SCC rejects Ontario firm’s leave request in client feud

Toronto area law firm Heydary Hamilton PC has reached the end of the line in its squabble with former clients and their new law firm after being dropped despite an existing retainer agreement.

In 2010, Heydary Hamilton Professional Corp. v. Hanuka, went to the Ontario Court of Appeal, which ruled in favour of the clients. The Supreme Court of Canada today announced that it would not hear a further appeal of the case.

According to the appeal court judgment, Heydary Hamilton was retained on a contingency fee basis to act for Thakar Baweja, Rajiv Baweja, and 6369162 Canada Inc. for representation in a dispute between the former clients and their franchisor. In October 2007, the firm issued a statement of claim on behalf of the former clients against the franchisor, and continued to work on the file for about two years.

In September 2009, the Bawejas told the law firm to renegotiate their sublease. The firm responded by indicating that this work was beyond the scope of the existing retainer, and offered to enter a further retainer to complete the work.

The following month, the firm began settlement negotiations with lawyers for the former clients’ franchisor. On Nov. 6, 2009, the firm received a copy of a letter written by lawyers from Davis Moldaver LLP to the franchisor’s lawyers regarding the sublease. Two days later, the former clients e-mailed Heydary Hamilton for information on the fees and disbursements incurred and a copy of its dockets. The Baweja’s failed to respond to Heydary Hamilton’s inquiries regarding their intentions.

Heydary Hamilton went on to sue the Bawejas over an unpaid bill of more than $60,000. Davis Moldaver and lawyer Ben Hanuka were also named as defendants. Heydary Hamilton sought damages for conspiracy, inducing breach of contract and unlawful interference with economic interests, and unjust enrichment.

Superior Court Justice James Spence quickly struck the claim, saying it couldn’t succeed due to clear case law backing the right of a client to release a lawyer. Court of Appeal justices Janet Simmons, Eleanore Cronk, and Jean MacFarland agreed. “Although it may be generally desirable that successor law firms co-operate in protecting a predecessor law firm’s account, to hold that a successor law firm’s failure to make arrangements to do so, standing alone, could found a cause of action would trench on a client’s unfettered right to change counsel,” they wrote.

Hanuka told Law Times in January that he was surprised when he was named in the statement of claim from Heydary Hamilton. “It struck me as bizarre, because we simply got a client who was not happy,” he said. “The allegations in the claim were extreme.”

Douglas Elliott, a partner at Roy Elliott O’Connor LLP who represented Heydary Hamilton on the appeal, told the newspaper the court could have used the case to set clear guidelines for firms that poach clients on contingency fee retainers. He suggested that Ontario’s law relating to contingency fees is outdated. “It’s true clients have a right to choose their lawyer, but at a certain point, the court is going to have to step in and offer some protection to the economic interests of law firms who take on these contingency fee arrangements or it’ll be the Wild West out there,” said Elliott.

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