Jackson v. Stephen Durbin and Associates, 2017 ONSC 5396

Court File and Parties

Citation: Jackson v. Stephen Durbin and Associates, 2017 ONSC 5396 Court File No.: 17-62221 Date: 2017-09-14 Ontario Superior Court of Justice

Between: Davis Jackson, Applicant

• and - Stephen Durbin and Associates, Respondent

Counsel: Michael Cochrane, for the Applicant Shoshana Bentley-Jacobs, for the Respondent

Heard: in Hamilton, September 7th, 2017

Reasons for Judgment

1This application is made for a determination of whether the inclusion of a results achieved fee in a family law retainer agreement entered into between the applicant and the respondent contravenes s. 28.1(3) of the Solicitors Act as a prohibited contingency fee agreement.

2The applicant, Davis Jackson (“Jackson”), is an officer with the Toronto Police Service. At the time Jackson retained Stephen Durbin and Associates, he was earning $96,000.00 per year.

3The respondent, Stephen Durbin and Associates (“the firm”), is a law firm with offices in Oakville, Toronto and York Region, primarily practicing family law.

4In or about July 2013, Jackson retained the firm to represent him in family litigation against his estranged spouse.

5On July 29th, 2013, Jackson signed a retainer agreement with the firm.

6The retainer agreement set out the hourly rate for the various lawyers in the firm, as well as support staff, “with a daily counsel fee for court or tribunal appearances at ten-fold (solicitor’s) hourly rate and an increase in fees in the event of a positive result achieved (“results achieved fee”)”.

7At the time Jackson retained the firm, the primary issue in contention was the custody of the parties’ six year-old daughter. At all times Jackson sought sole custody of his daughter.

8By September 2015, Jackson had depleted his retainer funds and began accruing arrears with the firm. The firm agreed to continue to act for him on the understanding that the firm’s fees would be paid from any settlement funds or judgment obtained at the conclusion of the litigation.

9Following a 36-day trial, Jackson was awarded sole custody of his daughter, $192,000.00 in costs, and 50 percent of the proceeds of sale of the matrimonial home. On July 22nd, 2015, Jackson had executed an authorization directing that any funds payable to him would be paid to the firm in trust, and that such funds would be paid towards any outstanding accounts. He ultimately recovered $217,000.00 after fees following the trial.

10In January 2016, Jackson signed a fresh and further direction authorizing and directing that any funds payable to him be paid to the firm in trust and that such funds be paid toward any outstanding accounts.

11As of May 27th, 2016, Jackson had an outstanding account of $132,597.74.

12In or around June 2016, the firm received $423,510.47 in trust representing Jackson’s share of the proceeds of sale of the matrimonial home, plus the costs award.

13The firm deducted $172,597.74 from trust to satisfy Jackson’s outstanding account with the firm.

14The firm then issued a separate statement of account charging Jackson a results achieved fee of $72,433.24 (inclusive of HST).

15On July 22nd, 2016, Jackson requisitioned and obtained an Order from the Registrar of the Court at Hamilton for the assessment of fees and charges delivered to him by the firm pursuant to s. 3 of the Solicitors Act. A hearing with respect to this matter took place on April 13th, 2017, at the Hamilton Family Court House before Assessment Officer Brian Horrocks.

16In his decision and reasons, Mr. Horrocks determined that he lacked jurisdiction in this matter in light of the question of law that needed to be addressed, namely whether any part of the account rendered related to contingency fees, and could not proceed with the assessment.

17Mr. Horrocks confirmed that the matter could proceed by way of an application to the Superior Court of Justice.

18Jackson does not contest the legal fees charged by the firm other than the results achieved fee.

19On this application, Jackson takes the position that the results achieved fee should be refunded because it constitutes a prohibited contingency fee agreement under the Solicitors Act.

20The respondent takes the position that the inclusion of a premium in a family law retainer agreement does not violate the Solicitors Act. Where the agreement itself is not conditional upon success, the inclusion of a premium or bonus does not alter the nature of the retainer.

Issues and the Law

21The sole issue on this application is whether the inclusion of a results achieved fee in a firm’s family law retainer agreement contravenes s. 28.1(3) of the Solicitors Act as a prohibited contingency fee agreement.

22S. 28.1 of the Solicitors Act, R.S.O. 1990, c. S.15 regulates contingency fee agreements in Ontario. The section reads as follows:

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

(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.

(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.

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

23The solicitor for the respondent argues that the inclusion of a premium in a family law retainer does not in and of itself render the agreement a contingency fee agreement for the purposes of s. 28.1(3) of the Solicitors Act. One element, to all contingency fee agreements in Ontario is that they require the client to pay the lawyer’s fee only in the event of success in the litigation.

24They argue that contingency fee agreements and retainers that include a bonus are entirely distinct. An agreement that contains a premium for success typically provides that the client pay either an hourly rate or a fixed fee for services performed but that if a certain result is achieved the solicitor becomes entitled to bonus his/her fee, either at a fixed amount or at a specified percentage.

25Respondent’s counsel relies upon the decisions in Teplitsky, Colson v. McCrea, [2008], O.J. No. 6014 (Sup.Ct.), Meagan Warnica v. Casey Van Moorlehem, 2012 ONSC 4241, Pakka v. Nygard, [2004] O.J. No. 2121 (Sup.Ct.) and Darichuk v. Currie, [1999] A. J. No. 2(Q.B.), in attempting to distinguish between contingency agreements and “premium” payments. In my view, these cases may all be distinguished on their facts. But for Pakka v. Nygard, they are all civil litigation damage cases and effectively hold that lawyers may charge a percentage of recovery as part of their fees in damage cases.

26In Darichuk v. Currie, in addition to hourly rate fees, the court describes “bonus” agreements as cases where the agreement provides that the client will pay either an hourly rate or a fixed fee for services performed but that if a certain result is achieved the solicitor becomes entitled to bonus his/her fee either at a fixed amount or a specified percentage.

27Pakka v. Nygard was the only family law case relied upon by the respondent. In that case the relevant portion of the fee agreement read as follows:

I understand and agree that in addition to the fees charged in interim accounts, there will be a final account at which the complexity of the issues and the result obtained may also be taken into consideration in filing the amount of the final fee.

28The court correctly stated in that case that there are no reported family cases, or, more importantly, child support cases in which a premium for legal fees has been awarded.

29When the court compared the fee arrangement in Pakka with other non-family law cases which were truly contingency fee cases, the court concluded that although Nygard’s lawyers “were never at the same financial risk as the solicitors in those other cases”. The judge then went on to say that Mr. Nygard conceded he would have to pay substantial child support. That being the case and considering the Tauber principle, the solicitors could be confident Mr. Nygard would have to pay some of their fees. They had some risk but it was not of the same magnitude as in the “premium cases”, thereby apparently making no distinction between premium cases and contingency cases. In any event, what was referred to as a “premium” in Pakka v. Nygard was disallowed by the court. The real issue in that case was whether the retainer agreement was reasonable.

30The case of Hyde v. Szabo is an example of a “premium for success” being charged as solicitor’s fees with respect to a matrimonial action in addition to an hourly rate for services rendered. Ms. Szabo signed a retainer letter with counsel. The letter set out what counsel understood to be the factual situation, outlined counsel’s opinion as to the expectation of success and recited an agreement to pay counsel $300 per hour, plus GST, plus disbursements together with “a premium for success” so that his fee would be not less than 30 percent of the recovery of lump sum support, property claim and costs but not periodic support. On assessment the assessment officer concluded that the premium bill claimed by counsel was contrary to the Solictors Act as being a prohibited contingency fee arrangement.

31On a confirmation application before Quigley J., counsel ultimately abandoned his claim to collect on the “premium for success” that had been previously contemplated. Regardless, Quigley J. still addressed the issue:

Turning now to Mr. Hyde’s contentions, as noted, he has abandoned any claim to receive the substantial premium that had been contemplated in the original retainer letter. Had he not done so, I would not have hesitated to address that issue and in particular, against all of the facts present, to have been supportive of the conclusion of the assessor that the “value” portion of Mr. Hyde’s account is either prohibited by the Solicitors Act or that there was no justification for the application of any premium to Mr. Hyde’s account in the circumstances.

32Clearly, Quigley J. concluded that the “premium for success” contemplated in counsel’s retainer agreement was a prohibited contingency fee arrangement contrary to the Solicitors Act.

See Hyde v. Szabo, 2007 CarswellOnt 7000, [2007] O.J. No. 4227.

33In Thompson v. Thomson, 2005 SKQB 345 (“Thompson”) the Saskatchewan Court of Queen’s Bench considered a provision similar to that of the Ontario Solictors Act with respect to contingency fees. The fee agreement in that case provided for the law firm to be paid legal fees at the end of the trial, but only to the extent that the client was successful at trial and that she would not be charged more than the amount obtained in judgment. However, the agreement also provided that if she succeeded at trial to the extent of obtaining a judgment of $300,000 or greater in an equalization payment from her husband, the lawyer was entitled to a bonus of 60 percent of the legal fees incurred after September 30, 1999. By this agreement the lawyer would receive 1.6 times the hourly rate for legal services rendered.

34The primary issue before the court in Thompson was whether this agreement was a contingency fee agreement and therefore prohibited by the Rules of the Law Society of Saskatchewan.

35The court found in Thompson that the lawyer’s entitlement to charge a fee of 1.6 times the lawyer’s hourly rate if the client received judgment in excess of $300,000 amounted to remuneration that is contingent, in part, upon a successful disposition of the matter. The “bonus fee” agreement was determined to be nothing more than a contingent fee agreement as defined by the Rules of the Law Society of Saskatchewan.

36In the case of Zloty v. Malamud, the Manitoba Court of Queen’s Bench addressing the appropriateness of contingency fees and family lawyer matters opined:

Contingency fees are appropriate in accident/personal injury cases and in estate cases where a tariff is applicable. The same principles do not apply in domestic proceedings where so much of the result obtained depends not only on the skill of the lawyer, but on the position of either party.

37S. 28(2) of the Solicitors Act describes a contingency fee agreement as an agreement that provides that the remuneration paid to the solicitor for legal fees 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. The retainer agreement before me provides that in addition to the hourly rate of the lawyers, there be an increase in fees in the event of a “positive result achieved”. The logical interpretation of that agreement is that the “results achieved fee” is only chargeable if a successful result is achieved. I find that the language of the retainer agreement combined with the way the results achieved fee was charged (by way of a separate account), confirms the firm’s intention that the fee was contingent on the successful disposition or completion of the matter in respect of which services were provided. As such, the results achieved fee charged by the respondent to the applicant is a contingency fee defined by the Solicitor Act and is a prohibited charge.

38In the result, order to issue that the respondent firm refund to Davis Jackson the sum of $72,433.24 plus interest as set out in the Courts of Justice Act.

39So far as costs are concerned, if the parties cannot agree on costs I will entertain written submissions concerning costs to be no more than four double-spaced pages, exclusive of time records or summaries thereof. The applicant shall have 10 days from the date of release of these reasons to provide their cost submissions, the respondent to have 10 days subsequent to that period to respond and the applicant to have five days after that time period to deliver a reply to the respondent’s submissions.