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Ontario judge raps lawyer over contingency fee agreement

|Written By Gabrielle Giroday

A personal injury lawyer won’t be getting thousands of dollars in fees after a judge ruled an agreement reached with her clients was “not fair or reasonable.”

Clients will get $2.75 million after a sailboat incident but their lawyer won’t be getting all the fees requested.
The ruling in Edwards v. Camp Kennebec (Frontenac) (1979) Inc. related to a fall 36-year-old Jared Edwards experienced while climbing into a sailboat at a summer camp.

Edwards — who has been developmentally delayed since shortly after his birth — suffered serious health effects from the fall, with a doctor indicating he is permanently disabled.

In 2012, Edward’s mother Eve Ojasoo and her husband retained De Rose PC to seek damages as a result of Jared’s fall, on Jared’s behalf, as well his family members.

A settlement of $2.75 million was reached, however, in his ruling Ontario Superior Court Justice Mario D. Faieta said he did not approve of the contingency fee agreement the law firm had with its clients.

“Unlike other CFAs, the Agreement does not state that the client has been advised to obtain independent legal advice before signing the CFA,” said Faieta.

“The misunderstanding related to the payment of disbursements demonstrates the importance of encouraging prospective clients to obtain independent legal advice before signing CFAs.”  

In his ruling, Faieta stated an agreement must comply with the provincial Solicitors Act, and regulations that fall under it. In particular, Faieta emphasized an agreement must state that a client is advised hourly rates can vary among lawyers and the client can consult with other solicitors to compare rates. He also said the agreement did not show an example how the contingency fee is calculated.

“While some may view this conclusion 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,” wrote the judge.

Faieta also said Ojasoo believed the law firm bore the risk it would not be reimbursed if the matter was unsuccessful, but this wasn’t accurate.

The agreement actually stated: “In addition to the Legal Fee or the Court/arbitration-ordered Costs, you agree to pay all expenses, even if we cannot settle your claim and/or you lose at trial.”

“Clearly Eve did not fully understand this agreement,” wrote Faieta.

“A significant aspect of this Agreement is establishing who bears the risk of paying for litigation expenses in the event that this action is unsuccessful. Eve did not understand that she, rather than De Rose, bore the risk of paying for disbursements in those circumstances. Eve’s misunderstanding of the Agreement is troubling as it demonstrated that De Rose did not adequately explain the Agreement to her.”

In his conclusion, Faieta approved the settlement to Edwards, but declared the agreement with the firm to be void.

He slashed the amount the firm was set to receive.

“I order De Rose’s account for legal fees, disbursements and taxes in relation to Jared’s claim be reduced by $381,311.30 to $225,00.00,” he ruled.   

Darryl Singer, a litigation lawyer with Singer Barristers, said the “real lesson from this decision is for personal injury lawyers to ensure their retainer agreements will be upheld.

“For example, my firm’s contingency agreements specifically state that if there is no settlement or judgment the client pays nothing and I eat my disbursements,” he says. “Additionally, rather than sign the client immediately and have an ‘out’ clause, don’t have the client sign the retainer until you at least have some basic information to determine if you want the case.”

Lawyers can protect themselves by explaining the agreement to a client and ensuring it complies with the Act, Singer says, as well as stating “in the agreement that no fees or disbursements will be payable to you if there is no recovery.”

“Cases like this . . . embolden clients to challenge fees that for the most part the lawyers deserve,” he says.

  • Mr

    A Jeff
    Securing a lawyer in a complex case in todays world is impossible now, .. unless you can “Pay2Play” or know somebody or have an existing connection. Litigation Lawyers LESSON from this decision is; for lawyers to ensure to have an ‘out’ clause, and don’t have the client sign the retainer until you have sound knowledge and factual information to determine if you want the case”. Soon all Lawyers will have a non refundable case valuation fee to cover the costs making access to to justice in a “Pay4JusticeSystem” fuel the stigmatizing and radicalization of more victims to in future drive the root cause of violence as the only way to resolve legal disputes

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