Court File and Parties

COURT FILE NO.: 54677/14 DATE: 2018-09-05 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Timothy G. Mitchinson, Applicant AND: Marshall Kirewskie Barristers and Solicitors, Respondents

BEFORE: The Honourable Mr. Justice R. B. Reid

COUNSEL: The Applicant self-represented The Respondent self-represented

HEARD: August 28, 2018

Endorsement as to contingency fee agreement

[1] The applicant was the plaintiff in a civil action against his trade union and six of its officers. The respondent law firm, through one of its principals, Paul Marshall, acted as counsel for the applicant in that action.

[2] The action was administratively dismissed. The applicant then changed counsel. The motion to set aside the dismissal of the action was unsuccessful.

[3] The applicant challenged the legal accounts rendered by his former counsel as regards the civil action. The challenge was resolved against all counsel except the respondent herein, upon whom the applicant had served an order for assessment, dated September 16, 2013.

[4] On May 25, 2016, in the process of resolving a dispute about the applicant’s retainer with one of his former counsel, the applicant advised that there was no dispute about his retainer with the respondent. Although the applicant requested that I assess the accounts myself, I ordered that the quantum of all the outstanding accounts between the applicant and his former counsel including the respondent was to be assessed by an out-of-region assessment officer.

[5] Subsequent to my May 25, 2016 order, the applicant became aware that an assessment officer would not have jurisdiction if the account being assessed was a contingency fee agreement (“CFA”). On that basis, the applicant returned to court and requested a reconsideration of my order. A hearing was convened to determine whether the retainer between the parties was in fact a CFA.

The retainer agreement:

[6] An agreement was negotiated between the parties. It was signed by the applicant on October 29, 2010 and by the respondent on November 3, 2010. That document was not titled but has several parts. The parts were shown as follows:

• Part 1: Our Services;
• Part 2: Fees, Expenses and Billing Arrangements Our Fees;
• Part 3: Dealing with Each Other;
• Part 4: Review of this Contract; and
• Part 5: Signing this Contract.

[7] For the purposes of this motion, the relevant portions of the agreement are contained in Part 2. It sets out as follows:

Generally, my fees will be based on an hourly rate and will depend on the actual time spent. I will be the main lawyer responsible for your case, but from time to time other people in my office may do some of the work. Some work may need to be done by a more senior lawyer, and other work can be done equally well by a more junior lawyer.

There are also many services, such as gathering information in preparing routine documents, that my Office Manager is well qualified to perform and at a lower cost. My Office Manager works under the supervision of a lawyer, but may not give legal advice; his name is Nick Kirewskie.

Billable legal services include preparation of and responding to correspondence, all telephone calls and office attendances, examinations for discovery, negotiations, preparation of documents and preparation for trial.

My firm’s hourly rates are:

My rate is $200 per hour. In consideration for the professional services provided and the risk of funding part of your costs, you understand and agree that my legal fee arising from this Retainer agreement will be 20% of the damages recovered on your behalf in addition to the hourly rate charged to you on an on-going basis.

If my firm’s fees increase, which they may, I will give you at least three months notice of such change.

Legal Expenses (also called disbursements)

In addition to my fees, you agree to pay all expenses, even if I cannot settle all your issues or we lose at trial.

Minor Expenses

I will charge you for the minor ongoing expenses (also called disbursements) that I have to pay. Some of these expenses are long distance telephone calls, photocopying costs (.20/page), costs to deliver documents to court or to your defendants’ lawyer, faxes (.40/page for outgoing and incoming faces), court filing fees, and necessary land, company registry or other searches. I charge $50.00 hour for travel time and .50/km for mileage.

This letter authorizes me to pay all necessary minor expenses as required from time to time from your retainer (see below for further information on retainers).

Major expenses

I may have to hire other people, such as court reporters, expert witnesses, accountants, and property appraisers to help with your case. If I need to hire these people, I will first discuss the matter with you. It will be your responsibility to pay for their services, either directly or as part of the retainer you will provide to me from time to time.

Costs

If we successfully settle your claim, win motions as brought before the court, or win at trial, we will seek a sum of money called costs from the defendants and if we are successful, you will collect full payment for any award of costs. If we are not successful in settlement, for any motions brought, or at trial, the defendants may seek costs against you. You are responsible for paying the costs ordered to the defendants.

HST

In addition to our legal fees and expenses, you also agree to pay any Harmonized Sales Tax (HST) that we must charge you.

Billing Arrangements

Retainer

Before I start work on your file, you agree to pay me a deposit of $4,000.00, called the retainer. I will keep this retainer in my general trust account (where I keep my clients’ money) for your benefit until I send you my first bill. At that time, I will transfer money from your retainer to help pay that bill. When the retainer has been used up, I may ask you to pay me another retainer. At the end of your case, I will refund any money left over in your retainer, after deducting any unpaid or final bills, any HST and any unpaid expenses.

All funds received will be applied firstly to pay HST and then to pay your account. At the end of your case, I will refund any money left over in your retainer, after deducting any unpaid or final bills, any HST and any unpaid expenses.

Periodic Billings

I will bill you from time to time for my services and minor expenses as work is done. My bills will detail the work done and the expenses I have had to pay. I will usually ask you to pay major expenses (for example, to hire expert witnesses) in advance or I will have the bill sent directly to you to pay.

Please pay my bills within 30 days. If you are unable to pay my bills on time and have not already made prior arrangements with me, please discuss this with me immediately.

Deduction from Settlement or Judgment

You agree that any money from a settlement or judgment, including costs, will be paid directly to me in trust. I will then deduct any unpaid or final bills, any HST and any unpaid expenses, and give you the balance.

Positions of the parties:

[8] The applicant points to the 20 percent contingency fee provision as proof that the retainer was a CFA. He deposes that he always considered the retainer to be a CFA from the time the retainer was negotiated and signed. The nature of the document does not change simply because the action was unsuccessful and no contingency fee was paid. The applicant submits that it is obvious that contingency is at least a partial component of the agreement.

[9] The applicant accepts that the agreement was not in compliance with all the requirements for a CFA set out in Regulation 195/04 under the Solicitors Act, but states that, as a lay person, he was not aware of that noncompliance at the time the agreement was signed.

[10] The applicant was never advised by the respondent that the agreement was not compliant with the legislative requirements for a CFA.

[11] In summary, the applicant submits that the agreement, despite failing to comply with the legislative requirements, is nevertheless a CFA and that his account should be assessed on that basis by a court.

[12] On behalf of the respondent, Mr. Marshall submits that the retainer was noncompliant with Regulation 195/04 and as such cannot be characterized as a CFA. He notes that the retainer did not comply with the provisions of s. 1(1)(a) of the Regulation that mandates a title identifying the retainer as a CFA nor with a variety of obligations in paragraph 3 of s. 2, which include statements that other options than a CFA have been discussed; that the client can speak with other solicitors to compare rates; that the client has chosen to retain the solicitor by way of a CFA; and that the client understands that all usual protections and controls on retainers between a solicitor and client apply to the CFA. Perhaps most significantly, the retainer did not include a statement required by s. 3 of the Regulation that the solicitor shall not recover more in fees than the client recovers as damages or receives by way of settlement.

[13] The respondent notes that there are many components of the retainer agreement that were indicative of a standard, non-CFA retainer, including the expectation of billing on an hourly basis at a defined rate and a corresponding requirement on the applicant to provide a financial retainer which would need to be replenished when exhausted by interim billing.

[14] In short, the respondent submits that the retainer agreement was, in effect, a hybrid containing elements of a regular fee agreement calculated on an hourly basis as well as elements of a CFA. The respondent submits that, if a charge had been made in accordance with the 20 percent contingency contained in the retainer agreement, it would likely have been subject to a successful court challenge by the applicant and as such the document would not be enforceable as a CFA.

Analysis:

[15] The usual form of a retainer agreement between a solicitor and client provides for fees calculated based on time spent or occasionally on a fixed-fee-for-service basis. A CFA, as defined by the Solicitors Act and Regulation 195/04, is an alternative to the usual form of agreement. The rationale for a CFA is to provide access to justice for clients who might not otherwise be able to afford legal fees. The lawyer assumes the risk of not being paid if the client is unsuccessful in exchange for the potential of receiving compensation as a percentage of the amount recovered that can produce a fee substantially higher than the amount an hourly rate would justify.

[16] Because there is a potential for unfairly high compensation to a lawyer under a CFA, that form of retainer is subject to the specific terms set out in Regulation 195/04 and ultimately to court approval.

[17] In this case, the parties agree that the retainer agreement is not compliant with the requirements for a valid CFA. It is also inconsistent with a CFA in that it provides for regular hourly rate billings by the lawyer and retainer replenishment by the client.

[18] The parties disagree about whether, assuming that the retainer agreement is not a binding CFA, it is nevertheless a CFA that is subject to court approval for the purpose of assessment of the solicitor’s account or alternatively that it should be treated as a normal retainer agreement and subject to the assessment previously ordered.

[19] I conclude that since the agreement is not compliant with many of the provisions of the Regulation (as submitted by the respondent and detailed above), it is not a CFA at all. The applicant’s view that the retainer was a CFA does not change its legal effect.

[20] Clearly the retainer agreement was an arrangement between the parties in which they defined their solicitor and client relationship. The document ends with a statement that: “If you are satisfied with this contract, please sign and date both copies and return one of them to me. Keep one for your records. If there is anything you do not agree with, or if there is anything you would like to discuss before signing, please call or write me.” Above the applicant’s signature on the document, which is dated October 29, 2010, is the sentence: “I have read this contract carefully and I agree with it.”

[21] Fees were charged by the respondent which are challenged by the applicant. They were not charged on a contingency basis but rather on the basis of a fixed hourly rate.

[22] Since I have concluded that the retainer agreement was not a CFA, it is appropriate that the quantum of fees be assessed based on the terms of the document. Therefore the contingency provision is of no effect and the account may be assessed in reference to the retainer document as applicable. As a result of this ruling, there is no remaining dispute about the retainer aside from determining the appropriate amount of fees charged.

[23] Now that there is no dispute about the retainer agreement, the question is whether I should accept jurisdiction to assess the appropriate quantum of the respondent’s account, or leave the May 25, 2016 order in place for assessment by an assessment officer.

[24] The respondent has requested that, because the applicant disputed the retainer, the requisition for an assessment should be set aside. I do not accept that request. The applicant sought an assessment of the account with the respondent in a timely way. The account was rendered by the respondent to the applicant based on time spent pursuant to the retainer agreement. The applicant is entitled to have the quantum of his accounts with the respondent assessed. My outstanding order of May 25, 2016 is to that effect. Once apprised of the limited jurisdiction of an assessment officer where a CFA is in place, the applicant was entitled to seek a determination of whether this retainer agreement was a CFA, the result of which would lead to assessment in the appropriate forum.

[25] The applicant requested that I assess the accounts when the matter initially came on for hearing in May 2016. I indicated that I saw no reason to depart from the usual procedure for several reasons. I noted that appeals from assessments pursuant to s. 17 (b) of the Courts of Justice Act are to a Justice of the Superior Court. The normal appeal process should be preserved so that, if necessary, an appeal could be taken to the Court. Clearly the normal procedure is to proceed to have assessments completed by an assessment officer. They have significant expertise which should be brought to bear in matters such as this. Given existing judicial schedules, there is no reason to expect that the matter could be heard by me within a time period shorter than that which would apply to scheduling before an assessment officer. As a result, I referred the assessments back to an assessment officer for hearing and determination.

[26] Those reasons for having the matter assessed by an assessment officer continue to apply.

[27] Even if the requisition for assessment was set aside, I would have ordered that the assessment of the quantum of the applicant’s accounts from the respondent be referred to a hearing by an out-of-region assessment officer pursuant to the reference powers available under Rule 54.02(1) (b) of the Rules of Civil Procedure.

[28] Therefore, and for the foregoing reasons, I conclude that the retainer agreement was not a CFA but that it did form the basis of the solicitor-client relationship between the parties. Pursuant to the May 25, 2016 order, the matter is referred for assessment.

Costs:

[29] I note that both parties were self-represented in this motion. I also note that there was divided success in that the applicant was unsuccessful in having the retainer characterized as a CFA such that it should be assessed by a Justice of the Superior Court and the respondent was unsuccessful in the request to set aside the assessment order obtained on requisition. My inclination is therefore to make no award as to costs. However, I will not come to a final decision on that point until I have given the parties an opportunity to make submissions, if they choose to do so.

[30] Therefore, I am prepared to receive written costs submissions according to the following timetable:

• The applicant is to serve the respondent with written costs submissions and a Bill of Costs on or before September 14, 2018.
• The respondent is to serve the Applicant with written costs submissions and a Bill of Costs on or before September 28, 2018.
• The applicant is to serve the respondent with any responding submissions on or before October 12, 2018.

[31] All submissions are to be filed with the court no later than October 15, 2018. If submissions are not received by that date or any agreed extension, the matter of costs will be deemed settled.

Reid J. Date: September 5, 2018