Court File and Parties

Court File Nr.: CV-14-61419 Superior Court of Justice – Ontario

Re: Michael Dervin, Plaintiff And: Manuel Suarez and Anatoie Koniouchine, Defendants

Before: Master Kaufman

Counsel: Benoit M. Duchesne, for Gowling WLG (Canada) LLP Michael Dervin, representing himself

Heard: December 15, 2020

Reasons for Decision

[1] Between May and July 2020, Gowling WLG (Canada) LLP (“Gowlings”) acted for Mr. Dervin in his personal injury action. Before Gowlings, Mr. Derek Nicholson was Mr. Dervin’s counsel for the preceding 7 years.

[2] On July 13, 2020, Mr. Dervin made serious allegations against his Gowlings’ counsel and it became evident that the solicitor-client relationship had broken down beyond repair. Mr. Dervin served a Notice of Intention to Act in Person and thereafter negotiated directly with counsel for the defendants. He settled his action for $1 million dollars. Gowlings now brings this motion for a declaration that it is entitled to a charge on the settlement funds.

Requirements for a charging order

[3] There is no right to a charging order, and the court will only order one if the lawyer was instrumental in securing property and the client will likely not pay the lawyer without the order. [1] Section 34 of the Solicitors Act [2] provides as follows:

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.

[4] The test for a charging order under s. 34 is well settled. To obtain a charging order a solicitor must demonstrate that:

i. the fund or property is in existence at the time the order is granted;

ii. the property was “recovered or preserved” through the instrumentality of the solicitor; and

iii. there must be some evidence that the client cannot or will not pay the lawyer’s fees. [3]

[5] The only issue in this motion is whether Gowlings’ was instrumental to the recovery of Mr. Dervin’s settlement funds. It is not disputed that the settlement funds exist, and that Mr. Dervin is unwilling to pay Gowlings’ account.

Meaning of “instrumental”

[6] Granting a charge over settlement funds gives a solicitor a priority over other claimants. Charging orders have been referred to as an “extraordinary privilege”. [4] Since a charging order enjoys priority over other secured creditors, playing “some part” in the recovery or preservation of the property has been held to be insufficient. [5] The word “instrumental” has been interpreted to mean that the solicitor’s efforts played a substantial and integral part in the recovery or preservation of assets to which the charging order might apply. [6]

Was Gowlings’ work instrumental to the recovery of the settlement funds?

Events leading up to Gowlings’ retainer

[7] Mr. Dervin was seriously injured in a motorcycle accident on June 21, 2013. His injuries affected his mental and physical functions. Mr. Dervin met the catastrophic impairment threshold for the purposes of statutory accident benefits and he retired from the public service in 2017.

[8] Mr. Dervin retained Mr. Derek Nicholson in November 2013. Mr. Nicholson commenced this action on July 17, 2014. Mr. Nicholson and members of his firm handled all the pre-trial steps, including obtaining documentation, retaining and instructing experts, attending discoveries, mediation and a pre-trial conference over which I presided on January 13, 2020. This action was referred to trial. It was scheduled to commence in September 2020.

[9] On March 9, 2020, the defendants made a formal Rule 49 offer to settle Mr. Dervin’s claim for $825,000 plus interest, costs, HST and disbursements. The offer was open for acceptance until 1 minute after the commencement of trial. Mr. Nicholson recommended that Mr. Dervin make a counteroffer in the amount of $1.5 million plus costs, and he recommended that Mr. Dervin settle the claim for approximately $1M.

[10] Mr. Dervin believed that the defendants’ offer did not adequately compensate him for his loss of future income. While Mr. Dervin retired from the Federal public service with a defined benefit pension, he argued that it was his intention to continue working post retirement and that any settlement should compensate him for this loss.

Gowlings’ representation

[11] On April 28, 2020, Mr. Dervin had discussions with a Gowlings lawyer about taking over his representation. Mr. Dervin and Gowlings initially entered into a limited scope retainer pursuant to which Gowlings would conduct a review of his file and it would outline an estimated range of damages for the purposes of settlement and trial. Gowlings provided an invoice for these services, which Mr. Dervin did not dispute.

[12] On May 14, 2020, Mr. Dervin entered into a contingency fee agreement pursuant to which Gowlings would represent Mr. Dervin up to and including trial. The agreement provided that if Mr. Dervin received money from the claim, Gowlings would be entitled to a fee not exceeding 33.3% of the total amount recovered.

[13] Between June 13, 2020 and June 18, 2020, Gowlings contacted several persons Mr. Dervin had identified as knowledgeable to obtain evidence on the range of post-retirement remuneration for a person with Mr. Dervin’s qualifications. The information counsel received did not support Mr. Dervin’s view that he would be able to earn over $200,000 per year in post retirement income.

[14] On June 28, 2020, Mr. Dervin offered to settle his claim for $1.2M, plus interest, costs, HST and disbursements.

[15] The defendants made a counteroffer on July 13, 2020. They offered the all-inclusive amount of $950,000 to settle the claim. Gowlings calculated that, after deducting disbursements and their proposed 12% contingency fee, this would leave Mr. Dervin with $798,640.47 in his pocket. Gowlings’ counsel recommended that Mr. Dervin make a further counteroffer to settle the claim for $1 million all-inclusive, which would net him $841,860.47.

The fallout

[16] Mr. Dervin was very disappointed by the defendants’ counteroffer and asserted that he would have fared better had he accepted the defendants’ March 9, 2020 offer of $825,000 plus costs, HST and disbursements. Moreover, Mr. Nicholson had not been paid for his services and had a claim against him for his fees and disbursements. Mr. Dervin made serious allegations of professional misconduct against his Gowlings’ counsel. He has since complained against her to the Law Society of Ontario.

[17] Counsel for Gowlings strenuously denied Mr. Dervin’s accusations. Because Mr. Dervin’s e-mails suggested that he had lost confidence in her, she offered to remove herself as counsel.

[18] On July 13, 2020, Mr. Dervin advised that he accepted counsel’s offer to remove herself as counsel. He also instructed her to accept the defendants’ all-inclusive $950,000 offer, and to pay out the disbursements for which Mr. Nicholson’s could provide justification and support. Mr. Dervin took the position that, in light of Gowlings’ counsel offer to remove herself from his representation, Gowlings had forfeited its legal fees.

[19] Gowlings’ counsel replied that she would only remove herself from the record if those were Mr. Dervin’s instructions. She offered to assist Mr. Dervin in finalizing a resolution and suggested that he make a counteroffer for $1 million instead of accepting the defendants’ $950,000 counteroffer.

[20] Mr. Dervin served a Notice of Intent to Act in Person on July 27, 2020 and settled the action on July 29, 2020, directly with the defendants’ counsel, for $1 million.

[21] On October 7, 2020, Gowlings requested that its account be assessed by this Court. It claims legal fees in the amount of $21,794.77 calculated on the basis of the time spent on the file.

Analysis

[22] Gowlings argues that it was instrumental in recovering the settlement proceeds because it was retained to represent Mr. Dervin, it marshalled evidence and advocated for him. After the defendants’ made their last offer, Mr. Dervin purported to terminate the retainer, delivered a Notice of Intention to Act in Person and entered into minutes of settlement directly with the defendants’ counsel. I am not persuaded by these submissions.

[23] Gowlings was retained to act for Mr. Dervin after Mr. Nicholson had been his counsel for the preceding 7 years. Mr. Nicholson had carriage of this litigation from its inception until after the pre-trial conference. Before Gowlings assumed carriage of this matter, the defendants offered to settle the action for $825,000 plus interest, costs, HST and disbursements. This offer is very close to the $1 million all-inclusive offer the defendants eventually accepted. While I am prepared to accept that Gowlings played a part in recovering the settlement funds, I am not convinced that it played a substantial part.

[24] For these reasons, I dismiss Gowlings’ motion for a charging order against the settlement funds.

[25] Nothing in these reasons should be construed to mean that Gowlings is not entitled to have its bill assessed and paid, only that the “extraordinary privilege” of a charging order is not available to it on the specific facts of this case.

Costs

[26] Mr. Dervin provided a costs outline. He claims costs in the amount of $71,240. Mr. Dervin estimates that he worked on this motion 3 hours per day, 3 days per week over a period of 16 weeks. He claims the same hourly rate of $460 as Mr. Duchesne who is a partner at Gowlings. As for disbursements, he claims $5,000 which represents the fees he paid Gowlings pursuant to the limited scope retainer which he says were for services that were never rendered.

[27] This is not how self-represented litigants’ costs are calculated. In Fong v. Chan, 1999 ONCA 1580 [7], the Court of Appeal explained that self-represented litigant’s costs are not calculated on the same basis as those of litigants who retain counsel. All litigants suffer a loss of time when they are involved in the legal process. A self-represented litigant cannot recover for the loss of time that any litigant would have had to devote to the case. Costs should only be awarded to self-represented litigants who demonstrate that 1) they devoted time and effort to perform work ordinarily done by a lawyer and 2) they forewent remunerative activity as a result. [8]

[28] I am satisfied that Mr. Dervin spent a significant amount of time on this motion conducting work that would normally be done by a lawyer. He gathered over 150 emails, he filed a motion record and a supplementary motion record, he wrote a factum and he made oral representations for which he was well prepared. I also accept that because of his disabilities, it would have taken him more time than most. He meets the first criterion.

[29] However, there is no evidence that he forewent any remunerative activity. To the contrary, Mr. Dervin’s evidence is that he was catastrophically injured which affected his ability to obtain gainful employment. The damages claimed in this action included a loss of future income resulting from his disability.

[30] Because there is no evidence of lost opportunity costs, I am not awarding any costs. As for the disbursements claimed, they do not relate to anything done in connection with this motion and are accordingly not allowable.

Master A. Kaufman Master Kaufman Date: February 19, 2021