Lawyers can sue clients in Small Claims Court
Ontario lawyer wins right for lawyers to sue clients in Ontario Small Claims Court
In a recent decision of Justice Dambrot, the Divisional Court has ruled that a lawyers can sue clients in Ontario Small Claims Court for legal fees. This Decision reversed a previous decision of Justice Nordheimer in the Jane Conte Professional Corporation v. Joseph Smith decision in which he found that under section 23 of the Solicitors Act, a lawyer had to take a retainer agreement for assessment in the Superior Court of Justice as opposed to suing in Small Claims Court.
The Basis for the Decision
Essentially, Justice Dambrot found that Justice Norheimer had overly broadened the parameters of section 23 of the Act to include hourly fee retainer agreements, when in reality, the legislation never contemplated including anything other than contingency fee retainer agreements. The salient points of Justice Dambrot’s decision can be found at paragraph 16:
I remain of the view that an agreement within the meaning of s. 16(1) of the Act is a fee agreement that is out of the ordinary, such as contingency fee arrangements. At any rate, a simple retainer agreement in writing setting out a solicitor’s hourly rate does not fall within s. 16(1). If a simple written retainer agreement setting out an hourly rate does not fall within s. 16(1), then it escapes the prohibition against action in s. 23 of the Solicitors Act.
As well as paragraph 21:
Finally, I see no inconsistency between my conclusion and the conclusion reached by Nordheimer J. in Jane Conte. I agree with him that by virtue of s. 23 of the Solicitors Act, the Small Claims Court has no jurisdiction to hear a claim made by a lawyer based on a “written fee agreement.” But this limitation on jurisdiction relates only to written agreements falling within s. 16(1) of the Solicitors Act. As a result of my interpretation of s. 16(1), I do not consider a simple retainer agreement setting out an hourly rate to be a written fee agreement as that phrase was used by Nordheimer J. In other words, an action may be brought by a lawyer upon any such agreement.
Implication of this Ruling
The implication of this Ruling is huge for lawyers and paralegals alike:
1 – Now, rather than forcing lawyers to spend the time and money bringing bringing their claims for legal fees for assessment, they can simply sue their clients in Ontario Small Claims Court or retain a firm such as Mr. Small Claims Court (shameless plug!) to assist with suing clients in Ontario Small Claims Court.
2 – At the same time, the assessment office, which was bogged down with claims for lawyers against clients, is now freed to pursue other files. Of course, the irony is that this may mean a client who is pursuing a lawyer for an assessment of legal fees will have a quicker date with the assessment officer. Many lawyers will be upset about this!
3 – Only non-contingency fee retainer agreements can be pursued by a lawyer against a client in Ontario Small Claims Court. A contingency fee retainer agreement in which a client fails to pay, must still go through the assessment office of the Superior Court. That said, the reality is that most lawyers will control the funds in contingency fee cases so the need for lawyers to go to assessment will likely not be so high.
Why Mr. Small Claims Court is Proud of this
Saving the most dramatic for last, what is most gratifying to me personally is that in an email exchange I had with a referring lawyer back on May 4, 2015, I bemoaned the previous Divisional Court’s ruling. My reason? You guess it: Because it over-broadened the intention of section 23 of the Solicitors Act! Don’t believe me? Here’s the email I sent (with name of referring lawyer removed to preserve confidentiality). Check out my analysis. Could have been written by the Divisional Court itself…In fact, it was.
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