Citation: McIntyre v. Gowling, 2017 ONSC 1733

COURT FILE NO.: 15-66541

DATE: 2017/03/22

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

KYLE IRWIN MCINTYRE AND CELINE FRANCINE MARIE LAFRANCE-MCINTYRE

Applicants/Moving Parties

– and –

GOWLING LAFLEUR HENDERSON LLP

Respondent/Responding party

Maurice Gatien, for the Applicants/Moving Parties

James Riewald, for the Respondent

HEARD: February 9, 2017

REASONS FOR JUDGMENT

R. Smith J.

[1] The applicants, Kyle Irwin McIntyre and Celine Francine Marie Lafrance-McIntyre (the “Borrowers”), seek an order opposing the confirmation of the Assessment Officer’s decision.

[2] The Borrowers defaulted on their mortgage with the Royal Bank of Canada (“RBC or the Bank”). The Bank then retained the respondent, Gowling Lafleur Henderson LLP (“Gowlings”), to conduct power of sale proceedings and to commence action against the Borrowers for payment of the mortgage debt, for the debt owing under a conditional sales contract, a line of credit, a visa overdraft, and for possession of the mortgaged property. Gowlings obtained judgment against the applicants, and the day before the Borrowers were to be evicted, the proceedings were cancelled to allow the applicants’ time to obtain refinancing and pay RBC’s mortgage in full.

[3] Gowlings invoiced RBC a total of $4,795.00 plus HST, plus disbursements for the power of sale proceedings and the enforcement steps. The Borrowers did not contest the amount of the disbursements.

[4] The Assessment Officer reduced Gowlings’ fees by $1,025.00 plus HST. As a result Gowlings’ fees were assessed at $3,770.00 plus HST and no costs were awarded for the assessment hearing. The applicants oppose confirmation of the Assessment Officer’s decision.

Issues

[5] The applicants’ main submission is that the Assessment Officer failed to consider all of the appropriate factors set out in Cohen v. Kealey & Blaney, 1985 CarswellOnt 1906 when determining the fairness and reasonableness of the fees charged by Gowlings. In particular the applicants submit that the Assessment Officer should have placed greater weight on the amount of the time spent by the lawyer in charge (McCluskey), the legal complexity, the degree of responsibility, and the skill and competence demonstrated by McCluskey.

[6] The applicants abandoned their objection that only hearsay evidence was called at the hearing, which was raised in their factum.

[7] When assessing a solicitor’s account, an Assessment Officer should consider the factors set out by the Court of Appeal in Cohen v. Kealey & Blaney. I agree with the respondent that if the Assessment Officer considered the Rules of Professional Conduct to reduce the assessment of a solicitor’s account, it would have been an error of principle and she would have exceeded her jurisdiction.

Analysis

[8] Did the Assessment Officer make an error in principle by failing to consider and appropriately weigh the nine (9) factors set out in Cohen v. Kealey & Blaney when assessing Gowlings’ account to RBC?

Standard of Review

[9] In RZCD Law Firm LLP v. Williams, 2016 ONSC 2122, 2016 CarswellOnt 4989 at paras. 46 and 48, the Divisional Court stated that on a motion to oppose an Assessment Officer’s Certificate which was in the nature of an appeal, the court should not hear the matter all over again – and should not interfere with the decision unless the Assessment Officer made a mistake in principle, made a decision that was outside her jurisdiction or patently misapprehended the evidence. The court is not concerned with mere questions of amounts, unless the amounts are so inappropriate as to suggest an error in principle.

[10] At para. 47 of RZCD, the Divisional Court stated:

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…

[11] The applicants do not allege that the Assessment Officer did not have jurisdiction or that she patently misapprehended the evidence.

Error in Principle

[12] Gowlings entered into a fee arrangement with RBC to perform mortgage enforcement and collection work for block fees which are not based on the time spent by the lawyer or a clerk on the file. As a result of this agreement, the lawyers and clerks who worked on the file did not record their time.

[13] RBC and Gowlings agreed that the block fee for performing the legal work for a power of sale was fixed at $1,200.00 regardless of how much time was spent or what hourly rates were charged.

[14] The applicants submit that the Assessment Officer erred in principle by failing to place more weight on the fact that Gowlings’ lawyers and clerks did not record the time they spent working on the file.

[15] In Cohen v. Kealey & Blaney, the Court of Appeal set out nine (9) factors which should be considered when determining a fair and reasonable fee for legal services. The nine (9) factors are the time spent by the solicitor, the legal complexity of the matter, the degree of responsibility assumed, the monetary value in issue, the importance to the client, the degree of skill and competence demonstrated by the solicitor, the results achieved, the ability of the client to pay, and the client’s expectation of the amount of the fee.

[16] The applicants submit that Gowlings has used modern technology, trained support staff, and made an agreement to perform all of RBC’s mortgage default work, which allows it to perform power of sale work in less time than a law firm without the same volume of work and technology.

[17] The Assessment Officer discounted the block fees agreed to by Gowlings and RBC by $1,025.00 because the firm did not provide evidence of the time spent by their lawyers and clerks. I am unable to find that her discount constitutes an error in principle. It should be noted that in addition to the power of sale proceedings the law firm also performed the following services:

(a) Receiving and reviewing the file and instructions from client;

(b) Preparing, issuing and serving a multi-debt Statement of Claim;

(c) Preparing and filing a motion for substituted service and ultimately obtaining an Order for substituted service;

(d) Preparing and issuing a Notice of Sale;

(e) Preparing and issuing a demand letter regarding insurance;

(f) Preparing and issuing several arrears and payout letters;

(g) Coordinating the payment of municipal property tax arrears and various correspondence with the municipality in respect of same;

(h) Preparing and obtaining default judgments for the mortgage debt and the unsecured debts;

(i) Preparing and filing Writs of Seizure and Sale;

(j) Preparing and filing a motion for an Order for a Writ of Possession and ultimately obtaining a Writ of Possession;

(k) Coordinating with the local Sheriff and arranging an evicting for the subject property;

(l) Preparing and registering a discharge of the mortgage, and

(m) Withdrawing all Writs.

[18] The Assessment Officer determined that $3,770.00, plus HST was fair and just remuneration to the solicitor for the services provided and was reasonable for the client to pay. The Assessment Officer also stated that she considered the nine (9) factors which are set out in the Cohen decision.

[19] The Assessment Officer found that the bulk of the work was done by the clerk, but that the solicitor was still responsible to review the work. She also noted that the solicitor’s and clerk’s time was not recorded to show the work done on the file. She also dealt with the expertise involved and described the work as (“cookie cutter”), but still held that it did not negate the value of the work done.

[20] The Assessment Officer exercised her discretion and reduced Gowlings’ account by $1,025.00 (approximately 21.4%) due to the fact that they had not recorded the amount of time spent by the lawyer involved or by his clerk. I find that she did not make any error in principle in making a deduction of this amount.

[21] It is quite acceptable for a lawyer and a client to agree that certain legal services will be provided on a block fee basis. Many, if not all real estate purchases and sales are based on block fee arrangements, where the lawyer and his or her clerks time is not relevant to the fixed amount of the fee. What is unique in this case is that Gowlings has entered an agreement with their client to charge block fees for certain mortgage enforcement services, where it is likely that these block fees will be passed on to and paid by the Bank’s defaulting customers. RBC’s standard charge terms obliges the Borrowers to pay RBC’s reasonable full indemnity fees in the event they default in their payments.

[22] Where a client makes an agreement with their lawyer to pay legal fees on a block fee bases due to the volume of work that will be performed, the client is aware that sometimes they may be overpaying or underpaying, when compared to if they were invoiced based on time spent. However, the trade-off is knowing that the legal fees are fixed at a maximum amount.

[23] Where a law firm decides not to record the amount of time spent by its lawyers and clerks working on the file, it assumes a risk that its client may not recover its full indemnity costs in an assessment without this information. The time spent is one of the important factors to be considered when assessing the fairness and reasonableness of legal fees. The time spent is more important when an invoice is sent to a client for a substantial sum, and is less important when the invoice is for a modest sum. In this case, the block fees are for modest sums and the time factor is of less importance.

[24] Gowlings referred to the cases of Home Trust Co. v. Pearcy, [2012] O.J. No. 2613 and 877534 Ontario Ltd v. Toronto Dominion Bank [2009] O.J. 6113 which approved fees for power of sale proceedings in the range or $1,095.00 to $1,500.00. Counsel for the Borrowers agreed that a block fee of $1,200.00 would be a fair and reasonable amount to charge for taking power of sale proceedings for most law firms in Ontario. However, the Borrowers, argue that they should receive the benefit of a discount for Gowlings’ technological efficiency and because of the large volume of standardized work performed for RBC.

[25] The Assessment Officer declined to reduce Gowlings’ account to give the defaulting borrowers the benefit of a volume discount. There was also insufficient evidence before the Assessment Officer on which to apply a volume discount. The Assessment Officer reduced the account by approximately 21% because the amount of time spent was not recorded. I am unable to find that she erred in principle in so doing. However, a law firm that does not record the time spent by lawyers and staff working on a file runs a risk that their fees will be reduced because the Assessment Officer is unable to weigh the amount of time spent, as a factor, when considering whether the fee charged is fair and reasonable.

Disposition

[26] For the above reasons, the motion to oppose confirmation of the Assessment Officer’s assessment is dismissed.

Costs

[27] Given the uniqueness of the issues and the fact that the law firm has deliberately decided not to record the time spent by the lawyers and clerks, which made it impossible for the Assessment Officer to weigh this factor, there will be no order as to costs.

R. Smith J.

Released: March 22, 2017

CITATION: McIntyre v. Gowling, 2017 ONSC 1733

COURT FILE NO.: 15-66541

DATE: 2017/03/22

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

KYLE IRWIN MCINTYRE AND CELINE FRANCINE MARIE LAFRANCE-MCINTYRE

Applicants

– and –

GOWLING LAFLEUR HENDERSON LLP

Defendant

REASONS FOR JUDGMENT

R. Smith J.

Released: March 22, 2017