COURT FILE NO.: 12-CV-452614CP

DATE: 20140729

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CASSIE HODGE

Applicant

– and –

GARY NEINSTEIN and NEINSTEIN & ASSOCIATES LLP

Respondents

Peter I. Waldman and Andrew Stein, for the Applicant

Chris G. Paliare, Odette Soriano and Nasha Nijhawan, for the Respondents

Proceeding under the Class Proceedings Act, 1992

HEARD: July 23 and 24, 2014

PERELL, J.

REASONS FOR DECISION

A. INTRODUCTION

[1] The Applicant, Cassie Hodge, had a motor vehicle accident personal injury claim and she hired the Respondent, Gary Neinstein, and his law firm, the co-Respondent, Neinstein & Associates, to prosecute her statutory benefits and tort claims. She signed a contingency fee agreement. Her litigation came to an end and she paid the Respondents’ contingency fee.

[2] Pursuant to the Class Proceedings Act, 1992, S.O. 1992, c.6, Ms. Hodge now brings a proposed class proceeding (by Application) on behalf of all contingency fee clients of the Respondents since October 1, 2004, approximately 6,000 clients. She seeks certification of her Application as a class proceeding.

[3] Ms. Hodge, who has recruited Ryszard Kolbuc and Czeslaw Kupnicki, other former clients as alternative Representative Plaintiffs, alleges that the Respondents, fraudulently, in breach of contract, and in breach of fiduciary duty, contravened the contingency fee provisions of the Solicitors Act, R.S.O. 1990, c. S.15 and its regulations.

[4] Every conceivable contravention is alleged, including: (a) the Respondents not following the formalities for the formation of an enforceable contingency fee agreement; (b) the Respondents not advising their clients about their rights and choices in retaining a lawyer; (c) the Respondents misrepresenting and deceiving the clients about their rights; and (d) the Respondents charging fees and disbursements that contravened the substantive provisions of the statutory regime that governs contingency fee agreements. The Respondents are accused of contravening other provisions of the Solicitors Act or breaching their professional responsibilities by improperly charging disbursements and interest.

[5] Ms. Hodge’s major complaint is an alleged contravention of sections 28.1(8) and 28.1(9) of the Act, which prohibit, without court approval, a contingency fee agreement that includes in the fee any amount of costs recovered by the client and that stipulates that a contingency fee agreement subject to approval is not enforceable unless it is approved. These sections of the Act state:

Agreement not to include costs except with leave

(8) A contingency fee agreement shall not include in the fee payable to the solicitor, in addition to the fee payable under the agreement, any amount arising as a result of an award of costs or costs obtained as part of a settlement, unless,

(a) the solicitor and client jointly apply to a judge of the Superior Court of Justice for approval to include the costs or a proportion of the costs in the contingency fee agreement because of exceptional circumstances; and

(b) the judge is satisfied that exceptional circumstances apply and approves the inclusion of the costs or a proportion of them.

Enforceability of greater maximum amount of contingency fee

(9) A contingency fee agreement that is subject to approval under subsection (6) or (8) is not enforceable unless it is so approved.

[6] Ms. Hodge submits that sections 28.1(8) and 28.1(9) of the Act are a free-standing strict liability civil wrong. The theory of Ms. Hodge’s case is that if recovered costs are included in the Respondents’ contingency fee, then the costs must be disgorged at a common issues trial as a matter of strict liability for the Respondents not obeying the law.

[7] Ms. Hodge alleges that the Respondents were scofflaws that expected not to get caught or were unconcerned because they expected not to be caught very often. She submits a class action will bring the Respondents the behaviour modification they deserve.

[8] The Respondents submit that Ms. Hodge’s Application fails each and every of the criteria for certification as a class proceeding under the Class Proceedings Act, 1992.

[9] The Respondents dispute that Ms. Hodge and her companions-in-arms have shown a cause of action. The Respondents submit that Ms. Hodge’s proposed class definition is overbroad, and indeed they suggest that it would be impossible for her to come up with a definition that could satisfy the requirements of the Act. They say that there are no common issues and that a class proceeding is not the preferable procedure. They challenge Ms. Hodge’s qualifications as a representative plaintiff and the adequacy of her litigation plan. They challenge her motives and the motives of Class Counsel. And, the Respondents submit that the proposed class proceeding is uncertifiable because it cannot be prosecuted or defended without a violation of the putative Class Members’ solicitor and client privilege.

[10] The Respondents throw everything they can to arrest the class proceeding, and they argue that no client was harmed because the breaches of the Solicitors Act were either technical breaches or breaches that upon examination caused no actual harm. They dispute that a breach of sections 28.1(8) and 28.1(9) of the Act are strict liability civil wrongs. They assert that their fee accounts are defensible and that they treated their clients fairly and honourably.

[11] However, in the context of a certification motion, the Respondents were unable to refute that from time to time it appears that there were contraventions of the Solicitors Act. A certification motion is not a merits motion, and the Respondents do hint at some technical defences such as limitation period defences and some substantive defences to uphold their contingency fee agreements. They have led evidence of satisfied clients and clients that want no part of Ms. Hodge’s proposed class proceeding.

[12] I disagree with some of the Respondents’ arguments, but I do agree that Ms. Hodge’s Application is not certifiable as a class proceeding.

[13] The fatal flaw of Ms. Hodge’s attempt to obtain access to justice is that while an identifiable group may have been victimized by the Respondents – which remains to be proven - the clients would have been victimized as individuals.

[14] A class proceeding is not the appropriate procedure to obtain access to justice for a group of individual claimants without a commonality other than the possibility of having been victimized by the same villain or group of villains. I agree with the Respondents that each Class Member’s claim of a breach of the Solicitors Act requires an independent fact specific assessment that cannot be done at a common issues trial. I agree that very little, if anything, would be carried forward from a common issues trial to advance the Class Member’s individual claims.

[15] Ms. Hodge’s attempt to find a commonality by asserting that s. 28.1(8) and 28.1(9) is a strict liability civil wrong with automatic disgorgement of the costs portion of a contingency fee fails. The Legislature did not make s. 28.1(8) and 28.1(9) a free-standing strict liability cause of action.

[16] Ms. Hodge’s proposed cause of action is untenable and would not have satisfied the cause of action criterion for certification, but there is within her proposed class action a viable cause of action albeit not a strict liability one. I conclude that she has or could satisfy the first criterion for certification. During argument, the Respondents conceded that there was a way for Ms. Hodge to satisfy the identifiable class criterion, and therefore, I conclude that she satisfies the second criterion for certification.

[17] However, her proposed class proceeding totally fails the third (common issues), fourth (preferable procedure) and fifth (representative plaintiff) criteria.

[18] Therefore, for the reasons that follow, I dismiss Ms. Hodge’s certification motion.

B. EVIDENTIARY BACKGROUND

[19] Ms. Hodge supported her motion for certification with the following evidence:

• her affidavits dated April 30, 2012 and November 14, 2012 on which she was cross-examined;

• the affidavit dated November 7, 2012 of Ryszard Kolbuc, a former client of the Respondent law firm;

• the affidavit dated November 7, 2012 of Czeslaw Kupnicki, a former client of the law firm;

• the examination pursuant to rule 39.03 of Gary Neinstein, the founding partner of the law firm;

• the examination pursuant to rule 39.03 of Stacy Koumarelas, an associate lawyer employed by the Respondents; and

• the examination pursuant to rule 39.03 of Irmina Wlodarczyk, an employee of the Respondents, who is fluent in Polish.

[20] The Respondents resisted the motion for certification with the following evidence:

• the affidavit dated April 17, 2013 of Greg Neinstein, the managing partner of the law firm, on which he was cross-examined;

• the affidavit dated March 20, 2013 of Mario Mijatovic, a former client of the firm and a putative class member;

• the affidavit dated April 10, 2013 of Hayden Allan Solomons, a former client of the firm and a putative Class Member. Mr. Solomons was cross-examined; and

• the affidavit dated April 12, 2013 of Brian Greenspan, a former client of the firm, who would not be a Class Member. Mr. Greenspan was cross-examined.

C. STATUTORY REGIME GOVERNING CONTINGENCY FEE AGREEMENTS

[21] The primary element of Ms. Hodge’s proposed class proceeding is the complaint that the Respondents breached their obligations under the law’s regulation of contingency fee agreements. Ms. Hodge says that other clients of the Respondents were victimized, and, therefore, a class proceeding is the preferable procedure for them to obtain access to justice and to modify the behaviour of the Respondents.

[22] Before describing her particular complaint and the complaints of the other clients, the putative Class Members, it is necessary to describe Ontario’s statutory regime that governs contingency fee agreements between lawyers and their clients.

[23] As noted above, Ms. Hodge submits that within this scheme, s. 28.1(8) and 28.1(9), are a free-standing and strict liability cause of action. Although her free-standing cause of action emerges from the Solicitors Act, Ms. Hodge contends, nevertheless, that it is detached from s. 23 of the same Act, which provides that no action shall be brought upon a contingency fee agreement but that all disputes be examined and determined by a judge of this court.

[24] Sections 23 to 25 of the Solicitors Act provide a dispute resolution system to determine disputes about lawyer and client agreements, including contingency fee agreements. Sections 23 to 25 state:

Determination of disputes under the agreement

23. No action shall be brought upon any such agreement, but every question respecting the validity or effect of it may be examined and determined, and it may be enforced or set aside without action on the application of any person who is a party to the agreement or who is or is alleged to be liable to pay or who is or claims to be entitled to be paid the costs, fees, charges or disbursements, in respect of which the agreement is made, by the court, not being the Small Claims Court, in which the business or any part of it was done or a judge thereof, or, if the business was not done in any court, by the Superior Court of Justice.

Enforcement of agreement

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 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.

Reopening of agreement

25. Where the amount agreed under any such agreement has been paid by or on behalf of the client or by any person chargeable with or entitled to pay it, the Superior Court of Justice may, upon the application of the person who has paid it if it appears to the court that the special circumstances of the case require the agreement to be reopened, reopen it and order the costs, fees, charges and disbursements to be assessed, and may also order the whole or any part of the amount received by the solicitor to be repaid by him or her on such terms and conditions as to the court seems just.

[25] As the discussion below will reveal, there is no basis for Ms. Hodge’s twisted and tortured interpretation of the Solicitors Act, and the case law stands against Ms. Hodge’s interpretation of the Act.

[26] The reason for Ms. Hodge’s interpretation is that she wishes to obscure the fatal flaw in her proposed class proceeding. As already noted above, Ms. Hodge’s purported class proceeding would inevitably lead to individual assessments of each Class Member’s claim with nothing or almost nothing added by a common issues trial that would decide not much more than if a lawyer breaches the Solicitors Act, then he or she may have to refund all, a part, or none of his or her fee.

[27] As the discussion below of Ontario’s statutory regime will reveal, Ms. Hodge and the putative Class Members have remedies for the alleged wrongdoings of the Respondents but not included among them is a class proceeding based on a free-standing strict liability cause of action suitable for a class proceeding.

[28] In Ontario, contingency fee retainer agreements are permitted and regulated by the Solicitors Act, R.S.O. 1990, c. S.15 and the Contingency Fee Agreements Regulation, Ont. Reg. 195/04. The relevant provisions of the statutory regime are set out in Schedules “A” and “B” to these Reasons for Decision.

[29] The Ontario Legislature intended to promote access to justice and to ensure that the cost of the legal system did not act as a barrier to justice when it amended the Solicitors Act in 2002 to allow contingency fees: Re Cogan, 2007 50281 (ON SC), [2007] O.J. No. 4539 (S.C.J.) at paras. 37-38, 59. The amendment came into force on October 1, 2004.

[30] In Raphael Partners v. Lam (2002), 2002 45078 (ON CA), 61 O.R. (3d) 417 (C.A.), the Court of Appeal established a two-step procedure to be followed by a judge where the enforcement of a contingency fee is sought or where the client seeks to have the agreement set aside pursuant to s. 23 to 25 of the Solicitors Act. First, the fairness of the agreement is assessed as of the date it was entered into. Second, the reasonableness of the agreement is assessed as of the date of the hearing; a contingency fee agreement can only be declared void, or be cancelled and disregarded, where the court determines that it is either unfair or unreasonable: Hendricks-Hunter (Litigation Guardian of) v. 814888 Ontario Inc., 2012 ONCA 496 at para. 13; Cookish v. Paul Lee Associates Professional Corporation, 2013 ONCA 278.

[31] In Raphael Partners v. Lam, supra, the Court of Appeal’s approach to the enforcement of contingency fee agreements was applied during the time when such agreements existed but were unregulated, and the same approach was applied in Hendricks-Hunter (Litigation Guardian of) v. 814888 Ontario Inc., supra and Cookish v. Paul Lee Associates Professional Corporation, supra and other cases after the Solicitors Act amendments came into force.

[32] Thus, under the case law, there is no strict liability for a breach of the Solicitors Act. A contingency fee agreement can only be disregarded when the court determines that it is either unfair or unreasonable: Soullière (Litigation guardian of) v. Robitaille Estate, 2014 ONSC 851 at para. 24. If there is a breach of the Act, the lawyer may have to refund all, some, or none of the illegal or unreasonable charges.

[33] In determining whether to approve a contingency fee agreement, the court must be satisfied that the way that the agreement was obtained was fair and that the terms of the agreement are reasonable: Raphael Partners v. Lam (2002), 2002 45078 (ON CA), 61 O.R. (3d) 417 (C.A.); Re Cogan, 2007 50281 (ON SC), [2007] O.J. No. 4539 (S.C.J.). In determining whether the agreement was fairly obtained, the court must consider the circumstances at the time the agreement was signed and the entire course of dealings between the client and solicitor to determine whether or not the client understood and appreciated the nature of the contingency fee agreement: Raphael Partners v. Lam, supra.

[34] I pause to point out the inherent individuality of the court having to consider the circumstances at the time the particular agreement was signed and the entire course of dealings between the particular client and the particular solicitor to determine whether or not the client understood and appreciated the nature of the contingency fee agreement.

[35] In determining whether to approve the contingency fee agreement as reasonable, the court should consider the following factors: (a) the financial risk assumed by the lawyer including the likelihood of success; (b) the nature and complexity of the claim and the expense and risk of pursuing it; (c) the time spent by the lawyer on the matter; (d) the results achieved and the amount recovered; (e) the expectations of the party; (f) who is to receive an award of costs, and (g) the achievement of the social objective of providing access to justice for injured parties: Raphael Partners v. Lam, supra; Re Cogan, supra at para. 42; Soullière (Litigation guardian of) v. Robitaille Estate, supra at para. 26. Risk should be assessed as it appeared to be at the time of the signing of the contingency fee agreement: Laushway Law Office v. Simpson, 2011 ONSC 4155 at para. 131.

[36] I pause again to point out the idiosyncratic nature of the numerous inquiries necessary to determine whether a contingency fee agreement is reasonable.

[37] Section 28.1(8) of the Solicitors Act precludes a solicitor from recovering both a proportion of the client’s award and also costs unless the court approves. A contingency fee agreement cannot provide for both the payment of costs received from the defendant and a percentage based on damages recovered, unless the court is satisfied that there are exceptional circumstances and the court approves the inclusion of the costs: Williams (Litigation Guardian of) v. Bowler (2006), 2006 19466 (ON SC), 81 O.R. (3d) 209 (S.C.J.); Séguin v. Van Dyke, 2013 ONSC 6576.

[38] As noted above, s. 28.1(8), along with s. 28.1(9), is the nucleus of Ms. Hodge’s cause of action.

[39] The exceptional circumstances referred to in s. 28.1(8) include assuming an extraordinary risk that would justify the solicitor charging a premium for his or her work; Williams (Litigation Guardian of) v. Bowler, supra. In the Williams case, the contingency fee was approved where counsel's assumption of significant and unusual risk, together with complications arising from feuding plaintiffs, amounted to extraordinary circumstances that justified granting approval. See also: Re Cogan, 2010 ONSC 915; Oakley & Oakley Professional Corp. v. Aitken, 2011 ONSC 5613.

[40] In authorizing the court to allow a lawyer to obtain both a contingency fee and to recover the costs awarded to his or her client in "exceptional circumstances," the Legislature recognized that there will be cases where having regard to the nature of the litigation and the associated risks, a contingency fee alone would not fairly compensate the lawyer for taking on the case: Oakley & Oakley Professional Corp. v. Aitken, supra at para. 17.

[41] In determining whether there are "exceptional circumstances" under s. 28.1(8) of the Solicitors Act, the court needs to know how much of a premium is being sought over by the solicitor and the solicitor should provide the court with his or her dockets or time records: Re Cogan, 2010 ONSC 915.

[42] No maximum percentage for a contingency fee has been established in Ontario other than the restriction set out in s. 7 of Ont. Reg. 195/04, that the solicitor shall not recover more in fees under the agreement than the client recovers as damages or receives by way of settlement, which effectively establishes a cap of 50% of the amount recovered: Re Cogan, 2007 50281 (ON SC), [2007] O.J. No. 4539 at para. 55 (S.C.J.).

[43] Where a settlement involves a person under disability, the settlement, including its treatment of a lawyer’s fees, be it by contingency fee or otherwise, is not binding without the approval of a judge: rule 7.08; Marcoccia v. Gill, [2007] O.J. No. 12 (S.C.J.); Morris v. Sparling, [2007] O.J. No. 3497 (S.C.J.); Re Cogan, 2007 50281 (ON SC), [2007] O.J. No. 4539 (S.C.J.).

[44] Section 5 of Ont. Reg. 195/04 stipulates that court approval is required for any contingency fee agreement entered into by a litigation guardian acting for a person under disability. The solicitor may apply to a judge for approval of the agreement before the agreement is finalized or include the agreement for approval as part of the motion for approval of a settlement under Rule 7.08 of the Rules of Civil Procedure.

[45] The duty of the court in considering whether or not to approve a settlement reached on behalf of a party under disability is to protect the party under disability and to ensure that the settlement is in the best interests of that party: Wu Estate v. Zurich Insurance Co. (2006), 2006 16344 (ON CA), 268 D.L.R. (4th) 670 (Ont. C.A.), leave to appeal to S.C.C. refused [2006] S.C.C.A. No. 289; Re Cogan, 2007 50281 (ON SC), [2007] O.J. No. 4539 (S.C.J.); Giusti (Litigation guardian of) v. Scarborough Hospital Grace Division, [2008] O.J. No. 1899 (S.C.J.).

[46] Where a party is under a disability, each case is unique and it is a matter for the discretion of the court as to whether the interests of the party are best served by allowing the fee provided for in the contingency agreement, or some calculated reduction of such fee or by awarding a premium over docketed time: Re Cogan, 2010 ONSC 915 at para. 22.

[47] A contingency fee agreement that does not comply with the requirements of Ont. Reg. 195/04 may be enforced: (a) under s. 24 of the Solicitors Act if it is fair and reasonable; or (b) the quantum may be determined on a quantum meruit basis: Laushway Law Office v. Simpson, supra at paras. 126, 129.

[48] If the contingency fee agreement does not comply with the formal, technical, or substantive requirements of the Solicitors Act or the Regulations, the deficiency does not entail that the agreement is void and unenforceable because the ultimate issue is the reasonableness of the lawyer’s fee and the evaluation of reasonableness requires an assessment of all the circumstances including the outcome of the litigation: Du Vernet v. 1017682 Ontario Ltd., [2009] O.J. No. 2373 (S.C.J.) at paras. 18-30; Laushway Law Office v. Simpson, 2011 ONSC 4155 at paras. 121-126; Chrusz v. Cheadle Johnson Shanks MacIvor, 2010 ONCA 553 at para. 40.

[49] Ms. Hodge’s proposed free-standing strict liability cause of action is meant to avoid the authority of all of these cases. This proposed interpretation is not supported by the language of the Act and is inconsistent with the case law about enforcing contingency fee agreements.

[50] Non-compliance with the Act or the Regulations does not make the contingency agreement void or unenforceable. In Simpson v. Laushway Law Office, [2009] O.J. No. 4445 (S.C.J.), Justice Power stated at para. 62:

I also agree with counsel for the respondent that the authorities from other provinces with respect to the consequences of non-compliance with an act or regulation are distinguishable. There is nothing in the Ontario legislation that clearly states that a court must declare void, or voidable, or unenforceable, an agreement that does not strictly comply with the Act or Regulation. In the absence of clear language to this effect, a judge's judicial discretion should not be unduly restricted. Indeed, in my opinion, s.24 of the Ontario Solicitors Act clearly bestows a discretion on the court to consider whether an agreement is fair and reasonable between the parties before determining whether the agreement should be declared void. The section says that, even where a declaration is made that an agreement is void, the court may direct that the "costs, fees, charges and disbursements incurred or chargeable in respect of the matter included therein to be assessed in the ordinary manner".

[51] Under sections 23 to 25 of the Solicitors Act, any question respecting the validity or effect of contingency fee agreements may be examined and determined by the court, and 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 in such manner as the court thinks fit; however, if the terms are deemed not to be fair and reasonable, the agreement may be declared void and the court may order it cancelled, directing costs, fees and other charges to be assessed in the ordinary manner, which includes compensation for financial risks assumed, skill, diligence, and success achieved: Du Vernet v. 1017682 Ontario Ltd., supra at paras. 17, 26.

[52] With one possible exception, i.e., Séguin v. Van Dyke, 2013 ONSC 6576, discussed below, all of the case law stands against Ms. Hodge’s interpretation of the Solicitors Act that posits a free-standing strict liability civil wrong.

[53] Ms. Hodge relies on Séguin v. Van Dyke, but upon analysis it does not support her theory and in any event Séguin cannot overrule the Court of Appeal authorities that stand against Ms. Hodge’s theory.

[54] In Séguin v. Van Dyke, Ms. Séguin, who had suffered catastrophic injuries in a motor vehicle accident, signed a contingency fee agreement with Mr. Van Dyke, and after she agreed to an “all in” settlement for $342,000 with the defendant in the personal injury action, she paid Mr. Van Dyke $150,044.04 inclusive of disbursements to pay his account in full. Subsequently, Ms. Séguin sued Mr. Van Dyke for negligence and she applied under the Solicitors Act for a declaration that the contingency fee agreement was void and unenforceable because by not breaking out the all in settlement proceeds, Mr. Van Dyke had contravened s. 28.1(8) of the Act that prohibits charging a contingency fee on the costs. The overcharge was calculated to be $21,922.00. Ms. Séguin wished to have the overcharge refunded and Mr. Van Dyke’s account assessed by an assessment officer. Mr. Van Dyke was prepared to refund the $21,922.00, but wished the reasonableness of his fee to be determined in the negligence action.

[55] Justice Lalonde granted the declaration that the contingency fee agreement was void and ordered that Mr. Van Dyke repay the $21,922.00 with the issue of the reasonableness of the Mr. Van Dyke’s fees to be determined by the trial judge in the negligence action.

[56] Given that Mr. Van Dyke consented to the refund of the $21,922.00, the Séguin v. Van Dyke judgment does not alter the principle that non-compliance with the Solicitors Act does not entail that the solicitor may not recover reasonable fees under the impugned contingency fee agreement that does not comply with the Solicitors Act.

[57] In any event, I am bound by the Court of Appeal decisions that stand against any strict liability civil wrong under the Solicitors Act.

D. FACTUAL BACKGROUND

1. Neinstein & Associates

[58] Neinstein & Associates is a plaintiffs’ personal injury firm. Gary Neinstein (called 1970) founded the firm in 2000. Currently, the firm has six partners, five associate lawyers, three licensed paralegals, and an articling student.

[59] Most, but not all, of the Respondents’ retainers are on a contingency fee basis. Since October 1, 2004, the firm has approximately 6,000 clients who signed contingency fee agreements.

[60] Although Ms. Hodge’s action raises the issue of how faithfully the practice is followed, the firm’s practice is that the client signs a contingency fee agreement and receives a copy of the agreement along with a client engagement letter explaining the agreement and what to expect from the litigation practice. The firm has standard form contingency fee agreements but the lawyers can and do negotiate and make changes to the agreement on a client by client basis.

[61] There are numerous templates of retainer agreements and engagement letters on the firm’s computer system that the lawyers can use as precedents. Forty-two differing examples were provided for the certification motion. All of the examples included the prospect of the Respondents recovering both a contingency fee and costs, or a portion of them, in addition to a contingency fee.

[62] Frequently, the matter of the Respondents’ fee is internally renegotiated as a part of settling the client’s claim with the opposing party. The lawyer with carriage of the matter will discuss any settlement offer and explain what the client will receive and how the settlement funds are allocated for disbursements, legal fees, and client recovery. The lawyer with carriage has the discretion to change the contingency fee having regard to the results achieved, the complexity of the matter, and the client’s expectations.

[63] The Respondents say that in practice, typically, they collect less than the contracted percentage because the lawyers discount the contingency fee as part of the settlement of the claims. Ms. Hodge disputes this merits issue, but as will be seen below, she posits strict liability and thus any discounting does not matter.

2. Ms. Hodge’s Grievances against the Respondents

[64] Ms. Hodge is married with children. Her husband works at Home Depot. She is now a homemaker with school-age children. Previously, she was trained as a legal assistant, and she worked as a court clerk in this Court (then the General Division) and as a legal assistant in three different law firms between 1992 and 2003. She is familiar with the billing procedures of a law firm.

[65] In September 2006, Ms. Hodge retained the Respondents to assume carriage of an automobile accident claim with respect to an accident that occurred in December 2002.

[66] Allegedly, without being told about any of the matters required to be discussed with her under the contingency fee regulations, Ms. Hodge signed a standard form contingency fee retainer agreement. She says that she received only an unsigned copy of the form. Her retainer agreement stated:

In consideration for the professional services provided and the risks in funding all costs and disbursements by N&A, I/We do hereby understand and agree that N&A’s legal fees arising from this Retainer agreement will be 25% of the damages recovered on my/our behalf, plus partial indemnity costs (which will be no more than 40% of the total recovered) plus disbursements.

[67] After an arbitration hearing, Ms. Hodge settled her accident benefits claim for $85,000.00. The Respondents charged $10,000 in fees and held back $2,000 for her then pending tort action. The tort action settled in 2010, after a pre-trial conference. The defendant made an all-in offer, but Ms. Hodge was advised that the settlement was $100,000.00 for the claim and $50,000.00 for costs.

[68] No application was ever made to the Superior Court to approve a contingency fee agreement that includes costs obtained as part of the settlement.

[69] Ms. Hodge alleges that she was not told that the defendant’s offer was an all-inclusive offer of $150,000 that Mr. Neinstein had arbitrarily apportioned. From the tort settlement, $48,942.37 was used to pay disbursements inclusive of GST, and the Respondents received legal fees of $60,326.49, inclusive of GST. The balance of $40,731.14 was ultimately received by Ms. Hodge.

[70] If the tort claim recovery is isolated from the accident benefits claims, then for the tort claim, Ms. Hodge recovered $40,731.14, net of disbursements, and the Respondents received $60,326.49, inclusive of GST, for fees; i.e. the lawyers recovered more than the client. If the accident benefits claim and the tort claim are aggregated, when the litigation dust settles, Ms. Hodge recovered $113,731.14, net of disbursements, and the Respondents recovered $72,326.49 in fees; i.e. the client recovered more than the lawyers.

3. Ryszard Kolbuc’s Grievances against the Respondents

[71] In 2004, while at work, Ryszard Kolbuc contracted West Nile Virus and became a paraplegic. He retained the Respondents to pursue a claim against his disability insurer. Mr. Kolbuc speaks only Polish, and Ms. Wlodarczyk, who speaks Polish, came to his home, where Mr. Kolbuc signed a contingency fee agreement. He alleges that he was never advised of any of his rights under the Solicitors Act. He says that Ms. Wlodarczyk told him that he would have to pay 20 percent of any money he received in his lawsuit. He subsequently received a letter in English that stated:

In consideration of the considerable risk and costs incurred by our firm for doing so, our fees (as outlined in our retainer agreement) will be 20% of the amount recovered by you, plus disbursements, party and party costs and GST.

[72] Mr. Kolbuc’s action was dismissed at trial. He gave instructions to appeal. The Respondents required him to sign an Authorization and Direction which stated that the firm would continue representing Mr. Kolbuc on the appeal, provided that he agreed to increase the legal fee to a 30 percent contingency.

[73] On July 12, 2006, Mr. Kolbuc received a letter from the Respondents enclosing an account for disbursements from Paliare Roland Barristers, counsel for the appeal, for $1,529.33 including GST. The earlier Authorization and Direction for the appeal had not mentioned that Paliare Roland would be involved with the appeal.

[74] The appeal was successful and Mr. Kolbuc alleges that the Respondents told him a settlement was available and that he could receive his cheque if he gave up his claim for damages for pain and suffering, of which the Respondents had previously said he was entitled. Mr. Kolbuc agreed and received a cheque for $93,141.13.

[75] Mr. Kolbuc later received an account that indicated that the Respondents had been paid fees of $32,594.91 and party and party costs of $12,000.00 and that Paliare Roland had been paid for fees of $18,935.72 and party and party costs of $16,737.64. A referral fee of $8,480 had been paid to lawyer Ken Bialkowski.

[76] Mr. Kolbuc alleges that the Respondents’ final account to him included lump sum disbursements for photocopies, telephone, courier service, fax, postage, laser copies, and Quicklaw research, which were never explained to him. He was charged $1,307.35 for “Interest Recovery,” which he alleges was never explained to him.

4. Czeslaw Kupnicki’s Grievances against the Respondents

[77] On June 29, 2002, Czeslaw Kupnicki was involved in a serious motorcycle accident in which he lost his left leg below the knee. On December 7, 2004, Mr. Kupnicki retained the Respondents after a visit from Gary Neinstein to his home. Mr. Kupnicki alleges that he was never advised of his rights under the Solicitors Act before he signed a retainer agreement that stated:

[The Respondents’] legal fees arising from this Retainer agreement will be 20% of the amounts recovered on my/our behalf plus party and party costs, plus disbursements.

[78] Subsequently the Respondents sent Mr. Kupnicki an interim account, including an item for $3,406.43 for “Interest Recovery.” He did not know the meaning of this or why the Respondents made this charge to him.

[79] On or about May 23, 2007, Mr. Kupnicki terminated his retainer with the Respondents. Mr. Kupnicki’s final account included lump sum charges for photocopies, outside photocopies, courier service, litigation service, fax, laser copies, and Quicklaw research.

[80] The Respondents refused to release Kupnicki’s files to him and Mr. Kupnicki was forced to bring a motion for the return of his files. In February and November, 2008, the Respondents sent him accounts with interest charges.

E. DISCUSSION AND ANALYSIS

Introduction to Certification

[81] Pursuant to s. 5(1) of the Class Proceedings Act, 1992, the court shall certify a proceeding as a class proceeding if: (1) the pleadings disclose a cause of action; (2) there is an identifiable class; (3) the claims of the Class Members raise common issues of fact or law; (4) a class proceeding would be the preferable procedure; and (5) there is a representative plaintiff who would adequately represent the interests of the class without conflict of interest and who has produced a workable litigation plan.

[82] For an action to be certified as a class proceeding, there must be a cause of action shared by an identifiable class from which common issues arise that can be resolved in a fair, efficient, and manageable way that will advance the proceeding and achieve access to justice, judicial economy, and the modification of behaviour of wrongdoers: Sauer v. Canada (Attorney General), 2008 43774 (ON SC), [2008] O.J. No. 3419 (S.C.J.) at para. 14, leave to appeal to Div. Ct. refused, 2009 2924 (ON SCDC), [2009] O.J. No. 402 (Div. Ct.).

[83] On a certification motion, the question is not whether the plaintiff's claims are likely to succeed on the merits, but whether the claims can appropriately be prosecuted as a class proceeding: Hollick v. Toronto (City), 2001 SCC 68, [2001] 3 S.C.R. 158 at para. 16.

[84] The test for certification is to be applied in a purposive and generous manner, to give effect to the important goals of class actions -- providing access to justice for litigants; promoting the efficient use of judicial resources; and sanctioning wrongdoers to encourage behaviour modification: Western Canadian Shopping Centres Inc. v. Dutton, 2001 SCC 46, [2001] 2 S.C.R. 534 at paras. 26 to 29; Hollick v. Toronto (City), supra at paras. 15 and 16.

[85] The purpose of a certification motion is to determine how the litigation is to proceed and not to address the merits of the plaintiff's claim; there is to be no preliminary review of the merits of the claim: Hollick v. Toronto (City), supra at paras. 28 and 29.

1. Cause of Action Criterion

[86] The first criterion for certification is that the plaintiff's pleading discloses a cause of action. The "plain and obvious" test for disclosing a cause of action from Hunt v. Carey Canada, 1990 90 (SCC), [1990] 2 S.C.R. 959 is used to determine whether a proposed class proceeding discloses a cause of action for the purposes of s. 5(1)(a) of the Class Proceedings Act, 1992.

[87] Thus, to satisfy the first criterion for certification, a claim will be satisfactory, unless it has a radical defect or it is plain and obvious that it could not succeed: Anderson v. Wilson (1999), 1999 3753 (ON CA), 44 O.R. (3d) 673 (C.A.) at p. 679, leave to appeal to S.C.C. ref'd, [1999] S.C.C.A. No. 476; 176560 Ontario Ltd. v. Great Atlantic & Pacific Co. of Canada Ltd. (2002), 2002 6199 (ON SC), 62 O.R. (3d) 535 (S.C.J.) at para. 19, leave to appeal granted, 2003 36393 (ON SCDC), 64 O.R. (3d) 42 (S.C.J.), aff'd (2004), 2004 16620 (ON SCDC), 70 O.R. (3d) 182 (Div. Ct.).

[88] In a proposed class proceeding, in determining whether the pleading discloses a cause of action, no evidence is admissible, and the material facts pleaded are accepted as true, unless patently ridiculous or incapable of proof. The pleading is read generously and it will be unsatisfactory only if it is plain, obvious, and beyond a reasonable doubt that the plaintiff cannot succeed: Hollick v. Toronto (City), supra at para. 25; Cloud v. Canada (Attorney General) (2004), 2004 45444 (ON CA), 73 O.R. (3d) 401 (C.A.) at para. 41, leave to appeal to the S.C.C. ref'd, [2005] S.C.C.A. No. 50 , rev'g (2003), 2003 72353 (ON SCDC), 65 O.R. (3d) 492 (Div. Ct.); Abdool v. Anaheim Management Ltd. (1995), 1995 5597 (ON SCDC), 21 O.R. (3d) 453 (Div. Ct.) at p. 469.

[89] In her Amended Notice of Application, Ms. Hodge alleges that the Respondents breached the Solicitors Act and its Regulations by: (a) entering into contingency fee agreements that obligated the Class Members to pay party and party costs in additional to the legal fee; (b) failing to make a joint application for judicial approval of taking costs under a contingency fee agreement, and failing to advise the class members of the right to make such an application; (c) failing to advise the Class Members of their rights under the Act; (d) claiming a total fee that is more than the Class Members’ share of the damages claim; (e) failing to include in its contingency fee agreements the mandatory language as required under the Act; and (f) charging impermissible interest under the Act on unpaid disbursements.

[90] In her Amended Notice of Application, Ms. Hodge alleges that the Respondents breached their fiduciary duty to the Class Members by: (a) entering into an “all-in” settlement without having a reasonable apportionment fixed between damages and costs; (b) charging clients for disbursements already paid by the Defendants or the insurance companies; (c) failing to disclose to the clients that their contingency fee agreements violated the Solicitors Act and the Regulations; and (d) being in a position of conflict of interest because they will share the proceeds and the larger the apportionment to costs, the more the Respondents receive and the less the client receives thereby motivating the Respondents to increase the costs and conversely to reduce the damages.

[91] Ms. Hodge relies on the same pleaded allegations in support of her breach of contract claim on behalf of Class Members.

[92] The Respondents submit that Ms. Hodge’s Amended Notice of Application fails the s.5(1)(a) test for certification for three reasons: (1) the Solicitors Act provides a complete and mandatory code for the complaints Ms. Hodge seeks to advance and there is no free-standing strict liability cause of action; (2) in addition, there is no tenable claim for the declaratory relief claimed because the declaratory relief sought is incapable of having a practical effect in resolving the ultimate issues between the parties; (3) Ms. Hodge has not pleaded a claim for breach of fiduciary duty or breach of contract.

[93] Although not eloquently pleaded, I do not agree with the Respondents that Ms. Hodge has not pleaded a claim for breach of fiduciary duty or breach of contract.

[94] I do think that the Respondents have a strong argument that these common law and equitable claims are precluded and covered by sections 23 to 25 of the Act, but I do not think that the argument is so strong that it is plain and obvious that the breach of fiduciary duty and breach of contract claims are precluded. Given that I think that Ms. Hodge has a cause of action or claim under sections 23 and 25 of the Act that has the same evidentiary footprint as the breach of fiduciary duty and breach of contract claims, I conclude that Ms. Hodge has satisfied the first criterion (cause of action) for a class proceeding for: (1) breach of the Solicitors Act; (2) breach of fiduciary duty; and (3) breach of contract.

[95] It, however, is necessary to be very clear that I would not certify a cause of action for a free-standing strict liability civil wrong for breach of sections 28.1(8) and 28.1(9) of the Act. For the reasons expressed above, no such free-standing, strict liability cause of action exists.

[96] To repeat, s. 23 of the Solicitors Act provides that a contingency fee agreement may be enforced or set aside on the application of any person who is a party to the agreement. Section 23 allows an application but precludes an action. Section 23 states:

Determination of disputes under the agreement

23. No action shall be brought upon any such agreement, but every question respecting the validity or effect of it may be examined and determined, and it may be enforced or set aside without action on the application of any person who is a party to the agreement or who is or is alleged to be liable to pay or who is or claims to be entitled to be paid the costs, fees, charges or disbursements, in respect of which the agreement is made, by the court, not being the Small Claims Court, in which the business or any part of it was done or a judge thereof, or, if the business was not done in any court, by the Superior Court of Justice.

[97] Sections 24 and 25 provide the remedies for a s. 23 application; these sections state:

Enforcement of agreement

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 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.

Reopening of agreement

25. Where the amount agreed under any such agreement has been paid by or on behalf of the client or by any person chargeable with or entitled to pay it, the Superior Court of Justice may, upon the application of the person who has paid it if it appears to the court that the special circumstances of the case require the agreement to be reopened, reopen it and order the costs, fees, charges and disbursements to be assessed, and may also order the whole or any part of the amount received by the solicitor to be repaid by him or her on such terms and conditions as to the court seems just.

[98] Although Ms. Hodge does not expressly mention, s. 23 of the Solicitors Act, and refers to “statutory breaches” in her Amended Notice of Application, I view Ms. Hodge’s Amended Notice of Application as bringing an application pursuant to s. 23 on her own behalf and on behalf of the putative class of clients (past and present) of the Respondents since October 1, 2004.

[99] Read in this way, her Application satisfies the cause of action criterion for certification and the breach of fiduciary duty and breach of contract claims can be certified, because it is not plain and obvious that they are precluded by s. 23 and they have the same evidentiary footprint in any event.

[100] The declarations that she seeks; i.e., that the Respondents have contravened the Solicitors Act, could have a practical effect if her Application is understood as explained above. Pursuant to the s. 23 Application, the court could declare that the contingency fee was unfairly obtained or that the fee was unreasonable and the court could order a refund of the fee, although it likely would only be a partial refund part because the Respondents are entitled to a quantum meruit award for the value of the services they delivered.

[101] Strictly speaking, Ms. Hodge’s claims of breach of fiduciary duty and breach of contract are probably redundant. They may also be precluded by s. 23 of the Solicitors Act. I do not decide the point, given the low threshold of the plain and obvious test, but the Respondents’ argument is that where the Legislature has enacted a comprehensive scheme, there is not a free-standing action for breach of the statute. See: Seneca College v. Bhadauria, [1981] 2 S.C.R. 188 at p. 188; Frame v. Smith, 1987 74 (SCC), [1987] 2 S.C.R. 99; R. v. Saskatchewan Wheat Pool, 1983 21 (SCC), [1983] 1 S.C.R. 205; Canadian Alliance of Pipeline Landowners’ Associations v. Enbridge Pipelines Inc., 2008 ONCA 227.

[102] I, therefore, conclude that Ms. Hodge has satisfied the cause of action criterion.

[103] Although it already may be apparent, but will become clearer below, the problem for Ms. Hodge’s proposed class action is that the resolution of her s. 23 Application requires a highly if not overwhelmingly idiosyncratic analysis of all the circumstances arising from the formation of each of the retainers to their completion.

2. Identifiable Class Criterion

[104] I turn now to the second criterion for certification of a class action, the identifiable class criterion.

[105] The definition of an identifiable class serves three purposes: (1) it identifies the persons who have a potential claim against the defendant; (2) it defines the parameters of the lawsuit so as to identify those persons bound by the result of the action; and (3) it describes who is entitled to notice: Bywater v. Toronto Transit Commission, [1998] O.J. No. 4913 (Gen. Div.).

[106] In defining Class Membership, there must be a rational relationship between the class, the causes of action, and the common issues, and the class must not be unnecessarily broad or over-inclusive: Pearson v. Inco Ltd. (2006), 2006 913 (ON CA), 78 O.R. (3d) 641 (C.A.) at para. 57, rev'g 2004 34446 (ON SCDC), [2004] O.J. No. 317 (Div. Ct.), which had aff'd [2002] O.J. No. 2764 (S.C.J.).

[107] The class definition proposed by Ms. Hodge is:

All clients who Neinstein & Associates LLP and Gary Neinstein Q.C. represented pursuant to a contingency fee agreement or arrangement since October 1, 2004.

[108] The Respondents submit that the class definition is not satisfied for two reasons: (1) the definition is over-inclusive and there is no way to redefine it without reference to the merits; and (2) there is no evidence of at least two Class Members who share Ms. Hodge’s claim.

[109] In paragraph 182 of their factum, to advance their argument that Ms. Hodge’s class definition is over-inclusive; the Respondents provide examples of clients who could not have claims. Paragraph 182 states:

182. However, the class definition includes the following individuals who cannot share in her claim:

a. individuals whose contingency fee agreement with the Firm has not been fully performed, including:

i. individuals who are currently in a solicitor-client relationship with the Firm, whose litigation remains unresolved and who have not been issued a final account; and

ii. individuals who terminated their retainer with N&A but were never issued an account;

b. individuals whose claims are outside the purview of the Solicitors Act, and/or are statute-barred because:

i. their claims are barred by limitation period and who have no tenable discoverability claim; and/or

ii. they entered into a contingency fee agreement with N&A before October 2004 when the Solicitors Act amendments came into force; and

c. individuals who did not pay a fee in excess of the percentage fee provided for in their contingency fee agreements excluding costs;

d. individuals who did not pay disbursements of the kind about which Ms. Hodge complains;

e. individuals who have already finally resolved any issues regarding their account by agreement, assessment or court approval, with or without the assistance of independent counsel, such as:

i. minors or persons under a disability whose settlements and solicitor’s contingency fee were approved by the court under Rule 7.08 such as Mr. Solomons;

ii. individuals who have expressly agreed to the distribution of their settlement funds in a particular manner by signing their settlement proposals;

iii. individuals who have negotiated a settlement of their account directly with N&A, and have received some consideration for that settlements; and

f. individuals whose accounts have already been formally assessed under s. 28.1(11), at their initiative or at N&A’s initiative.

[110] I agree that Ms. Hodge’s current class definition is overbroad, although not for all the reasons listed by the Respondents. And, I do not agree that there is no way to redefine it without reference to the merits.

[111] It may be noted that Ms. Hodge’s current definition does not define the class by reference to the merits. Definitions where membership depends on a successful claim (merits-based class definitions) are problematic because unsuccessful claimants would not be bound by the outcome and would be free to commence repeat litigation: Frohlinger v. Nortel Networks Corp. (2007), 2007 696 (ON SC), 40 CPC (6th) 62 (SCJ) at para. 21; Wuttunee v. Merck Frosst Canada Ltd., 2009 SKCA 43, rev’g 2007 SKQB 29 and 2008 SKQB 78 and 2008 SKQB 229, leave to appeal granted 2008 SKCA 79, leave to appeal to SCC refused [2008] SCCA No. 512; Keatley Surveying Ltd. v. Teranet Inc., 2012 ONSC 7120 at paras. 159-167.

[112] In other words, if the class is defined by success on the merits, then, tautologically, it follows that unsuccessful claimants will not be bound by being members of the class and the purposes of the legislation are frustrated as access to justice is not achieved and a multiplicity of proceedings is not avoided.

[113] It is the Respondents who submit that it is impossible for Ms. Hodge to come up with an amended definition without reference to the merits. This is not true. The problems of over-inclusiveness in the current definition can be addressed by amending the definition; visualize:

A client of Neinstein & Associates LLP and Gary Neinstein Q.C. (the Respondents) that:

(a) signed or amended a contingency fee agreement or arrangement after October 1, 2004, and

(b) who has paid before the date of certification the Respondents for their legal services on the completion of the matter in respect of which services were provided,

(c) except a client:

(i) for whom the court has approved the Respondents’ fee;

(ii) for whom the court has assessed the Respondents’ account; or

(iii) that have signed a release or settled any claim with respect to his or her contingency fee agreement or arrangement.

[114] This amended class definition will include clients whose claim may not be provable, but that is not objectionable. A class definition is not unacceptable simply because it may include persons who ultimately will not have a claim against the defendants, as determined at the common issues trial: Bywater v. Toronto Transit Commission, supra at para. 10.

[115] This amended class definition will include clients whose claims may be statute-barred but given the discoverability issues, this is a matter that would need to be addressed at individual issues trials and does not make the class definition uncertifiable.

[116] This amended class definition also satisfies the requirement that the definition identify a class of two or more persons with claims against the Respondents.

[117] During argument, the Respondents conceded that the above class definition satisfied the identifiable class criterion.

[118] I conclude that Ms. Hodge has satisfied the class definition criterion for certification as a class proceeding.

3. Common Issues Criterion

[119] The third criterion for certification is the common issues criterion. For an issue to be a common issue, it must be a substantial ingredient of each Class Member's claim and its resolution must be necessary to the resolution of each Class Member's claim: Hollick v. Toronto (City), supra at para. 18.

[120] With regard to the common issues, "success for one member must mean success for all. All members of the class must benefit from the successful prosecution of the action, although not necessarily to the same extent." That is, the answer to a question raised by a common issue for the plaintiff must be capable of extrapolation, in the same manner, to each member of the class: Shopping Centres Inc. v. Dutton, supra at para. 40; Ernewein v. General Motors of Canada Ltd., 2005 BCCA 540 at para. 32; Merck Frosst Canada Ltd. v. Wuttunee, 2009 SKCA 43 at paras. 145-46 and 160; McCracken v. Canadian National Railway Co., supra, at para. 183.

[121] An issue is not a common issue if its resolution is dependent upon individual findings of fact that would have to be made for each Class Member: Fehringer v. Sun Media Corp., [2003] O.J. No. 3918 (Div. Ct.) at paras. 3, 6.

[122] Common issues cannot be dependent upon findings which will have to be made at individual trials, nor can they be based on assumptions that circumvent the necessity for individual inquiries: Nadolny v. Peel (Region), [2009] O.J. No. 4006 (S.C.J.) at paras. 50-52; Collette v. Great Pacific Management Co., 2003 BCSC 332, [2003] B.C.J. No. 529 (B.C.S.C.) at para. 51, varied on other grounds (2004) 2004 BCCA 110, 42 B.L.R. (3d) 161 (B.C.C.A.); McKenna v. Gammon Gold Inc., 2010 ONSC 1591, [2010] O.J. No. 1057 (S.C.J.) at para. 126, leave to appeal granted 2010 ONSC 4068, [2010] O.J. No. 3183 (Div. Ct.), varied 2011 ONSC 3882 (Div. Ct.).

[123] The common issue criterion presents a low bar: Carom v. Bre-X Minerals Ltd. (2000), 2000 16886 (ON CA), 51 O.R. (3d) 236 (C.A.) at para. 42; Cloud v. Canada (Attorney General) (2004), O.R. (3d) 401 (C.A.) at para. 52; 203874 Ontario Ltd. v. Quiznos Canada Restaurant Corp., 2009 23374 (ON SCDC), [2009] O.J. No. 1874 (Div. Ct.), aff’d 2010 ONCA 466, [2010] O.J. No. 2683 (C.A.), leave to appeal to S.C.C. refused [2010] S.C.C.A. No. 348.

[124] An issue can be a common issue even if it makes up a very limited aspect of the liability question and even though many individual issues remain to be decided after its resolution: Cloud v. Canada (Attorney General) supra, at para. 53.

[125] Ms. Hodge requests that the Court certify 37 common issues. They are set out in Schedule “C” to these Reasons for Decision.

[126] In my opinion, the long list of common issues does not satisfy the common issues criterion because each question is deficient for one or more or all of the following reasons: (1) the answer would be dependent upon findings that would have to be made at individual trials; (2) the question is based on assumptions, the proof of which require individual determinations; (3) the question is not a substantial ingredient of each Class Member's claim; (4) the answer to the question is not necessary to the resolution of each Class Member's claim; and (5) the answer is not capable of extrapolation to each member of the class. There is also the objection that several of the questions are based on the uncertified claims for unjust enrichment and negligent or fraudulent misrepresentation.

[127] As noted at the outset of these Reasons for Decision, Ms. Hodge’s proposed class action wants for the fundamental element of commonality. The fatal flaw of Ms. Hodge’s attempt to obtain access to justice is that while an identifiable group may have been victimized by the Respondents – which remains to be proven - they would have been victimized as individuals and a class proceeding is not the appropriate procedure to obtain access to justice for a group of individual claimants without a common issue other than the commonality of possibly being victimized by the same villain, which is not even possible because the Respondents are also a group of individuals practicing together as partners, associate lawyers, and paralegals.

[128] What fee is charged and analyzing whether that fee contravenes the Solicitors Act and its regulations ultimately involves an investigation from beginning to end of a lawyer and client relationship, between the individuals that formed that relationship. The relationship typically lasts for years and the relationship will have its unique history and story including the story of the lawyer’s fee.

[129] In what I regard as somewhat exaggerated atomization of the individual nature of the claims in Ms. Hodge’s proposed class proceeding, at paragraph 28 of their factum, the Respondents describe what analysis would be required to determine whether the Solicitors Act and its regulations had been violated. Paragraph 28 states:

28. To determine what fees or disbursements were charged to and ultimately paid by a particular client and on what basis, one would have to review the client’s entire file to determine:

a. what documents make up their retainer agreement, including any changes or amendments to the agreement made over the course of the retainer;

b. what aspects of the client’s case are covered by the contingency fee retainer agreement, or what other agreements as to compensation might apply;

c. whether there were additional Family Law Act claimants represented by N&A, and on what terms;

d. whether the client was a minor or a party under a disability represented by a litigation guardian, and/or whether their status changed during the course of the litigation;

e. whether the disbursement or fee account of a previous lawyer was protected or paid by N&A;

f. whether there are any agreements as to the payment of significant or unusual disbursements, such as third party loans or the retainer of appellate counsel, that will affect the overall account;

g. what amounts were received by the client at what stages of the litigation, in respect of different aspects of their case;

h. if any accounts were rendered to the client prior to the final account, and what they stipulate including the waiver or deferral of fees;

i. any stipulations in the settlement agreement or any direction by the client to the lawyer as to the apportionment of settlement funds; and

j. the effect of any court orders on the account, including approval of the account.

[130] In the case at bar, the issues to be resolved ultimately require an inquiry into the individual solicitor-client relationship between the class members and the individual members of the Respondent law firm.

[131] Even if a breach of sections 28.1(8) and 28.1(9) were a free-standing strict liability civil wrong – which it is not – it would not avoid the problem that every individual client bill would still have to be examined to determine whether there had been a breach and the extent of the breach and, as Ms. Hodge’s own situation demonstrates, there would be individual inquiries about what is the significance of multiple accounts and the settlement of claims in stages or increments. Where defendants make all-in settlement offers, there would be difficult individual factual matters to resolve and evidence of trade practices about different types of claims and circumstances would probably be necessary.

[132] In my opinion, the common issues criterion, the most fundamental of the criteria, is not remotely satisfied, and Ms. Hodge’s Application is not certifiable as a class proceeding.

4. Preferable Procedure Criterion

(a) Analysis

[133] With the total failure of the common issues criterion, it follows that the preferable procedure criterion also fails, but for the purposes of the following preferable procedure analysis, I will assume that all the other certification criteria have been satisfied.

[134] Preferability captures the ideas of: (a) whether a class proceeding would be an appropriate method of advancing the claims of the Class Members; and (b) whether a class proceeding would be better than other methods such as joinder, test cases, consolidation, and any other means of resolving the dispute: Markson v. MBNA Canada Bank (2007), 2007 ONCA 334, 85 O.R. (3d) 321 (C.A.) at para. 69, leave to appeal to S.C.C. ref'd, [2007] S.C.C.A. No. 346; Hollick v. Toronto (City), supra.

[135] Relevant to the preferable procedure analysis are the factors listed in s. 6 of the Class Proceedings Act, 1992, which states:

6. The court shall not refuse to certify a proceeding as a class proceeding solely on any of the following grounds:

7. The relief claimed includes a claim for damages that would require individual assessment after determination of the common issues.

8. The relief claimed relates to separate contracts involving different Class Members.

9. Different remedies are sought for different Class Members.

10. The number of Class Members or the identity of each Class Member is not known.

11. The class includes a subclass whose members have claims or defences that raise common issues not shared by all Class Members.

[136] For a class proceeding to be the preferable procedure for the resolution of the claims of a given class, it must represent a fair, efficient, and manageable procedure that is preferable to any alternative method of resolving the claims: Cloud v. Canada (Attorney General) supra at paras. 73-75, leave to appeal to S.C.C. ref'd, [2005] S.C.C.A. No. 50.

[137] Whether a class proceeding is the preferable procedure is judged by reference to the purposes of access to justice, behaviour modification, and judicial economy and by taking into account the importance of the common issues to the claims as a whole, including the individual issues: Markson v. MBNA Canada Bank (2007), 2007 ONCA 334, 85 O.R. (3d) 321 (C.A.) at para. 69, leave to appeal to S.C.C. ref'd, [2007] S.C.C.A. No. 346; Hollick v. Toronto (City), supra.

[138] In considering the preferable procedure criterion, the court should consider: (a) the nature of the proposed common issue(s); (b) the individual issues which would remain after determination of the common issue(s); (c) the factors listed in the Act; (d) the complexity and manageability of the proposed action as a whole; (e) alternative procedures for dealing with the claims asserted; (f) the extent to which certification furthers the objectives underlying the Act; and (g) the rights of the plaintiff(s) and defendant(s): Chadha v. Bayer Inc. (2001), 2001 28369 (ON SCDC), 54 O.R. (3d) 520 (Div. Ct.) at para. 16, aff'd (2003), 2003 35843 (ON CA), 63 O.R. (3d) 22 (C.A.), leave to appeal to S.C.C. ref'd, [2003] S.C.C.A. No. 106.

[139] The court must identify alternatives to the proposed class proceeding: AIC Limited v. Fischer, 2013 SCC 69 at para. 35; Hollick v. Toronto (City), supra at para. 28. The proposed representative plaintiff bears the onus of showing that there is some basis in fact that a class proceeding would be preferable to any other reasonably available means of resolving the class members’ claims, but if the defendant relies on a specific non-litigation alternative, the defendant has the evidentiary burden of raising the non-litigation alternative: AIC Limited v. Fischer, supra at paras. 48-49.

[140] In AIC Limited v. Fischer, supra at paras. 24 to 38, the Supreme Court of Canada reiterated that the preferability analysis must be conducted through the lens of judicial economy, behaviour modification and access to justice. Justice Cromwell for the Court stated that access to justice has both a procedural and substantive dimension. The procedural aspect focuses on whether the claimants have a fair process to resolve their claims. The substantive aspect focuses on the results to be obtained and is concerned with whether the claimants will receive a just and effective remedy for their claims if established.

[141] In AIC Limited v. Fischer, Justice Cromwell pointed out that when considering alternatives to a class action, the question is whether the alternative has potential to provide effective redress for the substance of the plaintiffs' claims and to do so in a manner that accords suitable procedural rights. He said that there are five questions to be answered when considering whether alternatives to a class action will achieve access to justice: (1) Are there economic, psychological, social, or procedural barriers to access to justice in the case? (2) What is the potential of the class proceeding to address those barriers? (3) What are the alternatives to class proceedings? (4) To what extent do the alternatives address the relevant barriers? (5) How do the two proceedings compare?

[142] In considering the preferable procedure criterion, one should consider the type or genre of class action, because in terms of access to justice, the needs of plaintiffs suffering personal injuries are different than the needs of plaintiffs suffering a purely economic loss, and the needs of those suffering economic losses are different depending upon whether the loss is a deprivation or a missed expected financial gain.

[143] The type of remedy being sought be it declaratory, compensatory, or restitutionary may also make a difference to whether a class proceeding is the preferable procedure for the resolution of the class members’ claims. Providing injured parties with access to justice cannot be divorced from ensuring that the ultimate remedy provides substantive justice where warranted: AIC Limited v. Fischer, supra, at para. 24; F. Iacobucci, “What Is Access to Justice in the Context of Class Actions?" in J. Kalajdzic, ed., Accessing Justice: Appraising Class Actions Ten Years After Dutton, Hollick & Rumley (2011), 17 at p. 20.

[144] And one should now add to the preferable procedure factors the factor of the relationship between access to justice, which is the preeminent concern of class proceedings, and proportionality in civil procedures. The importance of proportionality to access to justice was recently expressed by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7 at paras. 1-2, 27, where the Court stated:

Ensuring access to justice is the greatest challenge to the rule of law in Canada today. Trials have become increasingly expensive and protracted. Most Canadians cannot afford to sue when they are wronged or defend themselves when they are sued, and cannot afford to go to trial. … Increasingly, there is recognition that a culture shift is required in order to create an environment promoting timely and affordable access to the civil justice system. This shift entails simplifying pre-trial procedures and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case. The balance between procedure and access struck by our justice system must come to reflect modern reality and recognize that new models of adjudication can be fair and just.

There is growing support for alternative adjudication of disputes and a developing consensus that the traditional balance struck by extensive pre-trial processes and the conventional trial no longer reflects the modern reality and needs to be re-adjusted. A proper balance requires simplified and proportionate procedures for adjudication, and impacts the role of counsel and judges. This balance must recognize that a process can be fair and just, without the expense and delay of a trial, and that alternative models of adjudication are no less legitimate than the conventional trial.

[145] The Respondents submit that in the instant case, a class proceeding is not a preferable procedure for four reasons; namely: (1) individual applications under s. 23 and 24 of the Solicitors Act or by way of assessment is the preferable procedure; (2) a class action is unsuitable because the Class Members’ claims are inherently individualistic; (3) a class proceeding would be unmanageable and inefficient; and (4) allowing this case to proceed as a class proceeding would result in a breach of the solicitor-client privilege held by thousands of clients and former clients of the firm.

[146] Having regard to the case law about satisfying the preferable procedure criterion, I agree with the first, second and third reasons for concluding that Ms. Hodge’s Application does not satisfy the preferable procedure criterion. It follows that Ms. Hodge’s Application does not satisfy the preferable procedure criterion.

[147] For immediate purposes, I do need to rely on the fourth reason to conclude that Ms. Hodge’s action does not satisfy the fourth criterion for certification as a class proceeding. However, the point was fully argued, and it raised a novel and important matter that I will discuss in the next section. I foreshadow to say that assuming the other certification criteria could be satisfied, I do not agree with the Respondents that allowing this case to proceed as a class proceeding would result in a breach of the solicitor-client privilege held by thousands of clients and former clients of the Respondents.

(b) Class Proceedings and Solicitor and Client Privilege

[148] Turning to the Respondents’ fourth reason, I regard the solicitor and client privilege of putative Class Members and of certified Class Members as an interesting and important issue to class proceedings generally.

[149] In the specific context of the case at bar, I regard the Respondents’ fourth reason (the alleged inevitable breach of solicitor-client privilege) as: (a) relevant to the management and efficiency of Ms. Hodge’s proposed class proceeding; and (b) another demonstration of the inherent individual nature of the claims of the Class Members, but, in and of itself, the solicitor and client privilege of the Class Members is not a reason for concluding that a class proceeding is not the preferable procedure.

[150] The Respondents submit that Ms. Hodge’s Litigation Plan for prosecuting the class proceeding presupposes or requires a breach of the solicitor-client privilege of absent Class Members and clients and former clients of the Respondents. Further, the Respondents submit that under the opt out regime of the Class Proceedings Act, 1992, Class Members who do not opt out would be presumed to waive privilege and this group would inevitably include absent class members who may have no knowledge of this proceeding.

[151] The Respondents submit that identifying potential class members, determining class membership, adjudicating the proposed common issues, and implementing the litigation plan, would all require information protected by solicitor-client privilege. The Respondents submit that the necessary violation of solicitor-client privilege is a reason not to certify Ms. Hodge’s proceeding as a class proceeding.

[152] The Respondents note that the Amended Litigation Plan proposed by Ms. Hodge contemplates a review of the Respondents’ files throughout the proposed class period to determine whether individuals are potential class members before the opt out period expires, which would necessitate a breach of privilege of clients and former clients who are not Class Members and clients and former clients who are potential Class Members but who do not waive privilege and/or who may choose to opt out.

[153] I agree with much, but not all, of the Respondents’ argument.

[154] The Respondents argue, and I agree, that solicitor-client privilege is a cornerstone principle of the legal system. Solicitor-client privilege concerns communications between a lawyer and his or her client. It is a fundamental right and a substantive rule of law: Canada v. Solosky, 1979 9 (SCC), [1980] 1 S.C.R. 821; Descôteaux v. Mierzwinski, 1982 22 (SCC), [1982] 1 S.C.R. 860; R. v. McClure, 2001 SCC 14, [2001] 1 S.C.R. 445; Lavallee, Rackel & Heintz v. Canada (Attorney General), 2002 SCC 61, [2002] 3 S.C.R. 209; Blank v. Canada (Minister of Justice), 2006 SCC 39 at paras. 24-26. To ensure public confidence in the legal system and the effectiveness of the privilege, solicitor-client privilege approaches an absolute right, rather than one that is decided on a case-by-case basis: Lavallee, Rackel & Heintz v. Canada (Attorney General), supra; R. v. McClure, supra; Pritchard v. Ontario (Human Rights Commission), 2004 SCC 31, [2004] 1 S.C.R. 809 (S.C.C.), affg (2003), 2003 8701 (ON CA), 63 O.R. (3d) 97 (C.A.).

[155] The Respondents argue, and I agree, that the trial of the issues in this Application, including the common issues, assuming there were some, and most certainly the individual issues, if there were individual issues trials, would require the Class Members to disclose privileged and confidential communications between themselves and the Respondents.

[156] In pursuing certification, Ms. Hodge has waived her privilege and disclosed her communications with the Respondents. The privilege was hers to waive and she has waived it in order to advance a claim of breaches of the Solicitors Act. She also advanced a claim for breach of fiduciary duty which, although I would not certify it, demonstrates the confidential nature of the communications and that she has waived her privilege.

[157] Ms. Hodge argues, however, that the Class Members do not have privilege to waive, because there is no privilege associated with their identities, addresses, retainer agreements, and statements of account. There is some traction in this argument because administrative information related to the establishment of a solicitor-client relationship, including a lawyer’s account, a client’s ability to pay, and the source of the lawyer’s fees are presumptively privileged, but the privilege is not categorical and may be rebutted: Re Kaiser, 2002 ONCA 838 at paras. 18-12; Maranda v. Québec (Juge de la Cour du Québec), 2003 SCC 67; Cunningham v. Lilles, 2010 SCC 10.

[158] The presumption may be rebutted by evidence showing: (a) that there is no reasonable possibility that disclosure of the requested information will lead, directly or indirectly, to the revelation of confidential solicitor-client communications: Maranda, supra at para. 34 and Ontario (Assistant Information and Privacy Commissioner), 2005 6045 (ON CA), [2005] O.J. No. 941 (C.A.) at para. 9; or (b) that the requested information is not linked to the merits of the case and its disclosure would not prejudice the client: Cunningham, supra at paras. 30-31.

[159] There is also the fact that some of this information becomes public information once formal court proceedings are commenced.

[160] Ms. Hodge’s argument that privilege is not a problem, nevertheless, fails for two reasons. First, the presumptive privilege for administrative information would still have to be rebutted on an individual basis, and it hardly lies on the Representative Plaintiff to act contrary to the wishes of the individual Class Members to rebut their privilege if they do not want it rebutted.

[161] Second, in this proposed class proceeding a great deal more than administrative information would be involved and that information is categorically privileged. I have not described in full the pathetic history of the relationship between Ms. Hodge and the Respondents, but the cross-examinations are an uncovering of confidential, private, and privileged communications that goes far beyond administrative information.

[162] As in Ms. Hodge’s case, and as would be the situation of any Class Member, an application under sections 23-25 of the Solicitors Act makes an issue of the fairness of the formation of the contingency fee agreement and it makes an issue of the reasonableness of the lawyer’s fee notwithstanding non-compliance with the Act. Those issues would probe deeply into the solicitor and client relationship and go beyond administrative matters. In other words, it will not be possible for Ms. Hodge to rebut the presumption that the communications were privileged.

[163] Ms. Hodge advances an alternative argument to support her submission that the Class Members do not have solicitor and client privilege. She relies on the fraud exception to solicitor-client privilege to once again argue that the clients have no privilege.

[164] It is true that if a client seeks guidance from a lawyer to facilitate committing a crime or a fraud, the communication will not be privileged: Descôteaux v. Mierzwinski, supra, R. v. Cox and Railton (1884), 14 Q.B.D. 153. Ms. Hodge’s argument, however, does not work because no Class Member is hiding behind the privilege to facilitate committing a crime or fraud. There is no exception to the privilege associated with their communications with the Respondents.

[165] Ms. Hodge advances yet another alternative argument. Borrowing from the procedure for an Anton Pillar order, she proposes that an independent supervising solicitor be appointed to investigate the Respondents’ files to find the information necessary to prosecute this proceeding against the Respondents. This argument also fails. A supervising solicitor cannot be empowered to waive the Class Members’ privilege and Anton Pillar orders are designed to respect not circumvent solicitor and client privilege. This argument is a non-starter.

[166] Thus, I conclude that to litigate this proposed class proceeding, the Class Members would each have to waive their solicitor and client privilege.

[167] The Respondents categorically submit that if a Class Member does not opt out of a class proceeding, then he or she will have waived solicitor and client privilege. In making this submission, the Respondents move their argument into uncharted territory.

[168] What is known from the case law is that before certification, the relationship between putative Class Members and putative Class Counsel, the plaintiff’s lawyer of record, is sui generis and after certification, there is a solicitor and client relationship in a litigation controlled by the Representative Plaintiff who is not supposed to have a conflict of interest with Class Members.

[169] In my opinion choosing not to opt out cannot be taken to an express waiver of solicitor and client privilege, but there may be the rare case where the choice of not opting out may amount to an implied waiver.

[170] Privilege may be waived intentionally or inferentially or as a matter of fairness. In S. & K. Processors Ltd. v. Campbell Avenue Herring Producers Ltd., 1983 407 (BC SC), [1983] B.C.J. No. 1499, 35 C.P.C. 146 at pp. 148-49 (B.C.S.C.), which was followed in Ontario in Browne (Litigation Guardian of) v. Lavery (2002), 2002 49411 (ON SC), 58 O.R. (3d) 49 (S.C.J.), Justice McLachlin, as she then was, stated:

Waiver of privilege is ordinarily established where it is shown that the possessor of the privilege (1) knows of the existence of the privilege, and (2) voluntarily evinces an intention to waive the privilege. However, waiver may also occur in the absence of the intention to waive, where fairness and consistency so require. Thus waiver of privilege as to part of a communication will be held to be a waiver as to the entire communication.

[171] An implied waiver is inferred from actions inconsistent with the intent to maintain the privilege: Glegg v. Smith & Nephew Inc., 2005 SCC 31, [2005] 1 S.C.R. 724 at para. 19; W. Matheson & J. Necpal, “Implied Waiver of Solicitor-Client Privilege in Civil Litigation” [2010] Annual Review of Civil Litigation 494.

[172] Where a client makes allegations of misconduct or professional negligence against his or her lawyer, the client by implication waives lawyer-and-client privilege to the extent necessary for the lawyer to defend himself or herself: R. v. Dunbar, 1982 3324 (ON CA), [1982] O.J. No. 581 (C.A.); Harich v. Stamp (1979), 1979 1904 (ON CA), 27 O.R. (2d) 395 (C.A.).

[173] In Bentley v. Stone (1998), 1998 14710 (ON SC), 42 O.R. (3d) 149 (Gen. Div.), the defendant resisted a motion to enforce a settlement by denying that her lawyer had instructions to settle, and the court ruled that by this denial, she had, by implication, waived the lawyer-and-client privilege associated with her communications with her lawyer. See also Newman v. Nemes, [1978] O.J. No. 3101 (H.C.J.).

[174] I think that the case at bar is one such instance where there would be an implied waiver if a Class Member did not opt out of the class proceeding, and, thus, I agree with the Respondents’ argument that certifying the case presents problems because it would be unfair to Class Members to certify the action at the cost of their solicitor and client privilege.

[175] The Respondents argue, and I agree, that neither Ms. Hodge nor Class Counsel can waive the privilege of the Class Members. The privilege belongs to the client, and it is for the client to expressly, or by implication, to waive his or her privilege. This last conclusion would appear to put a stake through the heart of the proposed class action, because it suggests another reason why the case would be unmanageable and why the preferable procedure criterion would not be satisfied.

[176] However, although it may come as a surprise having regard to the above discussion, I do not regard the matter of the solicitor-client privilege as an insurmountable obstacle to the certification of Ms. Hodge’s proceeding, if it was otherwise certifiable.

[177] The solution could have been to order that the notice of certification be personally served on Class Members along with a special notice. Personal service of a notice of certification is usually not necessary and some lesser form of service or notice is typically ordered. However, personal service and proof of service would be necessary for a case like Ms. Hodge’s Application.

[178] The personally served notice of certification could be drafted to make it clear that if the Class Member does not opt out of the class proceeding then four things will happen: first, the person served will be a Class Member; second, as a Class Member, he or she will have surrendered litigation autonomy and will be represented by Ms. Hodge, who will instruct Class Counsel; third, the Class Member will be deemed by implication to have waived their solicitor and client privilege; and four, what that waiver means will be explained. The special notice could advise the person served that he or she should obtain independent legal advice about the notice of certification because it will affect his or her legal rights.

[179] Because Ms. Hodge’s Application does not otherwise satisfy the certification criteria means that unless there is an appeal, the above discussion is of academic interest only. But I should add that had Ms. Hodge’s Application been certifiable, I would have made an order requiring personal service of the notice of certification to be accompanied with a special notice.

5. Representative Plaintiff Criterion

[180] The fifth and final criterion for certification as a class action is that there is a representative plaintiff who would adequately represent the interests of the class without conflict of interest and who has produced a workable litigation plan.

[181] The representative plaintiff must be a member of the class asserting claims against the defendant, which is to say that the representative plaintiff must have a claim that is a genuine representation of the claims of the members of the class to be represented or that the representative plaintiff must be capable of asserting a claim on behalf of all of the Class Members as against the defendant: Drady v. Canada (Minister of Health), 2007 27970 (ON SC), [2007] O.J. No. 2812 (S.C.J.) at paras. 36-45; Attis v. Canada (Minister of Health), [2003] O.J. No. 344 (S.C.J.) at para. 40, aff'd [2003] O.J. No. 4708 (C.A.).

[182] Provided that the representative plaintiff has his or her own cause of action, the representative plaintiff can assert a cause of action against a defendant on behalf of other Class Members that he or she does not assert personally, provided that the causes of action all share a common issue of law or of fact: Boulanger v. Johnson & Johnson Corp., [2002] O.J. No. 1075 (S.C.J.) at para. 22, leave to appeal granted, [2002] O.J. No. 2135 (S.C.J.), varied (2003), 2003 45096 (ON SCDC), 64 O.R. (3d) 208 (Div. Ct.) at paras. 41, 48, varied 2003 52154 (ON CA), [2003] O.J. No. 2218 (C.A.); Matoni v. C.B.S. Interactive Multimedia Inc., 2008 1539 (ON SC), [2008] O.J. No. 197 (S.C.J.), at paras. 71-77; Voutour v. Pfizer Canada Inc., [2008] O.J. No. 3070 (S.C.J.); LeFrancois v. Guidant Corp., [2008] O.J. No. 1397 (S.C.J.) at para. 55.

[183] Whether the representative plaintiff can provide adequate representation depends on such factors as: his or her motivation to prosecute the claim; his or her ability to bear the costs of the litigation; and the competence of his or her counsel to prosecute the claim: Western Canadian Shopping Centres Inc. v. Dutton, supra at para. 41.

[184] If the common issues criterion and the preferable procedure criterion are not satisfied, it is not possible for the proposed representative plaintiff to satisfy the fifth criterion for certification and thus Ms. Hodge’s application fails this criterion as well.

[185] Had the other certification criterion been satisfied, Ms. Hodge would have been a suitable representative plaintiff. I do not agree with the Respondents’ arguments challenging Ms. Hodge’s qualifications to represent the class composed of the Respondents’ clients.

[186] The Respondents arguments concerned the fact that Ms. Hodge had obtained a second opinion, from her current counsel, at the time when she settled her personal injury claim and did not pursue a motion to have that settlement set aside.

[187] I cannot fathom why the circumstances of her individual retainer with the Respondents would disqualify her as a representative plaintiff, although those circumstances demonstrate one more time that this proposed class action wants for being a representative action but only involves individual complaints and individual causes of action.

F. CONCLUSION

[188] For the above reasons, I dismiss the certification motion.

[189] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with the Respondents’ submissions within 20 days of the release of these Reasons for Decision followed by Ms. Hodge’s submissions within a further 20 days.

Perell, J.

Released: July 29, 2014

Schedule “A”

Solicitors Act

Agreements Between Solicitors and Clients

Definitions

15. In this section and in sections 16 to 33,

“client” includes a person who, as a principal or on behalf of another person, retains or employs or is about to retain or employ a solicitor, and a person who is or may be liable to pay the bill of a solicitor for any services;

“contingency fee agreement” means an agreement referred to in section 28.1;

“services” includes fees, costs, charges and disbursements.

Agreements between solicitors and clients as to compensation

16. (1) Subject to sections 17 to 33, a solicitor may make an agreement in writing with his or her client respecting the amount and manner of payment for the whole or a part of any past or future services in respect of business done or to be done by the solicitor, either by a gross sum or by commission or percentage, or by salary or otherwise, and either at the same rate or at a greater or less rate than that at which he or she would otherwise be entitled to be remunerated.

Definition

(2) For purposes of this section and sections 20 to 32,

“agreement” includes a contingency fee agreement.

Approval of agreement by assessment officer

[s. 17 not applicable to contingency fee agreements per s. 28.1 (10)]

17. Where the agreement is made in respect of business done or to be done in any court, except the Small Claims Court, the amount payable under the agreement shall not be received by the solicitor until the agreement has been examined and allowed by an assessment officer.

Opinion of court on agreement

[s. 18 not applicable to contingency fee agreements per s. 28.1 (10)]

18. Where it appears to the assessment officer that the agreement is not fair and reasonable, he or she may require the opinion of a court to be taken thereon.

Rejection of agreement by court

[s. 19 not applicable to contingency fee agreements per s. 28.1 (10)]

19. The court may either reduce the amount payable under the agreement or order it to be cancelled and the costs, fees, charges and disbursements in respect of the business done to be assessed in the same manner as if the agreement had not been made.

Agreement not to affect costs as between party and party

20. (1) Such an agreement does not affect the amount, or any right or remedy for the recovery, of any costs recoverable from the client by any other person, or payable to the client by any other person, and any such other person may require any costs payable or recoverable by the person to or from the client to be assessed in the ordinary manner, unless such person has otherwise agreed.

Idem

(2) However, the client who has entered into the agreement is not entitled to recover from any other person under any order for the payment of any costs that are the subject of the agreement more than the amount payable by the client to the client’s own solicitor under the agreement.

Awards of costs in contingency fee agreements

20.1 (1) In calculating the amount of costs for the purposes of making an award of costs, a court shall not reduce the amount of costs only because the client’s solicitor is being compensated in accordance with a contingency fee agreement.

Same

(2) Despite subsection 20 (2), even if an order for the payment of costs is more than the amount payable by the client to the client’s own solicitor under a contingency fee agreement, a client may recover the full amount under an order for the payment of costs if the client is to use the payment of costs to pay his, her or its solicitor.

Same

(3) If the client recovers the full amount under an order for the payment of costs under subsection (2), the client is only required to pay costs to his, her or its solicitor and not the amount payable under the contingency fee agreement, unless the contingency fee agreement is one that has been approved by a court under subsection 28.1 (8) and provides otherwise.

Claims for additional remuneration excluded

21. Such an agreement excludes any further claim of the solicitor beyond the terms of the agreement in respect of services in relation to the conduct and completion of the business in respect of which it is made, except such as are expressly excepted by the agreement.

Agreements relieving solicitor from liability for negligence void

22. (1) A provision in any such agreement that the solicitor is not to be liable for negligence or that he or she is to be relieved from any responsibility to which he or she would otherwise be subject as such solicitor is wholly void.

Exception, indemnification by solicitor’s employer

(2) Subsection (1) does not prohibit a solicitor who is employed in a master-servant relationship from being indemnified by the employer for liabilities incurred by professional negligence in the course of the employment.

Determination of disputes under the agreement

23. No action shall be brought upon any such agreement, but every question respecting the validity or effect of it may be examined and determined, and it may be enforced or set aside without action on the application of any person who is a party to the agreement or who is or is alleged to be liable to pay or who is or claims to be entitled to be paid the costs, fees, charges or disbursements, in respect of which the agreement is made, by the court, not being the Small Claims Court, in which the business or any part of it was done or a judge thereof, or, if the business was not done in any court, by the Superior Court of Justice.

Enforcement of agreement

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 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.

Reopening of agreement

25. Where the amount agreed under any such agreement has been paid by or on behalf of the client or by any person chargeable with or entitled to pay it, the Superior Court of Justice may, upon the application of the person who has paid it if it appears to the court that the special circumstances of the case require the agreement to be reopened, reopen it and order the costs, fees, charges and disbursements to be assessed, and may also order the whole or any part of the amount received by the solicitor to be repaid by him or her on such terms and conditions as to the court seems just.

Agreements made by client in fiduciary capacity

26. Where any such agreement is made by the client in the capacity of guardian or of trustee under a deed or will, or in the capacity of guardian of property that will be chargeable with the amount or any part of the amount payable under the agreement, the agreement shall, before payment, be laid before an assessment officer who shall examine it and may disallow any part of it or may require the direction of the court to be made thereon.

Client paying without approval to be liable to estate

27. If the client pays the whole or any part of such amount without the previous allowance of an assessment officer or the direction of the court, the client is liable to account to the person whose estate or property is charged with the amount paid or any part of it for the amount so charged, and the solicitor who accepts such payment may be ordered by the court to refund the amount received by him or her.

Purchase of interest prohibited

28. A solicitor shall not enter 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 is to bring or maintain on the client’s behalf.

Contingency fee agreements

28.1 (1) A solicitor may enter into a contingency fee agreement with a client in accordance with this section.

Remuneration dependent on success

(2) A solicitor may enter into a contingency fee agreement that provides that the remuneration 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 services are provided.

No contingency fees in certain matters

(3) A solicitor shall not enter into a contingency fee agreement if the solicitor is retained in respect of,

(a) a proceeding under the Criminal Code (Canada) or any other criminal or quasi-criminal proceeding; or

(b) a family law matter.

Written agreement

(4) A contingency fee agreement shall be in writing.

Maximum amount of contingency fee

(5) If a contingency fee agreement involves a percentage of the amount or of the value of the property recovered in an action or proceeding, the amount to be paid to the solicitor shall not be more than the maximum percentage, if any, prescribed by regulation of the amount or of the value of the property recovered in the action or proceeding, however the amount or property is recovered.

Greater maximum amount where approved

(6) Despite subsection (5), a solicitor may enter into a contingency fee agreement where the amount paid to the solicitor is more than the maximum percentage prescribed by regulation of the amount or of the value of the property recovered in the action or proceeding, if, upon joint application of the solicitor and his or her client whose application is to be brought within 90 days after the agreement is executed, the agreement is approved by the Superior Court of Justice.

Factors to be considered in application

(7) In determining whether to grant an application under subsection (6), the court shall consider the nature and complexity of the action or proceeding and the expense or risk involved in it and may consider such other factors as the court considers relevant.

Agreement not to include costs except with leave

(8) A contingency fee agreement shall not include in the fee payable to the solicitor, in addition to the fee payable under the agreement, any amount arising as a result of an award of costs or costs obtained as part of a settlement, unless,

(a) the solicitor and client jointly apply to a judge of the Superior Court of Justice for approval to include the costs or a proportion of the costs in the contingency fee agreement because of exceptional circumstances; and

(b) the judge is satisfied that exceptional circumstances apply and approves the inclusion of the costs or a proportion of them.

Enforceability of greater maximum amount of contingency fee

(9) A contingency fee agreement that is subject to approval under subsection (6) or (8) is not enforceable unless it is so approved.

Non-application

(10) Sections 17, 18 and 19 do not apply to contingency fee agreements.

Assessment of contingency fee

(11) For purposes of assessment, if a contingency fee agreement,

(a) is not one to which subsection (6) or (8) applies, the client may apply to the Superior Court of Justice for an assessment of the solicitor’s bill within 30 days after its delivery or within one year after its payment; or

(b) is one to which subsection (6) or (8) applies, the client or the solicitor may apply to the Superior Court of Justice for an assessment within the time prescribed by regulation made under this section.

Regulations

(12) The Lieutenant Governor in Council may make regulations governing contingency fee agreements, including regulations, ….

Schedule “B”

Solicitors Act

ONTARIO REGULATION 195/04

CONTINGENCY FEE AGREEMENTS

1. (1) For the purposes of section 28.1 of the Act, in addition to being in writing, a contingency fee agreement,

(a) shall be entitled “Contingency Fee Retainer Agreement”;

(b) shall be dated; and

(c) shall be signed by the client and the solicitor with each of their signatures being verified by a witness.

(2) The solicitor shall provide an executed copy of the contingency fee agreement to the client and shall retain a copy of the agreement.

Contents of contingency fee agreements, general

2. A solicitor who is a party to a contingency fee agreement shall ensure that the agreement includes the following:

3. The name, address and telephone number of the solicitor and of the client.

4. A statement of the basic type and nature of the matter in respect of which the solicitor is providing services to the client.

5. A statement that indicates,

i. that the client and the solicitor have discussed options for retaining the solicitor other than by way of a contingency fee agreement, including retaining the solicitor by way of an hourly-rate retainer,

ii. that the client has been advised that hourly rates may vary among solicitors and that the client can speak with other solicitors to compare rates,

iii. that the client has chosen to retain the solicitor by way of a contingency fee agreement, and

iv. that the client understands that all usual protections and controls on retainers between a solicitor and client, as defined by the Law Society of Upper Canada and the common law, apply to the contingency fee agreement.

4. A statement that explains the contingency upon which the fee is to be paid to the solicitor.

5. A statement that sets out the method by which the fee is to be determined and, if the method of determination is as a percentage of the amount recovered, 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.

6. A simple example that shows how the contingency fee is calculated.

7. A statement that outlines how the contingency fee is calculated, if recovery is by way of a structured settlement.

8. A statement that informs the client of their right to ask the Superior Court of Justice to review and approve of the solicitor’s bill and that includes the applicable timelines for asking for the review.

9. A statement that outlines when and how the client or the solicitor may terminate the contingency fee agreement, the consequences of the termination for each of them and the manner in which the solicitor’s fee is to be determined in the event that the agreement is terminated.

10. A statement that informs the client that the client retains the right to make all critical decisions regarding the conduct of the matter.

Contents of contingency fee agreements, litigious matters

3. In addition to the requirements set out in section 2, a solicitor who is a party to a contingency fee agreement made in respect of a litigious matter shall ensure that the agreement includes the following:

4. If the client is a plaintiff, a statement that the solicitor shall not recover more in fees than the client recovers as damages or receives by way of settlement.

5. A statement in respect of disbursements and taxes, including the GST payable on the solicitor’s fees, that indicates,

i. whether the client is responsible for the payment of disbursements or taxes and, if the client is responsible for the payment of disbursements, a general description of disbursements likely to be incurred, other than relatively minor disbursements, and

ii. that if the client is responsible for the payment of disbursements or taxes and the solicitor pays the disbursements or taxes during the course of the matter, the solicitor is entitled to be reimbursed for those payments, subject to section 47 of the Legal Aid Services Act, 1998 (legal aid charge against recovery), as a first charge on any funds received as a result of a judgment or settlement of the matter.

3. A statement that explains costs and the awarding of costs and that indicates,

i. that, unless otherwise ordered by a judge, a client is entitled to receive any costs contribution or award, on a partial indemnity scale or substantial indemnity scale, if the client is the party entitled to costs, and

ii. that a client is responsible for paying any costs contribution or award, on a partial indemnity scale or substantial indemnity scale, if the client is the party liable to pay costs.

4. If the client is a plaintiff, a statement that indicates that the client agrees and directs that all funds claimed by the solicitor for legal fees, cost, taxes and disbursements shall be paid to the solicitor in trust from any judgment or settlement money.

5. If the client is a party under disability, for the purposes of the Rules of Civil Procedure, represented by a litigation guardian,

i. a statement that the contingency fee agreement either must be reviewed by a judge before the agreement is finalized or must be reviewed as part of the motion or application for approval of a settlement or a consent judgment under rule 7.08 of the Rules of Civil Procedure,

ii. a statement that the amount of the 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 of the Rules of Civil Procedure, and

iii. a statement that any money payable to a person under disability under an order or settlement shall be paid into court unless a judge orders otherwise under rule 7.09 of the Rules of Civil Procedure.

Matters not to be included in contingency fee agreements

4. (1) A solicitor shall not include in a contingency fee agreement a provision that,

(a) requires the solicitor’s consent before a claim may be abandoned, discontinued or settled at the instructions of the client;

(b) prevents the client from terminating the contingency fee agreement with the solicitor or changing solicitors; or

(c) permits the solicitor to split their fee with any other person, except as provided by the Rules of Professional Conduct.

(2) In this section,

“Rules of Professional Conduct” means the Rules of Professional Conduct of the Law Society of Upper Canada.

Contingency fee agreement, person under disability

5. (1) A solicitor for a person under disability represented by a litigation guardian with whom the solicitor is entering into a contingency fee agreement shall,

(a) apply to a judge for approval of the agreement before the agreement is finalized; or

(b) include the agreement as part of the motion or application for approval of a settlement or a consent judgment under rule 7.08 of the Rules of Civil Procedure.

(2) In this section,

“person under disability” means a person under disability for the purposes of the Rules of Civil Procedure.

Contingency fee excludes costs and disbursements

6. A contingency fee agreement that provides that the fee is determined as a percentage of the amount recovered shall exclude any amount awarded or agreed to that is separately specified as being in respect of costs and disbursements.

Contingency fee not to exceed damages

7. Despite any terms in a contingency fee agreement, a solicitor for a plaintiff shall not recover more in fees under the agreement than the plaintiff recovers as damages or receives by way of settlement.

Settlement or judgment money to be held in trust

8. A client who is a party to a contingency fee agreement shall direct that the amount of funds claimed by the solicitor for legal fees, cost, taxes and disbursements be paid to the solicitor in trust from any judgment or settlement money.

Disbursements and taxes

9. (1) If the client is responsible for the payment of disbursements or taxes under a contingency fee agreement, a solicitor who has paid disbursements or taxes during the course of the matter in respect of which services were provided shall be reimbursed for the disbursements or taxes on any funds received as a result of a judgment or settlement of the matter.

(2) Except as provided under section 47 of the Legal Aid Services Act, 1998 (legal aid charge against recovery), the amount to be reimbursed to the solicitor under subsection (1) is a first charge on the funds received as a result of the judgment or settlement.

Timing of assessment of contingency fee agreement

10. For the purposes of clause 28.1 (11) (b) of the Act, the client or the solicitor may apply to the Superior Court of Justice for an assessment of the solicitor’s bill rendered in respect of a contingency fee agreement to which subsection 28.1 (6) or (8) of the Act applies within six months after its delivery.

Schedule “C”

Proposed Common Issues

(a) Whether the Respondents’ CFAs are in violation of the Act by including as the Respondents’ fees amounts arising from costs in an award or settlement;

(b) Whether the CFA is not made in accordance with s. 28.1(1) of the Act;

(c) Whether the Respondents have taken amounts arising from costs in an award or settlement from the Class Members contrary to the Act;

(d) Whether the Respondents have failed to obtain approval under s. 28.1(8) of the Act to obtain as part of their fees any part of the costs arising from an award or settlement;

(e) Whether the provision in the CFA for the Respondents take in addition to their fees, all or a portion of the costs arising from an award or settlement is severable;

(f) Whether the Respondents should be ordered to repay to the Class any amounts taken for costs in addition to their percentage fee, together with interest pursuant to s. 33(2) of the Act;

(g) Whether the Respondents have failed to include mandatory notices and language, in their CFA as required by the Regulation and did not disclose to the Class Members in the CFA, including:

(i) Failing to advise the Class Members that s. 28.1(1) requires the CFA to be made in accordance with the Act, and s. 28.1(8) requires the Superior Court of Justice to approve any costs taken in addition to fees on a joint application of the lawyer and the client based upon extraordinary circumstances;

(ii) Failing to include a statement that the client and lawyer have discussed options for retaining the lawyer other than by way of contingency fee agreement, including retaining the lawyer by way of hourly rate retainer, contrary to s. 2(3)(i) of the Regulation;

(iii) Failing to include a statement that the client has been advised that hourly rates may vary among solicitors and that the client can speak to other solicitors to compare rates, contrary to s. 2(3)(ii) of the Regulation;

(iv) Failing to include a statement that the client has chosen to retain the solicitor by way of a contingency fee agreement, contrary to s. 2(3)(iii) of the Regulation;

(v) Failing to include a statement that the client understands that all usual protections and controls on retainers between a solicitor and client, as defined by the Law Society of Upper Canada and the common law, apply to the CFA, contrary to s. 2(3)(iv) of the Regulation;

(vi) Failing to contain in the CFA a statement that sets out the method by which the fee is to be determined, contrary to s. 2(5) of the Regulation;

(vii) Failing to contain in the CFA a statement 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, contrary to s. 2(5) of the Regulation;

(viii) Failing to contain in the CFA a statement that informs the client of their right to ask the Superior Court of Justice to review and approve of the solicitor’s bill and which includes the applicable timelines for asking for review, contrary to s. 2(8) of the Regulation;

(ix) Failing to contain in the CFA a statement that outlines when and how the client or the solicitor may terminate the CFA, and the consequences of the termination for each of them, and the manner in which the solicitor’s fee is to be determined in the event the agreement is terminated, rather it contains a statement that if the CFA is “cancelled for any reason”, the client is immediately responsible for all disbursements and hourly-rate fees, which hourly rates are not set out in the CFA, contrary to s. 2(9) of the Regulation;

(x) Failing to contain a statement that the client retains the right to make all critical decisions regarding the conduct of the matter, contrary to s. 2(10) of the Regulation;

(xi) Containing a provision that the client grants N&A a power of attorney to settle the client’s claim or case, sign releases or any other documents if the Respondents after a reasonably diligent search is unable to locate the client, contrary to s. 2(10) of the Regulation;

(xii) Failing to include a general description of the disbursements likely to be incurred contrary to s. 3(2) of the Regulation;

(xiii) Failing to include a statement that explains costs and the awarding of costs and that the client is entitled to receive any costs contribution or award on a partial or substantial indemnity scale if the client is entitled to costs, contrary to s. 3(3)(i) of the Regulation;

(xiv) Including provisions in the CFA that the client will be immediately responsible for all disbursements expended and hourly-rated fees to the date of termination, contrary to the requirement to not include any provision that prevents the client from terminating the CFA or changing solicitors, contrary to s. 4(1)(b) of the Regulation;

(xv) Failing to include a provision that if the fee is determined as a percentage of the amount recovered, it shall exclude any amount awarded or agreed to that is separately specified as being in respect of costs and disbursements mandatory by s. 6 of the Regulation; and

(xvi) Failing to include that the solicitor is not to recover more in fees under the CFA than the client recovers as damages as required by s. 7 of the Regulation.

(h) Whether the failure to disclose such information in the CFA amounts to fraudulent concealment tolling the running of any limitation period;

(i) Whether the failure to disclose such information in the CFA postpones discoverability by the Class Members of their rights to receive any amount relating to costs arising by way of award or settlement;

(j) Whether the failure to disclose such information in the CFA and that the CFA is contrary to the Act and the Regulation constitutes negligent or fraudulent misrepresentation;

(k) Whether the Respondents are in breach of their fiduciary duties to the Class Members;

(l) Whether the amounts taken by the Respondents from awards or settlements of the Class Members constitute unjust enrichment for which there is no juristic reason for the Respondents to retain, and which should be returned to the Class.

(m) Whether the Respondents charged the Class Members for interest contrary to s. 33 of the Act, including for the “Interest Recovery” charges shown in their accounts for disbursements to Class Members;

(n) Whether failing to disclose information required by the Act and Regulation, and taking as part of their fees amounts arising from awards or settlements for costs, and charging for interest contrary to the Act, the Respondents were in breach of their fiduciary duties and obligations to the Class Members;

(o) Whether the Respondents have, without disclosing to the Class Members or obtaining agreement, charged items under the guise of disbursements which are actually office overhead not properly chargeable to the Class Members such as QuickLaw research, photocopying, laser copies, file closing fee to generate further revenue to the Respondents;

(p) Whether the Respondents have charged at an excessively high rate for disbursements to the Class Members such as QuickLaw research, photocopying, laser copies in excess of the Respondents’ expenditures for these items, to generate further revenue to the Respondents;

(q) Whether the payment of referral fees to other persons by the Respondents without the Class Members’ written agreement is contrary to the Respondents’ obligations to the Class Members, and what remedies for the Class Members are appropriate to impose upon the Respondents;

(r) Whether the conduct of the Respondents is so offensive, high-handed, and flouting of their duties as lawyers and their obligations to the Class Members and to their professional responsibilities under the Act, Regulation and Rules of Professional Conduct, that a significant award of punitive damages is warranted.

(s) That to make the Respondents’ legal fees to the Class Members capable of being determined as being or not being fair or reasonable, or amenable to be determined as to whether or not they are fair and reasonable, as a result of the Respondents having taken or received illegally the property of the class members, namely the costs which may have arisen or been paid as a result of, or ancillary to, any settlement or judgment, in addition to the Respondents’ contingency percentage legal fee in their CFAs, the Respondents’ are to first forthwith return to the Class Members any and all amounts taken or received on account of costs or referable to costs arising in connection with, or as a result of any settlement or judgment, along with an amount calculated for interest;

(t) Whether the Respondents entering into an “all-in” settlement without having a reasonable apportionment fixed between damages and costs is a breach of their fiduciary duties to the Class Members;

(u) Whether the Respondents have charged clients for disbursements already paid by the Defendants or the insurance companies; and

(v) Whether the Respondents charged compound interest on disbursements billed to their clients contrary to the Act.

COURT FILE NO.: 12-CV-452614CP

DATE: 20140729

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CASSIE HODGE

Applicant

– and –

GARY NEINSTEIN and NEINSTEIN & ASSOCIATES LLP

Respondents

REASONS FOR DECISION

PERELL J.

Released: July 29, 2014