Court File and Parties
COURT FILE NO.: FC12-708-03 DATE: 20160930 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Laura Leach, Applicant AND: Kenneth Leach, Respondent
BEFORE: McDermot J.
COUNSEL: Trevor Owen as agent for Ellen Anderson, Counsel for the Applicant Tom Dart as agent for Janice E. Younker, Counsel for the Respondent
HEARD: September 15, 2016
Endorsement
Introduction
[1] During family law litigation, inevitable difficulties arise with a solicitor’s retainer with his or her client. The client may have lost faith in the lawyer or the relationship between the lawyer and client has changed. When this occurs, lawyers will often make the choice which is in the best interests of his or her client and that choice may often include stepping away from the file.
[2] Perspectives change, however, when the client on the other side of the file demand the lawyer’s removal from the record. Then personalities become involved. The client perceives that they are being bullied or badgered by their former spouse. He or she says that they will not be told who they can hire as their lawyer, especially by their former partner. Or, worse yet, the lawyer loses objectivity and loses sight of what matters, which is, of course, whatever is in the client’s best interests. That is precisely the issue before the court in this case.
[3] Since these parties separated in 2011, Mr. Leach has paid spousal support to his wife. Although it took them some time to negotiate the first agreement, on April 18, 2013 Mr. Leach agreed to pay spousal support of $4,500 per month based upon his income of $145,000 per annum. A year later, Mr. Leach lost his job with a package which ran out on October 1, 2014, and the parties agreed to suspend spousal support. Then, in January, 2015, Mr. Leach got a temporary position at a lesser salary and reduced spousal support was renegotiated. After that, in July, 2015, Mr. Leach obtained full time work and since then, negotiations have stalled, largely because of the issue of Ms. Leach’s legal representation.
[4] Since 2011, Ms. Anderson has acted as counsel for Ms. Leach in negotiating spousal support. She assisted Ms. Leach in settling the terms of her original separation agreement, and then, as circumstances changed, she assisted in negotiating the last two changes to the agreement in 2014 and 2015.
[5] During much of this time, Ms. Leach had worked part time in Ms. Anderson’s office as a receptionist. No complaint was taken with this. But in April, 2015, Ms. Leach was hired full time with Ms. Anderson’s firm, Adams Anderson. For Mr. Leach, that crossed a line. On July 29, 2015, Ms. Younkers for Mr. Leach wrote Ms. Anderson, demanding that she remove herself from the record. Ms. Anderson demurred. Ms. Younkers then stated that she was instructed not to negotiate or speak with Ms. Anderson because of the conflict. And now, more than a year later, a full day motion was argued on Mr. Leach’s motion to remove Ms. Anderson from the record. According to the materials, this has been at enormous cost to these two clients. In the meantime, there has been little progress on the issue at hand, which is the variation of spousal support resulting from Mr. Leach’s latest change in employment status.
[6] The Respondent’s motion to remove Ms. Anderson from the record was originally returnable in January, 2016. Because of issues concerning counsel’s availability, it was adjourned a number of time, finally to this long motion date. This argument took a full day. There were extensive materials filed: Eight affidavits, three volumes of the continuing record and four different factums. I am concerned that more resources have been expended in argument of this motion than the differences in spousal support could possibly be worth to these parties.
[7] Considering the costs of this motion, and considering the fact that spousal support appears to have become secondary to who acts for Ms. Leach, it may have been best for Ms. Anderson to cease acting and allow another lawyer to take over. That is, however, not the question before me. The issue is whether Ms. Anderson can be forced to remove herself from the record in this matter.
[8] For the reasons set out below, my answer is no. The Respondent’s motion to remove Ms. Anderson as solicitor for Ms. Leach is dismissed with costs.
Analysis
[9] The issues in this motion are defined by the arguments of the Respondent concerning the Applicant’s employment with Ms. Anderson’s firm. Ms. Younkers originally complained that the employment relationship created a conflict because Ms. Anderson had now lost her objectivity as counsel. Later, this became an issue regarding income: Ms. Younkers suggested that the Applicant was receiving some sort of reduction in legal fees which she said was a benefit from employment which should be quantified for this motion to change spousal support. Ms. Younkers and her client say that if the Applicant cannot clearly address this issue, Ms. Anderson may be a necessary witness in these proceedings, especially as Ms. Anderson is responsible for HR at her small three lawyer firm.
[10] The issues concerning Ms. Anderson’s removal from the record can therefore be summarized as follows:
a. Does the employer and employee relationship between the Applicant and Ms. Anderson result in a conflict of interest necessitating the lawyer’s removal from the record?
b. If not, is the fee arrangement between Ms. Anderson and Ms. Leach a benefit of employment which would require Ms. Anderson to be a witness in these proceedings, which would also require her removal from the record?
c. Finally, is the fee arrangement between Ms. Anderson and her client champertous in nature, resulting in a contingency arrangement, illegal in family law matters?
[11] I will firstly address general legal issues regarding the removal of a lawyer from the record, and then deal with each issue in turn.
General Considerations
[12] There are no specific cases which address the issue of a lawyer’s conflict where there is an employment relationship between counsel and client. Because of this, the court must have reference to general principles which govern the issue of removal of counsel from the record because of the lawyer’s relationship with the client.
[13] Firstly, it is not the actual perceptions of the parties to this litigation, including the Respondent and his lawyer, which govern the issue of whether Ms. Anderson should be removed from the record. Rather than focusing on the subjective reactions of the litigants, the standard is objective: would a reasonably informed member of the public perceive there to be a conflict of interest or ethical breach arising from the lawyer continuing to act for her client in the fact of the employee-employer relationship which began in 2015: see Everingham v. Ontario, [1992] O.J. No. 121 (Div. Ct.) at para. 23 and MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235 at para. 44? Accordingly, it is not what Mr. Leach thinks that is important; I must determine what a reasonably informed person would think of the situation.
[14] The second principle that I must bear in mind is that the courts are loath to interfere with a client’s choice of counsel and a client should only be deprived of his or her lawyer in the clearest of cases: see MacDonald Estate at para. 13 and Best v. Cox, 2013 ONCA 695. As stated by K. Feldman J.A. in Best v. Cox, at para. 8, “This court has only recently re-iterated the principle that a court will only in the rarest of cases grant a removal motion.” She cited Re Kaiser, 2011 ONCA 713 where Cronk J.A. affirmed the motions judge’s statement that “[a] Litigant should not be deprived of counsel of its choice without good cause.” She confirmed that “Canadian courts exercise the highest level of restraint before interfering with a party’s choice of counsel” stating that “there must be a possibility of real mischief should a removal order be refused.”
[15] Finally, I repeat the three policy considerations which govern motions of this nature as set out in MacDonald Estate v. Martin at para. 16:
a. To maintain the high standards of the legal profession and the integrity of our system of judgment;
b. To ensure that a litigant is not deprived of his or her choice of counsel without good cause; and
c. The interest of mobility in the legal profession.
[16] The latter issue is not relevant to this motion as it involved, in that case, the issue of lawyers changing firms thereby creating a conflict. The first two considerations remain germane to this motion.
[17] I bear all of these principles in mind in considering the Respondent’s grounds for removal of Ms. Anderson as Ms. Leach’s counsel.
Does the employer and employee relationship between the Applicant and Ms. Anderson result in a conflict of interest necessitating the lawyer’s removal from the record?
[18] As I mentioned, Ms. Anderson has acted for Ms. Leach for five years. She is familiar with this file, and has vigorously defended her client’s interests in this continuing negotiation, which has now become litigation.
[19] The issue of representation only arose when Ms. Leach became a full time employee as a receptionist and real estate assistant at Ms. Anderson’s firm in April, 2015. At that point, Mr. Leach took exception to Ms. Anderson continuing to act in this matter. As pointed out by Mr. Dart, Ms. Leach’s employment became particularly offensive to Mr. Leach because he perceives that Ms. Anderson has now become increasingly aggressive in this negotiation. He suspects that this is because Ms. Anderson is no longer objective as counsel because of the new employment relationship that she has with Ms. Leach.
[20] The issue is whether this is a conflict of interest requiring Ms. Anderson to remove herself as counsel for Ms. Leach. Ms. Anderson argues through her counsel, Mr. Owen, that this does not constitute a conflict of interest. She notes that a conflict of interest traditionally arises where a lawyer finds himself adverse to the immediate legal interest of a current client: see Canadian National Railway Co. v. McKerchner LLP, [2013] 2 S.C.R. 649.
[21] That, however, is not the position of Respondent’s counsel. Indeed, Mr. Dart is not worried about the risk of Ms. Anderson acting adversely to Ms. Leach; he is concerned that the employment relationship will result in Ms. Anderson losing the necessary objectivity that she would otherwise demonstrate as counsel. That was mentioned in Ms. Younkers’ initial correspondence complaining about the employment of Ms. Leach. The fear is not that Ms. Anderson is in an adverse position to her client but that she is too close to her to negotiate objectively.
[22] That this is a legitimate concern is confirmed by the Rules of Professional Conduct [1], s. 3.4, which states that a lawyer “shall not act or continue to act for a client where there is a conflict of interest”. The concern expressed by Mr. Dart is that this is a “personal interest conflict” which is defined in the fourth commentary to the rule, which specifically addresses family law conflicts of interest. That commentary notes that a lawyer’s judgment in a family law matter may be impaired by a close personal relationship with the client:
A lawyer’s own interests can impair client representation and loyalty. This can be reasonably obvious, for example, where a lawyer is asked to advise the client in respect of a matter in which the lawyer, the lawyer’s partner or associate or a family member has a material direct or indirect financial interest. But other situations may not be so obvious. For example, the judgment of a lawyer who has a close personal relationship, sexual or otherwise, with a client who is in a family law dispute is likely to be compromised.
[23] The issue is therefore whether a reasonably informed person would, in light of the evidence, consider that Ms. Anderson’s objectivity and judgment would be impaired by the fact that Ms. Leach is her firm’s employee.
[24] Significantly, counsel were unable to cite to me any cases where an employment relationship was sufficient cause to have a lawyer removed from the record. This may be because of the nature of an employment relationship. It is completely unlike an intimate or sexual relationship; an employment relationship is supposed to be, as with a solicitor and client relationship, a professional one. The fact that someone is an employee does not necessarily mean that there is an emotional tie with the client and, in fact, we try our best to keep emotional ties out of an employment relationship. That being said, we also know that work relationships can be close and that a “down the hall” friendship can be an extremely close one.
[25] The cases which explore the conflict spoken of in the fourth commentary are generally those of an intimate or sexual relationship between solicitor and client. In McWaters v. Coke, 2005 ONCJ 73, the client was married to the lawyer. The lawyer in question was acting for his wife in matrimonial proceedings, and the husband sought an order removing him from the record. Zuker J. stated that, “The court must consider a lawyer’s personal involvement and whether that may impair his or her professional judgment.” He later says that the “solicitor-and-client relationship is a fiduciary one and a lawyer’s obligation is heightened if a client is emotionally vulnerable to the extent that the client’s ability to make reasoned judgements about the future is affected.” Zuker J. says that if there is a substantial risk that a lawyer’s professional judgment may be impaired by her relationship with the client, the lawyer is in a conflict of interest position.
[26] Similarly, in Kam v. Hermanstyne, 2011 ONCJ 101, the lawyer was in a romantic relationship with her family law client. She was also living with her client. She was removed from the record. Spence J. stated that the intimate relationship made it impossible to act. He stated that, at para. 17:
On the other hand, her professional standards of conduct necessitate that she act in a way that does not adversely affect her judgment in her role as counsel to her client. She must try to maintain her objectivity while, at the same time, being inextricably emotionally intertwined with the respondent and the outcome that the respondent is attempting to achieve in this case. In my view this is a near-impossible tension to resolve.
[27] However, it is not every close relationship that results in a lawyer being removed from the record in matrimonial proceedings. In fact, there are few cases where the doctrine of personal interest conflict has been extended beyond an intimate relationship between counsel and client. In Chouinard v. Chouinard, [2007] O.J. No. 3279 (S.C.J.) [2], the solicitor acted for his friend in matrimonial proceedings. D.K. Gray J. stated that an intimate relationship was necessary for there to be the required loss of objectivity. He stated at para. 27:
There is no prohibition against lawyers acting for friends, even good friends. It is only where the relationship becomes intimate and emotional that the Court will become concerned that the necessary degree of independence and detachment may not be present. I am not so satisfied in this case.
[28] In Judson v. Mitchele, 2011 ONSC 6004 (S.C.J.), a lawyer was removed from the record without notice on the judge’s own motion, mainly because the client was the lawyer’s son. In granting leave to appeal, Boswell J. said, “To the extent that... the ruling of the motions judge establishes a prohibition against lawyers acting in Family Court for close family members, it goes further than the Rules of Professional Conduct and represents a significant extension of the existing common law.” [para. 35].
[29] In the present case, Mr. Dart argued that the change in the relationship between Ms. Anderson and her client was marked by a corresponding change in her attitude towards the file. He says that Ms. Anderson became more unreasonable in her conduct of the file.
[30] He cites as an example the aggressive position that Ms. Anderson took on behalf of Ms. Leach in the Motion to Change regarding support payable; the claim is for $4,500 per month even though she knew that Mr. Leach had lost his job and suffered a later reduction in income.
[31] Mr. Dart says that a further example of Ms. Anderson’s loss of objectivity is her insistence Mr. Leach should waive the allegations of conflict of interest in the separation agreement, which was one of the causes of the breakdown of those discussions. He suggests that Ms. Anderson was taking things personally when she states in her letter of November 5, 2015 that, “Without unambiguous retraction of the allegations of conflict of interest by Mr. Leach, there can be no confidence between the parties or their counsel in attempting to negotiate a resolution.” [3] He points out that this was notwithstanding Mr. Leach’s undertaking not to challenge the agreement based upon his concerns about Ms. Anderson’s conflict of interest.
[32] Mr. Dart also complains that Ms. Anderson made up issues which did not make sense; he says that she raised matters that would make a minimal difference in the amount of spousal support. He also complains that Ms. Anderson would not consider an offer to settle until the motion materials to remove her from the record were served, something that Ms. Younkers complained “leads Mr. Leach to believe that you are trying to have him incur as many additional (and unnecessary legal costs as possible in this matter.” In the same letter, Ms. Younkers says that “the manner in which you have conducted this file since July 29th makes it apparent that the conflict is real.” [4]
[33] In his March, 2016 affidavit, Mr. Leach focuses on Ms. Anderson’s conduct subsequent to Ms. Leach becoming an employee at the Adams Anderson law firm. And I agree that the tone of the negotiation was negative and aggressive throughout. However, aggressive negotiations are often a part of family law disputes. That is especially so where the lawyer’s integrity is impugned as part of that discussion. Although ill-advised, it is not surprising that Ms. Anderson would take strong exception to the suggestion that there was a conflict of interest and that this type of allegation would result in her becoming defensive.
[34] And in concentrating on Ms. Anderson’s conduct subsequent to the conflict being raised, Mr. Leach fails to demonstrate a change in the lawyer’s conduct after Ms. Leach became employed; there was nothing in Mr. Leach’s initial affidavit against which to compare Ms. Anderson’s post-employment conduct.
[35] A more fulsome examination of the material shows that relations between Mr. Leach and Ms. Anderson were never easy or friendly. For example, Ms. Leach’s affidavit sworn January 6, 2016 speaks of the conflict that arose over the collaborative law agreement which Ms. Anderson had prepared early on after separation. That agreement had a mandatory arbitration clause contained in it. Mr. Leach obtained an opinion from a mutual acquaintance, Brian Galbraith, regarding that agreement; he later retained Mr. Galbraith over the objections of Ms. Leach. The parties never agreed on the collaborative law process and it took them 18 months after separation to negotiate the separation agreement. It was apparent that Mr. Leach thought Ms. Anderson unreasonable at that time as well; he refused to consider Ms. Anderson’s collaborative law agreement and had three lawyers represent him during that time. During that time, an application was issued by Ms. Leach. It does not appear that negotiations were easy during the initial separation notwithstanding the emails between the parties which indicated that the parties remained civil between each other during this time.
[36] In fact, it appears from Mr. Leach’s affidavit sworn March 27, 2016 that he was never impressed with the behaviour of Ms. Anderson. In para. 13 of that affidavit, Mr. Leach deposes that his lawyer, Ms. Younkers, said in 2011 that Ms. Anderson “had no intention of being collaborative in her representation of Laura.” He says in para. 14 that “from the outset Ms. Anderson conducted herself in a manner that Ms. Younkers felt was aggressive and highly positional”. [5] It is apparent that both Ms. Younkers and Mr. Leach did not think highly of Ms. Anderson from the beginning, and that this was, from the outset, a difficult relationship. There does not appear to have been a change in the perceived conduct of Ms. Anderson between 2011, soon after the parties’ separation, and after July of 2015 when Ms. Leach became an employee of Ms. Anderson.
[37] As well, it is apparent from the materials that Mr. Leach did not much care for Ms. Anderson at any time. I have outlined several statements made by Mr. Leach which confirm this, and there are others in his affidavits. I have mentioned above that the standard for the determination of whether there is a conflict is an objective one, and that a party’s perception of opposing counsel cannot alone govern; the standard is whether a reasonably informed individual would perceive there to be a conflict. There is good reason for this objective standard; the court must take care to guard against a client seizing upon a supposed conflict to rid himself of an opposing lawyer who he may think is getting in the way of a reasonable settlement. That would give rise to opportunistic attempts to remove an seemingly difficult lawyer upon discovering any sort of outside relationship between the opposing lawyer and client.
[38] The question is whether the relationship between Ms. Anderson and her client is such that she loses “independence and detachment” in the words of D.K. Gray J. in Chouinard. In my view, this relationship does not create a conflict within the definition contained in the Rules of Professional Conduct or in the cases noted above; in fact, as far as I can see Ms. Anderson’s conduct in the file did not change after July, 2015. As with Boswell J.’s ruling in Judson, to extend the definition of a conflict to prohibit counsel from acting for an employee, a less close emotional relationship than that of family members, would go well beyond the “intimate relationship” cases noted above and I do not find that it is in the interests of justice to do so.
[39] I therefore do not find that the relationship of employee relationship of Ms. Leach with her lawyer gives rise to a perceived conflict in this matter. The evidence does not support a change in the behaviour of Ms. Anderson after the employment relationship began, and I suspect that Mr. Leach would otherwise feel that he would be well rid of Ms. Anderson, and would be able to quickly negotiate a reasonable agreement were she out of the picture. That is no reason to remove counsel from the record. I do not find that there is a conflict of interest sufficient to remove Ms. Anderson as solicitor for the Applicant.
Is the retainer between Ms. Anderson and Ms. Leach an employment benefit to the client which would require Ms. Anderson to be a witness in these proceedings, requiring her removal from the record?
[40] It is trite that counsel cannot be a witness in the proceedings in which he or she is acting. If counsel becomes a potential witness, then that lawyer must remove himself from the record so that he or she can give evidence.
[41] Mr. Dart argued that there was evidence that Ms. Leach was getting a “break” on legal fees from Ms. Anderson. He argued that this was a benefit received from her employer, who was also her lawyer and that this was therefore relevant to the spousal support issues before the court. Accordingly, Ms. Anderson, as the human resources officer of her law firm, was a potential witness in these proceedings, and must therefore remove herself from the record.
[42] Moreover, normally a client’s retainer arrangement is confidential as between a solicitor and his or her client. Because Ms. Anderson is the client’s employer, the Respondent’s raising this as an issue renders this retainer inappropriate.
[43] It is in the Respondent’s interest to raise the question of Ms. Leach’s employment benefits through reduced legal fees. It serves his purpose by removing Ms. Anderson from the record, and it may also go to reduce his support if Ms. Leach is receiving an employment benefit.
[44] Ms. Leach denies that this is an benefit from employment. She denies that she is receiving any reduction of legal fees and she says that she will owe Ms. Anderson legal fees and disbursements. That being said, there was some ambiguity in the materials as to her fee arrangements with Ms. Anderson. At one point, she says that she is paying disbursements only; [6] later she says that she is paying “legal fees and disbursements.” [7] She says that she will pay her legal fees through her investments and with assistance from her parents. In any event, she says that she is entitled to payment of costs by the Respondent under para. 5.18 of the Separation Agreement dated April 18, 2013. [8] Finally, she says that if she is receiving a benefit of reduced legal fees, that is irrelevant to these proceedings as the Second Amending Separation Agreement dated March 9, 2015 states that support will be based on Ms. Leach’s 2014 income only, which only includes Ms. Leach’s part time income from Adams Anderson.
[45] If reduced legal fees are a benefit from employment, they would be an income benefit that is unique. The issue of whether indulgences given to an employee for legal fees are a benefit from employment for support purposes does not appear to have been considered in any of the case law.
[46] The Spousal Support Advisory Guidelines use the definitions of income under ss. 15 – 20 of the Child Support Guidelines [9] as a starting point for income determination. [10]
[47] Just because a benefit is received from your employer does not make it a benefit of employment or income for support purposes. The case law in respect of income for child support purposes make it clear that there are certain hallmarks of a benefit from employment. One of the major themes surrounding a benefit from employment for support purposes is that this benefit cannot be gratuitous; the employee must be entitled to the benefit as a term of his or her employment: see Rivard v. Hankiewicz, [2007] O.J. No. 2033 (C.J.) where E.B. Murray J. outlined four factors to be considered in determining whether non-taxable receipts were income within the meaning of the Child Support Guidelines. She found in two of the four factors that there had to be some entitlement or right to the “income”. In essence, to find income, “Receipt [of the benefit] is not gratuitous” and the payor must be “legally entitled” to the funds [para. 44]. In that case, an annuity was found not to be income.
[48] In this case, I am not satisfied that there is a benefit from employment within this definition. Mr. Leach says that his legal fees are in the range of about $40,000 for this motion and the motion to change in general. If Ms. Leach is receiving a waiver of those fees as a benefit from her employment, this would more than double her annual income which was, from the Adams Anderson firm, just over $33,000. I would be surprised if Ms. Leach took the position that she was “entitled” to her fee waiver and that it was a right which accrued to her through her employment contract. I would also be surprised if Ms. Anderson was intent upon providing to her employee a benefit which would more than double her income. I would also be surprised if, were a fee reduction or waiver being offered, that either Ms. Anderson or Ms. Leach would think this anything more than gratuitous in nature.
[49] Ms. Leach says that she has a “collegial” relationship with her employer and other members of the Adams Anderson firm. An employment relationship is, or at least should be, as with a solicitor client relationship, one of professionalism and distance. It is not an intimate relationship or the type of relationship that would give rise to a suspicion that she is receiving a benefit from that firm which may be as much as $40,000 to date.
[50] As well, there is no evidentiary foundation for any finding that Ms. Leach is enjoying a fee waiver or reduction through her employment with Adams Anderson. Mr. Leach says in his affidavit that “Presumably, [Ms. Anderson] will not require Laura to pay the balance of her legal costs, over and above any recovery of legal costs that the court requires”. [11] He says that this presumption arises from Ms. Anderson’s position that her client is entitled to costs under para. 5.18 of the Separation Agreement.
[51] I will speak of Ms. Anderson’s position that her client is entitled to costs below. However, I do agree with Ms. Leach when she says that Mr. Leach is “hypothesizing” about a benefit from Ms. Anderson for legal fees, and that these assertions are “speculative.” [12] Ms. Leach has clearly deposed that she is hopeful of an award of costs which will defray her legal fees, but she deposed that she is expected to pay the difference between those amounts and will do so from her investments and from assistance from her parents.
[52] Furthermore, the fact that Ms. Anderson may have deferred fees or disbursements also does not make this a benefit from employment. Family law litigation is an extremely expensive process and there is not a family law lawyer, I am sure, who has not been asked to carry his or her client from time to time. The fact that Ms. Anderson may have done so does not, in my view, give rise to an inference that Ms. Leach is receiving some sort of benefit from employment for support purposes. I repeat that both Ms. Anderson and Ms. Leach would be extremely surprised if it was asserted that Ms. Leach was entitled to be carried until receiving an award of costs in this proceeding.
[53] Again, I am concerned that the real issue here is that Mr. Leach feels that Ms. Leach “can litigate with impunity” and that he is worried that Ms. Leach has a “leg up on him” because of the fee arrangements that Ms. Leach may have made with her lawyer. That is no basis for removal of Ms. Anderson from the record any more than it would be for the removal of a more independent counsel from the record who may have taken a similar position regarding costs as did Ms. Anderson. We have all seen paying clients complain about a client who is legally aided who they feel can litigate to his or her heart’s desire with no consequence. To date, other than costs, there is no remedy for this situation, and I fear that the situation is the same for Mr. Leach.
[54] I do not find that it is within anything other than the realm of speculation that the fee arrangements that Ms. Anderson may have made with her client constitute a benefit from employment for spousal support purposes. It is also improbable that a finding could be made of Ms. Leach’s entitlement to any reduction in legal fees that she may be receiving; without such an entitlement, this cannot be a benefit from employment for support purposes. Therefore, the only reason to make Ms. Anderson a witness would be for the purposes of a fishing expedition. It is therefore not foreseeable that Ms. Anderson would be a witness in this proceeding or that she would be disqualified as a lawyer because of this possibility.
[55] Therefore, the issue of this being a benefit from employment, or the fear that Ms. Anderson may be called as a witness, are not grounds for removal of Ms. Anderson from the record in this matter.
Is the fee arrangement between Ms. Anderson and her client champertous in nature, resulting in a contingency arrangement, illegal in family law matters?
[56] Again, it is trite that contingent fees are not allowed in family law matters. That is for obvious reasons, as the lawyer having an interest in such litigation, which has the potential of being both emotionally charged and destructive, would obviously cross ethical boundaries.
[57] The Respondent says that Ms. Anderson has crossed that line. He says that Ms. Anderson has waived fees and is relying upon a costs award to fund her client’s litigation. He has some evidence to support him in this; in one letter sent to Ms. Younkers on November 5, 2015, Ms. Anderson says that her client is entitled to costs and that this is an absolute right under s 5.18 of the Separation Agreement. Ms. Anderson says in that letter,
“To be crystal clear:
ii. Mr. Leach will also pay Ms. Leach’s fees on a solicitor client basis, such that Ms. Leach cannot be imputed to receive any benefit of “legal services” from her employment, grossed up or otherwise. This provision concerning costs recovery would have applied whatever counsel Ms. Leach had chosen to act for her.
It is completely irrelevant for costs purposes which counsel is representing Ms. Leach, given that Mr. Leach will pay her legal fees because she had to initiate a legal proceeding to obtain disclosure and ongoing appropriate spousal support. Mr. Leach is accordingly contractually obliged to pay her costs; and Mr. Leach will in addition pay 5% interest on late spousal support payments.
[58] Ms. Younkers has extrapolated from this overly optimistic, if not unrealistic, position, that Ms. Anderson has an interest in this litigation insofar as she will need an award of costs to get paid. She says that this is, effectively, champerty and a contingency fee in favour of Ms. Anderson.
[59] Once litigation has commenced, costs are discretionary whatever agreements may govern between the parties. Rule 24 of the Family Law Rules mentions a number of factors in awarding and setting costs; the terms of a separation agreement is not one of them. As well, the agreement does not give a comprehensive right to Ms. Leach of indemnification for all of her costs; it gives a right to recovery of costs for enforcement proceedings if there is a default. Paragraph 5.18 says:
If Ken defaults on timely payment of support, then Ken will pay to Ms. Leach all of the solicitor and client costs she incurs to collect the arrears. (emphasis mine).
[60] This provision does not give Ms. Leach an entitlement to costs for renegotiation of spousal support in the event of a change in circumstances, such as Mr. Leach’s reduction in income. It only concerns costs of enforcement proceedings in the event of a default in spousal support.
[61] However invalid the position of the Applicant is as set out in the November 5, 2015 letter, the real issue is whether the intent was champertous in nature. Was there a fee arrangement contingent upon success in this matter?
[62] The fact that a lawyer suggests to her client that recovery of costs is possible, or in fact probable, does not make the fee arrangement a contingency fee. Ms. Leach’s position is clear in para. 19 of her affidavit of March 21, 2016 and is not contradicted. She is hopeful that she can recover costs against Mr. Leach; if not, however, she understands that she will owe her lawyer the difference. This is not a contingent arrangement; it is similar to the position of many clients in family law litigation who hope to recover part or all of their legal costs from their spouse. Ms. Anderson may have been foolish in stating that recovery of costs was a certainty; this did not, in my view, evidence a contingent arrangement between herself and her client. It evidenced, in my view, her own misunderstanding of the terms of the separation agreement.
[63] I do not find that the fee arrangement between Ms. Anderson and her client was a contingency fee or that this is a ground to remove Ms. Anderson from the record in this proceeding.
Disposition
[64] I therefore find that the Respondent has failed to demonstrate on the balance of probabilities that a reasonably informed person would find a conflict of interest or ethical breach arising from the employee employer relationship between Ms. Leach and her lawyer. I also do not find there to be any benefit of employment which would warrant Ms. Anderson being called as a witness, or any sort of contingent fee arrangement between Ms. Leach and Ms. Anderson. The Respondent’s motion is therefore dismissed with costs.
[65] The parties may make written submissions as to the quantum of costs on a ten day turnaround, with the Applicant’s submissions due first. Costs submissions shall be no more than five pages in length, not including bills of costs and any offers to settle which have been made.
McDERMOT, J.
Date: September 30, 2016
Footnotes
[1] Law Society of Upper Canada, 2000 [2] Cited in Kam v. Hermanstyne [3] Ex. Q to the affidavit of Mr. Leach sworn March 16, 2016. [4] Ibid., Ex. U [5] Affidavit of Mr. Leach sworn March 27, 2016, para. 13 and 14. [6] Affidavit of Ms. Leach sworn January 6, 2016 at para. 36. [7] Affidavit of Ms. Leach sworn March 21, 2016 at para. 19. [8] To call this an entitlement is incorrect. Costs are discretionary in nature. As well, para. 5.18 of the agreement is intended to indemnify Ms. Leach from legal costs “she incurs to collect the arrears” of support in the event of default. These are not collection proceedings; she has brought a motion to change spousal support. [9] SOR/97-175 [10] See R. Harris and C. Rogerson, The Spousal Support Advisory Guidelines: The Revised Users Guide, (April, 2016) at p. 16 [11] Affidavit of Mr. Leach sworn March 16, 2016, para. 59. [12] See the affidavit of Ms. Leach sworn March 21, 2016 at para. 19 and the affidavit of Ms. Leach sworn January 6, 2016 at para. 40.