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. Bimman v. Igor Ellyn Professional Corporation (Ellyn Law)

In Bimman v. Igor Ellyn Professional Corporation (Ellyn Law) (Ont CA, 2022) the Court of Appeal considers s.24 of the Solicitors Act ['Enforcement of agreement'] which allows the court to void a retainer agreement if "not ... fair and reasonable". In this case it was the lawyers that wanted to void the agreement, to avoid the Solicitors Act s.21 ['Claims for additional remuneration excluded'] provision that limited the firm from claiming additional disbursements:
(1) The motion judge did not err in finding that the retainer agreement was valid and enforceable

[31] The appellant submits that the motion judge erred by failing to follow the established two-step process to determine if the Agreement should be enforced under s. 24 of the Solicitors Act. It further submits that the motion judge erred by finding that the Agreement was fair and reasonable.

[32] The standard of review on this appeal is not in dispute. Whether the motion judge erred in interpreting s. 24 of the Solicitors Act is a question of law to which the standard of correctness applies. Whether the motion judge erred by finding the Agreement to be fair and reasonable is a question of mixed fact and law, and appellate intervention is governed by the principles in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633.

[33] Section 16 of the Solicitors Act permits lawyers to enter into compensation agreements with their clients. Under s. 21, these agreements generally preclude a claim by the solicitor for further fees not covered by the agreement. Section 21 provides:
21. Such an agreement excludes any further claim of the solicitor beyond the terms of the agreement in respect of services in relation to the conduct and completion of the business in respect of which it is made, except such as are expressly excepted by the agreement.
[34] However, ss. 23 to 24 permit a party to a retainer agreement to apply to a court to determine if it is “in all respects fair and reasonable”:
23. No action shall be brought upon any such agreement, but every question respecting the validity or effect of it may be examined and determined, and it may be enforced or set aside without action on the application of any person who is a party to the agreement or who is or is alleged to be liable to pay or who is or claims to be entitled to be paid the costs, fees, charges or disbursements, in respect of which the agreement is made, by the court, not being the Small Claims Court, in which the business or any part of it was done or a judge thereof, or, if the business was not done in any court, by the Superior Court of Justice.

24. Upon any such application, if it appears to the court that the agreement is in all respects fair and reasonable between the parties, it may be enforced by the court by order in such manner and subject to such conditions as to the costs of the application as the court thinks fit, but, if the terms of the agreement are deemed by the court not to be fair and reasonable, the agreement may be declared void, and the court may order it to be cancelled and may direct the costs, fees, charges and disbursements incurred or chargeable in respect of the matters included therein to be assessed in the ordinary manner.
[35] The parties agree that s. 24 of the Solicitors Act is to be interpreted according to this court’s decision in Raphael Partners v. Lam (2002), 2002 CanLII 45078 (ON CA), 61 O.R. (3d) 417 (C.A.). In Raphael, writing for the court, Cronk J.A. stated, at para. 37:
When a fee agreement is challenged under the Act, the solicitor bears the onus of satisfying the court that the way in which the agreement was obtained was fair and that the terms of the agreement are reasonable. The fairness requirement of s. 24 of the Act is concerned with 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: Best v. Yegendorf, Brazeau, Seller, Prehogan & Wyllie (1998), 1998 CanLII 14646 (ON SC), 37 O.R. (3d) 633 (Gen. Div.).
[36] Based on Raphael, the appellant argues that resolving a motion under s. 24 involves two discrete steps: first, a decision-maker must consider whether the retainer agreement was fair, and second, the decision-maker must determine whether the retainer agreement was reasonable in light of the outcome of the matter. This two-step methodology was affirmed in Henricks-Hunter v. 814888 Ontario Inc. (Phoenix Concert Theatre), 2012 ONCA 496, 294 O.A.C. 333, at para. 13. The appellant contends that the motion judge failed to follow the test in upholding the validity of the Agreement.

[37] As I shall explain, the motion judge did not err as he, in substance, applied the test set out in Raphael. However, Raphael dealt with a client seeking to invalidate a contingency fee arrangement with his lawyer that resulted in what he argued were excessive fees. This case appears to be the first in which a lawyer has sought to invalidate a retainer agreement under s. 24 of the Solicitors Act. This appeal causes us to ask whether a lawyer has the right to bring such a motion and, if so, whether the framework set out in Raphael remains appropriate.

[38] In answering those questions, it is important to consider the policy context of this provision. As Weiler J.A. stated in Jean Estate v. Wires Jolley LLP, 2009 ONCA 339, 96 O.R. (3d) 171, at para. 80, “[P]ublic policy considerations animate the right to an assessment of the fairness and reasonableness of the terms of a contingency fee agreement” under s. 24 of the Act.

[39] To begin, nothing in the Solicitors Act precludes a lawyer from bringing a motion for relief on the basis that a retainer agreement is unfair and/or unreasonable. Section 23 explicitly allows for an application by “a party to the agreement”, which includes the lawyer. That said, it is clear that these provisions were developed in order to protect clients. This rationale is apparent from the history of the legislation.

(a) The policy context of s. 24 of the Solicitors Act

[40] What is now ss. 23 to 24 of the Solicitors Act can be traced back to the English Attorneys’ and Solicitors’ Act 1870 (U.K.), 33 & 34 Vict., c. 28, ss. 8-9 (the “English Act of 1870”), which prohibited civil actions based on retainer agreements but preserved the courts’ jurisdiction to review them for fairness and reasonableness:
8. No action or suit shall be brought or instituted upon any such agreement; but every question respecting the validity or effect of any such agreement may be examined and determined, and the agreement may be enforced or set aside, without suit or action, on motion or petition of any person, or the representative of any person, a party to such agreement, or being or alleged to be liable to pay, or being or claiming to be entitled to be paid, the costs, fees, charges, or disbursements in respect of which the agreement is made by the court…

9. Upon any such motion or petition as aforesaid, if it shall appear to the court or judge that such agreement is in all respects fair and reasonable between the parties, the same may be enforced by such court or judge by rule or order in such manner and subject to such conditions, if any, as to the costs of such motion or petition as such court or judge may think fit; but if the terms of such agreement shall not be deemed by the court or judge to be fair and reasonable, the same may be declared void, and the court or judge shall thereupon have power to order such agreement to be given up to be cancelled, and may direct the costs, fees, charges, and disbursements incurred or chargeable in respect of the matters included therein to be taxed in the same manner and according to the same rules as if such agreement had not been made; and the court or judge may also make such order as to the costs of and relating to such motion or petition, and the proceedings thereon, as to the said court or judge may seem fit.
[41] These provisions were interpreted in Re Stuart, Ex p. Cathcart, [1893] 2 Q.B. 201 (C.A.), at pp. 204–05, where Lord Esher reasoned that when a retainer agreement is challenged, the duty falls to the solicitor to show that it is fair and reasonable:
By s. 9 the Court may enforce an agreement if it appears that it is in all respects fair and reasonable. With regard to the fairness of such an agreement, it appears to me that this refers to the mode of obtaining the agreement, and that if a solicitor makes an agreement with a client who fully understands and appreciates that agreement that satisfies the requirement as to fairness. But the agreement must also be reasonable, and in determining whether it is so the matters covered by the expression "fair" cannot be re‑introduced. As to this part of the requirements of the statute, I am of opinion that the meaning is that when an agreement is challenged the solicitor must not only satisfy the Court that the agreement was absolutely fair with regard to the way in which it was obtained, but must also satisfy the Court that the terms of that agreement are reasonable. If in the opinion of the Court they are not reasonable, having regard to the kind of work which the solicitor has to do under the agreement, the Court are bound to say that the solicitor, as an officer of the Court, has no right to an unreasonable payment for the work which he has done, and ought not to have made an agreement for remuneration in such a manner… [Emphasis added.]
[42] The English Act of 1870 was later replaced by the Solicitors Remuneration Act 1881 (U.K.), 44 & 45 Vict., c. 44, s. 8(4), which allowed a client to object to a retainer agreement that was unfair and unreasonable. This same approach was adopted in the Ontario Solicitors Act through The Conveyancing and Law of Property Act, 1886, S.O. 1886, c. 20, s. 23(4) (“the 1886 Act”).

[43] The more analogous provision to the current s. 24, however, was enacted through The Law Reform Act, 1909, S.O. 1909, c. 28, ss. 31-32 (“the 1909 Act”). This legislation repealed the 1886 provisions and replaced them with language that closely followed the English Act of 1870.

[44] The origins of this provision are confirmed in The Hon. Gordon Killeen, James Morton & Steinberg Morton Frymer, A Guide to Costs in Ontario (CCH Canadian Limited, 2002), at p. 2:
The provisions of the Solicitors Act dealing with solicitor and client agreements are more recent and can be traced back to the Law Reform Act of 1909. Earlier English legislation from the 1870s was a model for the Ontario legislation. The English legislation required a taxing officer’s approval for any agreement relating to fees in litigious matters before the solicitor received any money. The concept of Court supervision of solicitor and client fee agreement [sic] carried over to the current Solicitors Act, where such agreements must be found “fair and reasonable” before “the amount payable under the agreement” may be received by the solicitor. [Footnotes omitted.]
[45] In Re Mendelson, Beatty & Wood and Iwan, 1969 CanLII 271 (ON SC), [1969] 2 O.R. 393 (H.C.), Pennell J. recognized that with the 1909 Act, the Legislature had reached back to the language used in the English Act of 1870. While he did not speculate on the legislative intent behind this change, he reasoned that the drafters would have intended to adopt the spirit and meaning of that Act as interpreted in Re Stuart. He further held that although the 1886 Act appeared to place the onus on the objecting client to show “just cause” that an agreement was unfair and unreasonable, the amendments returned the law to its previous state, with the onus on the solicitor.

[46] In Re Solicitor, 1971 CanLII 435 (ON SC), [1972] 1 O.R. 694 (H.C.), rev’d on other grounds, 1973 CanLII 653 (ON CA), [1973] 1 O.R. 652 (C.A.), Wright J. set out the principles underlying the Solicitors Act in helpful detail, at pp. 697-98:
The solicitors in Ontario enjoy a statutory monopoly which the Law Society of Upper Canada is jealous to justify and maintain. The Solicitors Act, R.S.O. 1970, c. 441, makes it clear that there can be no action for recovery on a solicitor's bill until one month after it be rendered. It gives rights to the client to have it taxed. It requires agreements to be in writing and to be fair and reasonable. Where there is such an agreement, the amount due under it is not subject to taxation. It preserves an elaborate but not perfect system, weighted against solicitors, of measures which enable the Court to determine the quantity and quality of the bill. Thus it may be said of the solicitor's profession, that its members cannot set their own individual charges and that there is a procedure for determining in every case where it is invoked, that a solicitor's charges are fair and reasonable. To a degree this is a significant counter-weight to the monopoly, and some assurance against abuse and exploitation.

I make these general observations so that it may be evident that the maintenance of a system of independent taxation of fees is a vital factor for the integrity of an independent profession in a free society.

What chiefly, in this case, is now my concern, is the law with regard to agreements by solicitors about costs and fees and charges. Prior to the Attorneys and Solicitors Act, 1870 (U.K.), c. 28, the law was that agreements as to costs were, upon the application of the client,
... considered and examined by the Courts, and they were not infrequently held to be binding both on the solicitor and the client. The inquiry was always directed to the question whether the agreement was fair and reasonable, and an agreement by the solicitor to take less than the usual renumeration was not looked upon as unfair or unreasonable, but was held binding upon him. We must remember that that was the state of the law in 1870 when we are called upon to construe the Act of that year, an Act which was designed to provide fresh safeguards for the protection of the client and to give the solicitor certain rights which he did not previously possess, provided that he himself complied with the requirements of the Act.
Per Lord Alverstone, C.J., in Clare v. Joseph (1907), [1907] 2 K.B. 369 (C.A.) at p. 372. [Emphasis added.]
[47] Subsequent to Re Solicitor, the provisions of the Solicitors Act routinely have been referred to as enacted for the protection of clients. For example, in Andrew Feldstein & Associates Professional Corporation v. Keramidopulos, 2007 CanLII 40202 (Ont. S.C.), at para. 60, Murray J. reasoned that the Act is essentially consumer protection legislation:
Finally, I conclude that the Retainer Agreement is inconsistent with the client's rights under the Solicitors Act. The Solicitors Act is designed to give some protection to clients against unreasonable accounts rendered by their solicitors. The provisions of the Solicitors Act that allow a client to assess the accounts of his law firm are, in essence, consumer protection provisions designed for the protection of the public. To permit contracting out of the provisions of the Solicitors Act would defeat the whole purpose of those legislative provisions enacted in the public interest and designed to allow a client protection against unwarranted or unreasonable legal fees... [Emphasis added.]
[48] While Murray J. was referring specifically to the assessment of accounts under the Act, the same reasoning applies to s. 24. Indeed, the purpose of protecting clients has been expressly linked to the Raphael framework. In Allan C. Hutchinson, “A Study of the Costs of Legal Services in Personal Injury Litigation in Ontario: Final Report” (2016), at p. 9, Professor Hutchinson reasons that it would be unjust to expect the client to show that a retainer agreement was unfair in light of the imbalance in power and circumstances between lawyer and client.

[49] This brief review of the policy context of s. 24 of the Solicitors Act makes clear that it must be interpreted and applied in light of its purpose of protecting clients from unfair and unreasonable retainer agreements, which are generally drafted by lawyers who are themselves party to the agreement.

(b) The application of s. 24 to this case

[50] In this case, the motion judge approached the s. 24 analysis principally with a focus on the terms of the Agreement itself. He emphasized that it had been drafted by the appellant and it remained open to the appellant to propose new or revised terms as the litigation unfolded.

[51] In particular, the motion judge emphasized the breadth of paragraph 3(e), which set out that the Agreement covered “such further steps as are required to bring a resolution to this action.” He also pointed to paragraph 17’s express reference to appeal disbursements as confirmation that it covered any potential appeals.

[52] Given the Agreement’s hybrid compensation by the hour and on a contingency fee basis, the trade-offs between discounted fees on the one hand and premium fees on the other, and the clarity of the overall cap on fees that were not to exceed 30% of total recovery, the motion judge concluded the Agreement was fair at the time it was made.

[53] Section 21 of the Solicitors Act makes clear that lawyers are not entitled to seek fees beyond what is expressly agreed to in an agreement with a client. As a result of this provision, a lawyer must establish that an agreement with a client is invalid if a lawyer wishes to pursue additional fees. When a fee agreement is challenged under s. 24 by the client, the lawyer bears the onus of satisfying the court that the way in which the agreement was obtained was fair and that the terms of the agreement are reasonable. The fairness requirement of s. 24 of the Act is concerned with the circumstances surrounding the making of the agreement and whether the client fully understands and appreciates the nature of the agreement that they executed. I see no reason why this onus would shift in a case where a lawyer seeks to invalidate a retainer agreement. In this case, in light of the motion judge’s findings, there is no question that this requirement was met.

[54] With respect to the reasonableness of the Agreement at the time of the hearing, the factors to be considered are well-established – albeit in the context of complaints by clients rather than lawyers – including (1) the time expended by the lawyer; (2) the legal complexity of the matter; (3) the results achieved; and (4) the risk assumed by the lawyer: Raphael, at para. 50.
. Ilic v. Ducharme Fox LLP (Ducharme Weber LLP)

In Ilic v. Ducharme Fox LLP (Ducharme Weber LLP) (Ont CA, 2022) the Court of Appeal considered the law of assessments under the Solicitors Act:
(1) Principles Governing the Assessment of Accounts

[20] Courts should facilitate, not frustrate, the assessment of solicitor accounts. Sharpe J.A. observed that: “As a general matter, if a client objects to a solicitor's account, the solicitor should facilitate the assessment process, rather than frustrating the process”: Price v. Sonsini, 2002 CanLII 41996 (ON CA), 60 O.R. (3d) 257 (2002), at para. 19. He added his view that “the courts should interpret legislation and procedural rules relating to the assessment of solicitors' accounts in a similar spirit”. The reason for this approach, which Sharpe J.A. quoted from Orkin’s The Law of Costs, is that, "if the courts permit lawyers to avoid the scrutiny of their accounts for fairness and reasonableness, the administration of justice will be brought into disrepute". Sharpe J.A. held that: “The court has an inherent jurisdiction to control the conduct of solicitors and its own procedures”, which “may be applied to ensure that a client's request for an assessment is dealt with fairly and equitably despite procedural gaps or irregularities”. I cannot improve on Sharpe J.A.’s articulation of these principles.

[21] Epstein J.A. added in Clatney v. Quinn Thiele Mineault Grodzki LLP, 2016 ONCA 377, 131 O.R. (3d) 511, at para. 77, that both the legislation and the court’s inherent jurisdiction “respond to the public interest component of the rendering of legal services and lawyers' compensation, and the importance of maintaining public confidence in the administration of justice”. Again, I agree.
More at para 26-33.

. Couper v. Adair Barristers LLP

In Couper v. Adair Barristers LLP (Ont CA, 2020) the Court of Appeal considered on appeal from the lower court's decision with respect to the confirmation of an Assessment Officer's report:
[4] First, although authority to conduct the assessment of the contingency fee agreement was not formally delegated to the Assessment Officer as required under s. 28.1(11) of the Solicitors Act, the motion judge conducted his own analysis as though the matter had first come before him. He found that the retainer agreement included a contingency fee and that the contingent nature of the retainer agreement was fair and reasonable and should be enforced. In light of this finding, the motion judge noted that he would have delegated the question of quantum, and the detailed assessments of the accounts that entailed, to an assessment officer, who could carry it out far more effectively. Given that this had already occurred, we agree that there was no reason that the exercise had to be repeated.

[5] As Brown J.A. noted in Evans Sweeny Bordin LLP v. Zawadzki, r. 54.09(5) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 permits the motion judge to “confirm the [assessor’s] report in whole or in part or make such other order as is just”: 2015 ONCA 756, at para. 24. In our view, the procedure adopted by the motion judge was fair and appropriate in all of the circumstances, and it was not necessary to remit assessment of the accounts for reconsideration by another assessment officer when assessment already occurred.

[6] We note that the respondent argued that the appellant was estopped from contesting the jurisdiction of the Assessment Officer, based on the appellant having clearly and unequivocally stated that he was not disputing the retainer and undertaking not to raise the issue of the Assessment Officer’s jurisdiction as a ground of appeal. Given our conclusion in para. 5 it is not necessary to address this argument, and we are not to be taken as endorsing the motion judge’s analysis in this regard.
. Ghaeinizadeh v. Bennett Jones LLP

In Ghaeinizadeh v. Bennett Jones LLP (Ont CA, 2014) the court allowed an assessment of a solicitor's litigation account despite the fact that the client has earlier advanced the same account in adversarial cost submissions at trial. The primary basis of this finding was that the purpose of cost submissions at trial and account assessment were distinct:
[27] ... Given the different objectives and considerations arising in the two contexts of party and party costs and solicitor account assessments, parties availing themselves of both are not pursuing inconsistent options.


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