|
Representation - Lawyers - Contingency Fees. Bogue v. Miracle
In Bogue v. Miracle (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here from a "judgment of the motion judge that granted summary judgment against him" and "the solicitor’s lien granted to the respondent.".
Here the court considers a 'contingency fee' scenario, where the appellant unsuccessfully argued that the contingency agreement was unenforceable "because the appellant has not received the money that he was awarded":(1) Contingency fee
[2] The appeal arises in the context of a business dispute between the appellant and his son, Andrew Maracle III, that involves the business “Smokin’ Joe’s”. Both the appellant and his son are Mohawks of the Bay of Quinte. Smokin’ Joe’s operates as an on-reserve gas bar on Tyendinaga Mohawk Territory.
[3] The appellant and his son eventually agreed to settle their dispute by binding arbitration. The appellant retained the respondent as his lawyer for the arbitration. He did so pursuant to a contingency fee agreement (“CFA”) that said, in part: “Counsel will receive a contingency fee of 25% of the amount awarded by the Arbitrator, who shall be selected with mutual consent of the parties to this agreement.” An appendix to the CFA stated that “[t]he Amount of the fee is based on the amount recovered through the efforts of the lawyer”, and provided a numerical example.
[4] The arbitrator found in favour of the appellant and awarded him $11,486,238 as his share of the undistributed profits of Smokin' Joe's. The arbitrator also ordered the dissolution of the partnership that owned Smokin’ Joe’s. The arbitrator provided for a buy/sell process. The process ultimately resulted in the appellant acquiring his son’s interest in the business, along with the parcel of land it is located on, for $1, after his son failed to submit a bid for the business. An application to set aside the arbitrator's award brought by the son and his wife was dismissed by Kershman J. on October 10, 2017, and he was denied leave to appeal to this court.
[5] The appellant has not recovered any of the fixed sum awarded by the arbitrator. However, the appellant did gain control of the business. There does not appear to be any dispute that the business generates millions of dollars annually.
[6] The respondent says that the contingency fee owed to him under the CFA is $2,871,000. But for one small payment, the appellant has not paid it. The appellant contends that he does not owe the fee to the respondent because the appellant has not received the money that he was awarded under the arbitration.
[7] Based on this debt, the respondent sought the appointment of a receiver over the assets, undertakings and properties of the appellant, his son, and Smokin' Joe’s. On October 11, 2019, Kershman J. granted the order, pursuant to s. 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The son had, by this time, declared bankruptcy but it does not appear that Kershman J. was aware of that fact at the time that he made the receivership order.
[8] The appellant appealed the receivership order. He asserted that the application judge had erred because: (i) he had no authority to make a final order for a receiver; (ii) there was no money owed to the respondent for fees on the CFA; and (iii) the final order for a receiver contravened ss. 29 and 89 of the Indian Act, R.S.C. 1985, c. I-5, which prohibits “levy, seizure, distress or execution” against the assets of an “Indian” situated on a reserve.
[9] On April 30, 2021, this court released its decision on the appeal.[1] The decision only addressed the third ground. This court found that, since the Indian Act issue had not been fully canvassed before the application judge, the matter had to be remitted to him for determination of that issue.
[10] On November 15, 2021, Kershman J. held that, in the particular circumstances of the case, the appointment of a receiver and manager of the appellant’s property was permitted by the "commercial mainstream" exception under s. 89 of the Indian Act. The appellant appealed again.
[11] On September 29, 2022, this court allowed the appeal, holding that the receiver, acting on behalf of a creditor who is not an “Indian” for the purposes of the Indian Act, could not recoup profits from the appellant’s on-reserve businesses.[2] However, this court also held that s. 89 did not protect the appellant’s off-reserve assets from seizure.
[12] Another fact that must be noted is that on January 29, 2018, the appellant had executed an assignment of the judgment to his then lawyer in trust. The assignment states that it is made under r. 60.7(12.2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.[3] Of consequence for this appeal, the assignment records a list of persons to whom the appellant owes monies, which includes the respondent, who is listed as being owed $2,871,000. The document states that the assignment “expressly does not affect Andrew Clifford Miracle’s obligation to pay the above Creditors from his own assets, including from Smokin’ Joe’s”.
[13] The appellant’s central contention is that the motion judge erred in granting summary judgment in favour of the respondent for the contingency fee amount. He contends that, since the money ordered by the arbitral award has not been collected, he does not owe any contingency fee to the respondent.
[14] In my view, it is unnecessary, in the particular circumstances of this case, to engage in, and resolve, the debate over whether a contingency fee can only be due and payable if the client actually receives monies, nor is it necessary to resolve the corresponding debate over the proper meaning of the words “recover, recovers, recovered, recovery” as they are often used in this context.
[15] The Solicitors Act, R.S.O. 1990, c. S.15 clearly contemplates that a contingency fee can arise from the recovery of monies or the recovery of property. For example, s. 28.1(5) reads, in part:If a contingency fee agreement involves a percentage of the amount or of the value of the property recovered in an action or proceeding, ... . [16] As earlier noted, the arbitral award gave the appellant not only a monetary amount but also a process for the sale of Smokin’ Joe’s. That process led to the appellant gaining control of that business. There was a real monetary benefit conferred on the appellant as a result of the arbitration process. The appellant received, or has had access to, the significant funds that the business generates as a direct result of the arbitration. It follows from that reality that the appellant has received a benefit that gives rise to, and warrants, the payment of the contingency fee. In that regard, there is no reason, in my view, to interpret the CFA as requiring the appellant to pay the respondent only if he successfully collected a cash award. Reading the contract as a whole, giving the words used their ordinary and grammatical meaning, and consistent with the surrounding circumstances known to the parties at the time of formation of the contract,[4] the CFA should be interpreted as requiring the appellant to compensate the respondent for his work if he received any benefit from the arbitration. The percentage of the amount awarded by the arbitrator that he was required to pay under the CFA simply provides the mathematical calculation of the amount due. No issue is taken with the calculation.
[17] My conclusion is reinforced by the contents of the assignment agreement. In that document, the appellant expressly acknowledges that he owes the respondent $2,871,000. It is an unconditional acknowledgment. That acknowledgment is entirely inconsistent with the position that the appellant now advances that no fee is payable because no portion of the monetary award has been paid. I note that the assignment agreement was signed in the context of enforcing the arbitration award. It simply does not lie in the mouth of the appellant to now contend that he does not, and never has, owed the contingency fee to the respondent.
[18] The appellant also asserts that the CFA cannot be enforced because it does not comply with the requirements of the Solicitors Act and the regulation under it (then O. Reg. 195/04). While the regulation, at that time, stipulated various items that had to be included in a contingency fee agreement, neither the statute nor the regulation provided that non-compliance with these requirements rendered a contingency fee agreement void or unenforceable. Rather, s. 24 of the Solicitors Act reads, in part:[I]f 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 ... . [19] This court has previously ruled that a contingency fee agreement can be enforced if the court concludes that it is fair and reasonable: Raphael Partners v. Lam (2002), 2002 CanLII 45078 (ON CA), 61 O.R. (3d) 417 (C.A.), at para. 37. Similarly, in Laushway Law Office v. Simpson, 2011 ONSC 4155, 336 D.L.R. (4th) 632, Beaudoin J. said, at para. 126: “I conclude that a CFA that does not meet the requirements of O. Reg 195/04 is not inherently void or voidable.” . S.E.C. v. M.P.
In S.E.C. v. M.P. (Ont CA, 2023) the Court of Appeal considered contingency fee arrangements, here in the settlement of a personal injury action:[9] On June 30, 2021, Dr. C.’s litigation guardian settled a tort and accident benefit claim for $8,500,000. On September 17, 2021, the appellants moved in writing for the judicial approval of the action’s settlement under r. 7.08 and the Contingency Fee Agreement (“CFA”) under s. 24 of the Solicitors Act, R.S.O. 1990, c. S.15, and s. 6(b) of the Contingency Fee Agreements Regulation, O. Reg. 563/20 (“CFA Regulation”). ... . Novosel v. Campisi
In Novosel v. Campisi (Ont CA, 2023) the Court of Appeal considered whether an order 're-opening' a solicitor's contingency fee agreement under Solicitors Act s.25 was final or interlocutory:[3] Ms. Novosel challenged the jurisdiction of this court to hear the lawyers’ appeal, arguing that the application judge’s order is interlocutory since the substantive right to payment remains to be determined at the assessment hearing. Ordinarily, this submission would have merit, but the application judge’s finding that the fee charged under the CFRA for the Accident Benefit Claim was excessive and unreasonable is a final determination, as it would be binding during the assessment and foreclose an order for the entire fee claimed. Since we have jurisdiction relating to this final determination, and it is in the interests of justice to hear all of the issues in the appeal together, we decided to hear the appeal, pursuant to s. 6(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43. . Novosel v. Campisi
In Novosel v. Campisi (Ont CA, 2023) the Court of Appeal considered an appeal from a lawyer-client 're-opening' and re-assessment of an accident contingency fee agreement:[2] Ms. Novosel subsequently brought a successful application under the Solicitors Act, R.S.O. 1990, c. S.15. Pursuant to s. 25 of that Act, the application judge “reopened” the compensation agreement after it had been paid (the “re‑opening order”). She then declared the CFRA was unenforceable; ordered the “costs, fees, charges and disbursements” chargeable to Ms. Novosel to be assessed “pursuant to the provisions of ss. 24 and 25 of the Solicitors Act” (the “assessment order”); ordered $150,000 to be repaid after finding the fees paid towards the Accident Benefit Claim to be “unreasonable and excessive”; and fixed costs in the application payable to Ms. Novosel of $66,000 plus HST and disbursements.
....
[6] The lawyers pursued two challenges to the application judge’s finding that the Accident Benefit Claim fee was “excessive and unreasonable”. The first of those challenges requires consideration of the operation of ss. 24 and 25 of the Solicitors Act, which provide, as follows: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.
25 Where the amount agreed under any such agreement has been paid by or on behalf of the client or by any person chargeable with or entitled to pay it, the Superior Court of Justice may, upon the application of the person who has paid it if it appears to the court that the special circumstances of the case require the agreement to be reopened, reopen it and order the costs, fees, charges and disbursements to be assessed, and may also order the whole or any part of the amount received by the solicitor to be repaid by him or her on such terms and conditions as to the court seems just. [7] Specifically, the lawyers argue that this was a simple s. 25 application, and that once the application judge chose to reopen the CFRA, an assessment order was automatic under the terms of s. 25, without the need to determine whether the Accident Benefit Claim fee was “fair and reasonable” within the meaning of s. 24. The application judge therefore erred in ordering the assessment “pursuant to the provisions of ss. 24 and 25 of the Solicitors Act” (emphasis added), and in deciding whether the assessment was “fair and reasonable”.
[8] We do not agree. Ms. Novosel pleaded both provisions. She required s. 25 to reopen the CFRA (as the fees had been paid), and to secure the repayment order she was seeking. She required s. 24 to obtain a declaration that the CFRA was void. Both sections provided a path to an assessment order. The application judge did not err by considering both routes.
[9] Moreover, there is merit in Ms. Novosel’s submission that the application judge was entitled to consider the fairness and reasonableness of the Accident Benefit Claim fees in deciding whether to order the repayment of $150,000. It was in that context that she made the impugned finding.
[10] The lawyers second argument is that the application judge erred in principle by considering only the hours docketed in determining the reasonableness of the fee for the Accident Benefit Claim, and by giving insufficient reasons for this decision. They isolate a paragraph from her decision in which the application judge, in accepting Ms. Novosel’s submission that the fees charged by the lawyers were excessive and unreasonable, referred only to the disparity between the fees charged and the fees quantified based on the lawyers’ hourly rates and the hours expended. The lawyers argue that this is contrary to authority from this court that hourly rates do not control the reasonableness of contingency fees, and that numerous relevant factors are to be considered: Raphael Partners v. Lam, 2002 CanLII 45078 (ON CA), 61 O.R. (3d) 417 (C.A.), at para. 54; Newell v. Sax, 2019 ONCA 455, at paras. 40-43.
[11] We are not persuaded that the application judge made this error in principle or that her reasons were insufficient. When the decision is read as a whole, it is evident that the application judge engaged the issue of the reasonableness of the fees appropriately. She stated the law accurately in describing how the reasonableness of legal fees is to be assessed, and referred explicitly to additional factors she had considered, including the fact that there were undocketed hours, the risk the lawyers were undertaking, the insurer’s concession that Ms. Novosel had been catastrophically injured (thereby simplifying the case), and “the excellent result achieved by the Lawyers.”
[12] Finally, this is not a case for interfering with the discretionary determination of the application judge to make the costs award that she did. The lawyers have not sought leave to appeal costs. This is enough to warrant dismissing their challenge to the costs award. In any event, they are not well-situated to challenge the costs award given that the costs award given to Ms. Novosel of $66,000 is but a fraction, only slightly more than half, of the $120,098 costs award the lawyers were seeking on the application.
[13] The appeal is dismissed.
|
