The Appellant First Nation had entered into a contingency fee agreement (the “CFA”) with the Respondent law firm. The Respondent secured a settlement for the Appellant in the Action covered by the CFA. The Appellant later requested a review of the CFA per Rule 10.13, which allows a lawyer or client to request a review of a retainer agreement. The Reviewing Officer (the “RO”) determined that the 20% contingency fee resulted in an extremely high fee but that it was not “clearly unreasonable”. As a result, the RO allowed the fee.

The Appellant appealed the RO’s decision to the Alberta Court of Queen’s Bench. Justice Lee determined that the standard of review was correctness for errors in law, and palpable and overriding error for errors of mixed fact and law. His Lordship noted that Rule 10.19 specifies that the reasonableness of a CFA is determined at the time the retainer is entered into. After reviewing the authorities, the Court determined that the onus of proving that the CFA is fair and not unreasonable was on the Respondent.

Pursuant to Rule 10.19, Justice Lee reviewed the Appellant’s circumstances. The Appellant First Nation was in dire economic circumstances due to the collapse of the Alberta oil and gas industry. The Appellant was aware of the Respondent’s fee but was not aware of how long it would take to settle; a settlement was reached in just 18 months. The Respondent’s estimated time records amounted to about $391,900 in fees but the fees collected under the CFA were about $11.5 million.

Justice Lee determined that the RO decision was reversible on a correctness standard and a palpable and overriding error standard. The RO erred in law when evaluating whether the CFA was “clearly unreasonable” because the standard to be applied is that of reasonableness. The RO made a palpable and overriding error in finding that 20% was essentially a minimum; this decision ignored factors such as how long the Respondent spent on the file and how quickly and easily a settlement was reached.

As a result, Justice Lee revoked the RO’s decision and substituted a new decision pursuant to Rule 10.27. His Lordship determined that the CFA was unreasonable and allowed the parties to make written submissions as to the appropriate final amount of the Respondent’s fees.