CITATION: Carducci v. Paliare, 2017 ONSC 4717
COURT FILE NO.: CV-15-529706
DATE: 20170803
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N :
VICTORIA CARDUCCI
Applicant
- and –
PALIARE ROLAND ROSENBERG ROTHSTEIN LLP
Respondent
Jeffrey Radnoff for Applicant
Daniel Bernstein and Michael Darcy for Respondent:
HEARD: June 8, 2017
FAVREAU J.:
Introduction
[1] The applicant, Victoria Carducci, has brought this application under the Solicitor’s Act, R.S.O. 1990, c. S.15, for an order directing the assessment of the accounts of the respondent law firm, Paliare Roland Rosenberg Rothstein LLP (“Paliare Roland”).
[2] The applicant is involved in a family law dispute following the breakdown of her marriage. The dispute includes some complex issues, such as an application for an oppression remedy arising from a business owned jointly by the applicant and her husband. Paliare Roland acted for Ms. Carducci for approximately 16 months, from April 2013 to August 2014, when she terminated the retainer and hired a new lawyer. During the course of the retainer, Paliare Roland charged Ms. Carducci $338,016.61. Ms. Carducci paid all outstanding bills soon after terminating the retainer. Approximately, ten months later, she commenced this application seeking permission to assess the respondent’s bills.
[3] As Ms. Carducci has already paid the respondent’s final bill and the application was brought more than one month after the final bill was rendered, the parties agree that I must be satisfied that there are special circumstances in order to direct the assessment.
[4] For the reasons set out below, I find that there are special circumstances justifying the assessment of the respondent’s accounts. While not necessarily excessive, the amount charged by the respondent was significant, especially for an individual. Ms. Carducci did not have any prior experience dealing with litigation, at the end of the retainer she expressed concerns about the amounts charged, and there is not a significant delay between the time when Ms. Carducci paid the final bill and the commencement of the application.
Facts Giving Rise to the Application
[5] Ms. Carducci and her husband, Robert Carducci, separated in 2013 after 42 years of marriage. During the course of their marriage, the Carduccis developed and ran an aviation engineering business together.
[6] It appears that the separation was acrimonious. In particular, Mr. Carducci has sought to prevent Ms. Carducci from any involvement in the business and has disputed that she was a shareholder and director of the business.
[7] Initially, after the separation, Ms. Carducci retained Judith Birchall, a family law lawyer, to represent her. However, given the issues over the control and ownership of the business, Ms. Birchall recommended to Ms. Carducci that she retain a lawyer with experience in commercial litigation.
[8] On this basis, Ms. Carducci retained Paliare Roland. Chris Paliare was to act as the senior counsel on the corporate aspects of the file. Stephen Grant, who is not a member of the firm but was engaged by the firm to assist, was to act as senior counsel on family law matters. Debra Newell, an associate with Paliare Roland, was to work as junior counsel on both the corporate and family aspects of the file.
[9] Ms. Carducci signed a retainer agreement on April 1, 2013, in which she acknowledged that she understood that at that time Mr. Paliare’s rate was $900.00 per hour and Ms. Newell’s rate was $375.00 per hour, and that Mr. Grant’s legal fees would be charged as disbursements on the accounts. The retainer agreement also stipulated that Ms. Carducci would be charged for time spent on the file, including on matters such as correspondence, emails, telephone calls and meetings, and that she would be charged for disbursements.
[10] During the course of the retainer, from April 30, 2013 to August 15, 2014, Paliare Roland issued sixteen accounts to Ms. Carducci totaling $338,016.61, representing $240,396.00 in fees and $47,945.94 in disbursements.
[11] There is some dispute over the results obtained during the course of the retainer of the firm, but the work performed by Paliare Roland included the commencement of an oppression remedy and appointment of an inspector. It also included negotiation of orders dealing with access to a cottage and with non-depletion of assets.
[12] In August of 2014, Ms. Carducci retained a new lawyer, Simon Zucker, to represent her in her disputes with Mr. Carducci. On August 13, 2014, Mr. Zucker sent Paliare Roland a direction requiring the transfer of the file.
[13] On August 15, 2014, Mr. Paliare sent an email to Ms. Carducci indicating that he had spoken to Mr. Zucker about the direction. He advised that Ms. Newell was preparing the file to be sent to Mr. Zucker and he stated “If there is anything we can do to help ease the transition of your file to Mr. Zucker, we are happy to assist.” Mr. Paliare also indicated that the final bill in the amount of $25,664.89 would be sent that day, and asked that Ms. Carducci make arrangements to pay all outstanding accounts dating back to January 31, 2014, in the total amount of $157,068.07. Mr. Paliare went on to say “We expect our account to be paid in full before we transfer the file”.
[14] On August 18, 2014, Mr. Paliare sent an email to Mr. Zucker confirming that he had received the direction and that the firm was preparing the file for transfer. In the email, he also noted that seven matters “are outstanding and require immediate attention in this case” and provided a description of those matters.
[15] Ms. Carducci and Mr. Paliare met on August 28, 2014, at the firm’s offices. Ms. Carducci’s son was present at the meeting. The purpose of the meeting was for Ms. Carducci to pay her outstanding accounts, which she did.
[16] Ms. Carducci commenced this application on June 5, 2015, less than ten months after paying the final account.
[17] There is some evidence in dispute between the parties on the application.
[18] For example, Ms. Carducci claims that she made complaints about the accounts during the course of the retainer while the respondent claims that she did not make any complaints. However, in an affidavit on the application, Mr. Paliare does provide some evidence that Ms. Carducci expressed concern about the amount of the bills at their last meeting on August 28, 2014:
During the meeting, Vickie commented that the outstanding amount was large. I agreed and noted that the firm had done a great deal of work for her. Vickie asked for a discount. I pointed out that, on a number of occasions, I did not bill much of my time. In order to be cost-effective for Vickie, the bulk of the work and the interactions between Vickie and our firm were handled by Ms. McKenna. As well, I regularly had strategy meetings with Ms. McKenna about this file. I rarely docketed this time. Accordingly, I advised Vickie that the accounts were already reduced. Vickie appeared satisfied with this response and proceeded to write a cheque for the full amount owing. Vickie did not raise any issues about the quality of our work and there was no discussion about the transfer of the file to Mr. Zucker.
[19] Another example of disagreement between the parties over what happened is in relation to the delivery of the final account. Ms. Carducci claims that she had not yet received the final account when she paid it on August 28th whereas the respondent relies on the August 18, 2014 date on the account to argue that she had received the account by mail before the August 28th meeting.
[20] As mentioned above, there is also some disagreement about the extent of the work done by Paliare Roland. Ms. Carducci takes the position that little was achieved given the overall amount she was billed. Paliare Roland’s response to this concern is that, as Ms. Carducci herself is aware, the litigation was very hard fought on Mr. Carducci’s part, which had the effect of increasing the work required.
[21] For the reasons set out below, I do not think that these differences in the parties’ evidence affect the outcome of the application. Even accepting Paliare Roland’s version of events, in my view there are special circumstances warranting the assessment of the respondent’s accounts in this case.
Analysis
[22] Section 3 of the Solicitor’s Act provides that a client is entitled to an assessment of a solicitor’s bill that has already been delivered when a requisition is made within one month of the delivery of the bill:
- Where the retainer of the solicitor is not disputed and there are no special circumstances, an order may be obtained on requisition from a local registrar of the Superior Court of Justice,
(b) by the client, for the assessment of a bill already delivered, within one month from its delivery.
[23] Section 11 of the Solicitor’s Act addresses circumstance where the bill has been paid:
- The payment of a bill does not preclude the court from referring it for assessment if special circumstances of the case, in the opinion of the court, appear to require the assessment.
[24] In this case, while there is a dispute as to whether Ms. Carducci had received the final account at the time when she paid it on August 28, 2014, there is no dispute that the application was brought more than one month after she both received the final account and paid it. Therefore, there is no dispute that in order to assess the respondent’s bills, Ms. Carducci must establish that there are special circumstances.
[25] The Court of Appeal, in Clatney v. Quinn Thiele Mineault Grodzki LLP, 2016 ONCA 377, at paras. 84 to 86, recently emphasized that the courts have broad discretion in deciding whether there are special circumstances, but that such a finding is to be the exception and not the norm:
As noted by courts considering the meaning of “special circumstances” within other provisions of the Solicitors Act, however, the language implies that the court has a broad discretion to determine the matter having regard to all the circumstances in the case, but that ordering an assessment after payment will be the exception rather than the rule…
In the s. 11 context, where the payment of a bill does not preclude the court from referring it for assessment if the special circumstances of the case appear to require it, this court has noted that “exceptional circumstances of either a contractual or equitable nature could lead a court to find that an assessment is necessary or essential on general principles or is called for as being appropriate or suitable in the particular case”: Plazavest, at para.33. In Echo Energy, at paras. 30-31, this court said that “in the context of s. 11, those special circumstances relate to the underlying principle that payment of the account implies that the client accepted that the account was proper and reasonable… Thus special circumstances will tend to either undermine the presumption that the account was accepted as proper or show that the account was excessive or unwarranted.”
With this in mind, I view the authorities and the objectives of the Solicitors Act as supporting the broader test: “Special circumstances” are those in which the importance of protecting the interests of the client and/or public confidence in the administration of justice, demand an assessment.
[26] In Echo Energy Canada Inc. v. Lenczner Slaght Royce Smith Griffin LLP, 2010 ONCA 709, at paras. 30 and 31, the Court of Appeal held that generally the payment of an account implies that the client has accepted that the account was proper and reasonable. However, that presumption can be rebutted in one of two ways, either by showing that the account was not accepted as proper or by showing that the account was excessive or unwarranted.
[27] In Clatney, supra, at para. 87, the Court of Appeal held that the factors that may give rise to special circumstances are not closed but include the following:
- The sophistication of the client;
- The adequacy of communication between solicitor and client concerning the accounts;
- Whether there is evidence of increasing lack of satisfaction by the client regarding the services relating to the accounts;
- Whether there is overcharging for services provided;
- The extent of detail of the bills;
- Whether the solicitor/client relationship is ongoing; and
- Whether payments can be characterized as involuntary.
[28] In this case, Ms. Carducci argues that there are special circumstances because the accounts on their face are “patently excessive”. Ms. Carducci also argues that the special circumstances include the following:
a. she made her concerns known within a reasonable amount of time and brought her application within less than one year; b. the respondent failed to disclose its final account before requiring Ms. Carducci to pay it; c. the respondent failed to advise Ms. Carducci of her right to an assessment and has opposed this application; d. the respondent insisted that the accounts be paid before the file was transferred; and e. the lack of tangible results.
[29] In contrast, Paliare Roland argues that:
a. Ms. Carducci was a sophisticated client; b. the communications with her about the accounts were adequate; c. she did not show increasing dissatisfaction with the services or accounts; d. there is no evidence of overcharging and the bills were sufficiently detailed; and e. the payments cannot be characterized as involuntary.
[30] In my view, while I do not accept that all of the factors raised by the applicant constitute special circumstances, I do accept that in combination a number of the factors raised by Ms. Carducci are sufficient to establish special circumstances.
Lack of sophistication
[31] The respondent argues that Ms. Carducci was sophisticated because she was a successful business woman and she understood the risks of litigation.
[32] In my view, the respondent overstates Ms. Carducci’s level of sophistication. She had no prior involvement in litigation. She does not have a university degree. Her experience in business is limited to the work she has done within the business she and her husband owned. While she was involved in a complicated legal dispute, this does not make her a sophisticated client.
[33] In Enterprise Rent-A-Car Co. v. Shapiro, Cohen, Andrews, Finlayson, 1998 ONCA 1043, [1998] O.J. No. 727 (Ont. C.A.), at para. 21, the Court of Appeal accepted that one of the factors giving rise to special circumstances in that case was that “Enterprise was unfamiliar with the Canadian litigation system and with the costs of litigation in Canada”. Similarly, in this case, Ms. Carducci was not familiar with litigation, and while she signed a retainer agreement setting out the respondent’s hourly rate and was aware that the litigation would be hard fought, this is not sufficient to make her a sophisticated litigant.
Amount charged
[34] As set out above, courts have found that where an excessive amount has been charged, this factor on its own can constitute special circumstances. However, even where the amount on its own is not so excessive as to constitute special circumstances, the Court of Appeal in Echo Energy Canada Inc. v. Lenczner Slaght Royce Smith Griffin LLP, supra, at para. 31, held that in some cases the size of the account may not be determinative but it is one of the factors that may be considered in deciding whether there are special circumstances warranting an assessment. In that case, at para. 46, the Court of Appeal noted that “the appellant had a total revenue of $2.8 million in 2008, recorded expenses of over $5 million, yet spent almost $840,000 on litigation during that period.
[35] In this case, on its face $338,016.61 is a large amount to charge an individual, especially in a situation in which her litigation has not been concluded. The evidence put forward by the respondent is that the joint business’s revenue in 2012 was $2,9 million, and Ms. Carducci was paid approximately $657,000 from the business in that year. The respondent argues that the legal fees are not excessive given Ms. Carducci’s income and the overall revenue of the business. However, as in Echo Energy, the bills represent a very substantial portion of Ms. Carducci’s income.
[36] Given the dispute between the parties as to the scope and value of the services provided, I accept the respondent’s argument that as noted in Orkin’s The Law of Costs (Toronto: Canada Law Book, 2011) at p. 3-37, I am not in a position to “guess as to what the proper account ought to be for the matter in question”. Ultimately an assessment officer may find that these amounts were justified. However, as in Echo Energy Canada Inc., I am satisfied that the large amount of the bill is a factor that weighs in favour of finding special circumstances in this case.
Evidence of dissatisfaction
[37] The courts look for evidence of dissatisfaction to rebut the presumption that payment of a bill is evidence that the client is satisfied with the bill. However, prior decisions have also made clear that there is no requirement to show dissatisfaction during the course of the retainer and that not much is required to show dissatisfaction. For example, in Enterprise Rent-A-Car Co. v. Shapiro, Cohen, Andrews, Finlayson, [1997] O.J. No. 1405 (Ont. Gen. Div.), at paras. 17 and 18, the application judge commented that it would be unrealistic to expect a client to challenge the work or amount charged during the course of the retainer:
I am satisfied that Mr. Cohen prepared very detailed and particularized accounts, which included a breakdown of time spent, hourly rates and description of services. By and large, the accounts were paid without objection. Does this raise a presumption of satisfaction with the accounts which would make it inequitable or a breach of contractual retainer to refer accounts for assessment? In my view, it does not. As was noted in Lipsett, it is really quite unrealistic to think that a client will assess a solicitor’s bill during the course of an on-going matter as this would inevitably lead to a breakdown in the solicitor-client relationship and result in the solicitor removing himself or herself from the record. I think it equally unlikely that a client will necessarily appreciate until well into a retainer of this kind, and more probably, only at its conclusion, whether it is satisfied with the services performed by the solicitor, particularly in relation to the fairness and reasonableness of the accounts. The relationship of solicitor and client is founded on trust, and to a very great extent, the client is really quite limited in its ability to perform “due diligence” on the solicitor’s account. The client must necessarily trust the lawyer to deliver accounts which reflect the work performed and must further trust the lawyer that the work performed was reasonably necessary to achieve the desired result….
Obviously, courts should encourage clients to meet their obligations under a retainer, but when the relationship of trust breaks down, it would be inequitable to require a client to come before a court with proof, to a high standard, of its dissatisfaction with paid bills as such evidence will rarely be available. So long as the client makes known its concerns with the bills within a reasonable time which is appropriate to the circumstances of the case, it is my view that the presumption of acceptance of the reasonableness of the accounts will be rebutted.
[38] The Court of Appeal in its decision in Enterprise Rent-A-Car Co., supra, approved of this approach at para. 19.
[39] In this case, Ms. Carducci claims that she expressed concerns with the amount of the bills throughout the retainer. The respondent rejects this assertion and asks me to make a finding that Ms. Carducci’s evidence is not credible because she did not raise issues of dissatisfaction in the initial affidavit she swore and because she admitted during cross-examination to being under stress in this time period thereby putting her overall credibility into question. However, in my view, it is not necessary for me to determine the credibility Ms. Carducci’s evidence on this point. By Mr. Paliare’s own admission, Ms. Carducci expressed concern about the amount of the bill and asked for a discount at the meeting on August 28, 2014. In addition, Ms. Carducci terminated the retainer before the completion of the work, and retained a new lawyer to complete the work. In my view, this is sufficient to meet the low threshold for rebutting the presumption that the payment of the bills was an indication of Ms. Carducci’s satisfaction.
Voluntariness of the payments
[40] Ms. Carducci argues that she paid the outstanding and final accounts on August 28, 2014, because she felt she had to pay them in order to make sure that her file would be transferred to Mr. Zucker. The respondent argues that the payments were made voluntarily and there was nothing improper about requiring that the accounts be paid before the file was transferred. The firm further argues that there was no urgency to transferring the file.
[41] There is no doubt that lawyers can exercise a solicitor’s lien and retain a client’s file while awaiting payment in appropriate circumstances. As held in the case of Browning v. Eades, [1994] O.J. No. 3218, at para. 18, the fact that a lawyer expresses an intention to retain a file until a bill is paid on its own does not render the payment involuntary:
I find the payment of the account was voluntary and s.11 applies. The solicitor advised that the file would be released on condition of payment. This is an acceptable, often put, pre-conditioned to ensure payment. It is simply stating that he intends to exercise a solicitor’s lien against the file, which he is entitled to do. The client then has an absolute right for 30 days to an assessment under 3.3 whether or not he pays the bill and picks up the file.
The payment of the final account in order to retrieve the file does not render it an involuntary payment, nor a special circumstances impelling me to exercise my discretion to allow the assessment. There is no real evidence that there was any urgency about obtaining the files in early January.
[42] In Echo Energy Canada Inc., supra, at para. 36, the Court of Appeal has warned that courts should take a “client centered” approach when determining whether there are special circumstances:
In my view, the starting point was not the perspective of the lawyers. Section 11 of the Solicitor’s Act attempts to strike a balance between the solicitor’s legitimate interest in finality and the client’s interest in access to an independent process for review of accounts for legal services. However, the starting point ought to be the perspective of the client. That is, the circumstances should be looked at from the client’s perspective. While it is in fact true that retaining a file is permitted for the purpose of ensuring that a former client pays outstanding accounts, from Ms. Carducci’s perspective, it was reasonable for her to feel that there was a sense of urgency and that she was under pressure to pay the accounts at the time.
[43] Ms. Carducci was involved in a hard fought acrimonious ongoing family law dispute. The email she received from Mr. Paliare stated that she would be expected to pay the bill before the file was transferred to Mr. Zucker. But this was not the only communication on the topic. Mr. Paliare had also written to Mr. Zucker to advise that a number of matters required “immediate” attention. Under the circumstances, while it may not have been Mr. Paliare’s intention to pressure Ms. Carducci to pay the outstanding accounts, it was reasonable for Ms. Carducci to believe that there was some urgency to paying the accounts before she could proceed further in her litigation.
No indication that assessment was an option
[44] Ms. Carducci’s lawyer also argues that once Ms. Carducci expressed concerns about the amount of the account, Mr. Paliare ought to have informed her of her right to have the account assessed and that the respondent’s resistance to having the accounts assessed on its own supports a finding of special circumstances.
[45] While there is some support in the case law for the argument that resistance to an assessment on its own creates special circumstances (see, for example, the General Division decision in Enterprise Rent-A-Car Co, supra, at para. 20 and Minkarious v. Abraham, Duggan, 1995 ONSC 7253, [1995] O.J. No. 3494 (Ont. Gen. Div.) at para. 57), I wouldn’t go so far as finding that opposition to an assessment in this case gives rise to special circumstances on its own. As reviewed above, the case law makes clear lawyers are entitled to rely on the presumption that the payment of an account is evidence that the client was satisfied with the services provided and the amounts charged.
[46] However, the cases do suggest that once a client expresses dissatisfaction, a lawyer ought to let the client know about their right to assess the bills (see, for example, Borden Ladner Gervais LLP v. Cohen, [2005] O.J. No. 2440 (Ont. Gen. Div.).
[47] In this case, Mr. Paliare’s evidence is that he explained how the accounts had already been discounted and that Ms. Carducci appeared satisfied with the explanation. In my view, while it was appropriate to provide the explanation, it would have been preferable to inform Ms. Carducci of her right to have the bills assessed. Under the circumstances, it would be fair for Ms. Carducci to be left with the impression that she had no choice other than paying the accounts in order for her matter to proceed.
No excessive delay
[48] The cases relied on by the respondent in which the courts have found excessive delay are generally cases in which the delay has been much longer than in this case. For example, in Wilson v. Harrison, 2009 CarswellOnt 857 (Ont. Sup. Ct.) at para. 10, a delay of three years following the payments of accounts was found to be excessive.
[49] In contrast, Echo Energy Canada Inc., supra, at para. 44, the Court of Appeal rejected an argument that eight months in that case was an excessive delay holding instead that it was a “relatively brief delay”. In Enterprise Rent-a-Car Co., supra, the final bill was paid in June of one year and the application was commenced in January of the following year.
[50] Even accepting the respondent’s evidence that it delivered its final bill in August 2014 prior to the payment made by Ms. Carducci on August 28th, there was less than 10 months between the time when the payment was made and this application was commenced. As in the cases referred to above, this is not an excessive delay.
Conclusion
[51] For the reasons set out above, I find that there are special circumstances warranting the assessment of the respondent’s bills. Accordingly, the application is granted, and I direct that the respondent’s bills for the period April 30, 2013 to August 15, 2014, are to be assessed.
[52] My decision should not be taken as a criticism of the services provided by the respondent to Ms. Carducci or of the amounts charged by the respondent. However, the plaintiff’s lack of sophistication, the large amount of the accounts and the fact that she was under stress at the time and felt that she had to pay the accounts for her case to proceed are sufficient to warrant a finding of special circumstances and to give her an opportunity to assess the accounts.
[53] The order of Justice Archibald dated December 22, 2016, sealing the court record is to be continued pending further order of this court.
[54] If the parties cannot agree on costs, submissions of no more than three pages are to be made by the applicant within ten days of this decision, and responding submissions of no more than three days are to be made within twenty days of this decision.
FAVREAU J.
RELEASED: August 3, 2017
CITATION: Carducci v. Paliare, 2017 ONSC 4717
COURT FILE NO.: CV-15-529706
DATE: 20170803
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N :
CARDUCCI
Applicant
- and –
PALIARE
Respondent
REASONS FOR JUDGMENT
FAVREAU J.
RELEASED: August 3, 2017