COURT FILE NO.: CV-23-00693764-0000

DATE: September 12, 2025

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

RAVINDER SHARMA, KENNETH TESLIA, IMRAN BASHIR, EVP GP INC. and EXTREME VENTURE PARTNERS FUND I LP

Applicants

– and –

KIM SPENCER MCPHEE BARRISTERS P.C.

Respondent

COUNSEL:

Gerald L.R. Rankin and Jesse Harper, for the Applicant

Robert W. Staley and Douglas Fenton, for the Respondent

HEARD: January 16, 2025

Papageorgiou J.:

Reasons for Judgment

Overview

[1] This matter involves a dispute between lawyers and clients over the interpretation of a written contingency fee agreement. Specifically, it concerns whether a particular contingency fee agreement relates only to the trial or applies beyond the trial. It also concerns the validity of an oral agreement alleged by the lawyers that the terms of the written contingency fee agreement would also apply to the appeal.

[2] If the court finds that the contingency fee agreement does not apply beyond the trial, then the court must determine the fee to which the lawyers are entitled on a quantum meruit basis.

[3] The Solicitors Act, R.S.O., c. S. 15, and Contingency Fee Agreements, O. Reg. 195/04 (the "Regulation"), set out the statutory requirements for contingency fee agreements. The Solicitors Act was amended after the events in question and the Regulation was revoked effective July 1, 2021 and replaced by a new regulation.

[4] References in this decision to the Solicitors Act and the Regulation are to the versions in effect up to June 30, 2021, which covers when the contingency fee agreement in question was signed and when the alleged oral agreement took place.

The Public Policy and Public Interest Engaged by Contingency Fee Agreements

[5] Central to the issues before me is the policy and public interest engaged by contingency fee agreements.

[6] The common law prohibits champerty and maintenance. As a result, contingency fee agreements were generally restricted although the landmark case McIntyre Estate v. Ontario (Attorney General), 218 D.L.R. (4th) 193 (Ont. C.A.), established that not all contingency fee agreements were champertous: at para. 72. Rather, the lawyer's motivations and fairness had to be assessed.

[7] The legislature recognized that contingency fee agreements could improve access to justice. There were subsequent changes to the Solicitors Act that came into effect in or around 2004 which expressly permit contingency fee agreements as long as they comply with certain requirements.

[8] Where a contingency fee is the manner of remuneration, the lawyer takes a considerable risk in taking the retainer, because if the case does not succeed, then the lawyer will not be remunerated. Because of that risk, the remuneration can be significant in terms of the percentage of the award. The contingency fee agreements clients enter into are typically drafted by the very lawyer that they hire and the clients are usually not lawyers.

[9] As a result, contingency fee agreements are tightly regulated. The Solicitors Act sets out various requirements for a contingency fee agreement, the main one being that it be in writing: s. 28.1(4). This requirement existed at the material time and still exists. The Regulation also set out extensive requirements. For example, with respect to execution, s. 1 stated that, in addition to a contingency fee agreement being in writing, it must be called a Contingency Fee Retainer Agreement, be dated, and be signed in the presence of witnesses. Again, the in-writing requirement was preserved in the Regulation even after it was amended.

[10] There were multiple other requirements in the Regulation. These included that the written agreement must include a statement of the basic type and nature of the matter in respect of which the solicitor was providing services, that the solicitor discussed options other than payment by way of contingency fee, that the client had been advised that hours among lawyers vary, a statement that showed the matter in which the solicitor was providing services to the client, a statement that explained the contingency upon which the fee was paid to the solicitor, an example that showed how the contingency was calculated, and a statement that the client was allowed to ask the Superior Court of Justice to review and approve the solicitor's bill.

[11] Finally, there are specific provisions in the Solicitors Act that apply to disputes over contingency fee agreements: ss. 23, 24 and 25. If it appears to a court that a contingency fee agreement is fair and reasonable, it can be enforced, but if the court concludes that the terms are not fair and reasonable, then the agreement can be declared void. These provisions existed at the time of this dispute and still exist.

[12] Although the fairness requirement is not relevant to this matter as it was ultimately argued, the law surrounding it demonstrates the importance of clarity as an underlying policy goal. As set out in Raphael Partners v. Lam, 218 D.L.R. (4th) 701, at para. 37, the fairness requirement centers around "the circumstances surrounding the making of the agreement and whether the client fully understands and appreciates the nature of the agreement that he or she executed." See also Henricks-Hunter v. 814888 Ontario Inc. (Phoenix Concert Theatre), 2012 ONCA 496.

[13] It is also widely accepted that the Solicitors Act is consumer protection legislation, regulating the legal profession for the protection of the public: Andrew Feldstein & Associates Professional Corporation v. Keramidopulos, at para. 60 and Jean Estate v. Wires Jolley LLP, 2009 ONCA 339, at para. 69, cited for these propositions in Simpson v. Laushway Law Office, at para 35.

[14] In Laushway Law Office v. Simpson, 2011 ONSC 4155, 336 D.L.R. (4th) 632, at para. 143, the court noted the potential for abuse in contingency fee agreements.

[15] All of the above demonstrates the strong public interest engaged by contingency fee agreements. Contingency fee agreements must be transparent, clear, reasonable and fair. The public policy is so significant that the legislature has given the court the power to override the parties' freedom of contract and declare that a contingency agreement is void if it is considered to not be fair and reasonable.

Background of the Parties' Dispute

[16] The Applicants (the "Clients") are involved in the venture capital industry focused on investments in the technology space. The individual Applicants are founders.

[17] In or around late 2013, the Clients retained the Respondent Kim Spencer McPhee Barristers (the "Lawyers") to bring an action against a number of former business partners and related parties (the "Action"). These individual Clients and the former business partners had established a company, the Applicant, Extreme Venture Partners Fund 1 LP ("Fund 1") which was a venture capital fund providing seed capital to start-up companies.

[18] The Applicants alleged that the former business partners surreptitiously established and operated another fund, Extreme Venture Partners Annex Fund 1 LP ("Amex Fund") in breach of their fiduciary and contractual duties and that their conduct damaged Fund 1's brand. In that regard, the former business partners obtained financing from another company and through Amex Fund invested in six of Fund 1's most successful portfolio companies.

[19] There was also a complicated claim relating to the former business partners' conduct with respect to one of the businesses that Fund 1 had invested in, a mobile software development lab, Xtreme Labs Inc. ("Xtreme Labs"). The individual Clients held shares in Xtreme Labs as did former business partners, who were the co-chief executive officers of Xtreme Labs. The Clients sold their shares in Xtreme Labs and later discovered that Xtreme Labs had an equity interest in the dating app Tinder and Hatch Labs. The Clients alleged that the former partners had misrepresented the financial status of Xtreme Labs and concealed material information from them when they sold their shares. They also alleged that the former partners conspired with another to cause the individual Clients to sell their shares in Xtreme Labs at a discounted price and realized the true value of the company for themselves.

[20] One of the Clients, Ravinder Sharma, had a pre-existing relationship with one of the Lawyers, Won Kim. Mr. Kim had acted for Mr. Sharma in a previous class action where Mr. Sharma was a representative plaintiff where the parties had entered into a contingency fee agreement. There is evidence they considered each other friends.

[21] Over the years, the parties had numerous conversations about the type of retainer for this proceeding. While each asserts various agreements at various times, there was never any finalized written retainer agreement when the trial commenced. In general, some options the parties say they had discussed were a partial fee-for-service with a lower contingency rate, a higher contingency rate with the Clients paying 50% of the disbursements, a straight contingency fee in the amount of 30% or a straight contingency fee of 30 % if settled before trial but 20 % if settled after trial. I note that there is no agreement by the parties on any of these and some of these were asserted by each at various times.

[22] There was at least one draft exchanged before the trial, but it was never executed. And so, at the time of trial, there was not yet a written contingency fee agreement.

[23] On May 14, 2019, after a 28-day trial, Conway J. released reasons awarding the Clients a total of USD $17.5 million as follows:

• USD $12.33 million in disgorgement of profits.
• USD $3.36 million in damages to certain individual plaintiffs.
• USD $500,000 in punitive damages.

[24] Conway J. concluded that the former business partners had indeed breached their fiduciary duties as managing directors of Fund 1 and that they had also conspired with a third party to acquire Xtreme Labs at a discounted price. They had concealed Xtreme Lab's equity interest in Tinder and Hatch Labs and appropriated the value of the assets for themselves. She found other causes of action made out as well.

[25] There is no question that the Lawyers secured a very good result at trial through their dogged efforts.

[26] In respect of the trial, the Lawyers delivered their costs submissions on June 4, 2019. It showed docketed time of 13,000 hours and claimed $6 million for their time and $530,000 for their disbursements.

[27] On June 13, 2019 the defendants served a Notice of Appeal. On June 28, 2019 the Lawyers, on behalf of the Clients served a Notice of Cross Appeal.

[28] On October 3, 2019, the Lawyers attended a case conference with Conway J. to address trial costs. She required the Lawyers to file, under seal, a copy of their fee arrangement in the context of determining trial costs.

[29] Also on October 3, 2019, the Lawyers emailed the Clients and stated that they needed to meet ASAP to discuss Conway J.'s request for the fee arrangement as well as their retainer on the appeal.

[30] Also, on October 3, 2019, the Lawyers sent the Clients two different contingency fee agreements, one backdated to May 12, 2015, pursuant to which the Lawyers would be paid hourly rates plus a 15% contingency, and one backdated to August 25, 2018, which reflected a 30% contingency fee (the "CFA"). The Lawyers say that the purpose of these two contingency fee agreements was to document oral agreements that the parties had entered into on those dates, with the second one being the ultimate agreement. They say these were backdated to reflect the dates they were entered into orally.

[31] The Clients signed these agreements although they say they did not see these dates and do not know why they were dated in this way.

[32] On December 1, 2021, the Ontario Court of Appeal dismissed the defendant's appeal and also increased the disgorgement of profits award to USD $29.5 million, another stunning victory achieved through the Lawyers' efforts.

[33] At the conclusion of the appeal, the Clients were awarded a total of USD $35,742,587.33 and CAD $3,020,000, all with interest.

[34] On August 4, 2022, the Supreme Court dismissed the defendants' request for leave to appeal.

[35] Afterwards, on September 28, 2022, the Clients entered into a settlement with the defendants whereby the defendants would pay the Clients $40 million, payable in a number of tranches. The Clients say they entered into this settlement to avoid the necessity of enforcement proceedings against the defendants.

[36] The Lawyers then claimed a 30% contingency on the settlement.

[37] At that point, the Clients objected to the validity of the CFA at all, whether in respect of the trial fee or the appeal fee.

[38] The Clients began this proceeding.

[39] Until recently, the Clients disagreed that the CFA documented their agreement at all and took the position that there was no enforceable contingency fee agreement.

[40] The Clients did not dispute that they had orally agreed to a contingency fee agreement in respect of the trial but set out communications and correspondence that showed that the issue of what the contingency would be had changed over time. They alleged a blended model that existed for a time which consisted of a lower contingency fee and a partial fee-for-service. Then the Clients say that they ultimately agreed to a 30% contingency fee if it was settled before trial, but 20% if it went to trial. The Clients say they executed the CFA, which reflected the 30% after trial, which did not reflect their understanding or agreement, because they were pressured. They also denied that they had entered into any contingency fee agreement in respect of the appeal.

[41] The Clients also raised a variety of complaints about the Lawyers and took the position that the CFA was not fair and reasonable and as such could not be enforced at all in any respect. They made alternate claims including that it did not apply to the appeal and settlement even if it applied to the trial.

[42] The Lawyers delivered materials disputing a great deal of what the Clients said and challenging the Clients' version of events as to what their dealings were.

[43] The record is very large. The Lawyers, in their factum, asserted that the matter should proceed to trial because of credibility issues.

[44] Shortly before the hearing of the Application, the Clients conceded that there was a valid and enforceable contingency fee agreement but took the position that it only applies to the trial award made by Conway J., not the increased award by the Court of Appeal, and also not the settlement entered into. They said they were no longer seeking to set aside the CFA on the basis it was not fair and reasonable. They said they made this concession so as to avoid a trial because of the numerous credibility issues; they wanted to ensure that this Application, which was commenced two years ago, would be heard. They also wanted to generously compensate the Lawyers for their work.

[45] The Clients continue to maintain that as a matter of contract, the CFA did not apply to either the appeal or the settlement. The Lawyers take the opposite view.

[46] With the case reframed as primarily a matter of contractual interpretation, both sides take the position that this matter is appropriately decided by way of this application.

Decision

[47] For the reasons that follow, I declare that the CFA does not apply to the increased award at the appeal or the settlement. It applies only to the award at trial.

[48] I award the Lawyers $1,063,412.22 on a quantum meruit basis for the Lawyers' work on the appeal. I also award $31,543.95 for the leave to appeal plus $10,141.75 for their work addressing currency issues.

Issues

• Issue 1: Is the CFA the retainer agreement in respect of the appeal?

• Issue 2: If the CFA is not the retainer for the appeal, is there another valid contingency fee agreement in respect of the appeal?

• Issue 3: Even if the CFA was not the retainer agreement for the appeal, and there is no valid contingency fee agreement in respect of the appeal, does the CFA nevertheless interpreted on an objective basis entitle the Lawyers to a 30% contingency fee on the increased award made by the Court of Appeal? Similarly, does the CFA, interpreted on an objective basis, entitle the Lawyers to 30 % contingency on the settlement?

• Issue 4: If the CFA does not apply to the increased damages awarded at the appeal, or the settlement, what is the fee to which the Lawyers are entitled for the appeal and additional work that they claim outside the trial retainer including the application for leave to appeal to the Supreme Court of Canada?

• Issue 5: What process should be employed for the accounting of amounts already received by the Lawyers?

Analysis

Principles of Contractual Interpretation

[49] The main principles of contractual interpretation are as follows:

• The Supreme Court has described the object of contractual interpretation to be the determination of the objective intentions of the parties: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 55. It has also been described as a process to determine the reasonable expectations of the parties: R. v. Resolute FP Canada Inc., 2019 SCC 60, [2019] 4 S.C.R. 394, at para. 74.

• A court cannot take into account evidence of the parties' subjective intentions.

• With respect to written contracts, a court presumes that the parties have intended what they said.

• A court should interpret commercial agreements in accordance with good business sense, and avoid commercial absurdity: Resolute, at paras. 79 and 148.

• Where there is an ambiguity, the court may resort to extrinsic evidence to clear up the ambiguity: Montreal Trust Co. of Canada v. Birmingham Lodge Ltd., 125 D.L.R. (4th) 193 (Ont. C.A.), at p. 203; Thunder Bay (City) v. Canadian National Railway Company, 2018 ONCA 517, 424 D.L.R. (4th) 588, at paras. 62-63; London Medical and Dental Building Ltd. v. Middlesex Condominium Corporation No. 83, 2016 ONSC 6141, at paras. 93-95; Newman v. Beta Maritime Ltd., 2018 BCSC 1442, at paras. 31-32; and Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912, 404 D.L.R. (4th) 512, at para. 46.

• The words of a contract must be given their ordinary and grammatical meaning.

Contra Proferentem

[50] Further, it is well settled that where there is any ambiguity, the doctrine of contra proferentem (requiring any ambiguity in a written agreement to be resolved against the drafting party) applies with particular force to retainer agreements. This is not only because the lawyer controls the drafting of the agreement. It is also because the lawyer: (i) is presumed to have superior knowledge about the contents of the agreement; (ii) is presumed to have superior expertise in drafting agreements, and (iii) owes a fiduciary duty to fully and fairly advise the client of what is being agreed to: Morrison v. Rod Pantony Professional Corporation, 2008 ABCA 145, 429 A.R. 259, at para. 21.

[51] See also Van Brabant Estate (Re), 2013 ABQB 547, at paras. 36-37, where the court stated:

I believe that the contra preferentem rule applies to solicitor's retainer letters. Where there is any kind of ambiguity, the retainer letter must be construed against the lawyer who wrote it.

This would seem to be fair to the public.

[52] A solicitor is also under a heightened duty to ensure that the terms are clear, and he or she has a duty to explain those terms and ensure that these are understood by the client: Tri-Level Claims Consultants Ltd. v. Fryer, at para. 22.

[53] Because of these principles that govern the relationship between the solicitor and client, courts have routinely confirmed that any ambiguity or lack of clarity in a retainer agreement will be resolved in favour of the client: See, for example, Leduc v. Pharand, 2017 ONSC 6690, at para. 25; Jack Wang Law Corporation v. Du, 2021 BCSC 9, at para. 36; McIntosh v. Zhang, 2022 BCSC 1232, at para. 29; Poundmakers Lodge v. Scott & Co., 2002 ABQB 745, at para. 10; Laxton v. Morriss, 2007 BCSC 1690, at para. 9; Morrison at para. 21; and most recently, Aylmer Meat Packers Inc. and Richard Walter Clare v. Harrison Pensa LLP, 2025 ONSC 3383, at para 37.

[54] I note here that the Lawyers reference caselaw that holds that the principle of contra proferentem does not apply to contracts negotiated by sophisticated parties with an ability to modify the wording. They say that because the Clients were sophisticated business executives, the principle of contra proferentem does not apply: Dominus Construction Corporation v. H & W Development Corp, 2020 ONSC 8134, at para. 65 aff'd, 2022 ONSC 1240 (Div. Ct.), at para. 54. Notably, this case did not concern a contingency fee agreement but a dispute among businesspeople. There is no evidence before me that the Clients were Lawyers or sophisticated regarding retainer or contingency fee agreements, although Mr. Sharma had previously been involved in one class action with Mr. Kim. I infer he entered into a contingency fee agreement in that case. In my view, entering into one such agreement does not make him sophisticated on their terms.

[55] The fact that they had an opportunity to seek independent legal advice including from their long-standing corporate counsel, Fasken DuMoulin LLP ("Fasken"), but elected not to, does not mean that the principle does not apply. All individuals can seek independent legal advice before they execute a contingency fee agreement and yet the caselaw holds that the principle applies where there is ambiguity.

The Surrounding Circumstances

[56] In Sattva, the Supreme Court indicated that simply reading and interpreting the literal words of a contract alone might not actually establish the objective intentions of the parties. This is because there is always a "setting" in which the words are used: at para. 47. Further, words do not have "an immutable or absolute meaning": at para. 47. The Supreme Court also stated, at para. 48, that "[t]he meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement."

[57] These surrounding circumstances are referred to as the "factual matrix" and consist of objective evidence of which the parties would have been aware: Sattva, at para. 58.

[58] As set out in Sattva, at para. 58, quoting Investors Compensation Scheme Ltd. V. West Bromwich Building Society, [1998] 1 All E.R. 98 (H.L.), at p. 114, surrounding circumstances include "absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man."

[59] The most significant surrounding circumstance in this case is the regulatory scheme that places the obligation on lawyers to be clear so that clients understand whatever their obligation is. See the following cases which have held that legislative context can be a surrounding circumstance: Canadian Pacific Railway Company v. Canada, 2019 FC 1531, at paras. 24-27 and Geophysical Service Incorporated v. Falkland Oil and Gas Limited, 2019 ABQB 162 at paras 65-66, aff'd 2020 ABCA 21.

[60] The CFA contained the following provision:

31. This Agreement will be governed, construed, interpreted and enforced in accordance with the laws of the Province of Ontario. Any dispute arising from and/or related to this Agreement is subject to the exclusive jurisdiction of Courts of the Province of Ontario. It is the parties' intention that all requirements of contingency fee retainer agreements be included herein and, for such purpose, the parties agree that this Agreement shall be deemed to include any further requirements arising from amendments to the Solicitors Act, R.S.O. 1990, c. S.15 and the regulations under that Act. Alternatively, the parties to this Agreement agree to execute, from time to time, any amendment to this Agreement for the purpose of incorporating any such further requirements into this Agreement. [Emphasis added]

Issue 1: Is the CFA the retainer agreement in respect of the appeal?

[61] I conclude that the CFA retainer was only in respect of the trial and did not apply to the appeal or any steps beyond the trial retainer.

[62] I begin by making the point that lawyers are sometimes retained for a trial, but then other lawyers are retained to do the appeal.

[63] In line with this, some courts have held that a trial is a distinct proceeding from any subsequent appeal although admittedly these cases were not cases involving contingency fee agreements or similar to this case: Ellyn-Barristers v. Stone, at para. 25, leave to appeal refused, 2007 ONCA 565; Ladner Downs v. Crowley, 14 D.L.R. (4th) 403 (B.C. S.C.), at p. 420; and Samson Cree Nation v. O'Reilly & Associes, 2013 ABQB 350, 564 A.R. 169, at para. 35, aff'd 2014 ABCA 268.

[64] The provisions of the CFA, read as a whole, support the conclusion that it related only to the trial. All bolded words have been bolded by me for emphasis.

[65] The CFA is titled "Retainer Agreement".

[66] Paragraph 1 provides as follows:

Ravinder Sharma, Kenneth Teslia, Imran Bashir, EVP GP Inc., and Extreme Venture Partners Fund I LP (the "Clients") hereby retains, authorizes, and instructs Kim Spencer McPhee Barristers P.C., 1200 Bay Street, Suite 1203, Toronto, ON M5W 1J2 ("KSM") to act as their solicitors, counsel, and agents with respect to an action by the Clients against certain parties for claims involving technology ventures as described in the Statement of Claim issued in Court File No. CV-14- 10635-00CL, Ontario Superior Court of Justice, Commercial List (the "Action"),

[67] The CFA sets out the terms of payment as follows:

6. KSM shall be paid its fees upon the following contingency:

In the event the Clients are successful in obtaining judgment in the trial of this Action or in obtaining a settlement that benefits the Clients. The fees shall be paid by a lump sum payment or payments out of the proceeds of any judgment or order awarding damages, interest or costs to the Clients or any settlement which includes payments in favour of the Clients.

[68] Sections 11 to 12 address disbursements and note that the Clients were responsible for these and that there could be major expenses for things like expert witnesses, and electronic discovery experts. These are disbursements typically incurred for a trial and not for an appeal.

[69] Paragraph 23 indicates that the Clients acknowledge that the Lawyers would be incurring significant financial risk in "prosecuting the Action." There is no mention of financial risk for prosecuting the appeal.

[70] Paragraph 24 addresses the Lawyers' fees if the retainer was terminated and again referenced the prosecution of "the Action."

[71] Paragraph 26 addresses actions that the Lawyers would have to take if another lawyer was retained to "prosecute the Action." It does not mention a lawyer retained to prosecute an appeal having to protect the Lawyers' fees.

[72] Paragraph 32 provides that the Clients acknowledge that the Lawyers were "incurring a significant financial risk in agreeing to pursue the action on a contingency fee basis."

[73] The Regulation also supports the conclusion that the CFA was only in respect of the trial.

[74] Section 2 of the Regulation provided that a solicitor who was party to a contingency fee agreement must address the basic type and nature of the matter in respect of which the lawyer is providing services:

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

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

[75] All the references in the CFA speak of the trial of the action, or prosecuting the trial, indicate the Superior Court file number, and make no mention of an appeal or an appeal file number. The type and nature of the matter that the Lawyers were providing services in respect of as described in the CFA all relate to the trial. The reasonable expectations of the parties would be that the CFA would comply with the Regulation.

[76] The surrounding circumstances also support the conclusion that the CFA related only to the trial. Even though it was signed on or about October 10 2019, the date of the CFA is August 25, 2018. The Lawyers say that it was deliberately backdated to reflect the date of the oral agreement relied upon by the Lawyers and they say that was the effective date. The Clients say that they do not know why the CFA was backdated and they say the effective date of the CFA was the date of execution, on or about October 10, 2019.

[77] In my view the effective date of the agreement is August 25, 2019 because that is what the parties represented to Conway J. Although the Clients now say that they did not see that date at the time of signing, it is inconceivable that they did not realize this at some point after signing it. They did not take any steps to correct the representation made to Conway J. regarding the date of the CFA. She relied on it and they cannot resile from that being the date without having corrected the court record earlier.

[78] Either way, the surrounding circumstances favour the Clients.

[79] If the effective date was August 25, 2018, there was no appeal pending at that time and as such, the parties would understand the words "Retainer Agreement" to be for the trial alone particularly since all references therein are to the trial or the action.

[80] If the effective date was on or about October 10, 2019, the parties knew there was already an appeal pending, and yet there was no reference made to the appeal in the CFA but rather only to the trial. As such, they would still understand the words "Retainer Agreement" to be for the trial alone particularly given the language of the CFA.

[81] As well, the purpose of the written agreement was to respond to Conway J.'s request for the retainer for the purpose of assessing costs of the trial. In that regard, the Lawyers' factum states "the [Clients] were aware [the Lawyers] were relying on the [CFA] to justify [the Clients'] claimed trial costs."

[82] Therefore, the plain and ordinary meaning of "Retainer Agreement," when read in the context of the CFA as a whole, the surrounding circumstances as well as the statutory scheme, in particular s. 2 of the Regulation, leads to the conclusion that the CFA, objectively, resulted in the retainer of the Lawyers to prosecute the trial of the Action only and not the Appeal or any later steps.

[83] In my view, there is no ambiguity in the CFA.

[84] However, even if there was, any ambiguity as to what "Retainer Agreement" means, e.g. whether it is a retainer for the trial or for the trial and any subsequent steps, then the principle of contra proferentem should also apply. Since the Lawyers never made any reference to anything other than the trial, the Action and the court file number of the Action in the CFA, any ambiguity should be resolved in finding that "Retainer Agreement" means for the trial alone.

[85] The Clients have also referenced a series of communications the parties had relating to the appeal retainer. The Lawyers object to it on the basis that it is evidence of the parties' subjective intentions as per Goodlife Fitness Centres Inc. v. Rock Developments Inc., 2019 ONCA 58, at para. 15.

[86] I have found that the effective date is August 25, 2018. Therefore, this is evidence of subsequent conduct admissible if there is any ambiguity.

[87] On June 13, 2019, the Lawyers wrote, "[f]urther to Won's earlier note, Goodmans and BLG have confirmed that their clients are appealing. We will need a retainer to preparing your cross-appeal and responding to the appeal which will be sent under separate cover." [Emphasis added.]

[88] In the same email the Lawyers followed up on an invoice they had sent dated May 23, 2019 and confirmed that the invoice was for work conducted after the trial: "[o]ur most recent invoice is for work in addition to the trial, including work done in relation to security for costs." [Emphasis added]. The invoice stated that it was for services rendered.

[89] On June 16, 2019, the Lawyers wrote again requesting payments and said, "these are steps we have taken for you at your collective request well beyond the trial retainer." [Emphasis added.]

[90] On October 3, 2019, the Lawyers emailed the Clients regarding Conway J.'s request for the fee agreement and said, "[w]e need to meet with Ken and Ray ASAP to discuss this, as well as our retainer on our appeal." [Emphasis added.]

[91] On December 10, 2019, (which was a month after the CFA was signed) the Lawyers sent the Clients an email with the subject line "EVP appeal retainer" where the Lawyers followed up on the retainer for the appeal and cross appeal. The letter stated as follows:

Further to our call last week, we are following up on the retainer for the defendants' appeal and your cross appeal.

While we are content to pursue the cross appeal on a contingency fee basis, the defendants' appeal is a fee-for-service matter. As we have indicated in our calls, responding to an appeal is akin to defending an action - there is no possibility of recovery and thus fee-for-service is the only available retainer.

As you know, we have already incurred significant time on the appeal and will continue to do so moving forward. In that regard, we require a retainer payment of $200,000.00 as soon as possible and in any event no later than the end of next week (our offices are closed the following week for the holidays). Please have Jasmeet wire the funds to our account in accordance with the attached wire instructions.

[92] Although the Lawyers argue that this subsequent conduct evidence was thoroughly contested on cross examination, it is unclear how that can be since these are letters written by the Lawyers themselves and they do not deny that fact.

[93] This subsequent conduct shows that the Lawyers did not view the CFA as applying to the appeal. Although subsequent conduct evidence is approached cautiously, the above conduct is unequivocal, consistent, mutual, is based on the actions of the Lawyers chief representatives and is not self-serving: SS&C Technologies Canada Corp. v. The Bank of New York Mellon Corporation, 2024 ONCA 675, at para. 50.

[94] If I am wrong and the effective date of the CFA was when it was signed, on or about October 10, 2019, then the above communications are not admissible at all to show the parties' subjective intentions as per Goodlife Fitness Centres Inc., at para. 15.

[95] But in any event, the CFA is so clear on its terms in light of the surrounding circumstances, none of these communications, although relied upon heavily by the Clients, are necessary to arrive at the result that the CFA only applied to the trial in any event.

Issue 2: If the CFA is not the retainer for the appeal, is there another valid contingency fee agreement in respect of the appeal?

[96] I conclude that the oral agreement alleged by the Lawyers cannot constitute any valid amendment to the CFA.

[97] I also conclude that it cannot constitute a valid stand-alone contingency fee agreement in respect of the appeal or the Lawyers' work following the trial.

[98] The Clients say that during a telephone conversation on December 16, 2019, the Lawyers agreed they would work on both the appeal and the cross-appeal on a fee-for-service basis. They say the Lawyers sought a $200,000 retainer advising that the cross appeal would require only a minimum or modest time commitment. They say they subsequently paid this on December 18, 2019 in accordance with their agreement.

[99] The Lawyers say that during that telephone conversation, the parties agreed that the Lawyers would continue to work on the appeal and cross appeal under the existing CFA.

[100] There are no confirmatory emails or any notes of any kind either way.

[101] Among the factors that support the Lawyers' evidence are:

• Although the Lawyers typical practice was to take commercial cases on behalf of plaintiffs on a fee for service basis, they agreed to take this one on a contingency because the Clients were unable to pay hourly fees.

• Ms. McPhee and Mr. Kim both gave evidence as to the alleged oral agreement reached in a telephone conversation with Mr. Bashir that the CFA would apply to the appeal and the cross appeal. They both said that this was because Fund 1 had limited assets and the Clients were unwilling to pay the Lawyers out of their own pockets.

• The parties always had a contingency fee agreement of some sort throughout their relationship in respect of the trial even though there was disagreement as to the specifics.

• The cross appeal sought to double the award at trial; one could argue it makes little commercial sense for the Lawyers to have suddenly sought a fee-for-service retainer.

• The Lawyers did not render any accounts to the Clients in respect of the appeals where they sought payment on an hourly basis on an ongoing basis. Notably, the appeals were launched in 2019 and not heard until 2021; therefore, this was a two-year period where no bills were sent.

• The Lawyers have raised issues about the Clients' overall credibility with respect to their evidence relevant to the case in respect of the Clients' previous position that the CFA was not fair and reasonable. Most of these relate to meetings that took place in or around 2015 and discrepancies in their evidence about these meetings. These are set out in a detailed chart appended to the initial factum and I need not set them all out here. As well, the Clients signed the CFA and then raised not a single complaint about being pressured into it or its unfairness until approximately three years later after the appeal and settlement when the Lawyers sought their 30% contingency fee.

[102] Among the factors that support the Clients' evidence are:

• The Lawyers' evidence regarding the December 16, 2019 telephone call do not set out the details of the conversation they say resulted in an agreement. Ms. McPhee stated that they arranged a call for December 16, 2019, and that "We agreed with Imran that [the Lawyers] would continue our work on the appeal and cross-appeal under the [CFA]." Mr. Kim similarly indicated that they arranged the call and that during the call the Lawyers "agreed to work on the appeal and cross appeal under the contingency fee agreement." The phrase "we agreed" is a statement about what the witnesses concluded based upon whatever was discussed. It is not evidence of what was actually said by the Clients and the Lawyers. Perhaps this is not surprising given how long it has been and the absence of notes, but it makes it difficult to assess whether the words used resulted in the agreement alleged.

• When cross examined, Ms. McPhee's recollection of the December 16, 2019 telephone conversation was not entirely clear. She did not recall whether they discussed the individual Clients' ability to pay fees or hourly rates during that call although she stated in her affidavit that "the individual Applicants continued to be unwilling to pay [the Lawyers] out of their own pockets." She also did not recall who proposed the Lawyers' continuing to work on the appeal pursuant to the CFA, whether it was the Lawyers or the Clients.

• Mr. Bashir's provides a better description of the conversation that he alleges took place and there is corroboration for some of what he says. In his first affidavit, Mr. Bashir gave evidence that during a telephone conversation with Ms. McPhee in December 2019, she indicated she needed a retainer. When Ms. McPhee was cross examined, she initially did not recall whether she requested a retainer but ultimately agreed that there may have been such a request which supports his evidence. Mr. Bashir ultimately delivered the $200,000 payment and when he did so, he says he spoke with Ms. McPhee who confirmed there was relatively little work for the cross appeal compared to the work required on the appeal. I note that the factum on the appeal is 80 pages long and quite complex compared to the factum for the cross appeal which is only 10 pages long and is not complex. This also supports Mr. Bashir's evidence as to what he was told about the work required for the cross appeal. Mr. Bashir said that his understanding from their conversation was that the $200,000 deposit would cover the Lawyers' work on the appeal and cross appeal with Ms. McPhee never telling him otherwise.

• After the alleged oral agreement was raised in the Lawyers' materials, Mr. Bashir swore a supplementary affidavit where he acknowledges he had a discussion with Mr. Kim and Ms. McPhee on December 16, 2019. He said that at no time did Mr. Kim or Ms. McPhee tell him that the Lawyers would work on the appeal and cross appeal under the CFA. They did not discuss the CFA. The discussion focused on the appeal and cross appeal and they pressured him for a payment of $200,000. Based upon this call he remained of the view that the $200,000 was for their work on the appeal and cross appeal. The other Clients, Mr. Sharma and Mr. Teslia have given evidence that they too understood the basis of the retainer for the appeal and cross appeal being on an hourly basis with a $200,000 retainer. The payment of a $200,000 retainer is inconsistent with an agreement that the appeal and cross appeal would be conducted under the terms of the CFA.

• In her affidavit, Ms. McPhee explained the $200,000 payment as follows: "However, based on the legal fees and disbursements KSM had incurred both during and since the trial… and the limited quantum of payments Fund 1 had made since that time, we required the Applicants to provide a $200,000 payment." Mr. Kim describes it in similar terms. When cross examined, Ms. McPhee stated that this payment may have related to outstanding disbursements still flowing in from the trial and was not a retainer. However, the Clients have been asking for an accounting of payments they made for disbursements for approximately two years without success. They have provided evidence that shows that they have paid $920,779.54 to the Lawyers for disbursements, no more than $541,694 has been submitted to the courts by the Lawyers claiming disbursements, and if the disbursements the Clients paid directly are removed, the disbursements claimed by the Lawyers is reduced to $215,934. The Lawyers have provided some receipts in this record but they do not come close to adding up to $920,779. They say that they may have lost certain invoices and payment receipts during multiple moves they had and provide categories of documents they may have lost, but do not even estimate what amount these could be or provide sufficient detail. Therefore, the evidence that is before me supports the conclusion on a balance of probabilities that the $200,000 payment could not have been related to past disbursement amounts. It could also not have related to the disbursements on the appeal which were minimal.

• Mr. Bashir's evidence on what he says took place during the December 16, 2019 call was not undermined in any way when cross examined. He was not asked any questions that demonstrated any poor recall. He maintained that the bulk of the telephone call was in respect of how much time it would take to do the appeal versus the cross appeal and he was told that the bulk of the effort was around the appeal itself with minimal effort for the cross appeal.

• In her affidavit, Ms. McPhee stated that disgorgement of profits is a relatively rare remedy, and that there was no caselaw directly on point. To the extent the cross appeal was not straightforward, as this suggests, one could argue it may have made more business sense to conduct the appeals on a fee for service basis with an up-front sizable retainer. As well, it makes little sense to agree to conduct the appeal on a contingency since the Lawyers stood to gain nothing from it and the factum demonstrates the significant complexity of the cross appeal and the significant work that it required to address all the arguments made by the defendants/appellants.

• The Clients have raised issues that if proven could undermine the Lawyers' overall credibility. These are all set out in their factum and were also primarily relevant to the case in respect of the Clients' position that the CFA was not fair and reasonable for various reasons.

• When the Clients took the position on September 27, 2022 that there was no contingency fee retainer in respect of the appeal or cross appeal, Ms. McPhee wrote to them and said that they signed a retainer for 30 % of the settlement amount and made no reference to any oral agreement. In the multiple written communications since that where the Clients were seeking production of the relevant contingency fee agreement and other productions, no mention was made of this oral agreement. The Lawyers continually referenced the CFA as the basis for their entitlement to a contingency fee. The first time the alleged oral agreement was raised was in the Lawyers' response to this Application in Ms. McPhee's affidavit dated September 23, 2024.

• The Lawyers did not keep any contemporaneous notes and there are no internal law firm documents before me that describe any oral amendment to the CFA or the existence of a new oral contingency agreement with respect to the appeal.

[103] I add that over the course of their relationship there is evidence before me, in the approximately 3,000 pages of materials, that these parties had other conversations relating to their retainer agreement for the trial which they then each insisted were different.

[104] Given their acrimonious relationship and all of their disputes over the trial retainer, it is surprising that there is not one single contemporaneous email or even handwritten note documenting whatever their appeal arrangement was.

[105] I need not resolve the above conflicts in the evidence or determine whether any oral agreement was reached during the December 16, 2019 telephone call because as a matter of law, this alleged oral conversation cannot constitute an amendment to the CFA.

[106] The CFA that the Lawyers drafted had an entire agreement clause stating that there is "no representation, warranty, collateral agreement or condition affecting this Agreement except as expressed." If, after the CFA was executed, the parties subsequently agreed that it was to apply to the appeal and/or cross appeal, then it was the Lawyers' responsibility to document this in writing by way of a formal amendment to the CFA because any such alleged communications are expressly excluded from the CFA.

[107] As well, any such an oral agreement, whether it is an amendment to the CFA or is alleged to be a stand-alone contingency fee agreement is invalid (or at least unenforceable) because it does not comply with the clear in-writing requirement set out in the Act.

[108] Pursuant to s. 28 of the Solicitors Act, a lawyer shall not enter into an agreement where he purchases all or part of a client's interest in the action.

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. 2002, c. 24, Sched. A, s. 4.

[109] Pursuant to s. 28.1(1) of the Solicitors Act, a lawyer may enter into a contingency fee agreement in accordance with the requirements of this section which include it being in writing.

Contingency Fee Agreements.

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

(4) A contingency fee agreement shall be in writing. [Emphasis added]

[110] The in-writing requirement is mandatory and a solicitor may only enter into a contingency fee agreement if it is in writing pursuant to the clear wording of the Act: Peter B. Cozzi Professional Corporation v. Szrot, 2019 ONSC 1274 at para 42; Emam v. Dutton Brock LLP, 2018 ONSC 4852 at paras 75-77; Hall v. Tehseen, 2020 ONSC 3610 at paras 21-26.

[111] As noted, the in-writing requirement is also reflected in s. 1 of the Regulation which provided:

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.

[112] As also noted above, there are numerous other requirements set out in the Regulation which must be set out in the written agreement.

[113] In the cases Peter B. Cozzi Professional Corporation v. Szrot, at para 42 and Hall v. Tehseen, at paras 21-26 the courts concluded that the failure to reduce the alleged agreement to a signed agreement rendered it invalid or a bar to its enforcement. I note that in Hall, counsel had confirmed the contingency arrangement in a written letter to the client, the court fully accepted counsel's evidence that he had discussions with the client that covered most of what was set out in the Regulation and that the client agreed to pay fees on a contingency basis orally. (I note that there is no such evidence before me in this case.)

[114] However, even with these findings, the court declined to enforce the alleged oral contingency fee agreement concluding that the statutory requirement that agreements be in writing were sufficient reason to do so. The court was satisfied without a written retainer agreement; the court could not be satisfied whether the clients fully understood or remembered the detailed discussions they had concerning any contingency fee agreement or the protections under the Act and the Regulation.

[115] The Clients reference additional cases that have held that failure to comply with formal requirements renders a contingency fee agreement void, even where the deficiency is "relatively minor": Calles v. Yormak, 2023 ONSC 1248, at para. 50, citing Edwards v. Camp Kennebec (Frontenac) (1979) Inc., 2016 ONSC 2501, at paras. 29 and 30; and Du Vernet, Stewart v. 1017682 Ontario Ltd., 75 C.P.C. (6th) 295 (Ont. S.C.), at p. 301.

[116] In Edwards, the contingency fee agreement at issue was declared void, even though it was in writing and was signed. The defects were that: it did not say that the client had been advised that hourly rates could vary among solicitors; it did not say that the client could speak with other solicitors to compare rates as required by s. 2.3(ii) of the Regulation; it did not provide a simple example or any example that showed how the contingency fee was calculated as required by s. 2.6 of the Regulation: Edwards, at para. 28.

[117] Faieta J. began the analysis with s. 28 of the Solicitors Act that prevents lawyers from entering into an agreement where he purchases all of part of a client's interest in a proceeding.

[118] In his view, where an agreement does not comply with the Act and the Regulation, then it contravenes s. 28: para 27.

[119] He found the contingency fee agreement in that case void because it did not comply:

While some may view this conclusion [to void a contingency fee agreement for non-compliance with O. Reg. 195/04] as a harsh result, even though these requirements have existed for more than a decade, there is nothing in the Act or O. Reg. 195/04 that permits this court to waive compliance with these requirements. Where the Legislature has intended to allow the requirements for a CFA to be waived by the Court, it has expressly given such authority.

Further, the above regulatory requirements are for the benefit and protection of the public and, accordingly, public policy does not support relieving against a finding that the Agreement is void in these circumstances:

[120] There are important reasons why a contingency fee agreement must be in writing. It supports the underlying goals of clarity and transparency and as a result, fairness and reasonableness. Confusion and misunderstandings can occur even when agreements are in writing and even with the best of intentions.

[121] When an agreement is reduced to writing and presented to the client in draft, the client has the opportunity to review and consider it and ask questions. They may seek to negotiate it or they may decide they wish to retain another lawyer altogether who will offer them a better deal.

[122] No one has presented any case law suggesting that an alleged oral agreement, like the one the Lawyers reference, could be valid (let alone enforceable) and as noted, the cases on point are to the contrary.

[123] Failure to document a contingency fee agreement in writing is not a minor or technical breach. It breaches a fundamental mandatory provision of the Act. Without a written agreement, the other requirements in the Regulation cannot be met since the Regulation sets out extensive matters that have to be included in the written agreement. Thus, in such cases there is a complete failure to comply with both the requirements set out in the Solicitors' Act and the Regulation.

[124] In this case, it would have been a simple matter for the Lawyers to have emailed the Clients confirming the alleged oral agreement that the existing CFA would apply to the appeal and asking them to sign an agreement amending the CFA or documenting a new agreement. If there had been any confusion during their oral communications, this would have cleared things up and permitted the Clients to consider their position in possession of an agreement that set things out clearly.

[125] For reasons that are unclear they did not do so.

[126] In the Lawyers' affidavit material, when it came to the CFA, they conceded that they should have put it into writing earlier. They should have also done this with the alleged oral agreement from the December 16, 2019 conversation.

[127] Thus, while it is clear that the Clients retained the Lawyers for the appeal there is no valid (or enforceable) contingency fee agreement in respect of that retainer or for any steps following the trial.

[128] Finally, although the issue of the alleged oral agreement was raised in the materials and in argument, the Lawyers have brought no motion or application for the enforcement of any oral contingency fee agreement. Rather, the proceeding before me is solely brought by the Clients who raised issues concerning the enforcement and interpretation of the CFA alone. Therefore, the issue of the validity or enforceability of the alleged oral agreement is not even properly before the court.

Issue 3: Even if the CFA was not the retainer agreement for the appeal, and there is no valid contingency fee agreement in respect of the appeal, does the wording of the CFA nevertheless entitle the Lawyers to a 30% contingency fee on the increased award made by the Court of Appeal? Does the wording of the CFA entitle the Lawyers to a 30% contingency on the settlement?

[129] The Lawyers raise arguments that amount to the proposition that even if the CFA related only to the trial and the alleged oral agreement does not constitute a valid or enforceable contingency fee agreement, they can nevertheless read parts of the trial CFA to entitle them to a contingency fee in respect of work done beyond the trial retainer.

[130] I reject these arguments.

The Judgment on Appeal

[131] The Lawyers reference the following wording in paragraph 6 which I have set out in bold:

6. KSM shall be paid its fees upon the following contingency:

In the event the Clients are successful in obtaining judgment in the trial of this Action or in obtaining a settlement that benefits the Clients. The fees shall be paid by a lump sum payment or payments out of the proceeds of any judgment or order awarding damages, interest or costs to the Clients or any settlement which includes payments in favour of the Clients.

[132] I first note that the words "as varied on appeal" do not appear in s. 6 of the CFA.

[133] In rejecting the argument that the contingency fee agreement for the trial applied to the judgment on appeal in Aylmer, Horvat J. also referenced the lawyer's failure to include specific language that the contingency fee would apply to a judgment on appeal at para. 48:

HP, as the drafter of the Agreement, could have specifically included a judgment obtained on appeal as one of the payment triggers in paragraphs 20, 21 and 23 by either adding the word "appeal" so that the paragraphs read "judgment at trial or appeal" or by excluding the word trial so that the contingency in the paragraphs simply read "judgment."

[134] The Lawyers argue that all the appeal accomplished was that it increased the judgment at trial. Therefore, pursuant to the plain wording of the CFA, the Lawyers should be paid the increased amount because it was still part of the judgment at trial, even though this is because it was varied by the Court of Appeal.

[135] The Lawyers reference the Notice of Cross Appeal that asked that the Order in respect of the quantum of disgorgement in the trial judgment be set aside and that an order be granted in its stead, increasing the amount of the disgorgement to USD $29.5 million. In paragraph 118 of the Court of Appeal decision, the court allowed the cross appeal. This means that the court set aside the trial judgment, as requested in the Notice of Cross Appeal and then increased that award.

[136] Further, the Order in respect of the appeal specifically states that paragraphs 7, 10 and 11 of the Judgment at trial were set aside and the form of order in the Court of Appeal order substituted in their stead. I note as well that all of the court file numbers are on the Court of Appeal judgement as entered, including the Superior Court file number. This arguably supports the Lawyers' argument that since the CFA entitled the Lawyers to a contingency on the trial award, and what the Court of Appeal did was increase that very award, the CFA objectively interpreted, entitled the Lawyers to the increased award.

[137] The Lawyers' argument here is essentially that by operation of law, the increased award that the Court of Appeal made became the new trial award such that the CFA would apply to it even if the CFA was only a retainer for the trial.

[138] This argument fails to take into account the fact that the Lawyers have legal expertise but the Clients do not.

[139] It also fails to take into account the surrounding circumstances, which are the entire regulatory scheme, of which the parties objectively would have been aware, that requires the utmost clarity in contingency fee agreements.

[140] As stated in Van Brabant Estate, at para. 37:

The lawyer has a special knowledge about the law and knows the importance of clarity in contracts. Therefore, we must expect lawyers to write their Retainer Letters with clarity. If they do not, they should not benefit.

[141] See also Fryer, at para. 22, where the court stated:

What is routine and clear to an experienced practitioner, especially in a specialized legal context, such as the one in this case, may not be correctly understood, or appreciated, by a prospective client, even a very intelligent prospective client such as Ms. Fryer.

[142] It would not be within the Clients' reasonable expectations that when they signed a retainer in respect of the trial, that it would nevertheless apply to work done beyond the trial.

[143] I reference s. 28.1(2) of the Solicitors Act which says that:

(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. 2002, c. 24, Sched. A, s. 4. [Emphasis added.]

[144] I also reference s. 2 of the Regulation again that provides that the contingency fee agreement must include "a statement of the basic type and nature of the matter in respect of which the solicitor is providing services to the client."

[145] The matter in which services were provided pursuant to the CFA was the trial of the Action. Therefore, remuneration that is permitted pursuant to s. 28.1(2) of the Act and s. 2 of the Regulation is related to the successful completion of the trial and not steps taken beyond that.

[146] The Lawyers' interpretation is also commercially unreasonable.

[147] A client with a similar retainer agreement that does not reference an appeal, dissatisfied with the lawyers who conducted the trial, could hire a different lawyer for the appeal and enter into a contingency agreement with that new lawyer. That lawyer could win the appeal and then both lawyers could conceivably have a claim to a contingency on the increased award if the Lawyers are right that by operation of law, a judgment of the Court of Appeal increasing the judgment then entitles lawyers who conducted the trial to a contingency fee on the increased award.

[148] The Lawyers argue that this is hypothetical because they were the ones who did conduct the appeal so there is no danger of this outcome. Nevertheless, the CFA must mean the same thing whether the Lawyers conducted the appeal or not.

[149] If the Lawyers are right, that a judgment of the Court of Appeal entitles the trial lawyer to the contingency on the increased award by operation of law, in cases where different lawyers conduct the trial and the appeal, there is every likelihood that the overall recovery by the client would be less than the overall recovery that both lawyers received if they both charged 30%.

[150] The regulatory scheme does not permit recovery to a single lawyer to be greater than the recovery by the client. Section 28.1(5) of the Solicitors Act (then and now) provides:

(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. 2002, c. 24, Sched. A, s. 4.

[151] While this provision would not apply to the outcome of multiple contingency fee agreements together, the clear policy of the Solicitors Act is that clients should not receive less than their lawyers.

[152] If the Lawyers are correct, it would also result in significant pressure on clients to keep the same lawyer for the appeal or run the risk of having to pay two lawyers a contingency on the outcome of the appeal.

[153] Even though the Notice of Cross Appeal and Order of the Court of Appeal impact the trial judgment, the result on the appeal cannot be conflated with the terms of the solicitor/client relationship and the terms upon which the client engages counsel and agrees to pay fees. They are separate and distinct issues. Parsing the words of the Notice of Cross Appeal or the Order of the Court of Appeal would create a perverse incentive (as well as a potential conflict and breach of duty) on counsel who are the ones who draft these documents.

[154] When it comes to their agreement on fees, the court need look no further than the written CFA when read as a whole in light of the surrounding circumstances.

[155] Although the wording in section 6 of the CFA can be read in the manner suggested by the Lawyers if considered in isolation, when read in the context of the CFA as a whole which was a trial retainer, and taking into account the strong underlying policy of clarity and transparency which permeates the regulatory scheme, and the Lawyers' greater legal expertise and fiduciary duty to the Clients, the CFA cannot and should not be read to entitle the Lawyers to a contingency on the increased award.

[156] As a final point, I reject the Lawyers' argument that this results in a commercial absurdity. The Lawyers argue that, had they lost both the appeal and cross appeal, they would have not been entitled to any payment. Therefore, unless the CFA is read to relate to the appeal or any settlement, it is unfair because they then took all the risk and would have achieved none of the upside.

[157] This is the nature of working under a contingency fee agreement where there is a tremendous opportunity for gain, but a considerable downside risk. That practicality does not change the rules with respect to absolute clarity to clients in contingency fee agreements. And it does not change the express wording of s. 28.1(2).

[158] In any event, the opposite is true in this case. Had they lost the appeal and the cross appeal, then they would have been entitled to be remunerated on a fee basis in this situation at least for steps beyond the conclusion of the trial.

The Settlement

[159] As noted, after the Supreme Court of Canada refused to grant leave to appeal, and in order to avoid enforcement proceedings, the Clients asked the Lawyers to engage in settlement discussions with the defendants to avoid the potential cost challenges relating to collecting the judgment and they signed a settlement for USD $40 million to be paid in four instalments over ten months. This represented a small reduction but ensured the Clients could collect it.

[160] In their written argument, the Lawyers say that the CFA objectively applies to any settlement "freely entered into to compromise the trial judgment as varied on appeal." [Emphasis added.]

[161] I again note that the words "as varied on appeal" appear nowhere in the CFA.

[162] The Lawyers reference the following paragraphs of the CFA in support of their argument:

a) The Lawyers only partially cite the following wording in Paragraph 6:

The Clients will pay a contingency fee in respect of "any settlement that benefits the Clients" &

The fees shall be paid out of the proceeds of "any settlement which includes payments in favour of the [Clients]."

In my view, these words are cited out of context. Section 6 is set out in full above and it has as a precursor to the payments the following language: "In the event the Clients are successful in obtaining judgment in the trial of the Action or obtaining a settlement that benefits the Client." In my view, this language limits the payment to judgments in the Action or settlements achieved during the trial retainer for reasons that I will explain more fully below.

b) Paragraph 7:

The fees shall be calculated by applying a percentage of

30% of the amounts "recovered by the [Applicants] under any judgment(s) or settlements(s)"

This is just a manner of calculating the contingency fee and does not relate to a triggering event.

c) Paragraph 10

In the event recovery is by way of a "structured settlement", the Lawyers' fee shall be calculated based on the "funding amount of the structure."

Again, this is just a manner of calculating the contingency fee and does not relate to a triggering event.

d) Paragraph 21:

The Clients hereby authorize KSM, in its discretion, to enter into negotiations with the Defendants for the purpose of reaching a settlement.

This authorizes the Lawyers to conduct negotiations but for reasons I will explain, only during the trial retainer.

[163] The Lawyers argue that, since the trial had been won, and there was a pending appeal, it would make no sense for the parties to include this language unless the retainer also applied to settlements that may have been arrived at after the judgment in the Action.

[164] There are several difficulties with the Lawyers' argument.

[165] First, I have found that the CFA was a retainer for the trial only. Again, it references the trial, and the Action, as well as the court file number for the trial. The above paragraphs must be read in light of the retainer for the specific matter, which was the trial of the Action, and not the appeal. By the time of the settlement, the CFA was over in terms of performance apart from collection of the contingency for the award at trial.

[166] When reading the agreement as a whole, the paragraphs that reference the contingency being paid in respect of any settlement mean any settlement reached in accordance with the retainer which was for the Action only and prior to the appeal. I again reference s. 28.1(2) of the Solicitors Act that permits a contingency fee that is based upon the "successful disposition or completion of the matter in respect of which services are provided." In this case, services rendered pursuant to the CFA were in respect of the trial and as such the wording in the CFA in respect of the contingency on any settlement should be limited to a settlement arrived at in respect of services during the trial retainer. Section 2 of the Regulation also supports this. Section 6 of the CFA must be read in light of these statutory provisions and in that light.

[167] Second, as noted repeatedly, although the CFA was executed on or about October 10, 2019, it was backdated by the Lawyers to August 25, 2018. Again, having backdated it in this way, from the Lawyers' perspective who drafted it, it was deliberately as if it was made at that time, when there was no appeal yet pending and the trial had not yet commenced. And recall, the CFA was being provided to Conway J. at her request as part of the cost assessment for the trial. It would be odd for a trial retainer to not have a provision permitting the lawyer to enter into negotiations and earn a contingency if they successfully did so. As of August 25, 2018, there could have been a settlement of the action which required a structured settlement. Here I do construe the CFA against the Lawyers on the basis of contra preferentum with respect to the effective date for the purposes of this issue. They cannot resile from their own backdating of the CFA.

[168] Third, for the same reasons as above, the CFA itself would have reasonably been understood by the Clients to be a retainer for the trial only. Although the wording in the above paragraphs can be read in the manner suggested, when read in the context of the agreement as a whole, and taking into account the strong underlying policies of clarity and transparency which permeate the regulatory scheme, and the Lawyers' responsibility to be clear, it cannot be read on an objective basis to entitle the Lawyers to a contingency on the settlement reached which was after the appeal and which was after the trial retainer was already over. This would not be in accordance with their reasonable expectations as to what the CFA applied to.

[169] Fourth, it would be an odd and commercially unreasonable result that the Lawyers would have no entitlement to a contingency for their work on the appeal because they do not have a contingency fee agreement in respect of it, but by negotiating a settlement of the appeal award that reduced it slightly, they would then be entitled to an additional $6,000,000 contingency fee.

[170] I also apply contra proferentem here to the extent that there is any ambiguity as to whether settlement means any settlement at any time, or whether it means a settlement of the Action during the CFA retainer which related to the trial alone.

Issue 4: If the CFA does not apply to the increased damages awarded at the appeal, or the settlement, what is the fee to which the Lawyers are entitled for the appeal and additional work that they claim outside the trial retainer including the application for leave to appeal to the Supreme Court of Canada?

[171] If the CFA does not apply to the appeal or the settlement, then the onus is on the Lawyers to establish the fees to which they are entitled on a quantum meruit basis: Lima v. Singer Kwinter, 2019 ONSC 4064 ("Lima (ONSC)"), at para. 15, rev'd on other grounds, 2021 ONCA 47 ("Lima (ONCA)").

[172] In such circumstances, the court should conduct a holistic assessment, considering various factors: Lima (ONSC), at para. 15. These include: (a) the monetary value of the matters in issue; (b) the importance of the matter to the client; (c) the time expended by the solicitor; (d) the legal complexity of the matters to be dealt with; (e) the degree of skill and competence demonstrated by the solicitor; (f) the degree of responsibility assumed by the solicitor; (g) the results achieved; (h) the ability of the client to pay; and (i) the client's expectation as to the amount of the fee: Lima (ONSC), at para. 15.

[173] The Clients rely on this case for the proposition that the Lawyers should be paid a reasonable hourly rate taking into account the considerations therein. They say that the Lawyers should be paid no more than $500,000.

[174] The Lawyers rely on the same case in support of a 25 to 30 % contingency fee. In the alternative, the Lawyers request $1,404,180.30 for their work on the appeal, $31,543.95 for their work on the leave to appeal plus $10,141.75 for their work addressing currency issues.

The Clients' Expectations and the Alleged Oral Agreement of December 16, 2019

[175] In Lima (ONSC), the parties had entered into a written contingency fee agreement but it failed to comply with the Solicitors Act because it entitled the lawyer to partial indemnity costs awarded as well as the contingency on the damage award in contravention of then s. 28.1(8) of the Solicitors Act.

[176] The client brought a proceeding seeking reimbursement of the fees charged on the basis that the contingency fee agreement was unenforceable or in the alternative the return of the costs portion of the fees charged.

[177] The lawyer conceded that the contingency fee agreement was unenforceable and so the matter proceeded as a quantum meruit assessment of the fees to which the lawyer was entitled.

[178] As noted, the court awarded the lawyer 25 % of the damages' settlement.

[179] In Lima, both parties acknowledged they had entered into the written agreement and the client understood that the contingency fee agreement would apply. The court found, and the Court of Appeal agreed that an assessment based on a percentage of the settlement amounts was "clearly the mode of quantification contemplated by [the lawyer and the client.]" Lima (ONCA) at para 64.

[180] Notably, the consequences of failing to comply with s. 28.1(8) were spelled out in s. 28.1(9) which provided that any agreement that failed to comply with s. 28.1(8) was unenforceable unless approved by a justice of the Superior Court.

[181] There are no similar provisions with respect to an alleged contingency fee agreement that has not been reduced to writing. As noted above, s. 28 of the Solicitors Act precludes a solicitor from entering into an agreement by which the solicitor purchases all or part of the client's interest in the action. Section 28.1 then permits the lawyer to enter into a contingency fee agreement in accordance with that section which requires such an agreement to be in writing.

[182] While the case law references both the concept of enforceability and validity, in my view, the failure to document a contingency fee agreement in writing does not merely render it unenforceable; it is invalid and cannot come into existence in the first place.

[183] I have already elaborated on the policy reasons as to why this criteria is paramount.

[184] It is one thing to find that a written contingency fee agreement may ground the clients' reasonable expectations when it merely fails to comply with minor technical requirements, but all parties agree they entered into it. It is quite another to make such a finding in respect of an alleged oral agreement that fully fails to comply with any part of the Solicitors Act or the Regulation and which is disputed by the client altogether and where there is no supporting documentation.

[185] To find that such an alleged oral agreement can inform the client's reasonable expectations that they would have to pay a percentage recovery of a damage award or settlement for the purposes of a quantum meruit assessment would permit lawyers to do indirectly what they cannot do directly: rely on an alleged oral contingency fee agreement to impact the fees to which they are entitled.

[186] If this were permitted in this case, it would essentially gut the Solicitors Act requirement that contingency fee agreements be in writing because lawyers who fail to have an executed written agreement could still seek effective enforcement through a quantum meruit assessment where they still sought and obtained a percentage of the award or settlement. It would also gut all the other requirements set out in the Regulation that must also be set out in writing. This would thus undermine the policy objectives of clarity and transparency.

[187] There is no public policy reason to permit this since lawyers, who are well aware of the requirements of the Solicitors Act, can avoid any perceived injustice or unfairness to them by simply complying with the Solicitors Act, putting their agreements in writing, taking a stand with clients who give them the run around and/or by not representing any such clients.

[188] This is not a punishment to the Lawyers and it does not reflect any conclusion that they have committed any misconduct in this case. It is simply to recognize that the Lawyers can have no reasonable expectation to be remunerated by way of percentage of the settlement or judgment, and the Clients can have no reasonable expectation to pay a percentage of the settlement or judgment, where any such alleged agreement has not been reduced to writing given the clear wording and policy objectives of clarity and transparency in the Solicitors Act.

[189] It is unclear what the basis would be for awarding a percentage of the recovery without some form of valid written contingency fee agreement, or even a contemporaneous letter to the Clients that could be relied upon to show that this was their reasonable expectation. The mere fact that they had a contingency fee agreement for the trial would be insufficient in this regard. Notably, the Lawyers are already being remunerated by way of contingency in respect of the trial retainer in the approximate amount of $6,000,000, and this will compensate them for the assumption of the very real financial risk they took over many years to carry the matter through to trial. The excellent work they did on the appeal or the results achieved would also not reasonably ground any expectation that they would be entitled to a percentage recovery of the appeal or the settlement. Lawyers are routinely retained for appeals where they do excellent work and even settle before the hearing achieving significant outcomes for clients and yet there are no examples of any cases where such lawyers may claim a percentage recovery in the absence of a written contingency fee agreement.

[190] In Hall, even with the findings that counsel had written a letter to the clients outlining the 30 % contingency fee arrangement, that counsel had explained the relevant parts of the Regulation, and that the clients understood this, the court still did not award the 30 % contingency fee or any percentage of the settlement.

[191] While the court in Hall did take into account the letter by the lawyer as part of the client's expectation and awarded the docketed amount with a small premium to recognize a good result, this is distinguishable because there is no written letter to the Clients documenting the alleged oral agreement that would support any reasonable expectation on their part. Indeed, on June 13, 2019 the Lawyers wrote to the Clients saying that they would need a retainer for the cross appeal and appeal "which will be sent under separate cover." The Clients would have reasonably expected that something in writing would be sent and yet this did not occur. As well, when Mr. Sharma was cross examined about their dealings over the original CFA, he stated "an agreement is something that is put into writing and formalized." As well, there is no evidence that the Lawyers explained anything in the Regulation during the alleged oral conversation.

[192] In my view, the legal issue is sufficient to dispose of whether the Lawyers should be entitled to a percentage of the settlement on the basis of the Clients' reasonable expectations related to the alleged oral agreement. They are not.

[193] In the alternative, it is the Lawyers' burden to prove their entitlement on a quantum meruit basis and to address the Clients' reasonable expectations and other factors all on a balance of probabilities. I conclude that the Lawyers have not proven that any oral agreement existed that impacted the Clients' reasonable expectations.

[194] The Clients have cited caselaw that supports the conclusion that the court is entitled to weigh the evidence, evaluate credibility and draw any reasonable inferences from the evidence when it considers Applications as well as in summary judgement motions: Dubblestyne et al v. Town of Oakville, 2021 ONSC 2678 at para 8. The Clients also cited Parkland Corporation v. Caledon Fuels Inc., 2024 ONSC 2361 at paras 21-22 for this proposition. This is based on Hyrniak v Mauldin, 2014 SCC 7, which held that fairness and justice do not require "painstaking" procedure and viva voce evidence in all cases, even those where there is some conflict in the evidence. The paramount consideration is whether the process employed can achieve a fair and just outcome.

[195] The parties have provided materials which I have fully reviewed in addition to transcripts of cross examination.

[196] The evidence the Lawyers have proffered as to the alleged oral agreement does not meet the burden on them.

[197] Nor have they raised complex issues or provided a sufficient evidentiary basis to direct that this issue proceed to an oral hearing. As noted, the evidence consists of: no more than a few sentences on the alleged agreement which consist of bald statements of an alleged oral agreement not documented in any way over a five-year period; no written confirmation to the Clients at any time; where the Lawyers did not provide a description of what was actually said during the meeting that the Lawyers conclude resulted in an agreement; where the alleged agreement is inconsistent with the $200,000 payment the Lawyers required from the Clients; and where the Lawyers first raised the issue of this alleged oral agreement in response to this Application despite there being ongoing written communications after the settlement about the basis for the claimed contingency fee for some time. See paragraph 105 above.

[198] I have been able to make a proper and just determination of this issue on the basis of the materials before me. I conclude that the Lawyers have not proven the existence of any oral contingency fee agreement in respect of steps after the trial that would impact the Clients' reasonable expectations.

The Monetary Matters In Dispute and The Importance of the Matters to the Client

[199] The monetary matters in dispute were significant. The appeal sought dismissal of the Action which would have resulted in the Clients losing the judgment altogether which was for approximately $17.5 million. The cross appeal sought an increase in the amount of disgorgement to $29.5 million.

[200] The matters at issue were clearly important to the Clients who had a downside risk of losing the entire judgment and an upside possibility of doubling it.

The Legal Complexity

[201] The appeal and cross appeal were heard over two days and as noted the trial lasted 28 days.

[202] The factum filed by the Lawyers on the appeal is 80 pages long and demonstrates the significant complexity. It responded to the various issues raised by the defendant appellants including whether the trial judge erred in concluding that the Clients could sue for breach of fiduciary duty in connection with the sale of Xtreme Labs, whether the trial judge applied the correct test for "knowing assistance" in a breach of fiduciary duty as against one defendant and whether she made palpable and overriding errors in finding that he committed that tort, whether the trial judge made palpable and overriding errors in finding that this defendant unlawfully induced breach of contract by others and engaged in unlawful means conspiracy, whether the trial judge had correctly held the defendants jointly and severally liable, whether the trial judge used a reasonable methodology and the best evidence available to measure the Clients' losses on their sale of Xtreme Labs, whether the trial judge acted fairly in allowing the Clients to elect a disgorgement remedy and whether the trial judge had correctly held certain defendants liable for punitive damages.

[203] The factum also involved extensive review of the evidence from the 28-day trial which means the Lawyers would have been reviewing those transcripts to obtain these relevant parts. It also involved extensive review of relevant caselaw.

[204] The factum filed by the Lawyers on the cross appeal was 10 pages long. The issue therein focused on the trial judge's decision to limit the disgorgement award to the profits that would correspond to Fund I's interest in the entity in question. The Clients position, as advanced by the Lawyers argued that the correct approach was not to limit the disgorgement award to the Clients' losses, but rather that it should apply to any profits received by the faithless fiduciary to advance the policy of equity, preserve the integrity of the fiduciary relationship even if this was a windfall to the beneficiary.

The Results Achieved

[205] The 55-page decision of the Court of Appeal indicated that the appeals raised "important issues about remedies and, more importantly, acceptable standards of conduct in corporate Canada."

[206] The result achieved was a complete victory by the Lawyers. They achieved exactly what was set out in their Notice of Cross Appeal. That is, they increased the disgorgement award to $29.5 million, which was more than a doubling of it. The Court of Appeal agreed that the disgorgement award should be increased to "achieve its deterrent objective": para 11.

[207] This also substantially increased the amount of pre-judgment interest payable by over $1.5 million USD.

[208] They also achieved a dismissal of the appeal.

The Degree of Skill and Competence Demonstrated by the Lawyers

[209] The Clients have raised no issues as to the skill and competence of the Lawyers in terms of the work that they did to achieve the outcome.

[210] My review of the materials before me also supports the conclusion that the Lawyers took reasonable and appropriate steps to address the appeal, advance the cross appeal and address the leave to appeal to the Supreme Court of Canada as well as enforcement through the settlement.

[211] It is uncontradicted that following the appeals, Ms. McPhee met with one of the Clients who was very pleased at how the cross appeal had been presented and received by the court.

[212] There is no basis to draw any conclusion other than the conclusion that the Lawyers demonstrated significant skill and competence.

The Degree of Responsibility Assumed by the Lawyers

[213] The Lawyers took some risk in carrying the matter from the conclusion of the trial to settlement.

[214] Apart from the $200,000 payment in December 2019, the Lawyers did not receive any payments on account of their appeal work on an ongoing basis.

The Time Expended by the Lawyers

[215] As set out in Lima (ONSC) this factor involves the determination of the actual hours spent by the Lawyers and a determination of the reasonableness of such hours: at para 73 citing Burgess v. Dauncy, [2005] O.J. No. 810 (ONCA).

[216] The work the Lawyers did is described in both the dockets and the Bill of Costs filed with the Court of Appeal.

[217] The Lawyers' dockets are set out in Ms. McPhee's affidavit and were provided to the Clients on June 10, 2024.

[218] The dockets set out the following type of work done for the appeal: reviewing the trial decision; work on the Notice of Cross Appeal which included research on issues including corporate veil, disgorgement, fiduciaries, knowing assistance, permissible inferences and evidence, inducing breach of contract, tort damages at large, joint and several liability, punitive damages, prejudgment interest, memos; review of the defendants' Notice of Appeal; meetings among team members; reviewing the defendants' factums, researching cases cited by the defendants, research to respond to defendants' factum; attending case management conferences; developing a theory for the appeal and cross appeal; working on the appeal and cross appeal factum; communications with the Clients and receiving comments on the cross appeal factum; review of the trial transcripts to look for relevant excerpts; review of the trial file; review of the defendants' appeal documents; team calls to review the Clients' factums, revisions to the factums; discussions regarding compilation of the Compendium and preparation of same; review Appeal Books and the defendants' Compendium; preparation and finalization of the Books of Authority; updating factum footnotes and Compendium index; summarizing opposing facta; drafting appeal facta chart re: arguments and responses; strategy meetings for appeal submissions; additional review of transcripts, cases and all other materials including the trial decision, memos, facta and Compendia prior to the argument of the appeal and cross appeal; preparing oral submissions; searching any recent relevant case law and updating research memos; noting up the defendants' cases; preparing outlines for the appeal argument; attending appeal; preparation of cost submissions for the appeal; researching r. 49 offer in appeal cases; reviewing cost outlines; reviewing dockets for the preparation of the costs outline; editing submissions; updating footnotes for the schedules to cost submissions; reviewing defendants' cost submissions for the appeal and researching cases and awards; working on reply cost submissions; reviewing appeal cost decision.

[219] The Bill of Costs submitted to the Court of Appeal set out similar, although more concise categories being: research; drafting and preparing Notice of Cross-appeal; reviewing Notices of Appeal; research for moving factum on Cross Appeal; correspondence with the court and opposing counsel; reviewing appellants' moving facta; researching, drafting and preparing responding facta on trial appeals; researching drafting and preparing moving factum on cross appeal; reviewing Appellant's responding facta; case management attendances and related tasks and preparing for same; preparing for hearing of all appeals, including research, preparation of oral argument, and preparation of argument aids; attendance at the appeal.

[220] These general tasks are reasonable within the context of this appeal and in any event, there is no criticism over the type of work that the Lawyers say they had to do to defend against the appeal and advance the cross appeal.

[221] There is no dispute that the Lawyers' docketed time for the appeal is $841,186.13.

[222] Notwithstanding the dockets, the Clients' position is that the Lawyers should only be paid $500,000 because the Court of Appeal awarded more modest costs on the appeal in the amount of $300,000. However, this applies to party and party costs that an opposite party must pay. Costs awarded by the Court of Appeal do not necessarily have any bearing on a client's obligation to pay a lawyer for the value of his or her services.

[223] The Clients also say that there is no evidence from which I could award any amount other than what is actually docketed as any additional amounts are unsubstantiated.

[224] The Clients also argued that the Lawyers' time was overstated.

[225] The Clients rely in part on Conway J.'s comments in respect of the Lawyers' docketing practices. However, Conway J.'s decision related to the costs that the opposite party could expect to pay, not the costs that a client could expect to pay its own lawyer. As well, it provided no analysis of the appeal docketing.

[226] In any event, the Clients provided limited submissions on their concerns about the appeal dockets which they say is based on their "cursory" review. They merely point out that the Lawyers spent a total of 948.15 hours for review of the defendants' facta and research and drafting of responding facta in addition to a further 628 hours for preparing for the hearing of the appeal including research and preparation of facta. What they have done is collapsed the various categories of work that the Lawyers have described in their dockets into two categories which is an unfair representation of the work that was done.

[227] In any event, they never set out in their own evidence any concerns about these matters. They also asked the Lawyers no questions about these matters on cross examination. They did not even provide sufficient argument on why these amounts must be inflated in the context of the complex case in a high stakes appeal and the arguments that had to be made. While it is up to the Lawyers to prove their quantum meruit claim, challenging the Lawyers' docketed time based upon cursory review without grounding such criticism in the context of the case is insufficient assistance to the court.

[228] As well, it is somewhat unfair to raise this only in argument, without setting such concerns out in their own evidence first.

[229] The Lawyers did not have any opportunity to understand, let alone respond to the kinds of issues raised in argument about their dockets. And the dockets are so lengthy that it would have been unreasonable to expect the Lawyers to go through the minutiae of explaining every single line in their evidence when no issues were raised in the Clients' evidence.

[230] In Lima (ONSC), the lawyer was challenged on alleged problems with the dockets and given an opportunity to explain: para 87.

[231] The stakes were very high and it would be understandable that the Lawyers would spend considerable time to guard against the loss of what had been achieved at trial and to even seek to double it as set out in the Notice of Cross Appeal.

[232] The Clients raised no issues in respect of the billable rates in their own evidence, did not raise any issues regarding the Lawyers improperly attending meetings together or any other issues regarding the dockets such as alleged duplication or work being improperly done by lawyers who were too senior.

[233] There is affidavit evidence before me as to the additional amounts claimed by the Lawyers for amounts not docketed.

[234] The Clients also say that there is no evidence from which I could award any amount other than what is actually docketed as any additional amounts are unsubstantiated.

[235] Regarding additional undocketed time, Ms. McPhee has given evidence that she was advised by one of their lawyers, Micheal Spencer, and verily believes, that he tracked his own hours in the amount of 235.5 and did not enter them into his time-making system. His time represents $252.809.25 based on his hourly rate of $950. The Clients have not challenged the evidence that Mr. Spencer worked on the appeal or raised any issues as to his billable rate. I have reviewed the Lawyers' dockets and there is no time docketed for Mr. Spencer which does support the conclusion that his work on the appeal was not docketed.

[236] Mr. Kim argued the appeal with Ms. McPhee. Mr. Kim did not typically keep dockets on matters that he considered contingency matters. Ms. McPhee estimates that Mr. Kim spent at least 200 hours in relation to the appeal and cross appeal which represents fees of $214,700 at his then hourly rate of $950. She did not provide any explanation as to how she made this estimate or any back up documentation such as notes or other records kept by Mr. Kim.

[237] Mr. Kim provided an affidavit where he said that he agreed with the contents of Ms. McPhee's affidavit but he also did not provide any back up documentation or notes. I note as well that he did argue the appeal as reflected on the appeal decision. I have reviewed the Lawyers' dockets and there is no docketed time for Mr. Kim which confirms that he did not enter his time onto their docketing system even though he clearly worked on the appeal. As well, the Bill of Costs submitted to the court did note Mr. Kim's work on the appeal.

[238] Ms. McPhee also says she spent at least 130 hours preparing for the appeal and cross appeal that were not included in the dockets. This represents $95,485 at her then rate of $650. She did not provide any back up documentation or other support for this statement.

[239] Ms. McPhee's affidavit sets out that the total of docketed and undocketed time is $1,404,180.30 in time on the appeals and cross appeal taking into account the above.

[240] The Clients complain that the Lawyers did not provide enough evidence in support of these amounts to permit effective cross examination and that since the time was not docketed it was the Lawyers' onus to provide additional evidence in support apart from the affidavit evidence.

[241] The Clients rely on the case Monkhouse Law v. Belyavsky, 2024 ONSC 4970. Monkhouse was an assessment conducted after a client terminated the law firm and retained another lawyer to proceed with the matter. The lawyer sought to have the fees determined on a quantum meruit basis.

[242] The court made comments about the failure of the lawyer to provide supporting documentation to justify the reasonableness of the time docketed and to establish that the work was necessary.

[243] However, a significant distinguishing factor is that in Monkhouse, there was no evidence from the lawyers who worked on and had carriage of the file or any professional who worked on it. The court noted that it was a straightforward employment matter where the law firm had only prepared a demand letter and a Statement of Claim and billed $25,163.63. There were only affidavits from an articling student who was not at the firm at the relevant times and an associate who had never worked on the file. These affidavits were of limited assistance to the court in assessing the account.

[244] Additionally, in Monkhouse, the articling student did not indicate the source of her information and belief which was contrary to r. 39.01(4), which caused the court to place less weight on it.

[245] This is not the case here. There is an affidavit from Ms. McPhee and Mr. Kim, two of the principal lawyers who conducted this case. Ms. McPhee's affidavit in regard to Mr. Spencer complies with r. 39.01(4).

[246] There were many other concerns in Monkhouse including that there was a generic description of "correspondence" which covered most of the docketed time and which covered such a broad range of activities that it was meaningless. This is not the case here as can be seen from the summary of the docketed time above which references specific matters relevant to the appeal on its face.

[247] As well, the articling student offered opinion evidence that the lawyers were effective in working on the files and assisting clients. As such the judge was not satisfied that the work was done with sufficient skill and competence because there was no direct evidence. Additionally, and notably, in Monkhouse, because the lawyer had been terminated and therefore had not achieved any result, it would have made it more difficult to conclude that the work had value in the absence of this kind of direct evidence from the lawyers who worked on the file. This is not the case here as these Lawyers took this appeal to completion and it is a matter of record that they achieved a tremendous result which could not have been achieved without sufficient skill and competence.

[248] I note that in Lima (ONSC) the court was also faced with a situation where the lawyers had not docketed all their time because of their belief they were being provided pursuant to a contingency fee agreement. The lawyer reviewed the file, estimated the amount of time each task would have taken and produced reconstructed dockets. The court concluded that the time estimates were reasonable for the nature of the services provided: paras 82-86. This is not entirely the same as in this case the dockets have not been reconstructed, only ballpark numbers for additional undocketed amounts, but it does show that other courts have accepted that sometimes dockets do not reflect all the time spent by lawyers.

[249] I add that the Clients also did not challenge the Lawyers' evidence on the undocketed time they spent through cross examination. Rather, they engaged in a cursory cross examination where they asked limited questions related to the firm's obligation to have the time entered on their system:

178 Q. Thank you. Just before I leave this subject matter, you say throughout your affidavit in various places, that you and others at your firm under-docketed. Do you recall those references.

A. I do

180. Q Right. When I refer to "submit", that is the same concept as "enter" the dockets. Does that qualify?

A. Thank you.

181. Q And I take it that, to the extent either you, Mr. Kim, or others at your firm failed to keep dockets or to enter them in a timely manner, that is something for which your firm is solely responsible, correct?

A. Yes, the firm was solely responsible for entering dockets.

[250] The evidence from Ms. McPhee and Mr. Kim is essentially uncontradicted, except for the fact that the time was not entered into the system and should have been.

[251] While I do agree that the Lawyers could have provided more detail about how they estimated these undocketed amounts or provided back up such as notes or their diary, I do not discount their evidence entirely in the way the Clients say I should.

[252] Rather, I consider this evidence in the context of all of the evidence before me and the relevant factors which include the tremendous outcome achieved by the Lawyers.

The Clients' Reasonable Expectations Based upon the Bill of Costs Submitted to the Court of Appeal.

[253] The Bill of Costs submitted on the appeal is another way of considering the value of the Lawyers' time and the Clients' reasonable expectations in that regard.

[254] It claimed costs in the amount of $1,063,412.22. There is evidence before me that the Clients were very involved in this proceeding throughout including their involvement in written documents, for example the Statement of Claim. The Clients have attached the Bill of Costs to their affidavit materials and in doing so did not say that they were surprised to see it when it was submitted or that it was submitted to the court without their approval. In the midst of all the complaints in the record before me, had that been the case, I would have expected the Clients to say as much. Therefore, I infer that the Clients were aware of the Bill of Costs submitted to the Court of Appeal. Having implicitly agreed to submit the Bill of Costs to the Court of Appeal, the Clients' (and Lawyers') reasonable expectations, at a minimum, were that the legitimately billed amount for the appeal was this amount.

[255] I note as well that the Court of Appeal did not criticize anything about the Bill of Costs submitted or the docketed amounts as did Conway J. for the trial.

Fees for the Leave to Appeal and to Address Currency Payments Under the Settlement

[256] I am also satisfied that the Lawyers have proven that they incurred time of $31,543.95 based upon 259.6 hours for the leave to appeal to the Supreme Court of Canada motion as well as well as $10,141.75 inclusive of HST for additional time during October 2022 addressing the currency of the defendants' payments under the settlement.

[257] These amounts were set out in Ms. McPhee's affidavit and the Clients did not challenge them with their own evidence or cross examine on them or even provide argument on these. I accept this evidence.

The Ability of the Clients to Pay

[258] The Clients have just been awarded a significant judgment as a result of the Lawyers' efforts. There is no question that they have the ability to pay.

Conclusion Re Quantum Meruit

[259] In view of all of the evidence and in particular taking into account the massive value provided by the Lawyers, on a quantum meruit basis, I award the Lawyers the amount that they submitted to the Court of Appeal in respect of the costs of the appeal in the amount of $1,063,412.22. I also award $31,543.95 for the leave to appeal plus $10,141.75 for addressing currency issues which as I have said was not contested or even addressed by the Clients at all.

Issue 5: What process should be employed for the accounting of amounts already received by the Lawyers?

[260] The Clients have sought an accounting of the amounts that they have paid the Lawyers. I have set out in paragraph 102 above the discrepancies the Clients assert.

[261] The record shows that the Clients have been requesting an accounting for approximately two years through regular correspondence.

[262] The Lawyers have agreed to provide an accounting by an independent accountant, Mr. Harington, for all funds received and spent by the Lawyers on behalf of the Clients.

[263] I direct that this be completed within 60 days.

Costs

[264] As noted, the Clients' initial position in this matter was that there was no enforceable contingency fee agreement at all. They raised serious allegations including that: they were pressured into signing the CFA which did not reflect their agreement; the Lawyers improperly paid themselves the 30 % contingency without regard to the Clients' express instructions to the contrary; the Lawyers made improper demands for cash and threatened to stop work; they rendered invoices that failed to reflect actual fees or disbursements; they improperly failed to credit the Clients' cash payments against the contingency fees; they improperly failed to deduct and pay the Clients costs awards when they paid themselves the contingency fee; and that they were improperly borrowing from the Clients in breach of their ethical obligations pursuant to the Rules of Professional Conduct. They sought to set the CFA aside on the basis that it was not fair and reasonable. They resiled from this position shortly before the hearing, essentially transforming this matter into one that was a matter of contractual interpretation.

[265] Even though the Lawyers were unsuccessful in obtaining a 30 % contingency on the appeal and/or settlement, this may be a case where the Lawyers are entitled to their costs because arguably, significant costs incurred in this matter by the parties were driven by the manner in which the Clients advanced this matter until shortly before the argument.

[266] Therefore, the Lawyers shall be the first to make their cost submissions within 7 days followed by the Clients within 7 days thereafter.

[267] As a final matter I wish to thank both groups of counsel who provided significant assistance to the court through supplementary submissions in response to questions.

Papageorgiou J.

Released: September 12, 2025