Legal Blog

Payment

A lawyer does some work for a client; the client then pays for the work that has been done.  It’s an attractive concept, but concepts and reality do not always coincide.

Assessment

We all know that a client may assess a lawyer’s account as of right within the first twelve months after its delivery.  The client may not assess the account thereafter except under special circumstances and must obtain an order of the court to do so.  The case of Wells v. Biback, an unreported 1996 decision of Madam Justice Simmons, arose out of a motion by a client to obtain an order allowing an assessment to proceed two years after delivery of the account.

The lawyer was retained in a personal injury matter.  The client authorized the lawyer to accept a settlement offer and agreed, in writing, that the lawyer’s fee would be $60,000.00. The lawyer forwarded an account that was, in essence, simply a trust balance ledger showing money that had been received and disbursed. One item dealt with the lawyer’s fee as follows:  “to our fee for all services rendered herein, including all necessary correspondence and attendances incidental thereto – $60,000.00”. As part of the trust balance ledger, the lawyer took the $60,000.00 fee from the monies held in trust and paid the balance to the client.

Special Circumstances?

Madam Justice Simmons held, on this issue, that:

(a) the client signed an agreement agreeing to the fee;

(b)  the fee was not large enough to be unconscionable or to amount to fraud in the circumstances; and

(c)  the client did not adduce sufficient evidence to substantiate her allegation that she was emotionally devastated at the time that she agreed to the fee. Further, her credibility regarding assertions of intimidation was substantially diminished by her failure to provide particulars of the allegations in her affidavit.

Valid Account?

Before the twelve month limitation period starts to run, a valid account must be delivered.  Madam Justice Simmons held that the account delivered by the lawyer was not a valid account.  She stated that:

“the obligation of a solicitor is to deliver a bill that provides sufficient particulars of the services performed to permit the client to obtain an opinion as to its reasonableness and which would permit the assessment officer to proceed with an assessment … The fact that the client has previously agreed to the quantum of the fee should not obviate these requirements, given that the account remains subject to assessment absent an agreement in writing within the meaning of section 16 of the Solicitors Act”.

Madam Justice Simmons adopted the reasoning of Mr. Justice Binks in St. Jean v. Girones, Chiccone & Wallbridge, a 1993 Ontario Court (General Division) decision, in which he stated:

“a reasonable statement or description of the services performed must be given.  It is not necessary to go into extensive detail, but the nature of the services performed must be sufficiently stated to enable the taxing officer to fix the proper amount of fees chargeable or to say whether the amount claimed is reasonable … A bill which lacks the requisite formalities or particularity does not qualify as a bill under the Solicitors Act and cannot be said to have been ‘delivered’ within the meaning of the Act.  The same principles apply notwithstanding that the bill is alleged to have been paid”.

Mr. Justice Binks went on to say that:

“where the solicitor has deducted the amount of the account from the proceeds of a judgment or settlement, and rendered the account and paid the amount of the trust proceeds to the client, there has been no voluntary action on the part of the client making the payment and, accordingly, section 11 of the Solicitors Act does not apply and it is unnecessary for the client to show special circumstances before having the account taxed”.

This excerpt would not have been applicable in the Wells case due to the written agreement.

Madam Justice Simmons therefore found that the account, as delivered by the lawyer, did not comply with the Solicitors Act and ordered that the lawyer deliver a valid account for assessment.  As there were no special circumstances, the client would have been out of luck if the lawyer had taken the time to deliver a proper account.  However, because the lawyer did not do it right, the lapse of time did not save him from an assessment.

Written Agreement

At times, a lawyer realizes that the client does not have the cash to pay the lawyer’s professional fees and decides to take a chance on the ultimate financial viability of the client.  The fees may be postponed to a later date. In some cases, instead of payment in cash, the lawyer may take back a share of the client’s business venture.

In Stritzl v. Wassenaar, the lawyer decided to take back a 30% equity interest in the client’s venture in exchange for professional services rendered to the client and an agreement to lend the client $100,000.00 on “good terms”. The client, who was given independent legal advice, did not deny the existence of the agreement with the lawyer. However, he alleged that, in addition, the lawyer had agreed to contribute $350,000.00 by way of capital and had not done so.  The only document was a one-page declaration of trust stating that the sole shareholder of the client held 300 shares in trust for the lawyer. The lawyer and the client then acted in a manner consistent with the agreement as alleged by the lawyer.

The case, which is unreported, made its way to trial and was decided in favour of the client. The lawyer unsuccessfully appealed to the Divisional Court.  Leave to appeal to the Court of Appeal for Ontario was denied in 1996.

The Divisional Court held that if a lawyer enters into a commercial contract with a client, the lawyer has the onus of showing that the transaction is just and fair for the client.  The lawyer must also prove that the client has received the best professional assistance that the lawyer could have given, had the client been negotiating with a third party instead of the lawyer. In essence, the court held that “the solicitor must show that the client was duly informed and fully advised, and that the contract was fair”.

Notwithstanding the view of the trial judge that the client’s story “defied the law of gravity”, he was not satisfied that the conduct of the lawyer was appropriate or “good enough”. The Divisional Court stated that the “solicitor did not document the agreement as he would have done if the client were selling his shares to a third person.  The usual protections were not provided”. The Divisional Court held that the lawyer had not met the onus on him and that, as a result, he had no right to the shares.

 

Moral

The above cases led to the same result.  The clients won and the lawyers lost.  Had the lawyers spent the time to draft a proper account, or agreement, the results would have been reversed.