Executive Summary: Key Legal and Evidentiary Issues

• Whether an arbitration clause in a legal retainer agreement precludes a client’s right to court assessment of fees

• Whether the arbitration clause in the retainer agreement was unconscionable and unenforceable

• The proper interpretation of section 7 of the Arbitration Act, 1991 in the context of a legal fee dispute

• Whether the arbitration clause conflicts with rights under the Solicitors Act

• The extent of the arbitrator’s jurisdiction over disputes related to enforceability and fee assessments

• Whether allegations of potential bias against the appointed arbitrator met the legal threshold

Background of the dispute

The applicant, Julia Belova, retained Monkhouse Law for two separate matters: first, a Workplace Safety and Insurance Board (WSIB) case and second, a wrongful dismissal claim under a contingency fee agreement. Each retainer included an arbitration clause stating that any disputes regarding the retainers would be subject to binding arbitration under the Arbitration Act, 1991. The WSIB retainer was terminated in October 2023 after Ms. Belova failed to pay an invoice. Monkhouse Law also terminated the wrongful dismissal retainer shortly thereafter.

Following these events, Monkhouse Law asserted that Ms. Belova owed over $14,000 in fees for the WSIB matter and over $5,000 for the wrongful dismissal matter. Ms. Belova subsequently requested an assessment of fees by the court. Monkhouse Law took the position that the arbitration clause barred such an application and referred its own claim for unpaid fees to arbitration. However, the arbitrator stayed the arbitration until the court ruled on whether the dispute must proceed through arbitration.

The parties’ arguments

Ms. Belova argued that the arbitration clause was unconscionable and invalid, claiming vulnerability due to her health at the time of contracting, and further asserted that the Solicitors Act guarantees her a statutory right to court assessment. She also expressed concerns about potential arbitrator bias. Monkhouse Law argued that the arbitration clause was valid and enforceable and that all disputes—including challenges to the enforceability of the clause—should be resolved by the arbitrator in line with the competence-competence principle.

Court’s findings

The court found that the arbitration clauses in both retainers were valid and enforceable. It ruled that Ms. Belova’s claims of unconscionability did not meet the legal threshold established by the Supreme Court of Canada in Uber Technologies Inc. v. Heller. The court noted there was no evidence of improper tactics by Monkhouse Law, nor sufficient evidence that Ms. Belova was unable to understand the agreements at the time. The arbitration provisions were clearly stated in the retainers, which were relatively short and provided opportunities for review and questions.

On the issue of whether the Solicitors Act overrides the arbitration agreement, the court held that while parties cannot contract out of substantive protections under the Act, they may agree to have an arbitrator—rather than the court—assess legal fees. The court also rejected the argument of potential arbitrator bias, stating that there was no evidence presented to meet the high threshold for a reasonable apprehension of bias.

Conclusion

The court stayed Ms. Belova’s application for a fee assessment and referred the entire dispute—including questions of enforceability—to arbitration. An arbitrator from ADR Chambers was appointed to hear the matter. The court deferred its decision on costs pending written submissions from the parties.