Ontario: the limitation of claims arising from solicitor’s undertakings

Lofranco v. Azevedo considers the limitation period applicable to claims arising from solicitor’s undertakings.

The plaintiff’s new personal injury lawyer undertook to protect the former lawyer’s reasonable account.  The limitation period for the claim to remedy the breach of the undertaking (that is, the failure to pay out the reasonable account) would commence only when the undertaking was revoked:

[40]           In my view, it is not open to the Estate to argue that the limitation period runs against the applicant.  Given my finding that there was a valid undertaking given on behalf of Mr. Pereira, as recently discussed by Quigley J. in Cozzi, at para. 62, the limitation period stops running once the undertaking is given, unless the undertaking is revoked:

63     First, Mr. Cozzi tries to counter that proposition by noting that Kilian D.J. correctly adopted the law that a personal undertaking from a solicitor is not discharged by notification. I agree. Moreover, I agree with the appellant on the general proposition that a solicitor’s undertaking and a client’s undertaking will continue to be enforceable without the interference of a limitation period: Sokoloff v. Mahoney. The Deputy Judge specifically recognized this in para. 17 when he quoted from para. 15 of Sokoloff as follows:

15 There is also clear case law that a solicitor’s undertaking as well as a client’s undertaking is enforceable, can be relied upon, and stops the clock running for the purpose of a limitation defence unless revoked. In Tembec Industries Inc. v. Lumberman’s Underwriting Alliance(2001) 2001 CanLII 28252 (ON SC)52 O.R. (3d) 334[2001] O.J. No. 72 at paras 21-22, Ground J. held that an undertaking to pay a specified amount in damages gives rise to promissory estoppel where the recipient of the undertaking relied on it. Such reliance is expressly contemplated by a solicitor who gives an undertaking, as Wilton-Siegel J. held in Bogoroch & Associates v. Sternberg[2005] O.J. No. 2522 at para 38.

The former lawyer also had “a charging lien” under the Solicitor’s Act to which no limitation period applied:

[42]           Another basis on which I would find that the limitation period does not run against the applicant is the nature of its interest in the funds held by the Azevedo Firm.  In Thomas Gold Pettinghill LLP, at paras. 88 and 89. Perell J. explained that, besides charging orders that can be made under the Solicitor’s Act, the Court has inherent jurisdiction “to charge assets recovered or preserved through the instrumentality of a lawyer for a client”.

[43]           Perell J. also noted, at para. 101, that, in circumstances where the Court is satisfied that the preconditions are met for a charging lien, the limitation periods in the Limitations Act, 2002, do not apply:

For present purposes, the three points to note from Justice Henry’s decision in Re Tots and Teens Sault Ste. Marie about a charging lien made under the court’s inherent jurisdiction are: first, the charging lien creates the proprietary interest of a secured creditor; second, subject to being declared, the charging lien is an inchoate interest that pre-dates the court’s declaration; and third, the charging lien is intrinsically declaratory in nature. The last point supports Cassel Brock’s argument that a charging lien comes within s. 16 (1) (a) of the Limitations Act, 2002 and is not subject to any limitation period.

[44]           I am satisfied that the applicant is entitled to a charging lien.  In Thomas Gold Pettinghill LLP, at para. 88, Perell J. explained that the preconditions for a charging lien are that “(a) the fund, or property, is in existence at the time the order is granted; (b) the property was recovered or preserved through the instrumentality of the lawyer; and (c) there must be some evidence that the client cannot or will not pay the lawyer’s fees”.

[45]           In this case:

(a)   the funds held in trust by the Azevedo constitute the fund;

(b)   the Lofranco Firm did some work on Mr. Pereira’s file.  While there is a dispute about the extent of the work done, there is no dispute that the firm was involved in moving the matter forward; and

(c)   It is evident from the position taken by the Estate on this application that it will not agree to pay the fees claimed by the Lofranco Firm.

[46]           Looking at the matter from a different perspective, both the Solicitor’s Act and the common law provide special protection to lawyers in recovering their fees in circumstances in which a plaintiff is successful, either through a settlement or by obtaining judgment. The undertaking Mr. Azevedo gave on Mr. Pereira’s behalf and the fact that Mr. Pereira consented to the money being held in trust by the Azevedo Firm once settlement was reached, in my view, constitute an acknowledgement by Mr. Pereira that he understood the Lofranco Firm’s proprietary interest in the funds. However, as discussed below, given that the undertaking was subject to the fees being reasonable and Mr. Pereira’s ability to assess the account, the issue remains whether the applicant is entitled to payment of its full account or whether the Estate is entitled to assess the account.

I’m not familiar with the jurisprudence cited for this conclusion.  A charging lien may well be declaratory, but surely here it would result in the consequential relief of the former lawyer being entitled to the disputed funds?

A declaration that results in consequential relief doesn’t fall within s. 16(1)(a).


Ontario: the limitation of assessing solicitor bills

Gardiner Roberts v. Canada International Distributing Inc. provides a useful overview of the operation of the time limit (which is not strictly a limitation period) in s. 3 of the Solicitors Act. In particular, it underscores the importance that an account be final in order to trigger the running of time:

[28]           Section 3 of the Solicitors Act provides that where the retainer is not disputed and there are no special circumstances, a client may obtain an order for:  a) the delivery and assessment of the solicitor’s bill; or b) for the assessment of a bill already delivered, within one month from its delivery.

[29]           Gardiner Roberts argues that it provided its “‘final’ account, i.e. the last account” on November 30, 2016.  This, it is argued, is more than one month before Cana sought an assessment.  Thus, Cana is not able to obtain an assessment under s. 3.

[30]           Cana counters that the “last” account is not a “final” account; Gardiner Roberts has refused to render a final account in order to deprive Cana of its ability to assess the accounts.  Cana is entitled to have a final bill delivered and an assessment of the bill, which would include all interim accounts rendered.

[31]           When assessing the submissions of counsel, I keep in mind that the purpose of the Solicitors Act and the assessment process is “to regulate the legal profession and protect the public in their dealings with solicitors”: Laushway Law Office v. Simpson2011 ONSC 4155 (CanLII), at para. 143.

[32]           As explained by Sharpe J.A. in Price v. Sonsini2002 CanLII 41996 (ON CA)[2002] O.J. No. 2607 (C.A.), at para. 19:

Public confidence in the administration of justice requires the court to intervene where necessary to protect the client’s right to a fair procedure for the assessment of a solicitor’s bill.  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.

[33]           With this legal framework in mind, I have concluded that Cana is entitled to an assessment. Gardiner Roberts has failed to render a final bill: the November 30 account sent by Gardiner Roberts is an interim account, as were all previous accounts rendered by the law firm.  Given Gardiner Roberts’ failure to render a final account, it was open to Cana to obtain an order pursuant to s. 3(a) for the delivery of a final bill and an assessment.   All of the interim accounts were related to the same matter, and therefore the limitation period flows from the date of delivery of the final account.  Thus, Cana is entitled to an assessment of all of the accounts, even though many of them were paid.

Gardiner Roberts has Failed to Render a Final Bill

[34]           Following the November 30 account, Gardiner Roberts prepared written submission on costs.  Gardiner Roberts seemed (at least initially) to view the costs submissions as simply a continuation of the ongoing work being done on the Standard Innovation matter.  This seems clear from the email of Mr. Wolch on November 21, where he said “… I must also prepare submissions with respect to costs…”  Indeed, it is difficult to see the costs submissions following a lengthy trial as being anything other than part and parcel of the same matter.

[35]           Despite repeated requests by Cana, Gardiner Roberts has refused to provide a bill for the work done on the costs submissions.  Cana argues that Gardiner Roberts cannot simply refuse to render a bill for this final work done, in order to circumvent Cana’s right to an assessment under s.3 of the Solicitors Act.  I agree.  Cana properly moved pursuant to s. 3(a) of the Solicitors Act for the delivery of the final account.

            The Limitation Period Flows From the Final Account

[36]           Upon delivery of such final account, Cana is entitled to an assessment of all previous interim accounts.  As noted in Price v. Sonsini, at para. 15, where interim accounts are rendered in connection with the same matter, the limitation period for assessment under the Solicitors Act begins to run from the date of the final account, even if some of the interim accounts have been paid.

The Accounts Rendered Thus Far Have Been Interim Accounts

[37]           In Shapiro, Cohen, Andrews, Finlayson v. Enterprise Rent-a-Car Co.1998 CanLII 1043 (ON CA)[1998] O.J. No. 727 (C.A.), at para. 14, the Court of Appeal referred to a number of factors that supported the motions judge’s conclusion in that case that all accounts rendered prior to the final account were interim accounts.  Most of those factors apply to the present case.  For example:

•        All accounts relate to once piece of litigation.  The accounts all involve the action against Standard Innovation.  It was the same matter; they are part of a continuum.  This is illustrated by the fact that all accounts said “Re: Standard Innovation” and had the same file number.

•        None of the account were marked as final accounts.  Moreover, the retainer agreement specifically said that the firm would render interim accounts and reserved the right to take into account the result achieved in the final account.

•        Considerable adjustments were at times made to the accounts.  According to Gardiner Roberts, it wrote off more than $70,000 because of request for discounts by Cana.  An example of such a discount occurred on December 9, 2011.  On that date, Mr. Wolch agreed to reduce the amount owed by Cana by $20,000.  But in reducing the account, Mr. Wolch noted that if the firm was successful in the matter, and recovered a reasonable amount, that this money would be repaid.  This supports that the accounts were interim, not final.

•        Cana was led to believe that the work on the interlocutory injunctions would not be lost.

•        Given the nature of the services, Cana could only appreciate the services performed at the end of the retainer.  This is highlighted in the retainer agreement, where Gardiner Roberts reserved the right to take into account the results obtained in determining its final account.

[38]           Looking at these factors, I find that the accounts rendered thus far have been interim. No final bill has been delivered.  Gardiner Roberts cannot avoid s. 3 of the Solicitors Act by refusing to render a final account.  I find that pursuant to s. 3(a) Gardiner Roberts is required to deliver a bill.  The limitation period for the interim accounts rendered flows from the final bill.  Thus, Cana is not time barred from an assessment of the interim accounts in this matter, even where those accounts have been paid.

[39]           I turn now to the alternative submission raised, which is that there are special circumstances which justify an assessment of the accounts.

The decision also describes the test for special circumstances:

[40]           Where there are special circumstances, pursuant to s. 4(1) of the Solicitors Act a client may obtain an assessment of an account more than 12 months after it was delivered.  This applies whether the bills are paid or unpaid.  Further, pursuant to s. 11 of the Solicitors Act, a client may obtain an assessment of bills already paid within 12 months of delivery of an account, if the special circumstances of the case appear to require the assessment.  For bills rendered within 12 months, but that remain unpaid, the court has inherent jurisdiction to order an assessment: Enterprise Rent-a-Car, at para. 8.

[41]           There is a presumption that payment of a bill constitutes implied acceptance of its reasonableness.  This presumption, however, is rebuttable.  As noted in Enterprise Rent-a-Car, at para. 19, the presumption is refuted to some extent by the fact that clients cannot be expected to bring an assessment while the lawyer is representing them, as they would not wish to alienate the lawyer.

[42]           In Enterprise Rent-a-Car, at para. 21,  the Court outlined a number of factors showing that the special circumstances test had been met in that case.  Similar factors can be found in the present case, including the following:

•        Cana was not familiar with commercial litigation nor with injunctions;

•        Cana understood that if the interlocutory injunction were granted, it would effectively resolve the dispute and end the litigation, and the work done would contribute significantly to trial preparation;

•        Cana did not give instructions to proceed at all costs; to the contrary, Cana communicated to Gardiner Roberts that it expected that the firm would keep legal costs within reason;

•        It is unrealistic to expect that Cana should have sought to have the bill assessed during the course of an ongoing matter such as this case;

•        Cana could only have appreciated the nature of the services at the conclusion of the retainer.   This is supported by the retainer agreement, which specified that Gardiner Roberts may take into account the result obtained in the final bill;

•        Cana was not aware that it could seek to have its accounts reviewed until it retained new lawyers.  As noted in Enterprise Rent-a-Car, at para 20, lawyers “should take the opportunity to inform their clients of their right to an assessment at appropriate times during the solicitor-client relationship.”  Gardiner Roberts, however, failed to advise Cana of its right to have its accounts assessed, even when Cana had raised objection to certain accounts;

•        Gardiner Roberts billed Cana more than $1 million, without achieving any success.

[43]           In light of the above factors, I find that the test for special circumstances has been met.   Cana is entitled to an assessment of the accounts rendered by Gardiner Roberts pursuant to ss. 4(1) and 11 of the Solicitors Act.