



COURT OF APPEAL FOR ONTARIO

CITATION: Evans Sweeny
    Bordin LLP v. Zawadzki, 2015 ONCA 756

DATE: 20151109

DOCKET: C60119

Gillese, Lauwers and Brown JJ.A.

BETWEEN

Evans Sweeny Bordin LLP

Respondents

and

Joseph Zawadzki, Frenchmen's Creek Estates Inc.
    and 550075 Ontario Inc.

Appellants

William L. Roland, for the appellants

Michael Bordin, for the respondents

Heard: October 20, 2015

On appeal from the order of Justice James A. Ramsay of
    the Superior Court of Justice, dated February 6, 2015, with reasons reported at
    2015 ONSC 869.

Brown J.A.:

I.

OVERVIEW

[1]

This appeal involves the enforceability of a
    contingency fee agreement entered into between the appellants, the owners and
    developers of lands in Fort Erie worth about $20 million, and the respondent
    solicitors. Under the agreement, the appellants agreed to pay the respondents a
    bonus of $500,000 in the event their appeal from a final order of foreclosure over
    their lands was granted. Their appeal was granted, and the respondents rendered
    an account for the bonus. The appellants obtained an order to assess that and
    two other accounts before an assessment officer.

[2]

The assessment officer held that the contingency
    fee agreement was not fair or reasonable. On competing motions to oppose
    confirmation of the assessment officers report, the motions judge held that
    the assessment officer lacked the jurisdiction to consider the fairness and
    reasonableness of the contingency fee agreement. He also held that the agreement
    was fair and reasonable.

[3]

The appellants appeal from that order. They seek
    to restore the decision of the assessment officer or, alternatively, an order
    directing the assessment of the contingency fee agreement before a judge of the
    Superior Court of Justice.

[4]

I would dismiss the appeal. The motions judge
    correctly found that the assessment officer lacked jurisdiction to consider the
    fairness and reasonableness of the contingency fee agreement. The record before
    the motions judge enabled him to assess fairly the agreement, and there is no
    basis for appellate intervention in his conclusion that the agreement was fair
    and reasonable.


II.

FACTS

[5]

Joseph Zawadzki is the principal of Frenchmens
    Creek Estates Inc. and 550075 Ontario Inc. Those corporate appellants owned
    vacant development lands in Fort Erie which were subject to two mortgages. They
    defaulted on the mortgages. A settlement was reached under which the appellants
    consented to foreclosure in the event they did not perform the terms of the
    settlement. In 2006, the mortgagee obtained
ex parte
final orders of
    foreclosure against the properties. The appellants applied for relief from foreclosure.
    By judgment dated March 14, 2007, Lofchik J. dismissed their application (the
    Judgment).

[6]

The appellants thereupon retained the respondent
    solicitors, Evans Sweeny Bordin LLP, to appeal the Judgment. In a May 8, 2007
    letter to Zawadzki, the respondents estimated that the costs of the appeal
    would be around $35,000.

[7]

In June 2007, Zawadzki raised the prospect of
    paying the respondents a bonus of $500,000 in the event the appellants were
    able to sell the properties. Negotiations ensued, including the exchange of
    draft contingency fee agreements. In the result, the parties entered into an
    October 17, 2007 Contingency Fee Retainer Agreement (the Agreement) governing
    the appellants retainer of the respondents to represent them in an appeal of
    the Judgment.

[8]

Under the Agreement, the appellants agreed to
    pay the respondents the full sum of all legal fees and all disbursements
    incurred by the Law Firm. The Agreement went on to provide for the additional
    payment of a bonus to the respondents, setting out how to calculate the bonus
    in the event the appeal was granted or in the event the appeal was settled. Section
    5 of the Agreement provided that, In the event that the appeal is granted, the
    Law Firm shall be paid $500,000The above amounts shall be due and payable to
    the Law Firm within 60 days of the granting of the appeal.

[9]

The appeal was granted by order of this court
    dated February 6, 2008. The respondents rendered an August 7, 2008 account to
    the appellants for $700,307.96, which included the $500,000 bonus.

[10]

Subsequent proceedings ensued between mortgagor
    and mortgagee that ultimately resulted in a July 2008 judgment discharging the
    two mortgages from title, the appeal from which this court dismissed in January
    2009. On July 9, 2009, the respondents delivered two further accounts to the
    appellants for the additional work performed in the amounts of $96,524.42 and $15,711.53.

[11]

On August 11, 2009, Zawadzki obtained an order
    for assessment. As a result of an inquiry from the assessment officer, the
    parties obtained, on consent, an amended assessment order dated December 14, 2010
    (the Assessment Order), which included the corporate appellants as client
    parties and identified the three bills as the subject matter of the
    assessment.

[12]

A 10-day assessment hearing was held in late
    2011 and early 2012. Some 17 months following the completion of the hearing,
    the assessment officer released reasons dated September 27, 2013. He released
    supplementary reasons on costs together with his Report and Certificate (the
    Report) on December 10, 2013. The assessment officer assessed the respondents
    bills for time and disbursements at $268,354.13  a reduction of $44,179.78
    from the invoiced amount of $312,533.91  and disallowed the respondents
    billing of the bonus on the basis that the bonus, as it was imposed on the
    Clients and as it was applied in the bill, is neither fair nor reasonable, in
    all or in part.

[13]

Both parties moved to oppose confirmation of the
    Report: the appellants sought a further reduction of the invoiced amounts; the
    respondents did not object to the fee reduction, but sought payment of the
    $500,000 bonus.

[14]

By order dated February 6, 2015, the motions
    judge dismissed the appellants motion to reduce the amount payable, granted
    the respondents claim to a bonus of $500,000, and varied the Report
    accordingly. In reaching that result, the motions judge made two main findings:
    (i) the assessment officer lacked the jurisdiction to consider the fairness and
    reasonableness of the Agreement; and, (ii) even if the assessment officer had
    possessed such jurisdiction, the motions judge would have set aside the assessment
    officers conclusion that the Agreement was not fair and reasonable.

III.

ISSUES ON APPEAL

[15]

The appellants appeal the order of the motions
    judge, seeking to set it aside and reinstate the Report. Alternatively, they seek
    an order directing a trial of an issue as to whether the Agreement is fair and
    reasonable in all the circumstances. The appellants raise two main grounds of
    appeal. They submit that:


(i)

the motions judge erred in holding the assessment
    officer had no jurisdiction to consider the enforceability of the Agreement. They
    argue that the respondents raised no objection to his jurisdiction prior to the
    issuance of the Report, and the respondents therefore condoned and acquiesced
    by their conduct in the jurisdiction of the assessment officer; and


(ii)

the motions judge erred in holding that the
    Agreement was fair and reasonable because he failed to give proper deference to
    the findings of fact made by the assessment officer and lacked an adequate
    record to make such a determination.

IV.

THE JURISDICTION OF THE ASSESSMENT OFFICER

[16]

A contingency fee agreement is enforceable only
    if it is both fair and reasonable:
Henricks-Hunter (Litigation
    Guardian of) v. 814888 Ontario Inc.
, 2012 ONCA 496,
294
    O.A.C. 333,
at para. 13.

[17]

In
Cookish v. Paul Lee Associates
    Professional Corporation
, 2013 ONCA 278,
305 O.A.C. 359, this court
    considered the jurisdiction of assessment officers (who are not masters) to
    consider issues concerning contingency fee agreements.  This court held, at
    paras. 39 and 43, that
issues involving the enforceability of
    contingency fee agreements, including whether they are fair and reasonable,
    should be resolved by judges.  The
Solicitors Act
,
R.S.O. 1990, c. S.15, does not authorize assessment
    officers to consider such issues: at para. 43.  Although a judge can refer issues
    to an assessment officer for determination pursuant to the reference procedure
    in rule 54 of the
Rules of Civil Procedure
, a
    judge should not refer issues concerning the enforceability of a contingency
    fee agreement; at most, a judge may refer to an assessment officer the
    calculation of the quantum of a contingency fee under a valid contingency fee
    agreement: at paras. 44 and 47.  Where a judge orders a reference to an
    assessment officer, the assessment order must contain clear language of
    delegation  language
that simply refers a bill to an
    assessment officer for assessment is insufficient to vest in the assessment
    officer jurisdiction to determine disputes arising under a contingency fee agreement:
    at paras. 51, 53 and 54.

[18]

In the present case, the Assessment Order did
    not refer to the assessment officer any questions about enforceability of the
    Agreement. Applying the decision in
Cookish
,
    the motions judge understandably held that the assessment officer lacked the
    jurisdiction to decide whether the Agreement was fair and reasonable because
    the Assessment Order had not referred to him any issue concerning the enforceability
    of the Agreement.

[19]

The appellants submit that the motions judge
    should not have applied
Cookish
in the
    circumstances of this case because the respondents were estopped from relying
    on
Cookish
to oppose confirmation of the Report. The assessment
    hearing concluded in April 2012.
Cookish
was released in April 2013. The
    assessment officer released his reasons in September 2013 and his Report in
    December 2013. The respondents did not raise any issue about the assessment
    officers jurisdiction in the period after the release of
Cookish,
but
    before the release of the Report. In those circumstances, the appellants argue,
    the motions judge erred in applying the principle in
Cookish
. Instead,
    they contend, he should have followed the decision in
Price v. Sonsini
(2002), 60 O.R. (3d) 257 (C.A.) where this court held, at para. 17, that the
    solicitors failure to make a timely objection to the assessment procedure used
    to obtain the order for assessment was fatal to his opposition to the assessment
    officers report.

[20]

I do not accept that submission. An assessment
    officer either has jurisdiction or he does not. It is unfortunate that neither the
    parties nor the assessment officer were aware of the
Cookish
decision before the Report was released.  Nevertheless, the motions
    judge correctly applied the principles in
Cookish
to conclude that the
    assessment officer lacked jurisdiction to consider the enforceability of the
    Agreement.

[21]

Moreover, the decision in
Price
is
    distinguishable. In that case, this court held that the assessment officer had
    jurisdiction on the basis that s. 3 of the
Solicitors Act
permits a
    client to move for an assessment of an interim account within one month of
    delivery of the final account. The motions judge correctly held that the facts
    in
Price
differed from those in the present case when he stated, at
    para. 14:

[In
Price
], it was a question of the
    procedure by which the assessment officer did that which was clearly within his
    jurisdiction. Here the assessment officer did something that is not within his
    jurisdiction.

[22]

Accordingly, the motions judge did not err in
    concluding that the assessment officer lacked jurisdiction to consider the
    enforceability of the Agreement.


V.

THE FAIRNESS AND REASONABLENESS OF THE AGREEMENT

[23]

As an alternative argument, the appellants
    submit that if the assessment officer lacked jurisdiction to consider the
    fairness and reasonableness of the Agreement, then the motions judge should not
    have engaged in his own consideration of the Agreement on the motions to oppose
    confirmation because he lacked an adequate record to determine its fairness and
    reasonableness. Instead, he should have referred the issue of the fairness and
    reasonableness of the Agreement to another judge of the Superior Court of
    Justice for an assessment hearing. The appellants further submit that in
    considering the Agreement, the motions judge failed to give proper deference to
    the findings of fact made by the assessment officer.

[24]

In deciding the competing motions to oppose confirmation
    of the Report, the motions judge was entitled to consider the fairness and reasonableness
    of the Agreement. Rule 54.09(5) of the
Rules of Civil Procedure
provides that a judge hearing a motion to oppose confirmation of a report may
    confirm the report in whole or in part or make such other order as is just. If
    a judge hearing a motion to oppose finds that an assessment officer committed
    an error in principle, the judge may either correct the error or refer the
    matter back for correction:
Bales Beall LLP v. Fingrut
, 2012 ONSC
    4991,
356 D.L.R. (4th) 103
at para. 7, affirmed 2013 ONCA
    266. Having concluded that the assessment officer lacked the jurisdiction to
    consider the fairness and reasonableness of the Agreement, the motions judge
    possessed the jurisdiction to consider that issue.

[25]

That said, should the motions judge have exercised
    his jurisdiction to consider the enforceability of the Agreement in the
    circumstances of this case? The answer to that question turns on whether the
    record before the motions judge was adequate to conduct a consideration of the
    Agreement that was fair to both parties. I conclude that it was, for several
    reasons.

[26]

First, the appellants knew that the issue of the
    fairness and reasonableness of the Agreement would be argued before the motions
    judge because the respondents, in their cross-motion to oppose confirmation,
    specifically sought an order that they were entitled to be paid the $500,000
    bonus under the Agreement.

[27]

Second, although the parties did not place
    before the motions judge the entirety of the record created before the assessment
    officer, they agreed that it was open to each party to file whatever part of
    the evidence it considered relevant. As a result, the motions judge was able to
    review all the pertinent documentation concerning the negotiation and execution
    of the Agreement.

[28]

The appellants submit that the motions judge
    lacked an adequate evidentiary record because the transcripts of the assessment
    hearing were not before him. Given that the respondents had put the appellants
    on notice that they intended to argue before the motions judge the fairness and
    reasonableness of the Agreement, it was open to the appellants to include some
    or all of the transcripts of the assessment hearing in their motion record. They
    chose not to do so. Consequently, it is not now open to the appellants to complain
    about the absence of the transcripts.

[29]

In my view, the record before the motions judge
    was adequate to determine the fairness and reasonableness of the Agreement.

[30]

The appellants next submit that the motions
    judge failed to accord proper deference to the findings of fact made by the assessment
    officer about the circumstances that gave rise to the Agreement. The assessment
    hearing considered two issues: the enforceability of the Agreement and the
    reasonableness of the amounts billed by the respondents in the three accounts
    on a time and disbursements basis. The assessment officer made findings of fact
    on both issues. However, given that the assessment officer lacked the
    jurisdiction to consider the fairness and reasonableness of the Agreement, his
    findings of fact on that issue were not entitled to any deference by the motions
    judge. Nevertheless, the motions judge extensively canvassed the key findings made
    by the assessment officer, and he gave detailed reasons why the assessment
    officers criticisms of the solicitors work were the product of palpable and
    overriding errors of fact: paras. 24 to 33.

[31]

The motions judge considered the fairness of the
    Agreement as of the date it was entered into:
Henricks-Hunter
, at para. 13. Based on his review of the documents recording the
    negotiation of the Agreement between the parties, the Agreement itself, and the
    broader factual matrix, the motions judge concluded, at para. 23:

The evidence showed negotiations involving
    different positions by the parties, and a final, signed agreement that
    contained a compromise. There is no question that Mr Zawadzki is a
    sophisticated businessman. On the evidence, including the factual matrix, the
    written contract must be what the parties agreed to. They did not agree to the
    negotiating positions of the parties. The assessment officer erred by making
    the contract something he thought it should be, instead of deciding what the
    parties agreed to.

I see no error in that conclusion.

[32]

The motions judge also properly informed himself
    about the factors relevant to determining the reasonableness of the Agreement
    as of the date of the assessment hearing:
Henricks-Hunter
, at para. 13. He reviewed them in detail: paras. 25 to 34. In the
    circumstances of the case, he placed the greatest weight on the value of the
    property in question  $20 million  and the risk of the solicitors not getting
    paid. In so doing, the motions judge did not commit an error of law,
    misapprehend the evidence, or make a palpable and overriding error on a factual
    matter which would justify appellate intervention:
Rabbani v. Niagara
    (Regional Municipality)
, 2012 ONCA 280,
2 M.P.L.R. (5th) 23,
at para. 6.

[33]

Nor was his allowance of the $500,000 bonus so
    unreasonable as to constitute an error in principle. When the appellants first
    approached the respondents, they were on the brink of losing their lands worth
    $20 million because they were subject to a final foreclosure order. As a result
    of the respondents success on the appeal and further motions, the appellants
    re-gained their lands free and clear of the two mortgages. Under those
    circumstances, a bonus equivalent to 2.5% of the value of the property in issue
    was not unreasonable.

VI.

DISPOSITION

[34]

For those reasons, I would dismiss the appeal.

[35]

The parties agreed on costs of the appeal of
    $11,000, inclusive of disbursements and H.S.T. I would order the appellants to
    pay the respondents costs in that amount.

Released: November 9, 2015 (EEG)

David
    Brown J.A.

I
    agree E.E. Gillese J.A.

I
    agree P. Lauwers J.A.


