Legal Blog

Advice

Clients have the right to choose and fire their lawyers and to assess their accounts. Not a startling proposition; however, one that some lawyers do not seem to appreciate. Such was the case in Heydary Hamilton PC v. Muhamad, 2013 CarswellOnt 11120 (S.C.J.).

Retainer

The law firm (the “Firm”) and its client had a fixed fee retainer. The client agreed to pay the Firm $200,000 in advance for legal representation in an action against the client’s former bank. In addition, the client was to pay all disbursements and an additional 25% plus HST of all amounts recovered in the claim. This was a sweet retainer for the Firm.

 

The solicitor-client relationship broke down and the client sought advice from another lawyer regarding that relationship. The lawyer commenced an application seeking an assessment of the Firm’s accounts and a declaration that the retainer was unenforceable. So far, nothing unusual. Indeed, the written retainer noted that the client could assess any of the Firm’s accounts within 6 months of delivery.

 

How did the Firm react? It commenced an action against the Client and the lawyer. It claimed that the lawyer induced the client to breach his contract with the Firm; interfered with its economic relations; engaged in a civil conspiracy, civil extortion, and civil intimidation; and took part in a fraudulent conveyance.

The lawyer brought a motion to strike the entire claim against him.

 

Economic Torts

 

What were the allegations against the lawyer? He reviewed the retainer agreement and advised the client to assess the accounts. For that, he somehow induced breach of contract and interfered with economic relations.

 

The judge noted that every counsel consulted by one side in a legal dispute does what the lawyer was accused of doing. He was retained to give his advice in a dispute; he gave that advice; and the client took it. The judge stated,

 

“Far from being an actionable wrong, it was Schorr’s duty as a lawyer to advance his client’s interest and not to protect those of the opposite party in the negotiations or dealings that he is engaged in. For this reason, courts have often found it to be an abuse of process to sue opposing counsel, under the guise of any cause of action, for their conduct of a case.

 

A solicitor owes no duty of care to the opposite party and no action for any breach of such duty can lie against a solicitor in advising his client to take legal action against an opponent. The courts have long been at pains to point out that, for reasons of public policy inherent in the nature of the adversary process, an action in negligence against the solicitor for one’s adversary in litigation is not tenable in the law of Ontario.”

 

No duty of care meant no cause of action regarding the advice that the lawyer gave to the client.

 

The tort of inducing breach of contract requires an element of impropriety. The tort of interference with economic relations requires unlawful conduct. So what is the impropriety or unlawful conduct? None. How can there be impropriety or unlawful conduct when a lawyer simply advises a client?

 

Even worse for the Firm, it had commenced this type of action before – against a lawyer who had the audacity to advise another client to fire the Firm – under approximately the same circumstances. The Firm lost that action and appealed the decision. It then lost in the Court of Appeal. In its decision, the Court of Appeal stated that a solicitor’s sole economic interest in a retainer is to have his fees paid for the work he performs. Hard to complain about losing your retainer when your sole interest is in the prior work performed and your accounts are being assessed. No breach of contract by the client means no tort by the lawyer to induce the non-existent breach.

 

The judge held that, even if the lawyer influenced the client’s decision to terminate the Firm’s retainer, the termination deprived the Firm of nothing.

 

Defamation

 

The Firm claimed that the lawyer defamed it. The judge noted that nothing in the claim set out what the defamatory statement was. That, in itself, should have been enough to have this claim struck. However, the judge assumed that  the Firm was referring to the lawyer’s advice to the client to assess the account. The Firm, therefore, was claiming that the lawyer defamed it by doing and saying, “what every litigation lawyer does and says every day.”

 

That claim also did not go far.

 

Conspiracy

 

The tort of conspiracy needs one of the following two scenarios: the predominant purpose of the conspirators is an intent to injure the claimant, or the conspirators unintentionally injured the claimant by way of their unlawful conduct. The judge dealt with these quickly. The lawyer’s purpose in giving his advice was to advance the interests of his client, not to injure the Firm. Further, legal advice is not an instance of unlawful conduct. As the judge put it, “Suing opposing counsel for damages for his representation of the adverse party is simply not how the system works.”

 

Extortion et al 

The lawyer advised the Firm that he was going to commence an application on behalf of the client and that he was forwarding a complaint to LSUC regarding the retainer. This, according to the Firm, was extortion and intimidation. The Firm also alleged that, because the client paid a retainer amount to the lawyer, that payment was a fraudulent preference or conveyance. After all, at that time the client had not fully paid all of the fees that the Firm was claiming.

 

These claims were so ridiculous that they needed almost no answer. As to the letter, the judge stated, “What else is lawyer supposed to do when retained by a client to challenge another law firm’s fees.” The judge held that the notification regarding LSUC was a courtesy only. As to the fraudulent conveyance, how else is a client to pay a lawyer to challenge a former lawyer’s fees?

 

Result

 

The judge dismissed the action without leave to amend the pleadings. What happened with costs? The lawyer noted that the Firm had made serious allegations against him and that the Court of Appeal, in the previous case we discussed, awarded substantial indemnity costs (90% of the costs) against the Firm. He therefore requested costs on a full indemnity basis (i.e. 100% of his costs).

 

The Firm argued that only partial indemnity costs were warranted and that the judge should order that the costs be assessed by an assessment officer rather than being immediately fixed by the judge. The judge, as he should have, dismissed those arguments. He awarded substantial indemnity costs and fixed them at $30,000, just about what the lawyer had requested.