A Nova Scotia lawyer is on the hook for $28,000 owed to a former client after the province’s court of appeal overturned a lower court ruling that found paid accounts were not subject to assessment.
In a 3-0 decision in Mor-Town Developments Ltd. v. MacDonald, the Nova Scotia Court of Appeal ruled that the lower court judge’s narrow interpretation would not adequately protect the public when it comes to assessment, or taxation as it is known in the province.
“The fact that accounts were rendered to be paid by a client, and then were paid by a client, cannot mean that they no longer qualify as ‘accounts’ under the legislation. Such an interpretation would effectively gut any realistic opportunity for the client to ever challenge a bill,” wrote Appeal Court Justice Jamie Saunders, noting that clients are often unable to assess the reasonableness of a lawyer’s fees until consulting with other lawyers or people receiving similar services.
Between 2008 and 2009, the lawyer, David MacDonald, delivered two accounts totaling around $67,000 for his work on a real estate transaction on behalf of Mor-Town Developments Ltd. The first bill, for $60,000, was paid when the land sale closed, but the company later disputed both.
In August 2010, a Small Claims adjudicator reduced the two accounts to $32,000 and ordered MacDonald to refund the difference to Mor-Town. MacDonald successfully appealed to the Nova Scotia Supreme Court, where Justice Arthur LeBlanc sent the matter back to another adjudicator after finding that the first one had no jurisdiction to act on the paid $60,000 account.
In addition, LeBlanc found Mor-Town should have had the onus on proving the account was unreasonable because it had initiated the taxation. He also ruled that the adjudicator had breached his duty of fairness to MacDonald by making negative credibility findings without giving him an opportunity to address his concerns.
According to the appeal court, LeBlanc was wrong on both counts. The onus on proving the reasonableness of a lawyer’s account “should always rest with the lawyer,” regardless of who initiated the assessment, wrote Saunders.
“The lawyer knows what was done, by whom and when. The lawyer knows how long it took to complete the task(s) and what fee was charged to do it. The lawyer will also know why the task or particular action was necessary. Rarely would a client be possessed of such information. To expect the client to ‘prove’ the unreasonableness of the work done by the lawyer would neither be practical nor fair,” reads the decision.
Assuming a duty of fairness was owed by the adjudicator, the appeal court found that the lawyer must have known that the reasonableness of his accounts and his explanations for them would be a central issue in the taxation hearing.
“In plain language the validity of the account(s) was in issue. In order to decide that issue the adjudicator was bound to assess the evidence given by both the appellant and the respondent who sought to attack or justify the account(s), respectively. Such inquiries were sure to engage issues of credibility. It can hardly be suggested that the adjudicator owed a duty to Mr. MacDonald to remind him of the obvious,” Saunders wrote.