Court File and Parties

Court File No.: CV-17-588911 Date: 2019/12/04 Superior Court of Justice – Ontario

Between: TEPLITSKY, COLSON LLP, Plaintiff And: 2169252 ONTARIO INC., DME MEDEQUIP INC. O/A MEDICHAIR TRENT, RON SEIDERER and ALLISON SEIDERER ALSO KNOWN AS ALLISON ROLPH, Defendants

Counsel: Ian N. Roher and Eitan Kadouri, for the Plaintiff Ian Peddle, for the Defendants

Heard: November 12, 2019

Before: Perell, J.

Reasons for Decision

Hell hath no fury like a law firm scorned

A. Introduction

[1] Pursuant to the Solicitors Act, R.S.O. 1990, c. S.15, on March 14, 2017, the Defendants to this action, Ron Seiderer, Allison Seiderer, (also known as Allison Rolph), and 2169252 Ontario Inc. and DME Medequip Inc., the corporations that operated as MEDIchair Trent, obtained a registrar’s order (Court File No. 59171) in Peterborough, Ontario to assess the accounts (totaling $361,273.92) of the Toronto law firm, Teplitsky, Colson LLP, which is the Plaintiff in the action now before the court. (I shall hereafter refer to the Defendants collectively as the Seiderers).

[2] Although under section 6(4) of the Solicitors Act, R.S.O. 1990, c. S.15, a law firm shall not commence or prosecute any action in respect of the matters referred to in an assessment without leave of the court. On December 21, 2017, Teplitsky, Colson LLP, without leave of the court, commenced the action now before the court. In the action, Teplitsky, Colson LLP seeks payment of $216,273.92, the balance of its accounts unpaid by the Seiderers.

[3] Teplitsky, Colson LLP also seeks damages for breach of contract, misrepresentation, deceit, and unjust enrichment. It seeks punitive damages of $50,000 for fraud and deceit. It also seeks a charging order and or a charging lien against: (a) certain settlement funds received by the Seiderers; (b) their home; and (c) their business.

[4] By motion, Teplitsky, Colson LLP now seeks an Order: (a) staying the Assessment pending the final disposition of their Superior Court action; and (b) if necessary, granting leave of the court to commence or prosecute that action nunc pro tunc.

[5] By cross-motion, the Seiderers seek an Order staying Teplitsky, Colson LLP’s action until the completion of the Assessment under the Solicitors Act, R.S.O. 1990, c. S.15.

[6] For the reasons that follow, I grant the cross-motion, and I dismiss the motion. As a term of my Order, I direct the Seiderers to disclose the funds that they have offered to hold in their lawyer’s trust account pending the resolution of the Assessment and to pay those funds into court pending the resolution of the Assessment.

B. Facts

[7] Mrs. Seiderer was educated as an architectural technologist. She worked for several major banks, and she rose to be employed as a bank manager for a decade. Mr. Seiderer was trained as an electrical engineering technician, and he was formerly employed by General Electric. The Seiderers incorporated 2169252 Ontario Inc. and DME Mediquip Inc., and they operated these corporations as a medical equipment business. The business was a franchisee. The Seiderers were the guarantors of the franchisee’s indebtedness to the franchisor. The Seiderers also were the guarantors of their business’ loans.

[8] In the summer of 2014, the Seiderers were in a jam. The franchise was soon to expire, and the franchisor was refusing to renew the franchise. Worse, there was a restrictive covenant in the franchise agreement, which if enforceable, would have put the Seiderers out of business in the locale in which they wished to carry on business. And the Seiderers were indebted to their former franchisor for unpaid royalties.

[9] On July 30, 2014, the Seiderers retained David S. Altshuller, a partner of Teplitsky, Colson LLP. He came well recommended, and he had a fine reputation as an expert in franchise law. The lawyer-client relationship between the Seiderers and Mr. Altshuller was to last from July 2014 to February 2017.

[10] On July 30, 2014, the Seiderers signed a retainer agreement with Teplitsky, Colson LLP. The retainer stated, among other things:

... We will work with you to adhere to the budget; however, we cannot predict the need for interlocutory or procedural steps occasioned or initiated by the opposing party. We also cannot be responsible for extra-steps, communications, documents or information initiated by you or others. We will meet with you from time to time and update the budget accordingly.

Our monthly accounts will name and be sent to all of you and each client is responsible for payment of the entire amount. You will need to decide between you how our accounts will be divided.

Our monthly accounts reflect something very close to the product of our time spent multiplied by the applicable hourly rate. We may, however. at our sole discretion retain time spent as part of "work in progress" to be billed at a later time.

It is important that you appreciate that there are many factors beyond our control that may contribute significantly to your costs, particularly if the matter proceeds to formal litigation. For instance. we cannot predict whether our opponent will bring unnecessary or lengthy motions causing delay, plead in a manner requiring attack, prolong discoveries or cross-examinations, require attendances for examinations of witnesses prior to trial and so on.

Similarly, we do not have control over certain disbursements. Discoveries and cross-examinations are expensive, not only in lawyers' time but also in fees charged for transcripts. Process servers can sometimes be more expensive than we would like. There are many such disbursements that cannot be predicted with certainty, Nevertheless, we do our utmost to control those costs and to ensure that neither time nor money are spent on your file which are not both necessary and calculated to advance your interests.

[11] There is a dispute between the parties about what Mr. Altshuller told the Seiderers about the anticipated costs of resolving their legal problems with the franchisor. The Seiderers recollection is that they were told it would cost them about $60,000 to settle the dispute with the franchisor and there might be more expense, running the legal fees up to around $75,000 if the dispute with the franchisor became litigious.

[12] In the cross-examinations leading up to the motions now before the court, Mrs. Seiderer deposed that she understood these estimates but not that the terms of the retainer agreement would govern the retainer. She said that the Seiderers would never have retained Mr. Altshuller if they knew he would later deny that he was limited to billing no more than $60,000. However, as will be described further below, the Seiderers ultimately conceded that there was no fixed fee or maximum fee arrangement with Teplitsky, Colson LLP. The ultimate position of the Seiderers is that they will pay what they owe after an assessment of the legal fees.

[13] Returning to the narrative, the franchise agreement expired, and notwithstanding the restrictive covenant, the Seiderers on January 15, 2015, immediately re-opened the medical equipment business under the name “Living Well Home Medical Equipment”. Living Well was their only source of income.

[14] On January 29, 2015, the franchisor brought an Application to enforce the restrictive covenant in the expired franchise agreement. The franchisor sought an interim, interlocutory, and permanent injunction that would require the Seiderers and their corporations to cease operating with a defined area for a period of 18 months.

[15] At the time of the injunction Application, the Seiderers owed the franchisor $53,000 in unpaid royalties. The Seiderers also had guarantees exposing them to over $200,000 in debts. If the Seiderers lost the injunction Application, they were likely to lose their home, which had been mortgaged to support their business.

[16] It is admitted that Mr. Altshuller gave the Seiderers an approximate estimate of the costs of resisting the franchisor’s claims. Teplitsky, Colson LLP states in its Statement of Claim in its Supreme Court action that “but for certain unforeseeable events … such estimate was reasonable and accurate in all material respects”.

[17] In April 2015, the injunction Application came on to a hearing before Justice Conway. However, she adjourned it to conduct a judicial mediation in an attempt to settle the dispute between the franchisor and its former franchisee. The mediation, however, was not successful, and the Application was rescheduled for May 2015.

[18] On May 13, 2015, the Application was heard by the Justice McEwen, who reserved his decision. On July 14, 2015, Justice McEwen released his decision. He granted the franchisor the relief it had been seeking. The Seiderers were apparently breaching the restrictive covenant. The Seiderers instructed Mr. Altshuller to appeal.

[19] By this time, the Seiderers owed the law firm $88,744.91. Teplitsky, Colson LLP says that it was not inclined to take on the appeal, unless it received a monetary retainer which the Seiderers were unable to provide. However, in reliance upon the Seiderers’ promises of payment, Teplitsky, Colson LLP agreed to continue to act, and on July 16, 2015, it served a Notice of Appeal. The Seiderers’ entreaties are at the core of the law firm’s misrepresentation and deceit claim against them.

[20] Meanwhile, the franchisor refused to consent to a stay of the injunction judgment pending the Appeal. The Seiderers instructed Teplitsky, Colson LLP to bring a motion to stay the judgment pending the disposition of the Appeal.

[21] The franchisor responded with a countermove. Before the stay motion could be argued on July 28, 2015, the franchisor brought a motion to have the Seiderers sanctioned for contempt. The contempt motion was scheduled to be heard as a two-day trial.

[22] On July 31, 2015, with the Appeal, the stay motion, and the contempt trial all pending, and with no payment having been made towards Teplitsky, Colson LLP's outstanding accounts, Mrs. Seiderer sent an email message to Mr. Altshuller after he again inquired about being paid. The message, which again is an aspect of the law firm’s misrepresentation and deceit claim against the Seiderers, stated:

Just so you know, Ron and I would never not pay our bill. The reason I worry about costs so much is that regardless of what happens to us we will find the money to pay. We have never not paid our bills. We are just not the kind of people that would do that.

[23] On August 5, 2015, Justice Roberts heard the stay motion and reserved judgment. Two days later, the motion for a stay pending the Appeal was dismissed.

[24] With the appeal still pending, the contempt trial was scheduled to be heard on November 18 and 19, 2015. As it happened, however, Justice Conway was presiding on November 18, 2015 and given her prior involvement in the judicial mediation, she adjourned the matter to February 8 and 9, 2016, to be heard by another judge.

[25] The appeal was still pending, and on January 22, 2016, counsel attended before Justice Hainey. He adjourned the contempt trial sine die. In his endorsement, he noted, that the trial might be academic if the injunction judgment in the Application was reversed.

[26] On January 25, 2016, the appeal was heard by the Court of Appeal. The Court reserved its decision.

[27] On February 29, 2016, the Court of Appeal released its reasons. It granted the appeal, set aside the injunction, and awarded the Seiderers and their corporations $10,000 in costs for the appeal. Mr. Altshuller negotiated with franchisor, and it agreed to pay an additional $35,000 for the costs for the Application in the court below. The matters of the costs of the moot contempt trial, damages for the undertaking as to damages, and the franchisor’s outstanding claim for payment remained unresolved.

[28] By March 2016, the balance outstanding on Teplitsky, Colson LLP’s accounts was now $105,206.35. And there was unbilled time of $111,000 plus HST. There was unbilled disbursements of $44,237.64. Teplitsky, Colson LLP says that in reliance on and conditional upon the Seiderers promises of payment, they had reduced their fees by $44,635.

[29] In July 2016, the Seiderers agreed to make monthly payments of $10,000 on account of their outstanding accounts, and the first payment was made on July 19, 2016.

[30] On August 5, 2016, the franchisor sent Teplitsky, Colson LLP $45,000 on account of the costs of the Application and the Appeal. The funds were applied to reduce the Seiderers’ account.

[31] Meanwhile, Mr. Altshuller continued negotiating with the franchisor with respect to the costs of the contempt motion and for damages with respect to the undertaking.

[32] On August 22, 2016, the Seiderers made their second and last monthly payment of $10,000 on account of unpaid accounts.

[33] Mr. Altshuller demanded that the monthly payments continue. In an email sent on October 28, 2016, Mrs. Seiderer responded that she had just made a lump sum payment of $45,000. This, however, was untrue.

[34] Despite the outstanding accounts, Mr. Altshuller continued his work on the file. This continued until February 8, 2017. On that day, Mr. Seiderer sent an email message terminating Teplitsky, Colson LLP’s retainer. The email messages stated:

As a result of the lack of action taken to settle the outstanding legal issues we contacted [the franchisor] directly and have negotiated our own settlement with them. The issue has now been resolved WITHOUT requiring further court costs and as such, we no longer require your services- effective immediately. Given that you initially quoted us a cost of $45,000 with a worst case scenario (if we lost the first case and had to appeal) of $60,000 and we have already paid you triple that worst case amount already we feel (after two separate legal consultations) that you have been more then sufficiently reimbursed for your costs.

[35] As appears from the email message, the Seiderers had negotiated their own settlement with the franchisor. The monetary terms of that settlement have not been disclosed. During their cross-examination in the immediate case, the Seiderers have refused to answer any questions about the terms of the settlement. Teplitsky, Colson LLP did not bring a refusals motion.

[36] On March 14, 2017, in Peterborough, the Seiderers obtained an Order of the Registrar to have Teplitsky, Colson LLP's bills of fees, charges, and disbursements referred to an assessment officer in Peterborough.

[37] On June 12, 2017, Teplitsky, Colson LLP brought a motion to change the venue of the Assessment to Toronto. In bringing the motion, the law firm did not challenge the jurisdiction of an Assessment Officer to deal with the assessment.

[38] Teplitsky, Colson LLP’s venue motion was adjourned for cross-examinations, and on August 23, 2017 Mrs. Seiderer was cross-examined.

[39] After the cross-examinations, Teplitsky, Colson LLP’s venue motion was not brought on, and, instead, on December 21, 2017, without leave of the court, it commenced the action now before the court.

[40] On his cross-examination, Mr. Altshuller testified that it was because of Mrs. Seiderer’s testimony on her cross-examination that the law firm decided to bring an action rather than to proceed with an assessment.

[41] In the action, Teplitsky, Colson LLP seeks payment of the balance of its accounts. It also seeks damages for breach of contract, misrepresentation, deceit, and unjust enrichment. It seeks punitive damages of $50,000. It also seeks a charging order and or a charging lien against: (a) the settlement funds received by the Seiderers from the franchisor; (b) their home; and (c) their business. In the action, Teplitsky, Colson LLP seeks a declaration that the Seiderers induced the law firm to perform extensive legal services by reason of deceit and misrepresentations. The law firm claims damages of $216,273.92 for unpaid legal services, or alternatively as damages for breach of contract, misrepresentation, and unjust enrichment. The firms claim for relief is set out in paragraph 1 of the Statement of Claim as follows:

The Plaintiff, Teplitsky, Colson LLP ("TC"), claims:

(a) Declarations that:

(i) The Defendants induced TC to perform extensive legal services on their behalves by reason of their deceit and misrepresentations, the particulars of which are set out below;

(ii) All of the named Defendants are jointly and severally liable for the relief herein claimed; and,

(iii) TC is entitled to a charging order ("Charging Order") and a charging lien ("Charging Lien") against: (1) all funds received by the Defendants in settlement of a certain Application commenced in the Ontario Superior Court of Justice, … in which MEDIchair LP ("MEDIchair") was the Applicant …; (2) Certain property municipally known as l239 Bridle Drive Peterborough Ontario, K9J 7J7 (the Seiderer's home) …; and (3) 2169252 Ontario Inc., DME Medequip Inc. Living Well Home Medical Equipment … ("Living Well" or the "Business").

(b) Damages in the amount of $216,273.92 for legal fees, disbursements and taxes owed by the Defendants herein for the aforesaid services;

(c) In the alternative, the sum of $216,273.92, plus applicable taxes, as damages for breach of contract, misrepresentation and unjust enrichment;

(e) A Charging Order pursuant to Section 34 of the Solicitors Act, R.S.O. 1990, C.S. 15 (the "Act") as against the Settlement Funds, the. Home and Living Well.

(h) Punitive, aggravated and exemplary damages in the amount of $50,000.00;

(i) An Order staying the assessment of the Plaintiffs accounts pending the final disposition of this action;

[42] While I have not done a careful reconciliation since the accounts totaled $361,273,92 and Teplitsky, Colson LLP damages claim is for $216,273.92, it appears that the Seiderers did pay or direct payment of $140,000 to the law firm.

[43] In paragraphs 56 to 59 of their Statement of Claim, Teplitsky, Colson LLP pleads:

Effect of the Misrepresentations

56. TC alleges that the various representations described herein made by the Seiderers, on their own behalf and on behalf of the corporate Defendants, were made:

(a) Knowing, or under circumstances where the Seiderers ought to have known, the same to be inaccurate and untrue;

(b) As part of their plan to obtain legal services from TC without paying for the same;

(c) With the intent and the knowledge that TC would rely upon them; or

(d) Recklessly and with deliberate and wilful disregard to the consequences.

57. TC relied upon such representations and suffered damages as a result thereof.

Deceit

58. By reason of all of the foregoing, TC alleges that:

(a) The Defendants made various false representations or statements in order to obtain legal services without payment; and

(b) Such representations or statements:

(i) were knowingly false;

(ii) were made with the intention to deceive TC;

(iii) materially induced TC to act; and

(iv) resulted in TC suffering damages.

Unjust Enrichment

59. As a result of the Defendants' conduct outlined above:

(a) The Defendants secured the benefit of TC's legal services resulting in the preservation of their Business and their Home;

(b) TC suffered a corresponding deprivation by not being compensated for its continued legal representation; and,

(c) There was no juridical reason for such benefit and deprivation.

[44] On August 31, 2018, the Seiderers delivered their Statement of Defence. For present purposes, the following paragraphs of the pleading are pertinent:

9. In or around July 30, 2014, the Defendants retained the Plaintiff, for the purposes of negotiating an exit from a franchise agreement Litigation was not considered at the time of the initial retainer.

10. The Defendants provided an initial retainer in the amount of $4,000.

11. In or around January 2013, it became clear that there was not going to be a successful negotiation of an exit from the franchise agreement as the Defendants were advised that the amount being requested by the opposing party was unreasonable.

12. The Defendants were further advised that the cost of litigation would be less then what was currently being requested by the opposing party. The Plaintiff provided a verbal quote of $60,000 inclusive of the appeal, as the Plaintiff believed an appeal was likely if the Defendants were successful.

13. The Plaintiff has admitted in several subsequent emails that the initial quote was for no more than $75,000.

14. The Defendants state that [the franchisor] was always open to settling out of court. Settlement did not take place because of the advice of the Plaintiff, and the unrealistic expectations they provided on the costs of the litigation.

15. The Defendants state that at no time was a further litigation budget provided.

16. The Defendants states that despite the only litigation budget being provided being $60,000, they have received invoices to date totalling $361,273.92.

17. The Defendants state that the allegation as contained in paragraph 28 [Mrs. Seiderer’s promise] was not intended to be construed as a blank cheque. The Defendants at that point were not provided with any type of litigation budget to which they could commit to paying.

18. The Defendants state that at all material times they reserved the right to ensure that any invoices were fair and reasonable under the circumstances.

19. The Defendants states that they have offered to hold any settlement funds in trust pending the resolution of the accounts.

20. The Defendants state that on or about March 3, 2017 that they then sought to have the invoices assessed, pursuant to their rights under the Solicitors Act in Peterborough Ontario.

21. The Defendants state that they always have intended to pay the amount owing under the invoices, after the invoices had been assessed.

22. The Defendants state that they did and continue to intend to pay any invoices properly rendered and properly assessed.

[45] After the Superior Court action was commenced, settlement negotiations were unsuccessful, and the parties brought the reciprocal stay motions that are now before the court.

[46] The Seiderers deny there is any dispute about their retainer with Teplitsky, Colson LLP. They submit that the only dispute is about the quantum of the accounts and that they intend to pay whatever the Assessment Officer orders be paid.

[47] The Seiderers state that they do not dispute that they retained Teplitsky, Colson LLP and that they agreed to pay on the basis of an hourly rate. The Seiderers state that the contentious issue is whether a budget or estimate was provided and how that budget or estimate effects whether the fees charged were reasonable in the circumstances.

[48] Without disclosing the amount of the funds received from the franchisor, the Seiderers offer to have the settlement funds received from the franchisor held in trust by their lawyer.

[49] The Seiderers do not dispute that the Assessment Officer does not have the jurisdiction to decide Teplitsky, Colson LLP’s damages claims for breach of contract, misrepresentation, deceit, unjust enrichment, and punitive damages, or for a charging order or lien. However, they submit that all those claims can be pursued after the Assessment Officer decides the quantum of Teplitsky, Colson LLP’s accounts.

C. Statutory Background

[50] Teplitsky, Colson LLP seeks a stay of the Assessment. The Seiderers seek a stay of the Superior Court action. The relevant statutory background is sections 106 and 138 of the Courts of Justice Act, R.S.O. 1990, c. C.43, rule 21.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and sections 3, 6, and 34 of the Solicitors Act, R.S.O. 1990, c. S.15. These provisions are set out in Schedule A to these Reasons for Decision.

D. Discussion and Analysis

[51] There are multiple proceedings about Teplitsky, Colson LLP’s accounts. The law firm sues to collect the unpaid balance of the accounts. The Seiderers seek an assessment of the law firm’s accounts.

[52] If there is multiple proceedings between the same parties in respect of the same subject matter, the test for determining whether the action should be dismissed or stayed is that a stay or dismissal should only be ordered in the clearest of cases, and where: (a) the continuation of the action would cause the defendant prejudice or injustice, not merely inconvenience or additional expense; and (b) the stay or dismissal would not be unjust to the plaintiff. Thus, the onus is on the party seeking a stay to show both: (a) that it would be oppressive or vexatious or in some other way an abuse of process to have to be in involved in more than one proceeding; and also (b) that the stay would not cause an injustice or prejudice to the other party. Hathro Management Partnership v. Adler, 2018 ONSC 1560; Canadian Standards Association v. P.S. Knight Co. Ltd., 2015 ONSC 7980.

[53] Factors to be considered in determining whether a permanent or temporary stay should be granted include: (a) differences in the substantive scope and remedial jurisdiction of the two tribunals; (b) any juridical advantages associated with the plaintiff’s choice of jurisdiction; (c) the comparative progress of the two proceedings, including which proceeding starting first; (d) whether the proceedings will proceed sequentially or in tandem; (e) the effect of two proceedings about the same subject matter proceeding in tandem; (f) the ability of the defendant to adequately respond to both matters apart from just the financial burden or inconvenience of having to do so; (g) the possibility of inconsistent results; (h) the potential for double recovery; and (i) the effect of a stay in delaying or prejudicing access to justice for example by degradation in the evidentiary record for one or other of the proceedings. Conway, Baxter, Wilson LLP. v. 1179 Hunt Club Inc., 2019 ONSC 1056; Hathro Management Partnership v. Adler, 2018 ONSC 1560; Canadian Standards Association v. P.S. Knight Co. Ltd., 2015 ONSC 7980.

[54] The pivotal issue in Teplitsky, Colson LLP’s stay motion and the Seiderers’ cross-motion for a stay is the matter of the jurisdiction of the Assessment Officer. To be precise, the pivotal issue in the immediate case is whether there is a genuine dispute about Teplitsky, Colson LLP’s retainer.

[55] I discuss the law about assessments and disputed retainers in my book, The Law of Civil Procedure in Ontario (3rd ed) (Toronto: LexisNexis, 2017) as follows (citations and footnotes omitted):

The assessment officer does not have jurisdiction, if there is a dispute about the lawyer’s retainer. The assessment officer’s jurisdiction depends upon the retainer of the lawyer not being disputed, and if the retainer is disputed, the assessment must proceed before a judge by way of action or application. A genuine dispute about the solicitor’s retainer can be resolved only through the ordinary remedy of civil litigation, rather than through the assessment process.

A retainer is disputed when there is a question about its existence or about its terms or scope. Only a legitimate dispute regarding the retainer or the terms thereof will oust the jurisdiction of the assessment officer, and an assessment officer is empowered to make a limited inquiry to determine if there is a genuine dispute. If the dispute is solely with respect to quantum, the assessment officer retains jurisdiction to proceed with the assessment.

An assessment officer has no inherent jurisdiction and only has the jurisdiction conferred by statute and by the Rules of Civil Procedure. An assessment officer cannot acquire jurisdiction by the failure of a party to raise a preliminary objection; an assessment officer either has jurisdiction or he or she does not. Thus, unless the issue is directed to the assessment officer pursuant to the court’s power to order a reference, an assessment officer has no jurisdiction to conduct an assessment where there is a dispute about the solicitor’s retainer, and the assessment officer has no jurisdiction to determine disputes about the existence, nature, terms or extent of a retainer.

If there is a genuine dispute about the existence of a retainer or about the scope of the retainer, the assessment officer has no jurisdiction, and if he or she proceeds to make an assessment, the assessment is a nullity. If there is a genuine dispute about the retainer, the matter must proceed before a judge by way of action or application. However, only a genuine dispute as to the retainer ousts the jurisdiction of the assessment officer; if the dispute is solely with respect to the quantum of the lawyer’s account, an assessment officer has the jurisdiction to determine the nature of the agreement between the lawyer and client about the quantum of the fee and how that fee would be calculated.

In Re Solicitors, Master Sandler provides the following description of the assessment officer’s jurisdiction:

The whole scheme of the Act and the cases decided thereunder indicates that the [Assessment Officer] is to decide the issue of quantum and issues of accounting as between solicitor and client, and also questions of carelessness, impropriety and negligence in the conduct of the business to which the bill relates so far as they affect the solicitor’s right to recover the costs in question. However, he is not to decide whether a contract, or retainer, exists between a solicitor and client nor decide the terms thereof, except terms relating to quantum.

In determining the issue of the quantum of the lawyer’s account, the assessment officer has the jurisdiction to determine whether a lawyer’s account should be reduced or even disallowed because the lawyer’s work was carelessly, improperly or negligently performed. […]

The assessment officer does not have jurisdiction where there are “special circumstances”, which are questions that require a decision from the court by action or application. A client’s allegation that the lawyer was negligent in providing services is not a special circumstance because an assessment officer may reduce the bill for services rendered useless because of negligence.

[56] In the immediate case, there is no dispute about the existence of a solicitor and client relationship between the Seiderers and Teplitsky, Colson LLP. There is no dispute about what the law firm was retained to do; i.e., there is not dispute about the existence, nature, or extent of the retainer.

[57] In my opinion, Teplitsky, Colson LLP is mistaken in suggesting that there is a dispute about the terms of the retainer. The Seiderers signed the firm’s standard retainer agreement that provided for the payment of fees based on hours and hourly rates without any cap or limit on the amount that could be charged. The Seiderers made payments based on those contractual arrangements. The Seiderers are contractually bound by the terms of the written retainer agreement.

[58] Apart from the everyday client grievance that the client did not get value for the legal services rendered, the dispute in the immediate case is that the Seiderers complain that the services rendered by the firm exceeded the estimates and quotes that Mr. Altshuller had admittedly given at various times during the dispute with the franchisor. In my opinion, it is not a genuine dispute that would disqualify an Assessment Officer from assessing the law firm’s accounts.

[59] Teplitsky, Colson LLP admits in its law firm’s Statement of Claim and Mr. Altshuller has admitted during cross-examination that estimates were discussed, but the Seiderers do not allege that these quotes or estimates fixed or pre-determined a maximum fee. Rather, they plead and admit that they are prepared to pay reasonable fees after an assessment under the Solicitors Act, R.S.O. 1990, c. S.15.

[60] I appreciate that Teplitsky, Colson LLP relies on statements made by the Seiderers that they would not have agreed to the retainer with the firm if they had known that the fees would exceed the estimates, but the Seiderers do not suggest that the retainer agreement is void and unenforceable and rather they plead, and they are bound by their admission in their Statement of Defence, that they always intended to pay the amount owing under the invoices once the invoices had been assessed under the Solicitors Act, R.S.O. 1990, c. S.15.

[61] I also appreciate that the Seiderers said that the firm had been paid enough and paid more than the initial estimates but, once again, the Seiderers do not suggest that the retainer agreement is void and unenforceable, nor do their bitter and angry comments suggest that they dispute that there was a retainer agreement that required them to pay fees on an hourly basis without a pre-determined maximum.

[62] Put somewhat differently, if the matter had gone on to an assessment and if the Assessment Officer had made the limited inquiry he or she is entitled to make to determine if there is a genuine dispute about the retainer, the result would be that there is not a genuine dispute about the retainer and what there is, is a client disappointed that the ligation was more expensive than admittedly discussed with the lawyers.

[63] In the circumstances of the immediate case, it appears to me that Teplitsky, Colson LLP is making more of a suspected retainer dispute than it warrants because it purposely wishes to sue “in the alternative” for breach of contract, misrepresentation and unjust enrichment.

[64] But this alternative claim is just that – it is an alternative to an assessment - and these common law tort claims – which unquestionably are beyond the jurisdiction of the Assessment Officer – do not and should not obscure the reality that the pith and substance of the dispute between lawyer and client is no more than an assessment of the quantum of the lawyer’s accounts.

[65] In the circumstances of the immediate case, in my opinion, there is no genuine dispute about the retainer that would disqualify the Assessment Officer from determining what is a reasonable fee for the services rendered by Teplitsky, Colson LLP.

[66] While nothing turns on it, there is no cogent explanation why Teplitsky Colson changed its mind about participating in the assessment process. It could have objected from the outset that the Assessment Officer lacked jurisdiction or that there were special circumstances as a means to oust that jurisdiction. In the immediate case, the Seiderers initiated, as it was their right to do so, the Assessment process envisioned by the Solicitors Act, R.S.O. 1990, c. S.15. Teplitsky, Colson LLP initially participated in that process, and it was only after it brought its motion to change the venue for the assessment from Peterborough to Toronto that it decided to challenge the Assessment Officer’s jurisdiction. Teplitsky, Colson LLP submitted that it did so, because of the revelations made during Mrs. Seiderer’s cross-examination. But there was nothing new revealed in that cross-examination, and the examination merely confirmed what the law firm already knew.

[67] Teplitsky, Colson LLP raises the matters of special circumstances and about whether there is a genuine dispute about the retainer in part because of the difficulty that confronts it in that it appears to have contravened section 6(4) of the Solicitors Act, R.S.O. 1990, c. S.15. Section 6(4) states that the solicitor shall not commence or prosecute any action in respect of the matters referred pending the reference without leave of the court or a judge, which is precisely what Teplitsky, Colson LLP is doing.

[68] In the present case, the dispute between the parties is, in my view, strictly one of quantum and, accordingly, there is no legitimate dispute as to the retainer within the meaning of s. 3 of the Solicitors Act, R.S.O. 1990, c. S.15 and the Seiderers were entitled to a reference to an assessment. Paoletti v. Gibson, 2009 ONCA 71 at para. 31.

[69] Because I am satisfied and because I find as a fact that there is no genuine dispute about the retainer nor are there special circumstances, I will not grant Teplitsky, Colson LLP leave nunc pro tunc to prosecute its alternative causes of action for breach of contract, misrepresentation and unjust enrichment. I will rather grant the Seiderers’ request that the fraud action be stayed pending the Assessment. The law firm may apply to have the stay lifted after the Assessment Process.

[70] The obvious public policy purpose of section 6(4) of the Solicitors Act, R.S.O. 1990, c. S.15 is to discourage actions about the provision of legal services and to encourage that disputes about legal fees be diverted into the assessment process. Assessments are intended to provide a speedy and inexpensive process for settling solicitors' accounts outside the realm of ordinary litigation. Paoletti v. Gibson, 2009 ONCA 71 at para. 26; Re Whiteacre v. McGregor (1980), 19 C.P.C. 279 (Ont. Div. Ct.).

[71] It is always the situation that lawyers can sue for their unpaid fees, but once there is an assessment in process, section 6(4) of the Solicitors Act, R.S.O. 1990, c. S.15 requires that a court consider if there is good reason to grant leave and allow the Supreme Court action to go forward. The reason in the immediate case offered is that Teplitsky, Colson LLP has a fraud claim and a claim for a solicitor’s lien, which are matters that cannot be dealt with by the Assessment Officer.

[72] The matter of the solicitor’s lien or charging order is, however, irrelevant. Teplitsky, Colson LLP is at liberty to bring an application for those remedies independent of the assessment process, and it is at liberty to do so without bring an action. It is sometimes the case that law firms obtain charging orders and liens pending an assessment of their accounts.

[73] In the immediate case, the need for Teplitsky, Colson LLP to obtain a charging or lien may be ameliorated by the term that I shall add to my Order that the Seiderers must disclose the amount of funds that they have offered to hold in their lawyer’s trust account pending the resolution of the Assessment and they must pay those funds into court pending the resolution of the Assessment.

[74] The matter of the fraud claim is, of course, relevant to whether leave should be granted. The strength of that action is a relevant factor in the determination of whether granting a temporary stay of the action pending the assessment would cause injustice.

[75] While I am not in a position to say whether there is a genuine issue requiring a trial about the fraud claim and while I cannot decide the claim on its merits, for the purposes of granting leave and for the purposes of deciding whether the fraud claim should await the outcome of the assessment process, it does appear to me that the fraud claim is weak.

[76] It is a weak claim because it will be difficult to prove that the Seiderers had an evil intent to deceive. It will be difficult for a shrewd and resolute law firm like Teplitsky, Colson LLP to prove that it was gullible and deceived into taking on an appeal in an injunction matter that the law firm had lost in the first instance. While I cannot decide the point, it appears to me that professional pride and the honor of the profession are what induced Mr. Altshuller to seek the vindication that was achieved with the decision of the Court of Appeal.

[77] As for a better explanation than deception as the reason why Teplitsky, Colson LLP soldiered on without a refreshed retainer, there is also the pragmaticism that this was not a case of throwing good legal services after bad ones; the law firm believed in their client’s case and the law firm knew that its investment in the case would be forgone if their client’s appeal was unsuccessful and the Seiderers were bankrupt.

[78] Before concluding these reasons, I shall refer to two cases.

[79] In Hathro Management Partnership v. Adler, 2018 ONSC 1560, a law firm issued thirty accounts. The last four were not paid, and the law firm’s management company sued to collect the last four accounts. The client intended to have all thirty accounts assessed. Justice Copeland temporarily stayed the action in favour of the client applying for those assessments. Justice Copeland noted at paragraph 14 of her decision that the right of a client to seek to have his or her lawyer's account assessed is a matter of public interest because it relates to public confidence in the administration of justice. At paragraph 18 of her judgment, she noted that section 6(4) of the Solicitors Act, R.S.O. 1990, c. S.15 shows a legislative intent that if an application for an assessment is granted, the assessment should generally proceed prior to any action to recover the money owed on the accounts. I would adopt that reasoning to the circumstances of the immediate case.

[80] The discretion to grant a stay is in fact specific and the immediate case is far different from the facts of Conway, Baxter, Wilson LLP. v. 1179 Hunt Club Inc., 2019 ONSC 1056, a case relied upon by Teplitsky, Colson LLP as an example of where a stay of the assessment was granted.

[81] In that case, the client concurrently pursued an assessment of four outstanding accounts totaling $90,401.84, and the client also sued the law firm claiming $3.5 million in damages for gross overcharging and for negligence in connection with respect to the matter for which the law firm had been retained. In the Conway, Baxter, Wilson LLP., there was no genuine dispute about the retainer, but it was far beyond the jurisdiction of the Assessment Officer to deal with a negligence claim that overtopped the bills being assessed by $3.5 million. I agree with the decision reached in that case, but the circumstances of that case are not remotely similar to the circumstances of the immediate case.

[82] Returning to the immediate case, there is now an issue estoppel that there is no genuine dispute about the retainer, and the Assessment Officer should get on with assessing the law firm’s accounts. I grant the cross-motion. I dismiss Teplitsky, Colson LLP’s motion.

E. Conclusion

[83] For the above reasons, I grant the cross-motion and I the dismiss the motion. As a term of my Order, I direct the Seiderers to disclose the funds that they have offered to hold in their lawyer’s trust account pending the resolution of the Assessment and to pay those funds into court pending the resolution of the Assessment. This term should incentivize both parties to pursue the Assessment with alacrity.

[84] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with the submissions of the Seiderers within twenty days from the release of these Reasons for Decision followed by Teplitsky, Colson LLP’s submissions within a further twenty days.

[85] I alert the parties that it is presently my view that there should be no order as to costs.

Perell, J.

Released: December 4, 2019

Schedule “A”: Legislation

Solicitors Act, R.S.O. 1990, c. S.15

Order for assessment on requisition

3 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,

(a) by the client, for the delivery and assessment of the solicitor’s bill;

(b) by the client, for the assessment of a bill already delivered, within one month from its delivery;

(c) by the solicitor, for the assessment of a bill already delivered, at any time after the expiration of one month from its delivery, if no order for its assessment has been previously made.

No reference on application of party chargeable after verdict or after 12 months from delivery

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.

Delivery of bill and reference to assessment

6 (1) When a client or other person obtains an order for the delivery and assessment of a solicitor’s bill of fees, charges and disbursements, or a copy thereof, the bill shall be delivered within fourteen days from the service of the order.

Credits, debits, etc., on reference

(2) The bill delivered shall stand referred to an assessment officer for assessment, and on the reference the solicitor shall give credit for, and an account shall be taken of, all sums of money by him or her received from or on account of the client, and the solicitor shall refund what, if anything, he or she may on such assessment appear to have been overpaid.

Costs on reference

(3) The costs of the reference are, unless otherwise directed, in the discretion of the officer, subject to appeal, and shall be assessed by him or her when and as allowed.

No action

(4) The solicitor shall not commence or prosecute any action in respect of the matters referred pending the reference without leave of the court or a judge.

Solicitors’ Charging Orders

Charge on property for costs

34. (1) Where a solicitor has been employed to prosecute or defend a proceeding in the Superior Court of Justice, the court may, on motion, declare the solicitor to be entitled to a charge on the property recovered or preserved through the instrumentality of the solicitor for the solicitor’s fees, costs, charges and disbursements in the proceeding.

Conveyance to defeat is void

(2) A conveyance made to defeat or which may operate to defeat a charge under subsection (1) is, unless made to a person who purchased the property for value in good faith and without notice of the charge, void as against the charge.

Assessment and recovery

(3) The court may order that the solicitor’s bill for services be assessed in accordance with this Act and that payment shall be made out of the charged property.

Courts of Justice Act, R.S.O. 1990, c. C.43.

Stay of proceedings

106. A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.

Multiplicity of proceedings

138. As far as possible, multiplicity of legal proceedings shall be avoided.

Rules of Civil Procedure, R.R.O. 1990, Reg. 194

RULE 21 DETERMINATION OF AN ISSUE BEFORE TRIAL

WHERE AVAILABLE

To Defendant

(3) A defendant may move before a judge to have an action stayed or dismissed on the ground that,

Another Proceeding Pending

(c) another proceeding is pending in Ontario or another jurisdiction between the same parties in respect of the same subject matter; or

and the judge may make an order or grant judgment accordingly.