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Tag: Registrar Sainty

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

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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

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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.

Rule 15 Costs Cap Applied to Settlement of a Non-Rule 15 Claim

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Further to my previous posts on this topic (which can be found here and here), reasons for judgement were released this week by the BC Supreme Court, Vancouver Registry, finding that the Rule 15 costs cap can apply to a personal injury claim litigated outside of the fast track when a settlement below $100,000 is achieved.
In the recent case (Varga v. Shin) the Plaintiff was injured in a 2006 collision.  The plaintiff initially sought significant damages over $422,000 and the case was prosecuted in the usual course.  It was never put into the fast track rule.  Prior to trial the case settled for $65,000 plus costs “to be assessed or agreed“.  The parties could not agree on the costs consequences with the defendant arguing that the Rule 15 cap should apply.  Registrar Sainty agreed and in doing so provided the following reasons:
[27]         I prefer Ms Taylor’s submissions in relation to the application of the costs provisions of R. 15-1. In my view, this action, even though it was not declared to be a “fast track” action, is subject to the costs provisions of R. 15-1(15). I agree with Ms Taylor’s submissions that R. 15-1(1) is exclusive and not inclusive. In my opinion, if a matter settles for less than $100,000, R. 15-1(15) applies to the costs of the action. This is made clear, in my view, by the addition to the Rules of R. 14-1(1)(f). That subrule effectively fast tracks actions that were not fast tracked but should have been (see Axten, supra, and Affleck v. Palmer, 2011 BCSC 1366). The cases cited by Mr. Warnett (listed above) were all, in my view, decided per incuriam: without reference to either R. 15-1(1) or 14-1(1)(f) in relation to the issue of costs.
[28]         This interpretation is in keeping with the object of the Rules: “to secure the just, speedy and inexpensive determination of every proceeding on its merits” 
(R. 1-3(1)) and the proportionality provisions set out in R. 1-3(2).
[29]         Finally, I note that Mr. Warnett also suggested that, if the defendants wished the provisions of R. 15-1(15) to apply to the action, they ought to have applied to place it into fast track and as they did not do so, they should not be allowed to limit the plaintiff’s costs to the costs allowed under R. 15-1(15). This suggestion cuts both ways however. Just as it was open to the defendants to seek an order bringing the matter into fast track, it was also open to Mr. Warnett to seek an order (even at the trial management conference) that R. 15-1 not apply to the action. He did not do so and as the action is by operation of the Rules a fast track action, it attracts costs per R. 15-1(15).
[30]         As I have found that the action falls within the provisions of R. 15-1(15), thus the plaintiff is entitled to some proportion of the $6,500 “cap” available (see Duong v. Howarth, 2005 BCSC 128; and Anderson v. Routbard, 2007 BCCA 193 [Anderson]). In order to avoid a re-attendance before me (or some other registrar) to determine how much of that cap the plaintiff may claim, I am going to employ some “rough and ready justice” (see Anderson, at paragraph 49 and Cathcart v. Olson, 2009 BCSC 618 at paragraph 19) to this matter. I will set the amount at the full $6,500, plus tax. This matter settled some 15 days before trial. Likely a good deal of the trial preparation had occurred up to the settlement. It is therefore appropriate that the plaintiff receive the full amount of the cap: see Gill v. Widjaja, 2011 BCSC 951 (Registrar), aff’d 2011 BCSC 1822.

Costs Update: More on Rule 15 and Pre Trial Settlement Costs

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Last year reasons for judgement were released discussing the lump sum costs available to parties under Rule 15.  Reasons for judgement were recently published by the BC Supreme Court, Vancouver Registry, finding that the quantum pre trial Rule 15 settlement costs should remain a matter of discretion.
In the recent case (Benz v. Coxe) the parties settled a personal injury claim for an undisclosed quantum plus costs.  The parties could not agree to the amount of costs and the issue was put before the Court.  Ultimately Registrar Sainty held $6,5000 was an appropriate quantum of costs on the facts of the case (settled in the mature phase of litigation) but held that no hard and fast rule should exist making this amount appropriate across the board.  In doing so the Court provided the following reasons:

[15] I appreciate the submissions of counsel. I have found those of Mr. Jeffrey to be more persuasive than those of Mr. Cope. I am going to continue to support my decision in Cathcart No.1 for a variety of reasons.

[16] Firstly, I think it is important to note, as Harvey J. confirmed in Gill v. Widjaja, supra, that Rule 15-1(15) gives the Registrar wide discretion in determining the appropriate tariff amount. If I were to accede to Mr. Cope’s submission — that in every case you get the cap unless there are special circumstances — I believe that, would be taking away from the discretion given to the Registrar to make these types of decisions.

[17] Secondly, I think Mr. Cope’s approach, rather than taking away from confusion, makes matters more confusing. I do not think one can draw a line in the sand and decide, for example, that where there has been discovery and there are no other special circumstances, you get the cap. However, If there has been no discovery and there are no other special circumstances (yet to be decided and which must be argued), you will probably get some proportion of the cap. One might still end up in the same position. Because whether you call it special circumstances, parsing out, or rough and ready, the parties will still end up assessing costs before a registrar who would then decide where the case was, in terms of preparedness, and who would also have to decide if there are (or are not) special circumstances such that the cap or something less might be awarded.

[18] I agree with Mr. Jeffrey, who submitted that the fairest approach in these types of circumstances is to consider all of the circumstances of the action. I also agree that the fact Harvey J. says one should not get bogged down in the details does not take away from the rough and ready approach, which is actually more fair, I think, to all the parties, because to make discoveries, say, the arbitrary line in the sand could result in some injustices. For example, there may be those odd circumstances where no discoveries have been conducted and were set for a week or two before trial for some reason or other. In those circumstances, using Mr. Cope’s “line in the sand”, a plaintiff might have to apply to a registrar to find special circumstance so that they might get the full cap amount (or something approximating it) if the case settled before the discoveries had been conducted but still, essentially, on the eve of trial.

[19] On the basis of all of the above, I stand by my decision in Cathcart No.1.

Interest on Disbursements Disallowed in Personal Injury Claim

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Update November 17, 2014 – in Reasons released today the BC Court of Appeal overruled the below decisions and found interest on disbursements cannot be recovered.
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Update – May 17, 2013 – the below decision was overturned on Appeal.  You can click here to read about this development
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A very uncertain area of the law relates to recovery of interest on disbursements.  Last year the BC Court of Appeal declined to resolve this uncertainty.  Reasons for judgement were released today by the BC Supreme Court, New Westminster Registry, further weighing in on this inconsistent area of law finding that interest on disbursements is not recoverable.
In today’s case (MacKenzie v. Rogalasky) the Plaintiff was injured in a motor vehicle collision.  In the course of the lawsuit the Plaintiff borrowed $25,000 to finance the disbursements in his case. Following trial the interest on this loan was over $11,000.  The Plaintiff sought to recover this interest but Registrar Sainty declined to allow this claim.  In doing so the Court provided the following reasons:

[33]Based on all of the matters that I have considered — and I have had this matter under consideration for some time; I reviewed all of the submissions before coming here today and then today I have heard even more comprehensive submissions from counsel — I find that I am not bound by the decision of Mr. Justice Burnyeat in Milne. None of the decisions cited to me in favour of awarding interest, including Milne, are on all fours with the facts before me. Milne arose in the context of settlement of an action. Here, the matter was decided following a trial. Further, I find that Mr. Justice Burnyeat’s comments in Milne were obiter and are not binding on me. The case before me is also distinguishable from the decision of Registrar Cameron in Chandi as, in that case, counsel told the Learned Registrar that he was bound by Milne. His Honour was not given the benefit of the submissions I have had regarding the nature of that decision; nor of the impact of theCourt Order Interest Act on his decision. On that basis I may distinguish his reasons.

[34]That, of course, does not end the matter because the fundamental question still remains to be answered: Is this a disbursement that is recoverable by the plaintiff? I think that it is not on the basis of the arguments made by Mr. Parsons, most particularly those related to the impact of the Court Order Interest Act on claims of this nature.

[35]Firstly, a successful party’s right to claim disbursements does not actually arise until the action itself has been determined and so, until the judgment has been rendered, no entitlement arises to recover any costs or any disbursement. Accordingly there can be no right to claim any disbursement until the determination of the action.

[36]The decision in Milne was made without the benefit of the extensive argument that was before me, particularly the argument based on the application of the provisions of the Court Order Interest Act. That Act makes it clear that the legislature did not intend that interest be recoverable on disbursements.

[37]Nor can it be said that the object of costs (as compared to damages for a tortious act) is to return a party to his pre-litigation status and thus interest ought not to be recoverable. Costs are not intended to provide full indemnity to a successful party and the successful party is only entitled to recover necessary or proper disbursements at a reasonable amount. In my view it cannot be said that interest on disbursements is a necessary and proper adjunct of litigation. It is simply one of those unfortunate matters that arose in the circumstances of this particular plaintiff and I find it is not reasonable that the plaintiff recover it.

[38]So, for all of these reasons, I am going to disallow the plaintiff’s claim for interest paid to the third party lender in respect of the loan to fund the disbursements.

Firing Your ICBC Claims Lawyer: The Costs/Benefits Analysis

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As discussed last year in the below video, if you hire a lawyer to represent you for a personal injury claim and are not satisfied with their performance you can fire them.  However, there usually is a cost associated with this.
When people are seeking a new lawyer my typical advice is to first have them review their contract and determine how much it will cost them to change counsel.  From there an informed decision can be made whether the shortcomings in their current lawyer relationship outweigh the costs of moving on.  Reasons for judgement were released this week by the BC Supreme Court, Vancouver Registry, demonstrating the costs that come with switching lawyers.
In this week’s case (Alafriz v. Mathivanan) the Plaintiff was injured in a motor vehicle collision and hired a lawyer to represent him.  The Plaintiff eventually changed lawyers.  A dispute arose over how much was owed to the first lawyer for services rendered.  The lawyer sent a bill seeking $5,825.  The client refused to pay this and the Court was asked to settle the issue.  Ultimately Registrar Sainty held that the first lawyer’s bill was “far too pricey in these circumstances“.
Despite this the Court held that the first lawyer was entitled to a fee for the services rendered and ordered the client to pay $3,000.  This case is worth reviewing in full to see the types of factors the Court considers in addressing the appropriateness of a fee for a personal injury claim where a client changes lawyers prior to settlement or trial.

Cost of MRI and Medical Report Ordered By Lawyer Disallowed

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The winning side to a lawsuit in the BC Supreme Court is allowed to recover reasonable disbursements.  Some of the greatest costs of advancing injury lawsuits are those associated with expert medical evidence.  Today, reasons for judgement were released by the BC Supreme Court, Vancouver Registry, considering two common disbursements of Plaintiff lawyers in ICBC injury lawsuits; Private MRI’s, and medico-legal reports.
In today’s case (Farrokhmanesh v. Sahib) the Plaintiff was injured in two BC car crashes.  He settled his claims for $42,000 plus costs and disbursements.  The parties could not agree on some of the disbursements and the BC Supreme Court was asked to resolve the dispute.  The two biggest items in dispute were private MRI’s ordered by the Plaintiff’s lawyer and a medico-legal report from a psychologist.  Both of these items were disallowed as unreasonable expenses.

  • MRI

The Plaintiff’s lawyer sent his client for a private MRI to better investigate a shoulder injury.   The two scans cost just over $2,000.  The Plaintiff’s lawyer gave the following explanation for incurring this expense in the prosecution of the claim:

The plaintiff claimed damages herein as a result of injuries she sustained to both her neck and trapezius (shoulder area). Her symptoms persisted for years after the accident and were continuing when I made arrangements to have the plaintiff undergo magnetic imaging. I wanted to obtain the best possible imaging in order to ascertain the nature and extent of the plaintiff’s injuries and to uncover objective evidence of injury…

I ordered the scans because in my view presentation of my client’s claim required it. The plaintiff had been off work for a long time and had continuing complaints. These pain symptoms were also causing significant depression. I knew the fact of whether or not there were objective signs of injury as opposed to only subjective complaints was going to be an important issue at trial and thus I ordered the scans to obtain evidence going to this issue.

I knew when I ordered the scans that upon resolution of the subject claims the client would likely be required to sign a release thereby ending her ability to make any further claim for damage, on a permanent basis, to her neck and shoulder. Knowing this and the fact I was responsible for giving advice to the plaintiff regarding her injury and damages and the release, I ordered the scans to ensure there was no latent injury not previously uncovered. This was one of the reasons I ordered the scans. The plaintiff herein was going to forever give up her right to sue in connection with these injuries and thus it was my view that it was important to have the scans undertaken. In fact it was a term of the settlement herein that the plaintiff sign an ICBC form of release.

Registrar Sainty disallowed these disbursements providing the following reasons:

[38] The test for determining whether a disbursement ought to be allowed is:

…whether at the time the disbursement or expense was incurred it was a proper disbursement in the sense of not being extravagant, negligent, mistaken or a result of excessive caution or excessive zeal, judged by the situation at the time when the disbursement or expense was incurred”. (Van Daele v. Van Daele, [1983] B.C.J. No. 1482; 56 B.C.L.R. 178 (C.A.) (at para. 109))

[39] The provisions of Rule 57(4) of the Rules of Court relating to the Registrar’s discretion to award disbursements are broad. In general:

The registrar must consider all of the circumstances of each case and determine whether the disbursements were reasonably incurred and justified. He must be careful to balance his duty to disallow expenses incurred due to negligence or mistake, or which are extravagant, with his duty to recognize that a carefully prepared case requires that counsel use care in the choice of expert witnesses and examine all sources of information and possible evidence which may be of advantage to his client. (see Bell v. Fantini(1981), 32 B.C.L.R. 322 (S.C.)) at para. 23.))..

[44] I am going to disallow the claim for reimbursement for the two MRI scans. I cannot accede to Mr. Fahey’s argument that simply because he, as counsel, thought it was necessary to obtain MRI scans I ought not to question that decision unless I find it to be extravagant or overly zealous. In my view, and I am going to expand on what Registrar Blok held in Ward v. W.S. Leasing Ltd., to be allowed as a necessary and proper disbursement, there must be some medical reason for ordering an MRI. It is not simply enough that counsel seeks some (potential) objective evidence of an injury. Nor is it enough that counsel wishes to ensure that there is no latent injury such that his client might sign the standard release required. There is always a risk in personal injury litigation that a new injury or an injury that has not yet been determined might be found following settlement. That is simply a risk of litigation and a risk of settlement.

[45] I am not satisfied on the evidence before me that costs of the MRI scans were necessarily or properly incurred in the conduct of the proceeding and I will not allow them.

  • Psychologists Medico-Legal Report:

The other disputed item was a medico-legal report from a psychologist.   The Plaintiff retained the services of both a psychologist and a psychiatrist.  They both authored reports addressing the Plaintiff’s injuries.  The cost of the psychologist’s report was near $4,000.  The Defendant argued it was unreasonable for the Plaintiff to retain both experts stating that “(either) one of them could have provided the expert evidence required“.  Registrar Sainty agreed and disallowed this disbursement.  In doing so the Court reasoned as follows:

[52] I am not convinced, on the evidence before me, that it was necessary and proper to hire both experts given that their expertise clearly overlaps and each used similar methodology in assessing the plaintiff. The plaintiff saw both Dr. Joy and Dr. Sehon in July 2008. There was no reason, in my view, to have the plaintiff assessed by both, except to some extent, to do some “doctor shopping” (and in saying so I mean no disrespect to Mr. Fahey’s decision to have the plaintiff seen by both Dr. Joy and Dr. Sehon). My view is bolstered by the fact that, at the time that both experts were retained (or at least at the time their reports were ordered), the plaintiff had not yet seen Dr. O’Shaunessy (and certainly his report was not available) and thus Mr. Fahey’s concerns over having an expert who could “match” Dr. O’Shaunessy were unfounded.

[53] I find that is was not necessary or proper to have two experts engaged in a similar assessment at the time these experts were retained and, accordingly I disallow the claim for the expert report and fees charged by Dr. Joy in the amount of $3,937.50.