Contingency Fee Agreement Not Explained by Lawyer "Flawed From the Moment It Was Signed"

Reasons for judgement were released this week by the BC Supreme Court, Vancouver Registry, striking down a contingency fee agreement because it was not reviewed with the client by a lawyer.
In this week’s case (Klein Lyons v. Aduna) the client was involved in a 2005 collision and retained a law firm  to represent him.  His case eventually settled and the lawfirm charged $75,000 in fees under their contingency fee agreement.  A fee dispute arose and Registrar Sainty ultimately struck down the fee agreement as being flawed since it was not reviewed with the client by a lawyer in the firm.  In reaching this decision the Court provided the following reasons:
[35]         In my opinion, the CFA was flawed from the moment Mr. Aduna signed it as he signed it without the benefit of speaking to a lawyer at the law firm. In not having a lawyer review the CFA with Mr. Aduna, it may be said that the solicitors took unfair advantage of Mr. Aduna, although I do not find that any advantage so taken was taken deliberately or was designed to defeat the client’s objectives. Further, I am of the view that the fact that no lawyer met with Mr. Aduna to review the CFA, explain its terms to him and provide him with some advice as to how the law firm’s fees would be calculated, produced a serious flaw in the formation of the CFA and a mistake was made at the time it was signed. As such, the CFA must fail…
 [40]         While it was not required that the solicitors advise Mr. Aduna that he ought to get independent legal advice before entering into the CFA, they ought to have advised him “fully and fairly concerning the terms of that contract” (per Roberts & Muir (Re),supra), something they did not do. As the solicitors were entering into a bargain with the client (to pay them a fee based on a percentage of the recovery), they had a duty to ensure that the terms of the CFA were explained to Mr. Aduna by a lawyer. It was not sufficient that there was a lawyer on “stand-by” to be called into the room to discuss the CFA with Mr. Aduna if he had questions about it. 
[41]         While I have found that Mr. Aduna did not lack capacity to contract with the law firm, he was still under some duress, taking medication and in not insignificant pain when he met with Mr. Petrovic. It was even more pressing then that the solicitors ensure that Mr. Aduna fully grasped the consequences of the retainer agreement and took no unfair advantage given his distress; particularly since the consideration of the fairness of such an agreement, if reviewed by a registrar, is undertaken given the circumstances existing at the time the retainer agreement is made.
[42]         In my view, this is of even more import when the contract between a lawyer and his client is for a fee based on a contingency, a percentage of the recovery.  In Anderson v. Elliott (1998), 60 B.C.L.R. (3d) 131 (S.C.), Sigurdson J. explained the nature of contingent fee agreements, at para. 67:
        Under a contingent fee agreement, the lawyer and the client enter a type of joint venture where they will either share in the fruits of the action or suffer the defeat together. Normally, I would expect that it is not a joint venture of equals, in that the law firm, generally, has a more thorough understanding of the law, the legal process and the potential outcomes of litigation than the client.
[43]         Accordingly, I find that the CFA was unfair at the time it was entered into. What, then, is the consequence of that decision?
[44]         The Act provides:
68(6)    If the registrar considers that the agreement is unfair or unreasonable under the circumstances existing at the time the agreement was entered into, the registrar may modify or cancel the agreement.
[45]         I believe I must cancel the CFA as there is no modification of it that would render the CFA fair.

contingency fee agreements, Klein Lyons v. Aduna, Registrar Sainty

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ERIK
MAGRAKEN

Personal Injury Lawyer

When not writing the BC Injury Law Blog, Erik is the managing partner at MacIsaac & Company, based in Victoria, B.C. He is also involved with combative sports regulatory issues and authors the Combat Sports Law Blog.

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