Ontario judge raps lawyer over contingency fee agreement

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.”

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.

Free newsletter

The Canadian Legal Newswire is a FREE weekly newsletter that keeps you up to date on news and analysis about the Canadian legal scene. A separate InHouse Edition is delivered every two weeks, providing targeted news and information of interest to in-house counsel.

Please complete the form below to receive the weekly Canadian Legal Newswire and/or the Canadian Inhouse Legal Newswire.

Recent articles & video

TrustLaw, Nextlaw team up in pro-bono boost

Gowling WLG says Brexit is informing large firms’ HQ choices

Major law firms pledge U$5 million for industry diversity

Ashurst hails "game changer hire" for project finance team

Beverley McLachlin bio provides insights into remarkable life and career

Supreme Court of Canada set to hear appeals in Winnipeg

Most Read Articles

California now has toughest law in U.S. for the collection of personal information

Supreme Court of Canada set to hear appeals in Winnipeg

Beverley McLachlin bio provides insights into remarkable life and career

Digital privacy evolves in class actions