



COURT OF APPEAL FOR ONTARIO

CITATION: Jackson v. Stephen Durbin and Associates, 2018 ONCA
    424

DATE: 20180504

DOCKET: C64417

Benotto, Brown and Miller JJ.A.

BETWEEN

Davis Jackson

Applicant (Respondent)

and

Stephen Durbin and Associates

Respondent (Appellant)

Sean Dewart and Shoshana Bentley-Jacobs, for the
    appellant

Michael G. Cochrane, for the respondent

Heard: April 20, 2018

On appeal from the judgment of Justice Thomas R. Lofchik
    of the Superior Court of Justice, dated September 14, 2017, with reasons
    reported at 2017 ONSC 5396.

Benotto J.A.:

[1]

The sole issue in this appeal is whether a Results
    Achieved Fee charged by the appellant law firm in a family law matter is a
    prohibited contingency fee agreement under the
Solicitors Act
, R.S.O. 1990, c. S. 15 (the 
Act
).
    I have concluded that the fee is a contingency fee agreement within the meaning
    of the
Act
and is thus prohibited.

BACKGROUND

(1)

Facts

[2]

The respondent retained the appellant, Stephen
    Durbin and Associates, to represent him in family law litigation. The primary
    issue was the custody of the respondents 6-year old daughter.

[3]

The respondent signed a retainer agreement
    outlining hourly rates, daily fees for court appearances and an automatic
    yearly increase of 15% with respect to those fees. The retainer agreement also
    provided for an increase in fees in the event of a positive result achieved
    (Results Achieved Fee).

[4]

The respondent was a police officer, then
    earning about $96,000 per year. He depleted his retainer funds of $10,000 and
    began accruing arrears. He signed a direction that any funds payable to him
    from the litigation would be paid to the appellant in trust and the appellant
    would deduct outstanding fees from those funds.

[5]

After a lengthy trial, the respondent was
    awarded sole custody of the child, half of the proceeds of sale of the
    matrimonial home and costs of $192,000. The funds were all payable to the
    appellant pursuant to the direction. The appellant received $423,510.47 in
    trust representing the respondents share of the proceeds of sale from the
    matrimonial home plus the costs award.

[6]

The appellant deducted $132,597.74 from the
    trust to satisfy the outstanding account. The appellant also unilaterally deducted
    a Results Achieved Fee of $72,433.24. It is unclear on the record how the
    appellant arrived at this amount.

[7]

The respondent did not object to the deduction
    of fees to satisfy the outstanding account. He did, however, object to the Results
    Achieved Fee. He sought to have it assessed, but the assessment officer
    concluded that a judge would have to decide the matter as a question of law.

[8]

The application judge determined that the Results
    Achieved Fee is a contingency fee agreement as defined by the
Act
, and thus is a prohibited charge.

(2)

Statutory context

[9]

The
Act
provides:

Purchase of interest prohibited

28 A solicitor shall
    not enter into an agreement by which the solicitor purchases all or part of a
    clients interest in the action or other contentious proceeding that the
    solicitor is to bring or maintain on the clients behalf.

Contingency fee agreements

28.1 (1) A solicitor may enter into a contingency fee
    agreement with a client in accordance with this section.

Remuneration dependent on success

(2) A solicitor may enter into a contingency fee agreement that
    provides that the remuneration paid to the solicitor for the legal services
    provided to or on behalf of the client is
contingent, in
    whole or in part, on the successful disposition or completion of the matter
in respect of which services are provided.

No contingency fees in certain matters

(3)
A solicitor shall not enter into a
    contingency fee agreement if the solicitor is retained in respect of
,

(a) a proceeding under the
Criminal
    Code
(Canada) or any other criminal or quasi-criminal proceeding; or

(b)
a family
    law matter
. [Emphasis added.]

PARTIES POSITIONS

[10]

The appellant submits that the Results Achieved
    Fee is not a contingency fee agreement, but rather a permissible premium or
    bonus. It points to two features that it claims distinguish the two.

[11]

First, under the retainer agreement, the
    respondent was liable to pay the appellants fees regardless of the outcome at
    trial. The appellant argues that contingency fee agreements are limited to
    those wherein the lawyer only receives compensation for a successful result.

[12]

Second, the Results Achieved Fee was linked to
    success at trial, not the specific monetary result. The appellant argues that
    the public policy concerns that give rise to the prohibition against
    contingency fee agreements in family law matters do not arise where the
    lawyers fee is not tied to a fixed portion of the monetary result.

[13]

The appellant relies on a series of civil law
    cases, including
Teplitsky, Colson v. McCrea
, [2008] O.J. No. 6014 (S.C.)
.
There the clients fee arrangement in an employment matter provided
    it would be augmented to include a percentage of the recovery that exceeded a
    certain offer to settle. In determining whether this constituted a contingency
    fee agreement, Strathy J. (as he then was) distinguished between a bonus in
    the event of success and a contingency fee agreement. At paras. 77-78, he
    stated:

There has been no
    authority cited to me other than the statute itself, for the interpretation of
    Section 28 to apply to agreements which are not in and of themselves
    conditional on success, but which contain a bonus in the event of success. This
    agreement provided for a fee in any event, but a bonus calculated on a
    percentage basis in the event of success. Nor is any authority cited for the
    proposition that it is the charging of a percentage that makes the agreement
    objectionable.

While contingency
    fee agreements are frequently based on a percentage, the calculation of a part
    of the lawyers compensation by reference to a percentage, does not make the
    agreement bad as a contingency fee agreement.

[14]

The appellant also relies on
Warnica
    v. Van Moorlehem
, 2012 ONSC 4241, in which clients agreed
    to pay an amount equal to 30% of the amount recovered in the action brought on
    their behalf. Relying on
Teplitsky
, Quigley J. rejected that the mere payment of percentage-based
    remuneration renders an agreement a contingency fee agreement. He stated, at
    para. 33:

So the question is, just what is a
    contingency agreement? Is every agreement involving the payment of
    percentage-based remuneration to the solicitor, based upon the amount received
    in damages at the end of a trial or settlement negotiation a contingency fee
    agreement? Clearly the answer is no. Regardless of whether percentage
    compensation may be paid in whole or in part, the only fee arrangements which
    will fall within the definition are those embraced by section 28 of the
Solicitors
    Act
where the solicitor effectively purchases all or part of the clients
    interest and potential success in the action. The mere calculation of a part of
    a lawyers compensation by reference to a percentage does not necessarily makes
    the agreement bad as a contingency fee agreement, and thus require the
    protections enacted in the statute and the Regulations.

[15]

Justice
    Quigley concluded that the agreement at issue was a contingency fee agreement
    since, under the plain terms of the agreement, the solicitor would receive no
    fees for his services unless an amount was recovered.

[16]

The respondent takes the position that the
    application judge was correct in finding that the Results Achieved Fee was a
    contingency fee agreement in contravention of the
Act
.

ANALYSIS

(1)

Overview

[17]

As I will explain, the appellants position is
    outdated and does not accord with the current provisions of the
Act
. The
Act
was amended in 2004 to
    include the phrase contingent, in whole or in part on a successful outcome.
    Consequently, a premium or bonus added on to a lawyers fee is captured by the
    meaning of contingency fee agreement and is thus prohibited by s. 28.1(3)(b).

[18]

To demonstrate the meaning of a contingency fee
    agreement, I first consider the plain and ordinary meaning of the words in the
Act
; I then consider the broader statutory context. I conclude that a
    contingency fee agreement is an agreement under which
any part
of a lawyers compensation is
    tied to the successful resolution of the matter for which the lawyer was
    retained. Accordingly, the Results Achieved Fee is a contingency fee agreement
    and is prohibited by the
Act
.

(2)

Standard of review

[19]

The interpretation of the term, contingency fee
    agreement, under the
Act
is a question of law, reviewable on a correctness standard:
Housen v. Nikolaisen
, 2002 SCC
    33, [2002] 2 S.C.R. 235, at para. 8.

[20]

Whether the Results Achieved Fee constitutes a
    contingency fee agreement is a question of mixed fact and law. The application
    judges conclusion on this point is entitled to deference absent an extricable
    error in principle or palpable and overriding error:
Housen
, at para. 36.

(3)

The meaning of a contingency fee agreement

[21]

In the past, this court and others have described
    contingency fee agreements as those in which a lawyers fees are entirely
    dependent upon success. Specifically, in
McIntyre Estate v. Ontario
    (Attorney General)
(2002), 61 O.R. (3d) 257 (C.A.),
    OConnor A.C.J.O. stated, at para. 1:

Contingency fee
    agreements may take a variety of forms, but the one element common to all of
    them is that the client only becomes liable to pay the lawyers fees in the
    event of success in the litigation.

[22]

However, this description predated the statutory
    provisions at issue. At the time of
McIntyre
,
    the
Act
(as discussed below) was significantly
    different.

[23]

The change in the
Act

to include in whole or in part appears to have gone unnoticed by
    lower court decisions after
McIntyre
, and
    renders
Teplitsky
and
Warnica
inapplicable.
[1]


[24]

Thus, I interpret the meaning of a contingency
    fee agreement in light of the current wording of the
Act.


(a)

Principles of statutory interpretation

[25]

The modern approach to statutory interpretation is
    well established. The words of an act or provision are to be read in their
    entire context and in their grammatical and ordinary sense harmoniously with
    the scheme of the Act, the object of the Act, and the intention of Parliament:
Rizzo & Rizzo Shoes Ltd. (Re)
, [1998] 1
    S.C.R. 27, at para. 21, quoting E. A. Driedger,
Construction of
    Statutes
(2nd ed. 1983), at p. 87; and
Bell ExpressVu Limited
    Partnership v. Rex
, 2002 SCC 42, [2002] 2
    S.C.R. 559, at para. 26
.

[26]

It is presumed that the legislature does not
    intend to produce absurd consequences, such as rendering some aspect of a
    statute pointless or futile:
Rizzo
, at para. 27. It is further presumed that the legislature avoids
    superfluous or meaningless words and does not  speak in vain:
British Columbia Human Rights Tribunal v. Schrenk
, 2017 SCC 62, [2017] 2 S.C.R. 795, at para. 45, quoting Ruth
    Sullivan,
Sullivan on the Construction of
    Statutes
, 6th ed. (Markham, Ont.: LexisNexis, 2014), at
    para. 8.23.

(b)

The grammatical and ordinary meaning

[27]

Section 15 of the
Act
defines a contingency fee
    agreement as an agreement referred to in section 28.1. Section 28.1(2), reproduced
    in its entirety above, describes a contingency fee

agreement
    as one that provides the remuneration paid to a solicitor for legal services is
    contingent
in
    whole or in part

on
    the successful disposition or completion of the matter for which the services
    were provided.

[28]

I make several observations regarding the grammatical and
    ordinary meaning of the words in this provision.

[29]

First,
all
of the lawyers remuneration need not be contingent on
    success. Section 28.1(2) explicitly captures agreements where only 
part
of a lawyers remuneration is contingent.

[30]

Second, the legislatures inclusion of the language in whole
or in part
 (emphasis added) must be given real meaning
    and must not be interpreted so as to render it mere surplusage:
R. v. Proulx
, 2000 SCC 5, [2000] 1 S.C.R. 61,
    at para. 28. This clear legislative language provides reason to depart from
    this courts statement in
McIntyre
.

[31]

Lastly, s. 28.1(2) stipulates that remuneration must be contingent
    on the successful disposition or completion of the matter. It does not
    specify that the lawyers fees must be tied to  or contingent on  the
    specific monetary result. It is broader in scope.

[32]

Based on these observations, the grammatical and ordinary wording
    of the relevant provisions does not support limiting contingency fee agreements
    to those in which (i) a lawyers fees are only payable in the event of success
    and/or (ii) a lawyers fees are calculated by reference to the specific
    monetary result  as urged by the appellant.

[33]

Nor does the broader context support such an interpretation.

(c)

The entire context

(i)

The history of s. 28

[34]

The appellant argues that the application judge failed to consider
    whether the appellant had purchased all or part of the respondents interest in
    the action pursuant to s. 28 of the
Act
. It claims that this was a necessary analysis, since contingency
    fee agreements permitted by s. 28.1(2) are those referred to in s. 28.

[35]

This interpretation is consistent with the line of analysis adopted
    in
Teplitsky
and
Warnica
. For example, in
Warnica
,

Quigley J. described
    s. 28.1 as the exception to the antecedent stipulation in s. 28 (at para. 29)
    and held, at para 33:

[T]he only fee arrangements which
    will fall within the definition [of a contingency agreement] are those embraced
    by section 28 of the
Solicitors Act
where the solicitor effectively
    purchases all or part of the clients interest and potential success in the
    action.

[36]

With respect, I do not agree that s. 28 defines or limits
    contingency fee agreements in this manner, nor acts as a necessary antecedent. For
    one thing, this interpretation is contrary to the express language of s. 15,
    which defines contingency fee agreements as those referred to in s. 28.1 (not
    s. 28). More importantly, this interpretation
overlooks the context
    of ss. 28 and 28.1 and how they have developed.

[37]

Historically, courts in Ontario held that
    lawyers contingency fee agreements were champertous and unenforceable:
McIntyre
, at para. 49
. As this
    court explained in
McIntyre
, at para. 26,

champerty at common law was directed at:

[T]hose who, for
    an improper motive, often described as wanton or officious intermeddling,
    become involved with disputes (litigation) of others in which the maintainer
    has no interest whatsoever and where the assistance he or she renders to one or
    the other parties is without justification or excuse  [and] the maintainer
    shares in the profits of the litigation.

[38]

In 1897, the Ontario legislature enacted
An Act Respecting
    Champerty
, R.S.O. 1897, c. 327 (the 
Champerty
    Act
), codifying that: All champertous agreements are forbidden, and
    invalid.

[39]

Over time, rising litigation costs and concerns about access to
    justice resulted in a shift in attitude towards contingency fee agreements:
McIntyre
, at para. 55. In 2004, the legislature amended the
Act

to permit contingency fees
    in certain circumstances pursuant to s. 28.1.

[40]

While contingency fee agreements are now permitted, the champertous
purchase
    of a clients interest in litigation remains prohibited and the
Champerty
    Act
remains in effect
.
Section 28 relates to this
    separate and distinct prohibition.

[41]

The
    distinctness of s. 28 from s. 28.1 is evident from the legislative evolution of
    s. 28. Prior to the 2004 amendments, s. 28 read as follows:

Nothing  gives validity to a purchase by a solicitor of the
    interest or any part of the interest of his or her client in any action or
    other contentious proceeding to be brought or maintained,
or gives validity to an agreement by which a solicitor retained
    or employed to prosecute an action or proceeding stipulates for payment only in
    the event of success in the action or proceeding, or where the amount to be
    paid to him or her is a percentage of the amount or value of the property
    recovered or preserved or otherwise determinable by such amount or value or
    dependent upon the result of the action or proceeding
. [Emphasis added.]

[42]

In
    2004, the legislature removed the reference in s. 28 to agreements stipulating
    for payment in the event of success, tied to a percentage of recovery, determinable
    by the amount recovered, or dependent on the result of the action. These are
    contingency fee agreements now permitted in accordance with s. 28.1.

[43]

However,
    the legislature left the reference to the purchase of a clients interest in an
    action. To interpret s. 28 as an antecedent to s. 28.1, wherein agreements must
    be captured by s. 28 to trigger s. 28.1, would render the legislatures differing
    treatment of the old elements of s. 28 pointless, contrary to the principles
    of statutory interpretation.

(ii)

Policy concerns

[44]

I do not accept the appellants submission that the
    public policy concerns regarding contingency fee agreements in family law
    matters do not apply where the agreement is contingent only on success, and not
    tied to a specific monetary result.

[45]

Family law litigation is fundamentally different from civil
    litigation.
One of the unique aspects of family law is that monetary recovery
    does not occur in the same way in family law litigation as it does in civil
    litigation. Instead the family finances  which are depleted daily by
    litigation costs  are divided. No outside funds are injected into the recovery.
    In these circumstances, it is inappropriate for a lawyers fee to be contingent
    on the monetary result.

[46]

It
    is also inappropriate for a lawyers fees to be contingent on success. In
    family law litigation, the emphasis is on resolution, mediation and ways to
    save time and expense in proportion to the complexity of the issues:
Frick v. Frick
, 2016 ONCA 799, 132 O.R. (3d)
    321, at para. 11. A fee based on success risks detracting from, and indeed undermining,
    this emphasis.

[47]

When
    the primary issue is custody, a fee based in whole or in part on results
    achieved is even less appropriate.
There are no winners and
    losers. A custody decision by the court involves a determination of a childs
    best interests. It cannot be scrutinized to determine which parent had the more
    successful disposition.

[48]

The
    legislature excluded family law matters from contingency fee agreements on
    public policy grounds under s. 28.1(3)(b) of the
Act
. There is no reason
    to limit that exclusion to only agreements tied to monetary results.

(d)

Conclusion

[49]

A contingency fee agreement
under the
Act

is one in which any part
    of a lawyers compensation is dependent on the successful disposition or
    completion of the matter for which the lawyer was retained.

(4)

Is the
Results Achieved
    Fee a contingency fee?

[50]

The
    appellants retainer agreement provided that, in addition to hourly rates and
    daily counsel fees, the respondent would be charged an increase in fees in the
    event of a positive result achieved, defined as the Results Achieved Fee. This
    Results Achieved Fee 
part of
the appellants remuneration  was based
    on a positive result achieved 
i.e.
the successful disposition of the
    matter.

[51]

Accordingly,
    the Results Achieved Fee is a contingency fee agreement per the
Act
and is prohibited.

CONCLUSION

[52]

The appeal is dismissed with costs payable to the respondent in the
    agreed upon amount of $9,000 inclusive of disbursements and HST.

M.L. Benotto J.A.

David Brown J.A.

B.W. Miller J.A.

Released: May 4, 2018





[1]

It appears that the wording change was not brought to the
    attention of the court in either case.


