Raphael Partners v. Lam

Indexed as: Raphael Partners v. Lam

61 O.R. (3d) 417

[2002] O.J. No. 3605

Docket No. C36894

Court of Appeal for Ontario,

Catzman, Rosenberg and Cronk JJ.A.

September 24, 2002

Professions -- Barristers and solicitors -- Fees -- Contingency fee -- Solicitor agreeing to act for plaintiff in catastrophic personal injury action on contingency fee basis -- Client understanding contingency fee agreement -- Parties reaching settlement at mediation -- Client signing instructions to solicitor authorizing settlement and payment to solicitor of maximum amount which solicitor could have recovered under contingency fee arrangement -- Client subsequently having second thoughts about fee -- Contingency fee agreement enforceable -- Fee agreement reasonable in circumstances despite fact that settlement accomplished prior to trial -- Contingency fee arrangement involving considerable risk for solicitor -- Solicitor achieving excellent result through settlement -- Time spent by solicitor on client's file did not control question of whether solicitor entitled to maximum fees charged.

The client retained the solicitor in 1996 to act for him in a personal injury action arising out of an accident which rendered him quadriplegic. The solicitor agreed to act on a contingency fee basis. He told the client and his parents that his fees would be 15 per cent of the first $1 million recovered and 10 per cent of each million dollars thereafter. The solicitor did not obtain a written retainer from the client, but wrote to the client in October 1996 confirming the fee arrangement. Prior to a March 2000 mediation, the solicitor met with the client about 23 times. On every second or third occasion, he reviewed with the client the calculation of the solicitor's proposed fees and disbursements, based on the formula set out in his letter of October 1996, and provided the client with handwritten illustrations of the fees calculations. The March 2000 mediation resulted in a settlement by which the defendant agreed to pay the client $2.5 million for general damages, plus $200,000 for costs and $50,000 for disbursements. At the mediation, the solicitor proposed to the client that the solicitor would receive $500,000 for his fees, inclusive of GST, plus disbursements, thus leaving a residual settlement for the client of approximately $2 million. The client signed written instructions to the solicitor at the mediation authorizing the settlement and the amount of the solicitor's fees. He also signed minutes of settlement. The total value of the solicitor's docketed time and disbursements as at the date of the mediation was $96,760.02 for fees and $59,523.43 for disbursements. The client began to reconsider the amount of the solicitor's fees almost immediately following the mediation. He did not communicate any unease to the solicitor. He subsequently refused to sign a direction and authorization which confirmed that the legal costs of the litigation were $550,000, inclusive of fees, disbursements and GST. The solicitor obtained an order for the assessment of the account. The assessment officer concluded that the fees were patently excessive and reduced the fees to $230,000 plus GST. The solicitors opposed confirmation of the assessment officer's decision and moved to set it aside on the basis that the fees charged had been agreed to by the client and were fair and reasonable in the circumstances. The motions judge found that the client understood the contingency fee arrangement but that the process by which the March 2000 agreement was signed was not a fair one. The fees proposed were the maximum that the solicitor could have recovered under the contingency fee structure. The determination of the final amount of the solicitor's fee could easily have been left for another day so as to enable the client to obtain independent legal advice. The motions judge set aside the assessment officer's decision and assessed the solicitor's fees at $206,300. The defendant appealed the motions judge's decision. [page418]

Held, the appeal should be allowed.

The motions judge erred in assessing the fairness of the March 2000 fee agreement by focusing solely on the circumstances surrounding the March 2000 mediation, to the exclusion of the entire course of dealings between the parties concerning the solicitor's remuneration. The client understood the 1996 contingency fee arrangement and the March 2000 fee agreement. The process followed at the March 2000 mediation in connection with the execution by the client of his instructions to the solicitor was only the culminating step in a lengthier process by which the matter of the solicitor's compensation had been discussed and agreed upon between the parties. Examination of that full process revealed no unfairness to the client and demonstrated that the client understood and appreciated the nature of the fee agreement. The client did not object to the contingency fee arrangement, or to the payment thereunder of maximum fees to the solicitor, for more than 3 1/2 years. No objection was communicated by him to the solicitor until after a settlement of the action had been successfully negotiated and accepted, and after the client had signed minutes of settlement and written instructions to the solicitors providing for payment of the maximum fees permitted under the contingency fee arrangement. The fact that the client had second thoughts about the solicitor's compensation following settlement of the action was not itself grounds to avoid an otherwise enforceable fee agreement. The client was 27 years old and competent when the March 2000 fee agreement was made. The motions judge's conclusion that the client had no practical opportunity at the mediation to object to the solicitor's fees or to obtain independent legal advice if desired, failed to address the implications of the history of the dealings between the parties which culminated in the March 2000 fee agreement, including the circumstances that applied in 1996 when the contingency fee arrangement was finalized and throughout the 3 1/2 years of the solicitor's retainer. Moreover, during the proceedings before the motions judge, the client did not allege any impediment at the mediation to his ability to object to the solicitor's fees, or any inability by him to obtain independent legal advice, as grounds for precluding enforcement of the March 2000 fee agreement. In the circumstances, the March 2000 fee agreement was not unfair to the client. It was a bargain freely made, understood and accepted by him.

The contingency fee arrangement involved considerable risk to the solicitor. As found by the motions judge, the liability and contributory negligence issues in the case were complex; the risk of an adverse liability finding was a very real prospect, and the risk of an adverse finding on contributory negligence was very high, such that the client's recovery might be minimal, and an excellent result was achieved through the settlement, which reflected the best case scenario for the client had the case proceeded to trial. Those findings were relevant to, and should have been considered on, the examination of the reasonableness of the March 2000 fee agreement. The contingency fee arrangement did not contemplate the determination of legal fees based on the value of time spent by the solicitor on the file. The time spent by the solicitor on the file to the date of settlement, while a relevant factor, did not control the question of whether the solicitor was entitled to the maximum fees charged. Moreover, the resolution of the client's case prior to trial did not operate against enforcement of the March 2000 fee agreement. A settlement was not achieved for more than three years from the date of the solicitor's retainer. During that time, considerable preparation, research and work had been undertaken by the solicitor on behalf of the client, including services not reflected in the solicitor's docketed time. The March 2000 fee agreement was fair and reasonable. [page419]

APPEAL from an judgment of Molloy J. (2001), 55 O.R. (3d) 289 (S.C.J.), setting aside assessment officer's decision and assessing solicitor's fees.

Cases referred to 656203 Ontario Inc. v. Soloway Wright, 1999 ABQB 455, [1999] O.J. No. 429 (Quicklaw) (S.C.); Best v. Pick Estate (1998), 37 O.R. (3d) 633, 39 B.L.R. (2d) 141 (Gen. Div.) (sub nom. Best v. Yegendorf, Brazeau, Seller, Prehogan & Wyllie); Cohen v. Kealey & Blaney (1985), 10 O.A.C. 344 (C.A.); Desmoulin v. Blair (1994), 21 O.R. (3d) 217, 120 D.L.R. (4th) 700 (C.A.), revg (1991), 83 D.L.R. (4th) 157 (Ont. Gen. Div.); Finlayson v. Roberts (2000), 6 M.V.R. (4th) 193, 136 O.A.C. 271 (C.A.), revg (1996), 26 M.V.R. (3d) 66 (Ont. Gen. Div.); Gagne v. Silcorp Ltd. (1998), 41 O.R. (3d) 417, 167 D.L.R. (4th) 325, 39 C.C.E.L. (2d) 253, 27 C.P.C. (4th) 114 (C.A.), revg (1997), 35 O.R. (3d) 501, 14 C.P.C. (4th) 269 (Gen. Div.); McIntyre Estate v. Ontario (Attorney General) , 61 O.R. (3d) 257, [2002] O.J. No. 3417 (Quicklaw) (C.A.), (2001), 53 O.R. (3d) 137, 198 D.L.R. (4th) 165, 11 C.P.C. (5th) 267 (S.C.J.) Statutes referred to Solicitors Act, R.S.O. 1990, c. S.15, ss. 16, 17, 18, 19, 23, 24

William V. Sasso, for appellant. Patrick O'Hagan, for respondent.

The judgment of the court was delivered by

Reasons for Decision

[1] CRONK J.A.: -- This appeal involves the enforceability of a contingency fee arrangement between solicitors and their client, the plaintiff in a catastrophic personal injury action.

[2] A settlement of the client's negligence action was reached at mediation with the lead defendant. The settlement provided for a payment to the client of $2.5 million for general damages, plus $200,000 for costs and $50,000 for disbursements. The solicitors rendered an account to the client in the sum of $550,000, comprised of $461,313.62 for fees, including fees contributed by the Ontario Health Insurance Plan ("OHIP") to the costs of the litigation, plus Goods and Services Tax ("GST"), and $59,523.37 for disbursements inclusive of GST. On assessment of the account, the solicitors' fees were reduced by the assessment officer to $230,000 plus GST. The client was awarded his costs of the assessment hearing.

[3] The solicitors opposed confirmation of the assessment officer's decision and moved to set it aside. Mr. Lam brought a cross-motion to further reduce the solicitors' fees. By order dated July 26, 2001, Molloy J. set aside the decision and assessed the solicitors' fees at $206,300 net of the total fees contributed by OHIP, plus GST. She also confirmed the assessment officer's decision that the solicitors' disbursements and associated GST [page420] should be paid and that the costs of the assessment should be awarded to the client, and awarded the client his costs of the proceedings before her. The solicitors appeal the motions judge's decision concerning their fees, and both costs awards.

[4] Three issues arise on this appeal: i) whether the parties' contingency fee arrangement is enforceable under the Solicitors Act, R.S.O. 1990, c. S.15 (the "Act"); ii) if not, whether the motions judge erred in her own assessment of the fees charged; and iii) whether the costs awards to the client should be set aside. For the reasons that follow, I would allow the appeal.

I. Facts

[5] Chester Lam was born and educated in Hong Kong. He came to Canada in 1990 for part of his high school education. Thereafter, he undertook undergraduate studies at the University of Windsor. On September 25, 1996, Mr. Lam participated in a supervised judo class practice at the University. He was not then an enrolled student at the University. The supervisor departed early and Mr. Lam sustained a serious spinal cord injury while engaged in an unsupervised judo match with a new class member. As a result, he was rendered quadriplegic and dependent on others for most of his personal care and on a wheelchair for mobility. Tragically, his disability is permanent.

[6] Mr. Lam's mother flew from Hong Kong to Windsor to be with her son after the accident and his uncle and aunt, residents of Toronto, attended in Windsor to render assistance to him. On October 3, 1996, those individuals met with David Greenaway, a solicitor with Raphael Partners (the "solicitors"), to obtain legal advice concerning Mr. Lam's injuries. Mr. Lam, who was then hospitalized, did not attend that meeting.

[7] In a contemporaneous memorandum to file concerning the meeting, Mr. Greenaway stated:

I discussed remuneration. I told them that my fees would be 15 [per cent] of the first $1,000,000.00 recovered and 10 [per cent] of each million thereafter (e.g.: if $2,000,000.00 were recovered then my fees would be $250,000.00).

They are going to discuss the matter with Chester and get back to me.

[8] As a result of the meeting it was agreed that the solicitors would represent Mr. Lam on a contingency fee basis. The solicitors did not obtain a written retainer agreement from Mr. Lam or his relatives. However, they wrote to Mr. Lam at the hospital on October 4, 1996 confirming the fee arrangement. A copy of the letter was provided to Mr. Lam's uncle and aunt. As that letter is significant on this appeal, I set out its material contents in full: [page421]

This letter is to summarize the understanding that we have reached relating to fees and disbursements (i.e. expenses) that will be charged in connection with the lawsuit arising out of the injuries that you suffered at a Judo practice on September 25, 1996, at the University of Windsor.

I expect that my fees and disbursements will be recovered from the amount paid out by the defendants (i.e. the wrong- doers) following settlement or Judgment. My firm will receive no more than:

1. Fifteen (15) percent of the first $1,000,000.00 recovered on account of damages and prejudgment interest;

2. Ten (10) percent of each $1,000,000.00 or portion thereof that is recovered on account of damages and prejudgment interest in addition to the first $1,000,000.00; and

3. The amount paid by the defendants (i.e. wrong-doers) in addition to damages and interest, by way of "costs".

I gave your Uncle Daniel, your Aunt Angela and your mother an example. The example that I gave included a hypothetical $3,000,000.00 on account of damages and prejudgment interest by way of settlement or Judgment, plus an additional $150,000.00 paid by way of "costs". In that hypothetical fact situation, our fees would be no more than $500,000.00 (i.e. $350,000.00 calculated as per items 1 & 2 above, plus the amount awarded for "costs", namely $150,000.00).

In Ontario, a lawyer is entitled to charge fees based on time spent, complexity of the case, lawyer's expertise, importance to the client, and other relevant factors. I agree, as indicated above, that my fees will not exceed the amounts referred to in items 1, 2 & 3 above. Again, my firm will receive no more than 15 [per cent] of the first $1,000,000.00 received by way of settlement or Judgment together with no more than 10 [per cent] of each $1,000,000.00, or portion thereof, paid out in addition to the first $1,000,000.00 by way of damages and interest. In addition, I expect that there will be an amount awarded by way of "costs". My firm will be entitled to that amount, as well. If the amount awarded by way of "costs" is not sufficient to fully cover my firm's fees and disbursements, we will not seek anything in addition to the amounts referred to in paragraphs 1, 2 and 3 above.

(Emphasis in original)

[9] In April 1997, an action was commenced against the University and others on behalf of Mr. Lam. On several occasions thereafter, Mr. Lam requested an accounting from the solicitors for "his costs". On one of those occasions, in February 1999, the total value of the docketed time on Mr. Lam's file was calculated by the solicitors but was not disclosed to the client. However, at a meeting held with Mr. Lam on February 23, 1999, Mr. Greenaway reviewed with him the method for calculation of the solicitors' fees. The illustration then provided to the client reflected application of the maximum fees formula set out in Mr. Greenaway's letter to Mr. Lam of October 4, 1996 and depicted a damages recovery by the client net of the maximum fees which the solicitors could charge under the contingency fee arrangement. [page422]

[10] Mr. Greenaway testified that prior to the March 2000 mediation he met personally with Mr. Lam approximately 23 times. On every second or third occasion, he reviewed with the client the calculation of the solicitors' proposed fees and disbursements, based on the formula set out in his letter of October 4, 1996, and provided Mr. Lam with handwritten illustrations of the fees calculations.

[11] The action proceeded through discoveries. No offers of settlement were received from the defendants. A mediation conducted in November 1999 was unsuccessful in achieving a settlement.

[12] A second mediation was conducted on March 25, 2000. It resulted in a settlement with the University by which that defendant agreed to pay to Mr. Lam $2.5 million for general damages, plus $200,000 for costs and $50,000 for disbursements. OHIP, which was represented at the mediation, agreed as part of the settlement to accept $253,000 for its subrogated claim, from which the solicitors would be paid $44,700 as OHIP's contribution to legal fees. Accordingly, after the payment to OHIP, the settlement resulted in approximately $2.5 million payable by the University concerning Mr. Lam's claims.

[13] During the course of the mediation, Mr. Lam was advised by Mr. Greenaway of the latter's opinion that the case had a settlement value in the range of $2 million to $3.4 million based on a gross value in the range of $4 million to $4.5 million, less 25 per cent to 50 per cent on account of contributory negligence.

[14] At the mediation, Mr. Greenaway proposed to Mr. Lam that the solicitors would receive $500,000 for their fees, inclusive of GST, plus disbursements, thus leaving a residual settlement amount for the client in the approximate sum of $2 million. Mr. Lam agreed (the "March 2000 fee agreement"). He signed written instructions to the solicitors at the mediation authorizing the settlement and the amount of the solicitors' fees. He also signed minutes of settlement.

[15] Mr. Lam's written instructions recorded his understanding of the payment to be made to OHIP. They further provided:

3. I understand your fees will be $500,000.00 inclusive of GST and disbursements $50,000.00. [sic]

4. I understand that my recovery, after OHIP and legal expenses will be approximately $2,000,000.

Mr. Lam's signature on the instructions was witnessed by his uncle, who was present at the mediation together with Mr. Lam's mother and brother.

[16] The total value of the solicitors' docketed time and disbursements on Mr. Lam's file as at March 30, 2000 was $96,760.02 for [page423] fees excluding GST, and $59,523.43 for disbursements including GST. Not all of the solicitors' services were docketed.

[17] Mr. Lam began to reconsider the amount of the solicitors' fees almost immediately following the mediation. He claimed that while he was waiting to return home after the mediation, he felt that the solicitors' fees were excessive and that he had been pressured into signing the instructions to the solicitors authorizing the fees. He did not communicate any unease to the solicitors that day. Moreover, although he spoke with their offices within 48 hours of the completion of the mediation, at which time the possible requirement for a signed direction authorizing payment of the settlement funds and the solicitors' fees was raised with him, he did not express any disagreement with the fees or attempt to rescind his instructions.

[18] At a meeting with Mr. Lam on March 31, 2000, the solicitors provided him with a form of direction and authorization to be signed by him to implement the settlement. That document confirmed that the legal costs of the litigation were $550,000, inclusive of fees, disbursements and GST. Mr. Lam declined to sign the direction and authorization, pending discussions by him with his father who resided in Hong Kong.

[19] By letter dated April 3, 2000 to the client, Mr. Greenaway explained the breakdown of the solicitors' legal fees, based on the contingency fee arrangement entered into in October 1996:

1. Fifteen (15) percent of the first $1,000,000.00 recovered on account of damages and prejudgment interest (i.e. $1,000,000.00 x 15 [per cent]) $150,000.00;

2. Ten (10) percent of the balance recovered on account of damages and prejudgment interest ($1,500,000.00 x 10 [per cent]) $150,000.00;

3. The amount paid by the defendants by way of costs, $250,000.00.

Total $550,000.00

At your mother's request, I agreed to pay the GST, payable on the legal fees, out of my share and not your share.

(Emphasis in original)

[20] In the same letter, Mr. Greenaway also stated:

As I told you, my opinion was that, if we were forced to go to a trial, a Judge would likely calculate your claim somewhere in the range of $4 million to $4.5 million. I also told you that, in my opinion, there were liability problems . . . I had serious concerns that a Judge would find you partially responsible for your own injuries. As I advised you, I was of the opinion that a trial Judge could reduce your award by 25 [per cent] to 50 [per cent]. That would result in a Judgment in the area of $2,000,000.00 to $3,375,000.00. [page424]

The University's lawyer argued that the value of your claim was $3,500,000.00 only. He also took the position that your own negligence could be as high as 100 [per cent] (i.e. resulting in a "zero" recovery, for you).

In any litigation there are considerable risks. As you know, the possibility existed that, after a trial a Judge might award you nothing. I thought that that possibility was very remote but, still, the possibility existed. I think that the settlement is as good an end result as you could have expected, following trial. By having settled the case, now, you do not have to wait until January, 2001 (when trial was scheduled to take place).

[21] Two days later, at Mr. Lam's request, the solicitors forwarded their account to him. It reflected the total fees and disbursements set out in the direction and authorization. Shortly thereafter, Mr. Lam requested receipt of a letter from the solicitors showing how he was to be charged. A series of letters were then sent by the solicitors to Mr. Lam, in which they urged him to sign the direction and authorization and a release in favour of the University and others, in order that the settlement funds could be released. In those letters, the solicitors again explained the method by which their charged fees had been calculated in reliance on their October 4, 1996 letter to Mr. Lam and the March 2000 fee agreement, as confirmed by Mr. Lam in his written instructions to the solicitors signed on March 25, 2000. Mr. Lam also requested and received from the solicitors an itemized account dated May 10, 2000. It set out the same legal fees and disbursements contained in the solicitors' original account of April 5, 2000.

[22] On May 12, 2000, the solicitors obtained an order for the assessment of their account dated April 5, 2000. The following month, Mr. Lam signed the direction and authorization previously provided by the solicitors, subject to the assessment of the solicitors' account.

[23] By reasons dated January 19, 2001, the assessment officer concluded that the fees charged to Mr. Lam were patently excessive. He reduced the solicitors' fees from $461,313.62 to $230,000 plus GST. The solicitors' disbursements were not in issue on the assessment.

II. Reasons of the Motions Judge

[24] The solicitors opposed confirmation of the assessment officer's decision and moved to set it aside on the basis that the fees charged had been agreed to by Mr. Lam and were fair and reasonable in the circumstances. By cross-motion Mr. Lam sought to further reduce the solicitors' fees to the value of the time docketed by them to his file. [page425]

[25] The motions judge concluded that the assessment officer made two errors in principle: i) instead of examining the enforceability of the March 2000 fee agreement under ss. 16 and 17 of the Act, the assessment officer conducted an assessment of a solicitor and client bill and treated the March 2000 fee agreement as but one of several necessary factors to be taken into account; and ii) the assessment officer failed to refer to the statutory scheme for dealing with fee agreements between a solicitor and client, failed to give proper weight to the March 2000 fee agreement and failed to consider whether it was fair and reasonable.

[26] Having thus concluded that the assessment officer's analysis was fatally flawed, the motions judge, as requested by the parties, proceeded to conduct her own review of whether the March 2000 fee agreement, upon which the solicitors' account was based, was enforceable under the Act. The motions judge concluded that it was not enforceable for two reasons.

[27] First, in the opinion of the motions judge, the process by which Mr. Lam's signature was obtained on the March 25, 2000 instructions was unfair. The motions judge accepted the assessment officer's finding that Mr. Lam understood the contingency fee arrangement agreed upon by the parties in October 1996. As the March 2000 fee agreement derived therefrom, the motions judge concluded that Mr. Lam also understood the March 2000 fee agreement. Nevertheless, the motions judge reasoned at para. 22:

That does not mean, however, that the process by which the March 25, 2000 agreement was signed was a fair one. There was no particular reason for requiring Mr. Lam to consent to the proposed fees that day, other than the interests of the solicitors in maximizing their own recovery. The fees proposed were the maximum that the solicitors could have recovered under the contingency fee structure . . . [I]t would have been sufficient for Mr. Lam's purposes if he had been told what the maximum would be for fees. The determination of the final amount of the solicitors fees could easily have been left for another day, so as to enable Mr. Lam to obtain independent legal advice . . . To expect him . . . to feel confident about objecting to the fee suggested by his lawyer is expecting too much. In my opinion, the process cannot be said to be fair to the client . . . .

[28] Second, and in any event, the motions judge concluded that the March 2000 fee agreement was not reasonable in all of the circumstances at para. 25:

The contingency fee arrangement agreed to by Mr. Lam in 1996 provided for the maximum fees that could be charged by the solicitors. If Mr. Lam's case had gone all the way to trial, and then through appeals, and the ultimate recovery had been $2,750,000.00, the solicitors fees would have been the same $550,000.00 that they charged for this settlement before the matter was even on the trial list and after only incurring $59,000.00 in disbursements. That is a factor that must be taken into account in determining reasonableness. That [page426] is not to say that the solicitors should necessarily be restricted to a fee based on time spent and disbursements paid. There must be some recognition in the fee of the risk taken on by the solicitors. However, I do not see that the degree of risk assumed and the work done to that time, warranted charging the maximum fee recoverable.

[29] Given her finding that the March 2000 fee agreement was unenforceable, the motions judge next evaluated whether the assessment officer's decision regarding the solicitors' charged fees should be confirmed. During that stage of her analysis, she considered the findings of the assessment officer concerning whether the fees charged were fair and reasonable according to those factors applicable to an assessment of a solicitor and client account. The motions judge concluded that the assessment officer had made "a number of errors of law and errors of principle, such that his ultimate conclusion is unreliable". Some of those errors operated to the detriment of Mr. Lam, while others disadvantaged the solicitors. In the result, for reasons different from those advanced by the assessment officer, the motions judge agreed with his conclusion that the charged fees were excessive and should be reduced.

III. Analysis

(1) Enforceability of the fee agreement

[30] No challenge is made before this court to the legality of the contingency fee arrangement entered into by the parties in 1996, as subsequently reflected in the March 2000 fee agreement. Thus, for example, it is not alleged that the agreement was champertous or that the solicitors had an improper motive in entering into the arrangement or the subsequent agreement. Accordingly, no issue arises on this appeal concerning the public policy implications of the fee arrangement or, more generally, regarding the legal status of contingency fee arrangements in Ontario.

[31] Section 16 of the Act authorizes a solicitor to make an agreement in writing with a client concerning the amount and manner of payment for any past or future services conducted for the client, including an agreement that allows for compensation at a rate greater than the solicitor's normal rate of remuneration. Where the agreement concerns past or future litigation, s. 17 of the statute requires that the agreement be examined and allowed by an assessment officer before the solicitor is entitled to receive payment. The assessment officer may seek the opinion of a court on the agreement if he or she is of the view that the agreement is not fair or reasonable (s. 18). The powers of a reviewing court in such circumstances are set out in s. 19 of the Act. [page427]

[32] The Act also provides for an application to be made directly to the court by any party to such an agreement to determine any question respecting the validity or effect of the agreement or to enforce it or set it aside (s. 23). Section 24 of the Act provides:

24. Upon any such application, if it appears to the court that the agreement is in all respects fair and reasonable between the parties, it may be enforced by the court by order in such a manner and subject to such conditions as to the costs of the application as the court thinks fit, but, if the terms of the agreement are deemed by the court not to be fair and reasonable, the agreement may be declared void, and the court may order it to be cancelled and may direct the costs, fees, charges and disbursements incurred or chargeable in respect of the matters included therein to be assessed in the ordinary manner.

[33] In this case, the solicitors sought to enforce the March 2000 fee agreement entered into by Mr. Lam. In the alternative, they sought assessment of their account in the ordinary course. The motions judge concluded that the assessment officer erred by conducting only a solicitor and client assessment, instead of examining the agreement between the parties, as contemplated under ss. 16 to 18 of the Act. I agree.

[34] Although entitled to do so, the solicitors did not apply directly to the court for enforcement of the March 2000 fee agreement under s. 23 of the Act. However, the parties agreed that the motions judge should substitute her own decision for that of the assessment officer if she concluded, as she did, that he had erred in principle, rather than remitting the matter to the assessment officer for rehearing.

[35] Before this court, the solicitors argue that the relevant fee agreement is the contingency fee arrangement agreed upon in October 1996. I disagree. Section 16 of the Act authorizes written fee agreements. The only written fee agreement entered into by Mr. Lam was the March 2000 fee agreement as outlined in the written instructions signed by him on March 25, 2000. Accordingly, that is the only fee agreement capable of enforcement by the solicitors under the Act. During oral argument before this court, counsel for the solicitors properly conceded that argument before the motions judge focused on the March 2000 fee agreement.

[36] The motions judge concluded that the process by which Mr. Lam's signature was obtained on the instructions to the solicitors was unfair and that the terms of the March 2000 fee agreement were unreasonable. Accordingly, she declined to enforce the March 2000 fee agreement. With respect to the motions judge, I do not agree that the March 2000 fee agreement failed to meet [page428] the fairness and reasonableness criteria set out in the Act. I reach this conclusion for several reasons.

(a) The fairness of the fee agreement

[37] When a fee agreement is challenged under the Act, the solicitor bears the onus of satisfying the court that the way in which the agreement was obtained was fair and that the terms of the agreement are reasonable. The fairness requirement of s. 24 of the Act is concerned with the circumstances surrounding the making of the agreement and whether the client fully understands and appreciates the nature of the agreement that he or she executed: Best v. Yegendorf, Brazeau, Seller, Prehogan & Wyllie (1998), 37 O.R. (3d) 633 (Gen. Div.).

[38] In this case, in my view, the motions judge erred in assessing the fairness of the March 2000 fee agreement by focusing solely on the circumstances surrounding the March 2000 mediation, to the exclusion of the entire course of dealings between the parties concerning the solicitors' remuneration.

[39] The instructions to the solicitors signed by Mr. Lam reduced to writing the terms of the March 2000 fee agreement. The terms of that agreement, in turn, derived from and were calculated in accordance with the contingency fee arrangement agreed upon by the parties in October 1996. The motions judge accepted that Mr. Lam understood the 1996 contingency fee arrangement and held that he also understood the March 2000 fee agreement. That finding is not seriously challenged by the client on this appeal.

[40] The process followed at the March 2000 mediation in connection with the execution by Mr. Lam of his instructions to the solicitors was only the culminating step in a lengthier process by which the matter of the solicitors' compensation had been discussed and agreed upon between the parties. In my view, examination of that full process reveals no unfairness to the client and demonstrates that Mr. Lam understood and appreciated the nature of the fee agreement ultimately signed by him.

[41] The contingency fee arrangement was explained in detail to Mr. Lam's involved relatives, by means of a hypothetical illustration, at the first meeting held with Mr. Greenaway on October 3, 1996. The evidence on the record before this court indicates that Mr. Greenaway told Mr. Lam's relatives that his fees "would be 15 [per cent] of the first $1,000,000.00 recovered and 10 [per cent] of each million thereafter".

[42] The arrangement was confirmed in writing to Mr. Lam by letter dated October 4, 1996. That letter referred to the method [page429] by which the solicitors' maximum fees would be calculated. It thus held open the prospect that the solicitors could receive the maximum fees outlined, or fees in a lesser amount. Both possibilities plainly existed from the outset of the solicitors' retainer. The motions judge accepted the assessment officer's finding that the fee arrangement was orally explained to Mr. Lam on numerous subsequent occasions, including the meeting in February 1999 when Mr. Lam was told by Mr. Greenaway that the solicitors would be paid the maximum fees provided under the formula set out in the October 4, 1996 letter.

[43] At the March 2000 mediation, Mr. Greenaway proposed that the solicitors would receive the maximum fees contemplated under the contingency fee arrangement, from the settlement funds then being offered by the University. Mr. Lam agreed. Mr. Lam then signed the written instructions confirming that agreement.

[44] Mr. Lam did not object to the contingency fee arrangement with the solicitors, or to the payment thereunder of maximum fees to the solicitors, for more than three and one- half years. No objection was communicated by him to the solicitors until after a settlement of the action had been successfully negotiated and accepted, and after Mr. Lam had signed minutes of settlement and written instructions to the solicitors providing for payment of the maximum fees permitted under the contingency fee arrangement.

[45] The fact that Mr. Lam had second thoughts about the solicitors' compensation following settlement of the action is not unusual. As observed by Chadwick J. in 656203 Ontario Inc. v. Soloway Wright, 1999 ABQB 455, [1999] O.J. No. 429 (Quicklaw) (S.C.) at para 62: "[t]he degree of satisfaction by the client will diminish quite rapidly once the action has been completed or settled." The fact of such reconsideration by a client is not itself grounds to avoid an otherwise enforceable fee agreement.

[46] At the time of the mediation when the instructions to the solicitors were signed and the March 2000 fee agreement was made, Mr. Lam was approximately 27 years of age and legally competent. Various of his family members, including his uncle and mother, were present at the mediation.

[47] The motions judge concluded that Mr. Lam had no practical opportunity at the mediation to object to the solicitors' fees, or to obtain independent legal advice if desired. In my view, that conclusion fails to address the implications of the history of the dealings between the parties which culminated in the March 2000 fee agreement, including the circumstances that applied in 1996 when the contingency fee arrangement was finalized and [page430] throughout the three and one-half years of the solicitors' retainer. Moreover, it is not disputed on this appeal that during the proceedings before the motions judge Mr. Lam did not allege any impediment at the mediation to his ability to object to the solicitors' fees, or any inability by him to obtain independent legal advice, as grounds for precluding enforcement of the March 2000 fee agreement. Similarly, no such submissions were made on behalf of Mr. Lam before this court.

[48] Finally, I agree with the motions judge that determining the quantum of the solicitors' fees at the mediation, before the settlement of the action was concluded, was a material consideration relevant to Mr. Lam's ability to make an informed decision regarding the merits of the University's settlement offer. The motions judge concluded that disclosure of only the maximum amount of the solicitors' fees would have been sufficient for that purpose. In my view, only after the actual quantum of the solicitors' fees was fixed, was Mr. Lam in a position to fully assess the adequacy of his net recovery under the proposed settlement. Further, knowledge of the exact amount of the solicitors' fees provided an additional important advantage to Mr. Lam. With that information in hand, he was equipped to instruct Mr. Greenaway to seek a higher offer from the University on account of general damages or costs. He did not do so.

[49] Accordingly, I conclude in the circumstances applicable here that the March 2000 fee agreement cannot be said to be unfair to Mr. Lam. It was a bargain freely made, understood and accepted by him.

(b) The reasonableness of the fee agreement

[50] The factors relevant to an evaluation of the reasonableness of fees charged by a solicitor are well established. They include the time expended by the solicitor, the legal complexity of the matter at issue, the results achieved and the risk assumed by the solicitor. The latter factor includes the risk of non-payment where there is a real risk of an adverse finding on liability in the client's case: Cohen v. Kealey & Blaney (1985), 10 O.A.C. 344 (C.A.); Desmoulin v. Blair (1994), 21 O.R. (3d) 217, 120 D.L.R. (4th) 700 (C.A.).

[51] The motions judge concluded that the degree of risk assumed by the solicitors, and the work done by them to the date of the settlement, did not warrant recovery of the maximum fees provided under the contingency fee arrangement. She further held that the timing of the settlement was to be taken into account in determining the reasonableness of the solicitors' fees. I [page431] understand her analysis to be that the timing of the settlement, accomplished prior to a trial and before any appeal therefrom, militates against recovery of maximum fees.

[52] The solicitors were obliged under the contingency fee arrangement to fund all of the disbursements in the litigation and to bear the risk of non-payment of any fees if the litigation did not settle or was unsuccessful at trial. In this case, that arrangement involved considerable risk for the solicitors.

[53] During her consideration of whether the assessment officer's decision on the assessment of the solicitors' account should be confirmed, the motions judge made a number of key findings favourable to the solicitors. She held that: i) the liability and contributory negligence issues in the case were complex; ii) the risk of an adverse liability finding was a very real prospect and the risk of an adverse finding on contributory negligence was "very high", such that Mr. Lam's recovery might be minimal; iii) even if the case proceeded to trial and was successful, any return on the solicitors' investment in the case would not be quickly forthcoming; iv) the risk assumed by the solicitors in the case was significant; and v) an "excellent" and "outstanding" result was achieved through the settlement, which reflected the "best case scenario" for the client had the case proceeded to trial. In my view, those findings were relevant to, and should have been considered on, the examination of the reasonableness of the March 2000 fee agreement. They strongly support the conclusion that that agreement was reasonable and, hence, is enforceable.

[54] The contingency fee arrangement did not contemplate the determination of legal fees based on the value of time spent by the solicitors on the file. To the contrary, by definition, the arrangement provided for legal fees based on the amount recovered for the client. The fact that no interim accounts, based on hourly billing rates or docketed time, were ever rendered to Mr. Lam confirms that the time spent on the file was not a consideration underlying the nature of the bargain between the solicitors and the client. As stated by Carthy J.A. in Finlayson v. Roberts (2000), 136 O.A.C. 271, 6 M.V.R. (4th) 193 (C.A.), at para. 24, the contingency-like fees approach has been condoned by the courts for several years, particularly in negligence claims. Moreover, this court has recognized that the advantages to the administration of justice, in the form of increased access to justice, from properly regulated contingency fee agreements are compelling: McIntyre Estate v. Ontario (Attorney General) (2002), 61 O.R. (3d) 257, [2002] O.J. No. 3417 (Quicklaw) (C.A.) at para. 72, per O'Connor A.C.J.O. Accordingly, the time spent by the solicitors on Mr. Lam's [page432] file to the date of the settlement, while a relevant factor, does not control the question of whether the solicitors were entitled to the maximum fees charged through enforcement of the March 2000 fee agreement.

[55] Moreover, in my view, the resolution of Mr. Lam's case prior to trial does not operate against enforcement of the March 2000 fee agreement. A settlement was not achieved for more than three years from the date of the solicitors' retainer. During that time, as found by the motions judge, considerable preparation, research and work had been undertaken by the solicitors on behalf of Mr. Lam, including services not reflected in the solicitors' docketed time.

[56] Consideration of the degree of success achieved in the litigation is relevant to assessment of the reasonableness of the March 2000 fee agreement, as is the degree of risk assumed by the solicitors. The degree of success includes the early achievement of a beneficial settlement. Indeed, as observed by this court in the context of approving a contingent fee with a multiplier in class proceedings, the opportunity to receive "an enhanced reward for incurring the risks of litigation" is designed in part "to serve as an incentive for the solicitor to achieve the best possible results for [the clients], expeditiously and efficiently": Gagne v. Silcorp Ltd. (1998), 41 O.R. (3d) 417 at p. 424, 167 D.L.R. (4th) 325 (C.A.) (emphasis added).

[57] In Desmoulin v. Blair, this court approved solicitors' fees in a personal injury action equivalent to 31 per cent of the assessed damages and disbursements. In 656203 Ontario Inc. v. Soloway Wright, 1999 ABQB 455, solicitors' fees equal to 21 per cent of the clients' damages recovery, net of costs awarded, were approved by the court even in the absence of an express agreement with the client authorizing such fees. In this case, the solicitors' charged fees in the sum of $461,313.62 represent 18 1/2 [per cent] of the settlement amount of $2.5 million allocated to general damages. Those fees, in all of the circumstances, are not unreasonable.

[58] For the reasons given, I therefore conclude that the March 2000 fee agreement was fair and reasonable. Accordingly, it is enforceable according to its terms. Given that conclusion, it is unnecessary to consider whether the motions judge erred in her own assessment of the fees charged.

(2) The costs awards in the proceedings below

[59] The solicitors also appeal the confirmation by the motions judge of the costs award made by the assessment officer and the costs award of the motions judge on the motions before her. At the original assessment hearing, Mr. Lam was awarded his costs, [page433] fixed in the amount of $31,460.12, inclusive of applicable taxes. The motions judge awarded Mr. Lam his costs of the motions before her, fixed at $8,014.60, inclusive of applicable taxes. Given my conclusion that the March 2000 fee agreement is enforceable according to its terms, those cost awards cannot stand.

IV. Disposition

[60] Accordingly, for the reasons given, I would allow the appeal and set aside paras. 2, 5, 6 and 7 of the motions judge's order. The fees of the solicitors are allowed at $461,313.62 plus GST, less the amount of $44,700 already contributed by OHIP to the solicitors' fees. Before this court, the solicitors advanced no argument concerning the amount of their costs of the proceedings before the assessment officer or the motions judge. Accordingly, and in the interests of justice between the parties, I would make no costs award concerning either of those proceedings. The solicitors are entitled to their costs of this appeal on a partial indemnity basis, if demanded. If the solicitors wish to pursue an order for costs of this appeal, I would fix their costs in the sum of $12,500, inclusive of GST and disbursements.

Appeal allowed.