



COURT OF APPEAL FOR ONTARIO

CITATION: Cardillo v. Aird & Berlis LLP, 2018 ONCA 186

DATE: 20180226

DOCKET: C63935

Sharpe, LaForme and van Rensburg JJ.A.

BETWEEN

John Cardillo and Medcap Real Estate Holdings
    Inc.

Appellants

and

Aird & Berlis LLP

Respondent

F. Scott Turton, for the appellants

Pamela Miehls and Danielle Muise, for the respondent

Heard: January 30, 2018

On appeal from the order of Justice James F. Diamond of
    the Superior Court of Justice, dated May 18, 2017, reported at 2017 ONSC 3063.

REASONS FOR DECISION

[1]

Sun Life Assurance Company of Canada (Sun
    Life) entered into a loan agreement with Medcap Real Estate Holdings Inc.
    (Medcap), one of the appellants. The loan was secured by: (i) a mortgage over
    real property, (ii) a general security agreement; and (iii) a personal
    guarantee signed by John Cardillo, the other appellant
.

[2]

Ten years later Sun Life retained the respondent
    law firm to take the necessary steps to enforce the security and to collect the
    amounts due. Ultimately Sun Life and the appellants entered into a Forbearance
    Agreement in connection with Medcaps debt, which was then in excess of $1.5
    million. The appellants, among other things, agreed that Medcap would reimburse
    Sun Life for all reasonable expenses, including legal fees, and that they were
    estopped from disputing the amount owing. Further, the appellants released Sun
    Life and its attorneys, advisors and other representatives from claims in
    connection with the Forbearance Agreement or the original loan agreement.

[3]

A Forbearance Extension Agreement which extended
    the time for payment contained an identical release. Contemporaneous with the
    payment of the amounts due the parties entered into an Assignment Agreement,
    assigning the debt, loan agreement and underlying security to 2503866 Ontario
    Ltd. Schedule A to this agreement set out a summary of Medcaps indebtedness
    to Sun Life, which included specific amounts for legal fees and disbursements:
    $89,065.68, which was capitalized and included in Medcaps debt to Sun Life,
    and $14,671.12 for further legal fees. The Assignment Agreement also contained
    a comprehensive release in essentially the same terms as the first two
    releases. Sun Life paid each of the four accounts that were rendered by the
    respondent.

[4]

Subsequently, the appellants obtained a
    registrars order for the delivery and assessment of the respondents accounts.
    Eventually the respondent moved for an order declaring that the three releases
    precluded the assessment of the various legal accounts rendered to Sun Life.
    The motion judge granted the motion and declared that the Releases forever
    preclude the assessment of, or any other mater pertaining to, the [four
    accounts of Aird & Berlis LLP]. This order is the subject of this appeal.

[5]

The primary issue before the motion judge was
    whether the releases were effective to preclude the assessment of the
    respondents accounts on the basis that they attempted to contract out of the
Solicitors
    Act
, R.S.O. 1990 c. S.15. The motion judge noted that in
Jean
    Estate v. Wires Jolley LLP
,
2009
    ONCA 339, 96 O.R. (3d) 171 this court held that parties cannot contract out of
    the Act for public policy reasons. However, he held that the rationale in
Jean
    Estate
did not apply to the case at bar where the parties
    were sophisticated commercial parties acting with the benefit of legal advice.
    He concluded that the parties were not seeking to contract out of the
Solicitors
    Act
, but that they had agreed that the appellants would be
    precluded from challenging its payment to Sun Life, which included the legal
    fees.

[6]

The appeal is dismissed. We have serious
    concerns about the correctness of the motion judges opinion about the
    application of
Jean Estate
and the extent to
    which he countenanced what amounted to an attempt to contract out of the
Solicitors
    Act
. Nevertheless, we agree with his conclusion but for
    different reasons.

[7]

The respondents accounts rendered to Sun Life
    and reimbursed by the appellant Medcap are subject to the assessment provisions
    of the
Solicitors Act.
Because the accounts
    have already been paid by Sun Life and the appellant Medcap, who became liable
    for their payment and is not the client but a third party to the
    solicitor-client relationship, an order for assessment had to be obtained under
    s. 9(1) of the
Solicitors Act
, which required
    the appellant to  demonstrate special circumstances justifying the assessment
    following payment pursuant to s. 11:
Plazavest Financial Corporation
    v. National Bank of Canada
(2000), 47 O.R. (3d) 641
    (C.A.), at paras. 33-35
.

[8]

Section 11 refers to "special
    circumstances", which "in the opinion of the court appear, to require
    the assessment." And, it contemplates that in doing so, the court has a
    broad discretion to be exercised on a case-by-case basis and with an eye to all
    of the relevant circumstances:
Plazavest
, at
    para. 33. S
pecial circumstances will tend to either
    undermine the presumption that the account was accepted as proper or show that
    the account was excessive or unwarranted:
Echo Energy Canada Inc. v.
    Lenczner Slaght Royce Smith Griffin LLP
, 2010 ONCA 709,
104 O.R. (3d) 93, at para. 31.
Under s.
    9(2), the special circumstances to be considered include any additional special
    circumstances applicable to the third party who made the payment.

[9]

This is the analytical approach the motion judge
    should have followed in this case, which was also advanced by the appellants on
    the motion. Having considered the record in this case, and the arguments
    advanced by the parties on appeal, we are not satisfied that there are special
    circumstances that would warrant an order directing an assessment of the
    respondents legal accounts. We reach this conclusion for several reasons.

[10]

First, the appellants were at all material times
    represented by legal counsel. They were indebted to Sun Life, and they
    negotiated and concluded a commercial agreement to satisfy their debt. The
    appellants confirmed their obligation to pay the total indebtedness to Sun
    Life, including the respondents fees and disbursements, which were disclosed
    at Schedule A to the Assignment Agreement, to which they were parties. They
    made no attempt to reserve their right to assess the accounts, nor did they
    request details of the legal expenses or copies of the accounts.

[11]

Second, the terms of an agreement can figure
    prominently in the determination of whether special circumstances exist:
Plazavest
, at para. 17
. Here, the appellants
    expressly acknowledged in the Assignment Agreement that they had had an
    adequate opportunity to read and consider it and to obtain independent legal
    advice before executing it. They knew that Sun Life was entitled to its
    reasonable expenses, including legal fees. They were fully informed of the
    legal fees and disbursements that were included in the amount paid to Sun Life.
    And, they signed three documents containing a comprehensive release that by its
    terms extended to Sun Lifes legal counsel and their accounts.

[12]

In all the circumstances of this case, the appellants have failed to
    rebut the presumption that they accepted the respondents legal accounts as
    reasonable when they agreed to pay them. They have also failed to demonstrate
    that the accounts were grossly excessive. In sum, they
have not
    established special circumstances which, in the exercise of judicial
    discretion, would justify an order of assessment of the respondents legal
    accounts.

[13]

The
    appeal is dismissed. The respondents are awarded costs in the agreed upon
    amount of $7,500 inclusive of disbursements and HST.

Robert J. Sharpe J.A.

H.S. LaForme J.A.

K. van Rensburg J.A.


