Tag: contingency fee agreements

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.

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.

Can I Fire My Personal Injury Lawyer? A Video Discussion

Here is a recent video I uploaded to YouTube discussing the practical consequences of firing your personal injury claims lawyer in order to hire a new one:

When potential clients approach me telling me they are unhappy with their lawyer and want to fire him/her, my initial advice usually catches them off guard.  My first response is while I would welcome the business they should try to work it out with their current lawyer.
Why would I give potential clients this advice and risk losing their business?  The answer is simple, hiring a second lawyer means paying a second lawyer.  Sometimes the price of hiring a second lawyer to finish one job is not worth it and potential clients are entitled to know the costs of their intended actions.
You can click here to read an article I authored on this subject several months ago.  I hope this video and article are of assistance to people not only considering firing their contingency-based lawyer but useful for people who are looking to hire a contingency based lawyer in the first place.

ICBC Claims and Lawyer Fees

Reasons for judgement were released today by the BC Court of Appeal reducing a lawyer’s fee for services performed on a contingency basis.
The facts of the case are tragic.  The Plaintiff was catastrophically injured when she was 19 months old in a single vehicle roll over accident in 1993.
A claim was started against the driver of the vehicle.  Eventually a new lawyer took over the file and acted for the Plaintiff for over 10 years and had to spend over $10,000 of her own money to move the prosecution of the claim along.
The claim eventually settled for the ICBC insurance policy limits.  Although the fee agreement permitted the lawyer to charge 33.3% of the settlement the lawyer reduced the fee to 20%.
In these circumstances the fees needed the approval of the Supreme Court and in 2007 the fees were approved.  The Office of the Public Guardian and Trustee appeled the approval claiming the fees were excessive in the circumstances.
Interestingly, the guardian of the child took no issue with the legal fees and did not oppose the approved fee of 20%.  In other words, the client appeared to be happy with the services performed and the fees charged but the government was not.
The BC Court of Appeal reduced the lawyers fee to about 12% of the amount recovered.  In doing so the court summarized some of the factors that are considered when approving contingency fee agreements, specifically:

1.         the financial circumstances of the plaintiff;

2.         the risk to the law firm where it carries disbursements;

3.         the complexity of the issues;

4.         the experience and skill of defendant’s counsel;

5.         the experience and skill of plaintiff’s counsel;

6.         the risk assumed by plaintiff’s counsel that there would be no pay for effort expended;

7.         the time expended by plaintiff’s counsel;

8.         the importance of the case to the plaintiff; and,

9.         whether the settlement is a good settlement.

The court then went on to adopt some generally accepted propositions regarding contingency fee agreements in British Columbia:

[22] He said, in commenting in general on contingency fee remuneration at p. 269:

A solicitor who undertakes the prosecution of a difficult case, the prospects of which are uncertain due to various issues such as liability, causation or damages, is entitled to be well compensated in the event the case is brought to a successful conclusion.  Such remuneration must be substantial, but not exorbitant, in order to make up for those cases taken by the solicitor on a contingency fee basis which do not result in success.

[23] In Usipuik v. Jensen, Mitchell & Co. (1986), 3 B.C.L.R. 283, [1986] 5 W.W.R. 41 (S.C.), Madam Justice Southin observed (at p. 297):

In approaching the question of the fairness of any particular contract for fees on a percentage basis, one must remember that there are many kinds of personal injury cases: motor vehicle accidents, medical and other professional malpractice, products’ liability, occupiers’ liability and no doubt other kinds which do not, at the moment, occur to me. Medical malpractice cases are notoriously difficult and expensive to pursue. Expert witness fees in themselves can run to many thousands of dollars.

But actions for negligence in the operation of a motor vehicle may or may not be risky or difficult. Sometimes there is an issue of liability; frequently there is not. Sometimes there is a real difference of opinion on the proper amount of damages between the plaintiff and the Insurance Corporation of British Columbia; sometimes, there is very little.

Do you have questions about this case or lawyers fees and ICBC claims?  Feel free to contact me.

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If you would like further information or require assistance, please get in touch.

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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