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The Duty of a Solicitor in Transferring Unpaid Accounts

November 2, 2021

Nova Scotia

,

Canada

Issue

Does a successor lawyer have an obligation to secure the previous lawyer's account on a file?

Conclusion

The duties of a successor lawyer on the transfer of a file are not clear and different arrangements are possible. No rule of professional conduct can be laid down to cover the situation respecting unpaid accounts where a client moves from one solicitor to another. It is the client's absolute right to terminate his relationship with his solicitor at any time. While solicitors are duty-bound to extend reasonable courtesies to one another, there is no duty to ensure the payment of another solicitor's account absent some intervention by the court. It is proper for the successor licensee to urge the client to take reasonable steps towards settling or securing any outstanding account of the former licensee, but if a trial or hearing is in progress or imminent, or if the client would otherwise be prejudiced, the existence of an outstanding account should not interfere with the successor licensee acting for the client. There is no legal requirement that a lawyer give an undertaking to a predecessor lawyer or any obligation to ensure that any undertaking is acknowledged by the client, or to ensure that funds are payable to the lawyer. Lawyers are free to come to their own arrangements. However, there are obligations if a lawyer does give an undertaking. A solicitor giving such an undertaking must refrain from actions that would frustrate its performance. The lawyer who gives an undertaking is expected to provide timely notification of circumstances coming to the lawyer’s attention that may prevent the lawyer from honouring his or her undertaking. The former lawyer must be advised of all facts necessary to permit him or her to protect his or her account. The notice obligations under an undertaking could give rise to a breach of confidentiality obligations to the client by the successor lawyer which could only be addressed by express permission from the client to disclose. As a practical matter, in most situations, permission will only be given, if at all, when the file is transferred, and thus, as a practical matter, the lawyer giving the undertaking must address the issue. Otherwise, the solicitor takes the risk of legal exposure to his or her client if permission is not obtained prior to the conflict arising. Finally, the undertaking requires the lawyer to cease acting on behalf of the client from the time when the lawyer learns that the client proposes to take actions that would frustrate the undertaking (Thomas Gold Pettinghill LLP v. Ani-Wall Concrete Forming Inc.)

It is the client's absolute right to terminate his relationship with his solicitor at any time. In many cases, a rule that a superseding solicitor was obliged to make arrangements to 'protect the account' of the former lawyer could unjustly interfere with this right. In some cases there will undoubtedly be good grounds for the client leaving his former solicitor and it may be that his liability to pay any fee at this point would be questionable. It would be wrong to create the impression by a formal rule that members of the legal profession have a concerted or collective position against clients desiring to change their legal advisers - a rule which works to the benefit of individual members of the profession. Nevertheless, it is a dictate of professional courtesy that a solicitor make the effort, before commencing to act for a new client, to see that 'all unsettled matters be satisfactorily adjusted with the original solictor'. But, although this consideration is an important one, it can hardly form the basis of a hard and fast rule of professional conduct since it may be unjust to the client. As far as 'the law' is concerned, the former solicitor always has the right to tax his bill and, further, has his right to a lien on the papers involved. The succeeding solicitor is obliged to return them to him at the conclusion of the matter at hand. It is clear that if trial is imminent, the successor lawyer should not allow the outstanding account of a former lawyer to interfere with his acting for the client. However, it is quite proper for the successor lawyer to urge the client to settle or take reasonable steps towards settling or securing any outstanding account of the former lawyer. It is not only proper, but also necessary for the successor lawyer to insist that the client take reasonable steps to secure such an outstanding account. (Franklin Service Company Limited v. Halifax (City))

It is quite proper for the successor lawyer to urge the client to settle or take reasonable steps towards settling or securing any outstanding account of the former lawyer, especially if the latter withdrew for good cause or was capriciously discharged. But, if a trial or hearing is in progress or imminent, or if the client would otherwise be prejudiced, the existence of an outstanding account should not be allowed to interfere with the successor lawyer acting for the client. (Code of Professional Conduct)

When a solicitor and his or her client part company, in circumstances where a legal account is left unpaid, the solicitor may be entitled to either or both of two liens: firstly, a "general retaining lien" on the contents of the client's file; and, secondly, a lien on the "fruits of the action". Where a solicitor was discharged by the client without cause, the solicitor is entitled to a lien; however, if the solicitor removed himself from the record without cause, the solicitor loses the lien. (Mix v. Murphy)

Although there were good practical and professional reasons for giving an undertaking, there was no legal requirement that a lawyer gives an undertaking to a predecessor lawyer or any obligation to ensure that any undertaking was acknowledged by the client or to ensure that funds are payable to the lawyer. (Bogoroch & Associates v. Sternberg)

In Franklin Service Company Limited v. Halifax (City), three separate proceedings were consolidated and were settled prior to trial. The only matter outstanding was a claim by solicitors who had acted for the claimant in the three actions, but who withdrew as solicitors five days before the hearing. The claims were settled with new solicitors. The former solicitors claimed a lien or other right to be paid out the compensation payable to the plaintiffs. Cowan C.J. held that a successor solicitor who takes over the conduct of litigation on the withdrawal of another solicitor owes a certain duty to the former solicitor with respect to that solicitor's outstanding account. There was no reason for the successor solicitor to refrain from insisting that security for payment of the former solicitor's account be given by setting aside a portion of the fund which was readily available for that purpose.

In Mix v. Murphy, Ms. Arsenault was injured as the result of a car accident. Mr. Arsenault retained the applicant to assist her in the pursuit of her claim, and she entered into a contingency fee agreement. Later, Ms. Arsenault terminated her association with the Applicant. The successor solicitor agreed to hold back funds recovered, the amount of the Applicant’s then undetermined account plus 15%. The Applicant did not accept this proposal and other proposals were exchanged but no agreement was reached. The Applicant then proceeded with a taxation of his account in the Province of Nova Scotia. Rideout J. held that based on all the authorities, the applicant's claim against the successor solicitor for failure to protect his lien or charge could proceed.

Law

Rules 3.7-8 to 3.7-10 and related commentary in the Code of Professional Conduct, Nova Scotia Barristers’ Society’s Code of Professional Conduct provide some guidance to the duties of former and successor counsel as follows:

Manner of Withdrawal

3.7-8 When a lawyer withdraws, the lawyer must try to minimize expense and avoid prejudice to the client and must do all that can reasonably be done to facilitate the orderly transfer of the matter to the successor lawyer.

3.7-9 On discharge or withdrawal, a lawyer must:

(a) notify the client in writing, stating:

(b) the fact that the lawyer has withdrawn;

(c) the reasons, if any, for the withdrawal; and in the case of litigation, that the client should expect that the hearing or trial will proceed on the date scheduled and that the client should retain new counsel promptly;

(d) subject to the lawyer’s right to a lien, deliver to or to the order of the client all papers and property to which the client is entitled;

(e) subject to any applicable trust conditions, give the client all relevant information in connection with the case or matter;

(f) account for all funds of the client then held or previously dealt with, including the refunding of any remuneration not earned during the representation;

(g) promptly render an account for outstanding fees and disbursements;

(h) co-operate with the successor lawyer in the transfer of the file so as to minimize expense and avoid prejudice to the client; and

(i) comply with the applicable rules of court.

Commentary

[1] If the lawyer who is discharged or withdraws is a member of a firm, the client should be notified that the lawyer and the firm are no longer acting for the client.

[2] If the question of a right of lien for unpaid fees and disbursements arises on the discharge or withdrawal of the lawyer, the lawyer should have due regard to the effect of its enforcement on the client’s position. Generally speaking, a lawyer should not enforce a lien if to do so would prejudice materially a client’s position in any uncompleted matter.

[3] The obligation to deliver papers and property is subject to a lawyer’s right of lien. In the event of conflicting claims to such papers or property, the lawyer should make every effort to have the claimants settle the dispute.

[4] Co-operation with the successor lawyer will normally include providing any memoranda of fact and law that have been prepared by the lawyer in connection with the matter, but confidential information not clearly related to the matter should not be divulged without the written consent of the client.

[5] A lawyer who ceases to act for one or more clients should co-operate with the successor lawyer or lawyers and should seek to avoid any unseemly rivalry, whether real or apparent.

Duty of Successor Lawyer

3.7-10 Before agreeing to represent a client, a successor lawyer must be satisfied that the former lawyer has withdrawn or has been discharged by the client.

Commentary

[1] It is quite proper for the successor lawyer to urge the client to settle or take reasonable steps towards settling or securing any outstanding account of the former lawyer, especially if the latter withdrew for good cause or was capriciously discharged. But, if a trial or hearing is in progress or imminent, or if the client would otherwise be prejudiced, the existence of an outstan

In Franklin Service Company Limited v. Halifax (City), 1977 CanLII 686 (NS SC), three separate proceedings were consolidated and were settled prior to trial. The only matter outstanding was a claim by solicitors who had acted for the claimant in the three actions, but who withdrew as solicitors five days before the hearing. The claims were settled with new solicitors. The former solicitors claimed a lien or other right to be paid out the compensation payable to the plaintiffs. Cowan C.J. held that a successor solicitor who takes over the conduct of litigation on the withdrawal of another solicitor owes a certain duty to the former solicitor with respect to that solicitor's outstanding account. There was no reason for the successor solicitor to refrain from insisting that security for payment of the former solicitor's account be given by setting aside a portion of the fund which was readily available for that purpose:

Quite apart from the legal position of the parties, it seems quite clear that a successor solicitor who takes over the conduct of litigation on the withdrawal of another solicitor, owes a certain duty to the former solicitor with respect to that solicitor's outstanding account. The council of the Canadian Bar Association, on August 25, 1974, adopted a Code of Professional Conduct, consisting of a number of chapters, each of which states a rule or principle followed by illustrative commentary, stating the supporting ethical considerations. Chapter II deals with Withdrawal and the rule is as follows:-

"A lawyer owes a duty to bis client not to withdraw his services except for good cause and upon notice appropriate in the circumstances."

In the commentary on the rule, a number of illustrations are given with respect to various matters which may require to be dealt with by the solicitor withdrawing, and by the successor solicitor. It is quite clear that the successor solicitor owes a duty to the client to serve the client's interests and where, as in the present case, litigation is in progress and withdrawal takes place a few days before the date fixed for hearing, the successor lawyer must act promptly and assume the conduct of the litigation and of any negotiations for settlement.

The commentary in p.11 states as follows:-

"Before accepting employment the successor lawyer should be satisfied that the other approves or has withdrawn or has been discharged by the client. It is quite proper for the successor lawyer to urge the client to settle or take reasonable steps towards settling or securing any outstanding account of the other lawyer, especially if the latter withdrew for good cause or was capriciously discharged. But if a trial or hearing is in progress or imminent, or if the client would otherwise be prejudiced, the successor lawyer should not allow any outstanding account to interfere with bis acting for the client."

It seems quite clear that, as stated in the commentary, if a trial is imminent, the successor lawyer should not allow any outstanding account of the former lawyer to interfere with his acting for the client. However, as suggested in the comm­entary, it is quite proper for the successor lawyer to urge the client to settle, or take reasonable steps towards settling or securing any outstanding account of the former lawyer. It seems to me that it is not only proper, but necessary, for the successor lawyer to insist that the client take reasonable steps to secure such an outstanding account. In the present case, such a step would include the setting aside of sufficient funds in a deposit account, in trust, to secure payment of the account when taxed.

There is a useful discussion of the succeeding solicitor's duty to protect the account of the former solicitor, by John W. Morden (now Morden, IT., of the Ontario High Court) in (1971) 5 Law Soc. Up. C. Gaz. 257. Reference is made to Orkin's Legal Ethics (Carswell, 1957), at p.94, where the following is found after incorporating the author's footnotes in the text:-

"So far as any fees owing to the prior solicitor are concerned, while these may not, as such, be the responsibility of the super­seding lawyer [Drinker, Legal Ethics (New York, 1953), p.200, based on opinions of the Ethics Committee of the American Bar Associa­tion], he should not feel free to ignore them [Drinker, p.200: 'The superseded lawyer is entitled to notice so as to enable him to protect his right or lien'). Ludwig [Practical Ethics of the Lawyer, 29 C.L. Times 253 at p.261] puts his duty thus: 'In every case, before accepting the retainer be should insist that all unsettled matters be satisfactorily adjusted with the original solicitor, and if the client refuses to do so he should decline to act".

Mr. Morden continued as follows:‑

“It is my view that no rule of professional conduct can be laid down to cover the situation respecting unpaid accounts where a client moves from one solicitor to another. It is quite clear that it is the client's absolute right to terminate his relationship with his solicitor at any time. In many cases a rule that a superseding solicitor was obliged to make arrangements to "protect the account" of the former solicitor could unjustly interfere with this right. In some cases there undoubtedly will be good grounds for the client leaving his former solicitor and it may be that his liability to pay any fee at this point would be questionable. It would be wrong to create the impression by a formal rule that the members of the legal profession have a concerted or collective position against clients desiring to change their legal advisers—a rule which works to the benefit of individual members of the profession.

However, this is a subject upon which, if not as a matter of professional conduct, at least as a matter of common cour­tesy, guidance can be given. It surely has to be a dictate of professional courtesy that a solicitor make the effort, before commencing to act for a new client, to see that "all unsettled matters be satisfactorily adjusted with the original solicitor", to use Mr. Ludwig's phrase. It may be noted that Mr. Ludwig says that such "will establish and preserve the best of feeling and friendship among members of the Bar". This consideration, although an important one, can hardly form the basis of a hard and fast rule of professional conduct since, as indicated above, it may be quite unjust to the client that unsettled matters be adjusted to the satisfaction of the original solicitor before the matter can proceed. However, not to expect that a solicitor would inquire into the status of the relationship between the client and the former solicitor with a view to seeing that any issues are satisfactorily resolved not only would be contrary to the ordinary standards of courtesy between members of the Bar but could also create the impression in the minds of clients that the succeeding lawyer considered only his own position, in his desire to obtain new business, with sort of a devil take the hindmost attitude towards the former solicitor. This is cer­tainly an impression which the profession should seek to avoid.

As far as "the law" is concerned the former solicitor, of course, always has the right to tax his bill anti, further, has his right to a lien on the papers involved. The succeeding solicitor is obliged to return them to him at the conclusion of the matter at hand: Re Collison v. Hurst.[1] Reference also should be made to the recent decision of Keith, J. in Re Gladstone and Solici­tors,[2] following Hughes v. Hughes,[3] and denying the client the right to have the papers in current litigation delivered to her new solicitors. There was a holding that the client was un­justified in discharging her former solicitors. "She was, of course, perfectly entitled to do so, but the consequences of her doing so with respect to the solicitors' right to claim a lien on her papers for their unpaid account are very different than they would be if the solicitors themselves had decided that they would no longer act for her or if they had been discharged by her for a legitimate cause." The Collison case is not referred to in the judgment.) '"

The foregoing article does not deal specifically with the question of protecting the account of the former solicitor, by giving security. Presumably, the account can be protected either by payment or by giving security. In many cases, it would be unreasonable to insist on payment of the account if it had not been taxed, or if there were some reasonably valid reason why the client was then not ready or willing to pay the account. There would seem to be no reason, however, for the successor solicitor to refrain from insisting that security for payment of the former solicitor's account be given, as in the present case, by setting aside a portion of a fund which is readily available for that purpose.

In Mix v. Murphy, 2003 NBQB 395 (CanLII), Ms. Arsenault was injured as the result of a car accident. Mr. Arsenault retained the applicant to assist her in the pursuit of her claim, and she entered into a contingency fee agreement. Later, Ms. Arsenault terminated her association with the Applicant. The successor solicitor agreed to hold back funds recovered, the amount of the Applicant’s then undetermined account plus 15%. The Applicant did not accept this proposal and other proposals were exchanged but no agreement was reached. The Applicant then proceeded with a taxation of his account in the Province of Nova Scotia. Rideout J. set out the legal principles of when a solicitor's lien arises:

[13] The overarching question before the Court on this Application is whether a lawyer who succeeds to a file has a duty to reserve out of any amount recovered a reasonable amount of money to pay the proper legal fees of another lawyer who was known to him to have been previously retained by the client to pursue the matter?

[14] My review of the authorities would indicate that there are in fact two liens in the circumstances of this case: 1) a solicitor’s lien of the file, and 2) a lien against the “fruits of the action”. As well the authorities seem to confirm my impression that any “solicitor’s lien” is attached to the physical file and once the lawyer parts with the file the lien is lost. This of course, did not preclude the lawyer from commencing legal action to recover the lawyer’s fees but the lawyers security i.e. the solicitor’s lien, would be lost. Although, the lawyer could also proceed against the “fruits of the action”.

[15] In McIntosh et al. v. Wannamaker et al. (1999), 1999 CanLII 32569 (NB QB), 221 N.B.R. (2d) 286 Garnett J. dealt with a situation where a solicitor refused to transfer a file until he was paid. The Court ordered the transfer under the condition that any settlement in favour of the Plaintiff would be paid into Court so that the solicitor could bring a motion for directions. Garnett J. said at paragraph 1 and 2:

… Mr. McAllister has refused to transfer the file because his account has not been paid.

2 It is not in the interests of any party nor the administration of justice generally that inordinate delays occur due to differences between solicitor and client. The solicitor, however, does have a right to be paid fairly for his or her services and to protect against loss of costs for time already expended.

[16] The Ontario Court (General Division) had this to say in Linauskas v. Linauskas (No. 2) 1998 CanLII 14657 (ON SC), [1998] O.J. No. 424 at page 4:

It is well settled that when a solicitor and his or her client part company, in circumstances where a legal account is left unpaid, the solicitor may be entitled to either or both of two liens: firstly, a "general retaining lien" on the contents of the client's file; and, secondly, a lien on the "fruits of the action". In the case before me I am concerned only with the former.

Simply put, a general retaining lien allows an unpaid solicitor to hold personal property of the client that comes into the solicitor's possession in the course of representing the client. Obvious examples would be documents, photographs, videotapes, papers and the like. The lien is intended to stand as some security for the debt owed. And it would be naive not to acknowledge that the solicitor is well aware that the client may be somewhat inconvenienced by the lien; indeed, that is part of the effectiveness of the lien. If a dispute arises as to the legitimacy of the lien, the dispute is a question of law and can only be resolved by a court.

[17] Quinn J. in Linauskas outlines three possible scenarios:

(a) Where a solicitor is discharged by the client without cause, the solicitor is entitled to a lien;

(b) Where a solicitor removes himself from the record without cause, the solicitor looses the lien; and

(c) When a solicitor removes himself or herself from the record with cause, in other words, constructive dismissal, the precise circumstance will dictate when the lien is lost. In Collison v. Hurst 1946 CanLII 310 (ON CA), [1946] O.W. N. 668 the Ontario Court of Appeal concluded the lien was lost because the solicitor abandoned the client close to the trial. In R. v. Gladstone [1972] 2 O.R. (2) the Ontario Court of Appeal devised an arrangement to preserve the lien when third parties were involved. Quinn J. in Linauskas also preserved the lien in a constructive dismissal situation.

[18] A reading of subsection 94(1) of the Law Society Act clearly establishes that a lawyer has a charge against any recovery made by the client. As well, Quinn J. in Linauskas supra stated, there is a second lien on the “fruits of the action”. It was argued that subsection 94(1) only relates to the lawyer presently representing the client. With respect, I do not believe there is such a limitation in the wording of the section. 94(1) says: “A member who represents a client”. In my opinion this relates to any lawyer who has represented the client. If I am wrong in my interpretation of the section, the common law referred to in Linauskas would still be applicable. Consequently, any such lawyer has a charge against any property recovered for the benefit of the client whether the lawyer is the initial lawyer or a successor lawyer.

Rideout J. held that based on all the authorities, the applicant's claim against the successor solicitor for failure to protect his lien or charge may proceed:

[21] Considering all of the authorities including sections 93 and 94 of the Law Society Act, I am satisfied that in this case there is a potential lien or charge on the actual solicitor’s file and on the “fruits of the action”. Subsection 94(4) requires that directions for the realization or enforcement of the lien or charge be first obtained. Consequently I direct that the Applicant’s claim against the Respondents for failure to protect his lien or charge may proceed. But I make no findings as to the outcome on the merits of the particular claim advanced nor on the suitability of the taxation nor on the issue of latches.

In Thomas Gold Pettinghill LLP v. Ani-Wall Concrete Forming Inc., 2012 ONSC 2182 (CanLII), Ani-Wall did not pay the final account of its former solicitors for a litigation retainer that was transferred and completed by the successor solicitor. The litigation settled, and the successor solicitor had around $60,000 left in its trust account. The successor solicitor applied for a declaration that the former solicitors were entitled to the funds. Perell J. discussed the obligations of a successor lawyer on the transfer of a file. The Court held that the duties of a successor lawyer on the transfer of a file are not clear and there are different arrangements that are possible. No rule of professional conduct can be laid down to cover the situation respecting unpaid accounts where a client moves from one solicitor to another. It is the client's absolute right to terminate his relationship with his solicitor at any time. In many cases, a rule that a superseding solicitor was obliged to make arrangements to 'protect the account' of a former solicitor would unjustly interfere with this right. While solicitors are duty-bound to extend reasonable courtesies to one another, there is no such duty to ensure the payment of another solicitor's account absent some intervention by the court. It is quite proper for the successor licensee to urge the client to settle or take reasonable steps towards settling or securing any outstanding account of the former licensee, especially if the latter withdrew for good cause or was capriciously discharged. But if a trial or hearing is in progress or imminent or if the client would otherwise be prejudiced, the existence of an outstanding account should not be allowed to interfere with the successor licensee acting for the client. There is no legal requirement that a lawyer give an undertaking to a predecessor lawyer or any obligation to ensure that any such undertaking is acknowledged by the client, or to ensure that funds are payable to the lawyer. Lawyers are free to come to their own arrangements. However, there are obligations if a lawyer does give an undertaking. The undertaking will include a continuing obligation of the solicitor to refrain from actions that would frustrate the performance of the undertaking. The lawyer who gives an undertaking is expected to provide timely notification of circumstances coming to the lawyer’s attention that may prevent the lawyer from honouring his or her undertaking. The former lawyer must be advised of all facts necessary to permit him or her to protect his or her account. The notice obligations under an undertaking could give rise to a breach of confidentiality obligations to the client by the lawyer who gave the undertaking, and this could only be addressed by express permission from the client. As a practical matter, in most situations, this permission will only be given, if at all, at the time the file is transferred, and thus, as a practical matter, the lawyer giving the undertaking must address the issue. The solicitor takes the risk of legal exposure to his or her client if the lawyer does not obtain permission to give this disclosure prior to the conflict arising. Finally, the undertaking requires the lawyer to cease acting on behalf of the client from the time when the lawyer learns that the client proposes to take actions that would frustrate the undertaking:

3. The Obligations of a Successor Lawyer on the Transfer of a File.

[54] Although he gave an undertaking to pay Cassel Brock’s outstanding account receivable out of the proceeds of the anticipated settlement payable to Ani-Wall, Mr. Thomas had no professional obligation to Cassels Brock to give this undertaking. Unfortunately, the duties of a successor lawyer on the transfer of a file are not clear and there are different arrangements that are possible, some of which may prove problematic if the client does not support the undertaking.

[55] The Honourable John Morden discussed the ethical duties of a successor lawyer in J.W. Morden, “A Succeeding Solicitor’s Duty to Protect the Account of the Former Solicitor” (1971), 4 Law Society of Upper Canada Gazette 257, and he stated at p. 258:

It is my view that no rule of professional conduct can be laid down to cover the situation respecting unpaid accounts where a client moves from one solicitor to another. It is quite clear that it is the client’s absolute right to terminate his relationship with his solicitor at any time. In many cases a rule that a superseding solicitor was obliged to make arrangements to “protect the account” of the former solicitor would unjustly interfere with this right. In some cases there undoubtedly will be good grounds for the client leaving his former solicitor and it may that his liability to pay any fee at this point would be questionable. It would be wrong to create the impression by a formal rule that the members of the legal profession have a concerted or collective position against clients desiring to change their legal advisers – a rule which works to the benefit of individual members of the profession.

[56] More recently, Justice Rawlins of the Alberta Court of Queen’s Bench addressed the question of the successor lawyer’s duties to his or her predecessor in Merchant Law Group v. McLeod & Co., supra at para. 53, where he stated:

In my view, while solicitors are duty-bound to extend reasonable courtesies to one another, there is no such duty to ensure payment of another solicitor's account absent some intervention by the Court. I am supported in this view by Chapter 14 of the Law Society of Alberta's Code of Professional Conduct, which deals with withdrawal by and dismissal of a solicitor. Commentary 3 to Rule 3 of that Chapter provides, in part, as follows:

A withdrawing lawyer should not enforce a solicitor's lien for non-payment of fees if the client is prepared to enter into an arrangement that reasonably assures the lawyer of payment in due course. Successor counsel may also be requested to undertake to pay an outstanding account from the monies ultimately recovered by that counsel. Where the matter in question is subject to a contingency agreement, the lawyers may agree to divide the contingent fee on the basis of apportionment of total effort required to effect settlement.

Further, Commentary 5 to Rule 5 provides, in part, as follows:

Both the withdrawing and successor lawyer must cooperate in facilitating a smooth transition with as little inconvenience and expense to the client as possible. A successor lawyer has no general duty to ensure that the previous lawyer has been paid, but it is appropriate to encourage the client to resolve an outstanding account.

[...]

[62] Moving from the lawyer’s ethical or professional responsibilities to the law’s enforcement of undertakings, Justice Wilton-Siegel concluded that although there were good practical and professional reasons for doing so, there was no legal requirement that a lawyer give an undertaking to the predecessor lawyer or any obligation to ensure that any undertaking was acknowledged by the client or to ensure that funds are payable to the lawyer. Lawyers were free to come to their own arrangements.

[63] There are obligations, however, if a lawyer does give an undertaking. The undertaking will include a continuing obligation of the solicitor to refrain from actions that would frustrate the performance of the undertaking. The lawyer who gives an undertaking is expected to provide timely notification of circumstances coming to the lawyer’s attention that may prevent the lawyer from honouring his or her undertaking. The former lawyer must be advised of all facts necessary to permit him or her to protect his or her account.

[64] The notice obligations under an undertaking could give rise to a breach of confidentiality obligations to the client by the lawyer who gave the undertaking, and this could only be addressed by express permission from the client. As a practical matter, in most situations, this permission will only be given, if at all, at the time the file is transferred, and thus, as a practical matter, the lawyer giving the undertaking must address the issue. The solicitor takes the risk of legal exposure to his or her client if the lawyer does not obtain permission to give this disclosure prior to the conflict arising.

[65] Finally, the undertaking requires the lawyer to cease acting on behalf of the client from the time when the lawyer learns that the client proposes to take actions that would frustrate the undertaking. Whether the obligation to withdraw conflicts with the solicitor's professional responsibilities to the client will depends upon the particular circumstances of a case.

In Bogoroch & Associates v. Sternberg, 2005 CanLII 21682 (ON SC), affirmed in 2007 CanLII 41889 (ON SCDC), Richard Campbell was injured in a motor vehicle accident, and he retained Bogoroch & Associates to act for him to make tort claims and statutory accident benefit claims. The firm acted for a time, but Mr. Campbell decided to retain a different lawyer, Gerald Sternberg, to assume carriage of his claims. In order to obtain the file, Mr. Sternberg gave an undertaking to Bogoroch & Associates to protect its account, which was understood to mean that Mr. Sternberg would ensure that the account would be paid out of any arbitration or settlement proceeds after payment of Sternberg's account. There, however, was no complementary undertaking or acknowledgement from Mr. Campbell. Mr. Sternberg assumed carriage of the matter, and he negotiated a $75,000 settlement with Mr. Campbell’s accident benefits insurer. Mr. Campbell demanded that the settlement proceeds be paid directly to him and not to Mr. Sternberg in trust. Mr. Sternberg understood that Mr. Campbell wanted a direct payment to prevent Mr. Sternberg from using the funds to pay Bogoroch & Associates’s account. Mr. Sternberg advised Bogoroch & Associates that it was probable that Campbell would be paid directly and thus he would be unable to honour the undertaking. Meanwhile, Bogoroch & Associates issued an account for $31,435.97 and sent a copy to Mr. Sternberg, but before it could obtain a charging order, Mr. Campbell received the settlement proceeds. Subsequently, Bogoroch & Associates sued Mr. Sternberg on his undertaking to protect the account. Justice Wilton-Siegel noted that there was no uniform practice among lawyers with respect to the actions, if any, that should be taken at the time of the transfer of a client's file and thus the obligations of a solicitor giving an undertaking were unclear. Justice Wilton-Siegel set out a list of actions that a lawyer giving an undertaking to protect his or her predecessors account might take. He stated:

[55] The issue before the Court is the extent of the obligations assumed by a solicitor who gives a personal undertaking to protect the account of a prior solicitor. The issue is addressed in the particular context of personal injury litigation in which each solicitor is looking to be paid out of any judgment, arbitration or settlement proceeds. In these circumstances, the first solicitor’s account cannot be paid at the time of the transfer of the client’s file. As indicated below, the evidence before the Court indicates that there is no uniform practice among solicitors with respect to the actions, if any, which should be taken by the parties at the time

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