Taking over a file, even if fees remain unpaid, does not amount to inducing breach of contract

Heydary Hamilton Professional Corporation v. Hanuka, 2010 ONCA 881 deals with the common situation where a client fires a lawyer and hires a new one without paying the old one.

It appears that, even if the new lawyer knew of the existing fee arrangements (which one would expect), no claim for inducing breach of contract will lie:

[8]               In a brief endorsement, the motion judge concluded that this case is controlled by the decision in Manning v. Epp, 2006 CanLII 24126 (ON S.C.), affirmed by the Court of Appeal at 2007 ONCA 390. He therefore dismissed the appellant's claim against the successor lawyers on the basis that it could not possibly succeed.

[9]               In Manning, the plaintiff lawyer sued, among others, a mayor and a municipal councillor for inducing breach of contract and intentional interference with economic relations. The solicitor alleged that the mayor and the municipal councillor wrongfully persuaded the municipality to terminate the lawyer's retainer because the lawyer refused to change an opinion he had given to the municipality about a particular issue.

[10]          Lax J. struck the lawyer's claim. At para. 20 of her reasons, she held that a client has "an absolute and unfettered right to discharge a lawyer" and that a "solicitor's sole economic interest in a retainer is having his fees paid for the work he has performed". Moreover, at para. 21 of her reasons, she stated that "[a]ny conduct by [the municipality's representatives] that may have contributed to or influenced the decision cannot give rise to a cause of action for harm to economic interests where no economic loss exists."
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[12]          The appellant argues that, particularly in the context of a contingency fee arrangement, a cause of action exists against the successor lawyers for causing economic loss to the appellant through an unlawful act. As framed in oral argument, the unlawful act alleged is the knowing and deliberate participation by the successor lawyers in a scheme to assist the former clients in avoiding their obligation to properly compensate the appellant for services legitimately rendered under the retainer agreement. The appellant contends that the motion judge erred in holding that its cause of action as pleaded against the successor lawyers could not possibly succeed. In the alternative, the appellant argues that the motion judge erred in failing to grant leave to amend.

[13]          We do not accept the appellant's arguments. Even assuming that a cause of action as described by the appellant may exist, the appellant has failed to plead particulars of any conduct on the part of the successor lawyers capable of giving rise to an inference that such a cause of action exists in this case.

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[15]          Further, there are no facts pleaded in the statement of claim that are reasonably capable of supporting an inference that the successor lawyers "clandestinely enticed and assisted the [former clients] to terminate the [October 19, 2007 retainer agreement] without paying the amounts due and payable to [the appellant]." The fact that the former clients changed counsel without paying or securing outstanding fees is not, in itself, capable of supporting that inference. 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.
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[17]          Having regard to the former clients' absolute right to terminate their retainer with the appellant and our conclusions concerning the appellant's claim for inducing breach of contract and intentional interference with economic relations, we see no merit in the appellant's claim for unjust enrichment.
James Morton
1100-5255 Yonge Street
Toronto, Ontario
M2N 6P4

416 225 2777