A Verbal Contract Makes Transpharm Liable for Costs of Patents that Name its CEO as Owner

A Verbal Contract Makes Transpharm Liable for Costs of Patents that Name its CEO as Owner

Gowling Lafleur Henderson LLP v Transpharm Canada Inc, 2014 ONSC 5643

At issue in this case was the identity of the party liable to pay the law firm Gowling Lafleur Henderson LLP (“Gowlings”) outstanding legal fees for patent services that were charged to Transpharm Canada (“Transpharm”). [6] There was no written retainer to explicitly identify the client. [13] Transpharm argued that it was Transpharm’s president and CEO, Alexander MacGregor, [19] who had contracted with Gowlings for the services personally and was thus liable to pay the outstanding accounts rather than Transpharm itself. [8] However, citing the 10 year period during which Mr. MacGregor, on Transpharm’s behalf, accepted Gowlings’ treatment of Transpharm as its client and as responsible for the cost of the patent services, [53] the Court concluded that Transpharm verbally retained Gowlings for these services and are liable for the unpaid legal costs. [60]

The Working Relationship Between Gowlings and Transpharm

Gowlings’ industrial property department began working with Mr. MacGregor in June, 2000. [23] In November of 2000 Transpharm sent a $4000 retainer for ongoing patent work to be done. [25]

It was Gowlings’ understanding that Mr. MacGregor was to be shown on the patent applications as the inventor, applicant, and owner, and that all legal services were to be charged to Transpharm. [31] Mr. MacGregor similarly acknowledged that all services provided by Gowlings for patent work were to be invoiced to Transpharm. [35] Gowlings produced a number of invoices showing payments charged to Transpharm, which were paid by Transpharm and signed by Mr. MacGregor on behalf of Transpharm. [37] Correspondence between Mr. MacGregor and Gowlings similarly indicates that Transpharm would be paying Gowlings’ legal fees. [38-41]

There was no evidence of payment being made personally from Mr. MacGregor to Gowlings for patent services. [42]

The Point of Disagreement

An issue arose between Mr. MacGregor and Gowlings during a patent litigation dispute in January of 2012 for which Gowlings was retained. The Gowlings litigator had advised Mr. MacGregor to seek independent legal advice since he felt that some of the statements made by Mr. MacGregor on discovery were harmful to Mr. MacGregor’s assertion that he was the inventor of the relevant patents. Gowlings advised amending the statements. Mr. MacGregor was offended. [46]

Mr. MacGregor and Transpharm retained new lawyers in the lawsuit and instructed Gowlings to transfer the litigation file and all patent files to the new firm. [47]

At this time, some of the accounts payable to Gowlings were in arrears. In response to Mr. MacGregor’s instructions to transfer the files, Gowlings increased its efforts to receive payment for these outstanding amounts in March of 2012. Transpharm then denied liability, claiming that the retainer for patent services was with Mr. MacGregor personally. [50]

The Court’s Analysis

The Court acknowledged that verbal conduct by the parties may be sufficient to conclude that a verbal agreement was entered into. [14] The Court applied an objective test to determine the nature of the agreement. [15]

The Court placed great weight on the evidence that Gowlings billed Transpharm for a lengthy period of time and was never told that Mr. MacGregor was to be billed personally. [51] The Court found that Mr. MacGregor’s conduct of accepting Gowling’s treatment of Transpharm as the client responsible for the costs contradicts his assertion that he was the client himself. [53]

The Court ultimately concluded that Transpharm verbally retained Gowlings and is liable for the unpaid legal accounts. [60] The amount of fees and disbursements, which was not in dispute, amounted to $173,996.08 plus interest. [61]


This case demonstrates the importance of obtaining a written retainer between legal counsel and the client, lest a breakdown in the relationship lead to a legal battle over who is to pay legal fees.

In this case, the Court determined that without a written retainer agreement, a verbal retainer could be established by virtue of the verbal conduct between the parties involved. The corporation Transpharm was determined to be the client liable for payment due to the conduct of the CEO who conducted the financial transactions through Transpharm for at least 10 years. This was the conclusion even though the CEO was essentially the beneficiary of the patents as the named inventor and owner.

The Court made note that the CEO essentially “wore two hats”, where the patents were made out in his name as inventor and owner, but Transpharm was to bear the costs by virtue of his position as CEO. [55] The Court did not seem to find any perceived unfairness with this sort of arrangement, stating that “Mr. MacGregor would not be the first senior officer and directing mind of a corporation with one or few shareholders, that directs certain commercial activities of a personal and corporate nature or benefit to be conducted within or as part of the corporation.” [emphasis added] [59]