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Non-payment claims against clients have to go to Superior Court

|Written By Yamri Taddese

Lawyers can no longer bring claims against their clients for non-payment of fees at Ontario’s Small Claims Court for services delivered outside of that court.

Lawyers can no longer bring claims against their clients for non-payment of fees at Ontario’s Small Claims Court for services delivered outside of that court.

A Toronto Small Claims Court dismissed a matter brought by a law firm last week citing lack of jurisdiction over enforcement of legal service payment agreements despite the court having done so in the past.

The shift comes after Justice Ian Nordheimer pointed out in an October Divisional Court ruling a little-known section of the Solicitors Act, which states claims for non-payment must go to the Superior Court.

This means law firms, which often send paralegals to Small Claims Court to collect unpaid accounts, now have to pay lawyers to do it, as paralegals don’t have standing at the Superior Court.

“It’s a serious issue,” says Toronto lawyer Ben Hanuka. “The cost of sending a paralegal is significantly lower . . . than the cost of sending a lawyer.”

Hanuka says the matter is one of access to justice, especially for clients who have to retain another lawyer to defend themselves against non-payment claims.

Paralegal Frederick Goodman says the decision will have “a significant impact” on his practice as he often pursues unpaid accounts on behalf of lawyers and law firms.

In Dec. 12’s Dunsmore Law Professional Corp. v. Allegra Homes , Small Claims Court Deputy Justice Paul Martial said it was “abundantly clear” he does not have jurisdiction over the non-payment claim before him.

“In my view, it is abundantly clear on a plain reading of the above sections of the Solicitors Act and the binding decision of Nordheimer, J. that the Superior Court of Justice has exclusive jurisdiction and that the Small Claims Court does not have jurisdiction to hear the plaintiff’s claim for payment of its fees pursuant to a written retainer agreement,” Martial said.

On Oct. 15, Nodheimer said s. 23 of the Solicitors Act requires that an application to enforce of a written legal services agreement must be brought in the court in which the business was done or if the business was not done in court, by the Superior Court of Justice.

“I repeat that s. 23 expressly excludes the Small Claims Court from this authority,” he added.

Nodheimer’s decision is correct based on the law, Hanuka says, but he suggests the law could use a revision, emphasizing any revision has to come after ensuring more training for paralegals.

As to the qualification of deputy judges to make findings on such applications, Hanuka says he doesn’t think deputy judges, “properly informed,” would be any less qualified than assessment officers at the Superior Court.

  • Contingency only not all accounts

    Jeremy Schwartz
    The article is well written - but left out the most important part of the Court's decision. Section 23 of the Solicitor's Act deals only with contingency fee agreements. The article implies that all solicitors' accounts must be litigated before the Superior Court. That is just not the case.
  • Home Inspector

    Greg Kelly
    "Revising the rules on the fly" for the benefit of one side does not make for a good competition or for overall participation. Hanuka's suggestions of continuing to manipulate the game, whether by the venue or the "use" of Paralegals is unsettling. The day is gone of Paralegals practicing their trade with the purpose originally intended. Likewise for Small Claims Court.
  • Home Inspector

    Greg Kelly
    Resolution of legal billing in any court arena ruled over by a judge/lawyer is not going to be viewed by the general public as a level playing field. How is the lawyer representing the Defendant/Client by the other lawyers and judge viewed? Certainly not the preferred position.
    There was probably some logic involved when lawyers couldn't 't sue their client for fees.
    Has the right to sue had a negative effect on lawyer accountability and performance? Should payment for poor performance be mandatory in any profession?
    In that the entire complaint venue is via more lawyers and/or the law society, payrolled by lawyers, client success is not the smart bet.
    LSUC Bencher Malcolm Mercer's SLAW Magazine column
    (Sept 17,2014) titled "Independence and Self-Regulation: I'm OK but I'm Not So Sure About You!" is an interesting read.
  • RE: Non-payment claims against clients have to go to Superior Court

    Andres B
    It's ironic that this is being framed as an access to justice issue, as realistically this will only cause law firms to demand bigger retainers and to refuse to essentially extend credit through providing clients will additional time to pay overdue accounts.

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