to the clients; (6) the lawyers did not bring the skill and competence to bear on the file that was needed or appropriate; and, (7) the results obtained constituted a total failure for the clients.

[79] In their written submissions made at the completion of the assessment hearing, the Marinos submitted that the Law Firm had attempted to defraud them and the court by contriving the joint venture loan and this dishonesty constituted fraud warranting a finding of a nil account.

[80] At the assessment hearing, the Law Firm repeated its argument that the Marinos were not its clients and that the payments had been made by its client L-Jalco. Further, the Law Firm argued that only $409,950.97 had been paid by the Marinos. At the assessment hearing, as noted above, the Law Firm argued that part of the $588,500.46 noted in the Law Firm’s accounting ledgers for the Marinos was a $176,458.26 loan made by L-Jalco that the Law Firm later repaid to L-Jalco.

[81] At the assessment hearing, there was an ongoing controversy fueled by the Law Firm about what accounts were referred to assessment and about the quantum of the accounts and the amounts paid for the accounts. The Law Firm repeatedly asked that the matter of what accounts were to be before the Assessment Officer be clarified by a re-attendance before me. The Assessment Officer declined to send the matter back to the court.

[82] On January 17, 2008, the Assessment Officer directed that the Law Firm file all the accounts paid or payable by the Marino family. At that time, 75 accounts had been filed with a face value of $529,277.34 by her reckoning. The Marinos subsequently identified another 26 accounts (approximately $70,000.) Of these 26 accounts, seven were identified with Charlotte Marino ($15,333.78) and three were identified as the “Joint Venture accounts” ($5,093.20).

[83] The Assessment Officer included the Charlotte Marino accounts and the Joint Venture accounts as part of the assessment. Ultimately, the Assessment Officer found that there were 98 accounts with respect to 11 files opened by the firm to do the Marinos’ work. The 98 accounts had a value of $587,538.51.

[84] The Law Firm’s general ledgers revealed that they had received $588,500.46 from L-Jalco for the Marino files, consisting of $526,357.00 in fees, $23,792.80 for disbursements and $38,350.66 in taxes for the period from September 13, 2001 to June 20, 2004.

[85] About the contested issue of how much the Marinos had paid for legal services, the Assessment Officer concluded that the most objective, credible and trustworthy evidence were the Law Firm’s accounting ledgers that established as of July 2004, the accounts payable and paid for the Marinos totaled $588,500.46.

[86] The Assessment Officer summarized her overall findings from the assessment hearing in the opening three paragraphs of her decision, which stated:

1. Calin Lawrynowicz ("Calin"), a lawyer, and his law firm, Calin A. Lawrynowicz Barristers and Solicitors, also known as, Lawrynowicz and Associates ("L&A") were retained by Joseph Marino and his family to act in setting aside the forfeiture of a business property owned by Joseph and known as 372 Gilmore Road in Fort Erie, Ontario, and to redeem it. L&A was also retained to complete a $850,000 mortgage loan transaction between the Marino family and another L&A client, L­Jalco Holdings Inc., a mortgage and loan company owned by Calin's father, John Lawrynowicz. Four properties of the Marino family, including 372 Gilmore, constituted the security for the loan. Calin and his legal team were all newly called lawyers and they found the work challenging. The stakes were high. L&A knew that 372 Gilmore was Joseph Marino's livelihood and that there was a real risk of losing this property and the Marino family security.

2. Calin and his legal team described their efforts to get the property back as being "creative". But as the evidence amply demonstrates these efforts made on behalf of the Marino family clients were costly and ultimately unsuccessful. The legal costs involved were staggering, almost $600,000.00. The cumulative effect of L&A's inexperience, L&A's unresolved and persisting conflicts of interest between clients L-Jalco and the Marino family, a gross dereliction of lawyer responsibility to provide appropriate and timely advice and counsel to Joseph and the other members of the Marino family clients, accompanied by corresponding deficits in terms of skill and competence in the legal services provided, and the breach of their professional duty to provide a proper accounting of all the legal costs and disbursements charged and payable by the Marino family, culminated in tragic results for these clients, namely, the loss of all their property and security despite having paid L&A's manifestly excessive fees attached to the mortgage loan.

3. In sum, I determined that L&A failed to prove on a balance of probabilities that the subject legal accounts were fair and reasonable. I found that in the particular circumstances of this case, the fees charged and paid for by the Marino family were so grossly excessive as to amount to fraud. In the result, I assessed the fees at $Nil and allowed mortgage transaction disbursements of $7,500.00 inclusive. I also awarded the Marino family clients their interest and costs of the assessment on a substantial indemnity basis pursuant to the direction of the Honourable Justice Perell, who referred this matter to assessment on the basis of special circumstances.

[87] Before dealing with the matter of costs in her decision, the Assessment Officer ended her decision with the following conclusion set out in paragraphs 291-293:

291. For the aforementioned reasons, I determined that Calin and L&A failed on all fronts of this assessment to prove on a balance of probabilities that their legal accounts were fair and reasonable. The detailed analyses under each of the stated assessment factors effectively demonstrate that the Solicitors' legal accounts were not only unfair and unreasonable but so grossly excessive as being tantamount to fraud.

292. In the result, I assessed the L&A fees at nil and their disbursements limited to $7,500.00. In my opinion, this represents a fair and just result commensurate with the value of the services performed.

293. The Marino family clients are, therefore, entitled to a full refund of the legal costs paid on account, namely, $588,500.46, except for the $7,500.00 allowed for disbursements. This results in a total refund of $581,000.46 to the Marino family.

[88] The Assessment Officer granted pre-judgment interest from April 13, 2011, which is the date when the Law Firm submitted its final reply submissions, about four years after the assessment order and almost seven years after the Law Firm’s retainer ended with all the accounts having been paid, to July 17, 2015, the date of issuance of the Certificate of Assessment.

[89] The Assessment Officer ordered costs on a substantial indemnity basis because of the Marinos’ success on the assessment and because of what she regarded as Calin Lawrynowicz’s conduct during the hearing, which she viewed as calculated to delay, obfuscate, mislead, and increase the difficulties of the Marinos.

C. DISCUSSION AND ANALYSIS

1. Introduction

[90] In this section of my Reasons for Decision, I will first describe the law about the standard of appellate review of a Certificate of Assessment. Then, I will describe the jurisdiction of assessment officers. As the discussion will reveal, assessment certificates can be set aside if the assessment officer acted without jurisdiction, but if the assessment officer is acting within his or her jurisdiction, the circumstances in which an appellate court may set aside the assessment are limited. After the discussion of the law, I shall the consider whether the Assessment Officer’s decision to award a $nil fee reveals a reviewable error. Lastly, I shall deal with the matter of the Assessment Officer’s finding of fraud.

2. Standard of Appellate Review

[91] A motion to oppose an assessment officer’s certificate is in the nature of an appeal, and the court is concerned only with errors in principle and not mere questions of amount, unless the amounts are so inappropriate as to suggest an error in principle; the decision of the Assessment Officer can be disturbed only if: (a) there is absence or excess of jurisdiction; (b) there has been some error in principle; or (c) there has been some patent misapprehension of the evidence.

[92] See: Samuel Eng and Associates v. Ho, 2009 ONCA 150; Rabbani v. Niagara (Regional Municipality), 2012 ONCA 280; John Dryden v. Oatley Vigmond LLP, 2011 ONSC 7303; Nicholas C. Tibollo Professional Corp. v. Wasserman Associates Inc., 2011 ONSC 4742, aff’d 2013 ONSC 2685 (Div. Ct.); Labelle v. Howe, [1996] O.J. No. 759 (Div. Ct.); Eastwalsh Homes Ltd. v. Anatal Development Corp., [1995] O.J. No. 608 (C.A.); Foster v. Kempster, [2000] O.J. No. 5022 (S.C.J.).

[93] On an appeal of a certificate of assessment, the court will not interfere with the exercise of discretion of the assessment officer where the dispute involves no matter of principle but only a question of amount, unless the amount in question is so grossly large or small as to be improper beyond all question: John Dryden v. Oatley Vigmond LLP, supra; Schwisberg v. Kennedy, [2004] O.J. No. 3478 (S.C.J.); Kelleher, Hoskinson v. Knipfel (Executors of the Estate of), [1982] O.J. No. 3283 (C.A.); Re Solicitor, [1908] O.J. No. 454 (H.C.J.).

[94] The court hearing the motion appealing a certificate of assessment should not retry the matter or interfere with the result unless the reasons demonstrate some error in principle or unless there has been some absence or excess of jurisdiction or some patent misapprehension of the evidence: Ledroit v. Rooplall, 2011 ONSC 2751; Jordan v. McKenzie, [1987] O.J. No. 1193 (H.C.J.); In Re Solicitor (1976), 3 C.P.C. 148 (Ont. C.A.); Borden & Elliot v. Deer Home Investments Ltd., [1992] O.J. No. 2152 (S.C.J.).

[95] For an appeal of a certificate of assessment, rule 54.09 of the Rules of Civil Procedure provides that the court “may confirm the report in whole or in part of make such other order as is just.” If the court finds an error in principle, it can refer the matter back to the assessment officer or it may substitute its own opinion and set the amount of the fee: Bales Beall LLP v. Fingrut, 2012 ONSC 4991, aff’d 2013 ONCA 4991; Evans Sweeny Bordin LLP v. Zawadzki, 2015 ONCA 756; Hooper v. Sheehan, [2012] O.J. No. 3380 (S.C.J.).

3. The Jurisdiction of the Assessment Officer

[96] Section 6 of the Solicitors Act provides for the assessment of accounts by an assessment officer and for the refund of any overpayments found by the assessment officer. Section 6 states:

Delivery of bill and reference to assessment

6. (1) When a client or other person obtains an order for the delivery and assessment of a solicitor’s bill of fees, charges and disbursements, or a copy thereof, the bill shall be delivered within fourteen days from the service of the order.

Credits, debits, etc., on reference

(2) The bill delivered shall stand referred to an assessment officer for assessment, and on the reference the solicitor shall give credit for, and an account shall be taken of, all sums of money by him or her received from or on account of the client, and the solicitor shall refund what, if anything, he or she may on such assessment appear to have been overpaid.

Costs on reference

(3) The costs of the reference are, unless otherwise directed, in the discretion of the officer, subject to appeal, and shall be assessed by him or her when and as allowed.

No action

(4) The solicitor shall not commence or prosecute any action in respect of the matters referred pending the reference without leave of the court or a judge.

When payment due

(5) The amount certified to be due shall be paid by the party liable to pay the amount, forthwith after confirmation of the certificate in the same manner as confirmation of a referee’s report under the Rules of Civil Procedure.

Motion to oppose confirmation

(9) A motion to oppose confirmation of the certificate shall be made to a judge of the Superior Court of Justice.

[97] Under s. 3(b) of the Solicitors Act, provided four statutory preconditions are satisfied, a client may upon requisition to the court’s registrar obtain an order for an assessment of the solicitor’s account. The four statutory preconditions are: (1) the retainer is not in dispute; (2) there are no special circumstances; (3) the bill is already delivered; and (4) the requisition is made within one month of the delivery of the lawyer’s account. See: Davies, Ward & Beck v. Union Industries, Inc. (2000), 2000 5722 (ON CA), 48 O.R. (3d) 794 (C.A.); Re Solicitor, 1940 356 (ON SC), [1940] 4 D.L.R. 712 (H.C.J.), aff’d 1940 324 (ON CA), [1940] 4 D.L.R. 821 (C.A.).

[98] There is a similar jurisdiction for a solicitor to obtain an assessment of the account that he or she has delivered to the client. See: Re Moffatt (1887), 12 P.R. (Ont.) 240; Re Solicitor (1926), 31 O.W.N. 53 (H.C.J.). The solicitor also has the alternative of suing to collect his or her unpaid account.

[99] Upon a referral order by the court registrar, the assessment officer does not have jurisdiction where there are "special circumstances," which are questions that require a decision from the court by action or application: Simpson, Wigle v. Painter, [1993] O.J. No. 1469 (Gen. Div.); Re Solicitor, [1940] O.J. No. 267 (H.C.J.) at para. 6, aff'd 1940 324 (ON CA), [1940] 4 D.L.R. 821 (C.A.); Davies, Ward & Beck v. Union Industries, Inc., supra at para. 22.

[100] Where the client does not qualify to obtain an order upon requisition to the registrar, he or she may apply to the court for an order for a referral to assessment and the court has an inherent jurisdiction to order an assessment: Maplecrete Group Ltd. v. Belsito, Baichoo and Ruso, 2015 ONSC 4217 (Div. Ct.); Brusby v. Flak, 2011 ONSC 4917; Fellows, McNeil v. Kansa Canadian Management Services Inc., 1997 733 (ON CA), [1997] O.J. No. 2655 (C.A.). Section 4(1) of the Solicitors Act provides for a reference for an assessment under special circumstances to be proved to the satisfaction of the court or judge to whom the application is made. Section 4(1) 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 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.

[101] Special circumstances includes any circumstances of an exceptional nature affecting the matter of costs or the liability of a solicitor's client that a judge, in the exercise of his or her judicial discretion in each particular case, may consider to justify a taxation: Rooney v. Jasinski, 1952 115 (ON CA), [1952] O.R. 869 (C.A.); Minkarious v. Abraham, Duggan (1995), 1995 7253 (ON SC), 27 O.R. (3d) 26 (Gen. Div.). In determining whether there are special circumstances, the court exercises a broad discretion to be exercised on a case-by-case basis and with an eye to all of the relevant circumstances: Plazavest Financial Corp. v. National Bank of Canada (2000), 2000 5704 (ON CA), 47 O.R. (3d) 641 (C.A.); Minkarious v. Abraham, Duggan, supra.

[102] Although s. 4(1) of the Solicitors Act refers to requests for an assessment after twelve months from the time of the delivery of the bill, the special circumstances doctrine also applies for requests made within twelve months from the delivery of the bill. See: Reid v. Goodman & Goodman (1974), 1974 615 (ON SC), 4 O.R. (2d) 447 (H.C.J.); Burt v. Johnstone (1996), 1 C.P.C. (4th) 319 (Ont. Gen. Div.); Enterprise Rent-a-Car Co. v. Shapiro, Cohen, Andrews, Finlayson (1998), 1998 1043 (ON CA), 38 O.R. (3d) 257 (C.A.); Fellowes, McNeil v. Kansa Canadian Management Services Inc. (1997), 1997 733 (ON CA), 34 O.R. (3d) 301 (C.A.); Bunt v. Assuras (2003), 2003 17952 (ON SC), 63 O.R. (3d) 622 (S.C.J.).

[103] An irony in the law is that while the absence of special circumstances is a prerequisite for a registrar’s order referring the lawyer’s account and of the assessment officer having jurisdiction, the presence of special circumstances may be the reason that the court orders an assessment: Speciale Law Professional Corp. v. Shrader Canada Ltd., 2015 ONCA 856; Farlinger v. Maurice Neirinck, [2008] O.J. No. 88 (S.C.J.); Aird & Berlis v. Federchuk (1997), 1997 12167 (ON SC), 34 O.R. (3d) 406 (Gen. Div.). Thus, the presence of special circumstances sometimes negates the assessment officer’s jurisdiction, but sometimes it is special circumstances that empowers the assessment officer with jurisdiction to proceed with an assessment hearing.

[104] An assessment officer has no inherent jurisdiction and only has the jurisdiction conferred by statute and by the Rules of Civil Procedure: Cookish v. Paul Lee Associates Professional Corporation, 2013 ONCA 278. An assessment officer cannot acquire jurisdiction by the failure of a party to raise a preliminary objection; an assessment officer either has jurisdiction or he or she does not: Evans Sweeny Bordin LLP v. Zawadzki, 2015 ONCA 756 at para. 20. Thus, unless the issue is directed to the assessment officer pursuant to the court’s power to order a reference, an assessment officer has no jurisdiction to conduct an assessment where there is a dispute about the solicitor’s retainer, and the assessment officer has no jurisdiction to determine disputes about the existence, nature, terms, or extent of a retainer: Cookish v. Paul Lee Associates Professional Corporation, supra; Pape Barristers Professional Corp. v. Worthma, [2007] O.J. No. 3286 (S.C.J.).

[105] If there is a genuine dispute about the existence of a retainer or about the scope of the retainer, the assessment officer has no jurisdiction, and if he or she proceeds to make an assessment, the assessment is a nullity: Park v. Perrier, [2005] O.J. No. 3080 (Div. Ct.); Ledroit v. Rooplall, 2011 ONSC 2751. If there is a genuine dispute about the retainer, the matter must proceed before a judge by way of action or application: Paoletti v. Gibson, 2009 ONCA 71; Whiteacre and McGregor (1980), 19 C.P.C. 279 (Ont. Div. Ct.); Nicholas C. Tibollo Professional Corp. v. Wasserman Associates Inc.,supra; Park v. Perrier, supra; Aird & Berlis v. Federchuk, supra; Tory, Tory, DesLauriers & Binnington, [1992] O.J. No. 1200 (Gen. Div.); Re Solicitor, [1940] O.J. No. 267 (H.C.J), aff'd 1940 324 (ON CA), [1940] 4 D.L.R. 821n (C.A.).

[106] However, only a genuine dispute as to the retainer ousts the jurisdiction of the assessment officer: Paoletti v. Gibson; 2009 ONCA 71; Whiteacre and McGregor (1980), 19 C.P.C. 279 (Ont. Div. Ct.); Middlebrook & Company LLP v. McCormack, 2011 ONSC 376. If the dispute is solely with respect to the quantum of the lawyer’s account, an assessment officer has the jurisdiction to determine the nature of the agreement between the lawyer and client about the quantum of the fee and how that fee would be calculated: Paoletti v. Gibson; supra; Aird & Berlis v. Federchuk, supra.

[107] In Re Solicitors, [1978] O.J. No. 2347 (Master) at para. 5, Master Sandler provided the following neat description of the assessment officer's jurisdiction:

The whole scheme of the Act and the cases decided thereunder indicates that the [Assessment Officer] is to decide the issue of quantum and issues of accounting as between solicitor and client, and also questions of carelessness, impropriety and negligence in the conduct of the business to which the bill relates so far as they affect the solicitor's right to recover the costs in question. However, he is not to decide whether a contract, or retainer, exists between a solicitor and client nor decide the terms thereof, except terms relating to quantum.

[108] As Master Sandler noted, and, as would seem to be innate to any exercise of determining the issue of quantum of professional work, the assessment officer has the jurisdiction to determine whether the professional’s work was carelessly, improperly, or negligently performed. On a solicitor and client assessment, the assessment officer court may consider a demonstrated want of skill and competence on the part of the solicitor as a basis for reducing the account: Re Solicitor, 1970 488 (ON SC), [1971] 1 O.R. 138 (Taxing Officer); Steen v. Gibsons, LLP, 2015 ONSC 4933.

[109] As long ago as 1867, in Thomson v. Milliken (1867), 13 Gr. 104 (U.C. Ch.), Mowat, V.C. held that on the assessment of a solicitor’s bill, the assessment officer (then a Master) may take into consideration alleged negligence of the solicitor as having occasioned the suit or rendered it useless, and therefore constituting a ground for disallowing the whole bill; or the assessment officer may consider negligence as affecting parts of the bill, and affording a ground for disallowing such parts. However, Mowat, V.C. added that this rule would not sanction the assessment officer assessing unliquidated damages, when claimed by the client against his solicitor.

[110] In Simpson, Wigle v. Painter, [1993] O.J. No. 1469 (Gen. Div.), Justice Philp noted at paragraphs 13 and 14:

13. The question of the solicitor's negligence, when alleged by the client, is one for the assessment officer to consider in determining the amount of the solicitor's bill. It is a question of fact, not whether the solicitor's conduct was proper, but whether it was so wholly useless that the client de-rived no benefit from it. If the assessment officer finds negligence on the part of the solicitor, he or she may disallow the whole or the parts of the bill that were rendered useless by the negligence. (Orkin on Costs p. 3-25)

14. The assessment officer must take many factors into account when assessing a solicitor's account including the degree of skill and competence demonstrated by the solicitor and the results achieved as well as the reasonable expectation of the client as to the amount of the fee.

[111] A profound subtlety of the assessment officer’s jurisdiction to make findings of carelessness or negligence is that it is constrained by being limited to issues of quantum and this jurisdiction cannot encroach on genuine disputes about the solicitor’s retainer, which must be determined by the court. In Birenbaum, Koffman, Steinberg v. Clapton Construction Ltd., [1992] O.J. No. 282 (Gen. Div.) Justice Feldman, stated:

... I do not believe it is appropriate for a court on an assessment of this sort to try the issue of negligence. If the client wishes to sue the lawyer for negligence, the issue can be tried in the normal manner. On an assessment, it is the general skill level of the lawyer which is being evaluated not specific issues of negligence.

[112] In John Dryden v. Oatley Vigmond LLP, supra, which was a motion to set aside a Certificate of Assessment, at paras. 35-37, Justice Quigley stated:

35. Mr. Dryden believes Mr. Oatley’s conduct amounts to professional negligence which resulted in Mr. Dryden receiving a settlement that was far smaller than that to which he feels he was entitled. Consequently, Mr. Dryden essentially asks me (and the Assessment Officer before me) to conduct a mini-negligence trial and to make findings relative to Mr. Oatley’s representation of him in the face of what appears, at least on the evidence that was before me, to have been an excellent settlement. It was a significant settlement achieved in difficult circumstances with a difficult client.

36. The proper avenue for the determination of whether Mr. Oatley was professionally negligent in his representation of Mr. Dryden would be the commencement of a new action against Mr. Oatley by Mr. Dryden, should he continue to feel that Mr. Oatley negligently represented him and that he is entitled to damages arising out of that representation. I acknowledge that a judge of this court may assess costs where there are serious allegations of negligence or misconduct against the solicitor, and may take those allegations into account in assessing the costs, but I do not believe it has ever been suggested that such an assessment actually becomes a negligence trial: see Woods v. Chamberland (1991), 1991 7186 (ON SC), 6 O.R. (3d) 419 (Ont. Gen. Div.).

37. In my estimation the correct approach cannot involve indirectly reaching findings of negligence against the solicitor in the forum of a costs assessment where the solicitor cannot reasonably or realistically respond to the allegations. It is not a forum designed for the purposes of subjecting his professional conduct to investigation in all its minutia, but simply of determining whether the account rendered by the solicitor to the client is reasonable in the circumstances, properly takes account of the factors identified in the Cohen case and other applicable law, is correct as a matter of principle, and is not egregiously high or low. Neither is it appropriate in my view to use this confirmation hearing held under section 54 of the Rules as an ersatz negligence trial relative to the conduct of Mr. Oatley.

[113] In Woods v. Chamberland (1991), 1991 7186 (ON SC), 6 O.R. (3d) 419 (Gen. Div.), during the course of an assessment, the client alleged that the lawyer had been negligent. The lawyer applied to have the assessment transferred to a judge. Justice Chadwick held that the court has an inherent jurisdiction to assess accounts and where the client has made a serious allegation of negligence or misconduct by the solicitor, then it might be appropriate to transfer the assessment to the court in the county in which the solicitor resides, which is what Justice Chadwick decided to do.

[114] While solicitor and client assessments are normally conducted by assessment officers, the Superior Court has jurisdiction to order an assessment to be heard by a judge in cases raising legal issues such as alleged lack of competence, negligence, and serious allegations of lawyer misconduct including alleged fraud and breach of trust: Steen v. Gibsons, LLP, supra; Slan v. Kapelos, [1996] O.J. No. 3040 (Gen. Div.); Chiasson v. Richard, [2005] O.J. No. 5477 (C.A.).

[115] Ledroit v. Rooplall, supra demonstrates the delicacy of the assessment officer’s jurisdiction. In this case, the lawyer and the client had a contingency fee retainer agreement for a personal injury action, but on the very day that the action was called for trial, the lawyer indicated that he would withdraw as lawyer of record unless the client agreed to a new retainer. The client agreed, the case settled, and the client moved to have the account assessed by an assessment officer. The paid account was approximately $143,000 and the assessment officer ordered a $20,000 refund. The client appealed the assessment.

[116] In Ledroit v. Rooplall, Justice Daley stated that the rendering of legal services is pursuant to a contract of a special character governed by equitable considerations tempering the application of strict contract law. Justice Daley concluded that the assessment officer had acted without jurisdiction because the client’s evidence of the new retainer at the brink of the commencement of a trial and the possibility of duress and breach of the lawyer’s fiduciary duty of loyalty were special circumstances negating the assessment officer’s jurisdiction and giving birth to issues that required a trial.

[117] Another aspect of constraining the assessment officer’s jurisdiction to considering carelessness or negligence only for the purpose of determining the value of the lawyer’s work is that this constraint produces an asymmetrical phenomena about how binding the assessment officer’s determination is.

[118] Visualize, on the one hand if the assessment officer concludes that the lawyer was not careless, then there is an issue estoppel that would preclude the client from suing the lawyer for professional negligence: Susin v. Baker, [1997] O.J. No. 834 (C.A.); Simons v. Buck, [2003] O.J. No. 827 (C.A.). But on the other hand, if the assessment officer concludes that there was carelessness, that is not necessarily a finding of negligence and would have no significance as to a client’s claim for damages. Thus, for example, an assessment officer might conclude that a conveyancing lawyer’s bill should be reduced because of carelessness, but that conclusion does not necessarily mean that the lawyer was professionally negligent and that conclusion is not a finding that the lawyer is liable for damages caused by his or her carelessness; the conclusion only concerns the quantum of the lawyer’s account.

[119] In Ellyn-Barristers v. Stone, [2008] O.J. No. 1092 (S.C.J.), Justice Cumming held that if an assessment officer makes any finding of negligence on the part of the solicitors, such finding does not render the issue of negligence res judicata in any claim brought by the client for damages for breach of contract, tort or otherwise arising from the solicitor-client relationship.

[120] Apart from the references in the case law that excessive charges by a lawyer may be tantamount to fraud, I was not referred to any cases where the assessment officer’s jurisdiction to make findings of fraud is discussed. My own research has not discovered any cases about the assessment officer’s jurisdiction to make findings of fraud. My opinion is that the assessment officer’s jurisdiction to make findings of fraud is as constrained as the assessment officer’s jurisdiction to make findings of negligence.

[121] The assessment officer’s jurisdiction to conclude that an account is so excessive as to be tantamount to fraud is at first blush no more than a conclusion that the account is unreasonable or unfair and that it must be reduced. It certainly does not follow that simply because a lawyer charges an excessive amount that he or she has actually breached a fiduciary duty, as would be the case if the lawyer did no work at all and fabricated the bill.

[122] Once the assessment officer has jurisdiction, the factors to be considered in the assessment of a solicitor’s account are set out in Cohen v. Kealey & Blaney, [1985] O.J. No. 160 (C.A.) and include: (1) the time expended; (2) the legal complexity of the matter; (3) the degree of responsibility assumed by the solicitor; (4) the monetary value of the matters in issue; (5) the importance of the matter to the client; (6) the degree of skill and competence shown by the solicitor; (7) the results achieved; (8) the ability of the client to pay; and (9) the reasonable expectations of the client as to the amount of the fee.

4. The Nil Fee and the $662,455.98 Refund

[123] Applying the above law to the circumstances of the immediate case, from the outset of the assessment hearing and persistently throughout its course, the Law Firm challenged the jurisdiction of the Assessment Officer. As noted above, the Law Firm argued that there was a dispute about whether there was a retainer with the Marinos and it also argued about what accounts had been referred by the court to the Assessment Officer.

[124] The arguments were ill-advised. The arguments frustrated the Assessment Officer, prolonged the assessment hearing, and added fuel to the fire of acrimony between the Law Firm and the Marinos. These arguments probably led the Assessment Officer to an error in principle in reducing the Law Firm’s fee to zero plus $7,500 for disbursements.

[125] As the case law described above reveals, it is true that an Assessment Officer does not have the jurisdiction to decide whether a retainer exists, and it is true that apart from the terms of the retainer that go to the quantum of the lawyer’s account, an Assessment Officer does not have the jurisdiction to interpret the terms of the retainer agreement.

[126] The problem, however, in the immediate case is that Mr. Lawrynowicz made those jurisdictional arguments at the assessment hearing - after they had already been decided against him and against his Law Firm on the referral motion in 2007 - when I found that there were special circumstances that justified a referral of all Plaintiffs’ accounts to assessment.

[127] Having regard to my specific findings, there was an issue estoppel about the matter of the retainer and about the matter of what accounts were referred for assessment. It is, therefore, understandable why the Assessment Officer might regard Mr. Lawrynowicz’s arguments as a blatant delaying or obstructionist tactic. As she noted in paragraph 5 of her decision, “despite the judicial order for assessment, Calin again raised this issue at the hearing.”

[128] At paragraph 6 of her decision, the Assessment Officer set out the paragraphs from my referral Decision, set out earlier in these Reasons for Decision, that confirmed that the Law Firm had a lawyer and client relationship with the Marinos. In her decision, the Assessment Officer noted that an inordinate amount of time was expended at the hearing to ensure that all the accounts subject to the assessment were filed at the assessment hearing.

[129] My conclusion is that the Assessment Officer was acting within her jurisdiction when she made findings about what accounts had been referred to assessment and there was no genuine dispute about the retainer that ousted her jurisdiction to assess all the accounts that she did assess.

[130] The Law Firm had no basis to object to the inclusion of all of the accounts, including the accounts identified with Charlotte Marino, who had no involvement that was separate from the involvement of her brother Joseph and the rest of the family. The accounts addressed to Charlotte were properly included among the accounts referred to assessment.

[131] In her decision, the Assessment Officer included a chart that had been prepared by the Law Firm that provided a breakdown of the fees and disbursements for the 11 files it had with respect to Marino matters. The Assessment Officer valued the services rendered as “nil”.

[132] Set out below, is an expurgated version of the chart:

File

Fee

Disbursements

1. – General File

$284,232

$10,248

2. – Motion 1

$23,659

$1,475

3. – Motion 2

$6,669

$476

4. – Motion 3

$7,909

$561

5. – Motion 4

$2,052

$2

6. – Charlotte Marino

$10,808

$960

7. – Main Action

$14,794

$92

8. – Ont. Ont. C.A.1

$105,490

$3,316

9. – Ont. Ont. C.A.

$549

$93

10. – SCC

$65,435

$4,752

11. – Joint Venture

$4,760

TOTAL

$526,357

$23,729.80 (+ taxes $38,351)

[133] The Assessment Officer calculated that 2,846 hours of docketed time was devoted to the 11 files. From her review of the accounts, she determined that the Law Firm billed approximately $53,000 for services relating to all mortgage work performed including title searches, document preparation, registration, renewal and the joint venture discussions.

[134] She found that on a balance of probabilities, the Law Firm had failed to prove that the time docketed was fair and reasonable. She concluded that the Law Firm failed to prove the mortgage transaction fees and charges were fair and reasonable and, therefore, she awarded only the actual disbursements incurred, excluding duplications, excessive Quicklaw research charges, disbursements for secretarial work and other overhead charges including the $45.00 disbursement charged for the Annual Practice book. She assessed the amount of the disbursements to be $7,500.00, inclusive of taxes. For the mortgage renewal fees charged under the Charlotte Marino Invoices ($15,333.78) and the Joint Venture Invoices ($4,760), she disallowed these charges in their entirety as excessive.

[135] By way of contrast at the assessment hearing, there was evidence that DBM Capital sought $58,797.29 in substantial indemnity costs in the various interlocutory proceedings involving the Marinos and $33,940.58, all inclusive, for the appeal to the Ontario Court of Appeal of Justice Marshall’s order.

[136] Of the Law Firm’s work on the appeal from Justice Marshall’s decision, the Assessment Officer concluded that the Law Firm failed to prove on a balance of probabilities that the time expended on the appeal was fair and reasonable. She stated that the Law Firm’s failure to seek a stay of Justice Marshall’s order/decision made the appeal a futility in any event. She concluded that the time spent on the appeal was grossly excessive time and that the quality of services was substandard supporting a finding that the legal costs for the appeal should be reduced to nil. She concluded that the Law Firm’s work seeking leave to appeal to the Supreme Court was without instruction, ill-conceived, incompetently performed, and worthless.

[137] In my opinion, however, the Assessment Officer made an error in principle in reaching the conclusion that the value of the Law Firm’s professional services was $nil plus $7,500 for disbursements.

[138] As noted above, pursuant to s. 6 of the Solicitors Act, on the reference of the lawyer’s accounts, the Assessment Officer was charged with a twofold responsibility; namely: (1) give credit for and take an account all sums of money paid by the client; and (2) determine whether the amount charged by the solicitor was fair and reasonable.

[139] In the case at bar, as I will explain below, there is no reason to disturb the Assessment Officer’s accounting for the sums paid by the Marinos. However, in my opinion, she erred in only awarding $nil and $7,500 for disbursements as the quantum for the Law Firm’s accounts.

[140] The Assessment Officer’s conclusion essentially seems to be based on an analysis of how poor the outcome was for the Marinos compared with the almost $600,000 billed by the Law Firm, which she viewed as so excessive as to amount to evidence of fraud. In my opinion, however, it was an error in principle to move from a poor outcome and a very high bill immediately to the conclusion that the lawyer should be paid nothing. An apparently excessive high bill, as presented itself in the immediate case, may provide the special circumstance to have the bill assessed, but it does not follow that the special circumstance that justifies the referral to assessment, justifies the lawyer being paid nothing. Once the matter is referred to assessment because of special circumstances, the assessment officer must still scrutinize the bill to determine whether notwithstanding the poor outcome and the high fees, the lawyer deserves to be paid something for his or her work.

[141] In this regard, it is worth noting that s. 7 of the Solicitors Act empowers the assessment officer to allow the costs of even unnecessary steps in a proceeding and the costs of steps that were not calculated to advance the interests of the client where the steps were taken with instructions of a fully informed client. Section 7 (1) states:

Costs of unnecessary steps in proceedings

7. (1) Upon assessment between a solicitor and his or her client, the assessment officer may allow the costs of steps taken in proceedings that were in fact unnecessary where he or she is of the opinion that the steps were taken by the solicitor because, in his or her judgment, reasonably exercised, they were conducive to the interests of his or her client, and may allow the costs of steps that were not calculated to advance the interests of the client where the steps were taken by the desire of the client after being informed by the solicitor that they were unnecessary and not calculated to advance the client’s interests.

[142] In Serniak v. Teitel, [2004] O.J. No. 474 (C.A.), the Court of Appeal ordered an assessment of a solicitor and client account to continue notwithstanding a late arriving allegation that the lawyer should be paid nothing because he had breached his fiduciary duties to the client because of a conflict of interest. In directing the assessment to proceed, the Court noted that a conflict of interest does not create an absolute bar to the payments of fees and that such a determination would necessarily depend in any particular case on the nature of the conflict and the other circumstances. I mention this case because if an actual breach of fiduciary duty by a lawyer does not categorically relieve the client of liability for fees, it would seem to follow that if a lawyer charges patently excessive fees that does not mean that the client has no liability.

[143] The immediate case makes the point that it is an error in principle for an assessment officer to not scrutinize the services of the solicitor to determine their value notwithstanding a poor outcome and very high fees.

[144] When I referred the Law Firm’s bills to assessment the $600,000 in fees charged by the Law Firm seemed extraordinarily large compared to the substantial indemnity costs of approximately $100,000 claimed for DBM Capital’s lawyers, who were the successful party in the various litigation retainers in which the Law Firm was engaged. This discrepancy and the obnoxious argument that the Marinos were not clients were a special circumstance justifying sending the accounts for assessment. But, it does not follow that the Law Firm deserves no remuneration for its work.

[145] It is worth keeping in mind that the successful DBM Capital’s lawyers charged $100,000 for defending a virtually impregnable legal fortress. They charged $100,000 for defending a writ of possession, which had been obtained on consent, and for defending the legality of a power of sale proceeding for which the Marinos had never tendered payment of the debt. There was no suggestion that the power of sale proceeding was irregular, and the challenge to the power of sale was made after DBM Capital had already sold the property, when there is barely, if any, life left in the right to redeem. The properties were virtually lost before the Law Firm was retained, and it did not cause the loss of the properties; its failure was in leading an unsuccessful mission for a late redemption of the properties. There is no doubt that the Law Firm was instructed to make the effort to obtain a right to redeem for the Marinos, and if it cost $100,000 in legal fees for DBM Capital to defend the legal fortress that its proper power of sale proceeding provided, one might have thought it would cost the Marinos at least $100,000 to pay lawyers to attack that fortress.

[146] Lawyers frequently earn their fees notwithstanding that the outcome disappoints the client, and when I referred the Law Firm’s accounts for assessment because of special circumstances, I anticipated that the $600,000 would be reduced - but not necessarily to zero.

[147] I also do not see any basis to reduce the conveyancing work done by the Law Firm to zero. Charges of approximately $53,000 for services relating to all mortgage work performed for the original mortgage and for the renewed mortgage including title searches, document preparation, registration, and the joint venture discussions is excessive, but it does not follow that the professional work was worthless.

[148] The work the lawyers performed did have some value for the Marinos, and the Assessment Officer erred in ignoring that value. She did not err, however, in awarding substantial indemnity costs against the Law Firm. Nevertheless, the Assessment Officer did make a serious error in principle and the Certificate of Assessment must be set aside.

[149] However, neither party wants to extend the agony of the assessment process into its tenth year by having another assessment officer begin again and assess the accounts without any error in principle.

[150] Therefore, doing the best that I can with the Assessment Officer’s conclusions about the various factors that may be considered on an assessment, I would award the Marinos a refund of $475,000, all inclusive of the reduction in the accounts, plus pre-judgment interest on the refund, plus costs on a substantial indemnity basis for the assessment hearing.

[151] I believe that this result is fair and just. Practically speaking, subject to the determination of costs in this appeal, the Law Firm will be paid $100,000-$150,000 for the work it did, and it would have received somewhat more if it had not had to pay substantial indemnity costs for the assessment.

5. The Amount Paid by the Marinos and the Findings of Fraud

[152] As discussed above, during the assessment hearing, the Law Firm submitted that while the Marinos owed approximately $600,000 for legal fees, none of this debt had been directly paid by the Marinos. In particular, the Law Firm refused to give credit for a $166,834.78 payment received from L-Jalco that was deposited into the Marinos’ accounts. Mr. Lawrynowicz testified that the money was a loan from L-Jalco to the Law Firm and not part of L-Jalco’s loan to the Marinos.

[153] This submission raised an incendiary issue for the Assessment Officer because in their written submissions after the assessment hearing, the Marinos asserted that Mr. Lawyrnowicz’s evidence about a loan was contrived and unsupported by the documents in evidence and by the surrounding circumstances. In their written submissions after the completion of the assessment hearing, the Marinos submitted that the Law Firm’s submission was a fraudulent attempt to reduce the amount of any refund.

[154] The Law Firm responded to these allegations by requesting that the Assessment Officer refer the matter to a judge, which was an appropriate request given the seriousness of the allegations. The Assessment Officer indicated that she would take the matter under advisement and she would advise counsel if further submissions were needed. However, after the passage of over four years, by the time she released her decision, she simply went ahead and addressed the serious allegation being made against Mr. Lawyrnowicz and his Law Firm.

[155] In her decision, at paragraphs 127-129, the Assessment Officer described the Marinos’ submission about fraud as follows:

127. Mr. Sidlofsky, for the clients, submitted that the aforementioned grounds constitute irrefutable proof that the advances made in April and July 2004 to pay the L&A accounts was not a loan to L&A but in fact amounts added to the Mortgage debt and charged to the Marino family. They submitted that Calin's evidence that there was a loan between L&A and L-Jalco, that the loan was premised on a "joint venture" being agreed to, that the payments received on April 2 and July 30, 2004 were made only on the basis of this loan, and that L&A had to repay this loan to L­ Jalco, is incredible and dishonest. What is worse, they argued, is that L&A's reliance on this contrived "loan" argument at the assessment is unethical, unprofessional, and dishonest and constitutes fraud. Indeed, the clients hold that the L-Jalco statement of claim, which L&A prepared and issued in July 2004, is proof positive that L&A's position is a deliberate lie.

128. The clients asked the Assessment Officer to find that L&A was paid $588,500.46 on account and consider any reductions to the accounts in light of the total amount L&A received (regardless of what L&A did with the money after the fact). In addition, the clients asked the Assessment Officer to find that Calin knowingly lied in his evidence concerning the purported "loan" and the mortgage "attachment" issue to prejudice the clients and to improve L&A's position on the assessment. They submitted that this conduct of an officer of the court is grossly unethical and warrants an order that L&A's accounts be reduced to nil and that the entire $588,500.46 collected by L&A on the accounts be refunded to the clients with interest and costs.

129. In the Solicitors' written Reply to the Clients' Submissions, Mr. Roland took great exception to the clients' "brazen" allegations of fraud, wilful misconduct and solicitors' deceit. Mr. Roland stated that these allegations were raised "surreptitiously" and were not put to the Solicitors at the assessment. He requested that the assessment be moved before a judge to decide as the assessment officer has no jurisdiction to make any determinations on matters involving solicitor fraud, wilful misconduct and deceit.

[156] The Assessment Officer found at paragraph 139 of her decision that there was no credible or trustworthy evidence to establish a loan between L-Jalco and the Law Firm.

[157] At paragraphs 145 to 151, under cover of the finding on the referral of the accounts to assessment that there were “special circumstances,” the Assessment Officer concluded that an assessment officer has the jurisdiction to make findings of fraud as a part of assessing a lawyer’s accounts; she stated:

Client Allegations of Solicitors' Fraud and Misconduct

145. Mr. Sidlofsky, in his submissions for the clients, also argued that L&A's conduct at the assessment to prove their accounts, for example, that Calin's reliance on the joint venture loan was contrived and dishonest, constitutes fraud warranting a finding of a nil account. Mr. Roland in his reply submissions, asserted that the assessment officer has no jurisdiction to address allegations of fraud, wilful misconduct and deceit, and that in any event, such serious allegations were not properly raised before the Solicitors at the assessment hearing, all of which justifies that the matters be redirected to a judge to decide.

146. It bears repeating that my function and responsibility as an assessment officer are to determine whether or not the Solicitors proved on a civil standard that their accounts are fair and reasonable. Thus, the focus in solicitor and client assessments is on the Solicitors, who carry the burden of proof, not the clients. The clients are given the opportunity at the assessment to raise any relevant issues and concerns about the Solicitors, the services they provided to the clients, and the fees and disbursements they billed.

147. In this case, the Marino family clients raised many substantive issues and concerns regarding the L&A services and legal bills; and also serious allegations about the Solicitors' deceit and wilful misconduct in the provision of legal services and in proving their accounts. In my experience as an assessment officer, it is not uncommon for clients to voice similar allegations against their former lawyers. It is perhaps more accurate to say that it is allegations of this sort that often serve as the catalyst for clients to seek assessments of their legal bills.

148. Assessment Officers are obliged to take allegations of deceit or misconduct seriously, whether or not they emanate from Solicitors or clients or whether Solicitors or clients are adversely affected. When such conduct results in abuses, obstructions or delays of the assessment process, the Assessment Officer can take this into account when exercising her discretion to award costs on the assessment.

149. Applications for assessments where clients raise allegations of fraud and misconduct on the part of a lawyer and which subsequently are referred to assessment by the Court require special attention by assessment officers. I say this because the jurisprudence governing assessments implicitly confers on assessment officers the jurisdiction to address issues involving special or exceptional circumstances affecting legal costs, such as gross misconduct or fraud.

150. For example, in this particular assessment, Justice Perell determined there to be "special circumstances" warranting the assessment of the L&A accounts. As His Honour stated, at paragraph 47 of his decision: "Special circumstances include any circumstances of an exceptional nature affecting the matter of costs or the liability of a solicitor's client that a judge, in the exercise of his or her discretion in each particular case, may consider to justify an assessment of the account."

151. As the case law further informs, the judge's jurisdiction to order assessments exists quite apart from the provisions of the Solicitors Act because solicitors are officers of the Court and the Court has general or inherent jurisdiction over them. However, this jurisdiction of a judge to refer a lawyer's account to an assessment officer is not absolute and historically has been invoked whenever circumstances amounting to fraud (usually related to overcharging) or gross misconduct were established to justify the exercise by the judiciary of its disciplinary powers over its officers. Hence, the term "special circumstances." Therefore, I find that in appropriate cases, assessment officers may make findings of fraud or gross misconduct where established on assessment.

[158] I agree with some and disagree with some of what the Assessment Officer had to say about the jurisdiction of an assessment officer to make findings of fraud or gross misconduct. As I explain above, an assessment officer has a circumscribed jurisdiction to make findings of lawyer misconduct but whatever jurisdiction there is to make findings of fraud does not exist because of the “special circumstances” that justified the matter being referred to assessment.

[159] The assessment officer’s jurisdiction to make findings of fraud, which is similar to his or her jurisdiction to make findings of negligence, exists independently of special circumstances and is rather an aspect of a circumscribed jurisdiction. This point can be quickly demonstrated. If there are no special circumstances, a registrar could order a solicitor and client bill to be assessed and the assessment officer would have the jurisdiction to make findings of negligence, or fraud to the extent that this was necessary to make a finding about the quantum of the lawyer’s fees.

[160] Thus, while I agree that an assessment officer has jurisdiction to address negligence, and fraud, that jurisdiction is circumscribed by the assessment officer’s role of: (1) taking an account of what the client has paid; and (2) evaluating the worth of the lawyer’s services. The assessment officer does not have an untethered jurisdiction to make findings against a solicitor of negligence, fraud, embezzlement, misappropriation or defalcation.

[161] An oddity, a rarity really, in the immediate case is that the major discussion about fraud had to do with the issue of accounting for what the client had paid to the lawyer. As I noted above, there will rarely be an issue about what has been paid or not paid by the client. Here, however, the Law Firm created an issue about the state of the accounts by attempting to divert $176,458.26 as a loan made by L-Jalco to the Law Firm. Thus, the Law Firm attempted to persuade the Assessment Officer to not give credit for this sum as a payment made by the Marinos. However, once the Assessment Officer had determined that the money was advanced as part of the $880,000 mortgage loan to the Marinos, there actually was no need for her to go forward to make a hard-edged finding of fraud by the Law Firm.

[162] Similarly, the Assessment Officer’s findings that the Law Firm’s accounts were “not only unfair and unreasonable but so grossly excessive as being tantamount to fraud,” did not call on her to make a hard-edged finding of fraud. All that was called for in the immediate case was for the Assessment Officer to make findings of carelessness, negligence, or even fraud, to the extent necessary to justify a reduction of the bill and a refund to the Marinos.

[163] Ultimately that is what she did. She had the jurisdiction to order a refund, and she did not exceed her jurisdiction in the circumstances of the immediate case because she confined her findings to the two substantive issues that were before her; namely: (1) how much the client had paid on account of fees; and (2) what should have been the value of those fees.

[164] I conclude that the Assessment Officer’s decision was within her jurisdiction. I also conclude that she did not decide the issue of whether the refund to the Marinos in the immediate case is a liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity. That type of finding is a matter for a court to determine.

D. CONCLUSION

[165] For the above reasons, I order the Law Firm to refund $475,000, all inclusive, to the Marinos. If the parties cannot agree about the matter of costs of this appeal, they may make submissions in writing beginning with the Marinos’ submissions within 20 days of the release of these Reasons for Decision followed by the Law Firm’s submissions within a further 20 days.

Perell, J.

Released: March 24, 2016

CITATION: Calin A. Lawrynowicz Barristers & Solicitors v. Marino Estate, 2016 ONSC 2065

COURT FILE NO.: 07-CV-333171

DATE: 20160324

ONTARIO

SUPERIOR COURT OF JUSTICE

IN THE MATTER OF THE Solicitors Act and in the matter of:

CALIN A. LAWRYNOWICZ BARRISTERS & SOLICITORS

Applicant/Solicitor

– and –

THE ESTATE OF DOMENICO MARINO, deceased, by its representative JOSEPH MARINO, MARIA MARINO, JOSEPH MARINO and GREGORY MARINO

Respondent/Clients

REASONS FOR DECISION

PERELL J.

Released: March 24, 2016