In an unusually critical decision, the Ontario Superior Court of Justice had harsh words for a prominent Condo law firm’s actions and bills with respect to a lien placed on a condominium unit. The judge felt that the law firm’s fees were “excessive”, its behavior was “irresponsible,” and that it took actions that added an “element of drama to what normally would be a mundane commercial matter.”
After unit owners defaulted on their mortgage, RBC initiated a claim. RBC obtained judgment and a writ of possession, and subsequently entered into an agreement of purchase and sale to sell the unit.
However, before defaulting on their mortgage the unit owners had failed to pay several months of common expenses. Consequently, the condominium corporation registered a lien pursuant to section 85 of the Condominium Act (the “Act”), which provides that a condominium corporation can place a lien on an owner’s unit for all unpaid common expenses together with interest and all reasonable legal costs and reasonable expenses incurred in connection with the collection of the unpaid amount. The condominium corporation also launched an action for possession of the unit.
The unit owners brought a motion for an assessment of the Corporation’s legal expenses relating to the lien and the statement of claim – they challenged the quantum of the legal fees and requested a breakdown.
RBC paid the law firm $15,071 to discharge the lien in 2010, and paid a further $12,651 in 2012. However, the law firm representing the condominium corporation refused to discharge the lien (as required by Section 85(7) of the Act), claiming that they were still owed money in respect of legal fees.
Ultimately, RBC brought an application for a declaration that the lien should be discharged. In reviewing the facts to determine if the legal fees were connected to the collection of the common expense default, Justice Whitten of the Ontario Superior Court made a number of highly critical comments regarding the actions taken by the law firm:
- He pointed out that the condominium corporation should have discontinued its action for possession of the unit, stating that “Obviously it had not dawned on [the law firm] that with RBC having paid their common expense arrears and related expenses, and having committed itself to paying the ongoing common expense, the right of the condominium corporation to pursue this matter pursuant to s.85(7) was over.”
- He made numerous comments regarding the law firm’s “quite generic” bills which provided no breakdown as to time and who rendered the services, or the qualifications of the persons rendering the services.
- The law firm called the unit owners’ motion to assess the costs of the law firm’s bill a “frivolous motion.” Justice Whitten disagreed, stating that “Any litigant, no matter what their deficiencies, is entitled to challenge legal fees, such a challenge is perfectly legitimate.”
- The law firm made an attempt to settle the lawsuit in which it pointed out to the unit owners that the condominium corporation’s offer “had a value of over $9,000 in legal costs, which in itself was a 50% reduction of the actual costs. No mention was made of the legal costs received from RBC. This concluding comment was a manifestation of considerable audacity.”
In conclusion, Justice Whitten ordered that the lien be discharged and that the fees which RBC had paid be assessed. The court further declared that the expenses incurred with respect to the law firm’s efforts to avoid an assessment of their fees by the unit owners and the pursuit of a claim for possession were not the proper subject of a lien pursuant to Section 85 and were “above and beyond the actual common expense deficiency”:
“The costs claimed were not costs contemplated by s. 85 of the Act. The prolongation of a lien discharge which was mandated by s.85(7), was not justifiable. [The law firm] was not only flogging a dead horse, they were acting as if it would go around the track.”
This case makes it clear that even though defaulting owners are required to pay the legal expenses incurred with respect to the collection of common expense arrears, this is not a blank cheque to unreasonably rack up legal expenses. This case is also a warning for lawyers to provide sufficient detail on their bills!