ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-11-427912
DATE: 2012-07-18
B E T W E E N:
MEAGAN WARNICA
Stephen J. MacDonald, for the Applicant
Applicant
- and -
CASEY VAN MOORLEHEM
Victor T. Bulger, for the Respondent
Respondent
HEARD: May 3, 2012, at Toronto, Ontario
Reasons For Decision
Michael G. Quigley J.
[ 1 ] The question on this motion is whether an account rendered by a solicitor ought to be referred for assessment. The solicitor, Casey Van Moorlehem, represented Meagan Warnica in a tort claim she brought after she was injured in a motor vehicle accident. The vehicle in which she was a passenger collided with a City of Mississauga fire truck and Meaghan was seriously injured. Meagan and her parents, David and Carolyn Warnica, retained the defendant to represent them.
[ 2 ] Meagan’s claims and those of another passenger in the vehicle were settled when the matter was mediated before trial, but there was only $1 million in insurance funds available to compensate both Meagan and the other passenger of the vehicle, because the City of Mississauga would not admit any liability without going to trial. A decision was made not to pursue the City for damages for its alleged liability, given the costs risks associated with pursuing them alone. The Warnica’s decided to settle the case.
[ 3 ] Under that mediated settlement the two injured passengers had to share the available $1 million insurance limit. After costs, disbursements and the addition of a de minimis without liability contribution by the City, Meagan Warnica’s action was settled for the all-inclusive amount of $569,750.
[ 4 ] Mr. Van Moorlehem received that amount directly from the insurer. Then he withheld 30% of the settlement amount as the percentage based compensation that had been agreed at the outset when he was retained. He remitted the balance to Meagan. Meagan and her parents thought the settlement should have been much larger, and they claim to have been told that it would be larger. Now, they say that the fee was inappropriate relative to the result achieved.
[ 5 ] On this application, for the reasons that follow, I have found (i) that the solicitor’s retainer was a contingency fee agreement under the Solicitors Act and regulations, that failed to comply with statutory requirements; (ii) that court approval of the agreement was required under Rule 7.08; and (iii) that while the applicants were not without an understanding of the retainer agreement they entered into with the solicitor, there are nevertheless special circumstances to justify the referral of the solicitor’s account for assessment.
Summary of factual background
[ 6 ] Meagan Warnica was the rear seat passenger in a car that was involved on May 20, 2005 in a serious collision with a fire truck owned by the City of Mississauga. She suffered significant fractures to her ankle and pelvis and she sustained a head injury. These injuries required airlifting to the hospital, extensive hospitalization and surgery, and lengthy rehabilitation care and treatment. She was 17 years old when the accident occurred.
[ 7 ] Six months later, Meagan and her parents consulted with the respondent, Casey Van Moorlehem, concerning the injuries and damage that she suffered. They ultimately made a decision some time after that meeting to retain him. On November 1, 2005, he sent a letter to David and Carolyn Warnica setting out the terms of the retainer. In that letter he described how he would charge his fees and disbursements for the work that he proposed to do on Meagan’s and their behalf. Included with that letter was a document entitled “Appointment of Counsel and Fee Agreement.” That was the agreement under which they retained Mr. Van Moorlehem to advance claims arising out of the accident of May 20, 2005.
[ 8 ] The claims with respect to Meagan Warnica related to her injuries. The claims advanced with respect to David Warnica and Carolyn Warnica were based on the Family Law Act. Both of Meagan’s parents signed the retainer document. Meagan’s mother signed twice, once on her own and once as Meagan’s Litigation Guardian.
[ 9 ] Casey Van Moorlehem’s affidavit explained how the retainer agreement was concluded between himself and the Warnica’s. He specifically recalled presenting the Warnica’s with two options with respect to paying for his services. The first was on an hourly rate basis, taking account of the time spent on their claim, subject to periodic increases in that rate plus disbursements and taxes, yielding an amount that would be billed on a monthly basis.
[ 10 ] The second option would involve the Warnica’s paying an amount “equal to 30% of the amount recovered in the action brought on their behalf.” The Warnica’s did not rush into their decision. They told Mr. Van Moorlehem they would consider their options and get back to him. When they did, they chose the second method of payment – based on a percentage of the amount recovered.
[ 11 ] The solicitor commenced an action against the owner and operator of the vehicle in which Meagan Warnica had been a passenger, and also against the City of Mississauga as the owner and operator of the fire truck that had struck that vehicle. The other passenger in that vehicle also had commenced a similar action against the same parties through a different solicitor and that action proceeded in a similar parallel fashion. These cases proceeded through examinations for discovery, but they both came to an end before trial at a mediation that was held in Toronto on October 26, 2010.
[ 12 ] As noted, even though a settlement was reached following the mediation there was insufficient insurance coverage available from which to pay damages totaling more than $1 million to both passengers who had been in the vehicle. Either of the plaintiff’s could have continued to trial against the City of Mississauga, but it was felt that establishing liability against the City would have been a long and expensive battle. A decision was made that the risks were too high relative to the potential rewards. The Warnica’s settled. The action relative to the other claimant passenger was also settled, and for the same amount.
[ 13 ] Meagan Warnica and her parents’ settled their claims for the all-inclusive amount of $569,750, all attributable to Meagan. That consisted of $475,000 for all claims inclusive of pre-judgment interest, costs of $84,000 on a partial indemnity basis inclusive of Harmonized Sales Tax and disbursements of $10,000. The insurer paid that total to Mr. Van Moorlehem in trust.
[ 14 ] Mr. Van Moorlehem charged fees of $176,925 for his services, plus $23,000 of HST on those fees and disbursements of $10,100.72 and HST on disbursements of $1,099.69, for a total of $211,125.13. As a result, the net settlement cheque made payable to Meagan was for $358,624.87.
[ 15 ] The applicant's now claim that fee was inappropriate relative to the result achieved. More importantly, they claim as well that the solicitor failed to comply with provisions of the Solicitors Act in entering into that retainer agreement with them. They apply for an order that Casey Van Moorlehem’s account for fees and disbursements rendered to Meagan Warnica be referred for assessment, and for a declaration that the retainer agreement of November 4 was not a reasonable and fair agreement and is therefore void. Alternatively, they ask the court to find that the agreement is not enforceable against Meagan Warnica because they say it does not comply with the requirements of the Solicitors Act and regulations concerning contingency fee agreements.
Issues
[ 16 ] Several issues must be addressed in considering whether the account ought to be referred for assessment, but it is also important to remember the context within which those issues arise. That context is the policy of ensuring that members of the public are able to maintain their confidence in the justice system in circumstances where they entrust their cause or concern to a solicitor acting on their behalf.
[ 17 ] One way of doing so is by ensuring that they are able to hold the solicitor to account for the fees charged for the services rendered. Justice Sharpe makes the point directly at para. 19 of the leading case of Price v. Sonsini: [1]
Public confidence in the administration of justice requires the court to intervene where necessary to protect the client's right to a fair procedure for the assessment of the solicitor’s bill. As a general matter, when the client objects to a solicitors account, the solicitor should facilitate the assessment process, rather than frustrating the process: see Orkin, The Law of Costs, 2 nd ed. (2001), at p. 3-13. In my view, the courts should interpret legislation and procedural rules relating to the assessment of solicitors accounts in a similar spirit. As Orkin argues, "if the courts permit lawyers to avoid the scrutiny of their accounts for fairness and reasonableness, the administration of justice will be brought into disrepute." The court has an inherent jurisdiction to control the conduct of solicitors and its own procedures. This inherent jurisdiction may be applied to ensure the clients request for an assessment is dealt with fairly and equitably despite procedural gaps or irregularities. See Krigston v. Samuel (1982), 31 C.P.C. 41 (Ont. H.C.J.) and Minkarious v. Abraham, Duggan (1995), 1995 7253 (ON SC), 27 O.R. (3d) 26 (Gen. Div.) at 55–57. See also Re Solicitor, 1972 655 (ON SC), [1972] 2 O.R. 571 (H.C.J.) at 574, where the court held that a solicitor’s reversal of position with respect to the procedure to be followed on an assessment should be approached cautiously. [2]
[ 18 ] So against that background, the issues that need to be addressed here include the following:
(i) Was the solicitor’s retainer a contingency fee agreement under the Solicitors Act and regulations and if so, does the retainer agreement comply with statutory requirements?
(ii) Was court approval of the agreement required under Rule 7.08 before it could be binding on the parties?
(iii) Are there special circumstances to justify the referral of the solicitor’s account for assessment?
Was the solicitor’s retainer a contingency fee agreement, and if so, does the retainer comply with the statutory requirements?
[ 19 ] Section 28.1 of the Solicitors Act outlines the terms upon which a solicitor is permitted to enter into a contingency fee agreement with a client. A contingency fee agreement is defined as one that stipulates that the remuneration to be paid to the solicitor for the legal services provided to or on behalf of the client is contingent, in whole or in part, on the successful disposition, or completion of the matter in respect of which the services are provided. To put it simply, under a contingency fee arrangement, the amount that the solicitor is paid is directly dependant on the amount of damages that he or she obtains for the client. Contingency fees may not be charged in criminal matters, or in family law matters.
[ 20 ] Subsection 28.1(4) requires that contingency fee agreements be in writing, but the Warnica’s claim subsection 28.1(8) is also relevant in this case since it prohibits the fee payable to the solicitor from including any amount arising as a result of costs obtained as part of the settlement, in addition to the fee payable under the agreement. That is only permitted if the solicitor and client jointly apply to a judge of the Superior Court for approval to include those costs in the contingency fee agreement. They may only be included if the judge is satisfied that there are exceptional circumstances and approves of the inclusion of the costs or a portion of them. No court approval was sought here to include the costs component of the settlement under this rule.
[ 21 ] The Regulations to the Solicitors Act directs the content of a contingency fee agreement. It must include the name address and telephone number of the solicitor and the client, a statement of the type and nature of the matter in respect of which services are to be provided, a statement explaining that the solicitor and client have discussed alternative terms for the retainer, a statement that explains the contingency upon which the fee is to be paid to the solicitor, and a statement that sets out the method by which the fee is to be determined. If the fee is to be determined as a percentage of the amount recovered, the agreement must include a statement that explains that for the purpose of calculating the fee, the amount of recovery excludes any amount awarded or agreed to that is separately specified as being in respect of costs and disbursements.
[ 22 ] Contingency fee retainer agreements are also to include a simple example that shows how the contingency fee is to be calculated. Moreover, the contingency agreement should inform the client of their right to ask a Superior Court judge to review and approve of the solicitors account, and include the applicable timelines for such a review to be requested.
[ 23 ] Clearly, if this is a contingency fee agreement, it fails to on its face to comply with all of these stipulations.
[ 24 ] Section 3 of the Regulations also bears on the content of contingency fee agreements and subsection 3(5) lists three important requirements that must be met if the client is a party under disability for the purposes of the Rules of Civil Procedure and represented by a Litigation Guardian, as in this case:
(i) The agreement must include a statement that the contingency fee agreement must either be reviewed by a judge before being finalized or be reviewed as part of a motion or application for approval of a settlement or a consent judgment under Rule 7.08 of the Rules of Civil Procedure;
(ii) It must contain a statement that the amount of legal fees, costs, taxes and disbursements are subject to the approval of a judge when the judge reviews a settlement agreement or consent judgment under rule 7.08; and
(iii) It must include a statement that any money payable to a person under a disability under an order or settlement is to be paid into court unless otherwise ordered by a judge under rule 7.09.
[ 25 ] Subsection 5(1) of the Regulations imposes further obligations on a solicitor who is acting for a person under a disability, who is represented by a Litigation Guardian and with whom the solicitor is entering into a contingency fee agreement, by requiring that the solicitor apply to a judge for approval of the agreement before the agreement is finalized. In this case, Mr. Van Moorlehem was acting for a person under a disability who is represented by a Litigation guardian, but none of these steps were taken in this case. The reason is that these steps need only be taken if the retainer agreement relates to a contingency fee.
[ 26 ] The failure to adhere to any of these requirements would be adequate to resolve this question in favour of the Warnica’s if the agreement does provide for a contingency fee agreement, but in this case, it was and remains the view of the solicitor that this is not a contingency fee agreement, so the key issue here is whether this fee arrangement is a contingency agreement within the meaning of the Solicitors Act and Regulations.
[ 27 ] In Teplitsky, Colson v. McCrea, [3] Strathy J. considered four issues relating to whether an impugned retainer agreement provided for a contingency based fee, and the consequences if it did. The only one of those issues relevant here is whether the agreement offended the Solicitors Act on the basis that it was a contingent fee agreement that was not in writing.
[ 28 ] At paragraphs 75 through 81, Strathy J. observes that reference must be had to section 15 of the Solicitors Act in determining whether any particular retainer arrangement between a solicitor and client constitutes a contingency fee arrangement. That provisions explains that a "contingency fee agreement means an agreement referred to in section 28.1.”
[ 29 ] This is important in the context because section 28.1 is the exception to the antecedent stipulation in section 28. That section prohibits a solicitor from entering into an agreement “by which the solicitor purchases all or part of a client's interest in the action or other contentious proceeding” that the solicitor brings or maintains on the client’s behalf.
[ 30 ] Historically, contingency fees were prohibited for violating the common law rules against champerty. Black's Law Dictionary defines champerty, amongst other things, as the purchase of an interest in the thing in dispute, with the object of maintaining and taking part in the litigation. It is a bargain between a stranger and a party to a suit by which that third person stranger undertakes to carry on the litigation at his own cost and risk, in consideration of receiving a part of the proceeds or subject sought to be recovered, if successful on the claim.
[ 31 ] This is exactly the type of fee arrangement that was forbidden at common law as champertous under Haseldine v. Hosken [4] and that is forbidden in this province by section 28 of the Solicitors Act – a fee arrangement effectively founded upon the solicitor purchasing a part of the client’s position and interest in the action. Similar provisions are enacted across Canada.
[ 32 ] However, section 28.1 now creates a safe harbour from the prohibition in section 28 by permitting a solicitor to enter into a contingency fee agreement with the client in accordance with the stipulations of that section. Where those requirements are met, the solicitor and client may agree that the remuneration paid to the solicitor for the legal services provided to or on behalf of the client will be contingent in whole or in part, on the successful disposition or completion of the matter in respect of which services are provided. Contingency fee arrangements have been given statutory and regulatory approval in order to permit increased access to justice by litigants who might not otherwise be able to afford to commence an action, but only within the confines of a strict regulatory framework.
[ 33 ] So the question is, just what is a contingency agreement? Is every agreement involving the payment of percentage-based remuneration to the solicitor, based upon the amount received in damages at the end of a trial or settlement negotiation a contingency fee agreement? Clearly the answer is no. Regardless of whether percentage compensation may be paid in whole or in part, the only fee arrangements which will fall within the definition are those embraced by section 28 of the Solicitors Act where the solicitor effectively purchases all or part of the client’s interest and potential success in the action. The mere calculation of a part of a lawyer's compensation by reference to a percentage does not necessarily makes the agreement bad as a contingency fee agreement, and thus require the protections enacted in the statute and the Regulations.
[ 34 ] In McIntyre Estate v. Ontario (Attorney General), [5] O'Connor A.C.J. notes that contingency fee agreements can take a variety of forms, but the common element that they all share is that the client becomes liable to pay the lawyer’s fees only in the event that the litigation is successful. In the Teplitsky case, above, the agreement made between the solicitor and the client did not offend the Solicitors Act because it was not a contingency fee agreement within the meaning of the Act that was to be payable only in the event of recovery. Indeed, in that case, if it turned out that the solicitor spent more time on the matter than was justified by the percentage agreement, he would have been entitled to bill a fee based on his time spent and the client would have been liable for that fee in any event, regardless of the percentage based stipulation.
[ 35 ] However, that is not the case here, or the type of arrangement that was agreed. The critical provision is paragraph 2. That paragraph states as follows:
We agree to pay for services rendered, fees, not exceeding 30% of the amount recovered by us and our daughter by way of judgment or settlement arising from the above-mentioned accident.
[ 36 ] There is no minimum fee stipulated to be payable here regardless of success. Under the plain terms of the agreement, the solicitor would receive no fees for his services unless an amount was recovered on behalf of Meagan. If he did recover an amount on behalf of Meagan, he would be entitled to keep up to 30% of the amount recovered. Plainly, the fees to be received are directly tied to the recovery of an amount.
[ 37 ] In Mr. Van Moorlehem's view, however, this was not a contingency agreement as there was no possibility in the circumstances that Meagan Warnica would not recover from the tortfeasor, and therefore there was no risk of the claim not being successful. Meagan Warnica clearly had no liability with respect to the motor vehicle accident, insofar as she was a passenger in a vehicle owned by one of the defendants and operated by another defendant. Neither did she have anything to do with that vehicle colliding with a third-party vehicle. As such, Mr. Van Moorlehem was of the view that she would certainly recover at least some amount as a result of the claim that she was advancing.
[ 38 ] However, I see nothing in the language of section 28.1 that necessarily excludes percentage calculated fee arrangements, or like here, an arrangement where the solicitor will become entitled to claim up to 30% of whatever amount he is successful in recovering for his clients, solely because it is virtually certain that some award will be obtained. Or to put it differently, the language of section 28.1 does not on its face appear to exclude a retainer merely based upon the certainty of some award being obtained, and I would note, without regard to the adequacy of the recovery or the quality of the service in the context, taken as a whole.
[ 39 ] Here, regardless of the certainty of some amount of award being obtained, the solicitor did effectively purchase an interest in Meagan’s lawsuit to the extent that his remuneration was dependent upon the amount he was able to secure for her, either on a settlement or at trial. In my view, at least in the circumstances of this case, it is plain that the remuneration to be paid to the solicitor does depend, in whole or in part, on the successful completion of the lawsuit in respect of which he was providing his services. I find that this was a contingency fee agreement as contemplated in the Solicitor’s Act.
Was court approval of the agreement required under Rule 7.08 before it could be binding on the parties?
[ 40 ] One of the leading cases on the question of whether court approval was required before any contingency fee agreement could be binding on the parties was Justice Wilkin’s decision in Marcoccia v. Gill. [6] In that case, he considered an infant settlement under Rule 7. He had presided over continuing settlement discussions between the parties and a partial settlement for the severely mentally disabled infant plaintiff in that case required the approval of a judge under rule 7.08, so the matter came back before him for approval. He undertook that review to ensure that the settlement reflected the terms as they had been agreed between the parties and to provide for the disposition of the funds, including for the purchase of a structured annuity and the payment of the solicitors fees and disbursements.
[ 41 ] Wilkins J. observed at paragraphs 19 and 20 that settlements for persons under a disability not only have the requirements with respect to the approval as set out in Rule 7, that must be met, but also requirements with respect to the conditions established by the Substitute Decisions Act and the Children's Law Reform Act. In essence, a settlement for a person under a disability requires an approval of the amount for which the claims are being settled. It further requires approval of the disposition of those funds for the best interests of the plaintiff under a disability, whereby a Guardian as to property must of necessity be appointed by the court in circumstances where a structured settlement carrying forward for years will be part of the settled terms. Further, the court must approve the scheme of management that is contemplated and the accounting for the ultimate disposition of monies.
[ 42 ] At paragraphs 38 and 39 he stated as follows with respect to the solicitors fees, and the circumstances where contingency fee agreements may be in place:
As far as the solicitor’s fees are concerned, there should be proper material before the judge to justify any amount being charged to the person under a disability that exceeds the amount of the partial indemnity costs and disbursements obtained from the settlement.
It may well be that the Litigation Guardian and even possibly, the Guardian of Property, might be prepared to make agreements with respect to contingency fees or other payments of fees to the solicitor, but, in my view, the scope of rule 7.08 is such that none of those agreements has any force and effect in the absence of approval by a judge and there is no obligation on the judge to award the solicitor fees and disbursements in accordance with any such agreement, unless that judge might be satisfied, having regard to the total circumstances of the settlement, that such additional fees and disbursements are correct and justified.
[ 43 ] This was a case where there was a need for judicial approval of the solicitor’s fee agreement at the outset. Meagan Warnica, represented by a Litigation Guardian, was a minor who sustained serious injuries arising out of the motor vehicle accident. It appears that court approval was required under Rule 7, at least at the time that the agreement was entered into even if not upon the settlement, on the basis that she was no longer a minor by that time. More importantly, court approval was required because this was a contingency fee agreement, which needed to be blessed by the court in circumstances such as these. No court approval was obtained for any of these matters.
Are there special circumstances to justify the referral of the solicitors account for assessment?
[ 44 ] The leading case on this point is Tory, Tory, DesLaurier & Binnington v. Concert Productions International, Inc. [7]
[ 45 ] In that case, the applicant had entered into an agreement under which another party was to provide financing for an entertainment venture to the applicant and the applicant agreed to pay all legal fees in connection with it. After the venture was completed, the principals of the applicant and the other party met to settle their accounts. At the time, the principals of both parties indicated that they believed the legal fees payable to be excessive. Nevertheless, the account was paid in order to settle accounts between the parties and, in addition, a mutual release was signed in February of 1985. Then, seven months later in September of 1985, CPI brought its application for an assessment of the solicitors’ accounts.
[ 46 ] Steele J. dismissed the application. He found that sections 8 and 10 of the Solicitors Act required that special circumstances be present before the court will order the assessment of the solicitor’s account once it has been paid. The facts in each case must be considered on their merits, but the mere fact that a solicitor’s account is higher than what was expected does not constitute special circumstances. Further, in circumstances where the account is voluntarily paid and only later objected to, neither does the fact that the client may come to later believe that the success achieved by the solicitor was less laudatory than what the client expected.
[ 47 ] In contrast, a party may be entitled to have an assessment of the solicitor’s account in circumstances where it was paid involuntarily. This follows from the Court of Appeal’s statement in Rooney v. Jasinski, [8] as to the meaning of “special circumstances” in the context of the assessment of a solicitor’s account after it has been paid. In that context, the words include any circumstance of an exceptional nature affecting either the matter of costs generally or the client’s liability, which a judge in the exercise of his or her judicial discretion looks upon as justifying taxation
[ 48 ] At paragraph 6 of her reasons in Teplitsky, Colson v. Daniels, [9] Stewart J. clarifies that the availability of the assessment procedure depends upon a number of matters, including the existence of an undisputed retainer, the timing of the delivery of the account, whether the account is an interim or final account, whether the account is paid or unpaid, and the timing of the payment of the account. Again, however, paid accounts can only be assessed where there are special circumstances as stipulated in section 11.
[ 49 ] Among the factors which have been considered when determining whether or not special circumstances exist are the sophistication of the client, the adequacy of communications between the solicitor and the client concerning the accounts, whether there is evidence of increasing lack of satisfaction of the client regarding the services provided on the accounts, whether there is overcharging for the services provided, the level of details in the bills, whether a solicitor-client relationship still exists, and whether payments made could be characterized as having been made involuntarily.
[ 50 ] In that case, she concluded that special circumstances did exist because there was never any reference made to the implications that payment might have for the right of assessment as the accounts were paid on receipt and over the course of the retainer. Moreover, the client acted quickly to challenge the lawyer’s account upon receipt of the last account, and very quickly thereafter sought to assess all of the accounts.
[ 51 ] The client in that case was an individual involved in high-stakes matrimonial litigation, but he was not particularly sophisticated. Thus, part of Stewart J.'s conclusion rests on being mindful that public confidence in the administration of justice requires the court to intervene where necessary to protect clients’ rights to fair procedures for the assessment of a solicitor’s bill. This comes back to the principle expressed in Price v. Sonsini, that as a general matter, if the client objects to the solicitors account, the solicitor should facilitate the assessment process rather than frustrating it.
[ 52 ] In this case, as I have acknowledged, there are some facts present that do not favour a finding of special circumstances, but in my view there are stronger and more persuasive factors that do call out for the solicitor’s account to be referred for assessment.
[ 53 ] Looking first at the unfavourable factors, separate and apart from the technical non-compliance with the regulations, Meagan’s father, David Warnica, acknowledges that Mr. Van Moorlehem told him in the fall of 2010 that mediation had been scheduled. They met with Casey to review the mediation process and discuss what could be expected. That was evidently when Casey reported that he had recently received a report or information in which Meagan Warnica's future projected loss of income claim was estimated to exceed $1 million, but Mr. Warnica denies there was any discussion about legal fees during that meeting. Casey and his assistant say exactly the opposite.
[ 54 ] Then the mediation took place in Toronto on October 26, 2010 with the less than desirable outcome from the plaintiff’s perspective. The City of Mississauga strongly denied liability, and would not contribute any meaningful sum towards an overall settlement of either Meagan Warnica's case or that of the other passenger.
[ 55 ] This surprised David Warnica, as he came to understand that there was not going to be enough insurance coverage available to fully compensate both plaintiffs. It was surprising to him and Carolyn because he insisted that Mr. Van Moorlehem had consistently been of the opinion that the City of Mississauga would make a significant contribution to the settlement. That had been important to the Warnica’s given the nature of Meagan injuries and their concerns about her future.
[ 56 ] Mr. Warnica went on in his affidavit to state that at the time in the mediation where they had to agree to the settlement, he asked Mr. Van Moorlehem what his legal fees would be based on the proposed settlement. He claims Mr. Van Moorlehem never advised what his legal fees would be based on the settlement, either an approximation or any precise calculation. However, I find this is refuted by David Warnica’s cross-examination on his affidavit, and more importantly, by his own notes that he made as reflected on Exhibit 2 of the supplemental motion record filed by Mr. McDonald.
[ 57 ] David Warnica made notes during the course of the mediation on the back of a July 22, 2009 letter from the mediator’s firm. It is not reflective of specific advice from Mr. Van Moorlehem, but those notes show the aggregate amount likely to be paid to Meagan on the settlement as totaling $560,000, including the amounts attributable to fees, costs and disbursements. Those notes show that Mr. Van Moorlehem's 30% share under the terms of the retainer agreement would total $170,000, leaving $390,000 for Meagan Warnica. So it seems Mr. Warnica was aware of this before agreeing to the settlement, and presumably Meagan and Carolyn as well.
[ 58 ] Neither am I persuaded that the Warnica’s did not understand the nature of the retainer agreement they entered into with Mr. Van Moorlehem at the outset. They are not unsophisticated or uneducated people. They specifically designated Carolyn as Meagan’s Litigation Guardian because Mr. Warnica was frequently away from the city for extended periods on business, and they did not want approvals to have to await his return. I believe they fully understood the nature of the agreement they made with the solicitor. So neither of those aspects would create the “special circumstances” that must exist before the solicitor’s account can be referred for assessment.
[ 59 ] However, I find that there are several special circumstances that do call for the assessment of the solicitor’s account that are not outweighed by aspects that may not favour referral for assessment. First, this was a contingency fee agreement where the solicitor failed to include the required content in the agreement, and failed to provide all information to the client as mandated by the Act and Regulations. Further, he did not obtain court approval for the settlement when the inclusion of the costs component in the contingency element of the fee is contrary to the Act and Regulations absent a specific ruling by a judge that there are special circumstances present that justify it.
[ 60 ] A second aspect to this case that troubles me in all the circumstances is the concern that the solicitor needed to do, and evidently did do relatively little referred to in the evidence before me to earn a significant fee. Clearly the Warnica’s thought he was reassuring them that a larger settlement would be or at least was potentially achievable, yet little seems to have been done to advance the case from a technical or medical evidence perspective. Correspondence with Carolyn Warnica, Meagan’s mother, suggests he was not interested in obtaining a CAT scan of Meagan as a tool to then be provided to an expert for medico-legal purposes because the cost would be quite high. Instead, he says in his February 19, 2007 email that a referral of Meagan for treatment purposes would be preferable. I might have thought that was an obvious and probably likely piece of evidence that might or would have been needed to support the solicitor’s arguments relating to the extent of Meagan’s compensable damages.
[ 61 ] Another aspect is that the Warnica’s had no choice in paying Mr. Van Moorlehem’s account, because he withheld his 30% fee from the amount he received from the insurer and deposited to his trust account, and only remitted to them the net balance. It was not a case where they received the full settlement amount, decided to pay that account, and only later reconsidered their position. Their payment was not voluntarily made.
[ 62 ] Finally, I have concluded that the account needs to be referred for assessment as a matter of fundamental fairness, even if it is concluded that the Warnica’s had an awareness of the nature of the fees agreement they were entering into with the solicitor. I reach this conclusion given the solicitor’s failure to comply with either the contingency fee requirements of the Solicitors Act or the court approval requirements of Rule 7 for persons under disability, his possibly unjustified apparent elevation of the clients’ expectations, the effort seemingly applied to the case, and the absence of detail in his own accounts that even begins to permit one to assess whether the clients got money’s worth or not.
[ 63 ] Fees and disbursements of in excess of $200,000 is handsome payment for pre-trial work where there is so little evidence of what was done. In my view, the solicitor needs to be at least able to demonstrate what it is that he actually did to earn the 30% contingency fee he claims. He has not done that. The appropriate mechanism to permit that to happen, and also to ensure that he is paid a fair fee for the service he provided, and to permit an informed assessment to be made of the services provided for the contingency fee, is not to declare the agreements void or unenforceable. Rather, it is to refer the matter for assessment to ensure that the fee received and fixed following assessment is commensurate to the service provided, and relative to the recovery achieved on behalf of the client.
[ 64 ] The application is granted. The solicitor’s account shall be referred for assessment. The applicant’s shall have their costs of this proceeding, on a partial indemnity basis. If counsel, acting reasonably, cannot agree on or before August 15, 2012 on the costs due to the applicants for this application, they may contact my assistant to seek further directions from the court.
Michael G. Quigley J.
Released: July 18, 2012