



COURT OF APPEAL FOR ONTARIO

CITATION: Lima v. Kwinter, 2021 ONCA 47

DATE: 20210126

DOCKET: C67269

Doherty, Hoy and Jamal JJ.A.

BETWEEN

David Lima

Applicant
(Respondent/Appellant in Cross-Appeal)

and

Alfred M. Kwinter, Alfred
    Kwinter Professional Corporation and 1736314 Ontario Inc. carrying on business
    as Singer Kwinter

Respondents
(Appellants/Respondents in Cross-Appeal)

Chris G. Paliare and Lauren Pearce, for
    the appellants/respondents in cross-appeal

Peter I. Waldmann, for the respondent/appellant
    in cross-appeal

Heard: In writing (submitted to a panel on
    September 17, 2020)

On appeal from the judgment of Justice Cynthia
    Petersen of the Superior Court of Justice, dated July 3, 2019 with reasons
    reported at 2019 ONSC 4064.

Doherty J.A.:


I



[1]

This is an appeal brought by the law firm,
    Singer Kwinter (SK), and a cross-appeal brought by their former client, Mr.
    David Lima.  SK represented Mr. Lima in an action brought against his insurer
    and his insurance broker. The appeal and cross-appeal are from an assessment of
    SKs fees. That assessment proceeded by way of an application before a Superior
    Court judge. In addition to appealing the assessment, both SK and Mr. Lima also
    seek leave to appeal the costs order made by the application judge.

[2]

I would allow SKs appeal, but only to the
    extent of eliminating the application judges recalculation of the
    disbursements to account for what she believed to be a double-counting of
    certain disbursements. I would dismiss Mr. Limas appeal from the assessment.

[3]

I would dismiss SKs application for leave to
    appeal the costs ordered on the application. I would grant Mr. Lima leave to
    appeal, allow the appeal and vary the costs order in his favour to $20,000.


II



background facts

[4]

Mr. Limas home and other buildings on his
    property burned down in February 2011. Investigation revealed the fire was
    deliberately set. Mr. Limas insurer suspected him.

[5]

In the summer of 2011, frustrated with the
    progress of his insurance claim, Mr. Lima decided to retain SK.
[1]
SK, a well-known plaintiffs
    litigation firm, has enjoyed considerable success taking lawsuits to trial
    against insurers who have denied coverage on fire insurance policies and alleged
    arson.

[6]

Mr. Lima could not fund what was potentially
    long, complicated and expensive litigation on an ongoing basis. He and SK
    negotiated a contingency fee agreement (CFA). SK initially proposed a fee
    equal to one-third of all monies ultimately paid by any defendants. Mr. Lima
    verbally agreed with this proposal, but shortly afterwards, suggested to Mr.
    Singer the fee was too high. Mr. Singer agreed to renegotiate.

[7]

In September 2011, Mr. Lima signed a retainer agreement
    with SK. The retainer provided for payment to SK, calculated in two ways. SK
    was to receive a fee based on a percentage of any amount recovered. Mr. Lima
    agreed to pay a fee equal to 20 percent of all claims paid by the defendants up
    to $500,000, and 10 percent of all claims paid in excess of $500,000. In
    addition to the percentage fee, the CFA also entitled SK to costs paid by the defendants.
    The relevant provision read:

In addition to the above-noted sums, the
    balance of our fees will be paid by the defendant known as partial indemnity
    costs. This amount is in addition to the amounts paid by you noted above.

[8]

In October 2011, SK commenced an action against
    the insurer and the insurance broker. In addition to claiming damages against
    the insurer of over $5 million for negligence and breach of contract, Mr. Lima sought
    punitive damages based on the insurers bad faith denial of coverage. As
    against the broker, Mr. Lima claimed damages of $2 million, alleging the broker
    failed to give him proper advice and arrange adequate or appropriate insurance
    coverage.

[9]

The insurer denied coverage in its statement of
    defence, alleging Mr. Lima had either started the fire or caused someone else
    to start the fire. The insurer and the broker both maintained the losses claimed
    by Mr. Lima were grossly exaggerated. The insurer also counterclaimed against
    Mr. Lima, seeking $1.7 million in damages for monies the insurer said it was
    obliged to pay to mortgagees under the terms of the policy.

[10]

The action proceeded through discoveries, three pre-trials,
    and a mediation. In May 2015, the broker agreed to settle the claims made
    against it with a payment to Mr. Lima of $150,000 all in. The insurer settled
    about a month later in June 2015 with an all in payment of $1,250,000.
    Neither settlement attributed any part of the settlement amounts to any specific
    head of damages, or to costs.

[11]

Mr. Lima directed that certain payments be made directly
    to third party creditors. The remainder of the settlement funds was paid into
    SKs trust account. SK billed Mr. Lima $50,000 in respect of the settlement
    with the broker. SK unilaterally attributed $20,000 of that amount to costs.
    The remaining $30,000 represented SKs fees calculated in accordance with the
    percentages set out in the CFA. SKs bill to Mr. Lima showed $33,900 ($30,000
    in fees, plus $3,900 HST) paid to SK from the settlement funds deposited into
    SKs trust account by the broker. Mr. Singer testified SK forgave the remaining
    amount owing on fees  as part of its final accounting with Mr. Lima after the
    settlement with the insurer.

[12]

In respect of the funds paid by the insurer into
    SKs trust account, SK took fees of $338,390.04, of which it unilaterally attributed
    $150,000 to costs, with the remainder representing the fees owed to SK under the
    percentages set down in the CFA.
[2]

[13]

In total, SK took fees of $372,290.04 ($33,900
    plus $338,390.04). In addition, disbursements of $101,994.34 were paid out of
    the settlement funds.


III



the application

[14]

About a year after receiving SKs final account,
    Mr. Lima served a Notice of Assessment under the
Solicitors Act
, R.S.O. 1990, c. S.15
. After a false
    start before an assessment officer, Mr. Lima commenced an application in the
    Superior Court in July 2017, challenging the legality of the CFA. The
    application was eventually heard in late January and early February 2019.

[15]

On the application, SK conceded that it knew
    when it entered into the CFA with Mr. Lima the agreement contravened s. 28.1(8)
    of the
Solicitors Act
, and was unenforceable by virtue of s. 28.1(9).
[3]
According to SK, it was
    commonplace in 2011 to negotiate contingency fee agreements, like the one
    negotiated with Mr. Lima, and to fail to apply for, or obtain, the judicial
    approval required under s. 28.1(8).
[4]

[16]

SK argued, that because the CFA was unenforceable,
    its fees should be calculated on a
quantum meruit
basis. SK further
    submitted, that in performing that
quantum merit
assessment, the court
    must look at Mr. Limas reasonable expectations as one of the relevant factors.
    SK contended Mr. Limas reasonable expectations were reflected in the terms of
    the CFA he had agreed to with SK. SK contended the amount it had billed Mr.
    Lima pursuant to the CFA was reasonable and justifiable on a
quantum meruit
analysis.

[17]

On the application, Mr. Lima did not argue that
    SK should be required to return all of the funds it had taken as fees as a
    consequence of deliberately entering into an unenforceable contingency fee
    agreement. Instead, Mr. Lima submitted SKs bills should be reduced by subtracting
    the amounts SK had arbitrarily allocated to costs in the settlement with the
    insurer and the broker ($170,000). Mr. Lima argued those arbitrary figures were
    made up numbers and amounted to double-counting, having regard to the fees SK
    had taken as a percentage of the settlement funds. Mr. Lima insisted he had
    never been told that SK would be entitled to costs paid by the defendant on top
    of the percentage fee he had agreed to pay. Finally, Mr. Lima submitted there
    should be other specific deductions from the fees charged to reflect duplications
    and excessive charges.

[18]

Prior to the application, counsel for Mr. Lima
    and SK agreed disbursements were not in issue and did not have to be proved. The
    application proceeded on the basis that the amount claimed for disbursements
    was not in issue.

[19]

The application judge agreed that SKs fees should
    be assessed on a
quantum meruit
basis. After referencing the many
    factors identified in
Cohen v. Kealey and Blaney
, [1985] O.J. No. 160
    (C.A.), the application judge proceeded to consider each factor at length.
    Ultimately, she concluded SK was entitled to fees in the amount of $328,546.41
    rather than the $372,290.04 SK had claimed. The application judge ordered the
    difference, $43,743.63, returned to Mr. Lima.

[20]

Despite the parties agreement that
    disbursements were not in issue, and the absence of any submissions from
    counsel, the application judge, based on her own review of the billing documents,
    concluded SK had inadvertently double-billed disbursements in the amount of
    $16,100. She ordered repayment of that amount by SK to Mr. Lima. In total, the
    application judge awarded judgment to Mr. Lima in the amount of $59,843.63,
    plus pre-judgment interest.


IV



the issues

[21]

Both parties advanced a number of grounds of
    appeal. Their arguments raised three questions:

·

Did the application judge err in failing to eliminate
    or at least substantially reduce SKs fees on account of SK entering into a CFA
    it knew to be unenforceable under the
Solicitors Act
?

·

Assuming the application judge was correct in assessing
    SKs fees on a
quantum meruit
basis, did she make legal errors or
    material factual errors in her analysis?

·

Should the application judge have reviewed the
    amounts attributed to disbursements, given the position of the parties on the
    application, and if so, did she correctly hold $16,100 in disbursements had
    been inadvertently double counted?

A.

should sks deliberate non-compliance with the
solicitors
    act
have disentitled sk to any fees or, alternatively resulted in a
    substantial reduction in sks fees?

[22]

The CFA crafted by SK required Mr. Lima to pay a
    percentage fee based on the amount he recovered and, in addition, authorized
    payment of costs to SK. Sections 28.1(8) and (9) of the
Solicitors Act
,
    when read together, provide that a contingency fee agreement, which includes
    both a fee payable under the agreement and an amount arising as a result of an
    award of costs or costs obtained as part of a settlement, is unenforceable
    unless that agreement is approved by a justice of the Superior Court. Approval is
    granted only if the lawyer and client make a joint application for approval of
    the contingency fee agreement, and satisfy the justice there are exceptional
    circumstances warranting including payment of costs to the lawyer as part of
    the fees owed under a contingency fee agreement. SK knew an application to the
    court for approval was necessary, but did not make any application. SK did not
    tell Mr. Lima court approval was required.
[5]

[23]

Sections
    28.1(8) and (9) are consumer protection legislation. The
requirements of a joint application for approval and judicial
    approval predicated on exceptional circumstances protect clients from excessive
    fees and fees determined, according to contractual terms, lacking in
    transparency and predictability:
Almalki v. Canada (Attorney General)
,
    2019 ONCA 26, at paras. 47-50. The lack of transparency is apparent from a
    review of the CFA entered into by SK and Mr. Lima. Under the terms of that
    agreement, it was left to SK to unilaterally attribute an amount from the
    settlement amounts to costs. Mr. Lima could not know, from the terms of the
    CFA, what amount from any settlement SK would attribute to costs paid by the
    defendant, and therefore ultimately payable to SK as part of its total fee.

[24]

With the CFA rendered unenforceable by the
Solicitors
    Act
, the question becomes how should SKs fees be assessed? Counsel for
    Mr. Lima on appeal submits SKs reliance on a CFA it knew to be contrary to the
Solicitors Act
and unenforceable should disentitle SK to any payment
    for the services it provided, or alternatively should result in a substantial reduction
    of any amount otherwise payable to SK for those services. Counsel argued that
    SKs blatant disregard of the constraints of the
Solicitors Act
resulted in a breach of its fiduciary duty to Mr. Lima and an improper removal
    of Mr. Limas funds from SKs trust account. Counsel stresses SK knew all along
    the CFA contravened the
Solicitors Act
and could not be enforced. He
    submits that SKs deliberate and knowing breach of the
Solicitors Act
distinguishes this case from cases like
Tri Level Claims Consultants Ltd.
    v. Koliniotis
(2005), 257 D.L.R. (4
th
) 297 (Ont. C.A.), at
    para. 40, in which this court allowed recovery of fees on a
quantum meruit
basis, after a paralegal unknowingly entered into an unenforceable contingency
    fee agreement.

[25]

I cannot accept Mr. Limas submission for
    several reasons. The assessment process is intended to provide a relatively
    expeditious manner in which to determine a reasonable fee for legal services
    provided. Allegations of misconduct against a lawyer, which have no impact on
    the value of the legal service provided, are not properly resolved in the
    context of an assessment application. Mr. Limas argument would introduce a
    punitive element into the assessment process. He invites the court to punish
    SK for non-compliance with the
Solicitors Act
by eliminating or reducing his fee. Punishment is
    not normally a goal of civil litigation. If SK should be punished, that task must
    be left to the state or the Law Society.

[26]

Mr. Lima also seeks a windfall. He would have
    the court make an order allowing him to avoid reasonable payment for legal
    services that resulted in significant financial benefit to Mr. Lima. The approach
    urged by Mr. Lima, which would allow him to reap the benefits of the settlements
    achieved by SKs efforts without paying a fair and reasonable fee, goes well
    beyond any legitimate consumer protection goal, and strikes me as the very
    definition of unjust enrichment.

[27]

Mr. Limas contention that SKs breach of
    the
Solicitors Act
should disentitle SK to reasonable fees for
    services finds no support in the language of the relevant provisions in the
Solicitors
    Act
. Section 28.1(9) renders a
    contingency fee agreement that does not comply with s. 28.1(8) unenforceable.
    Courts have long drawn a distinction between services provided pursuant to an
    agreement which is illegal as offensive to fundamental public policy notions
    and agreements that are unenforceable. Services provided under agreements which
    are unenforceable but not illegal as contrary to public policy are compensable
    on a
quantum meruit
basis:
Tri Level Claims Consultants Ltd.
, at para. 34 (Ont. C.A.).

[28]

Section 28.1(9)
    speaks only to the enforceability of a non-compliant contingency fee agreement.
    SK cannot enforce the CFA. That is, SK cannot rely on the terms of that
    agreement to fix the value of the legal services provided to Mr. Lima. The unenforceability
    of the CFA does not, however, alter the reality that the services provided by
    SK had real value to Mr. Lima. Nor, in my view, does the unenforceability of
    the CFA negate SKs entitlement to reasonable compensation for the services it
    provided. Had the legislature intended to deny legal fees for services provided
    pursuant to an unenforceable CFA, or had the legislature intended that
    non-compliance with s. 28.1(8) should compel a deduction in fees otherwise
    owed, the legislature would have done much more than simply declare the contingency
    fee agreement unenforceable.

[29]

Apart from
    the specific language of s. 28.1(9), the common law provides no basis for
    depriving SK of any payment for its services by virtue of its non-compliance
    with s. 28.1(8). Courts will not recognize or enforce claims predicated on illegal
    agreements that are offensive to public policy. For example, the court process will
    not lend itself to recovery for services provided pursuant to an agreement to
    commit a tort or a crime:
Tri Level Claims
    Consultants Ltd.
, at
    para. 35.

[30]

The CFA
    entered into by SK and Mr. Lima does not contemplate the commission of a crime.
    Nor do the terms necessarily constitute champerty, maintenance or any other
    tort: see
McIntyre Estate v. Ontario (Attorney
    General)
(2002), 61
    O.R. (3d) 257 (C.A.), at paras. 26, 47, 70-76. The common law offers no
    justification for going beyond the statutory consequences described in s. 28.1(9).
    That section speaks only to the enforceability of the contingency fee agreement,
    and not to any entitlement to compensation for the value of services provided
    pursuant to the agreement.

[31]

Sections 23 and 24 of the
Solicitors Act
offer strong support for the interpretation of s. 28.1(9) that does not deny a
    lawyer a
quantum meruit
assessment of fees if the contingency fee
    agreement is rendered unenforceable by s. 28.1(9). Under s. 23, a client may
    challenge fees owing under any agreement, including a contingency fee agreement,
    on the basis the terms of the agreement are not fair and reasonable between the
    parties. If the court accepts that the terms are not fair and reasonable, s.
    24 directs:

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.

[32]

As s. 24 makes plain, a contingency fee
    agreement that is not fair and reasonable is void and cancelled. The
    section, however, goes on to provide that fees are to be assessed in the
    ordinary manner, that is by a determination of  what is reasonable in all the
    circumstances: see
Raphael Partners v. Lam
(2002), 61 O.R. (3d) 417
    (C.A.), at paras. 30-33, 49-50;
Henricks-Hunter v. 814888 Ontario Inc.
    (Phoenix Concert Theatre)
, 2012 ONCA 496.

[33]

Although s. 28.1(9) does not specifically
    indicate a contingency fee agreement found unenforceable under that section
    should be assessed in the ordinary manner, I see no principled reason to draw a
    distinction between a contingency fee agreement found unenforceable under s.
    28.1(9) and a contingency fee agreement found void or cancelled under s.
    24. The same consequence should follow in respect of agreements found wanting
    under either s. 24 or s. 28.1(9). The lawyer can no longer rely on the terms of
    the contingency fee agreement as the basis for determining their fee, but is entitled
    to reasonable compensation reflective of the value of the legal services
    provided.

[34]

The case law,
    while sparse, is also against Mr. Limas position. In
Cookish v. Paul Lee Associates Professional Corporation
, 2013 ONCA 278, the client claimed the
    contingency fee agreement with his lawyer was invalid for non-compliance with
    the
Solicitors Act
. This court framed the issue in this way,
    at para. 2:

As it turns out, however, there is a dispute
    about the nature of the retainer agreement entered into between the parties. Is
    it, or is it not, a valid contingency fee agreement, as contemplated by the
Solicitors
    Act
[citation omitted]? If the answer is no  as Ms. Cookish contends 
    then the account may be assessed as to the amount on a
quantum meruit
basis. If the answer is yes  as the solicitors contend  then effect must be
    given to the formula set out in the agreement in determining the amount.

[35]

Ultimately, at para. 60, the court remitted the
    matter to the application judge to consider the nature, validity and effect of
    the agreement entered into between the client and the solicitor.

[36]

In
Du Vernet v. 1017682 Ontario Limited
    and Victor Wong
, 2009 ONSC 29191, the client sought an assessment of his
    lawyers fees payable under a contingency fee agreement. The motion judge held
    the contingency fee agreement did not comply with the relevant regulations
    under the
Solicitors Act
:
Du
    Vernet
, at paras. 18-20. He further
    held the agreement was void under s. 24 of the
Solicitors Act
as unfair and unreasonable:
Du Vernet
, at para. 23. The motion judge went on, however, to
    determine that the lawyers were entitled to fees assessed in the ordinary
    manner:
Du Vernet
, at
    paras. 26-29.

[37]

In
Sé
guin v. Van Dyke
, 2013
    ONSC 6576, the motion judge considered a contingency fee agreement that did not
    comply with s. 28.1(8). He declared the agreement void and unenforceable. The
    motion judge said, at para. 20:

I grant the application and declare the
    contingency fee agreement void and unenforceable. The reasonableness of the
    fees charged by the defendant will be determined by the trial judge in the tort
    action, who will receive
viva voce
evidence and who will be in a
    better position to determine the credibility of the parties.

[38]

The order in
Sé
guin
recognizes the lawyers entitlement to reasonable fees,
    despite non-compliance with s. 28.1(8) of the
Solicitors Act
, and the unenforceability of the contingency fee
    agreement. For reasons peculiar to that case, the motion judge directed that
    the assessment of the fees should be determined in the context of the pending tort
    action.

[39]

Mr. Lima
    relies on
Chudy v. Merchant Law Group
, 2008 BCCA 484. In
Chudy
,
    the client sued his former solicitors alleging fraud, breach of trust and
    breach of fiduciary duty. Among other things, the client demanded the return of
    the funds paid pursuant to a contingency fee agreement. The client alleged the
    agreement was invalid for a variety of reasons, all of which involved
    misconduct by his former lawyers. The client maintained any fees paid were paid
    as a result of the lawyers deceit and breach of their fiduciary duty.

[40]

The majority
    of the British Columbia Court of Appeal concluded the contingency fee agreements
    were unenforceable primarily because the solicitor who entered into the
    agreements was not licensed to practice law. The majority also rejected the
    lawyers claim to a
quantum meruit
assessment of those fees. The court said,
    at para. 76:

The appellants arguments do not address the
    misconduct found by the trial judge or how that misconduct affects the
quantum
    meruit
claim. In this respect, the finding that the respondents would have
    taken the file elsewhere had they known the truth about Mr. Shaws professional
    status in the winter of 2002 takes on particular significance. The application
    seeks to recover fees it would not have earned but for Mr. Shaws deceit. His
    deceit clearly makes the
quantum meruit
claim untenable in equity.

[41]

I agree with the conclusion reached by the
    majority of the British Columbia Court of Appeal. On the findings of the trial
    judge, the fees paid by the client were paid directly as a consequence of the
    deceit perpetrated upon the clients by the lawyers. The client was entitled to
    recover any fees paid as damages flowing from the lawyers fraud. A
quantum
    meruit
claim could not mitigate those damages.

[42]

There is no suggestion in this record Mr. Lima
    would not have agreed to the terms of the CFA if he knew the agreement contravened
    s. 28.1(8) of the
Solicitors Act
. Further, on the application judges
    findings, Mr. Lima was not deceived or misled as to the terms of the CFA.
Chudy
does not assist Mr. Lima.

[43]

Both parties made some reference to
Hodge v.
    Neinstein
,
supra
. In that case, the Divisional Court and this
    court were concerned with whether s. 28.1(8) of the
Solicitors Act
could support a cause of action for the purposes of certification as a class
    action. Neither court opined on the consequences of non-compliance with s.
    28.1(8). The
Divisional Court did, however,
    indicate the court trying the action might order the return to the client of
    all funds paid under the unenforceable contingency fee agreement. The court
    went on to observe, if the funds were ordered returned, it would be incumbent
    on the lawyer to establish a valid
quantum meruit
claim for fees:
Hodge v. Neinstein
, at para. 8.


[44]

In summary, for the reasons set out above, the
    application judge correctly held the CFA was unenforceable. She properly concluded
    SKs fees should be assessed on a
quantum meruit
basis and correctly
    did not treat SKs deliberate breach of s. 28.1(8) of the
Solicitors Act
as a reason for eliminating or substantially discounting fees otherwise earned by
    SK.

[45]

On the application judges findings, the CFA
    reflected Mr. Limas agreement as to how SKs fees would be calculated. Specifically,
    the application judge was satisfied Mr. Lima understood the CFA included both a
    percentage fee component and a costs component. In coming to that conclusion, the
    application judge rejected Mr. Limas evidence to the contrary, stating at,
    para. 176:

I find that Mr. Lima was aware, from the time
    that he retained Singer Kwinter, that partial indemnity costs would be added to
    the solicitors percentage fees in the event of a settlement. There is,
    however, no evidence that Mr. Lima knew how partial indemnity costs would be
    calculated.

[46]

By all accounts, Mr. Lima is a successful and
    experienced business person. He negotiated the fee agreement with SK. The terms
    of the agreement negotiated by Mr. Lima provided valuable insight into his
    reasonable expectations as to the fees he would eventually have to pay. His
    reasonable expectations are a significant factor in determining reasonable
    value for the service provided. It must, however, be stressed that the terms of
    the agreement go only so far in shedding light on Mr. Limas reasonable expectations.
    Based on the CFA, Mr. Lima could not know how the costs component would be determined,
    or what the amount would be.

B.

did the application judge make errors in her
quantum
    meruit
analysis?

[47]

The application judges
quantum meruit
assessment tracked the individual factors identified in the case law. She
    clearly understood it was not her function to value the services according to
    the terms of the unenforceable CFA. Instead, she had to arrive at a
quantum
    meruit
assessment after weighing all of the relevant factors, including
    Mr. Limas reasonable expectations as to the fees he would be required to pay:
Lima
    v. Singer
, at para. 62.

[48]

In her detailed consideration of the factors
    relevant to a
quantum meruit
assessment, the application judge made a
    number of significant factual findings:

·

SK took appropriate and reasonable steps to
    advance Mr. Limas litigation (para. 85);

·

It would have been reasonable for SK to have
    spent roughly 300 billable hours on the file (paras. 86-88);

·

The file had significant legal complexity (para.
    100);

·

SK handled the litigation with demonstrable
    expertise and competence. They showed a high degree of skill, which favours a
    generous assessment of their fees (paras. 100, 124);

·

Mr. Limas claim that SK failed to follow his
    instructions on a specific matter was, like significant other parts of his
    evidence, false (paras. 121, 175);

·

SK assumed a substantial financial risk by
    committing to take Mr. Limas case all the way through trial without payment.
    There was a genuine risk the claim would be dismissed at trial. Had the claim
    failed at trial, SK would have been required to absorb losses in excess of
    $500,000 (paras. 133, 134, 141-43, 159);

·

The results achieved by SK were very good and
    excellent (para. 160);

·

Without SK extending the contingency fee
    agreement, Mr. Lima would not have been able to finance the litigation. On a
    normal fee-for-service basis, he would have been required to advance at least
    $100,000 before the case got to trial (para. 164); and

·

The amounts to be paid to Mr. Lima under the
    terms of the settlements were commensurate with the amounts he had been told he
    could expect to receive under those settlements before Mr. Lima signed the
    Minutes of Settlement and the Directions to Counsel (para. 186);

[49]

It is fair to say that neither SK nor Mr. Lima
    are happy with the application judges
quantum meruit
analysis. Both
    argue she was wrong about the level of success Mr. Lima realized through the
    settlements. SK argues the application judge understated the success by
    calculating SKs fees at the low end of the range suggested by one witness. Mr.
    Lima, however, submits the application judge mischaracterized what were, in
    reality, average results as very good or excellent.

[50]

I will not go through the arithmetic and other
    exercises performed by the parties in support of their very different
    interpretations of the results achieved by SK. The assessment of the level of
    success achieved, like other assessments (e.g. the level of risk assumed by the
    lawyers, the skill of the lawyers), requires a holistic assessment which places
    the results in the context of the entirety of the relevant circumstances. There
    is no doubt an element of subjectivity to some of the necessary assessments. It
    is sufficient, in my view, to hold that the application judges assessments
    were reasonable and available to her on the record before her. I would not
    interfere with any of her factual findings.

[51]

SK and Mr. Lima allege errors in respect of the
    treatment of the evidence of the witness, David Leblanc. Mr. Leblanc, an
    appraiser who had been retained by Mr. Lima during the litigation, was called
    as a witness on the assessment by Mr. Lima. In cross-examination, Mr. Leblanc
    was asked about his experience working with law firms in cases like this one
    and the kinds of fees charged by those law firms. Mr. Leblanc testified to his considerable
    experience in cases like this one. He indicated that, as a rough average,
    fees ranged from 25 to 35 percent of the recovery. Counsel for Mr. Lima
    objected to the answer, but the trial judge admitted it, indicating the witness
    was speaking only to his personal experience and not offering a broader
    opinion.

[52]

The application judge ultimately determined SK
    should receive a fee of 25 percent of the settlement funds, less disbursements
    (paras. 189-92). SK submits the 25 percent falls at the bottom of Mr. Leblancs
    range and, given the findings of the application judge, the assessment should
    have been closer to the 35 percent, at the top of the range. Mr. Lima maintains
    Mr. Leblancs evidence was inadmissible and should have been rejected outright.
    He claims Mr. Leblanc was not qualified to give expert evidence and the
    procedural requirements in respect of expert evidence were not followed.

[53]

The trial judge was entitled to consider Mr.
    Leblancs evidence, based on his personal experience, for what it was worth.
    His evidence constituted some evidence of fees charged in cases that were, at
    least, generically similar to this one.

[54]

I would also reject SKs submission in respect
    of Mr. Leblancs evidence. That submission proceeds on the faulty assumption
    that, because the application judge permitted Mr. Leblanc to testify about his
    personal experience, she was required to translate that evidence into a range
    of fees within which she must operate, for the purposes of determining SKs
    fees. Mr. Leblancs evidence did not set a general range, and the application
    judge did not use it for that purpose. His testimony simply provided some
    evidence of the level of contingency fees charged in similar cases in which he had
    been involved.

[55]

The application judge made no error in her
    treatment of Mr. Leblancs evidence. She did not arrive at 25 percent as an
    appropriate fee by relying on Mr. Leblancs evidence. She explained how she
    arrived at 25 percent as an appropriate fee, at para. 190:

This percentage takes into consideration the
    significant monetary value of the matters in issue and their importance to Mr.
    Lima, the very substantial amount of time reasonably expended by the solicitors
    on the file, the high degree of skill and competence demonstrated by the
    solicitors, the risk of non-payment assumed by the solicitors, the excellent
    results achieved by the solicitors, Mr. Limas ability to pay any amount that
    Mr. Lima could reasonably have expected to pay in the circumstances. It also takes
    into consideration the fact that the claims were settled prior to trial and
    prior to completing full trial preparation. Had the matter gone to trial with
    the same result, I would have found that a higher percentage than 25 percent
    was appropriate.

[56]

SK next submits the application judge wrongly
    took into account Mr. Limas ability to pay his legal fees as at the time of
    the assessment, some four years after the settlement. SK submits Mr. Limas
    ability to pay at the time of the retainer, or at the time of settlement, may
    have relevance in assessing his fees on a
quantum meruit
basis, but
    Mr. Limas financial circumstances years after the settlement cannot have any
    relevance.

[57]

There is merit to SKs submission. However,
    although the application judge made a brief reference to Mr. Limas difficult
    financial circumstances as of 2019 under the heading Ability of the Client to
    Pay (para. 163), I do not read Mr. Limas financial difficulties as having any
    impact on the application judges ultimate assessment. The application judge
    went no further than to indicate some reduction in SKs fees could provide
    financial help for Mr. Lima. The application judge did not endorse that
    approach or identify any reduction on account of Mr. Limas difficult financial
    circumstances.

[58]

SKs last submission challenging the
quantum
    meruit
assessment by the application judge arises out of the treatment of
    legal services provided by SK in respect of ancillary claims made by Mr. Limas
    creditors. These claims had some collateral connection to Mr. Limas claims
    against the insurer and the broker. Mr. Singer testified SK undertook to help Mr.
    Lima on these matters without charging him anything beyond the amounts payable
    under the CFA.

[59]

SK submits that its decision not to charge for
    services relating to ancillary matters was predicated on the existence of the
    CFA. SK contends, that because the CFA was unenforceable, it is entitled to a
quantum
    meruit
assessment of all of the services it provided.

[60]

SKs submission is bold, if nothing else. In
    effect, SK submits that it should not be bound by its agreement not to charge
    for certain legal services because the CFA, which it knew all along was
    unenforceable, is indeed unenforceable. In any event, Mr. Lima clearly had
    every reason to reasonably expect he would not be required to pay for services
    rendered in respect of the ancillary matters.

[61]

Even if the service in respect of these ancillary
    matters should have been taken into account in the
quantum meruit
assessment, the application record indicates that minimal work was done on
    these ancillary files. Assuming the work should have been taken into account, I
    see no reason to think the minimal additional work involved would have led to
    any different ultimate determination as to the appropriate fee.

[62]

Like SK, Mr. Lima raises several alleged errors
    in the application judges
quantum meruit
assessment. He argues, that
    without a valid contingency fee agreement, a
quantum meruit
assessment
    cannot be based on a percentage of the settlement amounts. He submits, if a
quantum
    meruit
assessment is based on the percentage of the settlement amounts, it
    is simply a contingency fee under another name. Contingency fees that do not
    comply with the
Solicitors Act
are not enforceable. Counsel contends
    the application judge could not avoid the prohibition against enforcing the CFA
    by, in effect, implementing a contingency fee agreement under the guise of a
quantum
    meruit
assessment.

[63]

The application judge did not base her
quantum
    meruit
assessment on a percentage of
    the settlement amounts. She based that assessment on her thorough review of the
    relevant factors and a careful blending of those factors. Her reasons clearly
    set out the path to her decision.

[64]

The application judge did ultimately determine
    that the assessment should be quantified as a percentage of the settlement
    amounts. I see no error in that mode of quantification, particularly where a
    significant part of the value of the legal services provided flowed from the
    lawyers assumption of a very real, significant financial risk, absent which
    the client could not have pursued the claim. Furthermore, an assessment based
    on a percentage of the settlement amounts was clearly the mode of
    quantification contemplated by both SK and Mr. Lima.

[65]

Mr. Lima next argues, that even if the
    application judge properly determined that
quantum meruit
fees could be awarded as a percentage of the
    settlement amounts, the motion judge erred in failing to deduct the amounts SK
    had attributed to costs ($170,000) from the settlement amounts before
    determining the fee based on 25 percent of the settlement amounts.

[66]

I would reject this argument. The amount SK
    had attributed to costs from the settlement for the purposes of their fee
    calculations under the CFA had no relevance to the application judges
quantum
    meruit
assessment. The application
    judge concluded the value of SKs legal services should be quantified as a
    percentage of the settlement amounts recovered for Mr. Lima. Whatever part of
    those amounts SK unilaterally attributed to costs, for the purposes of the CFA,
    had no relevance to the trial judges assessment of SKs fees on a
quantum
    meruit
basis.

[67]

Mr. Lima further submits that time spent on
    the file is the major factor in any
quantum meruit
assessment. He contends, that while the application
    judge referred to the hours spent, she largely ignored them in her assessment:
Lima
    v. Singer Kwinter
, at paras. 73-88.

[68]

Time spent on the file is obviously a relevant
    consideration. Under traditional retainers, it will, in all likelihood, be
    among the most important considerations. Its significance in any given case,
    however, depends on the interplay of all of the relevant factors.

[69]

The application judge decided that the nature of
    the retainer and the totality of the circumstances warranted giving prominence
    to factors other than the time spent on the file. She said, at para. 143:

Given the substantial risk assumed by Singer
    Kwinter, it would be inequitable to compensate the solicitors in this case on
    an hourly basis for the services they provided on a percentage contingency fee
    basis. The clients assume no financial hardship. Mr. Lima paid an initial retainer
    of only $5,000, but that amount was ultimately refunded to him. The clients
    benefitted from skilled legal representation at no costs to them with all the
    financial risk assumed by their solicitors.

[70]

I agree with the trial judges
    observations. They explain why the hours put in on the file were not as
    important in arriving at a
quantum meruit
assessment in this situation, as they would be in many others.

[71]

None of the arguments advanced by SK or Mr. Lima
    give cause to set aside or vary the application judges
quantum meruit
assessment.

C.

should the application judge have reviewed the
    disbursements and, if so, did she err in finding an inadvertent double-counting?

[72]

The parties had agreed well before the
    application commenced that SK was entitled to the disbursements listed in its
    accounts and need not prove those disbursements. The application proceeded on
    that basis. The disbursements went unchallenged and the documents relevant to
    the disbursements were left unexplored.

[73]

In her reasons, the application judge concluded
    SK had inadvertently included in its final bill disbursements in the amount of
    $16,100, that had already been claimed and paid in connection with the
    settlement with the broker:
Lima v. Singer Kwinter
, at paras. 57-60,
    191-95. The application judge had discovered the apparent double-counting on
    her own review of the records during the preparation of her reasons. Neither
    party had any opportunity to address the issue. They first became aware that
    disbursements were in issue when they read the application judges reasons.

[74]

The rules governing raising issues not properly
    pleaded are not necessarily applied as strictly in a proceeding involving an assessment
    of a lawyers fees, as they would be in regular civil litigation. I think it would
    have been appropriate for the application judge to raise the question of the possible
    double-counting of disbursements, even though the parties had agreed
    disbursements were not in issue. The application judge erred, however, in
    deciding that issue without giving the parties any opportunity to address the
    apparent double-counting she had discovered during her review of the evidence.

[75]

SK had no reason to think the amount of
    disbursements it claimed were challenged, or that the application judge would
    take issue with the amount claimed for disbursements. Fairness dictated that
    when the application judge had concerns about the amounts claimed for
    disbursements during her review of the record, she bring those concerns to the
    attention of the parties and give them an opportunity to call evidence and make
    submissions before she decided the issue.

[76]

The wisdom of allowing counsel an opportunity to
    address the issue before deciding it, is made clear on this record. The billing
    documents referred to by the application judge do not demonstrate any
    double-counting, although they do raise that distinct possibility. The
    submissions made in the facta filed in this court are not convincing either
    way. There may or may not have been an inadvertent double-counting. It may also
    be that the fees owing to SK as a result of the settlement with the insurance
    broker were understated in the same billing documents. Evidence and submissions
    based on that evidence would, in all likelihood, have resolved the issue one
    way or the other.

[77]

Normally, the onus would be on SK to prove the
    disbursements. However, when, as here, the parties had specifically agreed SK
    was entitled to the disbursements claimed and need not prove them, it would be
    unfair to deny SK disbursements for want of proof. Absent a clear and
    demonstrated double-counting, I would hold Mr. Lima to his agreement that SK
    was entitled to the disbursements claimed. The application judge erred in
    requiring SK to repay $16,100 to correct a double-counting of disbursements.


V



conclusion on the appeal and cross-appeal

[78]

I would allow SKs appeal to the extent that the
    judgment in favour of Mr. Lima is reduced by $16,100 from $59,843.63 to
    $43,743.63, plus pre-judgment interest.

[79]

Mr. Limas cross-appeal is dismissed.


VI



the costs appeals

[80]

The application judge awarded Mr. Lima costs on
    a partial indemnity basis up to November 13, 2018, the date on which SK served
    Mr. Lima with an Offer to Settle in the amount of $50,000. The application
    judge fixed those costs at $20,000.

[81]

The application judge treated the $50,000 offer
    as more favourable than the judgment obtained by Mr. Lima, as in her view the
    $16,100 attributable to the inadvertent double-counting of disbursements should
    be deducted from the judgment for the purposes of assessing costs, leaving a net
    judgment of $43,743.63. Based on this calculation, the November 13, 2018
    $50,000 offer exceeded the judgment. The application judge awarded SK partial
    indemnity costs after November 13, 2018. She fixed those costs at $17,000.
[6]

[82]

In the end, SK was required to pay Mr. Lima
    $3,000 in costs ($20,000 minus $17,000).

[83]

Both parties have alleged a myriad of errors by
    the application judge in her costs assessment. I do not propose to address each
    argument. Nor do I think the appropriate costs order in these circumstances
    should turn on the rules applicable to offers to settle. There are two fundamental
    facts which are largely determinative of the proper costs order on this
    application.

[84]

First, SK bears the responsibility for the need
    for an assessment. By entering into a fee agreement it knew to be contrary to
    the
Solicitors Act
and unenforceable without prior court approval, and
    by failing to inform the client of these facts, SK made the ultimate assessment
    of its fee virtually inevitable if and when the client learned the CFA was
    unenforceable. Not only was the assessment made inevitable by SKs conduct, I
    think its very combative tone was also very much a predictable consequence of
    SKs troubling lack of candor with Mr. Lima. Mr. Lima had little reason to
    accept at face value anything SK said about their fees by the time he commenced
    his application.

[85]

SKs misconduct in respect of the CFA made the
    assessment of its fees virtually inevitable and goes a long way to making SK
    responsible for the costs of that assessment, regardless of the outcome.

[86]

The second important fact, however, points in
    the opposite direction. Beginning about two months before the application
    hearing, SK made several
bona fides
attempts to settle the assessment.
    Mr. Lima made none. His only offer to settle proposed terms more suggestive of
    capitulation than settlement.

[87]

Mr. Lima bears significant responsibility for
    the four-day hearing that eventually ensued. Two of the offers he rejected were
    better, one was much better, than the amount Mr. Lima is due under the
    judgment, as varied by this court. While SKs actions are largely responsible
    for the bringing of the assessment application, Mr. Limas actions are
    primarily responsible for the four-day hearing.

[88]

In my view, a proper balance is achieved by
    awarding Mr. Lima his costs up to the point of the offer in November 2018 and
    denying either party any costs after that point.

[89]

The application judge fixed Mr. Limas costs at
    $20,000 up to November 2018. This amount may be somewhat high on a partial
    indemnity basis. However, Mr. Lima was entitled to something more than partial
    indemnity costs, given SKs misconduct.

[90]

I would grant Mr. Lima leave to appeal costs and
    vary the costs to $20,000, all inclusive. I would dismiss SKs motion for leave
    to appeal costs.


VII



costs of the appeal

[91]

SK was successful on the main appeal to the
    extent of reducing the judgment by $16,100. Mr. Lima was successful on the
    costs appeal to the extent of increasing the costs award to him by $17,000. In
    light of the similar and limited success of both parties, I would make no order
    as to costs on the appeal.

Released: DD JAN 26 2021

Doherty J.A.

I agree Alexandra Hoy J.A.

I agree M. Jamal J.A.





[1]
SK was retained by Mr. Lima and his common-law wife, Ms.
Martha
    Hildebrandt. I will refer to Mr. Lima as the client.



[2]
As the application judge points out, at para. 61, by treating the
    settlement amounts paid by the broker and insurer separately, contrary to the
    terms of the CFA, the total amount claimed for fees by SK exceeded the amount
    actually owed under the percentages set out in the CFA. The application judge
    did not quantify that amount, but it would appear to be about $15,000.



[3]

The CFA also did not comply with the applicable regulations:
    O. Reg. 195/04  Contingency Fee Agreements, ss. 2, 3.



[4]
The practice apparently changed after December 2015, when the
    Divisional Court certified a class action against a law firm. The class action
    raised common issues with respect to the enforceability of the contingency fee
    agreements and the clients entitlement to a return of any and all fees
    collected under contingency fee agreements that contravened the
Solicitors Act
:
Hodge
    v. Neinstein
, 2015 ONSC 7345 (Div. Ct.), affd in part, 2017 ONCA 294, leave to
    appeal to SCC dismissed, [2017] S.C.C.A. No. 341
.



[5]

In May 2018, legislation was enacted repealing ss. 28.1(8)
    and (9) of the
Solicitors Act
. That amendment
    has not yet been proclaimed in force.



[6]

The application judge erred in deducting the $16,100 from
    the judgment, for the purposes of determining whether SKs offer exceeded the
    judgment. However, that error was overtaken when this court varied the judgment
    to $43,743.63, the amount used by the trial judge in determining whether the
    offers exceeded the judgment.


