The Respondent First Nation (the “Tallcree”) entered into a contingency fee arrangement (pursuant to Rule 10.7(3) and (4)) with the Appellant law firm to negotiate their treaty rights with the Canadian government. However, it was not clear whether full compliance with all of the formal provisions of Rule 10.7 was ever achieved, as required by Rule 10.8.

Ultimately, the Appellant received a 20% fee in the amount of more than $11-million.

The Tallcree had a Review Officer review the agreement. Pursuant to Rule 10.9, retainer agreements and lawyer’s accounts are subject to review by a Review Officer. Pursuant to Rule 10.19, the reasonableness of a retainer agreement must be assed based on the circumstances that existed when it was entered into — hindsight may not be used.

Following a hearing, the Review Officer issued a certificate under Rule 10.19(4) that stated the contingency free agreement was reasonable and the resulting fee was not “unexpectedly unfair” or clearly unreasonable.

The Tallcree appealed the Review Officer’s decision to the Court of Queen’s Bench pursuant to Rule 10.26. The Court reversed the decision of the Review Officer. It found the Review Officer had committed reviewable errors by reviewing the contingency fee agreement according to the wrong standard, determining the resulting fee was “was not unexpectedly unfair” or “clearly unreasonable” instead of determining its reasonableness as required by Rule 10.9.

Pursuant to Rule 10.19, once a contingency fee agreement was found to be unreasonable the appropriate fee was to be determined in accordance with the factors in Rule 10.2. However, the Chambers Judge found the Appellant’s efforts were non-legal in nature and stated that, as a result, the factors in Rule 10.2 were not material considerations as they applied to lawyers acting as legal counsel in a typical adversarial case. The Chambers Judge awarded the Appellant $3-million - a fraction of what he would have received from the contingency agreement. The Appellant appealed.

The Court of Appeal noted that courts generally do not review contracts for the adequacy or fairness of the consideration. Retainer agreements, however, are a separate category because Rule 10.9 provides that they could be reviewed for “reasonableness.” Pursuant to Rule 10.19(2), reasonableness was to be determined based on the circumstances that existed when the retainer agreement was entered into.

The majority found that the Review Officer applied the correct standard but were concerned about comments made by the Officer regarding how the agreement was reasonable because its 20% contingency fee was lower than most personal injury matters (especially as this was not a personal injury matter).

Furthermore, the Court of Appeal found the Chambers Judge did not follow Rule 10.19(2) as he used hindsight in its analysis. The Court of Appeal conducted a fresh analysis and found the contingency fee agreement was unreasonable.

The Court then considered what an appropriate fee would be - and confirmed it must be determined in accordance with Rule 10.2. The Majority noted that it was not clear that any of the lawyer’s actions expediated a resolution and settlement and noted that the $3 million fee fixed by the Chambers Judge was generous. Ultimately, the Majority found that, in all the circumstances, while it was based on an unsupportable analysis, there was no basis to disturb the fee of $3 million, and that pursuant to Rule 10.27(2), the Appellants must refund the excess fees to the clients.