Contingency Fee Agreement Not a Lottery

Contingency Fee Agreement Not a Lottery

Mide-Wilson v Hungerford Tomyn Lawrenson and Nichols 2013 BCSC 374 is a very interesting case relating to the intricacies of the “poor man’s key to the courtroom”, the contingency fee agreement is not a lottery for the lawyer.

This is where the lawyer and the client agree to enter into a fee arrangement based on a % of the recovered amount, to be the fee, rather than the traditional pay as you go hourly rate, that no one, client and lawyer alike, prefers anymore.

On December 8, 2008 the date the fee agreement was entered into::

a) Everyone believed they were in the Action for the long-haul;

b) Home had told Rennie on October 17 that he was not interested in paying

Ms. Mide-Wilson anything;

Ms. Mide-Wilson was not interested in a settlement wherein she was paid money by Home and Gibson; she wanted the company back;

A significant amount of legal work would be necessary on a go forward basis;

e) The value of the assets was somewhere in the $100 million range.

They settled on a %20 fee agreement, which resulted in the lawyers recovering a $17 million fee, which the client refused to pay on the basis that it was unreasonable.

The supreme court ultimately agreed and reduced the account to $5 million.

On a taxation of the account prior to the supreme court hearing,  the Registrar had  allowed $9 million, but on appeal, Justice Goeppel  of the Supreme Court stated :

“In the circumstances of this case, I find that $9 million is not a proper fee for the work actually done and does threaten the integrity of the profession. While the Solicitors took on a case in which there was great risk, the case and the risk ended within months of the commencement of the retainer.” and “In order to maintain the integrity of the legal profession, a legal account must have some relationship to the actual work carried out. To allow the fees awarded in this case given the work the Solicitors actually did would call into question the integrity of the profession.”

[180] A contingency fee agreement is not a lottery ticket. Success in the action does not guarantee a fee in the amount set out in the agreement. Even if the agreement was neither unfair nor unreasonable at the time it was entered into, the final account must be reasonable and proper given the services provided and the risk undertaken.

Having determined that the CFA was not unfair or unreasonable under the circumstances existing at the time it was entered into, the Solicitors’ account remains subject to review pursuant to the provisions of s. 70 of the LP A. A contract can itself be fair and reasonable and yet the fees purportedly charged pursuant to it may not be recoverable: Doig v. Davidson Muir, 106 B.C.A.C. 80,

48 B.C.L.R. (3rd) 53 at para. 19. As noted in Coad v. Rizk (1999), 68 B.C.L.R. (3d) 340 (S.C.), the provisions of s. 68 and 70 are not mutually exclusive, but work in concert to ensure that both the initial fee agreement and what is subsequently billed pursuant to that agreement are appropriate.

[154] In this case the registrar dismissed the application to cancel the CFA. I have upheld that decision. The matter now to be determined is the proper fee to which the Solicitors are entitled.

[155] In Commonwealth Investors Syndicate Ltd. v. Laxton (1994), 94 B.C.L.R. (2d) 177 (C.A.) [Commonwealth No. 2], the court had to wrestle with the reasonableness of the fee that a contingency contract had generated. McEachern C.J.B.C. said at para. 25:

I take the foregoing to mean that a contingency fee agreement under the old regime had to be reasonable in the result. This brought into play the well established principles which generally govern the fixing of a lawyer’s fee such as those stated in Yule v. Saskatoon (City) (1955), 1 D.L.R. (2d) 540, [17 W.WR. 296], (Sask. C.A.), and, of course, those further considerations that apply only to contingency fees. These include at least the risk of there being no recovery at all and the expectation of a larger fee based upon results than would be appropriate in non-contingency cases.

[183] While the terms of the contract set the maximum fee, the proper fee is ultimately determined by a consideration of the factors set out in s. 71(4) augmented as noted in Commonwealth No. 2 by those further considerations that apply only to contingency fees including the risk of no recovery and the expectation of a larger fee based upon results than would be appropriate in non-contingency cases. Regardless of the terms of a contingency fee agreement, those factors and considerations cap the amount that lawyers can charge. A lawyer is never entitled to more than a proper fee.

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