MIKISEW CREE FIRST NATION v RATH & COMPANY

Mikisew Cree First Nation (“Mikisew”) disputed the enforceability of two contingency fee agreements (“CFAs”) with the law firm Rath & Company (“Rath”). Mikisew had filed for a review of the CFAs pursuant to Rule 10.14, and the Review Officer referred several issues related to their enforceability to the Court in accordance with Rule 10.18. Mikisew appealed a Chambers Judge’s Decision finding the CFAs with Rath complied with procedural rules despite some minor irregularities. Mikisew contended that the Chambers Judge erred in concluding that the CFAs met the necessary legal requirements, and further erred in failing to find that their conditions had expired without being fulfilled.

The Chambers Judge acknowledged delays and gaps in the evidence regarding when the CFAs were signed and served. While service occurred months after execution and Rath provided no explanation for the delay, the Chambers Judge held that Mikisew eventually received the CFAs, and, as a sophisticated client, suffered no prejudice. As such, the Chambers Judge concluded the delay was a technical error and deemed the CFAs enforceable.

The Court of Appeal disagreed, emphasizing that Rule 10.7 imposes strict procedural requirements for CFAs, including the obligation pursuant to Rule 10.7(4) to serve the client with a signed CFA within 10 days of execution. The Court noted that service is essential to initiate the client’s five-day “cooling off period” under Rule 10.7(5), which allows clients to terminate the agreement without incurring legal fees. The Court stressed that this procedural safeguard protects clients from entering into unfair agreements and provides certainty to lawyers.

The Court acknowledged that while minor, technical breaches of the rules governing CFAs may not always invalidate a CFA; however, substantive non-compliance does, regardless of whether any prejudice existed. The Court of Appeal found that the Chambers Judge erred in treating Rath’s months-long delay in service as a minor irregularity and focusing solely on the absence of prejudice to Mikisew. It held that non-compliance with Rule 10.7(4) cannot be excused merely because no harm occurred, as this would undermine the Rule’s purpose and create legal uncertainty. The Court also noted the Chambers Judge failed to assess whether curing the breach was in the interests of justice, as required by Rule 1.5(4)(d), and that Rath never applied for an extension of time pursuant to Rule 13.5.

Given Rath’s unexplained delay, the absence of clear notice to Mikisew of its termination rights, and the failure to comply with procedural formalities, the Court of Appeal concluded that the breach was substantive. As a result, the Appeal was allowed, and the CFAs were declared unenforceable.