Lawyers Changing Firms and Disbursement Carriage

When a lawyer changes firms clients usually have a choice of whether to stay with their present firm or follow their lawyer to the new firm.  In the case of personal injury files prosecuted on a contingency basis there are often disbursements associated with the files.  When a client wishes to follow their lawyer to a new firm and have their file transfered who has the burden of paying for the disbursements?  Reasons for judgement were published today by the BC Supreme Court, Vancouver Registry, tackling this issue.

In today’s case (Sagert v. Cascade Law Corporation) the Petitioner’s employment with the Respondent law firm ended.  Approximately 58 of the Petitioner’s clients elected to have their claims stay with the Petitioner.  The Respondent firm had incurred disbursements on these files.  The firm argued that these had to be paid before the files would be transferred.  The Petitioner brought an application to have the files transferred without up front payment of disbursements.  The Court concluded that the firm was within their right to demand payment of disbursements prior to transfer.  In reaching this conclusion Mr. Justice Wilson provided the following reasons:

[38]       I am satisfied that the law in British Columbia is that absent a term to the contrary, disbursements must be paid if the client chooses to retain a new solicitor, although the solicitor must await the contingency in order to determine appropriate compensation for legal fees. The solicitor is entitled to assert a possessory lien to secure payment of the disbursement account. The court retains a discretion to override the solicitor’s possessory lien and to impose other terms within the framework of s. 79(2) of the LPA if the circumstances warrant. However, those determinations are fact specific inquiries and are dependent on whether the client would be precluded from advancing the claim, which the court found was the case in both Ashurst and Kelly.

[39]       In this case, the petitioner is the solicitor. There is no evidence of the financial circumstances of the clients with one exception. The one client who has put specific information before the court is Ms. Cooper. However, even the evidence of her circumstances does not establish that she is unable to pay her account for disbursements, whether in whole or by way of instalments. The evidence is also insufficient to establish that she will be precluded from pursuing her claim if her disbursement account, which is relatively modest, must be paid at this time.

[40]       The petitioner is asking the court to exercise its discretion to displace the law firm’s possessory liens. However, discretion requires an analysis of the particulars and the specifics of each individual circumstance. It would not be proper for me to conclude that any particular client would be prejudiced or not by the order sought because the clients are not parties to the application before me. As such, if any of the individual plaintiffs were in similar positions as the clients in Kelly and Ashurst, it would be unfair for me to make a decision in this case that would preclude them from advancing those arguments on proper evidence.

[41]       The petitioner argues that the law firm is better off with a charging lien. She says the law firm’s only other option would be to sue in small claims court. This is not so, because the law firm would likely be better proceeding with a review under the LPA, a much simpler procedure. However, if the disbursements were not properly payable at this time as the petitioner asserts, any review or small claims action would presumably fail.

[42]       I do not accept that the law firm is better off with the petitioner’s proposed acknowledgement of a charging lien. It is important to remember that the petitioner is a stranger to the arrangement between the law firm and each individual client. At best, the petitioner can acknowledge that the law firm asserts that it has a charging lien. But the fact that the petitioner says she is prepared to acknowledge a charging lien is of little or no value to the law firm. It is the clients who would be impacted by such an order. The petitioner may think that the law firm has a valid charging lien but her thoughts are not binding on the 58 clients.

[43]       On the facts here, it is far from clear that the law firm would have the ability to assert the charging lien in the circumstances of each of the various clients. In Cliffs Over Maple Bay (Re), 2011 BCCA 346, the Court of Appeal discussed a solicitor’s charging lien and concluded that the court must be satisfied that the prerequisites must be present before ordering a charging lien. At paras. 24 and 25, Newbury J.A., in dissent but not on the solicitor’s lien issue, held the following:

[24]      Like its common law predecessor, the statutory lien or charging order is discretionary in the sense that it does not arise as a matter of right upon the satisfaction of the stated prerequisites. Rather, the court must be persuaded it would be “just and proper” to grant the privilege of a lien: Henry v. Columbia Securities Ltd.; In Re Freemen & Freeman (1942) 58 B.C.R. 193 (C.A.); and Wilson, King & Co., supra, cited and confirmed in Hosseini v. Oreck Chernoff 1999 BCCA 386, 174 D.L.R. (4th) 685 (B.C.C.A.) at paras. 18-22.

[25]      Before exercising its discretion, the court must be satisfied that the solicitor recovered or preserved property as a result of the proceeding in which his or her fees and disbursements arise. The property against which the charge arises or attaches must be the property so recovered or preserved. Thus Donald J.A. stated for this court in Hosseini, supra:

A lawyer employed to prosecute a claim regarding property seeks to recover that property; a lawyer employed to defend the claim strives to preserve it. The relationship between the words connects the lien with the lawyer’s employment. In other words, the lien must relate to what the lawyer was hired to do and what the lawyer accomplished; it can only go against the property that the lawyer recovered or preserved as the case may be. [At para. 26; emphasis added.]

[44]       In this case, the question of whether property was recovered or preserved on account of anything done by the law firm is not something the court can determine without any evidence. The property preserved or recovered in the context of a personal injury action would presumably be the settlement funds or trial judgment. Assuming that some of these files are in their infancy and may not even have actions started, it is not possible to conclude by way of a general statement or assertion that the requisite findings for a charging lien can be satisfied.

[45]       The standard practice in British Columbia is that a law firm who wishes to assume conduct of an ongoing personal injury file pays the disbursements and agrees to protect the fees portion. The fees may be the subject of a review by the registrar in the event the two lawyers cannot agree. It may be that the fee at the conclusion of the file is sufficient for both firms to be paid their full hourly rates; however, in some cases this may not be the case.

[46]       In the circumstances, the petitioner has failed to establish that there is anything unique or unusual about these circumstances that would cause the court to conclude that some alternative method of securing the disbursements incurred by the law firm is either necessary or appropriate, either in the instance of a specific client or generally.

[47]       Finally, I do not consider the petitioner’s suggestion raised during reply of an undertaking on the part of the petitioner to pay the disbursements as a first charge on any settlements and for all disbursements to be paid with an outside date of five years, to be an attractive alternative. Indeed, this proposal would appear to confirm that what the petitioner seeks is to compel the law firm to fund its former associate’s new practice. The law firm is not prepared to do so willingly, and I am not prepared to order it to do so.

[48]       The petition is dismissed, with costs to the respondents.