Court File and Parties

Court File No.: CV-16-566060 Date: 2018-05-24 Superior Court of Justice - Ontario

Re: Gardiner Roberts LLP, Plaintiff/Responding Party And: Cana International Distributing and Micheline Ciolli, Defendants/Moving Parties

Before: H. McArthur J.

Counsel: Upenieks, E., appearing for the Plaintiff/Responding Party Laubman, S., appearing for the Defendants/Moving Parties

Heard: April 16, 2018

Endorsement

H. MCARTHUR J.:

Introduction

[1] In July 2010, Cana International Distributing Inc. retained Gardiner Roberts to prosecute a claim for damages against another company. The matter spanned almost seven years. In that time, Gardiner Roberts unsuccessfully brought two motions for injunctive relief on behalf of Cana. In November 2016, following a 22-day trial, the judge dismissed all claims advanced by Gardiner Roberts on behalf of Cana.

[2] Cana now seeks an assessment of the accounts rendered by Gardiner Roberts. If successful, Cana also seeks to have an action brought by Gardiner Roberts against Cana for unpaid legal fees dismissed or stayed pending an assessment of the accounts.

[3] Gardiner Roberts argues that Cana is out of time to request an assessment: Cana did not try to have the account assessed until after the law firm brought its action and failed to seek an assessment within 30 days of the last account.

[4] Cana counters that Gardiner Roberts has refused to provide a final account; thus, it is open to Cana to request delivery of a bill and an assessment pursuant to s. 3(a) of the Solicitors Act, R.S.O. 1990. c. S.15. Cana argues that "Gardiner Roberts cannot prevent Cana from availing itself of the protection of the Act by refusing to render a final account and then beating Cana to the punch by issuing a Statement of Claim, without notice, before completing the Retainer." Alternatively, Cana submits that an assessment of all previous accounts is justified because of "special circumstances."

[5] For the reasons that follow, I have concluded that Cana is entitled to have the accounts assessed pursuant to s. 3(a) of the Solicitors Act. The accounts provided by Gardiner Roberts to date have been interim; Gardiner Roberts has never rendered final account. The limitation period flows from the date of the final account, so Cana is not time barred from seeking an assessment pursuant to s. 3. In the alternative, Cana is entitled to have the accounts assessed as there are special circumstances as set out in ss. 4(1) and 11 of the Solicitors Act. In light of s. 6(4) of the Solicitors Act, I fid that the action brought by Gardiner Roberts against Cana should be stayed pending the outcome of the assessment hearing.

[6] At the outset, I propose to briefly outline the relevant facts. I will then explain why I have determined that Cana is entitled to an assessment pursuant to s. 3(a) of the Solicitors Act. Next, I will outline why I have found that there are special circumstances justifying an assessment. Finally, I will turn to why I have concluded that Gardiner Roberts' action should be stayed pending the outcome of the assessment.

Outline of Relevant Facts

(a) The Retainer Agreement

[7] On July 9, 2010, Cana retained Gardiner Roberts to represent it in a dispute against Standard Innovation Corporation and to "prosecute a claim for damages" against Standard Innovation. Micheline Ciolli, the principal of Cana, signed a retainer agreement on behalf of Cana. Howard Wolch signed the retainer on behalf of Gardiner Roberts.

[8] Among other things, the retainer agreement provided as follows:

• Gardiner Roberts would charge an hourly rate;
• Cana would provide an immediate deposit of $10,000;
• The deposit would be used to pay for "interim fees or disbursements." Cana would then be required to replenish the deposit "as work proceeds";
• The money in trust would be applied "against the final account for services";
• Gardiner Roberts reserved the "right to take into account results obtained and the complexity of the matter in determining" its final account.

(b) The Litigation to the End of the Trial

[9] On August 18, 2010, Gardiner Roberts initiated an action against Standard Innovation on behalf of Cana.

[10] In September and November, 2010, Gardiner Roberts argued a motion for an interlocutory injunction on behalf of Cana. On November 18, 2010, McKinnon J. dismissed the motion, holding that Cana had failed to establish that it would suffer irreparable harm. Cana was ordered to pay $30,839.53 in costs.

[11] In November 2011, Gardiner Roberts brought a second motion for injunctive relief on behalf of Cana. On January 4, 2012, Hackland R.S.J. dismissed this motion, concluding that Cana had failed to meet the irreparable harm requirement. Cana was ordered to pay $21,000 in costs.

[12] In July 2012, Standard Innovation brought a counterclaim against Cana and Ms. Ciolli personally, claiming, among other things, damages for defamation and injurious falsehood.

[13] The trial started on April 4, 2016 and lasted 22 days. In reasons dated November 18, 2016, the trial judge dismissed all claims Gardiner Roberts advanced on behalf of Cana. The trial judge also awarded damages against Cana of $50,000 for defamation, along with an award of special damages for injurious falsehood to be determined following costs submissions.

(c) The Accounts Rendered to the End of the Trial

[14] From the time that Gardiner Roberts was retained, until the end of the trial, it delivered a number of accounts to Cana. None of the accounts were marked as "final". All invoices were marked as "Re: Standard Innovation Corporation". All accounts were in relation to the same file number: 94860.

[15] From time to time, Ms. Ciolli objected to the accounts rendered, and Gardiner Roberts adjusted the accounts. For example, on December 9, 2011, Mr. Wolch agreed to reduce the amount owed by Cana at that time by $20,000. Mr. Wolch noted that "in the event that we are successful in this matter and recover a reasonable amount of costs from the defendant, then this $20,000 would be repaid at that time."

[16] Despite the issues raised by Cana about the accounts, at no time did Gardiner Roberts advise Cana of its right to have its accounts assessed pursuant to the Solicitors Act.

[17] The last bill provided by Gardiner Roberts was dated November 30, 2016. This bill was not marked as "final." Nor did it take into consideration the final result, as contemplated in the retainer agreement.

[18] Gardiner Roberts asserts that it billed Cana a total of $1,086,262.90, of which $73,265.38 was written off after Ms. Ciolli requested discounts. Gardiner Roberts claims that there is a balance owing of $214,361.53. Cana counters that Gardiner Roberts is wrong: Cana has paid the firm $1,016,680.80 in legal fees, disbursements and charges.

(d) The Costs Submissions

[19] Cana was to file its written submissions on costs by January 9, 2017. In an email dated November 21, 2016, Mr. Wolch discussed a potential appeal of the trial decision and noted that "...I must also prepare submissions with respect to costs..."

[20] After being advised that Cana intended to retain different counsel to handle any potential appeal, the position of Gardiner Roberts with respect to the costs submissions changed. By letter dated December 12, 2016, Mr. Wolch wrote that given the "clear refusal" of Canna to pay outstanding accounts, "there is a conflict of interest and it would not be appropriate for either of us to have Gardiner Roberts prepare the Cost Submissions."

[21] On December 21, 2016, Gardiner Roberts agreed to prepare the costs submissions on Cana's behalf, if Cana provided $10,000. Mr. Wolch noted that the $10,000 "is not the amount that we will actually charge for this exercise, which may be more or less than $10,000." The costs submissions were filed on January 9.

[22] On March 17, 2017, the trial judge awarded Costs against Cana in the amount of $600,000.

[23] Despite being asked repeatedly, Gardiner Roberts has never provided an account with respect to the work done on the costs submissions.

(e) The Action Brought by Gardiner Roberts and Cana's Requisition for Delivery and Assessment of Gardiner Roberts' Bill

[24] On December 14, 2016 (two days after Mr. Wolch asserted that there was a conflict of interest with Cana), Gardiner Roberts issued a Statement of Claim against Cana. The claim was not served and Cana was unaware of the claim. On January 9 (the day the costs submissions were filed), Gardiner Roberts amended the still unserved Statement of Claim. On January 18, Gardiner Roberts served the claim on Cana.

[25] In January and February 2017, Cana repeatedly requested a final account for the work done by Gardiner Roberts on the cost submissions. Gardiner Roberts failed to provide any such account.

[26] On February 27, 2017, Cana successfully sought a Requisition for Delivery and Assessment of Gardiner Roberts' account pursuant to s. 3(a) of the Solicitors Act. Cana was granted an Order for Delivery of Gardiner Roberts' "bill of fees, charges, and disbursements, within fourteen days" and an Order of Assessment. Gardiner Roberts failed to deliver any bill in response to this order.

[27] The Registrar also issued a notice of Preliminary Appointment pursuant to the Order of Assessment, with a return date of May 8, 2017. On that date, Gardiner Roberts objected to the assessment on the grounds that the requisition for assessment was not filed on time, and because it had started an action in the Superior Court with respect to legal fees. The Registrar directed Cana to bring a motion in this Court for directions on whether the assessment could proceed and to request another preliminary appointment after the motion had been dealt with. Cana then brought the present motion.

Analysis

Issue One: Is Cana entitled to an assessment pursuant to [s. 3(a)](https://www.canlii.org/en/on/laws/stat/rso-1990-c-s15/latest/rso-1990-c-s15.html#sec3_smooth) of the [Solicitors Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-s15/latest/rso-1990-c-s15.html)?

[28] Section 3 of the Solicitors Act provides that where the retainer is not disputed and there are no special circumstances, a client may obtain an order for: a) the delivery and assessment of the solicitor's bill; or b) for the assessment of a bill already delivered, within one month from its delivery.

[29] Gardiner Roberts argues that it provided its "'final' account, i.e. the last account" on November 30, 2016. This, it is argued, is more than one month before Cana sought an assessment. Thus, Cana is not able to obtain an assessment under s. 3.

[30] Cana counters that the "last" account is not a "final" account; Gardiner Roberts has refused to render a final account in order to deprive Cana of its ability to assess the accounts. Cana is entitled to have a final bill delivered and an assessment of the bill, which would include all interim accounts rendered.

[31] When assessing the submissions of counsel, I keep in mind that the purpose of the Solicitors Act and the assessment process is "to regulate the legal profession and protect the public in their dealings with solicitors": Laushway Law Office v. Simpson, 2011 ONSC 4155, at para. 143.

[32] As explained by Sharpe J.A. in Price v. Sonsini, 2002 CanLII 41996 (ON CA), [2002] O.J. No. 2607 (C.A.), at para. 19:

Public confidence in the administration of justice requires the court to intervene where necessary to protect the client's right to a fair procedure for the assessment of a solicitor's bill. As a general matter, if a client objects to a solicitor's account, the solicitor should facilitate the assessment process, rather than frustrating the process.

[33] With this legal framework in mind, I have concluded that Cana is entitled to an assessment. Gardiner Roberts has failed to render a final bill: the November 30 account sent by Gardiner Roberts is an interim account, as were all previous accounts rendered by the law firm. Given Gardiner Roberts' failure to render a final account, it was open to Cana to obtain an order pursuant to s. 3(a) for the delivery of a final bill and an assessment. All of the interim accounts were related to the same matter, and therefore the limitation period flows from the date of delivery of the final account. Thus, Cana is entitled to an assessment of all of the accounts, even though many of them were paid.

Gardiner Roberts has Failed to Render a Final Bill

[34] Following the November 30 account, Gardiner Roberts prepared written submission on costs. Gardiner Roberts seemed (at least initially) to view the costs submissions as simply a continuation of the ongoing work being done on the Standard Innovation matter. This seems clear from the email of Mr. Wolch on November 21, where he said "... I must also prepare submissions with respect to costs..." Indeed, it is difficult to see the costs submissions following a lengthy trial as being anything other than part and parcel of the same matter.

[35] Despite repeated requests by Cana, Gardiner Roberts has refused to provide a bill for the work done on the costs submissions. Cana argues that Gardiner Roberts cannot simply refuse to render a bill for this final work done, in order to circumvent Cana's right to an assessment under s.3 of the Solicitors Act. I agree. Cana properly moved pursuant to s. 3(a) of the Solicitors Act for the delivery of the final account.

The Limitation Period Flows From the Final Account

[36] Upon delivery of such final account, Cana is entitled to an assessment of all previous interim accounts. As noted in Price v. Sonsini, at para. 15, where interim accounts are rendered in connection with the same matter, the limitation period for assessment under the Solicitors Act begins to run from the date of the final account, even if some of the interim accounts have been paid.

The Accounts Rendered Thus Far Have Been Interim Accounts

[37] In Shapiro, Cohen, Andrews, Finlayson v. Enterprise Rent-a-Car Co., 1998 CanLII 1043 (ON CA), [1998] O.J. No. 727 (C.A.), at para. 14, the Court of Appeal referred to a number of factors that supported the motions judge's conclusion in that case that all accounts rendered prior to the final account were interim accounts. Most of those factors apply to the present case. For example:

• All accounts relate to once piece of litigation. The accounts all involve the action against Standard Innovation. It was the same matter; they are part of a continuum. This is illustrated by the fact that all accounts said "Re: Standard Innovation" and had the same file number.
• None of the account were marked as final accounts. Moreover, the retainer agreement specifically said that the firm would render interim accounts and reserved the right to take into account the result achieved in the final account.
• Considerable adjustments were at times made to the accounts. According to Gardiner Roberts, it wrote off more than $70,000 because of request for discounts by Cana. An example of such a discount occurred on December 9, 2011. On that date, Mr. Wolch agreed to reduce the amount owed by Cana by $20,000. But in reducing the account, Mr. Wolch noted that if the firm was successful in the matter, and recovered a reasonable amount, that this money would be repaid. This supports that the accounts were interim, not final.
• Cana was led to believe that the work on the interlocutory injunctions would not be lost.
• Given the nature of the services, Cana could only appreciate the services performed at the end of the retainer. This is highlighted in the retainer agreement, where Gardiner Roberts reserved the right to take into account the results obtained in determining its final account.

[38] Looking at these factors, I find that the accounts rendered thus far have been interim. No final bill has been delivered. Gardiner Roberts cannot avoid s. 3 of the Solicitors Act by refusing to render a final account. I find that pursuant to s. 3(a) Gardiner Roberts is required to deliver a bill. The limitation period for the interim accounts rendered flows from the final bill. Thus, Cana is not time barred from an assessment of the interim accounts in this matter, even where those accounts have been paid.

[39] I turn now to the alternative submission raised, which is that there are special circumstances which justify an assessment of the accounts.

Issue Two: In the alternative, are there special circumstances justifying an assessment?

[40] Where there are special circumstances, pursuant to s. 4(1) of the Solicitors Act a client may obtain an assessment of an account more than 12 months after it was delivered. This applies whether the bills are paid or unpaid. Further, pursuant to s. 11 of the Solicitors Act, a client may obtain an assessment of bills already paid within 12 months of delivery of an account, if the special circumstances of the case appear to require the assessment. For bills rendered within 12 months, but that remain unpaid, the court has inherent jurisdiction to order an assessment: Enterprise Rent-a-Car, at para. 8.

[41] There is a presumption that payment of a bill constitutes implied acceptance of its reasonableness. This presumption, however, is rebuttable. As noted in Enterprise Rent-a-Car, at para. 19, the presumption is refuted to some extent by the fact that clients cannot be expected to bring an assessment while the lawyer is representing them, as they would not wish to alienate the lawyer.

[42] In Enterprise Rent-a-Car, at para. 21, the Court outlined a number of factors showing that the special circumstances test had been met in that case. Similar factors can be found in the present case, including the following:

• Cana was not familiar with commercial litigation nor with injunctions;
• Cana understood that if the interlocutory injunction were granted, it would effectively resolve the dispute and end the litigation, and the work done would contribute significantly to trial preparation;
• Cana did not give instructions to proceed at all costs; to the contrary, Cana communicated to Gardiner Roberts that it expected that the firm would keep legal costs within reason;
• It is unrealistic to expect that Cana should have sought to have the bill assessed during the course of an ongoing matter such as this case;
• Cana could only have appreciated the nature of the services at the conclusion of the retainer. This is supported by the retainer agreement, which specified that Gardiner Roberts may take into account the result obtained in the final bill;
• Cana was not aware that it could seek to have its accounts reviewed until it retained new lawyers. As noted in Enterprise Rent-a-Car, at para 20, lawyers "should take the opportunity to inform their clients of their right to an assessment at appropriate times during the solicitor-client relationship." Gardiner Roberts, however, failed to advise Cana of its right to have its accounts assessed, even when Cana had raised objection to certain accounts;
• Gardiner Roberts billed Cana more than $1 million, without achieving any success.

[43] In light of the above factors, I find that the test for special circumstances has been met. Cana is entitled to an assessment of the accounts rendered by Gardiner Roberts pursuant to ss. 4(1) and 11 of the Solicitors Act.

Issue Three: Should Gardiner Roberts' action be dismissed or stayed pending the assessment?

[44] Pursuant to s. 6(4) of the Solicitors Act, where a client has obtained an order for the delivery and assessment of a solicitors bills, the solicitor shall not commence or prosecute any action in relation to that matter without leave of the court or a judge. I am not persuaded that I should grant leave to Gardiner Roberts to prosecute its action before the completion of the assessment.

[45] The action brought by Gardiner Roberts relates only to a subset of the accounts rendered, but if the action proceeds there will inevitably be duplication with the assessment process. Moreover, the outcome of the assessment could impact on the viability of the claim or the defence to the claim. The process for assessment under the Solicitors Act is a specialized process, better suited than an action to determine the issues surrounding the accounts. In my view, it is appropriate to stay Gardiner Roberts' action against Cana, pending the outcome of the assessment.

Costs

[46] I encourage the parties to see if they can agree on costs. If the parties are unable to agree on costs, Cana shall serve and file with my office written costs submissions within 15 days. Gardiner Roberts shall serve and file with my office any responding costs submissions within 15 days thereafter. The written submission shall not exceed three pages in length, excluding the Costs Outline.

Justice Heather McArthur

Date: May 24, 2018