IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20130715

Docket: S115012

Registry:
Vancouver

Between:

Klein Lyons

Solicitors

And

Tito C. Aduna

Client

Before:
Registrar Sainty

Reasons for Decision

[1]            
Mr. Aduna was injured in a motor vehicle accident on July 13, 2005 (the
“Accident”). The Accident was witnessed by Mr. Bojan Petrovic, a case manager
with Klein Lyons, Barristers and Solicitors (and the solicitors in this
action). Mr. Petrovic approached Mr. Aduna at the scene of the Accident,
gave him his card and advised that he was prepared to be a witness on Mr.
Aduna’s behalf regarding the circumstances of the accident should the need
arise.

[2]            
Some five days after the Accident, Mr. Aduna emailed Mr. Petrovic as
follows [all sic]:

Hi Bojan,

Thank you for your kind
assistance (being a witness) in the July 13^th 2005 car accident. It
happened on West Broadway and Hemlock, around 12:30 pm and 1:30 pm.

I’m driving a tiny 1998 Toyota
Tercel. I was hit by a HUMMER. Initial finding that the driver of the HUMMER
was 100% at fault.

Anyways, I don’t have serious
injuries….just left hip, lower back and shoulder pain. My car was totalled.

I originally didn’t consider
hiring a lawyer, but it’s getting to the point that managing the accident is
becoming a big administration hussle

Both my wife and I are both
self-employed with 3 young children. We don’t have time for this kinda hussle.
I don’t know my rights and I was worried that ICBC will force me to settle for
less than I’m entitled to get.

Is this going to be a conflict,
if we ask your firm to represent my claim? because your one of the witness?
Please advise on how we’re go about on this claim as quickly as possible. Thank
you again.

Warms regards,

Tito Aduna

[3]            
Mr. Aduna met with Mr. Petrovic on July 20, 2005 and, at that meeting,
signed a “Retainer and Contingency Fee Agreement” (the “CFA”) with the law
firm, Klein Lyons. The CFA says:

I, Tito Aduna, retain KLEIN LYONS to act on my behalf
with respect to the accident that occurred on or about July 13, 2005, in Vancouver,
B.C.

I authorize you to take all necessary steps, incur all
reasonable expenses, and employ such agents and counsel as you consider
necessary.

The legal fee paid to KLEIN LYONS will be 29% of my settlement
or judgement, plus disbursements and taxes. Interest on disbursements will be
charged at a rate of 10% per annum, not compounded.

. . .

If I terminate the services of Klein Lyons before my case is
concluded, I agree to pay Klein Lyons’ disbursements immediately. I also agree
to pay Klein Lyons their reasonable fee for services rendered up to the time of
termination, as a first charge against the proceeds of my claim. I understand
that this fee will be based not only on the time Klein Lyons has spent on my
behalf, but also the scale and complexity of my claim and the amount I recover
by way of settlement or judgment.

I may, within 90 days after this agreement is made, or
terminated, apply to a district registrar of the Supreme Court of British Columbia
to have it reviewed notwithstanding that I have made payment under this
agreement.

I acknowledge receiving a copy of
this retainer and contingency fee agreement.

[4]            
No one from the law firm signed the CFA.

[5]            
Mr. Petrovic confirmed in his evidence that no lawyer met with Mr. Aduna
at that first meeting. Rather Mr. Petrovic testified that his usual practice is
to review fee agreements with clients with whom he has initial meetings and
that, if the client has questions or concerns about the contents of the agreement,
he brings a lawyer into the meeting to review the agreement with the client and
answer the client’s questions.

[6]            
Mr. Aduna agrees that he did not meet with a lawyer during that initial
meeting. He also agrees that he signed the CFA at that meeting, although he
noted that he initially misdated the CFA (he dated it July 19, 2005) whereas
the actual meeting with Mr. Petrovic occurred on July 20, 2005. Mr. Aduna
had a copy of the CFA dated July 19, 2005 and the solicitors retained one dated
July 20.

[7]            
Mr. David Osborne, a lawyer with Klein Lyons wrote to Mr. Aduna on July
20, 2005 to confirm the retainer. The letter written by Mr. Osborne provides,
in part:

Thank you for retaining Klein
Lyons to act on your behalf in this matter. This letter is a brief summary of
how we handle accident and injury cases.

Investigating the Accident

We will be obtaining copies of
police reports, hospital records, doctors’ reports and employment records.
Depending on the nature of the accident, witnesses will be contacted and
photographs arranged.

We will keep you fully informed
of the results of our investigation. We will also send you copies of all the
reports and records we obtain.

It is important that all
communication with ICBC be through our office.  If ICBC contacts you, tell them
that you have a lawyer and give them our phone number. Do not discuss your
case with anyone except the staff at Klein, Lyons and your doctor.

.
. .

Legal Fees

No legal fees are paid by you
until you collect your damages award. As agreed in your contingency fee
agreement, our fee will be 29% of your settlement or damages award, plus
disbursements, GST and PST.

We would like to conclude by
saying that we are pleased you chose Klein, Lyons to act on your behalf in this
case. If we can be of assistance to any of your friends or relatives who have
personal injury claims please refer them to our office.

If you have any questions about
any aspect of your clam, please do not hesitate to call us.

[8]            
The law firm commenced working on Mr. Aduna’s matter. Mr. Osborne initially
was assigned to the file and he conducted the case until January 2009 when he
left Klein Lyons. On January 29, 2009, the law firm sent Mr. Aduna a letter
which provides, in part.

As David Osborne was the responsible lawyer on the above
matters, we are required to inform you that you may choose to have him continue
to represent you at his new firm, or you may have Klein Lyons continue to
represent you, in which case, your file will be handled by Mark Lyons with the
continued assistance of your case manager, Bojan Petrovic.

. . .

Please advise us in writing of
your decision so that continuity in your representation is assured. . .

[9]            
Mr. Aduna chose to have his file stay with Klein Lyons by ticking the “I
wish my file to stay with Klein Lyons” option, signing the letter and returning
it to the law firm.

[10]        
Mr. Lyons did take over as the lawyer at the law firm responsible for
Mr. Aduna’s file but in April 2009 Mr. Manjot Hallen assumed conduct
of Mr. Aduna’s file. At all times, Mr. Petrovic was the case manager
for Mr. Aduna’s matter.

[11]        
The action was settled at mediation on April 21, 2011 for the sum of $334,734,
inclusive of costs and disbursements. On April 28, 2011, Klein Lyons sent a
bill to Mr. Aduna for fees of $75,000, taxable disbursements totalling
$24,555.83 (before tax) and non-taxable disbursements of $939.50 (the “Bill”).
In all, the Bill was for $111,139.17. Mr. Hallen told me at the hearing that he
reduced the percentage amount of the fee from 29% to 25% and then applied that
percentage (25%) to $300,000, the amount he calculated Mr. Aduna received in
damages from the defendant in the action. Mr. Hallen says the balance
($34,734) of the settlement funds represented Mr. Aduna’s costs and
disbursements.

[12]        
In July 2011, Mr. Aduna commenced this action by filing an appointment
for:

(a)      assessment
of the bill of costs of Klein Lyons, ArcPrint and Imaging and Paul Taberner;

(b)      review
of the bill of Klein Lyons; and

(c)      examination of the agreement
between Klein Lyons and Tito C. Aduna.

[13]        
The original appointment gave a time estimate of one day for the matter.
At a pre-hearing conference held August 23, 2011, it was determined that 4 days
would be needed for hearing. The matter was then set for October 2012 but again
adjourned to January 2012 when it commenced before me. I heard the first four
days of hearing and then, as the matter was not completed, I held three
additional days of hearing over the next several months. The parties completed their
submissions on May 3, 2013.

[14]        
In my view, I must begin this matter with the examination of the CFA.

[15]        
Section 68 of the Legal Profession Act, SBC 1998, c. 9 (the “Act”)
deals with the examination of an agreement by a registrar of the court. The
pertinent sections say:

(2)        A person who has entered into an agreement with a
lawyer or law firm may apply to the registrar to have the agreement examined.

(5)        On an application under subsection (2), the
registrar must confirm the agreement unless the registrar considers that the
agreement is unfair or unreasonable under the circumstances existing at the
time the agreement was entered into.

(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.

(7)        If an agreement is cancelled under subsection (6),
a registrar

(a)        may require the lawyer to prepare a bill for
review, and

(b)        must review the fees, charges and disbursements
for the services provided as though there were no agreement.

[16]        
In Commonwealth Investors Syndicate Ltd. v. Laxton (1990), 50
B.C.L.R. (2d) 186 (C.A.) [Commonwealth No. 1], the British Columbia
Court of Appeal established that the enquiry into whether a retainer agreement
is unfair or unreasonable is done in two steps. The Court explained at pp.
198-199:

The first step investigates the mode of obtaining the
contract and whether the client understood and appreciated its contents. The
enquiry would include whether, at the time the contract was entered into, there
was any lack of capacity on the part of the client, whether there was any undue
influence exercised or unfair advantage taken by the solicitor, whether any
mistake was made, or whether any other flaw arose in the formation of the
contract which would indicate that the client did not understand and appreciate
its content. The onus would be upon the solicitor to satisfy the foregoing
requirements of the enquiry. Should any of those be found, the contract would
not be “fair” in the sense of the statute and Re Stuart [Re Stuart: ex parte
Cathcart, [1893] 2 Q.B. 201]. The court would declare the contract cancelled,
or would modify it, or the bill could be remitted for taxation.

The second enquiry, assuming the
contract is found to be “fair” involves an investigation of the
“reasonableness” of the contract. On this investigation, extending from the
time of the making of the contract until its termination or its completion, all
of the ordinary factors which are involved in the determination of the amount a
lawyer may charge a client are to be considered, and each factor may be the
subject of professional evidence to assist the judge in determining the
reasonableness of the fee in the particular circumstances.

[17]        
Commonwealth No.1 also confirms (at p. 202):

To summarize: close examination should be made of the words
of Re Stuart. It says very distinctly that the solicitor must not only
satisfy the Court that (a) the agreement was fair with regards to the way it
was obtained; but (b) must also satisfy the Court that the terms are
reasonable; and (c) the matters covered by the expression "fair"
cannot be re-introduced in the "reasonable" consideration.
Conversely, the matters covered by the expression "reasonable" cannot
be considered in the "fairness" enquiry.

In our view the two enquiries are
in nearly watertight compartments. One compartment investigates the mode of
obtaining the contract and whether the client understood and appreciated its
content. The second enquiry involves the reasonableness of the amount of the
fee.

[18]        
Commonwealth No. 1 was decided under the Barristers and
Solicitors Act, R.S.B.C. 1979, c. 26. In Randall & Co. v. Hope
(1996), 13 E.T.R. (2d) 257 (B.C.S.C.) [Randall], Levine J. (as she then
was) considered the fairness and reasonableness of a contingent fee agreement
under ss. 78(8) and (9) [now ss. 68(2) and (5)] of the Legal Profession Act,
S.B.C. 1987, c. 25, which sections slightly modified the provisions of the Barristers
and Solicitors Act considered by the Court of Appeal in Commonwealth
No.1.

[19]        
In Randall, Levine J. confirmed that a two-step enquiry must be
undertaken on an examination of an agreement between a lawyer and a client but
noted that both stages of the enquiry were concerned with the circumstances
existing at the time the contract was entered into. Specifically, Her Ladyship
said, at para. 36:

…The only change in the
legislation from the Barristers and Solicitors Act [R.S.B.C. 1979, c.
26] to the Legal Profession Act [S.B.C. 1987, c. 25] is with respect to
the time at which the reasonableness of the agreement is to be determined. Both
fairness and reasonableness are to be determined under the circumstances
existing at the time the contract was entered into. This may change some of the
questions asked, but not the matters to be determined: fairness still involves
the mode of obtaining the contract and whether the client understood and
appreciated its contents, and reasonableness still involves the amount of the
fee.

[20]        
In addition to the provisions of the Act applicable on this
review, the Benchers of the Law Society of British Columbia (as is permitted
under s. 66(2) of the Act) have made rules regarding contingent fee
agreements. Those rules include limitations on the amount, in certain cases,
that can be charged by way of a contingency fee and the form and content of
contingent fee agreements.

[21]        
Specifically, Rule 8-1 of the Law Society of British Columbia Rules
provides:

(1)        A lawyer who enters into a contingent fee agreement
with a client must ensure that, under the circumstances existing at the time
the agreement is entered into,

(a)        the agreement is fair, and

(b)        the lawyer’s remuneration provided for in the
agreement is reasonable.

(2)        A lawyer who prepares a bill for fees earned under
a contingent fee agreement must ensure that the total fee payable by the client

(a)        does not exceed the remuneration provided for in
the agreement, and

(b)        is reasonable under the circumstances existing at
the time the bill is prepared.

[22]        
Therefore, I must begin by examining whether the CFA was “fair” at the
time it was entered into and then, assuming the CFA does not fail for being
unfair, I must consider whether it was “reasonable”, which, per Randall,
I must also consider as at the time the CFA was entered into.

[23]        
Commonwealth No. 1 confirms that, in inquiring into the fairness
of the agreement between a solicitor and client, the registrar should give
regard to (at p. 198):

…whether, at the time the
contract was entered into, there was any lack of capacity on the part of the
client, whether there was any undue influence exercised or unfair advantage
taken by the solicitor, whether any mistake was made, or whether any other flaw
arose in the formation of the contract which would indicate that the client did
not understand and appreciate its content. …

[24]        
In my view, the proper approach to deciding the fairness of the CFA is
to consider, in the context of this matter, the questions posed by the Court of
Appeal in Commonwealth No. 1.

[25]        
As the issue of Mr. Aduna’s ability to contract with the lawyers
occupied a great deal of time at the hearing, I will start by considering
whether there was any “lack of capacity on the part of the client” on July 20,
2005, when the CFA was signed by him.

[26]        
Mr. Aduna insisted at the hearing that he lacked the capacity to sign
the CFA on July 20, 2005. Specifically, he testified that when he met with Mr.
Petrovic he was drugged up, in pain and completely unable to function. Mr.
Aduna told me that he saw his doctor shortly after the accident and that,
before meeting with Mr. Petrovic he had been to the pharmacy and had started
taking some prescription pain medication that made him feel very drugged. He
was also, he said, experiencing headaches, dizziness and pain (at a lower level
than without the mediation) and suffering from a number of psychological issues
resulting from the accident when he met with Mr. Petrovic. Owing to the level
of his incapacity – from the drugs, his pain levels and inability to function (which
Mr. Aduna submits Mr. Petrovic knew, or ought to have known), Mr. Aduna submits
he was incapable of contracting with the solicitors.

[27]        
Mr. Aduna says that Mr. Petrovic ought to have been aware of the
state of his mind and body at that interview; based on both his observations of
Mr. Aduna during that meeting and his recording of the facts as told to
him by Mr. Aduna during that initial intake interview.  Specifically, Mr. Aduna
points to the note Mr. Petrovic made on the law firm’s “Client Data Sheet”
that Mr. Aduna was taking medication as some evidence of his incapacity to
contract with the law firm. He also relies on the notations Mr. Petrovic
made on the Client Data Sheet about the extent of Mr. Aduna’s injuries. He
also notes that Mr. Petrovic confirmed that Mr. Aduna was suffering
from “nervousness”. All of this together ought to have lead Mr. Petrovic to
conclude that Mr. Aduna was not competent to sign the CFA.

[28]        
Mr. Aduna also told me that he cannot believe now that he signed
the CFA without negotiating it and without the benefit of speaking to a lawyer
about the contract. He testified that, at the time he signed the CFA, he needed
lots of attention because of his shock over the accident but also that he
simply wanted to get it over with and get out of the office (since he was in so
much pain). These things together led to his signing the CFA. Particularly, Mr. Aduna
emphasized the fact that he did not negotiate the contract in any way as
evidence of his incapacity. He told me that it was his usual practice to
negotiate professional services contracts. His failure to do so in this
instance is, he submits, something I ought to rely on to find that he did not
have the capacity to enter into this contract.

[29]        
Mr. Aduna also relies as evidence of his lack of capacity to
contract with the law firm on the fact that during his meeting with Mr. Petrovic,
he apparently signed two different documents. He says his disorientation (from
the drugs he was taking and his pain levels) led him to make a mistake on the
first document he signed and which he dated, in error, July 19. In fact (and
this is not disputed) he actually met with Mr. Petrovic on July 20, 2005. Once
he discovered his error, Mr. Aduna then apparently signed a second copy of
the CFA which he dated correctly – July 20, 2005. This mistake, in and of
itself, Mr. Aduna submits ought to have been enough for Mr. Petrovic
to realise that Mr. Aduna lacked the capacity to sign the CFA.

[30]        
The law firm does not agree that the client lacked the capacity to
contract with them. Mr. Petrovic testified that when he met with Mr. Aduna
he had no concerns about Mr. Aduna’s ability to understand what it meant
to hire a lawyer. Nor, he said, did he have any concerns about Mr. Aduna’s
mental state. Specifically, Mr. Petrovic testified that, at their meeting,
he found Mr. Aduna to be very pleasant, intelligent and cooperative and
that he (Petrovic) was of the view that Mr. Aduna understood the nature
and consequences of the CFA. Mr. Petrovic could think of no impediment to
Mr. Aduna signing of the CFA.

[31]        
Despite his insistence that he lacked the capacity to enter into the
CFA, I cannot find on the evidence before me that at the time he signed it Mr. Aduna
lacked the capacity to do so. He inquired of Mr. Petrovic (before meeting
with him) whether, since Mr. Petrovic was a witness to the accident, the
law firm could act for him. Clearly he understood in making that inquiry that
he was to hire the law firm. It follows that he knew he would be expected to enter
into some sort of contract for services with the law firm.

[32]        
Mr. Petrovic was forthright in his testimony. He did not have
perfect recall of his initial meeting with Mr. Aduna and admitted as such.
What he did recall of the meeting was believable. Mr. Aduna did not really
testify as to his recollection of the meeting. He did not say what he may have
recalled, if anything, of that meeting. He only said that he was in so much
pain and suffering from such psychological distress that it must be said he
could not have been capable of entering into the CFA. I do not find that to be
the case. Mr. Aduna himself is a businessman who has worked in a variety
of capacities, including as a self-employed graphic designer. He must have
known when he approached the law firm about representing him in respect of his
injury claim that he would be required to contract with them to carry out those
services. If he had concerns about it, he could have taken it away to consider
or seek advice from his wife, for example, before signing it. I was not told
that Mr. Aduna was in any way pressured to sign the CFA during his meeting
with Mr. Petrovic.

[33]        
Mr. Aduna submitted that I ought to take the fact that he did not
negotiate the CFA as evidence of his incapacity. I do not find that to be so. While
I understand that, per Randall, my inquiry into the fairness of the CFA
must occur at the time the CFA was signed, in my view it is instructive to note
that at no time after the CFA was entered into did Mr. Aduna question it. Mr. Osborne’s
letter confirming the retainer was apparently sent to Mr. Aduna the same
day he signed the CFA. Mr. Aduna did not, on receipt of that letter, call
Mr. Osborne and question either the CFA or the contingency percentage in
it, something that was certainly open to him, either on receipt of that letter
or shortly thereafter. Also, when Mr. Osborne left the law firm and Mr. Aduna
chose to stay with Klein Lyons, he did not question the CFA or attempt to
renegotiate it, something I would have expected him to do if he truly believed
that, when he signed it, he lacked the capacity to do so.

[34]        
Having found no lack of capacity on the client’s part, I will turn to
the other matters I am instructed to consider (per Commonwealth No. 1).
Those matters are: whether there was any “undue influence exercised or unfair
advantage taken by the solicitor, whether any mistake was made, or whether any
other flaw arose in the formation of the contract which would indicate that the
client did not understand and appreciate its content”.

[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.

[36]        
In his submissions, Mr. Aduna referred me to a decision of the Court of
Appeal of this Province (Carr-Harris & Co. v. Gnam (1993), 108 DLR
(4^th) 575; 87 BCLR (2d) 58) wherein the Court held that a legal
assistant was not entitled to enter into a contingency fee agreement with a client.
Specifically, the Court said, at para. 7):

[6]        It is conceded that Carr-Harris & Company is
not a member of the Law Society and that the legal assistant that signed on its
behalf is not a member of the Law Society. In my opinion, s.78(1) and (2) [of
the Legal Profession Act, R.S.B.C. 1987, c.25] require that an agreement
such as this if it is to be enforceable, must be made by a member of the Law
Society. I need not concern myself in these reasons with what the result would
be had a lawyer in Carr-Harris signed on behalf of the company and I confine my
reasons to the facts before us.

[7]        On these facts no
member of the Law Society has entered into this agreement with the client. I am
in agreement with the brief reasons of the chambers judge. This was the only
issue before us if it was to be decided adversely to the appellant, as in my
opinion, it must be. That being so I would dismiss the appeal.

[37]        
In reply, Mr. Murray submitted that Carr Harris v. Gnam is
distinguishable on its facts. Firstly he said that the CFA in this case was not
signed by a secretary (as was the case in Carr Harris v. Gnam).
Secondly, he notes that the provision of the Legal Profession Act
referred to in that case specifically provided that “a member” of the Law
Society may enter into an agreement with his client whereas the current
provision of the Act (s. 65) provides that “a lawyer or law firm” may
enter into an agreement for services. Here, Mr. Murray says the agreement
is between the law firm and Mr. Aduna. The fact that Mr. Petrovic was
in the room is of no importance since the contract is with the law firm. Mr.
Petrovic was not asked to, nor did he, provide legal advice on the agreement
and therefore it cannot be said to be flawed.

[38]        
I cannot agree. There is no doubt that a solicitor owes a duty of
“utmost good faith” to his client in all matters, including matters of
retainers. In Roberts & Muir (Re) (1986), 7 B.C.L.R. (2d) 211,
Southin J. (as she then was) confirmed that duty of utmost good faith and noted
further that, in contracting with his client, a lawyer has a duty to “fully and
fairly” advise his client of the terms of that contract.  Specifically, Her
Ladyship says (at pp. 217-18):

I approach this matter with two principles in mind:

1.         The relationship between solicitor and client is
contractual (although it may give rise to a liability in tort).

2.         The relationship is also one of utmost good
faith.

My Lords, there is no relation known to society, of the
duties of which it is more incumbent upon a court of justice strictly to
require a faithful and honourable observance, than the relation between
solicitor and client; … a solicitor shall not, in any way whatever, in
respect of the subject of any transactions in the relations between him and his
client, make gain to himself at the expense of his client, beyond the amount of
the just and fair professional remuneration to which he is entitled.

Tyrrell v. Bank of London (1862), 10 H.L. Cas. 26 at
44, 11 E.R. 934 at 941, per Lord Westbury.

Because the relationship is contractual, the first issue is,
what did the contract between the parties provide? In many contracts for
services, the express terms between the parties are few and others are imported
by necessary implication. Solicitors in obtaining payment under their contracts
for services have one great advantage over others. They need not, although they
may, sue for unpaid fees. They may go straight to the taxing officer and get
something much like a judgment without the delay and expense of discovery and
trial. This right is rooted in history. See my judgment on this point in Usipuik
v. Jensen No. 2, Vancouver Registry No. A841017, 17th October, 1986.
[(1986) 7 B.C.L.R. (2d) 58]

Because the solicitor, when he
accepts a retainer, is contracting with his own client, he has a duty to advise
the client fully and fairly concerning the terms of that contract. That is a
duty which arises from the second principle. (See London Loan and Savings
Co. of Canada v. Brickenden [1933] S.C.R. 257 at 261 & 262). I see no
reason why in principle the contra proferentum rule should not apply to the
construction of a written instrument between solicitor and client which the
solicitor has drafted.

[39]        
The solicitor’s obligation to advise his client of the nature of an
agreement between them is further explained in Waldock v. Bissett
(1992), 67 B.C.L.R. (2d) 389 (C.A.). In that case, Southin J.A., in considering
the issue of undue influence exercised by a lawyer over his client confirmed
that, while independent legal advice is not required for an agreement between a
lawyer and his client to be found to be fair, there is an obligation on a
lawyer to advise a client of the effects of an agreement between them. Her
Ladyship said at para. 28:

Here the difficulty is two-fold: (1) There is no rule of law
or equity that a solicitor entering into an agreement with his client must
advise the client to obtain independent advice. Such advice is often wise for
the protection of the solicitor even if not for the client. But the true
obligation is to advise the client, if as here the agreement will have the
effect of depriving the client of his existing legal right to performance of
the earlier contract, of that legal right. That proposition is merely an
application of the principle expressed in 1859 in Lyddon v. Moss, 4 DeG.
& J. 104, 45 E.R. 41. At issue there was the enforceability of an agreement
made by a client, not at the outset of the relationship as the foundation for
the relationship, but during it to pay interest on his solicitor’s bills of
cost. Lord Justice Turner said this (at 51, E.R.):

In the first place it is founded upon, and gives effect to,
an agreement by a client, to allow his solicitor interest, and even compound
interest, upon his bills of costs. Every such agreement is a bargain between
the solicitor and the client, and can be supported only under the same
circumstances as would support any other bargain between them. It is the
bounden duty of a solicitor, before he enters into any such bargain with his
client, to inform the client that the law allows of no such charge of interest,
and that although he may decline to conduct the client’s business without such
an allowance, others, of equal ability, may be found who will conduct it upon
the scale of allowances which is sanctioned by the law. There is here no
evidence of any such information having been given, nor can I find anything
which could warrant an agreement for the charge of interest

[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.

[46]        
Section 68(7) of the Act says:

(7)        If an agreement is cancelled under subsection (6),
a registrar

(a)        may require the lawyer to prepare a bill for
review, and

(b)        must review the fees, charges and disbursements
for the services provided as though there were no agreement.

[47]        
In Kelly v. McMillan, 2003 BCSC 307, Goepel J. decided that if a
fee agreement is cancelled or modified on its review under s.68 of the Act,
the registrar has no jurisdiction to proceed with a fee review in the absence of
a bill from the law firm that is capable of being reviewed by her.
Specifically, his Lordship says:

[50]      As previously noted, the solicitors have submitted
that the use of the word "may" in s. 68(7)(a) gives the Registrar
discretion as to whether or not to order a solicitor to produce a bill. With
respect, I do not agree. In my opinion, the reason for the permissive wording
is that under s. 68(3), the application to examine the agreement can be brought
within three months of the date the agreement was made. In the case of an
agreement cancelled at such an early date, there may well have been no services
provided by the solicitor and thus no need for him to prepare a bill.

[51]      I reject the suggestion that the use of the word
"may" in s. 68(7)(a) allows a subsequent review to be conducted
absent a bill. Such a result is contrary to the legislative scheme which has
been set up. As previously noted, absent a bill, there is nothing to review.

[52]      I have concluded that the Registrar lost
jurisdiction in this matter when she allowed the review to proceed absent a
bill having been issued by the solicitors. The Registrar’s jurisdiction is
limited to that given by statute. See: Aydin & Co. v. Schaber
(2000), 49 C.P.C. (4th) 77 (B.C.S.C.). The Act does not give the Registrar
the power to conduct a quantum meruit review absent a bill. Further, the
Act does not give the Registrar a general power to award costs outside the
terms of s. 72 or the power to certify interest from any date other than the
date the lawyer delivered the bill.

[53]      After the cancellation of the agreement the lawyers
should have been directed to prepare a bill. The client then would have had the
opportunity to consider whether the bill was or was not reasonable and if the
parties could not agree, then the matter would have properly been set down for
review. In proceeding in the manner that she did, I am satisfied that the
review that was conducted by the Registrar was done without jurisdiction.

[54]      In reaching this conclusion I have not overlooked the
solicitors’ submission that the process followed in this case was no different
than what occurred in Randall. In my opinion, the process in Randall was
similarly flawed. As the jurisdiction issue was not raised in Randall, I am not
bound to follow it. See: Re Hansard Spruce Mills Ltd., [1954] 4 D.L.R
590 (B.C.S.C).

[55]      I have reached this
conclusion reluctantly. It is clear that the learned Registrar received little
assistance from either counsel on this question. This problem undoubtedly would
have been avoided if counsel for the petitioner had raised this issue at the
outset. By proceeding in the manner they did, neither side covered itself with
glory.

[48]        
At the commencement of this hearing, I asked Mr. Murray what “bill” the
law firm intended to rely on if I reached the conclusion that the CFA was
unfair or unreasonable. Mr. Murray advised that, regardless of what decision I
made, the law firm intended to seek fees of $75,000 from the client and thus
would not render a new bill in those circumstances but would simply ask that I
review the Bill of April 28, 2011 as their quantum meruit bill to Mr.
Aduna.

[49]        
While I believe that I may be able to proceed with the next phase of
this matter without a new bill and simply review the “Bill” rendered on the
basis of quantum meruit, as the issue of the costs of the review of
their bill depends upon the amount of the bill being reviewed (see s. 72 of the
Act), the law firm, knowing that I have cancelled the CFA, may wish to
issue a new bill to Mr. Aduna (considering s. 71 of the Act).

[50]        
Accordingly, I direct that the law firm has 30 days from the date of
these reasons to issue a new bill to Mr. Aduna (with a copy to me) for the
services rendered by them in connection with their representation of him in
respect of the Accident or to confirm to me that they will rely on the Bill of
April 28, 2011. If a new bill is issued, both parties will have 30 days in
which to apply to me to make additional submissions regarding the reasonableness
of the new bill which submissions must relate solely to the new bill. If neither
party so applies, or if I am advised that the law firm wishes to rely on the
Bill, I will then proceed to review the bill in accordance with the provisions
of s. 71 of the Act on the basis of the evidence and submissions adduced
at the hearing.

“Registrar Sainty”