COURT OF APPEAL FOR ONTARIO
CITATION: Bimman v. Igor Ellyn Professional Corporation (Ellyn Law), 2022 ONCA 781
DATE: 20221116
DOCKET: C70011
Gillese, Huscroft and Sossin JJ.A.
BETWEEN
Alexander L. Bimman and 2182474 Ontario Inc.
Applicants (Respondents)
and
Igor Ellyn Professional Corporation also known as Ellyn Law
Respondent (Appellant)
Igor Ellyn, for the appellant
Joel Levitt, for the respondents
Heard: September 16, 2022
On appeal from the order of Justice Frederick L. Myers of the Superior Court of Justice, dated October 12, 2021.
Sossin J.A.:
OVERVIEW
[1] This appeal is about the circumstances in which a court may set aside a retainer agreement between a lawyer and their client because it is not fair and reasonable to the lawyer under s. 24 of the Solicitors Act, R.S.O. 1990, c. S.15.
[2] Igor Ellyn Professional Corporation (“Ellyn Law” or “the appellant”) appeals the order dated October 12, 2021 (the “Order”), that its retainer agreement (the “Agreement”) with Alexander L. Bimman (“Mr. Bimman”) and 2182474 Ontario Inc. (collectively, “the respondents”) was valid and that certain other legal fees and disbursements could not be claimed.
[3] For the reasons that follow, I would allow the appeal in part. While I agree with the motion judge’s Order that the Agreement is valid, I conclude the motion judge erred in disallowing a disbursement for the services of an external law firm.
BACKGROUND
(1) The retainer agreement and the underlying litigation
[4] Igor Ellyn (“Mr. Ellyn”) and his former law firm, Ellyn Law LLP, were retained by the respondents to act on a complex shareholder dispute that ran between December 2012 and May 2017. Mr. Bimman and several other Toronto investors were involved in a real estate project in Manitoba. The other investors diluted the respondents’ minority share and accused Mr. Bimman of fraud. In response, the respondents commenced an action for oppression and damages.
[5] At the time Mr. Bimman approached Ellyn Law, the action had been ongoing for two years and the respondents had gone through two other lawyers. $4,000,000 was being held in court as security for the action. In addition to acting on the main litigation, the respondents retained Ellyn Law to assess the accounts of their most recent counsel, which was the subject of a separate retainer agreement.
[6] Ellyn Law drafted the Agreement for the main litigation, which the parties signed on January 31, 2013. Paragraph 3 set out the matters covered by the Agreement:
Your firm is retained to do the following:
a. Consider whether to bring a motion for orders seeking an advance on account of legal fees including reimbursement of legal fees advances [sic] already;
b. Bring a motion for order seeking interim relief from oppression;
c. Carry on the conduct of the action;
d. Negotiate with our previous counsel Joel Levitt to obtain the contents of our file;
e. Take such further steps as are required to bring a resolution to this action.
[7] Paragraph 3(e) did not include any qualifications or exceptions. Mr. Ellyn’s evidence was that his overall goal for the Agreement was to assure the respondents that he would see the matter through to trial.
[8] In addition to a modest retainer fee, the Agreement set out a hybrid compensation structure, with hourly billing plus a premium in the case of total recovery of more than $1,800,000. Paragraph 15 provided that, “In no circumstance will the fees and disbursements be less that the costs recovered.” However, paragraph 16 imposed an overriding cap on fees at 30% of total recovery:
Your [Ellyn Law’s] fees, not including disbursements and HST, shall not exceed 30% of the amount recovered on account of Mr. Bimman’s shares or damages under any circumstances. If there is any conflict between this paragraph, and any other paragraph in this retainer agreement, this paragraph governs.
[9] Paragraph 17 of the Agreement dealt specifically with disbursements in the case of an appeal:
We understand that if an appeal to the Court of Appeal is required, the disbursements for the appeal will be paid in addition to any other retainers. The disbursements include the cost of trial transcripts, photocopy and binding of three copies of the exhibit books and five copies each of the appeal books, facta and books of authorities, and filing fees, to a limit of $12,000 plus HST.
There was no other reference to an appeal in the Agreement.
[10] The action was complex and lengthy, but the appellant was able to secure what the motion judge described as excellent results for the respondents throughout. Following a six-week trial in 2014, the trial judge found that the respondents had been oppressed. Both parties filed appeals, which were dismissed except to correct a calculation error in the award of damages. There was no separate retainer agreement prepared or agreed to for the appeal.
[11] The respondents’ recovery after the appeals was $1,984,100, including partial indemnity costs of $780,312.50 and post-judgment interest. $553,308.91 of the costs award was for legal fees, disbursements, and HST, while the balance was for the fees of expert witnesses.
[12] In January 2014, the respondents signed an irrevocable direction, later incorporated into the trial judgment, providing that the proceeds of any settlement or judgment in the action would be paid to Ellyn Law in trust out of the funds held in court. This amount would be used to pay the outstanding fees and disbursements of the appellant, three expert witnesses, and the respondents’ prior counsel, with the remaining balance paid out to the respondents.
[13] Following the appeals, in May 2017, Mr. Bimman informed Mr. Ellyn that he was withdrawing the irrevocable direction and asked that the funds in court be paid directly to him. Mr. Ellyn rejected these instructions as contrary to the previous direction and the order of the trial judge. In reply, the respondents terminated the Agreement.
[14] Mr. Ellyn recognized that he was no longer counsel of record for the respondents and that he had both a duty to deal with the funds in accordance with the trial judgment, and a potential conflict given his personal interest in how those funds were distributed. He retained Chitiz Pathak LLP to represent Ellyn Law and ensure the court funds would not be paid out contrary to the directions and the judgment. Eventually, the dispute was resolved through a motion for directions before the trial judge, who directed that the funds due under the judgment be paid to the appellant in trust.
(2) The assessment dispute
[15] The appellant rendered regular accounts to the respondents between January 2013 and January 2015. No further accounts were rendered until June 2017, after the respondents terminated the Agreement. In the June 2017 account, the appellant sought payment for fees of $552,954.89 all-in, which was greater than the 30% recovery cap of $356,315.55 plus HST, though still less than the actual docketed time on the file.
[16] Specifically, the appellant sought $25,000 for the costs argument needed to finalize the trial judgment; $5,000 for negotiation of advance costs; $9,000 for a motion in the appeal; $25,000 for the cross-appeal; $5,000 for arguing costs on the appeal; and $11,600.90 for the services of Chitiz Pathak LLP (“the Chitiz disbursement”).
[17] The respondents disagreed with these additional charges. They brought a motion under the Solicitors Act to determine the effect of the Agreement on the fees claimed. An assessment officer directed the parties to bring a motion before a judge to review the nature, validity, and effect of the Agreement, and whether the officer had jurisdiction to assess accounts.
[18] The respondents asked the motion judge to find that the Agreement capped fees at 30%, that the five other accounts claimed by the appellant were subsumed by the Agreement, and that the Chitiz disbursement was not payable. They also sought an assessment of the fees charged by the appellant for assessing prior counsel’s account. The appellant argued that the 30% cap was unfair and unreasonable in the context of a difficult client, an excellent result in the litigation, and the many unforeseen activities that were required on the file.
(3) The decision of the motion judge
[19] The motion judge found that the Agreement was valid and enforceable, capping the appellant’s fees at 30% of $1,187,708.52, or $356,312.55 plus HST for a total of $402,633.18. He disallowed any further fees or disbursements except for the appellant’s assessment of prior counsel’s account, which was remitted to the assessment officer. He declined to order costs of the motion in the circumstances.
[20] The motion judge noted that the regular rules of contract interpretation apply to a retainer agreement, subject to the requirement under s. 24 of the Solicitors Act and the common law that the agreement be fair and reasonable.
[21] The motion judge reviewed the Agreement and affidavit evidence and found the appellant agreed to accept a retainer that was less than the amount reasonably needed to secure the firm’s fees. He characterized this an an “indulgence” to the respondents, explained in part by the $4,000,000 being held in court to satisfy a judgment and legal fees. In exchange, the appellant negotiated a possible premium payment based on the quantum of damages recovered.
[22] The motion judge found that paragraph 3(e) of the Agreement was drafted very broadly. He observed that the steps required to “bring a resolution” to an existing, “hotly contested” piece of litigation will necessarily be extensive.
[23] Paragraph 3(e) was not limited to litigation through the end of trial, given, among other things, the Agreement’s reference to disbursements for an appeal. The parties must have understood that an appeal was likely and made provision for it. It was reasonably foreseeable at the time of the retainer that the respondents might appeal an eventual trial decision.
[24] The motion judge also observed that the history of the litigation at the time the Agreement was signed, as well as the respondents’ request to assess prior counsel’s fees, would have reasonably raised the appellant’s concerns about the future collectability of his own account.
[25] The motion judge noted that he must look at fairness and reasonableness both at the time the Agreement was entered into and “at the end of the day.” He accepted that he had jurisdiction to refuse to enforce an agreement that worked an unfairness against a lawyer, though he later described this as a “strange inversion” of the typical situation. The motion judge observed that, as a general principle of interpreting fee agreements, a court will usually order an agreement enforced against the lawyer, but not always, citing Moore v. John A. Annen Barrister Professional Corporation, 2017 ONSC 7720, at para. 11(i).
[26] He found the Agreement in this case was both fair and reasonable. Notwithstanding the excellent service provided, all steps in the litigation were or ought to have been reasonably anticipated. The appellant, as drafter, could have included exceptions in the Agreement or required a separate retainer for an appeal. The fact that he did not do so, while demonstrating more than admirable good faith and professionalism, was consistent with a finding that the parties knowingly and voluntarily remained under this arrangement throughout the litigation.
[27] The motion judge noted that although the fees sought were likely reasonable on a purely quantum meruit basis, it was not unfair or unreasonable to hold a solicitor to a fee agreement in respect of specific matters that fell within its scope, that were reasonably foreseeable, and from which they could have protected themselves by drafting differently. A 30% recovery is common in contingency fee agreements, and if the hybrid nature of this arrangement made a difference to the economics, this should have been dealt with in the Agreement.
[28] Having concluded the Agreement was valid, the motion judge went on to find that all of the additional fees sought were expressly contemplated by, or reasonably part of, the broad language of paragraph 3(e). The only exception was the fees billed for assessing prior counsel’s bill, which were subject to a separate retainer agreement.
[29] Finally, the motion judge reasoned that the Chitiz disbursement did not fall under the Agreement because it was related more to a dispute between lawyer and client than to resolving the action. He concluded that the time to seek costs in that matter was during the motion before the trial judge. As no costs were awarded at that time, the appellant could not seek reimbursement after the fact.
ISSUES ON APPEAL
[30] The issues on appeal can be summarized as follows:
1) Did the motion judge err in finding that the retainer agreement was valid and enforceable under s. 24 of the Solicitors Act?
2) Did the motion judge err in finding that the additional fees claimed were covered by the retainer agreement or that the disbursement should not be allowed?
ANALYSIS
(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), 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), 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] 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, [1972] 1 O.R. 694 (H.C.), rev’d on other grounds, [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.
[55] Again, the appellant argues that the motion judge failed to consider these factors in the context of this case.
[56] I disagree.
[57] The motion judge found the appellant was aware the litigation was “nasty” and would likely continue to be hard fought. He found nothing unusual about the 30% fee cap.
[58] The motion judge found that the appellant achieved an excellent result for the respondents and utilized considerable skill in doing so. He also recognized that the appellant took on a considerable risk in entering into the Agreement, knowing that Mr. Bimman was a “difficult” client.
[59] While accepting the skill and hard work demonstrated by the appellant in representing the respondents, the motion judge concluded, “I can’t say it’s unfair or unreasonable to hold counsel to a contract [in] respect of specific matters that fall within the scope of the agreement, were reasonably foreseeable, and which Mr. Ellyn could have protected himself from by drafting differently.”
[60] Although the motion judge did not expressly refer to the two-part framework from Raphael, his findings addressed the substantive inquiries required by that test. He properly gave greater priority to the retainer agreement, as the lawyer drafted the Agreement and must be presumed to understand the risks involved in the arrangement better than the client. The motion judge also appropriately focused on the reasonable foreseeability of the steps that occurred in the litigation and the fact that the appellant could have revisited the Agreement when it became clear it was not favourable to him.
[61] However, in my view, the Raphael framework should be modified in the rare case of a lawyer challenging their own retainer agreement under s. 24 of the Solicitors Act. In these circumstances, it should be presumed that retainer agreements are made fairly and that their terms are reasonable. The lawyer seeking to challenge the validity of a retainer agreement will bear the burden of demonstrating some exceptional circumstance to rebut this presumption. Presumptively holding lawyers to the agreements they draft is consistent with the purpose and policy context of s. 24, especially when read together with s. 21, which is to protect clients.
[62] In this case, there are no exceptional circumstances rebutting the presumption of validity in light of the following findings by the motion judge:
i) The appellant drafted the Agreement;
ii) The parties freely agreed to certain discounted legal services, to a premium contingent on the result in the litigation, and to a clear 30% cap on fees;
iii) The financial consequences of the Agreement were reasonably foreseeable; and
iv) At no point was the appellant precluded from seeking to renegotiate any aspect of the Agreement with the respondent if he concluded different terms were more appropriate.
[63] As for the nature and type of exceptional circumstances which could justify invalidating a retainer agreement on a lawyer’s motion under s. 24, a consideration of this question is best left for another day, in a proceeding in which it is squarely raised and argued.
(2) The motion judge erred in disallowing the disbursement for the services of Chitiz Pathak LLP
[64] The appellant further submits that the motion judge erred by finding that the additional categories of fees claimed were covered by the retainer agreement and that the respondents were not obligated to pay the Chitiz disbursement.
[66] The motion judge characterized the Chitiz disbursement as relating to a matter in which the appellant, and other professionals to whom he felt “obliged”, had a financial stake, and which should have been resolved, if at all, on the motion for directions before the trial judge.
[67] Recall that paragraph 3(e) of the Agreement set out that the scope of the appellant’s obligations were to “Take such further steps as are required to bring a resolution to this action” (emphasis added).
[68] Respectfully, the motion judge fell into error in his interpretation and application of the Agreement by concluding that the Chitiz disbursement did not fall within this provision. The appellant was both legally and professionally obligated to ensure that the funds from the action were not paid out contrary to the trial judgment. The disbursement was reasonably necessary to fulfill this obligation. While there had been a breakdown in the solicitor-client relationship between the appellant and respondents by the time of the disbursement, this expenditure flowed directly from the litigation to which the Agreement was directed. This disbursement was part of what was “required to bring a resolution to the action” in the context of the many twists and turns of this case. Under paragraph 16 of the Agreement, disbursements are not subject to the 30% cap on total recovery. The Chitiz disbursement is therefore recoverable by the appellant (in addition to the legal fees as accepted by the motion judge).
[69] The motion judge also commented that there were no costs awarded to the appellant in this dispute when it came before the trial judge. Given that the disbursement was covered by the terms of the Agreement, and in light of the appellant’s duty to the court to ensure compliance with the trial judgment, it was not necessary for the appellant to seek to recover these legal fees on the motion for directions. Nor does the availability of costs at that time affect whether the respondents are responsible for this disbursement under the Agreement.
DISPOSITION
[70] Accordingly, I would allow the appeal in part and vary the Order, deleting paragraph 4 of the Order and replacing it with a paragraph declaring that the disbursement to Chitiz Pathak LLP in the amount of $11,600.90 is allowed.
[71] I would order costs of the appeal to the respondents. Given the appellant’s partial success, I would fix those costs at $8,000, all-inclusive.
[72] I see no basis on which to disturb the decision of the motion judge to not award costs to either party.
Released: November 16, 2022 “E.E.G.”
“L. Sossin J.A.”
“I agree. E.E. Gillese J.A.”
“I agree. Grant Huscroft J.A.”