Lawyers can sue clients for unpaid fees

The Ontario Divisional Court has issued a stinging criticism of the processes lawyers have to follow to retrieve unpaid fees from clients and the provincial government’s failure to address backlogs in that system.

In a recent decision concerning a dispute between Gilbert’s LLP and two clients who refused to pay their bills, the Divisional Court ruled that lawyers can bring an action in court to recover outstanding fees.

Justice Ian Nordheimer, writing on behalf of a three-judge panel, said the assessment processes are “outdated and impractical” and that the Ministry of the Attorney General’s failure to properly resource the assessment office has compounded delays.

Backlogs in the assessment office at the Ontario Superior Court in Toronto have often led to waits of more than three years before lawyers seeking fees have their matters heard by an assessment officer, lawyers say.

Nordheimer urged the provincial government to make much-needed amendments to the Solicitors Act, which contains the provisions that lay out assessment processes.

“I should add that this conclusion is not intended, and should not be taken, as any approval of, or excuse for, the failure of the Ministry of the Attorney General to properly resource the assessment process,” Nordheimer said in the decision, Gilbert’s LLP v David Dixon Inc.

“The problems that arise from that failure, both for the Bar and for the public, remain. It should also be apparent to the Ministry of the Attorney General that the time has long since passed when it ought to engage in a thorough review, and modernization, of the Solicitors Act, and all of its provisions.”

Lawyers say the decision provides some clarity on the proper approach of recourse that lawyers have to pursue clients for unpaid fees.

The decision will mean that going forward lawyers will be able to seek to recover fees through an action at the Ontario Superior Court if the amount in dispute is more than $25,000 and Small Claims Court for smaller amounts.

Matthew Diskin, a partner with Gilbert’s LLP, says the decision means lawyers will now be able to sue clients for unpaid accounts, as long as there is no quantum dispute.

“If there is a quantum dispute and you’re within the time frame for proceeding with an assessment, then you’re stuck with that, but if there is no quantum dispute, it seemed to be quite silly to go through this lengthy protracted assessment process, which, of course, wasn’t intended to be that but became that,” he says. The appeal concerned an order by an Ontario Superior Court judge that dismissed Gilbert’s LLP’s application under s. 23 of the Solicitors Act.

The firm had requested an order that the client pay for two unpaid retainers, but Justice Sean Dunphy tossed the application, saying the firm had to go through an assessment officer to retrieve the fees.

Gilbert’s LLP eventually received payment from the clients after the appeal was filed, but the Divisional Court felt the case was still important to hear, even if it was moot between the parties, because of “its importance to the profession generally.”

The provisions of the Solicitors Act that deal with the assessment process date back to 1909, according to the decision.

The act is based on English legislation and was implemented with little consideration of the differences of the court systems in England and Ontario, said Nordheimer. The judge noted that the language in the act has caused a lot of confusion within the bar as to what its remedies are for pursuing unpaid fees.

Diskin says he hopes the decision will push MAG to take a look at some of the more confusing provisions of the act.

“For whatever reason, the Solicitors Act just hasn’t received legislative attention,” he says. The Divisional Court found that a simple fee agreement does not fall within the scope of the act’s provision that requires a dispute over fees come before an assessment officer.  

Nordheimer ruled that if the act’s provisions actually required all fee arrangement disputes to come before an assessment officer, it could eventually cause the collapse of the system.

“Lawyers will be effectively precluded from collecting accounts, because the demands on the assessment process will cause such a backlog of assessments that the system will collapse,” he wrote.

In order to help with the backlogs, MAG hired two new assessment officers in the Toronto office in the fall. But David Sterns, president of the Ontario Bar Association, says more needs to be done to alleviate the problems at the assessment office, such as implementing electronic scheduling.

“In Toronto, it’s a disaster,” he says. Emilie Smith, a spokeswoman for MAG, said that in addition to hiring new staff, the ministry has implemented new scheduling strategies in Toronto to help reduce the backlog and offer earlier hearing dates to parties whose dates had been scheduled. She added that a full-day assessment hearing can be booked in Toronto within a month and an appointment for a settlement of an order can be booked within a few days.

“The Ministry is aware that many people find the current court-based process for resolving disagreements about lawyers’ bills complex and confusing,” she said in an email. “We are aware of and will consider important issues raised in the recently released decision of the Divisional Court.”

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