COURT FILE NO.: CV-21-0010243-00

DATE: 2024-10-23

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Wallbridge, Wallbridge

Plaintiffs

• and -

Patrick Poupore, Kristin Connors, Renee Guenette and Diamond & Diamond

Defendants

AND BETWEEN:

Patrick Poupore

Plaintiff by Counterclaim

-and-

Wallbridge, Wallbridge

Defendant by Counterclaim

Counsel: G. Adair, for the Plaintiffs/Defendants by Counterclaim M. Davis and H. Abramsky for the Defendants/Plaintiff by Counterclaim

HEARD: April 17, 2024, at Thunder Bay, Ontario

Madam Justice T. J. Nieckarz

Decision On Motions for Judgment

OVERVIEW:

[1] Wallbridge, Wallbridge (“Wallbridge”) is a plaintiff personal injury/medical malpractice law firm with offices in Timmins, Sudbury, New Liskeard, and North Bay. The only two partners of the firm are spouses, who are the founding members of the firm. There are ten lawyers in total who work at the firm.

[2] The Defendant, Patrick Poupore (“Patrick”) is a lawyer who worked as an associate lawyer at Wallbridge for 18 years.

[3] Patrick’s files were paid on a contingency basis, meaning that each file was billed to the client only upon settlement or judgment funds being received by the client. Patrick was paid by Wallbridge based on how much he billed and collected each year.

[4] On October 1, 2021, Patrick notified Almeda Walbridge (“Almeda”) that he will be leaving the firm effective October 18, 2021, to open a branch in Sudbury of the Defendant law firm, Diamond & Diamond (“Diamond”).

[5] Almeda and her partner/spouse, James Wallbridge (“James”) did not take the news well. James terminated Patrick’s relationship with the firm effective immediately (October 1st) and advised Patrick that “[t]he files you have are my files[…] they are not to leave the office”. James threatened Patrick with injunctive relief and further demanded that he cease all client contact. That same day, James had the firm’s legal counsel email Patrick repeating the demand that he not communicate with clients, prohibiting him from removing client files, and threatening “an immediate action for injunctive relief and damages”.

[6] The Wallbridge reaction set the tone for what has been a bitter departure and litigation. This action was commenced December 22, 2021, and originally included $100,000 claims against Patrick’s long-time assistant and his law clerk, who both left with him, and a claim against Diamond. Those claims, as well as the claims against Diamond were discontinued as of June 2022. The claims between Patrick and Wallbridge continue.

[7] In the action, Wallbridge seeks the following relief with respect to Patrick:

a. a declaration that Patrick has no entitlement to any compensation from the firm with respect to unbilled work in progress existing as of February 1, 2021, and at all times thereafter on Wallbridge client files;

b. damages in the amount of $3 million for breach of fiduciary duty and contract; and

c. punitive damages in the amount of $250,000.

[8] Patrick defended the action and advanced a counterclaim. Patrick’s counterclaim is for:

a. damages for breach of contract in the amount of $500,000;

b. in the alternative, restitution for unjust enrichment in the amount of $500,000;

c. in the further alternative, an accounting and disgorgement of amounts wrongfully appropriated and withheld by Wallbridge; and

d. punitive damages in the amount of $100,000 for alleged high-handed and malicious conduct following Patrick announcing his departure, including in the prosecution of this litigation.

[9] Effectively what Patrick seeks is payment for billings collected in the month prior to his departure but not paid to him, and billings accrued as of the date of his departure from Wallbridge on October 1, 2021, but not collected until after that date. He says that once those billings are collected, regardless of the termination of the relationship with Wallbridge, he is entitled to a percentage. Wallbridge says that these fees belong to the firm and that Patrick, who is no longer an employee, has no right to those fees if they were collected and realized after the date of his departure. This applies to both files that remained with Wallbridge and those that went with Patrick.

[10] Wallbridge has two motions before the court as follows:

a. compelling delivery of all funds Patrick or Diamond received after his departure with respect to the settlement of three claims (N.G., J.M., and M.L.), seeking details of settlements entered into on behalf of clients who files were transferred to Diamond, and striking paragraphs in Patrick’s Amended Statement of Defence and Counterclaim; and

b. in response to Patrick’s summary judgment motion, partial summary judgment dismissing Patrick’s counterclaim.

[11] Patrick’s motion is for summary judgment in accordance with his Statement of Defence and Counterclaim. He seeks a dismissal of Wallbridge’s claims against him (including the damages claim) and payment of the money he says he earned prior to his departure from the firm. Neither party asked me to quantify the amount owing to Patrick, if any. The summary judgment motions focused on the issue of Patrick’s entitlement to compensation post departure from Wallbridge and not the amount.

[12] On January 16, 2024, I ordered the motions to be heard together. The parties subsequently agreed that the pleadings component of Wallbridge’s first motion should be stood down pending determination of the summary judgment motions. I agree that this makes sense.

[13] At the hearing of the motions Patrick’s counsel indicated that he was abandoning his claim for punitive damages. The central issues for determination by me with respect to the motions are:

a. whether Patrick is entitled in law to compensation for his unbilled WIP existing as of October 1, 2021, which subsequently became fees billed and collected; and

b. is there a triable issue with respect to Wallbridge’s claim for damages.

[14] For the reasons that follow, I find:

a. Patrick is entitled to compensation for his unbilled WIP existing as of October 1, 2021, which subsequently became fees billed and collected, and;

b. Subject to the Wallbridge firm receiving their appropriate share of the fees billed and collected on files transferred to Diamond and being paid for their disbursements incurred on those and inactive files, the Wallbridge damages claim has no merit and shall be dismissed.

BACKGROUND:

Patrick’s employment with Wallbridge and decision to leave:

[15] Patrick began working at Wallbridge in 2003, when he was called to the Ontario Bar. He practiced at Wallbridge’s Timmins office for one year, after which he worked from the Sudbury office for the balance of his 18 years with the firm.

[16] When Patrick first began working at the firm, he did so initially as a salaried employee. He was paid a fixed annual salary that was subject to review from time to time.

[17] Patrick did not have a written employment or compensation agreement with Wallbridge. The parties agree that any agreement between them was oral, with some aspects recorded in writing.

[18] In January 2006, Patrick’s compensation structure changed and became based on what he billed and collected. On January 26, 2006, James sent Patrick a memorandum “Re: Overhead and Profit Sharing” confirming the arrangements for 2006. The relevant parts of that memorandum are as follows:

a. Patrick was to receive a draw of $100,000 per year;

b. Patrick was to receive 1/3 of his “net fees” to $450,000 (the $100,000 draw being credited in the calculation of his “commission”);

c. Billings over $450,000 attract a “bonus” of 50%;

d. Bonuses were to be calculated quarterly; and

e. Files that are inactive will be credited against any bonus (referring to disbursements on inactive files being written off and charged against the lawyer’s bonus).

The parties agree that “fees” refers to amounts billed and collected.

[19] In March 2017, the lawyers of the firm were notified by way of memorandum from James that if a lawyer on the “bonus system” does not cover his or her overhead and draw for the year then they will be taken off the bonus system for the following year. Patrick was never removed from the bonus system.

[20] Also in March 2017, the lawyers were advised in writing, by James, that disbursements 5 years old or older will be reviewed and charged against “commissions” of the responsible lawyer. If the disbursements subsequently get billed, they are credited back to the lawyer. This may have later been changed to 3 years or older.

[21] On September 24, 2020, a memorandum to “[a]ll Commissioned Lawyers” confirmed that as part of COVID adjustments the draw had been eliminated in favour of a system whereby a lawyer’s “bonus” was to be calculated monthly and paid at the pay period closest to the 15th of the following month, instead of quarterly.

[22] There are no other memoranda, in evidence, setting out the terms for calculating or payment of “commission” or “bonus” (both terms are used interchangeably in the Wallbridge written communications to lawyers).

[23] Patrick says he ultimately chose to leave Wallbridge because he felt there was no opportunity to advance his career and become a partner there. He reached out to Diamond in February 2021 and began having discussions with that firm. Diamond had closed its Sudbury office in or about 2019 but was interested in re-opening an office in that city. Diamond had over 180 open files in the Sudbury area.

[24] Patrick continued to have discussions with Diamond throughout the spring of 2021. On June 15, 2021, Patrick signed a contract to begin working for Diamond on October 18, 2021. In the intervening four months, Patrick continued to work at the Wallbridge firm. During this time he actively assisted Diamond in finding the office space he would be working from.

[25] From the time of Patrick’s first conversations with Diamond to his departure from Wallbridge on October 1, 2021, Patrick billed over $680,000 (which counsel for Patrick indicated may be closer to $797,000 for the full February to October period). Patrick’s billings in 2021 qualified him for a 50% share of billed and collected fees over $450,000.

[26] In the month prior to his departure, Patrick generated $42,000 in fees that he did not receive his 50% share of. Usually, Patrick’s share of fees billed and collected in one month are paid by the second week of the following month.

Patrick gives Wallbridge notice and Wallbridge was not happy:

[27] Patrick attests that when he gave his two weeks’ notice on October 1st, 2021, it was his intention to stay longer than the two weeks to ensure a smooth transition if Wallbridge required. Wallbridge says that when Patrick gave his notice, he only mentioned being willing to stay until October 18th, and had already cleaned out and taken his desk. Patrick denies this.

[28] Patrick’s telephone conversation about his departure was solely with Almeda. Almeda did not swear an affidavit in support, or in defence of the motions and has not been cross-examined.

[29] James has attached to his affidavit notes that Almeda made about her conversation with Patrick. These notes were made days after the conversation and Patrick says they are not reliable.

[30] Patrick says that during the conversation with Almeda he explained to her that the Law Society of Ontario Rules of Professional Conduct, specifically Rule 3.7-7A(1), which set out the following requirements for lawyers leaving a firm:

a. jointly contacting clients to advise them of the departure; and

b. presenting them with options about whom they choose to represent them going forward.

Patrick further says that Almeda said “…I don’t know about that”. Twenty-five minutes after the call ended Almeda texted Patrick and asked him to send the rule to her, which he did.

[31] Wallbridge acknowledges that there was discussion between Almeda and Patrick about the transfer or possible transfer of files of which he had carriage. Wallbridge says that Patrick raised the prospect of a transfer or possible transfer of some of the files of which he had carriage. He offered to pay the firm’s disbursements on any files transferred to him and that he would, in due course, remit 50% of the fee to the firm on any files transferred. James says that this was the context in which Almeda made a comment to the effect that ‘this was not the way things worked’. Almeda asked for a copy of the Rule Patrick had referred to and said she would discuss the matter with James. In the meantime, files were not to be removed from the firm. Based on conversations with Almeda and her notes, James denies there was any suggestion from Patrick that a joint letter be written to clients.

[32] Three hours after sending the text to Almeda with the Rule of Professional Conduct, Patrick received a letter from James requiring the immediate delivery of his keys, terminating his access to the firm server, terminating his relationship with the firm, and threatening litigation. The letter stated, in part:

Almeda advised me that you are leaving the firm. I wish you luck in your new position.

The files you have are my files, referred to you.

They are not to leave the office.

The office manual makes it clear that the files are firm property.

I have retained Geoff Adair if necessary to seek injunctive relief.

The manual also provides a non-solicitation provision with respect to all firm clients including my clients you were up till today handling.

Please govern yourself accordingly:

2. You are to have no further contact with any firm clients, past or present. We will reach out to all clients to ensure an orderly transition.

[33] That same day, Mr. Adair sent an email to Patrick, which stated in part… “I trust you understand that you are not entitled as a matter of law to remove any files from the firm or any propriety information including client lists, client names and contact information etc.”.

[34] Wallbridge says that there is an office manual that governs these matters, which their lawyers and employees are bound by. The Wallbridge office manager had a post-it note with names checked off, which Wallbridge relies upon to say Patrick was aware of the office policy. Patrick says that he has not seen the office manual and was unaware there was one. The office manual says that all files are to remain in the custody of the firm. The office manager recalled sending a copy to the Sudbury office, but not to Patrick directly and has no knowledge as to whether Patrick had ever seen it or was aware of the terms. Patrick says he would not have agreed to the terms set out in the manual. James says that whether he agrees or not, those are the terms that everyone who works at the firm must abide by.

[35] Patrick’s position is that James’ email, followed by Mr. Adair’s email made it clear to him that Wallbridge was not going to cooperatively implement the Law Society of Ontario’s protocol for transitioning lawyers, that “both licensees and firms are obligated to give all affected clients sufficient notice of the licensee’s departure and information to allow them to make an informed choice”. On October 5th, Patrick advised Mr. Adair that he had retained counsel to deal with any issues arising out of the transfer of files.

[36] Patrick also says that he was left with no choice but to notify clients unilaterally to ensure that he was complying with his obligations under the Rules of Professional Conduct. On October 2nd, 2021, the day after giving his notice and the day after receiving the emails, Patrick emailed his clients. Patrick’s email to clients said:

I am writing to inform you that effective October 1, 2021, I have left Wallbridge Wallbridge and will be practising, in the same area of law, at Diamond and Diamond. We will have our office in Sudbury. I am notifying you of this change as part of my obligation to you.

You have three choices in terms of who will represent you going forward. The three choices you have are:

1. You can remain with Wallbridge Wallbridge and your file will be reassigned to another lawyer;

2. You can choose to continue with me as your lawyer; or

3. You can hire another lawyer of your choice.

Your retainer agreement will not change. This is, you will not be charged any more or less. Your interests as the client are paramount, and you are free to decide whom to retain as counsel without undue influence or pressure.

If you have any questions or concerns about this email, you are welcome to contact me at 1-705-562-6650 or by replying to this email or, you are welcome to contact Wallbridge Wallbridge at 1-866-856-6197.

If you indicate that you would like to continue with me, then we will forward you the necessary documents to ease the transfer of your file.

If you choose to stay with Wallbridge Wallbridge or, continue on with someone else, we wish you the very best of success with your matter.

Yours very truly,

Patrick Poupore

[37] One client was notified of Patrick’s departure, by him, on October 1st.

[38] Patrick says that it was not a requirement of his relationship with Diamond that he bring any files with him. Diamond was able to provide Patrick with a sufficient client base to maintain his practice without his former clients. As evidence of this, Patrick notes that he was provided with 90 files on his arrival at the Diamond firm. In other words, by sending the email he was not attempting to actively solicit Wallbridge’s clients, but rather comply with his obligations under the Rules of Professional Conduct.

[39] In response to the emails, some clients chose to remain with Wallbridge, while some followed Patrick to Diamond.

[40] Three of the clients that went with Patrick (N.G., M.L., and J.M.), had their files settle while at Wallbridge, but the settlement was not paid until after these clients had left the Wallbridge firm to go to Diamond with Patrick. Diamond received the contingency fees on these files, which totalled $471,987.03, and which is being held in trust pending a determination of the action.

[41] The clients who chose to follow Patrick signed directions requiring Wallbridge to deliver their files to Patrick. These executed directions were delivered to Wallbridge by Patrick. Patrick says that Wallbridge refused to honour the signed directions of the client, and in one case a direct plea from a client. Patrick says that he had to ask opposing counsel or the clients themselves to provide him with copies of the files to prepare for approaching mediations and examinations for discovery.

[42] In November 2021, Patrick brought a motion to compel Wallbridge to comply with a particular direction and deliver the client’s file. Patrick argues that Wallbridge capitulated on the day the motion was scheduled to be heard, but only after terms were negotiated, which Patrick says should not have happened. He says the files should have been turned over unconditionally.

[43] James’ evidence is that once Patrick’s counsel contacted Wallbridge counsel on October 15th, 2021, Wallbridge counsel responded by setting out the terms under which files would be transferred and Wallbridge would relinquish their lawyer’s lien. Patrick’s counsel took the position that the files were to be transferred unconditionally, and this led to the motion being brought. After the motion was brought, terms were agreed upon.

[44] The terms for the transfer of all files to Diamond requires Diamond to provide particulars of any settlement or judgment forthwith upon the happening of such event. The fees, HST, and disbursements to be charged to the client were to be held in trust pending resolution of any dispute as to the allocation between firms of the fees and disbursements, unless it was agreed that the disbursements could at least be paid. Any dispute as to how the fee was to be split between the firms would be referred to “an unofficial umpire”.

Fees At Issue:

[45] The fees at issue relate to:

a. The three files that went with Patrick that were settled prior to his departure but not paid until after he started at Diamond. The amount in dispute is $471,987.03.

b. The $42,000 in billed and collected fees for September 2021, with Patrick’s 50% share being $21,000.

c. The files that went with Patrick to Diamond to continue to work on, and the files that remained at Wallbridge for another lawyer to complete.

ANALYSIS

Summary Judgment

[46] Pursuant to Rule 20.04(2)(a) of the Rules of Civil Procedure, summary judgment may be granted if there is no genuine issue requiring trial with respect to a claim or defence. Pursuant to Rule 20.04(4), where the only genuine issue is a question of law, the court may determine the question summarily and grant judgment accordingly.

[47] The applicable legal principles with respect to summary judgment are well established and not in dispute. They are clearly established by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, and summarized in Apotex Inc., v. Pfizer Ireland Pharmaceuticals, 2021 ONSC 6345 (S.C.J.), additional reasons 2021 CarswellOnt 14641 (S.C.J.). I also reviewed them in Business Development Bank of Canada v. 2611948 Ont. Ltd. et al, 2024 ONSC 604, at paras. 30-36.

[48] While I do not intend to set out all the principles of summary judgment applicable to these motions, Karakatsanis J., at para. 49 of Hryniak provided the following direction with respect to the test:

[49] There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.

[49] What both parties seek is partial summary judgment. With respect to Patrick’s motion for summary judgment on his defence and counterclaim, I cannot quantify his damages and give him judgment for the amount claimed, as there is no evidence before me as to amount. Patrick’s claim for dismissal of Wallbridge’s damages claim fails to recognize that part of that claim is also for Wallbridge’s fees and unpaid disbursements, most of which Patrick/Diamond has agreed to pay subject to determination of the amount. Wallbridge’s motion is to dismiss Patrick’s counterclaim, but allow its claims to continue.

[50] In Butera v. Chown, Cairns LLP, 2017 ONCA 783, at para. 34, the Court of Appeal cautioned courts that the granting of partial summary judgment should be reserved for rare cases in which an issue or issues may be readily bifurcated from others in the action, and that may be dealt with expeditiously and in a cost-effective manner.

[51] In Malik v. Attia, 2020 ONCA 787, at para. 62, the Court of Appeal set out “three simple requests” that a motion judge should make of counsel on motions for partial summary judgment. I am satisfied that dividing the determination of the case into:

a. Entitlement of Patrick to ongoing compensation (determined now) and quantifying the compensation (determined following entitlement, if required); and

b. Entitlement of Wallbridge for damages for its fees and disbursements for transferred and inactive files (quantification of which is not capable of determination), and damages for the breach of contract and fiduciary duty claims,

will prove to be a cheaper, and more efficient way for the parties to deal with the case that will not result inconsistent findings. The barrier for the parties is the entitlement with respect to compensation and Wallbridge’s damages claim. The parties have reached an out of court method of dealing with quantifying Wallbridge’s fee entitlement for files transferred to Diamond. It is likely that once Patrick’s entitlement is determined, a similar out of court method for determining quantum is possible. It would also be a waste of resources for the parties to have to quantify and marshal the evidence as to the amount of fees each claims they should receive when the issue of entitlement has not been determined. The devotion of legal fees and court time in a trial over quantification could be for naught depending on the outcome of the entitlement issue. Given that entitlement will be decided on a final basis, there is no fear of inconsistent findings by multiple judges who may hear both issues.

Is Patrick entitled to any compensation for fees that were unbilled as of the date of his departure?

[52] It is common ground between the parties that Patrick’s compensation for his work as a lawyer at Wallbridge was governed solely by an oral agreement.

[53] It is agreed that Patrick’s earnings were based on his fees that were billed and collected, and that there was never any discussion as to entitlement (or conversely lack thereof) to compensation upon departure from the firm.

Wallbridge Position:

[54] Wallbridge argues that Patrick was an employee, whose employment relationship was governed by a contract. The sole material term of that contract was that Patrick was to be compensated during the term of his employment, for work done on files of which he had carriage, at or shortly after the file had been billed and the fees collected. Given the nature of the files, this happened when settlement or judgment funds were received.

[55] Wallbridge says that there was no express or implied term of the contract between the parties that entitlement to compensation continues after the lawyer leaves the firm. In fact, the express, or in the alternative the implied terms of the contract are clear that entitlement to compensation is only for billed and collected fees, while the lawyer remains an associate of the firm in good standing. The sole right to benefit from unbilled WIP after an associate lawyer leaves the firm belongs to Wallbridge. If the file had not been billed and collected by Patrick’s departure date, he receives nothing.

[56] Wallbridge takes the position that Patrick’s entitlement to compensation was contractually stipulated in clear and unequivocal terms. It is a matter of contract interpretation principles.

[57] The argument of Wallbridge is that the words used by the parties, do not provide for any entitlement to post departure compensation. The words used by the parties are that Patrick is entitled to compensation on the basis of “his billings” for files he had carriage of, while at the firm. As of when he left the firm, other than the September billings, the rest was nothing more than unbilled work in progress (WIP), to which Patrick was not entitled.

[58] Wallbridge further argues that Patrick has not argued any implied contractual term that entitles him to compensation after he leaves the firm, nor do equitable principles of quantum meruit or unjust enrichment aid him in the face of an existing contract. Furthermore, the agency relationship caselaw Patrick relies upon is not applicable. As such, Patrick’s claim to compensation for unbilled WIP existing as of the date of his departure from Wallbridge must be dismissed, even if this results in partial summary judgment.

[59] Wallbridge further argues that it never would have agreed to any entitlement to compensation for unbilled work in progress for many reasons, such as:

a. Any such arrangement is fraught with uncertainty and difficult to implement. For example, how are the fees allocated between the departing lawyer and the successor lawyer? Should it be based on an ad hoc formula that was never discussed?

b. The departing lawyer had already enjoyed the benefit of generous compensation over the years based on billings on the files under their carriage at the time of billing.

c. Maintaining the sole right to the benefit of unbilled work in progress benefits the firm by providing an incentive to lawyers to stay with the firm.

d. Retention of the benefit of unbilled work in progress by a law firm is a common practice in Ontario even in the case of departing partners. There is no reason not to follow this practice.

Patrick’s Position:

[60] Patrick argues that he did all the work giving rise to his claim and it is irrelevant that he left the firm. He argues that the law is clear that absent a clear contractual term denying commissions after termination or resignation, they must be paid. There is no agreement with Wallbridge that precludes him from being paid his fees post departure. This was never discussed at any time. Historical practice of the firm was to provide compensation to departing lawyers. Patrick also intended to be paid for his work, even if he left the firm. To hold otherwise would result in an unjustifiable windfall for Wallbridge.

Decision:

[61] I find that there is no genuine issue requiring a trial with respect to the issue of entitlement to fees billed and collected on account of WIP accumulated prior to Patrick’s departure. The necessary findings of fact as to entitlement (although not quantum) may be made from the evidentiary record before me, and the process allows for the law to be applied to the facts. A partial summary judgment motion is the most proportionate, expeditious and least expensive means to achieve a just result. The evidentiary record is extensive, and I see no benefit or need for the parties to proceed to trial on the issue of entitlement.

[62] Throughout Patrick’s association with Wallbridge, there existed an agreement between the firm and Patrick governing the terms and conditions of his remuneration or compensation. That agreement started off with Patrick being paid as a salaried employee, and then moved to payment based on a percentage of fees billed and collected. Each of the parties characterizes the relationship between Patrick and the firm differently for the period of 2006 to 2021. Wallbridge says that Patrick was an employee, and Patrick says he was an independent contractor. Associate lawyers on the commission/bonus/profit sharing compensation structure at Wallbridge were found by Employment Insurance Canada to be independent contractors for the purpose of those benefits. James says that the Employment Insurance determination is irrelevant as lawyers were treated as employees with all the same rights and obligations. The parties made no argument as to the factors required to determine this issue. Based on my analysis, I do not need to.

[63] I agree with Wallbridge that the starting point must be to determine what the contract was and then look to the terms of the contract between the parties to determine on ordinary principles of contractual interpretation whether the parties objectively intended for Patrick to be compensated post-departure. This requires a consideration of contract as a whole and the context of the circumstances as they existed when the agreement was created. Dumbrell v. The Regional Group of Companies Inc., 2007 ONCA 59, at paras. 51 and 53.

[64] Dumbrell was relied upon by both parties. In Dumbrell, the Plaintiff was in a short-term employment relationship with the Defendant. Dumbrell’s role was to find commercial real estate projects and bring them to the Defendant for purchase and development. Dumbrell was to be paid a commission on the profits earned from the projects that he brought to the Defendant. Specifically, he was to be paid 50% of the profits earned by the Defendant “…as a result of the Employee’s direct involvement for completed and closed projects …” There were termination provisions in the contract, but it did not specifically provide for payment of commission on profits earned after the termination of the contract.

[65] The trial judge in Dumbrell found that the Plaintiff was entitled to compensation for profits earned after the termination of the agreement, on account of projects brought to the Defendant prior to the termination. The trial judge, relied on the reasoning in Charles P. Rowen & Associates Inc., v. Ciba-Geigy Canada Inc. (1994), 1994 CanLII 1585 (ON CA), 19 O.R. (3d) 205 (C.A.). In Rowen, Galligan J.A. stated:

“[…] Where a principal accepts and benefits from the work performed on its behalf by its agent the principal, in the absence of an agreement to the contrary, is liable to pay for it. Indeed it seems to me that this principle is so well established by the jurisprudence that it is not necessary for a court to imply it into a particular relationship. It seems, on the other hand, that it is only if there is an agreement to the contrary, express or implied, that a principle could escape the legal obligation to compensate its agent for work which was done for the principal and accepted by it.”

Patrick relies on Dumbrell and this paragraph from Rowen. He argues that his entitlement to fees post-departure may be found both on equitable principles and the lack of agreement precluding him from being paid for fees collected after his departure.

[66] Doherty J.A., in Dumbrell upheld the trial judge’s decision, but applied a different analysis. Rowen was distinguished on the basis that the relationship in that case was a true principal-agent relationship, the terms of which had not been reduced to writing. As Doherty J.A., noted in paras. 45 and 46, the reasoning in Rowen blended quantum meruit and implied terms of a contract to resolve a problem the parties had not addressed when establishing their relationship. He found that such analysis was not necessary as the parties were sophisticated, had extensively considered the nature of their relationship including termination of the relationship, and reduced it to writing. In these circumstances, if there is ongoing entitlement, it must be found in the contract and not by resort to other principles. Upon reviewing the terms of the contract, Doherty J.A. found that the obligation to pay Dumbrell his share of the profits when and if they arise, is an obligation that exists under the contract as of the date of termination. As there is no express term saying otherwise, the obligation survives the termination of the contract.

[67] Despite the absence of a written agreement and other distinguishing facts in Dumbrell, a similar analysis informs the issue of Patrick’s entitlement to compensation post-departure. This requires that I first determine what the agreement between the parties was:

a. Patrick says that the agreement was that he was paid based on “my billed fees” (which he acknowledges also means collected fees) from the previous month based on 33% of the first $450,000 of fees billed and 50% of any fees over that amount.

b. Wallbridge says that agreement was that Patrick was paid based on his billings, on files for which he had carriage, while he was employed at the firm.

[68] The closest thing the parties have to a written record of the agreement between them is the January 26, 2006, memorandum sent from James to Patrick, as referred to earlier in this decision (and as amended by subsequent memoranda). That memorandum talks about Patrick receiving one-third of “your net fees” to $450,000, with billings over $450,000 attracting a bonus of 50%. The parties did not discuss compensation upon voluntary departure, and this memorandum does not address such event in any way whatsoever.

[69] I find that the agreement of the parties was that Patrick would perform work based on a promise to pay by Wallbridge, in accordance with the agreed upon percentages, once a file realized settlement or judgment proceeds. The entitlement to payment does not crystallize until the fees are billed and collected. These are the “billings” referred to in the agreement.

[70] I find that the agreement also contemplated disbursements on Patrick’s inactive files being charged against the commission or bonus received by Patrick. While Patrick denied any knowledge or agreement of this set-off, it is reflected in the January 26th memorandum and subsequent memoranda sent to the lawyers who had a commission/bonus compensation agreement.

[71] I also find that no term of the agreement expressly or impliedly requires continued carriage of a file post departure as a precondition for payment of compensation. I did not take Patrick’s claim to be for billings on any file other than those which he had carriage of while at Wallbridge (in other words, he is not claiming compensation for work done, if any, on files for which another lawyer had carriage while he was at the firm).

[72] Contrary to Wallbridge’s argument, I find that no term of the agreement between the parties can reasonably be interpreted as requiring continued employment with the firm as a precondition to receipt of compensation for work performed before leaving the firm. I disagree with Wallbridge that the reference in the oral agreement to “his billings” can only lead to the conclusion that compensation on any file worked on by Patrick while at Wallbridge was strictly dependant upon his association with the firm at the time the matter was billed.

[73] Wallbridge argues that after October 1, 2021, there were no billings and only unbilled WIP.

[74] Firstly, there were billed and collected fees owed to Patrick as of October 1st. Patrick had not been paid his share of the $42,000 in billed/collected fees for September. There is no genuine issue for trial with respect to this amount. The fact that Patrick was intending to leave the firm and had signed a contract with another firm should not disentitle him to this amount. Even by Wallbridge’s interpretation of the agreement between the parties Patrick’s entitlement to these fees had crystallized.

[75] I acknowledge that but for the $42,000 billing/collected for September, the amounts that Patrick seeks to be paid for and Wallbridge seeks to retain was unbilled WIP as of October 1st, 2021. I agree with Wallbridge that Patrick has no entitlement to compensation based solely on unbilled WIP. With respect to the three settled files totalling $471,987.03, I disagree with Patrick that his entitlement to a portion of the fees, in accordance with his commission arrangement with Wallbridge, crystalized on the day they were settled.

[76] Secondly, the fact that Patrick left the firm, and the file may have been billed and collected under another lawyer does not mean that the fees are no longer “his billings”. This is an unduly restrictive interpretation of those words. If Patrick did the work, it can still be said that the portion of the fees billed and collected that represent Patrick’s work, are “his billings”, as they represent his efforts. For the files that went to Diamond with Patrick, I struggle to accept an interpretation of the agreement about “his billings”, that deprives Patrick of his share of the unbilled Wallbridge WIP that becomes billed and collected solely as a result of Patrick’s ongoing efforts on the files. They are still Patrick’s billings, and no one else’s, regardless of his departure.

[77] Wallbridge also argues that a consideration of the context in which the agreement was made could only lead to the conclusion that the agreement was subject to an express understanding that there is no entitlement to compensation upon leaving the firm. Alternatively, the context supports an implied condition of termination of entitlement to compensation upon termination of the relationship between the lawyer and the firm.

[78] With respect to context, the relationship contemplated was long-term, with departure not being discussed. James proposed the terms and changed certain of them from time to time. While James would have known his experience with other lawyers leaving the firm, there is no evidence that at the time Patrick was aware of the compensation (or lack thereof) upon departure. It is acknowledged that allocating a contingency fee between a departing lawyer and remaining lawyer could prove challenging and is something someone in Wallbridge’s position may have wanted to avoid.

[79] On the other hand, there are contextual factors that contraindicate a reasonable person concluding the agreement was subject to an express understanding of no compensation upon leaving the firm, or alternatively imposing such a limit. I have considered the following:

a. The purpose of the agreement was to set out how Patrick was to be compensated for work performed on files he had carriage of.

b. Patrick was moving from a fixed salary compensation structure to a commission/bonus structure. Under the fixed salary structure, Patrick was paid as an employee regardless of his billings and collections. Under that structure, once Patrick was no longer working for Wallbridge, there would be no expectation of payment post departure from the firm as Patrick would have been paid for his work done on Wallbridge files.

c. Under the new structure, if Patrick did not bill and collect on a file, he did not get paid for his work on those files. Both parties agreed to assume the risk that a file may not be billed and collected for various reasons. A reasonable person would not expect that once a file is billed and collected, that Patrick would receive nothing at all for his efforts simply because he left the firm. This is particularly so if Patrick had done much of the work on a file before leaving.

d. Given the nature of the new compensation agreement and the movement away from a more traditional employer/employee compensation structure, and in the absence of any express discussion or proposed term to the contrary, a reasonable person in Patrick’s shoes would not have had an express understanding that his entitlement to be paid for his work ended if he left the firm. He would have expected his entitlement to his share of the billings generated from him efforts to still crystallize when a file, post departure, is billed and collected.

[80] As for implying a term in the agreement that entitlement to compensation ends on termination of the relationship, Wallbridge cannot satisfy the test. The test is set out in M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., 1999 CanLII 677 (SCC), [1999] 1 SCR 619, at para. 27:

[27] …The general principles for finding an implied contractual term were outlined by this Court in Canadian Pacific Hotels Ltd. v. Bank of Montreal, 1987 CanLII 55 (SCC), [1987] 1 S.C.R. 711. Le Dain J., for the majority, held that terms may be implied in a contract: (1) based on custom or usage; (2) as the legal incidents of a particular class or kind of contract; or (3) based on the presumed intention of the parties where the implied term must be necessary “to give business efficacy to a contract or as otherwise meeting the ‘officious bystander’ test as a term which the parties would say, if questioned, that they had obviously assumed” (p. 775). See also Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701, at para. 137, per McLachlin J., and Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, at p. 1008, per McLachlin J.

[81] Wallbridge argues that custom is that WIP belongs to the firm and a departing lawyer has no entitlement unless the firm chooses to make a discretionary payment. While I recognize that many firms may take this position, in cross-examination (and other than Wallbridge’s own recent experience with two departing lawyers), James was not able to provide specific examples or evidence of this proposition so that the Court may properly evaluate the argument. For example, do other firms have an express agreement to this effect?

[82] I also do not agree that implying a term terminating Patrick’s entitlement to compensation upon his departure to the firm is necessary for business efficacy. Wallbridge points to, among other things, the challenges in allocating a fee between a departing lawyer and new lawyer on a file. While this is a legitimate concern, business efficacy also requires a consideration of the effect of limiting mobility of professionals by denying them compensation for work performed if they leave the firm. It could be said that it is not in the best interests of the firm, the lawyer, or the clients if lawyers feel they must remain at a firm to protect their entitlement to their years or months of work. Client’s interests could be prejudiced if lawyers encourage settlements merely to facilitate their mobility. There are many considerations beyond those argued by Wallbridge. At best, business efficacy may place some reasonability and temporal limits on what Patrick may recover. For example, if Patrick had carriage of a file in its early stages, and a new lawyer assumes carriage to completion, there is likely very little of “his billings” and to try to ascertain Patrick’s billings could result in further dispute between the parties that neither could be said to have intended. Based on Patrick’s materials and the submissions of his counsel, I was left with the impression that Patrick’s primary concern was with files on which he had invested considerable work. This is reasonable. The agreement between the parties and Patrick’s work performed on the files entitles him to recover his portion of the billings when these files are billed and collected.

[83] Finally, and as more of an aside, Wallbridge’s position with respect to Patrick’s entitlement to fees and Wallbridge’s entitlement to disbursements for inactive files is inconsistent. On the one hand when it comes to Patrick’s compensation, Wallbridge takes the position that his contract with the firm ended and so did his contractual entitlement to compensation if the WIP subsequently became billed and collected fees. On the other hand, in paragraph 58 of James’ affidavit he claims that Patrick’s contractual obligation to pay disbursements on files that remained at the firm but may be difficult to realize or are “inactive” survives the termination of his contract.

[84] In conclusion, I find that the agreement between the parties entitles Patrick to compensation for his work performed on files he had carriage of while at Wallbridge once those files are billed and collected. There are no express or implied terms of the agreement of the parties that ends this contractual entitlement upon termination of the relationship with the firm. Similarly, Wallbridge’s entitlement to its disbursements for inactive files survives Patrick’s leaving and may be set off against any commission/bonus payable by Wallbridge to Patrick upon Wallbridge providing an accounting of the disbursements.

Unjust Enrichment:

[85] If I am wrong and there is nothing in the agreement of the parties that can be interpreted as addressing compensation after leaving the Wallbridge, I would award Patrick damages for unjust enrichment on a quantum meruit basis. For Wallbridge to retain the benefit of Patrick’s work or permit another member of their firm to retain that benefit, to Patrick’s detriment would constitute an unjust enrichment for which there is no juristic reason. On the other hand, by paying Patrick his fee allocation on files billed and collected post departure, Wallbridge receives nothing less than it would have received had Patrick remained at the firm. Any time spent by a new lawyer in becoming familiar with, and finalizing the file can be accounted for in the fee allocation, for which Wallbridge will also receive its share.

[86] Wallbridge has previously recognized the inequity with respect to two employees departing the firm, albeit in different circumstances. The departure of these lawyers was in 2020 and 2021. One of these lawyers left for a mediation (not competing) practice. She requested and received payment, after set-off for disbursements on inactive files, for a case she had recently settled but had not been billed and collected as of her departure. A senior lawyer who left the firm upon appointment to the bench was paid 75% of fees billed and collected for a fixed period post-departure, for files for which she did the bulk of the work. A memorandum from James to lawyers in the firm dated April 22, 2020, recognizes that the intention is not for the newly assigned lawyers to make a windfall from the departing lawyer’s work in progress. James states the expectation of the firm in such circumstances for “everyone to be fair…I would be seriously concerned if someone tries to take advantage of…or sells her short.”

[87] The sole reason for depriving Patrick of his commissions on the work he did, or a part of them, is that the Wallbridge’s were upset that Patrick left to go to a competitor and continued to work for Wallbridge while under contract with (but not yet working for) that competitor. Based on Wallbridge’s relief sought, this extends to files such as the three settled on the day Patrick left the firm but had not yet been paid out. There is no basis for Wallbridge retaining this benefit in contract or in equity.

[88] This case is distinguishable on the facts from Dumbrell and the conclusion in that case that the only way the Plaintiff could recover is if that recovery could be found in the contract between the parties. In that case there was a written agreement, between sophisticated parties, arrived after considerable negotiation and with the benefit of legal assistance, with termination provisions, and which fully considered the nature of the relationship between the parties. This is not the case here.

[89] As with contractual damages, I do not have sufficient evidence to determine the quantum of damages for unjust enrichment and neither party have made submissions as to what that amount should be. Submissions were focused on whether or not there was entitlement based on equitable principles.

[90] With respect to the files transferred to Diamond, Wallbridge is entitled to have its account paid. My understanding is that the parties have agreed upon a method for determining this amount. If I have misunderstood, then the amount of fees owing to Wallbridge shall be determined based on the provisions in the contingency agreement with the client pertaining to terminating the retainer with the firm.

Is there a genuine issue for trial with respect to Wallbridge’s damages claim, or should it be summarily dismissed?

[91] At the heart of this issue is Patrick’s actions in negotiating a contract with Diamond and his efforts in assisting Diamond open a Sudbury office, without disclosing to Wallbridge. Wallbridge’s claim is that had the firm known that Patrick was talking to Diamond, he would have been fired sooner and would not have had ongoing access to the firm’s clients or the billings derived from those files. Patrick says that there is no basis in law or fact for the claim and is retributive.

Wallbridge Position:

[92] With respect to the $3million damages claim, Wallbridge pleads the following:

a. Patrick owed a duty of good faith and loyalty to Wallbridge and was at all material times to act in the best interests of Wallbridge in matters pertaining to the business of the practice of law. Specifically, he was not to compete or aid or assist others in competing with Wallbridge.

b. Patrick’s actions in “aiding and abetting” Diamond by assisting in setting up their personal injury law practice office facilities in Sudbury while working for Wallbridge, and persuading Wallbridge employees to come work with him, constitute a clear breach of Patrick’s fiduciary duty to his employer.

c. Patrick discussed with and made representations to Diamond that if they established an office in Sudbury, he would be able to have numerous Wallbridge clients transfer to Diamond. In the weeks and months before October 1, 2021, he downloaded client files and other confidential information, including firm precedents, all of which he took with him contrary to his contract of employment. Patrick was required as a condition of his employment to keep all information touching on his employment, including that related to client files in confidence and not to make any use of same upon his departure including client’s contract information, addresses, and any part of their file. Prior to October 1st he actively began “an intense period of communicating” with Wallbridge clients with a view to having them transfer their files. These actions constituted a breach of his contractual obligations and a breach of his fiduciary duty to Wallbridge, all to further his own financial interests. These actions also breached the Law Society of Ontario Rules of Professional Conduct requiring a departing lawyer to jointly with the firm advise the client of the situation and outline the choices to the client in a neutral way.

d. Patrick continued to work for Wallbridge after signing a contract with Diamond and did not advise Wallbridge. He remained at Wallbridge after agreeing to become employed by Diamond solely to persuade Wallbridge clients to follow him and to benefit himself financially by settling cases to increase his entitlement to compensation. Had Wallbridge known of his association with Diamond, Wallbridge would have immediately terminated his contract with the firm.

[93] Wallbridge further pleads that Patrick engaged in high-handed conduct in the period leading up to his departure from Wallbridge on October 1st that showed a reckless disregard for his contractual and good faith obligations to his employer. Wallbridge says that this conduct entitles it to punitive damages. Much of the conduct supporting the regular damages claim is also plead in support of the punitive damages claim, including:

a. Remaining employed by Wallbridge after he had agreed to join a competitor firm without disclosing his commitment to Diamond to the partners of Wallbridge.

b. Aiding Diamond in establishing the Sudbury office, and actively using client files and client information to persuade those clients to joint Diamond. When directly asked about this, Patrick did not respond honestly.

c. Patrick took copies of valuable Wallbridge confidential information including one or more “compromised baby case” files, the names of experts, sample opinions they had rendered, Wallbridge business strategies, and provided this to Diamond in breach of his contract of employment.

d. Patrick deleted emails from his firm account to prevent detection of his planned departure and to hide his activity and instructed his assistant and law clerk to do the same.

[94] The damages Wallbridge claims to have suffered are:

a. Thousands of dollars in compensation paid to Patrick from February 1, 2021, to October 1, 2021, that would not have been paid but for Patrick’s deceit, because had Wallbridge known he was aiding a competitor and under contract to that competitor, Wallbridge would have immediately terminated Patrick.

b. Patrick has not paid Wallbridge all disbursements incurred and uncollected on all client files of which he had carriage as of October 1, 2021.

c. Patrick has not paid Wallbridge’s share of the fees on the three files settled while at Wallbridge but moved over to Diamond. Wallbridge also claims on account of its unbilled WIP and disbursements for all files transferred to Diamond.

d. A loss of future income from the clients that Patrick persuaded to join Diamond, and a loss of an opportunity to persuade clients on a level playing field to remain with the firm rather than transfer their files. This also includes files referred between February 1, 2021, to October 1, 2021, some of which may have gone to Diamond with Patrick, that would not have been referred had Wallbridge known of Patrick’s intentions.

e. Wallbridge was put to time and expense to replace the staff members that left with Patrick.

f. Patrick has taken client records, firm records, and precedents, all of which are the property of Wallbridge.

Patrick’s Position:

[95] Patrick argues that Wallbridge’s damages claim in this action rests on its argument that his successful search for a new opportunity in his practice is a compensable breach in law. He argues it is not. He argues that he had a right not only to seek a new place of work, but also to compete against Wallbridge once he left. He relies on Loreto v. Little et. al., 2010 ONSC 755, at para. 35, and Aquafor v. Whyte, Dainty and Calder, 2010 ONSC 2733.

[96] Patrick’s position is that he did nothing wrong in seeking out a new opportunity, continuing to work at Wallbridge until he was ready to give notice, assisting Diamond in locating office space for him to work from, letting his assistants know of his intention to leave so that they could pursue the same opportunity if they wished, notifying clients of his intention to leave only after having provided notice and after having been threatened by Wallbridge. Patrick argues that the only highhanded conduct is that of Wallbridge. He does not deny Wallbridge’s entitlement to a 50% share of its WIP and the full amount of disbursements for files transferred to Diamond, but he does dispute Wallbridge’s claim to be solely entitled to WIP accumulated as a result of his efforts while working at Wallbridge.

[97] Patrick argues further that there is no evidentiary support for the claims made by Wallbridge, nor is there any evidence to support Wallbridge’s $3million damages claim, which James has said is a “ballpark figure”. At James’ cross-examination on his affidavit, he said the following:

12. Q. And the damages, I take it, for the loss of – you tell me, what are those damages supposed to represent?

A. Well, I would have fired Poupore in February, after his meeting with Diamond & Diamond. And we paid him a lot of money after that and up to October the 1st. And I gave him a lot of files. And he took most of those files. So I think that would be the basis for the damages, as well as disbursements that we feel the present time we’re not able to collect. I think that covers it all. We’re also…

13. Q. … (Inaudible)

A. Excuse me. We’re also claiming punitive damages for his conduct […]

Patrick billed $680,345. Patrick was paid 50% of the billings he generated.

[98] Patrick argues that Wallbridge has sustained no damages at all. In fact, his billings totalled $797,000 for the period of February 1, 2021, to October 1, 2021, 50% of which was retained by Wallbridge. Patrick argues that Wallbridge lost nothing from his continued associated with the firm until October 1st and in fact, the firm benefitted.

Decision and Reasons:

[99] I find that there is no genuine issue for trial with respect to Wallbridge’s damages claim, and it shall be dismissed. The only portion of the Wallbridge claim that has merit is for its share of the fees, and payment of the disbursements for the files that went to Diamond with Patrick. That claim has been dealt with in this motion as set out above, and Patrick has not disputed Wallbridge’s entitlement to a share of the fees and disbursements as of the date of transfer (subject to quantification). There are no further damages that Wallbridge is entitled to.

[100] Wallbridge’s primary complaint is that Patrick continued to work at the firm, have access to firm resources and referrals, all while he was actively helping a competitor to identify Sudbury as a center to open an office in, and locate an office. In addition, he engaged in discussions with the law clerk and assistant who worked with him, about going to Diamond. He then used Wallbridge client lists to contact clients. In doing this, and other actions that are pleaded, he breached his fiduciary and contractual duties to the firm.

[101] I find that Patrick did not compete with Wallbridge from February 1, 2021, to October 1, 2021, or in any other way breach his fiduciary or contractual duties to Wallbridge. I find that there is no evidence that Patrick did not properly fulfill his duties to Wallbridge during this time. There is also no evidence that he did not diligently pursue his client’s interests during this time.

Did Patrick Compete?

[102] The duty of good faith owed to an employer, and particularly when someone occupies a position in which they are a party to confidential information was discussed in Restauronics Services Ltd. V. Nicolas, 2004 BCCA 130, at paras. 46, 48 and 50. Competition with an employer will, in most cases, constitute a breach of the duty of loyalty. Conduct that can be characterized as planning and preparation by an employee to compete with the employer does not violate the duty of fidelity. Conduct such as abusing the employer’s confidential information or trade secrets, or beginning to canvass customers or entice fellow employees to join them may be a breach.

[103] In Alishahh v. 1582557 Ontario Ltd., 2006 CanLII 38883, at para. 42, Justice Thorburn (as she then was) in finding that an employee’s long-term plan to leave his employer was not a breach of his good faith obligations, cited the following:

[42] In State Vacuum Stores of Canada Ltd. v. Phillips, 1954 CanLII 240 (BC CA), [1954], 12 W.W.R. 489, 3. D.L.R. 621, (B.C.C.A.), Chief Justice Sloan stated that:

I know further of no law which says that he [an ordinary employee] may not think about that beforehand and may not talk it over with somebody else. And I know of no law that they and that somebody else may not make some provisions for going in the business.

To hold otherwise is to tread dangerously close to saying that in a free enterprise society a man’s thought and conversation of an intention to attempt to better his position in life by leaving his present position and undertaking another even in competition with his employer…

…merely planning on leaving the employer or plotting to do so and conferring with others life-minded is not…an offence against the contracts of employment.

[104] I find that Patrick did not compete with Wallbridge during the period of February 1, 2021, to October 1, 2021. Patrick’s conduct may be characterized as “planning” for his departure. During the planning phase of his departure, Patrick maintained billings consistent with his past history, which benefitted both Wallbridge and Patrick. There is no evidence that he did anything at the firm to undermine Wallbridge. Despite his negotiations with Diamond, Patrick carried on his duties as an associate at the Wallbridge firm. There is no evidence of any complaint of Patrick’s performance during this time or any conduct that suggests that the interests of Wallbridge were being compromised by Patrick’s relationship with Diamond.

[105] There is no evidence that Patrick courted clients for Diamond during this time. There is no evidence that Patrick did any work at all for Diamond, other than assist in establishing the Sudbury office. I find that his actions in doing so constituted planning and not competition. Whether or not Diamond had an active presence in Sudbury previously (which is a fact in dispute), with Patrick’s hire there was a desire on Diamond’s part to have a physical office in Sudbury. There is no evidence that Patrick’s assistance in identifying office space for Diamond utilized confidential information of Wallbridge or in any other way constituted competition while he was actively working at Wallbridge. While I can appreciate the Wallbridge reaction to knowing that one of their associate lawyers was actively helping another competitor start an office, I cannot find that Patrick’s actions extended beyond planning and preparation for his departure. His actions, in my view, are no different than if he had looked for office space for himself had he chosen to start his own firm.

[106] With respect to the two Wallbridge employees who left with Patrick, both Ms. Guenette and Ms. Connors swore affidavits in support of Patrick’s summary judgment motion. Ms. Connors had worked exclusively with Patrick for more than 15 years as of 2021, while Ms. Guenette’s evidence is that she worked for Patrick and another lawyer at the firm for approximately 15 years also. The evidence of both Ms. Connors and Ms. Guenette was that Patrick advised them of his intention to leave Wallbridge but did nothing to encourage or persuade them to leave. Each of them has a very good working relationship with Patrick and did not wish to remain at Wallbridge if Patrick was no longer there. Ms. Guenette’s evidence is that she was looking for alternate employment before becoming aware of Patrick’s intentions. Considering this evidence, and the lack of any evidence to the contrary adduced by Wallbridge, I find that Patrick did not entice these employees to leave and therefore committed no breach of his duty of fidelity, or any other duty owed to Wallbridge.

Did Patrick Improperly Use Client Information?

[107] In Loreto v. Little et al, 2010 ONSC 755 Belobaba J., dealt with a claim by the Plaintiff for breach of contractual and fiduciary obligation and breach of the duty of confidentiality. The claim was by a partner against four associates who left and started their own firm after partnership negotiations were unsuccessful. There are many factual similarities with the case at hand, but also distinguishing facts. In Loreto, there was no period of employment with the firm while the associates were actively establishing their own firm. The relationship with the Loreto firm ended, and they immediately began planning for their own firm and contacting their clients (using a firm client list) to let the clients know what their options were. Over 200 clients went to the new firm.

[108] In Loretto, the departing lawyers were found to be employees. Because those employees had complete responsibility for the personal injury files they had carriage of, they were found to be fiduciaries and they owed fiduciary obligations to the Loretto firm. At para. 28 of Loretto, Belobaba J., held that that there is an implied duty of fidelity when employees leave a firm.

[109] At para. 30 of Loretto, Belobaba J., noted that the general rule preventing departing employees from making use of customer lists does not apply to professionals such as lawyers. He noted that a different approach must be adopted because of the personal nature of professional services and the client’s right to choose. Quoting Potts J., in Goodman v. Newman, [1986] O.J. No. 922 (aff’d by CA [1988] O.J. No. 298), he noted:

[P]rofessionals such as doctors, dentists and lawyers do not have the same proprietary right to their patients or clients as does a corporation to its customers. Professionals provide a personal service and establish a personal relationship with their clients, regardless of where or how the client or patient arrived at the firm or practice. The client or patient ought no[t] to be “handcuffed” to the business. Clients should have freedom of choice.

[110] The paramountcy of a client’s rights over that of the lawyer or the firm, and the obligations to a client are set out in Rules 3.7-7A(2) and (3) of the Law Society of Ontario Rules of Professional Conduct pertaining to when a lawyer leaves a law firm. It says:

[2] The client’s interests are paramount. Clients should be free to decide whom to retain as counsel without undue influence or pressure by either the lawyer or the firm. The client should be provided with sufficient information by the lawyer and the remaining lawyers to make an informed decision about whether to continue with the departing lawyer, remain with the firm where that is possible, or retain new counsel.

[3] The lawyer and the remaining lawyers should cooperate to ensure that the client receives the necessary information on the available options. While it is preferable to prepare a joint notification setting forth such information…In the absence of agreement between the departing lawyer and the remaining lawyers as to who will notify the clients, both the departing lawyer and the remaining lawyers should provide notification.

[111] In reviewing the jurisprudence that has developed and the LSO Rules, at para. 34 of Loretto, the law was summarized as follows:

• The departing lawyer not only has the right but the obligation to contact the client and tell her that he has left the firm. This does not constitute solicitation.
• When he contacts the client, he must present three choices: the client can remain with the firm, transfer her file to the departing lawyer or hire another lawyer.
• If the client agrees to go with the departing associate and signs the requisite direction and authorization, the file should be transferred to the departing lawyer.

[112] Based on the foregoing, I agree with Patrick that Wallbridge wrongly took the position that the firm’s clients were the firm’s property. I further agree with Patrick that there was no breach of fiduciary duty or confidentiality, or otherwise, in Patrick using client contact information he had either downloaded or received while at Wallbridge solely for the purpose of contacting the clients to offer them the three choices referred to above: Loretto, at para. 39.

[113] Wallbridge has acknowledged that they have no evidence of Patrick contacting any client prior to October 1 to notify them of his departure. There is no evidence of Patrick, at any time, trying to persuade clients to move over to Diamond. I find that Patrick’s correspondence to his Wallbridge clients was neutral and appropriate and did not constitute solicitation of those clients. There is nothing actionable about Patrick’s conduct.

[114] There is a factual dispute with respect to whether Patrick asked Almeda to jointly write to clients. Resolving that dispute is not necessary for the purpose of my decision. Even if I were to assume that Patrick did not ask if a joint letter was possible, his actions in unilaterally contacting the clients cannot be criticized on the facts of this case. Based on the letter from James on October 1st, Patrick’s immediate termination, and the email received from Wallbridge counsel on October 1st, it was reasonable for Patrick to assume that joint notification may not be possible. James specifically said in the letter “You are to have no further contact with any firm clients past or present. We will reach out to all clients to ensure an orderly transition”. The LSO Rules are clear that regardless of the nature of the relationship with the firm, the departing lawyer also has an obligation to contact the client. Patrick did nothing improper by complying with his LSO obligations. While it is understandable that Wallbridge wanted to control Patrick’s contact with clients post-termination of its relationship with Patrick, Wallbridge could not (and should not) have attempted to prevent Patrick from complying with his professional obligations. See also: Robert Findlay Law Office Professional Corporation v. Werner, 2015 ONSC 2955, at para. 25.

[115] I further find that there is no evidence that Patrick used the Wallbridge client information to secure a competitive edge for himself or Diamond, to the detriment of Wallbridge. There is also no evidence that Patrick breached any client confidentiality.

Is any other conduct a breach of Patrick’s fiduciary or contractual duties to Wallbridge?

[116] I agree with Patrick that there is no evidence that he did anything harmful or in breach of any obligation to Wallbridge (other than leave) or a Wallbridge client during the period in question.

[117] Wallbridge has questioned Patrick’s settlement of three files in the hours before he notified Almeda of his departure. James alleges that Patrick stayed associated with the firm as long as he did just so he could preserve his entitlement to his share of the fee on these files. There is also a suggestion that Patrick did something untoward in having these clients transfer their files to Diamond to have the settlement documents completed and finalized, thereby ensuring that Diamond received the settlement funds and not Wallbridge. In the absence of anything more, even if this is the case, I cannot say that Patrick breached any duty. There is no evidence that the settlement was improvident, or that Patrick sacrificed his client’s interests or Wallbridge’s interest in the contingency fee merely to secure his entitlement to his share before terminating his relationship with the firm. Patrick does not take the position that Wallbridge’s disbursements and its fees should not be paid. As the majority of the work on the case was performed at Wallbridge, Wallbridge will still receive the majority of the fee (subject to Patrick’s share). I see no harm done to Wallbridge or the clients.

Are there any damages?

[118] Based on the evidentiary record before me, there is no evidence of damages suffered by Wallbridge. I am particularly perplexed by Wallbridge’s claim for recovery of Patrick’s commission paid from February 1st to October 1st given the significant financial benefits derived by Wallbridge from Patrick’s work during this period. The situation would be different if Patrick had been paid but did not generate revenues to justify such payment (i.e. if he had received a draw inconsistent with the revenue earned from his billings).

ORDER:

[119] I did not have draft judgments. Counsel are at liberty to word the partial judgment differently than set out in this decision, provided they agreement. I may be spoken to with respect to the wording of the partial judgment if my order is not clear, is contrary to any agreement reached by the parties in this proceeding, or anything I have omitted.

[120] It is ordered that:

a. Except as provided for in this partial judgment, the Wallbridge claim against Patrick is dismissed.

b. Patrick shall have judgment for $21,000 representing his 50% share of the fees billed and collected in September 2021.

c. The fees, disbursements, and HST for the three files totalling $471,987.03 shall be allocated, and judgment shall issue as follows:

i. To payment of all reasonable disbursements of Wallbridge and Diamond.

ii. Fees allocated as between Wallbridge and Diamond as they agree upon to account for all work, save and except finalizing the settlement documents and structuring the settlement, being performed while at Wallbridge. If they cannot agree, I may be spoken to.

iii. Patrick shall receive 50% of the share received by Wallbridge if all funds were billed and collect in 2021. Any portion of the fees billed and collected in 2022 shall be subject to payment at one-third if Patrick’s total post-departure billings for 2022 are less than $450,000, and 50% if they are more than $450,000.

d. Wallbridge shall be entitled to payment of its fees and disbursements for files transferred to Diamond, subject to payment to Patrick of his share.

e. Patrick shall be entitled to his either one-third or 50% share (as the case may be) of amounts billed and collected by Wallbridge on files of which he had carriage while at Wallbridge, taking into consideration that a reasonable allocation must be made to the lawyer assuming carriage of the matter, and negligible fee claims for a file should be avoided.

f. Wallbridge and Patrick shall provide each other with an accounting of amounts billed and collected for all files to which the fee sharing structure may apply, and any other necessary information to determine the fee allocation between Wallbridge and Diamond.

g. If the parties cannot agree as to the terms of the order, or the amounts payable, they may arbitrate the issue in accordance with their prior agreement or return the matter before me.

h. If costs cannot be agreed upon, written submissions shall be delivered as follows:

i. The party claiming costs shall do so within 30 days of the release of this decision, failing which costs shall be deemed to be settled.

ii. The responding party shall do so within 30 days of receipt of the claimant’s submissions;

iii. Any reply shall be delivered within 15 days of receipt of the responding submissions.

iv. Submissions shall be limited to 5 pages, double-spaced, not including a bill of costs, dockets, offers to settle and caselaw, save and except that the reply shall be limited to 2 pages, double-spaced.

“Original signed by” The Honourable Madam Justice T.J. Nieckarz

Released: October 23, 2024