


COURT OF APPEAL FOR ONTARIO

CITATION:
Hannafin v. Adair
    Morse LLP, 2012 ONCA 402

DATE: 20120612

DOCKET: C54599

Rosenberg, MacPherson and Cronk JJ.A.

BETWEEN

Edmund J. Hannafin and Judith G. Hannafin

Clients (Respondents on Appeal)

and

Adair Morse LLP

Lawyers (Appellant)

John J. Adair and Jennifer L. King, for the appellant

R. Steven Baldwin, for the respondents

Heard: June 8, 2012

On appeal from the orders of Justice John A. McMunagle of
    the Superior Court of Justice, dated October 31, 2011 and January 26, 2012.

By the
    Court:

I.        Background

[1]

The appellant law firm was retained by the respondents in 2006 to act on
    their behalf in litigation arising out of the respondents sale of their
    interest in a business.  Written retainer agreements were executed by the
    respondents in February 2006 and 2007.  Under the retainer agreements, the
    parties agreed that: (1) the appellant would render interim accounts for fees
    and disbursements incurred, which would be payable by the respondents within 30
    days of receipt; (2) the appellants interim fees would be billed at 50% of its
    applicable hourly rates; (3) if the litigation concluded without recovery of
    damages by the respondents  either by settlement or judgment  the appellant would
    receive no further payment in excess of its interim billings; and (4)
    conversely, if the litigation concluded with recovery of damages by the
    respondents, the appellant would be paid a fee in addition to fees already
    billed that would result in total fees billed at 150% of its applicable hourly
    rates.

[2]

As agreed, interim accounts were rendered by the appellant and paid by
    the respondents. However, in approximately mid-August 2008, the respondents
    informed the appellant that they were unable to continue to fund the
    litigation, even on the agreed 50% interim fee basis.  After negotiations
    regarding alternate payment arrangements proved unsuccessful, the respondents
    retained new counsel to assume carriage of the litigation on their behalf.

[3]

Difficulties then arose concerning the transfer of the respondents file
    to their new counsel and the terms of an Irrevocable Direction that the
    appellant wished the respondents to sign to protect the appellants account. 
    At this point, although unresolved, the litigation was well underway and
    various discoveries had been held.

[4]

On January 26, 2010, on motion by the respondents, Tausendfreund J. of
    the Superior Court of Justice directed that the appellant deliver the
    respondents litigation file to the respondents new solicitors.  He also
    directed that the appellants accounts  both paid and unpaid  be assessed
    under the
Solicitors Act
, R.S.O. 1990, c. S. 15 (the Assessment
    Order).

[5]

The assessment hearing was originally scheduled for June 9, 2011.  By
    that time, the respondents new solicitors had settled the respondents
    litigation for the sum of $1 million, payable to the respondents.

[6]

In early June 2011, on request of the respondents solicitors, the
    appellant delivered a final account dated June 1, 2011 (the June Account),
    which represented the appellants total claimed outstanding fees, including the
    premium payment envisaged under the retainer agreements.  When the respondents
    disputed the amount claimed and the appellants entitlement to have the June
    Account included in the assessment, the appellant moved for directions
    regarding the assessment hearing.

[7]

By order dated October 31, 2011, McMunagle J. of the Superior Court of
    Justice ruled that the June Account was not to be included in the assessment. 
    By order dated January 26, 2012, he also awarded the respondents their costs of
    the motion for directions, on a full indemnity basis.

[8]

The appellant appeals both rulings by the motion judge.

II.       Issues

[9]

The appellant contends that the motion judge erred in three respects in
    excluding the June Account from the assessment: (1) by considering irrelevant
    factors, including the reasonableness of the fees claimed by the appellant and
    the appellants entitlement to the fees and disbursements covered by the June
    Account; (2) by failing to consider relevant factors, in particular, the plain
    language and context of the Assessment Order; and (3) by concluding that, by
    operation of s. 6(1) of the
Solicitors Act
and the two-year limitation
    period under the
Limitations Act, 2002
, S.O. 2002, c. 24, the
    appellants right to deliver the June Account and to seek compensation on the
    basis reflected in the June Account was statute-barred.

III.      Discussion

[10]

In
    our view, the language of the Assessment Order is dispositive of this appeal.

[11]

There
    was only one issue properly before the motion judge for determination: whether
    the June Account should be included in the assessment.  All other issues
    considered by the motion judge, including the fairness of the quantum of the
    June Account and the appellants entitlement to deliver and to seek payment as
    contemplated by the June Account, were extraneous to the motion judges task. 
    These were matters for the assessment officer.

[12]

The
    Assessment Order explicitly contemplated that the assessment hearing was to be
    held in Belleville at the earliest convenient date.  It directed an
    assessment of all accounts paid to date, unpaid accounts, interim accounts and
    final accounts of the appellant directed to the respondents.  It also provided
    that the appellant was to deliver all accounts, pre-bills [and documents
    related to the appellants accounts]
forthwith
, to permit the
    [respondents] sufficient opportunity to prepare for the assessment (emphasis
    added).

[13]

The
    appellant failed to comply with a critical term of the Assessment Order: it did
    not deliver the June Account until June 2011, almost 18 months after the date
    of the Assessment Order.

[14]

The
    appellant contends that it was unable to deliver its final account to the
    respondents forthwith after the Assessment Order, as required, because the amount
    of its final account could not be determined until the outcome of the
    respondents litigation was known.  As the litigation was not settled until the
    fall of 2010, the amount of the appellants compensation entitlement was not
    known until then.

[15]

We
    reject this submission.  The Assessment Order stipulated, in clear and
    unambiguous language, that all accounts were to be delivered by the appellant
    forthwith and that the assessment hearing was to be held at the earliest
    convenient date.  The appellant acknowledges that the maximum amount of the
    compensation potentially to be claimed by it was known to all parties
prior
    to
the appearance before Tausendfreund J.  the appellant had sought to
    have this amount included in the Irrevocable Direction that it proposed the
    respondents should sign as a condition of the transfer of their file to their
    new solicitors.

[16]

Thus,
    from the fall of 2009 at the latest, when the respondents moved for an order
    compelling the release of their file by the appellant, the appellants maximum
    potential compensation claim was known and, indeed, under debate by the
    parties.  In our view, the fact that the amount of that claim might require
    future adjustment downwards, depending on the outcome of the respondents
    litigation, did not prevent the delivery of an account in the full amount of
    the claim in accordance with the Assessment Order.  The terms of the account
    could easily have stipulated that it was subject to adjustment, depending on
    the outcome of the respondents litigation and the assessment.  But the
    appellant failed to deliver the June Account on a timely basis, in accordance
    with the Assessment Order.  It also failed to appeal the Assessment Order or to
    seek a variation of its terms, as it was entitled to do under the
Rules of
    Civil Procedure
.

[17]

We
    therefore agree with the motion judge, although for reasons that differ in part
    from his, that the June Account is not to be included among those accounts to
    be considered at the assessment hearing.

[18]

We
    reach a different conclusion regarding the appellants challenge to the motion
    judges costs order of January 26, 2012.

[19]

The
    motion judge awarded the respondents their full indemnity costs of the motion
    for directions, subject to minor adjustments that he regarded as appropriate. 
    However, he made no finding of reprehensible conduct by the appellant and does
    not appear to have considered the narrow circumstances in which costs on the
    full indemnity scale  the maximum scale for costs  may be granted: see
Toronto
    Star Newspapers Ltd. v. Fraleigh
, 2011 ONCA 555, at paras. 34 to 39.  As a
    result, in our view, the motion judge erred in principle and his costs award
    cannot stand.

[20]

The
    respondents were successful on the motion for directions in resisting the
    inclusion of the June Account in the court-ordered assessment.  Thus, they are
    entitled to their costs of the motion.  We see no basis for departing from the
    usual, partial indemnity costs scale in respect of the motion.  We fix the
    respondents costs of the motion in the amount of $8,565.00, inclusive of
    disbursements and all applicable taxes.

IV.     Disposition

[21]

For
    the reasons given, the appeal from the motion judges order dated October 31,
    2011 is dismissed.  Leave to appeal the motion judges costs order dated
    January 26, 2012 is granted and the appeal from that order is allowed, in
    accordance with these reasons.  The respondents are entitled to their costs of
    the proceeding in this court, fixed in the amount of $9,000.00, inclusive of
    disbursements and all applicable taxes.

Released:

MR                               M. Rosenberg J.A.

JUN 12 2012                 J.C. MacPherson J.A.

E.A. Cronk J.A.


