[CITATION](http://intra.judicialsecurity.jus.gov.on.ca/NeutralCitation/): Novosel v. Campisi et al. 2022 ONSC 4022

COURT FILE NO. 21-76032

DATE: 20220707

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Blanka Novosel, Applicant

AND

Joseph Campisi and Campisi LLP, Respondents

BEFORE: Justice L. Sheard

COUNSEL: Allen J. Wynperle, counsel for the Applicant

Ashu Ismail, counsel for the Respondents

HEARD: In writing

COSTS DECISION

Overview

[1] This decision relates, in part, to the costs to be awarded on the Application brought by Blanka Novosel (“Novosel”), challenging the $300,000 in fees charged and collected by her former lawyer and law firm (collectively the “Lawyers”), in respect of Novosel’s tort and accident benefit claims.

[2] Novosel had sought, in part, a declaration that the Contingency Fee Retainer Agreement she had signed with the Lawyers (the “CFRA”) was void and an order that the fees to be charged by the Lawyers be fixed by the court, or, alternatively, to be referred for an assessment.

[3] Pursuant to Reasons for Judgment dated June 2, 2022 (the “Judgment”), the CFRA was held to be void and unenforceable and an order was made directing the assessment of the costs, fees, charges and disbursements chargeable by the Lawyers. Pending the assessment, the Lawyers were also ordered to repay Novosel $150,000 plus HST, together with interest.

[4] This costs decision also relates to the costs of a motion brought under r. 52.10 by the Lawyers, who sought to reopen the Application to introduce new evidence (“the Motion”). The Motion was heard on May 12, 2022 and was dismissed for reasons given orally.

[5] The parties were invited to make costs submissions on the Motion and on the Application. Submissions were received and have been considered in this decision.

[6] The costs submissions include reference to pre-Application motions and cross-motions, to be determined by this court pursuant to the endorsement of the motions judge dated February 3, 2022 that reads, in part:

This matter continues from January 21, 2022. All issues regarding the adjournment and o/s undertakings and refusals have been addressed and resolved. Costs for the series of motions are reserved to the Application Judge.

[7] The court was not provided with the motion materials filed on the “series” of motions, nor with the costs outlines required by r. 57.05(6). The latter would have been helpful but to have asked this court to review the former would, in my view, have been unduly onerous. While the lack of information about these motions presents a challenge, reference to the time dockets submitted does assist the court in fixing the costs of these motions, which costs are included in the overall amount awarded on the Application.

Nature of the Proceedings

[8] Novosel suffered injuries in a motor vehicle accident and retained the Lawyers to represent her on claims brought against the owner and driver of the vehicle that had hit her: the “Tort Claim”, and later, against her own insurer, for payment of accident benefits: the “AB Claim”.

[9] Novosel signed the CFRA pursuant to which the Lawyers claimed to be entitled to payment equal to 30% of the amounts recovered by Novosel in the Tort Claim and the AB Claim.

[10] The Tort Claim settled in November 2019 for the all-inclusive amount of $580,000. From this amount, Novosel paid the Lawyers $145,000, plus HST. This fee was based on 30% of the $485,000 paid to Novosel for damages and interest on the settlement of the Tort Claim.

[11] The AB Claim was settled in August or September 2020, for $1 million. From this amount, the Lawyers deducted fees of $300,000, plus HST.

[12] Novosel subsequently retained new counsel and brought the Application in which she challenged the validity of the CFRA and sought an order fixing the legal fees or directing that they be assessed.

[13] The Lawyers opposed the relief sought by Novosel. They defended the validity of CFRA; submitted that their fees were fair and reasonable; and that Novosel knew and agreed to pay the 30% contingency fee.

[14] On the Application, the Lawyers acknowledged that the CFRA contained two errors, both of which were held by the court to be significant: 1. The CFRA misstated how the legal fees were to be charged and, 2. The CFRA misstated the time period within which a client may dispute an account.

[15] The Lawyers were also found to have failed to comply with s.1(2) of O. Reg. 195/04 in that they did not provide Novosel with a copy of the CFRA. Novosel asserted that until she brought the Application, the Lawyers had not provided her with a copy of the CFRA. The Lawyers had no evidence to challenge that assertion.

[16] Although the Lawyers had not provided Novosel with a copy of the CFRA, they asserted, unsuccessfully, that Novosel had received independent legal advice (“ILA”) on its terms, or, alternatively, that the court should infer that Novosel had received such advice. That issue was also at the heart of the Motion, which will be addressed later in these reasons.

[17] No stone was left unturned in this Application. Both sides of the dispute filed multiple affidavits and cross-examinations were conducted.

[18] From his cross-examination, it became clear that the law clerk who reviewed the CFRA with Novosel was not aware of the law that governed contingency fee retainer agreements and/or had not read the CFRA. As a result, the law clerk had not spotted the errors in the CFRA. That fact, together with the acknowledged errors in the CFRA, were known to the Lawyers before the Application was heard.

[19] In addition, and as noted in the Judgment, when the Application was brought, the Lawyers knew that the CFRA included terms of art not understood by laypersons, and that the “mediation” referenced in the CFRA, on which the Lawyers relied to trigger an increase in the contingency fees chargeable from 15% to 30%, was no longer applicable, due to amendments to the Insurance Act, R.S.O. 1990, c. I.8.

[20] Finally, the Lawyers knew that the fees associated with their docketed time for the Tort Claim and for the AB Claim were significantly lower than the amount charged to Novosel based on 30% of the amount recovered. That differential is particularly striking with respect to the $300,000 charged by the Lawyers on the AB Claim, whose docketed or recorded time was $38,720.50. While the differential between the docketed time and the fees charged under the CFRA is not determinative of the issues raised by Novosel in the Application, when considered together with Lawyers’ knowledge of the errors in the CFRA, and the frailties in the evidence given by Lawyers’ law clerk, the Lawyers’ aggressive opposition to Novosel’s Application is difficult to justify and constitutes a proper consideration when determining the costs to be awarded on the Application.

Positions of the Parties

[21] Novosel and the Lawyers each submitted Costs Outlines covering the time spent up to the hearing of the Application but prior to the Motion.

[22] Novosel’s Costs Outline and Dockets (Pre-Bill), which begins with an entry on February 7, 2021, and ends with an entry on March 18, 2022, can be summarized as follows:

(1) Fees $151,965.00

(2) HST on Fees $ 19,755.45

(3) Disbursements with HST $ 2,903.76

TOTAL: $174,324.21

[23] Novosel submits that the costs should be awarded on a substantial indemnity basis (80%) or, alternatively, on a partial indemnity basis (66%).

[24] The Lawyers’ Costs Outline, can be summarized as follows:

(1) Fees $120,098.00

(2) HST on Fees $ 15,612.74

(3) Disbursements with HST $ 2,033.06

TOTAL: $137,743.80

[25] Suffice to say that the fees recorded by both sides of this dispute are astounding and disproportionate, given the nature of the dispute and that the matter took only two days to be heard.

The Law

[26] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, (the “CJA”) gives the court the discretion to determine by whom and to what extent costs are to be paid.

[27] In civil litigation, costs usually follow the event. That rule should not be departed from except for very good reasons: see Gonawati v. Teitsson 2002 41469 (ONCA), [2002] CarswellOnt 1007 (Ont. C.A.)], 2002 41469 and Macfie v. Cater, 1920 401 (ON SC), [1920] O.J. No. 71 (H.C.J.) at para 28): Usanovic v. La Capital Life Ins., 2016 ONSC 5795, at para. 7.

[28] Costs are discretionary and, in the exercise of that discretion, the court is to consider the factors set out in r. 57.01:

57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs.

[29] In 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (Ont. S.C.J.), Perell J. reformulated the purposes of the modern costs rules, at para. 10, as follows:

(1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements.

[30] Overall, the objective is to fix an amount that is fair and reasonable, having regard for, among other things, the expectations of the parties concerning the quantum of costs: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) at paras. 26 and 38.

[31] A costs award should reflect what the court views as a fair and reasonable contribution by the unsuccessful party to the successful party rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), 2002 CarswellOnt 4020, 118 A.C.W.S. (3d) 341 (C.A.), at para. 4: Fehr et al. v. Sun Life Assurance Company of Canada, 2021 ONSC 8368, at para. 83.

[32] In this case, when applying the factors under r. 57, consideration need also be given to the nature of this litigation. In Ilic v. Ducharme Fox LLP (Ducharme Weber LLP), 2022 ONCA 463, the court set out the long-held principles that govern disputes of the nature before this court. At paras. 20 and 21 the Court stated:

(1) Principles Governing the Assessment of Accounts

[20] Courts should facilitate, not frustrate, the assessment of solicitor accounts. Sharpe J.A. observed that: “As a general matter, if a client objects to a solicitor's account, the solicitor should facilitate the assessment process, rather than frustrating the process”: Price v. Sonsini, 2002 41996 (ON CA), 60 O.R. (3d) 257 (2002), at para. 19. He added his view that “the courts should interpret legislation and procedural rules relating to the assessment of solicitors' accounts in a similar spirit”. The reason for this approach, which Sharpe J.A. quoted from Orkin’s The Law of Costs, is that, "if the courts permit lawyers to avoid the scrutiny of their accounts for fairness and reasonableness, the administration of justice will be brought into disrepute". Sharpe J.A. held that: “The court has an inherent jurisdiction to control the conduct of solicitors and its own procedures”, which “may be applied to ensure that a client's request for an assessment is dealt with fairly and equitably despite procedural gaps or irregularities”. I cannot improve on Sharpe J.A.’s articulation of these principles.

[21] Epstein J.A. added in Clatney v. Quinn Thiele Mineault Grodzki LLP, 2016 ONCA 377, 131 O.R. (3d) 511, at para. 77, that both the legislation and the court’s inherent jurisdiction “respond to the public interest component of the rendering of legal services and lawyers' compensation, and the importance of maintaining public confidence in the administration of justice”. Again, I agree.

[33] As referenced earlier in these reasons, contrary to the principles outlined above, the Lawyers aggressively opposed the relief sought by Novosel, in the face of facts known to, and admitted by the Lawyers, that undermined the validity and enforceability of the CFRA and put into question the fairness and reasonableness of the fees charged. In responding to the position taken by the Lawyers, Novosel incurred significant costs, simply to get to the point at which the Lawyers’ fees can be assessed.

[34] While Novosel’s costs are, to some degree, disproportionate to the issues and to the amount at stake, the position taken by the Lawyers appears to have left her with little choice.

Offers to Settle

[35] Novosel’s costs submissions reference two offers to settle. The first, dated July 28, 2021, was made by Novosel in which she offered to waive her costs of the Application if the Lawyers agreed to refer the matter to an assessment officer to determine the fairness and reasonableness of the accounts rendered in respect of the Tort Claim and the AB Claim. This offer remained open for acceptance until August 30, 2021, on which date, Novosel asserts she became certain that the CFRA would be void and unenforceable and withdrew the offer.

[36] The second offer to settle came from the Lawyers and is dated December 8, 2021, in which the Lawyers agreed to allow Novosel to withdraw her Application, without costs. Novosel replied that she would proceed with the Application and the Lawyer’s offer was withdrawn just after five p.m. on December 8, 2021.

[37] Both sides of this dispute merit criticism for failing to put forth meaningful offers to settle. However, as that criticism applies equally, I conclude that the Offers to Settle play no role in the determination of costs.

[38] Novosel submits that costs should be awarded on a substantial indemnity basis (80%) or alternatively, on a partial indemnity basis (66%). Novosel supports her request for substantial indemnity costs on the basis that the Lawyers’ behaviour demonstrates “high handed, hardball litigation tactics”, directly contrary to the principles set out in Price v. Sonsini, that provides that lawyers should facilitate a client’s assessment of their account.

[39] Novosel asserts that the Lawyers’ tactics included:

1. criticizing Novosel’s ability to be a good witness, when the lawyer making those criticisms had not attended Novosel’s examination for discovery;

2. in the responding affidavit sworn by Joseph Campisi, adopting the position taken by the defendants in its pre-trial brief;

3. criticizing Novosel’s pre-accident work history despite not having interviewed key witnesses on the issue;

4. alleging that Novosel had received ILA on the CFRA when there was no evidentiary basis for that allegation; and

5. in submissions at the hearing, suggesting that Novosel and/or her lawyer were misleading the court, referencing the Rules of Professional Conduct, which allegation was repeated in the Motion.

[40] The Lawyers submit that:

1. Novosel was not successful in having the court fix her legal fees and that, in seeking that relief, Novosel forced the parties to present extensive evidence to assist the court to determine the amount to be fixed as reasonable legal fees;

2. the Lawyers were forced to bring a motion to establish a timetable for the delivery of the exchange of factums and that Novosel’s cross-motion was “frivolous”, as Novosel had already received spreadsheets from the Lawyers, from which Novosel could have used the “Excel sheet’s program to tally up the columns,” a task completed by the Lawyers to avoid any argument; and

3. the costs claimed by Novosel are disproportionate to the relief granted, namely, the return of $150,000 and the right to proceed with an assessment of the fees to be charged on the Tort and AB Claims.

[41] In their costs submissions, the Lawyers assert that the time spent by the lawyers on both sides of this motion was “excessive” and that the principles found at paras. 33 and 28 of in Moon v. Sher, 2004 39005 (ON CA) apply. Briefly, in Moon, the court commented that if a lawyer spends four weeks to prepare for a motion when one week would have been reasonable, the losing party should not be required to pay for “over-preparation”, nor should the losing party “reasonably expect to have to do so”.

[42] The principle of reasonable expectations remains a governing principle.

[43] R. 57.01 (0.a) requires the court to consider the principle of indemnity, the experience of the lawyer for the party entitled to costs as well as rates charged and hours spent, and (0.b) the amount of costs that an unsuccessful party could reasonably expect to pay. The hourly rate charged by Novosel’s counsel, called in 1996, was lower than charged by the Lawyers’ counsel on the Application, whose year of Call was 2007. The time spent by counsel for Novosel – who was the applicant and bore the onus – was 259.6 hours. The Lawyers’ counsel incurred fewer hours - 197.89.

[44] It is easy to conclude, which I do, that the fees incurred by each side are excessive when considered in the context of the amount claimed and that fact that, until the assessment has been completed, the amount recovered is not yet known. However, when considering the “reasonable expectation” of the unsuccessful party concerning the quantum of costs, the court may consider the fees incurred by the losing party. In this case, that figure is $120,098, as set out in the Lawyers’ Bill of Costs.

[45] I find this matter to have been reasonably complex. It involved disputed questions of fact and a number of legal issues.

[46] The Lawyers ask the court to consider their admission that the CFRA contained errors. Those admissions did not, however, materially reduce the time spent on the Application given that the Lawyers continued to assert that, despite those errors and other shortcomings, such as a failure to comply with the applicable Regulation, the CFRA was still enforceable.

[47] Weighing against the time potentially saved by the Lawyer’s admissions is their repeated, and unfounded allegation that Novosel had received ILA and that her counsel was attempting to mislead the court. While I do not accept Novosel’s submissions that the Lawyers’ allegations on that issue were such as to justify costs on a solicitor and client level, in my view, those allegations increased the length of the hearing.

Disposition: Costs of the Application

[48] Having considered the parties’ submissions and positions, I find Novosel to be entitled to her costs on a partial indemnity basis. For the reasons set out above, I fix the costs of the Application to be paid by the Lawyers at $66,000, plus 13% HST on that amount ($8,580), plus disbursements of $2,903.76.

[49] Costs of the Application are, therefore, fixed in the total amount of $77,483.76 to be paid by the Lawyers to Novosel.

Costs of the Motion

[50] As per the reasons given orally on this motion, the Motion was dismissed on the basis that the Lawyers had failed to satisfy the court that there had been any accident, mistake, or other cause that kept the Lawyers from proving a fact or document material to its case. In particular, the Lawyers failed to show that Novosel had received ILA with respect to the CFRA.

[51] Central to the Motion was the Lawyers’ claim that:

1. Novosel had received ILA “prior to signing her second retainer and signing off on settlements”, which Novosel had denied when cross-examined on her affidavit filed in support of the Application;

2. Novosel had failed to tell her current counsel about the ILA;

3. on the Application, Novosel’s counsel submitted that his client had not received ILA on the CFRA or the settlements, which, the Lawyers asserted, was incorrect; and

4. Novosel’s counsel, unbeknownst to him, gave evidence on cross-examination and made submissions to the court which may have misled the court on the issue of whether the applicant received independent legal advice, prior to signing her second retainer for 33% in fees, and agreeing to the two settlements.

[52] In fact, the Lawyers knew that Novosel had seen another lawyer on June 4, 2019 – years after she had signed the CFRA and well prior to the settlement of the Tort Claim and the AB Claim: as they had made a one-page memo to file entitled “Call from Blanka [Novosel] update re union”.

[53] The Lawyers’ memo to file also makes clear that Novosel had seen the other lawyer with respect to her claim for long term disability benefits – a claim which was not the subject of the Application. The memo to file also reveals that the Lawyers knew the name of the lawyer with whom Novosel had met, which is set out in the memo and also because Novosel had left that lawyer’s business card with the Lawyers, who failed to turn over the business card to Novosel’s current counsel.

[54] The transcript of Novosel’s cross-examination was before the court on the Application. Novosel’s evidence that she had not sought, nor received, ILA “prior to signing off on both the AB and tort settlement” and, even if she had consulted with another lawyer, her refusal to disclose what advice she had received were brought to the attention of the court on the Application.

[55] In the grounds set out in the Motion, the Lawyers asserted that Novosel had kept relevant information from her current counsel and that the Lawyers did not ask Novosel about the business card because they “did not anticipate its potential relevance”, nor that Novosel’s counsel would argue on the Application that the Lawyers should not be believed about whether Novosel had received ILA prior to signing (an unrelated) CFRA, and “prior to signing off on her two settlements”.

[56] Novosel filed an affidavit in response to the Lawyers’ motion in which she produced the Lawyer’s memo to file, referenced above. Novosel’s affidavit also attached the 2019 reporting letter from the other lawyer confirming that his meeting with Novosel was with respect to her disability claim.

[57] As already noted, the Lawyers knew that Novosel had met with another lawyer about her potential disability claim, on which she later retained the Lawyers and about which Novosel takes no issue.

[58] Most of the issues raised by the Lawyers on the Motion were canvassed at the hearing of the Application. The information and evidence put before the court on the Motion entirely undermines the Lawyers’ central assertion that Novosel had received ILA, deliberately kept that information from her counsel, who then inadvertently misled the court. There was no factual basis for the serious allegations of dishonesty made by the Lawyers, who, themselves, had information and documentation that undermined those allegations.

[59] In submissions on the Motion, counsel for the Lawyers asserted that her clients did not intend to allege any deliberate non-disclosure on the part of Novosel’s counsel. However, based on the Lawyers’ materials on the Motion, I find that it was reasonable for both Novosel, and her counsel, to interpret the Motion as questioning their honesty and integrity.

[60] In the final result, the Lawyers asserted, and failed to establish, that Novosel was dishonest with her counsel, knowing that he would then mislead the court in his submissions on the Application.

[61] For the reasons set out above, I find that the costs of this motion should be awarded to Novosel on a substantial indemnity basis.

[62] I have reviewed the Bill of Costs submitted on behalf of Novosel and her counsel’s dockets that show total fees of $14,885 plus HST of $1,935.05 for a total of $16, 820.05.

[63] The Lawyers’ Bill of Costs record total fees and HST of $11,376.56 for the Motion.

Disposition: Costs of the Motion

[64] In the exercise of my discretion and after considering and applying the factors relating to costs, reviewed earlier in these reasons, I fix Novosel’s costs of the Motion at $8,500, plus $1,105 in HST, for a total award of $9,605, to be paid to Novosel by the Lawyers.

L. Sheard J.

Date: July 7, 2022

COURT FILE NO.: 21-76032

DATE: 20220707

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Blanka Novosel

Applicant

• and –

Joseph Campisi and Campisi LLP

Respondents

COSTS DECISION

L. Sheard J.

Released: July 7, 2022