Court File and Parties

COURT FILE NO.: 1828/17 DATE: 20181122 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Gibbs & Associates Plaintiff – and – 1904601 Ontario Limited Respondent

COUNSEL: Peter J. Mitchell, for the plaintiff Darwin Harasym, for the respondent

HEARD: November 2, 2018 BEFORE: Hockin J.

Endorsement

[1] 1904601 Ontario Ltd. (“190”) is a drywall contractor. Mr. Sam Halbouni is a director of 190 and the operating mind of 190.

[2] In 2015, 190 was the drywall contractor on a stipulated price, standard form subcontract with Prica Group on its construction of a student residence in Waterloo, Ontario.

[3] Gibbs and Associates (“G.A.”) is a firm of solicitors. G.A. was retained by 190 to prosecute a lien claim against Prica for the recovery of $360,035.06 under the subcontract and $1,107,850.12 for additional work. Total, $1,467,885.10.

[4] Prica defended and in September, 2017 G.A. moved for summary judgment on behalf of 190. There was some success. Judgment was granted in favour of 190 for the full amount owing under the subcontract or $360,035.06 and $390,606 for extras.

[5] Beginning in 2015, thirteen accounts were delivered by G.A. to 190. Dates as follows:

1. February 23, 2015
2. May 27, 2015
3. June 3, 2015
4. December 10, 2015
5. April 6, 2016
6. May 19, 2016
7. July 1, 2016
8. August 22, 2016
9. September 15, 2016
10. October 12, 2016
11. December 15, 2016
12. January 13, 2017
13. February 10, 2017.

[6] Many accounts were paid, some were not. Some accounts were paid promptly but other accounts were not.

[7] In early 2016, Mr. Halbouni complained that too much time had been spent on the Prica file. He had given thought to changing counsel. G.A. agreed in March, 2016 to write down approximately $6,500 worth of time in return for 190’s promise to pay its outstanding accounts and to pay promptly future accounts. Mr. Halbouni in his affidavit asserts that, “in no way was there any sort of agreement that 190 would pay the outstanding accounts or promptly pay any future accounts rendered by Gibbs and Associates”.

[8] There was an exchange of emails between G.A.’s managing partner, Mr. Gary Gibbs and Mr. Halbouni, February 24, 25, 2016. The tenor and effect of the emails was that the unpaid accounts would be paid with the $6,500 discount applied and that future accounts would be paid. Mr. Halbouni in his February 26, 2016 email, sent at 8:18 p.m., allowed that “I will pay the money” and “month to month billing is required”. Mr. Gibbs’ answer at 8:40 was “I will tell Pete he can start working again, and trust you will have the cheques delivered for early next week. We will bill monthly going forward”. The accounts to which the discount applied were paid and accounts 5, 6 and 7 were then paid.

[9] Accounts 5, 6 and 7 were accounts which followed the extensive preparation of the Prica file for the September, 2016 motion for summary judgment. Witnesses and an expert were interviewed, four affidavits were prepared and delivered and there were seven cross-examinations held through July and August, 2016.

[10] Account 8, the August 22, 2016 account was not paid until September 26, 2017, a day before the second day of the hearing of 190’s motion for summary judgment. Accounts 9 through 13 were not paid. Paragraph 14 of the August 23, 2018 affidavit of Andrea Gorys is a description of the services rendered through the fall, 2016. Without payment, G.A. advised Mr. Halbouni that no further legal services could be provided and it was at that point that Mr. Halbouni retained new counsel. The total fees and disbursements with HST for accounts 9 to 13 was $52,541.14.

[11] G.A. with 190’s newly retained counsel on February 14, 2017 entered into an agreement to resolve G.A.’s lien on its file. The agreement was that G.A. would release its file and proceed to an assessment of accounts 9 to 13 in exchange for Mr. Halbouni’s undertaking on behalf of 190 to direct that from the monies paid into court in the Prica action, action C-1162-14, the assessed value of G.A.s accounts would be paid first to 190’s counsel and then to G.A. On February 14, 2017, the sum of $1,517,885.18 had been paid into court in this action and Prica had initiated a motion for payment out to 190 the week of February 27, 2017 $765,000 of that amount. There would be money for G.A.

[12] The agreement is contained in two directions signed by Mr. Halbouni directing his lawyer to pay G.A. once “an Assessment officer has assessed the Bills” and directing the Accountant of the Superior Court to pay monies in court to his solicitor. 190’s lawyer’s undertaking to pay G.A. included the following language in its preamble:

And whereas Hi-Tek disputes the entitlement of Gibbs to the payment of five of the Bills that Gibbs has rendered to Hi-Tek for legal fees and disbursements related to the Action (“the Bills”).

[13] Mr. Halbouni signed these documents for 190 February 14, 2017. Mr. Gibbs by email at 11:59 a.m. the same day included the following understanding of what would follow:

Hi-Tek and Gibbs & Associates to thereafter proceed with a timely assessment of the outstanding accounts of Gibbs & Associates under the Solicitors Act and neither party to oppose confirmation of the assessment certificate arising from said assessment.

[14] Also on February 14, 2017, Mr. Halbouni, not by his counsel, and I may safely assume without his knowledge, on his own or through Mr. Halbouni’s office, at London, requisitioned an appointment for the assessment of ten accounts, the four 2015 accounts, 1 to 4 and the last six accounts, 8 to 13.

[15] There had been no mention of this to GA. It was a surprise particularly after the email exchange. The position of G.A. on this is set out at paras. 2 and 3 of G.A.’s factum as follows:

2. The lawyer’s intention in entering into the lien release agreement was to define the parameters of the account dispute with the client and facilitate a quick and economical resolution of that dispute.
3. Contrary to the terms and underlying intent of the lien release agreement, the client unilaterally proceeded to commence without the assistance of counsel, a s. 3(b) assessment proceeding which included within its scope accounts other than the five accounts that were the subject matter of said agreement. Notably, the proceeding was commenced within hours of the consummation of the lien release agreement.

[16] There is this answer by Mr. Halbouni at para. 4 of this affidavit:

4. Paragraph 17 of the Gorys Affidavit makes reference to a lien release agreement of February 14, 2017 (the “Lien Release Agreement”). The Lien Release Agreement was simply an arrangement that allowed the file to be transferred to a new solicitor. In no way was there any sort of agreement that 109 would limit any assessment to only the five outstanding accounts.

[17] For a short time, a London firm acted on behalf of 190 on several appearances before the assessment officer in London. The material includes this statement in the London solicitor’s affidavit:

4. It is the position of 109 that the Lien Release Agreement was simply an arrangement that allowed the file to be transferred to a new solicitor. Further, it is the position of 109 that while the Lien Release Agreement did contemplate the assessment of the five outstanding accounts, it is no way an agreement to refrain from assessing any of the other accounts.

[18] I view as disingenuous Mr. Halbouni’s view that his instructions to his newly retained counsel on the lien release agreement allowed him without censure to take steps coincidentally to assess 10 accounts, many of which had been paid. I view the London solicitor’s view that 190 could proceed in this manner after reaching an agreement with 190’s litigation counsel to be an invitation to sharp practice. The initiation of the London assessment could only be described as a plan to turn to his advantage the negotiation on an assessment of accounts 8 to 13.

[19] On March 27, 2017, 190 went ahead with its assessment of G.A.’s accounts but in G.A.’s absence. G.A.’s Mr. Peter Mitchell on his trip to London encountered rain and traffic problems and reached the hearing room at 10:15 a.m. He had called the court staff to ask that the matter stand down but when he appeared the matter had been dealt with in default. It must have been that news of Mr. Mitchell’s travel problems reached the assessment officer after the hearing of submissions and he had decided that G.A. owed 190 $40,800.

[20] Sensibly at some point after March 27, 2017, on consent the report and certificate were set aside by Justice Grace who remitted all matters to the assessment officer for “an assessment de novo ”. Date of the order, May 16, 2017.

[21] After May 16, 2017, 190 sat on its hands and to move matters along, G.A. obtained an appointment under s. 3(c) of the Solicitors Act for the assessment of its last five accounts, the accounts covered by the lien release agreement.

[22] On December 4, 2017, the assessment officer, in doubt, it is clear, whether he should review 5 or 10 accounts directed that the parties return to the court to determine which accounts should be referred to him for assessment.

Resolution

[23] The accounts fall into three categories:

1. Accounts 9-13 (covered by Lien Release Agreement) Accounts 9-10, from September 15, 2016 to February 10, 2017 are covered by the Lien Release Agreement. By the agreement, G. A. agreed to submit the accounts for “assessment” in exchange for the security of 190’s promise to pay the assessed value of the accounts from the Prica money in court. There was nothing in the language of the agreement to limit the assessments to a section 3(c) assessment. These accounts are referrable and may be reviewed as section 3(b) assessments. I need not decide whether the accounts be treated as periodic but final or interim and the last account final. As I say, G. A. fairly, from its agreement, was prepared to have them assessed.

2. Account 8, August 22, 2016 This is a paid account. It was paid September 26, 2017. The account is in the material; tab A(8), affidavit of Andrea Gorys of August 28, 2018. It covers the period of June 24, 2016 to August 18, 2016. The account is based on time and an hourly rate. The relevant section of the Solicitors Act is section 11 which reads as follows:

   11. The payment of a bill does not preclude the court from referring it for assessment, if the application is made within twelve months after payment, and if the special circumstances of the case, in the opinion of the court, appear to require the assessment.

   I consider all the accounts to be final accounts and in the ordinary course since this account was paid would strain to find special circumstances but I chose to err on the side of caution and refer this account for assessment. I am instructed by the general rule that lawyers and the court “should facilitate the assessment process”. Price v. Sonsini, (2002) 60 O.R.(3d) 267 at para. 19. The later accounts will be assessed and the review of this account may shed light on their assessment. I do this reluctantly in light of 190’s behaviour.

3. Accounts 1-4 (2015) These accounts are final accounts. They were paid under the March, 2016 agreement. Consideration of the value of each must have been taken into account when the $6,500 discount was struck. The reasonableness of the accounts which will be assessed may be determined, in my view, without reference to these accounts. In any event, it is the case with G. A., where they billed strictly on the basis of an hourly rate applied to the time spent and where its client 190 knew work on the file would stop without payment that the accounts were final accounts. These accounts were paid accounts. The presumption which underlies section 11 of the Solicitors Act, that payment acknowledges reasonableness and fairness, applies. They need not be assessed. In any event, any reference on these accounts would be out of time under section 4(1) which reads as follows:

   4(1) No such reference shall be directed upon an application made by the party chargeable with such bill after a verdict or judgment has been obtained or after twelve months from the time such bill was delivered, sent or left as aforesaid, except under special circumstances to be proved to the satisfaction of the court or judge to whom the application for the reference is made.

[24] Special circumstances for accounts paid more than 12 months before the application may not be referred for assessment in the absence of fraud on gross misconduct. It is because that 190 has tried to have these accounts reviewed by requisition under section 3 but it is the case in my view an application under section 4(1) of the Act was required. In either event, it is too late to review these accounts.

[25] The order will therefore be that accounts 8 through 13 will be assessed. For the reasons given, accounts 1 through 4 will not be. 190 did not ask that the assessment include accounts 5, 6 and 7.

[26] Costs: Two pages from G. A. on liability and quantum by correspondence by December 5, 2018 and from 190 by December 14, 2018 please.

“Justice P.B. Hockin” Justice P. B. Hockin Released: November 22, 2018

COURT FILE NO.: 1828/17 DATE: 20181122 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Gibbs & Associates Plaintiff – and – 1904601 Ontario Limited Respondent REASONS FOR Decision Hockin J. Released: November 22, 2018