COURT FILE NOS.: CV-21-00656995-0000, CV-21-00657670-0000
DATE: 2021-08-19
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
FOGLER, RUBINOFF LLP Applicant and Respondent in Cross-Application
– and –
CONRAD HOULE and SHEILA HOULE Respondents and Applicants in Cross-Application
Counsel: Milton A. Davis and Hailey Abramsky, for the Applicant and Respondent in Cross-Application David Sischy and Maggie MacDonald, for the Respondents and Applicants in Cross-Application
HEARD: August 17, 2021
BEFORE: VERMETTE J.
[1] The Applicant, Fogler, Rubinoff LLP (“Fogler”), seeks a judgment enforcing a costs award made against the Respondents, Conrad and Sheila Houle (the “Houles”), by Arbitrator Ronald Dash on January 25, 2021 in the amount of $130,485.00 (“Costs Award”). Fogler’s application is based on section 50 of the Arbitration Act, 1991, S.O. 1991, c. 17 (“Act”).
[2] In a separate application, the Houles seek an order setting aside the Costs Award pursuant to subsection 46(1)3 of the Act or, in the alternative, leave to appeal the Costs Award pursuant to subsection 45(1) of the Act.
[3] The Costs Award is with respect to a five-day arbitration pertaining to the assessment of two accounts rendered by Fogler to the Houles (“Disputed Accounts”) that was heard in October 2020. The Arbitrator released a very detailed 84-page award on December 7, 2020. He summarized the arbitration as follows in his Costs Award:
Following an arbitration to assess the Claimant’s [Fogler’s] accounts for legal services rendered, I released an Award dated December 7, 2020. The Claimant billed $357,637.17 in two Disputed Accounts inclusive of disbursements and HST. The Respondents had made payments totalling $100,000 on these accounts. The Claimant submitted that the accounts be assessed at $357,637.17 and claimed the balance owing of $257,637.17 plus interest and costs. The Respondents [the Houles] submitted that the accounts be assessed at zero, such that no further payments be made and the $100,000 payments already made be repaid to the Respondents. The accounts were assessed in the sum of $244,637.17, a reduction of $113,000 ($100,000 plus HST). After deducting the payments already made and adding interest, I awarded an additional $149,516.24 to the Claimant.
[4] The $149,516.24 amount has been paid by the Houles to Fogler.
[5] After receiving submissions from the parties regarding costs, the Arbitrator released the Costs Award, which remains unpaid.
[6] For the reasons set out below, the Houles’ application is dismissed and Fogler’s application is granted.
Subsection 46(1)3 of the Act
[7] In my view, there is no merit to the Houles’ submission that the Costs Award should be set aside pursuant to section 46(1)3 of the Act because it “deals with a dispute that the arbitration agreement does not cover or contains a decision on a matter that is beyond the scope of the agreement.”
[8] In Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254 (“Alectra”) at paras. 25-27, the Court of Appeal stated the following with respect to an application to set aside an arbitration award under section 46(1)3 of the Act:
[25] Although the court cannot apply s. 46(1)3 without having regard to an arbitrator’s decision, the court’s authority to set aside an arbitration award under that subsection depends on the mandate the arbitration agreement confers on the arbitrator to resolve a particular dispute. In order to succeed on an application to set aside an arbitration award, an applicant must establish either that the award deals with a dispute that the arbitration agreement does not cover or contains a decision on a matter that is beyond the scope of the arbitration agreement.
[26] For example, if an arbitration agreement provides that an arbitrator shall resolve a particular question and the arbitrator does so, the court has no authority to set aside the award on the basis that the arbitrator’s decision is unreasonable or incorrect. If, however, in the course of resolving the particular question remitted the arbitrator asks and answers an additional second question, the award may be set aside – not because the arbitrator’s answer to the second question is unreasonable or incorrect, but because the arbitrator had no authority to reach any conclusion on the second question at all.
[27] In short, s. 46(1)3 requires that arbitrators act within the bounds of the authority granted by the arbitration agreement pursuant to which they are appointed – no less, but no more. Section 46(1)3 is not an alternate appeal route and must not be treated as such. [Emphasis in the original.]
[9] According to the Court of Appeal, subsection 46(1)3 of the Act sets out a jurisdictional question that must be answered correctly, and it neither requires nor authorizes review of the substance of an arbitrator’s award: see Alectra at para. 43. Jurisdiction is determined not by asking whether the arbitrator made a correct decision, but by asking whether the arbitrator had the authority to make the inquiry that they made: see Parc-IX Limited v. The Manufacturer’s Life Insurance Company, 2021 ONSC 1252 at paras. 40-42. Here, there is no doubt that the Arbitrator had the authority to determine the issue of costs and that he was correct in assuming jurisdiction over the issue of the costs of the arbitration.
[10] The “Agreement to Arbitrate and Terms of Appointment Re Arbitration” in this case provides that the provisions of the Act apply to the arbitration, and that the parties agree to be bound by the ADR Chambers Arbitration Rules, as amended from time to time (“ADR Rules”).[^1] Section 54 of the Act provides that an arbitral tribunal may award the costs of an arbitration, and that the costs of an arbitration consist of the parties’ legal expenses, the fees and expenses of the arbitral tribunal and any other expenses related to the arbitration. Schedule “A” to the ADR Rules states, in part:
The costs of the arbitration, including arbitrators' fees and disbursements, and any charges by ADR Chambers, will be fixed by the Arbitral Tribunal and allocated between or among the Parties in its award on the merits of the dispute or in a separate award after receiving further submissions from the Parties.
Where there is an arbitration panel, the fees of the Arbitral Tribunal will be stated separately for each arbitrator. Unless the Parties agree otherwise, the Arbitral Tribunal will have the power, in its discretion, to modify the division of the arbitration fees and to award legal costs in addition to the foregoing fees and disbursements.
If the Arbitral Tribunal does not make a costs award, and unless otherwise agreed by the Parties, the arbitrators' fees and disbursements will be billed equally between or among the Parties.
[11] Thus, it is clear that the Arbitrator had the authority to rule on the issue of the costs of the arbitration: the issue of costs is covered by the arbitration agreement and, therefore, a decision on costs is a matter within the scope of the arbitration agreement. Contrary to the Houles’ submissions, the Arbitrator did not answer any additional question in his Costs Award – he only dealt with the question of costs. In doing so, he discussed various factors, but these factors were taken into consideration in order to resolve the issue of costs. They do not constitute separate questions, disputes or decisions. The only decision contained in the Costs Award is a decision regarding the costs of the arbitration.
[12] What the Houles are asking the court to do is to set aside the Costs Award on the basis that the Arbitrator’s decision is unreasonable or incorrect or that his consideration of certain factors was unreasonable or incorrect. However, given that the issue of costs is within the scope of the arbitration agreement, the court has no authority to set aside the Costs Award or to review its substance.
Subsection 45(1) of the Act
[13] Subsection 45(1) of the Act provides as follows:
If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that,
(a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and
(b) determination of the question of law at issue will significantly affect the rights of the parties.
[14] In my view, the Houles are not entitled to get leave to appeal the Costs Award as the alleged errors that they raise are not with respect to questions of law, but, rather, with respect to questions of mixed fact and law.[^2]
a. Questions of law
[15] Questions of law are questions about what the correct legal test is, and questions of mixed fact and law involve applying a legal standard to a set of facts: see Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (“Sattva”) at para. 49. Legal errors include the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor: see Sattva at para. 53.
[16] The Supreme Court of Canada stated the following in Sattva at para. 51 with respect to the distinction between questions of law and questions of mixed fact and law:
The purpose of the distinction between questions of law and those of mixed fact and law further supports this conclusion. One central purpose of drawing a distinction between questions of law and those of mixed fact and law is to limit the intervention of appellate courts to cases where the results can be expected to have an impact beyond the parties to the particular dispute. It reflects the role of courts of appeal in ensuring the consistency of the law, rather than in providing a new forum for parties to continue their private litigation. For this reason, Southam identified the degree of generality (or “precedential value”) as the key difference between a question of law and a question of mixed fact and law.
b. Principles applicable to the costs of an assessment
[17] Subsection 6(3) of the Solicitors Act, R.S.O. 1990, c. S.15 provides that the costs of an assessment are, unless otherwise directed, in the discretion of the assessment officer. With respect to the exercise of this discretion, the following passage from M.M Orkin, The Law of Costs (2nd ed., looseleaf) at para. 602 has been quoted with approval in the case law (see, e.g., Schwisberg v. Kennedy, 2004 CanLII 7574 at para. 50 (Ont. S.C.J.)):
Although costs of the reference are in the discretion of the assessment officer, his position in this respect is distinguishable from that of a judge presiding at a trial or other proceeding. Unlike a trial, which is an adversary proceeding, a reference is commonly considered to be an inquiry into the matters referred. There are, strictly speaking, no adversaries on an assessment of solicitor-and-client costs nor, as a matter of procedure, does the person who applies for an order referring a bill for assessment occupy a position similar to that of a plaintiff in an action, given the restrictions imposed by the Solicitors Act on applications for such an order. Since the onus is on the solicitor to justify his bill irrespective or [sic] who took out the order of reference, he always occupies a position analogous to that of a plaintiff. For these reasons it has been suggested that it would be unfair to adopt a procedure of awarding the costs of the assessment to an applicant who has achieved complete or partial success, on the analogy of a plaintiff in an action. Based on this reasoning, it has been held that the costs of the assessment would normally be awarded on the following basis:
If the bill is patently excessive – payable by the solicitor;
If excessive but not patently so – payable by the solicitor;
If reasonable but apparently excessive – no costs;
If patently reasonable – payable by the client. [Footnote references omitted and emphasis added.]
[18] These principles are general guidelines only: see Starkman Barristers v. Cardillo, 2017 ONSC 5530 at paras. 104-105.
[19] In paragraph 10 of the Costs Award, the Arbitrator refers to these principles and to the fact that the “exercise of discretion of an assessment of costs is distinguished from the exercise of discretion by a judge in an action”. In paragraph 14 of the Costs Award, the Arbitrator also outlined the principles applicable to the compensation of a self-represented lawyer, as set out in Benarroch v. Fred Tayar & Associates P.C., 2019 ONCA 228.
c. Reasons of the Arbitrator
[20] To analyze the Respondents’ submission that the Arbitrator made errors of law as opposed to errors of mixed fact and law, it is important to consider the reasons provided by the Arbitrator for his decision. He stated the following in paragraphs 17-24 and 26 of the Costs Award:
The Disputed Accounts, inclusive of HST (but excluding interest awarded) were reduced from $357,637 to $244,637, a reduction of 31.8%. Conversely, the Claimant was awarded 68.2% of the Disputed Accounts as billed. With interest, the Claimant was awarded 69.8% of the Disputed Accounts as billed.
That does not tell the whole story. The Respondents took the position in the arbitration that, although the Undisputed Accounts were not subject to assessment, I should consider the totality of the Disputed and Undisputed Accounts (“Total Accounts”) when examining the factors that inform the assessment. There were numerous references by the Respondents to the Total Accounts in their written closing submissions […]. Looking at the reduction of $113,000 (inclusive of HST) through that lens, the Total Accounts were reduced by only 9.04%.
Further, the Respondents were not simply seeking to have the arbitrator reduce the accounts to a fair and reasonable value. They were of the view that the Disputed Accounts had no value. They sought to reduce the accounts from $357,637.17 to zero and have monies paid on account returned. The Claimant asserted that the accounts be assessed for their full value. The Award of $249,516 (with interest) was $249,516 more than the Respondents’ position of zero, yet only $108,121 less than the Claimant’s position.
In all of these circumstances, I would not characterize the accounts as “patently excessive” or as “excessive or not patently so”. I would characterize the accounts, based solely on the results of the assessment, as somewhere along the spectrum between “reasonable but apparently excessive” and “patently reasonable”, but closer to the former. Given that characterization, this might normally result in no costs being awarded to either party. There are, however, other factors that inform a departure from the “normal” costs disposition. The arbitration was far from a typical assessment of a lawyer's accounts. It was treated by both parties as an adversarial proceeding.
I found that the Claimant lacked the requisite degree of skill and competence (one of the factors to be considered on an assessment) by not obtaining written instructions respecting the Gougeon settlement, which caused excess time to be expended (although I also found that Sheila and Katulka were to an extent the authors of their own misfortune respecting the quantum of costs incurred by agreeing to settle and then resiling from the settlement). I found that the Houles “must accept some responsibility for having driven up costs”. This was one of the factors that led to a reduction in the Disputed Accounts.
The Respondents, however, made very serious allegations of negligence and unprofessional conduct against the Claimant, none of which were proven, but which the Respondents would have known would be vigorously defended by the Claimant. This required significant time in the arbitration, including preparation of documents, cross-examination at the hearing and closing submissions. These are allegations not normally considered in an assessment of accounts and the Claimant's success in defending against these allegations is a factor in the determination of costs. These unproven allegations included: [list of 6 allegations].
The Respondents sought, as relief in the arbitration, an order staying the Award until after completion of the Underlying Action and the Negligence Action. This is also a matter not normally considered in an assessment and goes beyond the determination of the reasonable value of the Claimant's services. Considerable time was devoted to this issue at the arbitration. The Claimant's success in resisting this relief is also a factor in determining costs.
There were also three motions heard prior to the hearing. […] I refer to these motions in the context of my determination that this arbitration went far beyond the ambit of a normal assessment of accounts. Such motions are not normally heard by an assessment officer. Indeed, the mere fact that the Respondents would have tasked me with determining damages for alleged negligence, a matter not within the jurisdiction of an assessment officer, is further evidence that none of the parties considered this arbitration as one where normal rules for fixing costs of an assessment would apply.
In all the circumstances, I award costs of the arbitration to the Claimant. The results of the arbitration as a whole, including an Award of almost 70% of the Disputed Accounts, the respective position of the parties in the arbitration as to the amount by which the Disputed Accounts should be assessed, the relation of the reduction to the Total Accounts (9%), the Claimant's substantial success on the non-assessment issues raised by the Respondents in the arbitration (rejection of allegations of negligence and breach of professional conduct standards, and refusal to stay the Award), and the results of the pre-hearing motions strongly favour an award of costs to the Claimant. There is no compelling basis whatsoever to consider an award of costs to the Respondents. [Emphasis added.]
[21] The Arbitrator also reviewed the factors set out in Rule 57.01 of the Rules of Civil Procedure (paragraph 33 of the Costs Award) and the reasonable expectations of the Houles (paragraph 34 of the Costs Award). In addition, given that Fogler was “self-represented”, he performed an analysis of Fogler’s time in order to “separate client time and lawyer time” (paragraphs 27-29, 36).
d. Nature of the errors/questions raised by the Houles
[22] The Houles submit that the Arbitrator erred in law by departing from the “established costs paradigm” in assessment cases set out in paragraph 17 above. They also submit that the Arbitrator considered and applied factors that were outside of his jurisdiction and improper considerations in determining the degree of success achieved by the Houles for purposes of determining costs, including: (a) the reduction in fees achieved by the Houles as a percentage of the Total Accounts as opposed to a percentage of the Disputed Accounts; (b) “non-assessment” issues; and (c) the fact that the arbitration proceeded as an “adversarial proceeding”.
[23] I disagree that the departure from the “paradigm” or the consideration of any of these factors could constitute errors of law in this case.
[24] The Arbitrator set out in his reasons the general principles that apply in a typical or normal assessment of a lawyer’s accounts. However, he concluded that this was not an ordinary assessment of accounts and he gave detailed reasons in support of this conclusion. The factors that he took into account in addition to the traditional guidelines normally applicable to an assessment of accounts – e.g., relative success, unproven allegations that significantly lengthen the proceeding, unsuccessful motions, etc. – are considerations that are relevant to the issue of costs and directly related to the proceeding that took place before him. The “costs paradigm” relied upon by the Houles sets out general rules, but not strict ones that apply in every case without any exception. Given that the Arbitrator considered the “costs paradigm” but expressly found that this case was not a normal assessment of accounts, he made no error of law in the exercise of his discretion and his consideration of the various factors set out in his reasons. He did not exercise his discretion on wrong principles.
[25] In my view, the Houles make too much of the use of the expression “non-assessment issues” by the Arbitrator in his reasons. This expression is only used once in the Costs Award and, when interpreted in light of the preceding paragraphs, it simply refers to the factors identified earlier by the Arbitrator as differentiating this case from a “normal” or “ordinary” assessment of costs. There is no basis in the Arbitrator’s reasons or anywhere else to conclude that he considered matters that did not take place during the assessment that proceeded before him. His reasons show no arbitrariness.
[26] The Houles also allege that the Arbitrator incorrectly stated and applied the legal test for a lawyer to claim remuneration for a lost opportunity while acting as a self-represented litigant. I find no error in how the Arbitrator articulated the applicable test based on the 2019 decision of the Court of Appeal in Benarroch v. Fred Tayar & Associates P.C., 2019 ONCA 228. The Houles have not pointed to any wrong statement of law in the Arbitrator’s reasons on this issue. The Houles’ complaints are not about how the Arbitrator stated the legal test, but, rather, about how he applied it. In particular, they complain that while Fogler filed an affidavit of Mr. Davis in support of its position that remunerative work opportunities were lost, no evidence for any other Fogler lawyer was filed. In my view, the error alleged is an error of mixed fact and law, i.e. whether the facts and evidence satisfy the legal test, not an error of law.
[27] None of the issues raised by the Houles would have an impact beyond the parties to this particular dispute. Nor do they have the degree of generality or precedential value that is generally expected of questions of law. Granting leave to appeal in this case would not contribute to ensure the consistency of the law, but, rather, would only provide a new forum for the parties to continue their private litigation: see Sattva at para. 51.
[28] Given that the Houles have failed to show that their appeal would relate to questions of law, leave to appeal is not granted and I do not need to address the issue of the standard of review.
Fogler’s application
[29] Subsections 50(1) and (3) of the Act read as follows:
(1) A person who is entitled to enforcement of an award made in Ontario or elsewhere in Canada may make an application to the court to that effect.
(3) The court shall give a judgment enforcing an award made in Ontario unless,
(a) the thirty-day period for commencing an appeal or an application to set the award aside has not yet elapsed;
(b) there is a pending appeal, application to set the award aside or application for a declaration of invalidity;
(c) the award has been set aside or the arbitration is the subject of a declaration of invalidity; or
(d) the award is a family arbitration award.
[30] Given the dismissal of the Houles’ application, there is no valid ground to deny Fogler’s application to enforce the Costs Award.
Conclusion
[31] In light of the foregoing, the Houles’ application to set aside the Costs Award or, in the alternative, for leave to appeal the Costs Award is dismissed. Fogler’s application to enforce the Costs Award is granted, and the Houles are ordered to pay to Fogler $130,485.00 in respect of the Costs Award.
[32] If costs cannot be agreed upon, Fogler shall deliver submissions of not more than three pages (double-spaced), excluding the bill of costs, within 14 days of the date of this Judgment. The Houles shall deliver their submissions (with the same page limit) within 10 days of their receipt of Fogler’s submissions.
Released: August 19, 2021
Vermette J.
[^1]: The Arbitrator makes the same observation in paragraph 6 of the Costs Award. He refers to section 54 of the Act and Schedule “A” to the ADR Rules in paragraphs 8 and 9 of the Costs Award.
[^2]: I am also of the view that the Houles cannot rely on subsection 45(1) of the Act because the ADR Rules, which are incorporated in the parties’ arbitration agreement, do not allow an appeal on a question of law. Section 17.4 of the ADR Rules provides as follows: “An award or interim award made under the provisions of these Rules shall be treated as a final award for the purposes of recognition and enforcement by a judicial authority and shall not be subject to any appeal to the courts or otherwise unless the Parties have otherwise agreed or the Law of the Arbitration requires.” [Emphasis added.] Here, the Law of the Arbitration, i.e. the Act, does not require an appeal to the courts. Rather, subsection 45(1) of the Act only applies if “the arbitration agreement does not deal with appeals on questions of law”. Since the arbitration agreement provides that there is no appeal to the courts, section 45 does not apply. See Orgaworld v. The Corporation of the City of Ottawa, 2015 ONSC 318 at para. 70 and the reasoning of the Court of Appeal with respect to a similar provision in Alectra at paras. 21-22. Despite the foregoing, since this argument was not clearly advanced by Fogler, my decision is based primarily on my conclusion that the errors raised by the Houles are not questions of law.