Can I Get Fees With That? Law Firm Unsuccessfully Seeks Fees From Their Own Insurer's Negligence Payout

Reasons for judgement were released  this week by the BC Supreme Court, Vancouver Registry, addressing whether a lawfirm that negligently failed to file a lawsuit before the expiry of a limitation period can then seek fees from their clients for the payout the client’s receive in successfully pursuing the lawfirm for damages stemming from their negligence.  Not surprisingly the answer was no.
In this week’s case (Taylor v. Brozer) the clients were injured in a 2006 Washington State collision.  The crash was caused by an underinsured motorist.  They had ICBC Underinsured Motorist Protection coverage and retained the lawfirm to represent them in their UMP Claim. They did so on a contingency basis.  The lawfirm “failed to file a writ in Washington State and missed the limitation period thus denying the clients their rights to seek UMP protection/damages from ICBC“.
The clients hired a new lawyer to sue the former firm.   Ultimately the former firms insurer paid out a $200,000 settlement “based on the clients’ expected recovery under UMP“.
The initial lawfirm then sought over $25,000 in fees from their former clients “in respect of the work it did for the clients” arguing that the work they did before missing the limitation period “was of value and the lawfirm ought to be compensated“.  Registrar Sainty dismissed the claimed fees finding they could not be recovered.  In reaching this decision the court provided the following reasons for judgement:
[49]         There is no dispute between the parties that these solicitors were retained by these clients for a single purpose: “to handle the client’s claim for damages arising from injury suffered in the [Accident]” (paragraph 1 of the retainer agreement). The retainer agreement between them is therefore an “entire contract” in accordance with the holdings in Ladner Downs v. Crowley (supra).
[50]         Since it is an “entire contract”, unless the solicitors had “good cause” to withdraw from acting for the clients, they are not entitled to any fees for the work done by them for the clients up to the time the retainer contract was terminated (Maillott and Morrison Voss v. Smith, 2007 BCCA 296).
[51]         Did they have “good cause” to withdraw? There is no doubt that it was their negligence (in missing the limitation period) that terminated the retainer. After realising their negligence, the solicitors were bound to withdraw and they could no longer act for the clients.
[52]         Can the solicitors own negligence constitute “good cause” as submitted by the law firm or must it be said that as the solicitors “caused” the termination (by their own negligence) therefore must be found not to have had good cause to withdraw (as submitted by the clients)?
[53]         In my view, the solicitors cannot be found to have “good cause” to withdraw. It is simply not proper to hold that a lawyer may find “good cause” for withdrawal in his own negligence and thus be entitled to claim a fee for work done for his clients before his negligence was discovered but may not find “good cause” for withdrawal in something completely beyond his control (e.g., an appointment to the bench, nonpayment of practice fees, death or the like) and lose his entitlement to claim a fee for work done up to the time of the involuntary act. My view is supported by the decision of District Registrar Blok (as he then was) in McVeigh v. Ewachniuk, 2003 BCSC 1328) wherein it was held that a solicitor’s disbarment was not “good cause” for terminating an entire contract retainer.
[54]         Even if I am wrong in this analysis, I find that the work performed by the law firm was of no value to the clients and therefore the clients should not be required to pay the law firm for any of that work. The failure of the law firm to file the action in Washington State defeated the whole purpose of the retainer. But for the assistance of New Counsel and the intervention of the law firms’ insurer, the clients were left with no remedy against the underinsured motorist and thus the work done by the solicitors must be said to have been of no value. Any value was lost once the limitation period was missed and the personal injury action became doomed to fail.

contingency fee agreements, Professional Negligence, Registrar Sainty, Taylor v. Brozer

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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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