CITATION: Novosel v. Campisi et al. 2022 ONSC 3300
COURT FILE NO. 21-76032
DATE: 20220602
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Blanka Novosel, Applicant
AND
Joseph Campisi and Campisi LLP, Respondents
BEFORE: Justice L. Sheard
COUNSEL: Allen J. Wynperle, counsel for the Applicant
Ashu Ismail, counsel for the Respondents
HEARD: March 15 and 18, 2022, Via Videoconference
REASONS FOR JUDGMENT
Overview
[1] This Application was heard on March 15 and 18, 2022. After the hearing, the Respondents brought a motion to reopen the Application under r. 52.10. That motion was heard on May12, 2022, and dismissed for reasons given orally.
[2] The Applicant, Blanka Novosel (“Novosel”), was the former client of the respondent lawyer and law firm (collectively the “Lawyers”). Novosel suffered injuries in a motor vehicle accident that occurred on December 9, 2014.
[3] Novosel retained the Lawyers to assist her to pursue damages against the other driver (the “Tortfeasor”) involved in the accident (“the Tort Action”) and to pursue recovery of accident benefits to which she was entitled pursuant to her own policy of insurance (“the AB Claim”).
[4] On June 23, 2015, Novosel signed a document entitled “Contingency Fee Retainer Agreement Motor Vehicle Accident” (the “CFRA”), intended to embody the terms of Novosel’s retainer with the Lawyers.
[5] Novosel and the Tortfeasor engaged in mediation in May 2019. The case did not settle at that time but a settlement was reached on November 14, 2019, on which date, Novosel instructed the Lawyers to accept a settlement in the all-inclusive amount of $580,000 to resolve the Tort Claim.
[6] Novosel’s instructions to the Lawyers were confirmed in a letter dated November 15, 2019, sent by Joseph Campisi Jr. (“Campisi”), the lawyer with carriage of the action. In that letter, Campisi confirms that he has received instructions from Novosel to settle the Tort Claim for the all-inclusive amount of $580,000. The letter tells Novosel that the Tortfeasor will pay $485,000 for her damages and interest, $53,000 toward Novosel’s legal costs, $6,890 in HST on that amount, and $35,000 toward Novosel’s disbursements. Campisi also tells Novosel that the Lawyers’ fees will be $145,500, plus HST, Novosel’s disbursements total $40,000 and that Novosel is expected to be left with approximately $280,585. Although the letter makes no reference to the 30% contingency fee to be charged by the Lawyers, the fees claimed are 30% of $485,000.
[7] The fees paid by Novosel with respect to the Tort Claim are the subject of this Application. Novosel does not assert that the settlement was improvident but submits that the Lawyers’ fees are excessive and ought to be reduced to 20% of the damages: $97,000.
[8] The AB Claim was settled in or about August or September 2020 for $1 million.
[9] In his correspondence to Novosel of August 26, 2020, Campisi confirms his instructions to settle the AB Claim for $1 million on an all-inclusive, full and final basis. The letter makes no reference to the fees to be paid to the Lawyers.
[10] The Lawyers presented Novosel with a Release to be executed in favour of her insurance company in consideration of payment of $1 million, in full settlement of the AB Claim. The release makes no reference to how the payment is to be allocated as between the statutory accident benefits and/or legal fees and disbursements. Novosel signed the Release on September 10, 2020. The Release included a direction authorizing Novosel’s insurer to pay the full $1 million to the Lawyers, in trust.
[11] By letter dated September 30, 2020, the Lawyers submitted an invoice for $354,031.67 in respect of the AB claim, and an invoice in the amount of $1,890.41 respecting a separate claim made by Novosel for long-term disability benefits. Novosel does not dispute payment of that account, which does not form part of this Application.
[12] Novosel takes issue with the fees of $300,000 plus HST charged by the Lawyers in respect of the AB Claim, based on of 30% of the $1 million settlement amount. Novosel asserts that in respect of the AB Claim, she had expected to pay a contingency fee of no more than 15% of the settlement amount.
[13] Pursuant to s. 25 of Solicitors Act, R.S.O. 1990, c. S. 15 (the “Act”), where an amount agreed to under a contingency fee agreement has been paid, on an application to challenge the agreement, the Applicant must establish that the “special circumstances of the case” require that the agreement be reopened. In that event, the court may order that the costs, fees, charges and disbursements be assessed and that all or any part of the amount received by the solicitor to be repaid.
Relief Sought
[14] On this Application, the relief sought by Novosel may be summarized as follows:
(a) a declaration that the fees, disbursements and HST charged by the Lawyers following the settlements of the Tort Claim and the AB Claim were not fair and reasonable and that the fees, disbursements and HST should be fixed by the court or referred for an assessment;
(b) an order confirming that the CFRA was not in accordance with the Act and that it is void and unenforceable and that all fees, disbursements and HST collected by the Lawyers pursuant to the CFRA should be returned to Novosel; and
(c) a declaration that s. 25 of the Act does not apply in the event that the CFRA is found to be unenforceable or, in the alternative, that special circumstances exist such that the CFRA should be reopened and the Lawyer's accounts be assessed by an assessment officer.
Disposition and Orders
[15] For the reasons set out below, the court orders that:
(i) the CFRA is declared to be unenforceable;
(ii) the costs, fees, charges and disbursements chargeable by the Lawyers to Novosel in respect of the Tort Claim and the AB Claim, shall be assessed;
(iii) pending an assessment of the costs, fees, charges and disbursements chargeable by the Lawyers in respect of the Tort Claim, the Lawyers shall not be required to repay to Novosel any amount on account of the fees, disbursements, and HST paid to date by Novosel from the settlement funds in respect of the Tort Claim;
(iv) pending an assessment in respect of the costs, fees, charges and disbursements chargeable by the Lawyers in respect of the AB Claim, the Lawyers shall immediately repay to Novosel the sum of $150,000, together with an amount equal to H.S.T. on that amount, which payment is intended to represent repayment of 50% of the fees charged by and paid to the Lawyers from the settlement funds in respect of the AB Claim;
(v) the Lawyers shall also pay Novosel interest on the amounts to be repaid as per (iv), above, calculated from and after September 30, 2020, at the applicable Courts of Justice interest rate; and
(vi) as Novosel has had greater success on this Application than the Lawyers, she is presumptively entitled to expect an award of costs. If the parties are unable to agree on costs, then costs submissions may be made as follows:
a) within 14 days of the date of the release of this judgment, Novosel shall serve and file her written costs submissions, not to exceed 3 pages, double-spaced, together with a draft bill of costs and copies of any pertinent offers;
b) the Lawyers shall serve and file their responding submissions not to exceed 3 pages, double-spaced, together with a draft bill of costs and copies of any pertinent offers, within 7 days of the service upon them of Novosel’s costs submissions;
c) reply submissions, if any, may be delivered within 7 days of delivery of the Lawyers’ costs submissions and shall not exceed one page, double-spaced; and
d) if no costs submissions are received within 21 days of the date of the release of this judgment, the parties will be deemed to have resolved the issue of the costs and costs will not be determined by me.
The Facts
[16] On December 9, 2014, Novosel was involved in a motor vehicle accident when the vehicle she was driving was “T-boned” by another vehicle who went through the stop sign. Novosel suffered physical and psychological injuries as a result of the accident. For two and one-half years after the accident, Novosel was unable to return to work. Novosel tried unsuccessfully to resume her employment but was unable to do so and, since March 2019, has been unable to work as a result of her injuries.
[17] On June 23, 2015, Novosel met with Cesar Carranza (“Carranza”), a paralegal employed by the Lawyers, whose practice area is confined to personal injury law. For approximately 15 minutes of this initial meeting, Carranza took Novosel through the CFRA. Novosel initialed the CFRA as requested and signed at the end of the CFRA.
[18] Novosel’s evidence is that she was never provided with a copy of the CFRA. The Lawyers concede that they have no evidence that Novosel was ever provided with a copy of the CFRA. I accept that Novosel was not provided with a copy of the CFRA.
[19] Novosel’s evidence is that she was never provided with any written confirmation of what was discussed in her meeting with Carranza concerning, among other things, the payment terms set out in the CFRA. Novosel asserts that when she met with Carranza her short-term memory and cognition were impaired because of the head injury she suffered in the accident. Those impairments continue to the present day.
[20] There is no evidence that the Lawyers ever provided Novosel with any correspondence confirming the terms of their retainer with Novosel or any written explanation of the CFRA.
[21] Novosel’s evidence is that she understood that the CFRA entitled the Lawyers to charge legal fees of 30% of the amount recovered by Novosel in the Tort Claim.
[22] Novosel’s evidence was that, provided that no mediation was required, the CFRA entitled the Lawyers to charge legal fees of 15% of the amount recovered by Novosel in the AB Claim.
[23] On this Application, Novosel takes the position that the CFRA is invalid and unenforceable and that the 30% contingency fees charged by the Lawyers are unreasonable. Novosel also submits that if the CFRA is found invalid, the Lawyers’ fees should be assessed on a quantum meruit basis.
[24] The key paragraphs of the CFRA read as follows:
I acknowledge and understand that fees are to be payable with respect to my Accident Benefits claim upon the contingency of my receipt of accident benefits, and in the third party claim upon receipt of settlement or judgment funds.
In calculating the fees payable for my accident benefits claim, prior to any need for an application for mediation, your fees will be fifteen percent (15%) of any Income Replacement Benefits, Caregiver Benefits, and Housekeeping Benefits that I receive. I will not be charged any fees based on other accident benefits I receive unless mediation is required to obtain them.
In calculating the fees payable with respect to my Accident Benefits claim once mediation is required, and for any litigation arising out of the accident, you will charge legal fees of 30% of any lump-sum amount for damages, benefits, interest, as a result of mediation settlement, arbitration settlement or otherwise, plus disbursements and HST. I understand that this means your legal fees will never be more than I recover in damages or by settlement. (Emphasis added.)
I understand that the term “costs” refers to an amount the losing party in litigation pays to assist the winning party with my legal fees. In an accident benefits claim, this is also referred to as “expenses” and is generally less common and smaller amounts. I understand that unless otherwise ordered by a judge, I am entitled to receive any costs contribution or award, on partial indemnity scale or substantial indemnity scale, that I may would be awarded. I understand that all amounts recovered specifically for “costs” or disbursements will be credited toward your fees and disbursements. (sic)
I understand the following example of the contingency calculation in a negligence (“tort”) action:
Damages $82,174.00 damages/interest
(lump sum)
$ 12,236.00 costs
$ 5,500.00 disbursements
$100,000.00
Legal Fees (30%) $ 30,000.00
HST on fees $ 3,900.00
Disbursements $ 5,500.00
Total amount $ 39,400.00
Total amount to me: $ 60,600.00
- I understand that I have the right to ask the Superior Court of Justice to review and approve of your bill, and that in order to do so I must make an application within a month of your account being issued.
[25] Paragraph 7 in the CFRA produced on this Application had a line drawn through it. Novosel denies that she put a line through this paragraph and has no memory of Carranza doing so or explaining to her that paragraph 7 would not apply to her. The Lawyers’ evidence was that paragraph 7 was deleted because Novosel was given a “friends and family” discount due to Novosel’s family connection to Carranza. According to the Lawyers, had paragraph 7 not been stroked out, Novosel would have been obligated to pay the Lawyers 15% of all Income Replacement Benefits, Caregiver Benefits, and Housekeeping Benefits that she received.
[26] Novosel’s evidence was that she understood that, unless there was a mediation, the Lawyer’s contingency fee would be 15% on amounts recovered and that if there was a mediation, that percentage would increase to 30%.
Positions of the parties
Novosel
[27] Novosel’s position is that the following constitute “special circumstances” which permit the court to reopen the CFRA:
(1) Novosel suffered from a head injury which affected her memory and ability to concentrate such that it was incumbent upon the Lawyers to provide Novosel with a reporting letter following her meeting with Carranza to explain the CFRA, which the Lawyers did not do;
(2) at the meeting with Carranza, he did not properly explain paragraphs 7 and 8 of the CFRA to Novosel and, in particular, did not make clear that while under paragraph 7, fees would be calculated based on 15% of the Income Replacement, Caregiver, and Housekeeping benefits received prior to, and unless any mediation was required to obtain them, whereas under paragraph 8, fees would be calculated based on 30% of all monies received on a settlement;
(3) Carranza did not explain, and there is no evidence that Novosel understood or was ever told, that the “FSCO” mediation that she agreed to have, which related to a minor treatment plan worth $2,065, would constitute a “mediation” under paragraph 8 of the CFRA, and would trigger the payment of the 30% contingency fee. Moreover, had Novosel been told as much, she would not have proceeded with the mediation that involved a relatively minor amount;
(4) paragraph 12 of the CFRA provided an inaccurate example of how the contingency fee would be calculated in that, without a court order authorizing fees to be charged on costs paid, the fees shown in the example would be in contravention of section 28.1(8) of the Act;
(5) the example given at paragraph 12 of the CFRA is “of the contingency calculation in a negligence (“tort”) action”; the CFRA contains no example of how contingency fees are to be calculated in the AB Claim;
(6) paragraph 15 of the CFRA is misleading in that it provides that the client has one month to have a paid account assessed. In fact, the Act states that the assessment of a solicitor’s bill rendered in respect of a contingency fee agreement to which section 28.1 (6) or (8) applies may be assessed within six months after its delivery;
(7) the Lawyers failed to establish that they complied with O. Reg 195/04 1. (2) that, among other things, requires the client to be provided with a copy of the CFRA;
(8) that, particularly with respect to the AB Claim, the fees charged were unfair because Novosel did not understand or appreciate the CFRA at the time she signed it and, in particular, that Novosel was never told that by engaging in a FSCO mediation, she would trigger the increase in the payment of contingency fees from 15% to 30%;
(9) the fees charged with respect to the Tort Claim and the AB Claim were unreasonable in that Novosel:
i) was not fully or fairly informed as to how the fees were calculated in the payment of the “all-in” settlement of $580,000 – that was left to Mr. Campisi;
ii) on the AB Claim, there is scant evidence that Novosel was informed of the proposed $300,000 in fees to be paid on the $1 million settlement, which is not referenced in his letter confirming instructions, nor in the Release and Direction to the AB insurer;
iii) 30% charged for the AB claim is excessive in the circumstances, both in respect to the time actually spent by the Lawyers on achieving the AB settlement and in view of the fact that Novosel had been designated as catastrophic, thereby greatly increasing the certainty of a significant recovery from the AB insurer’s and reducing any risk taken by the Lawyers; and
iv) if the Lawyer’s fees were based on docketed time, using an hourly rate of $500 for Campisi, which Novosel asserts is reasonable given Campisi’s year of call and experience, even 15% of the $1 million paid to settle the AB Claim would result in the Lawyers’ receiving fees equal to approximately four times the value of the Lawyer’s docketed time - a generous premium.
(10) the court has inherent jurisdiction over the fees charged by any legal practitioner and may fix the amount of fees to be charged based on the usual and relevant factors such as time expended; complexity; outcome achieved; access to justice; and risk to the law firm.
The Lawyers
[28] The Lawyers oppose the relief sought by Novosel on this Application. They submit that they spent five years securing settlements for Novosel totaling $1.58 million and that they expended a total of 401.81 hours of docketed time and sent/received 2,162 emails for which time dockets were not prepared.
[29] The Lawyers submit that their fees are fair and reasonable given the excellent results they achieved for Novosel and that Novosel knew and agreed to pay the 30% contingency fees, charged by the Lawyers.
[30] The Lawyers submit that the CFRA is a short document, consisting of 22 paragraphs, each of which was read and explained to Novosel, who initialled key paragraphs throughout the CFRA and signed it at its end.
[31] The Lawyers submit that that CFRA sets out the amount of the contingency fees including that, with respect to the AB Claim, the fees would increase from 15% to 30% if mediation was required. The Lawyers state that when the CFRA was entered into, mediation was required in all cases, pursuant to the Insurance Act, R.S.O. 1990, c. I.8, s. 280(2) and that the intention of the CFRA was that if mediation was required or when the case was at the (then mandatory) mediation stage, the contingency fees would increase to 30%.
[32] The statutory requirement of mediation was abolished on April 1, 2016. However, the Lawyers state that they are not relying on the statutory requirement for mediation because a FSCO mediation had taken place in 2015. The Lawyers assert that this (FSCO) mediation was sufficient to trigger the increase from 15% to 30% in the contingency fee that was chargeable on any and all amounts thereafter recovered on the AB Claim.
[33] In terms of the fairness or reasonableness of the fees charged, the Lawyers submit that after taking part in a mediation with the Tortfeasor respecting the Tort Claim, at which the initial settlement offer was only $142,000, they were able to secure an “all-in” settlement of the Tort Claim in the amount of $580,000. The Lawyers assert that this was an excellent result, given the challenges Novosel faced in succeeding on the Tort Claim and the settlement amount initially offered by Tortfeasor. The Lawyers submit that this favourable resolution justifies the 30% contingency fee.
[34] In addition, the Lawyers state that at the time of the settlement of the Tort Claim, they provided Novosel with a clear breakdown of their fees and disbursements, which she agreed to pay.
[35] With respect to the AB Claim, the Lawyers submit that, in addition to the CFRA, which contemplated an increase in the contingency fees after a mediation, the Lawyers achieved a significant settlement for Novosel, whose insurers had initially offered $210,000 even after Novosel was designated as catastrophically injured. The Lawyers submit that, by reason of their skill and effort, the settlement offer on the AB Claim was increased to $1 million and that this outcome justifies the 30% percent contingency fee charged by the Lawyers.
[36] The Lawyers also oppose the Application on the basis that no “special circumstances” exist that would entitle Novosel to reopen the CFRA beyond the six-months that had passed since the accounts were paid, and before this Application was brought.
The Law
(i) Special Circumstances
[37] Sections 11 and 25 of the Act provide as follows:
11 The payment of a bill does not preclude the court from referring it for assessment if the special circumstances of the case, in the opinion of the court, appear to require the assessment.
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.
[38] The “special circumstances” referenced in s. 25 should be construed broadly “to include any circumstances in which the ‘importance of protecting the interests of the client and/or public confidence in the administration of justice, demand an assessment’”: Hodge v. Neinstein, 2017 ONCA, 494, at para. 137.
[39] Non-compliance with the Act could amount to special circumstances: Hodge, at para. 138.
[40] While the court has a broad discretion to determine whether special circumstances exist, “ordering an assessment after payment will be the exception rather than the rule”: Clatney v. Quinn Thiele Mineault Grodzki LLP, 2016 ONCA 377, at para. 84.
[41] “[S]pecial circumstances will tend to either undermine the presumption that an account was accepted as proper and reasonable…or show that the account was excessive or unwarranted.” The authorities support that “[S]pecial circumstances are those in which the importance of protecting the interests of the client and/or public confidence in the administration of justice, demand an assessment”: Clatney, at paras. 85, 86.
[42] In an application respecting the validity or effect of a contingency fee retainer agreement, the agreement may be enforced or set aside by the court: Act, s. 23.
[43] Section 24 of the Act reads as follows
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. R.S.O. 1990, c. S.15, s. 24.
[44] Where enforcement of a contingency fee agreement is sought, the court follows a two-part process: first, the court must determine the fairness of the agreement as of the date it was entered into and, secondly, it must assess the reasonableness of the agreement as at the date of the hearing. Such an agreement may be declared void or cancelled if the court determines that it is either unfair or unreasonable: Henricks-Hunter v. 81488 Ontario Inc. (Phoenix Concert Theatre), 2012 ONCA 496, at para. 13.
(ii) Fairness of the CFRA
[45] As it is Novosel who challenges the CFRA, the onus is on the Lawyers to establish that the way in which the CFRA was obtained was fair, and that its terms were reasonable. To meet the fairness requirement, the Lawyers must show that Novosel fully understood and appreciated the nature of the agreement: see, Raphael Partners v. Lam, 2002 45078 (ON CA), at para 37.
[46] To evaluate whether the fees charged by a lawyer are reasonable, the court should consider the complexity of the matter, the results achieved and the risk assumed by the lawyer, including the risk of non-payment “where there is a real risk of an adverse finding on liability”: Raphael, at para 50.
iii) Jurisdiction to order repayment of fees and/or to fix the fees
[47] S. 24 of the Act provides that if it appears to the court that special circumstances exist, an order may be made to reopen the agreement and for the repayment of the whole or part of the amount paid to the solicitor.
[48] If a contingency fee agreement is found void or unenforceable, fees should be assessed in the ordinary manner and reasonable compensation awarded on a quantum meruit basis: see, Lima v Kwinter, at para 33; Hodge v. Neinstein, at para 135; and Clatney v. Quinn, at paras. 77- 79.
Factual Findings and Analysis
[49] It is undisputed that there are two obvious errors in the CFRA: one in paragraph 12 and the second in paragraph 15. I find both to be significant: the error at paragraph 12 misstates how the legal fees are to be charged and, at 15, misstates the time period within which a client may dispute an account.
[50] I also find that the Lawyers failed to comply with s.1(2) of O. Reg. 195/04. That failure is also significant: Novosel was entitled to know the agreement that she had signed and have a copy of it with her. That is especially important in this case, as Novosel’s memory and cognitive ability was affected by the head injury she suffered in the accident, and she was not permitted by Carranza to have a support person accompany her at her meeting with him.
[51] I accept the evidence, which the Lawyers cannot disprove, that Novosel did not receive a copy of the CFRA until after the fees that are the subject of this Application had been paid and Novosel had retained Mr. Wynperle, to whom the Lawyers delivered their file. That evidence, alone, puts to rest the assertion made by the Lawyers on this Application that Novosel had received independent legal advice about the contingency payments set out in the CFRA (or that the court should infer she had received such advice), and that Novosel still chose to continue to be represented by the Lawyers.
[52] In addition, as explained below, I am unable to accept the Lawyers’ submissions that in the 15 minutes Carranza spent with Novosel to review the CFRA, Carranza read and fully explained it and that Novosel understood the CFRA.
[53] Firstly, the errors at paragraphs 12 and 15 of the CFRA, together with Carranza’s evidence that he was not aware of the applicable sections of Act or O. Reg. 195/04, lead me to find that Carranza either did not read those paragraphs closely or did not understand the provisions of the Act. In either case, I do not accept that Carranza did, or was able to, properly explain the CFRA and, in particular, the contingency fees to be charged to Novosel.
[54] Secondly, the CFRA included terms of art not understood by laypersons, nor were they explained to Novosel. For example, in oral submissions, counsel for the Lawyers acknowledged that: 1) in referring to “mediation” in the CFRA, the Lawyers intended to reference the statutory provision under the Insurance Act that required all cases to go to mediation, which requirement was abolished on April 1, 2016; 2) a layperson’s understanding of mediation could be very different from how that term is understood by a personal injury lawyer; and, 3) the impact of the abolishment of mediation raised a “very good question” but submitted that it was a question that need not be answered given that there had been a FSCO mediation in October 2015, which triggered the increase in the contingency fee from 15% to 30%.
[55] The difficulty with that position is that the evidence is that Novosel was never told that by engaging in a mediation respecting a dispute over the payment of benefits of approximately $2,000, she would be triggering a doubling of the contingency fee from 15% to 30%; nor, after the mediation, was Novosel informed that the contingency fee had increased to 30%.
[56] The Lawyers prepared the CFRA; there was no evidence that Novosel negotiated its terms. As a result, the contra proferentum rule applies and any ambiguity in the terms intended for the benefit of the Lawyers – which, in my view, would include the increase in the contingency fee – must be resolved against the Lawyers: Manulife Bank v of Canada v. Conlin, [1996] 3 S.C.R. at p. 426.
[57] The jurisprudence is clear that agreements are to be construed in accordance with the plain and ordinary meaning of the words used and to be construed in light of the surrounding circumstances: Premium Iron Ores Ltd. v. Minister of National Revenue, 1996 76 (SCC) and Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33.
[58] On a plain reading of the CFRA, and of paragraphs 7 and 8 in particular, it is far from clear in what circumstances Novosel would be required to pay 30% of amounts recovered on the AB Claim.
[59] Moreover, consideration must also be given to the fact that ss. 28.1(8) and (9) constitute consumer protection legislation and are intended to protect clients from excessive fees, and fees determined by contractual terms that are lacking in transparency and predictability: Lima v. Kwinter, 2021 ONCA 47.
Disposition: Validity and Enforceability of the CFRA
[60] I find that the Lawyers have not established that the way in which the CFRA was obtained was fair. As more fully explored below, particularly with respect to the AB Claim, the Lawyers have not established that the fees charged were reasonable. I conclude that there are special circumstances that require the intervention of this court to protect the interests of Novosel and public confidence in the administration of justice and that the CFRA must be declared unenforceable and set aside.
[61] That conclusion is based on the evidence referenced throughout these Reasons, including the following findings that:
(a) the Lawyers’ failure to comply with s.28 of the Act and O. Reg. 195/04 constitute significant errors and omissions;
(b) Carranza was unfamiliar with the Act and failed to recognize that the CFRA was not in compliance with it; for those reasons, Carranza could not have properly explained to Novosel the contingency fees that the Lawyers were legally entitled to charge;
(c) Novosel had been encouraged by Carranza to believe that the fees set out in the CFRA would not be enforced by the Lawyers, a view consistent with Carranza’s evidence that Novosel was being given a “friends and family” rate;
(d) as a result of the error at paragraph 12 of the CFRA, the omission of an example respecting the AB Claim, and the poorly-drafted and unclear wording used, the CFRA is so unclear as to render it enforceable, particularly with respect to when the contingency fee of 15% charged in respect of the AB Claim would be increased to 30%;
(e) the reference in the CFRA to “mediation” was a legal concept, unexplained to Novosel and which no longer applied after 2016;
(f) it is unclear as to when paragraph 7 of the CFRA was struck out and, if paragraph 7 does apply, whether the CFRA could or should be interpreted to say that on AB payments made to Novosel in respect of Income Replacement Benefits, Caregiver Benefits, and Housekeeping Benefits, the Lawyers will charge only 15%;
(g) when a dispute with her insurer arose in 2015, entitling Novosel to engage in a FSCO mediation, the Lawyers did not advise Novosel that this would trigger an increase in the contingency fees. Had that been disclosed to Novosel, given the small amount of money in dispute, as compared to the cost to her of the increased contingency fees, it is reasonable to conclude that Novosel would not have proceeded with the mediation. I therefore reject the submissions by the Lawyers that the mediation that took place in 2015 should, or did, operate to trigger the increase of the contingency fee from 15% to 30% and/or that Novosel knew that would occur.
(h) unlike when the Tort Claim was settled, when the Lawyers confirmed in writing the fees to be charged and the net amount to be received by Novosel from the settlement, when the AB Claim was settled, the Lawyers did not mention their fees, nor did they set out the net amount to be retained by Novosel;
(i) Novosel was not informed of, nor agreed to pay, the 30% contingency fee on the AB Claim. I accept Novosel’s evidence, that she believed and expected to be charged no more than 15% and that by the time the 30% fees became known to her, the settlement was a fait accompli; and
(j) the fees charged by the Lawyers are unreasonable and excessive, in view of the time spent and the risk to which the Lawyers were exposed.
Disposition on Remedy
A. Fees Charged on the Tort Claim
[62] Novosel’s evidence in cross-examination was she understood from her discussions with Carranza that the firm would charge 30% on amounts recovered in the Tort Claim and in the AB Claim only if the matter went to trial and that the firm does not charge that much and would “work it out with” her.
[63] Countering Novosel’s evidence, is the correspondence sent to her by Campisi at the time of the settlement of the Tort Claim explaining, in detail, how the Lawyer’s fees would be charged. This communication supports the Lawyers’ evidence that Novosel understood that she was paying 30% of the damages paid in the settlement of the Tort Claim. While the Lawyers’ documentation is lacking in clear evidence that Novosel explicitly agreed to the 30% fee, when the evidence is considered as a whole, it is reasonable to infer that she did.
[64] In submissions on this Application, counsel for Novosel took no issue with the amount of for which the Tort Claim was settled; however, he submitted that Campisi had a conflict of interest and that it was inappropriate for Campisi to determine the amount to be allocated toward Novosel’s costs from the settlement: the Tortfeasor (or his insurer) should have broken out the amount being paid for Novosel’s costs. Despite those submissions, counsel for both parties agreed that Campisi’s calculation was in keeping with the generally accepted “rule of thumb” that costs on a settlement are calculated at 15% on the first $100,000 paid and 10% on the balance.
[65] In Campisi’s letter to Novosel dated November 15, 2019, he confirms that from the all-inclusive settlement of the Tort Claim, the Lawyers’ fees would be $145,500 plus HST plus disbursements, and that the defendant’s contribution toward Novosel’s costs would be $53,000.
[66] Novosel’s submission is that a 30% contingency fee charged by the Lawyers on the Tort Claim is excessive and should be reduced to 20%. In support of that assertion, Novosel asks the court to consider her calculation of the Lawyers’ legal fees of $67,579 on the Tort Claim. That figure was arrived at using the hourly rates set out by the Lawyers for all timekeepers except for Campisi, for whom an hourly rate of $500 was used, reduced from $700, multiplied by the docket time for each timekeeper.
[67] On this Application, Novosel asks that I fix the Lawyers’ fees on a quantum meruit basis. I do not understand the Lawyers to join in that request. In the absence of an agreement, having determined that the CFRA is void and unenforceable, I am of the view that my authority is limited to ordering an assessment of the Lawyers’ accounts.
[68] I do accept that I have jurisdiction to order the repayment of all or some of the fees paid to the Lawyers, pending the final determination of the account on the assessment. I decline to do so with respect to the fees charged on the Tort Claim.
B. Fees Charged on the AB Claim
[69] Novosel submits that the 30% contingency fee charged by the Lawyers on the AB Claim is excessive. In support of that assertion, Novosel asks the court to consider her calculation of the Lawyers’ legal fees of $38,720.50 on the AB Claim. That figure was arrived at using the hourly rates set out by the Lawyers for all timekeepers except for Campisi, for whom an hourly rate of $500 was used, reduced from $700, multiplied by the docketed time for each timekeeper. The Lawyers’ fees of $300,000 plus HST was 7.7 times that amount.
[70] I accept Novosel’s submissions that the fees charged by the Lawyers on the AB Claim are excessive and unreasonable. In reaching that conclusion, I have taken into consideration the time spent by Lawyers, and the Lawyers’ submissions that there was a significant amount of undocketed time; the virtually non-existent risk to the Lawyers of non-payment of their fees; that the insurers had accepted that Novosel was catastrophically injured and had offered no less than $200,000; and the excellent result achieved by the Lawyers.
[71] In consideration of the evidence and the application of the law to my findings, I conclude that, pending the assessment of the Lawyers’ account on the AB Claim, the Lawyers must immediately return 50% of the fees paid to them in respect of the AB Claim together with HST on those fees. Novosel is also entitled to be paid interest on those amounts to be calculated from September 30, 2020.
[72] A final determination of the fees and other amounts that the Lawyers are entitled to charge Novosel in respect of the AB Claim, as well as the Tort Claim, is to be left to the determination of the assessment officer on the assessment of the Lawyers’ accounts.
L. Sheard J.
Date: June 2, 2022
COURT FILE NO.: 21-76032
DATE: 20220602
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Blanka Novosel
Applicant
- and –
Joseph Campisi and Campisi LLP
Respondents
REASONS FOR JUDGMENT
L. Sheard J.
Released: June 2, 2022