Law firm's claim for unpaid legal fees was not an abuse of process: Saskatchewan Court of Appeal

The Saskatchewan Court of Appeal has refused to dismiss a law firm’s claim for damages from a client who changed representation without paying the legal fees for services already performed.

In Merchant Law Group LLP v. Slusar, 2022 SKCA 75, Merchant Law claimed that it entered into a written contingency fee agreement with a client who was seeking damages arising out of his attendance at an Indian residential school. The firm allegedly performed legal services for the client’s case in the amount of $5,178.45. However, without paying the fees, the client changed his representation to Slusar Law.

Slusar Law admitted that the client had received compensation in relation to his attendance at a residential school, but the firm claimed that it had represented him for the entirety of an independent assessment process (IAP), which was unrelated to the legal services performed by Merchant Law for the client.

Merchant Law sued both the client and Slusar Law for unpaid legal fees, arguing that it held a solicitor’s charging lien for the value of its prior legal work and disbursements. Slusar applied to strike Merchant’s statement of claim on the ground that it was an abuse of process and failed to disclose a reasonable cause of action. The chambers judge agreed and consequently struck Merchant’s claim.

Reasonable cause of action

Slusar argued that the pleadings didn’t reveal a reasonable cause of action. However, the court noted that Merchant amended its statement of claim and that amendment did not refer to the IAP, which Slusar asserted was unrelated to Merchant’s claim. Rather, the court found that the amended claim was based on the assertion that a lien arose in favour of Merchan, in relation to the settlement proceeds recovered by the client for a claim arising out of his attendance at a residential school.

“According to the facts as alleged, Merchant Law represented the client for a claim and Slusar Law represented him on the same claim,” said the court. “Merchant Law pleads that its legal work was in part responsible for the settlement being obtained.”

Consequently, the court concluded that the amended statement of claim disclosed a reasonable cause of action and the chambers judge made an error in striking it.

Abuse of process

The chambers judge struck the claim as an abuse of process, based on Merchant’s assertion that it had a lien that could be enforced against Slusar, and Merchant’s fees were covered by the IAP process and the Indian Residential Schools Settlement Agreement (IRSSA). The court explained that bringing a claim that has already been settled by agreement or judgment amounts to an abuse of process because “permitting an action to proceed that has already been unambiguously and fully resolved would bring the administration of justice into disrepute.”

However, the court found that there was an arguable issue as to whether the IRSSA barred Merchant’s claim and the determination of the dispute must involve an interpretation of the agreement and a weighing of the evidence. In addition, there was also an issue as to whether the client had indeed engaged in a subsequent and independent process that was not related to the original retainer with Merchant.

 “Given the convoluted and disputed nature of the issues at stake, it is impossible to conclude that it is plain and obvious that Merchant Law’s claim will fail,” said the appeal court in determining that It should not have been dismissed as an abuse of process.