10.18: Reference to Court
10.2: Payment for lawyer’s services and contents of lawyer’s account
10.27: Decision of judge
10.7: Contingency fee agreement requirements
10.9: Reasonableness of retainer agreements and charges subject to review

Case Summary

The Court heard an Appeal from the Review Officer’s Decision with respect to the Tallcree First Nation’s (“Tallcree”) contingency fee agreement (the “Agreement”) entered into with Rath & Company and their former counsel Jeffrey Rath (collectively, “Rath”). Pursuant to the Agreement, Rath was entitled to 20 percent of the $57.5-million-dollar agricultural benefits settlement payment from the Federal Government to Tallcree.

Justice Lee found that the Review Officer had made two reversible errors. First, the Review Officer applied a lower standard of review than required by Rule 10.9 in assessing the reasonableness of the retainer fee. Second, the Review Officer erred in finding that the Agreement’s 20% contingency fee was a reasonable “low end minimum” payment without hearing any evidence or supporting caselaw to justify Rath’s $11.5 million dollar bill.

Justice Lee emphasized that reviewing a contingency agreement pursuant to Rule 10.9 inquires whether the Agreement was unreasonable, not “unexpectedly unreasonable”, as per the Review Officer’s decision. With respect to the second error, His Lordship noted that automatically finding the Agreement’s 20% contingency fee was reasonable without any supporting authorities neglected the factors relevant to that inquiry. These factors arising from Rule 10.2(1) are: (a) the nature, importance, and urgency of the matter; (b) the client’s circumstances; (c) the trust, estate or fund, if any, out of which the lawyer’s charges are to be paid; (d) the manner in which the services are performed; (e) the skill, work and responsibility involved; and (f) any other factor that is appropriate to consider in the circumstances.

In this respect, Justice Lee stated that the matter had settled quickly with little time spent by Rath, as well as the fact that Rath was a small 6-person law firm. The Court also noted that what little inquiry into the reasonableness of this fee conducted by the Review Officer was inconsistent with his own statement that he had never encountered a fee this high before.

Having found these two palpable and overriding errors, Justice Lee applied his authority under Rule 10.27 to override and substitute his Decision for the Review Officer’s. His Lordship noted that Rule 10.27(1)(d) also grants the Court the authority to make any Order the Court sees fit. In this case, that Order included a return of any excess fees collected by Rath, as is permitted by Rule 10.27(2). The Court also found that the Agreement contained an arbitration clause which contravened the requirements of Rule 10.7(7) permitting the client to request a review of the Agreement or any resulting statements of account.

After considering the factors in Rule 10.2(1), Justice Lee re-emphasized the Court’s authority to alter or find any or all of a contingency agreement void as per Rule 10.18(3)(b). As such, His Lordship found that Rath was entitled to $3 million dollars as final payment, inclusive of all disbursements.

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