Karl Shay v. Saron Legal Professional Corporation

COURT FILE NO.: CV-22-676040-0000

DATE: 2022-09-29

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Karl Shay

AND:

Saron Legal Professional Corporation

BEFORE: J.T. Akbarali J.

COUNSEL: Melissa Gizzo, for the applicant Saron Gebresellassi, for the respondent

HEARD: September 27, 2022

ENDORSEMENT

Overview

[1] The applicant seeks a declaration that the contingency fee retainer agreements he signed with the respondent do not comply with the requirements of the Solicitor’s Act, R.S.O. 1990, c. S.15, and Regulation 195/04, the governing regulation at the time the retainers were signed. He seeks an order disgorging from the respondent all legal fees and HST charged to him, or alternatively, an order for an assessment of the respondent’s account.

Brief Factual Background

[2] On August 17, 2015, the applicant was injured when a bus in which he was riding was rear-ended by a truck. The record discloses that he suffered injuries that were serious and permanent, including, among others, pain in his neck, shoulder and back, headaches, reduced cognitive functioning, anxiety, depression, and impaired memory.

[3] The applicant has a grade nine education. Prior to his accident he worked jobs involving physical labour. He was the sole income earner in his household; his common law spouse of 23 years was unemployed. Unfortunately, he was unable to return to his employment after the accident.

[4] On November 27, 2015, the applicant met with a lawyer, Ms. Gebresellassi, the principal of the respondent, and signed two contingency fee retainers, one for his tort claim and one for his accident benefits claim. Ms. Gebresellassi issued a statement of claim on April 21, 2017, advancing the applicant’s tort claim, but not advancing a Family Law Act claim for the applicant’s spouse.

[5] By December 2018, the applicant had become dissatisfied with the work performed on his file by Ms. Gebresellassi, and as a result, he retained his current counsel to advance his claims. The file had not yet proceeded to discovery. New counsel sought a copy of the respondent’s account for services rendered. Seven months later, the respondent provided a copy of its account for $51,748.35, representing 150 hours of time at $300/hr plus HST. The respondent’s dockets were not provided. Efforts to resolve the respondent’s account were unsuccessful.

[6] In June 2021, the applicant’s claims settled at mediation.

[7] On July 7, 2021, the respondent delivered a motion record seeking a first charge for its fees. The motion record included the retainers as exhibits. The record suggests that he was never provided with a copy of the retainers before.

[8] On reviewing the retainers, the applicant’s current counsel formed the view that the retainers were non-compliant. On January 31, 2022, the applicant commenced this proceeding.

[9] This matter returned before me multiple times. Two adjournments were required because the respondent delivered its responding materials in French, although its former client and the applicant’s counsel do not speak French. The first adjournment occurred because the French motion materials were served only four days before the return date, and had not yet been translated. The second adjournment occurred because, although the respondent had served its materials, there was some delay or mix-up in filing them, and the materials could not be translated in time for the second hearing. On the third occasion, Ms. Gebresellassi advised that there was a widespread internet outage in British Columbia, where she was, and she could not access the electronic file for the motion.

[10] The application finally proceeded on September 27, 2022, with French to English interpretation. No English to French interpretation was required as Ms. Gebresellassi is fully bilingual.

[11] Because Ms. Gebresellassi is fully bilingual, and the applicant does not speak French, I have chosen to write these reasons in English.

Issue

[12] This application requires me to decide whether the respondent’s retainer agreements with the applicant are non-compliant with the legislative and regulatory requirements that existed at the time they were entered into, and if so, the consequence arises as a result of the non-compliance.

[13] At the hearing, the respondent argued that the deficiencies identified by the applicant are not required by any legislative or regulatory instrument. Moreover, it argued that if the retainers were deficient, the court has no jurisdiction in any legislation to set the agreements aside. In its written materials, the respondent argued that if the retainers are deficient, it is entitled to be remunerated for its work based on the principle of quantum meruit; it did not make this argument at the hearing.

Analysis

[14] It is apparent that the respondent’s retainer agreements are non-compliant with Regulation 195/04, the regulation that was in place at the time the retainer agreements were signed. The applicant identifies a number of deficiencies at para. 27 of his factum. These include (but are not limited to) the following deficiencies which are, in my view, the most important ones:

a. The retainers do not contain a statement that the client retains the right to make all critical decisions regarding the conduct of the matter as required by s. 2(10) of the Regulation. See also Du Vernet, Stewart v. 1017682 Ontario Ltd., 2009 ONSC 29191, at para. 19, where the failure to include this statement in a retainer was found to be an important deficiency;

b. The retainers give the solicitor the discretion to determine how the fee will be calculated under the retainer agreement in the event of termination of the retainer, when s. 2(9) requires that the manner in which the solicitor’s fee is to be determined in the event of termination is set out in the agreements;

c. The retainers do not provide an example that shows how the contingency fee is calculated, as required by s. 2(6);

d. The retainers do not explain whether the fees to be charged exclude any amount that is awarded as costs, although s. 2(5) of the Regulation requires a retainer to do so, and although s. 28.1(4) of the Solicitors’ Act provides that a contingency fee agreement shall not include in the fee payable any amount arising as a result of an award of costs, or costs obtained as part of a settlement, unless the court grants leave to include costs on a joint application to the court made by the lawyer and client;

e. The retainers do not inform the applicant that he has the right to ask the Superior Court of Justice to review and approve of the solicitor’s bill or the timelines for doing so, although that is required by s. 2(8) of the Regulation.

[15] In Du Vernet, Stewart, at para. 17, Aston J. held that, if the terms of a solicitor’s retainer are “deemed not to be fair and reasonable, the agreement may be declared void and the court may ordered it cancelled, directing costs, fees and other charges to be assessed in the ordinary manner.” Justice Aston made reference to the Solicitors’ Act, but also noted, at para. 25, that the court has “a well-established inherent jurisdiction to supervise officers of the court which includes assuring that solicitors are only remunerated on a fair and reasonable basis, an exercise that includes consideration of agreements in relation to fees but is much wider than that”.

[16] In my view, it is not fair and reasonable to hold the applicant to retainer agreements that, in substantial measure, fail to comply with the Regulation, the contents of which are designed to protect the public. I find that the deficiencies in the retainer agreements are too numerous, and too many of them are significant. In these circumstances, I conclude this is an appropriate case to declare the retainer agreements void, and direct an assessment of the respondent’s account in the ordinary manner, before an Assessment Officer. Even if I were to accept the respondent’s argument that there is no legislative jurisdiction that allows me to do so, I agree with Aston J. that I have the inherent jurisdiction to make this order.

[17] Although the applicant sought disgorgement of fees paid, there is no evidence whether any fees were or were not paid. If any fees were paid, they can be accounted for in the assessment.

Costs

[18] The three main purposes of modern costs rules are to indemnify successful litigants for the costs of litigation, to encourage settlement, and to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 1999 CanLII 2052 (ON CA), 46 O.R. (3d) 330, at para. 22.

[19] Subject to the provisions of an Act or the rules of court, costs are in the discretion of the court, pursuant to s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The court exercises its discretion taking into account the factors enumerated in r. 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, including the principle of indemnity, the reasonable expectations of the unsuccessful party, and the complexity and importance of the issues. Overall, costs must be fair and reasonable: Boucher v. Public Accountants’ Council for the Province of Ontario, 2004 CanLII 14579 (Ont. C.A.), 71 O.R. (3d) 291, at paras. 4 and 38. 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 CanLII 25577 (ON CA), 2002 CarswellOnt 4020, 118 A.C.W.S. (3d) 341 (C.A.), at para. 4.

[20] The applicant is the successful party on the application and as such, is presumptively entitled to his costs. The applicant seeks costs on a substantial indemnity scale in the amount of $17,492.40, together with disbursements of $861.98.

[21] The respondent filed a bill of costs in the amount of $800, indicating 10 hours of research at the student rate of $20/hr, and two hours of Ms. Gebresellassi’s time at $300/hr for preparing the factum.

[22] The respondent’s bill of costs does not reflect the actual costs of this application. First, there were four separate attendances, none of which appear on the bill of costs. Second, no time is claimed for the preparation of the motion record. Third, it is not reasonable to think that only two hours were spent on the factum. Fourth, even assuming that the hourly rate claimed for the student reflects the out-of-pocket cost of that work to the respondent, it does not reflect the value of the work as it would normally be reflected on a bill of costs. For these reasons, I do not consider the respondent’s bill of costs to be a useful tool in assessing the respondent’s reasonable expectations.

[23] In support of its claim for costs, the applicant filed a brief of correspondence between the parties in which the applicant attempted to negotiate with the respondent with respect to its account. The negotiations that resulted were minimal, and not productive. However, while the correspondence demonstrates that the applicant attempted to resolve the issue, there is no offer that attracts costs consequences under the Rules of Civil Procedure.

[24] The applicant also claims he is entitled to substantial indemnity costs on the basis that the respondent delayed the proceedings because of the delays associated with the translation of the materials into French, and the internet outage that apparently impeded Ms. Gebresellassi’s ability to argue the motion on its third return date.

[25] The respondent argues that it had the right to a bilingual hearing, and disputes that it can be penalized in costs for requiring a bilingual hearing. While I question the wisdom of a fully bilingual counsel in litigation with a unilingual former client with a grade nine education opting to require a bilingual hearing, I do not question the respondent’s right to require it. The request for a bilingual hearing plays no part in my determination of costs.

[26] However, the manner in which the proceeding unfolded – and particularly, the late delivery of French materials and the late filing of them – is not a matter of the respondent’s right to a bilingual hearing, but rather of the respondent’s conduct in the proceeding. I find that the respondent’s conduct did contribute to the delay in bringing this matter to a hearing.

[27] Taking into account the principles in r. 57.01, including the complexity of the issues, the respondent’s conduct in delaying the proceeding, the nature of the material filed, and the time spent (mostly by the junior timekeeper at a very reasonable hourly rate), I conclude that costs fixed at $15,000, all-inclusive, are fair and reasonable. The respondent shall pay these costs to the applicant within thirty days.

J.T. Akbarali J.

Date: September 29, 2022