Court of Appeal Decision of the Week

Contingency Fee Bonuses

Case: Evans Sweeny Bordin LLP v. Zawadzki, 2015 ONCA 756 (CanLII)

Keywords: Contingency Fee Agreement; Order for Assessment; Cookish v. Paul Lee Associates Professional Corporation, 2013 ONCA 278, 305 O.A.C. 359.

Synopsis:

This appeal involves the enforceability of a contingency fee agreement entered into between the appellants (owners and developers of lands in Fort Erie worth approximately $20M) and the respondent solicitors.

The parties’ contingency fee agreement provides the clients pay a bonus of $500K in the event their appeal from a final foreclosure order is allowed. The appeal is successful, and so the solicitors submit an account including the $500K bonus. In response, the clients obtain an order for assessment and the assessment officer disallows the bonus on the basis that it is not fair and reasonable.

The solicitors seek payment of the bonus, while the clients attempt to further reduce the invoiced amounts, in competing motions to oppose confirmation of the assessment officer’s report. The motions judge grants the solicitors’ motion. The clients appeal.

The Court of Appeal dismisses the appeal; the motion judge correctly found the assessment officer lacked jurisdiction to consider the fairness and reasonableness of the contingency fee. On the record before motion judge, however, he could fairly assess the agreement. The Court of Appeal finds there was no basis to interfere with his conclusion that the bonus was fair and reasonable.

Importance:

Citing Cookish v. Paul Lee Associates Professional Corporation, 2013 ONCA 278, 305 O.A.C. 359, the Court of Appeal states that issues involving the enforceability of contingency fee agreements, including whether they are fair and reasonable, should be resolved by judges.

The Court of Appeal was clear in stating that the Solicitors Act, R.S.O. 1990, c. S.15 does not authorize an assessment officer to consider such issues.

Accordingly, the Court of Appeal indicates at para. 17 that a judge should not refer issues concerning the enforceability of a contingency fee agreement. At most, a judge may refer to an assessment officer the calculation of the quantum of a contingency fee under a valid contingency fee agreement.

Where a judge does order a reference to an assessment officer, the order must contain clear language of delegation. What counts as clear language? The Court of Appeal says that simply referring a bill to an assessment officer is insufficient to vest jurisdiction to determine disputes arising under a contingency fee agreement.

Concluding Thought:

When the clients first retained the solicitors, the estimated costs of the appeal were around $35K. That being said, it was the clients who first raised the prospect of paying a bonus of $500K in the event the properties were sold by the clients. Following negotiations, which included an exchange of draft contingency fee agreements, the parties entered into a Contingency Fee Retainer Agreement. Pursuant to this agreement, and following the date the appeal was granted, the solicitors rendered an account for $700,307.96 (which included the $500K bonus).

Counsel for the Appellants: William Roland

Counsel for the Respondents: Michael Bordin (Evans Sweeny Bordin LLP, Hamilton)

Discuss on CanLii Connects

Posted: Wednesday, January 27, 2016