IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20150826

Docket: S147788

Registry:
New Westminster

Between:

Spraggs &
Company

Plaintiff

And

Stuart Roy Carnaby

Defendant

Before:
District Registrar Nielsen

Reasons for Decision

introduction

[1]            
This is an application by the lawyer to have his bill reviewed and to
obtain a certificate for fees pursuant to the provisions of the Legal
Profession Act, SBC 1998, c. 9.

background

[2]            
The lawyer specializes in personal injury litigation and has practised
exclusively in this field for the past 10 years of his career. The lawyer was
retained by the client to pursue a legal action for damages following a motor
vehicle accident. The retainer was in the form of a contingency fee agreement, signed
on May 28, 2010, which provided for a 33 and 1/3 percent fee. The contingency
fee agreement states in part:

IN CONSIDERATION OF THE PREMISES and of the following conditions,
the parties agree as follows:

1.         Spraggs agrees to undertake the carriage of
the case for a fee based upon the total recovery obtained by way of award of
the Court or by way of settlement exclusive of taxable costs and disbursements.

2.         The Client agrees to pay Spraggs on the
following basis:

a)         Spraggs shall receive all disbursements and
costs incurred by the firm; and

b)         Spraggs shall receive a fee that shall
represent 33 1/3% of the recovery exclusive of taxable costs and
disbursements to the Client.

TOTAL = 33 1/3%

3.         If Spraggs is
requested to no longer act in the matter, then he shall be paid a final fee
based upon the final settlement or recovery made exclusive of taxable costs and
disbursements based upon the percentage of fee as outlined in paragraph 2
above, and in accordance with the principles as laid down in McQuarrie
Hunter v. Foote et al, 41 B.C.L.R. 1983.

4.         The Client
acknowledges that Spraggs has brought to their attention Part 8 of the Law
Society Rules, and, in particular, Section 8-4, which is attached hereto.

5.         The Client acknowledges that they must pay
G.S.T. and P.S.T. on Spraggs’ fees and disbursements.

[3]            
The lawyer is the second lawyer retained on the client’s behalf. The
first lawyer was also retained on a contingency fee basis. The file was
transferred to the lawyer on the date the contingency fee was signed.

[4]            
Upon transfer of the file, the lawyer reimbursed the first lawyer
$7,743.70 for disbursements incurred. Both lawyers have agreed to share the 33
and 1/3 percent contingency fee on a quantum meruit basis.

[5]            
The client was injured in a motor vehicle accident that occurred on
April 27, 2009. At the time of the accident he was 49 years old, unemployed,
and on social assistance. In the circumstances, a contingency fee agreement was
the only way in which the client could access the services of a lawyer.

[6]            
At the time of the motor vehicle accident, the client had a pre-existing
benign brain tumor which was unknown to him. The motor vehicle accident led to
the discovery of the tumor which may, ironically, have saved the client’s life.
According to the medical evidence, if it were not for the fact that the impact
mildly dislodged the tumor, facilitating its discovery and removal, the client
may have died.

[7]            
To complicate the matter further, the motor vehicle accident was
categorized as a low-velocity impact collision by ICBC, as there was less than
$500 in damage to the client’s vehicle.

[8]            
At the time of the motor vehicle accident, the client was on social
assistance and had been for an extended period of time prior to the collision.
Although on social assistance, the client had planned to start a power washing
business. A future loss of income claim was advanced on this basis.

[9]            
The lawyer testified that his work and time devoted to the plaintiff’s case
included numerous meetings and phone and written communications with the client
throughout the period of the lawyer’s retainer. In addition, the lawyer
provided “no interest compassionate loans” to the client. The lawyer filed the
Part 7 Writ (the Writ and Statement of Claim commencing the action had already
been filed by the prior lawyer). The lawyer arranged for medical examinations
and reports by experts, obtained social services records, Workers Compensation
Board records, and various clinical records. A Freedom of Information and
Protection of Privacy Act request was also made to ICBC. The lawyer
performed the necessary legal research and analysis of the claim, a risk
analysis, the scheduling of a judicial management conference, and the scheduling
of the trial.

[10]        
The lawyer communicated with the ICBC adjuster and defence counsel
throughout the course of the proceeding. Eventually, settlement discussions
took place resulting in the defendant advancing an offer to settle of $100,000
plus taxable costs and disbursements, by letter dated April 6, 2011.

[11]        
The lawyer testified that the number of the hours invested in the claim
by him and his Claims Manager exceeded 150, exclusive of the time spent by his
other staff, which he opined exceeded 100 hours.

[12]        
The lawyer described the client as an “extra care client”, needing more
attention and assistance than might otherwise be required. The lawyer gave
evidence of the client being belligerent while in his offices and making sexual
comments to his staff.

[13]        
The lawyer was of the view that the client would not make a good witness
at trial. He was also of the opinion that there would be difficulties in
proving both causation with respect to the client’s injuries, and the future
wage loss claim based upon the proposed pressure washing business. The lawyer’s
opinion was that the settlement offer of $100,000 plus taxable costs and
disbursements was generous and “fell at the deep end of the pool”.

[14]        
The lawyer wrote to the client and met with him to explain the offer and
canvass the relative merits and pitfalls of the claim. The lawyer testified
that during the meeting the client accused him of being “without honour” and
that he had previously “promised he’d get a recovery of $3.0 million dollars”.
The lawyer denies he made any such promise and he states he advised the client
to seek the advice of other counsel.

[15]        
Following the meeting, the relationship between the lawyer and the
client began to deteriorate. The client testified that on September 9, 2011, he
advised the lawyer he wanted him “off the case”. The client further testified
that he attended the lawyer’s office September 12, 2011, and confirmed he wanted
the lawyer off the case. The lawyer wrote to the client September 13, 2011,
confirming the client’s wishes and provided a “strong recommendation that the
client obtain legal advice”. The letter enclosed a Notice of Intention to Act
in Person for the client’s signature, which the lawyer advised he would file
upon receipt of the signed document.

[16]        
When the lawyer felt that the client had lost confidence in him by
requesting the termination of the solicitor-client relationship and refusing to
communicate, or sign the Notice of Intention to Act in Person, a Notice of
Intention to Withdraw as Lawyer was served on the client October 26, 2011, and
finally, a Notice of Withdrawal of Lawyer was filed on November 7, 2011. It
should be noted that this is not a case where the lawyer quit. It is a case
where the client dismissed the lawyer, in no uncertain terms, following a
breakdown in the solicitor-client relationship.

[17]        
The client did not subsequently retain another lawyer, although he did
consult with other lawyers concerning this possibility. The client testified
that none were willing to act on his behalf. The client blamed this eventuality
on the lawyer, and alleged a conspiracy in this regard.

[18]        
The defendants brought an application for summary judgment which was
heard on April 26, 2012. The client was unrepresented at the hearing. He was awarded
a total of $50,000 in damages, which the court described as “generous”. No
costs were awarded.

[19]        
Upon being advised of the judgment, the lawyer presented his bill for 33
and 1/3 percent of the $50,000 judgment awarded, being $16,666.65.

[20]        
The lawyer also sought reimbursement for all of his disbursements
totalling $17,047.98. The total bill presented to the client was $35,714.65. As
the client did not respond to the demand for payment, an appointment to review
the bill and obtain a certificate was filed under the provisions of the Legal
Profession Act.

[21]        
There was considerable difficulty in locating and serving the client
with the appointment. The client refused to provide an address for delivery. An
order dated April 1, 2014, was made by Master Keighley which provides:

1.         Pursuant
to Rule 4-4 of the Rules of Court, the Plaintiff may serve the
self-represented Defendant, Stuart Roy Carnaby, by an alternative method in the
following matter:

a.         Mailing copies by “regular”
mail to his last known address of [……]

and that such service shall be deemed good service upon the
Defendant, Stuart Roy Carnaby.

[22]        
A pre-hearing conference took place on June 30, 2014, which was attended
by both the lawyer and the client. The following orders were made at the
pre-hearing conference:

(1)           
that the June 30, 2014 hearing be adjourned generally;

(2)           
that the Solicitor/Plaintiff provide further written particulars of the
time spent and the results obtained for the Client/Defendant during the
retainer as counsel by July 21, 2014;

(3)           
that the Defendant/Client provide written objections to the statement of
account of the Solicitor/Plaintiff by August 18, 2014;

(4)           
that the Solicitor/Plaintiff set a further pre-hearing conference to
occur after August 18, 2014; and

(5)           
that the Solicitor/Plaintiff use [……] as the address for service of the
Client/Defendant.

[23]        
Despite the order that the claimant was to provide written objections to
the statement of account by the lawyer, the client failed to respond.

[24]        
During the course of the review of the lawyer’s bill, the client made
general objections to the lawyer’s account, centering on alleged promises that
his case was worth $3.0 million and that he should have received $2.0 million
after the deduction of the lawyer’s fee. The client also made disparaging and
insulting comments towards the lawyer without any evidence or justification in
support.

analysis

Examination of the Agreement

[25]        
Section 65 of the Legal Profession Act allows a lawyer or
a law firm to enter into an agreement with any other person, requiring the
payment for services provided or to be provided.

[26]        
Section 68 of the Legal Profession Act allows a person who
has entered into an agreement with a lawyer to have the agreement examined and
cancelled if the agreement was unfair or unreasonable at the time it was
entered into. However, section 68(3) of the Legal Profession Act provides
a strict limitation period for such a review which has not been met in this
case. The client’s failure to properly challenge the agreement within the time
provided by the Legal Profession Act is sufficient to dispose of this
issue.

[27]        
Although the client did not specifically challenge the agreement by
filing an appointment within the specified limitation period, he alleged he did
not read, understand, or consent to the terms of the agreement. The client did
admit he signed a contingency fee agreement, but testified that the signature
on the agreement entered into evidence was not his and was forged after the
fact. Given the client’s allegations, the agreement was reviewed.

[28]        
The test for determining whether an agreement is fair and reasonable was
established in Commonwealth Investors Syndicate Ltd. v. Laxton, 50 BCLR
(2d) 186 (BCCA), leave to appeal refused [1990] S.C.C.A. No. 479 QL. The
Court stated at pages 198 and 199:

In our opinion s. 99 contemplates a two-step enquiry.

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. 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.

[29]        
This approach continues to be endorsed by the court. See Mide-Wilson
v. Hungerford Tomyn Lawrenson & Nichols, 2013 BCCA 559, at paragraphs
22 and 23.

[30]        
In considering the fairness issue, the Registrar may consider whether
there was duress, misrepresentation, breach of fiduciary duty, and whether the
client had the benefit of a review of the agreement with a lawyer at the firm.

[31]        
In the present case, I accept the lawyer’s evidence that the client had
the contract explained to him by the lawyer prior to it being signed by the
client. I also accept the lawyer’s evidence that the signature on the agreement
was that of the client. There are no factors which would indicate that the
contingency fee agreement was unfair.

[32]        
Having found the contingency fee agreement to be fair, the inquiry turns
to a determination of reasonableness. The factors to be considered in
determining reasonableness include the complexity of the case, the difficulty
in establishing liability, the amount likely to be recovered, the time involved
in completing the work, the potential risk to the lawyer of not recovering the
fees or disbursements, and the special knowledge required by the lawyer.

[33]        
In the present case, liability for the motor vehicle accident was
admitted. However, the complexity of the client’s medical condition, the
speculative nature of the future income loss claim, the difficulty surrounding
the issue of causation, the fact that the claim was a low-velocity impact, the
impecunious state of the client, and the very real risk to the lawyer who
carried the disbursements, advanced interest free compassionate loans, and took
the risk of non-recovery, all combined to make the agreement reasonable in the
circumstances.

[34]        
This case is a classic example of the adage that “contingency fee
contracts provide a key to the courthouse for impecunious plaintiffs” (see Lee
(Guardian ad litem of) v. Richmond Hospital Society, 2005 BCCA 107 at para. 3).
The importance of contingency fee contracts giving access to justice was noted
in Mide-Wilson, supra, wherein the court stated at paragraph 89
“Contingency fee contracts are obviously an important means by which not only ‘the
poor’ but the middle class may be enabled to bring their causes, public or
private, to courts of law”. If not for a contingency fee arrangement, the
client wouldn’t have had access to legal advice or representation, the value of
which became painfully obvious as he proceeded to summary trial, contrary to
the legal advice he’d been given, and without representation. The consequences
were financially disastrous for the client.

Principles of Review

[35]        
Having found the agreement to be fair and reasonable is not the end of
the matter. It remains to be determined whether the agreement results in a
“fair fee” (see Mide-Wilson, supra, at paragraphs 69 to 73, 76 to
77, and 100.

[36]        
Section 71(5) of the Legal Profession Act provides that
the discretion of the Registrar is not limited to the terms of an agreement
between the lawyer and the client. Therefore, the bill is to be reviewed
keeping in mind the principles of review which are summarized in s. 71 of
the Legal Profession Act which provides:

71(1)
This section applies to a review or examination under section 68 (7), 70, 77
(3), 78 (2) or 79 (3).

(2) Subject to
subsections (4) and (5), the registrar must allow fees, charges and
disbursements for the following services:

(a) those
reasonably necessary and proper to conduct the proceeding or business to which
they relate;

(b) those
authorized by the client or subsequently approved by the client, whether or not
the services were reasonably necessary and proper to conduct the proceeding or
business to which they relate.

(3) Subject to
subsections (4) and (5), the registrar may allow fees, charges and
disbursements for the following services, even if unnecessary for the proper
conduct of the proceeding or business to which they relate:

(a) those
reasonably intended by the lawyer to advance the interests of the client at the
time the services were provided;

(b) those
requested by the client after being informed by the lawyer that they were
unnecessary and not likely to advance the interests of the client.

(4) At a
review of a lawyer’s bill, the registrar must consider all of the
circumstances, including

(a) the
complexity, difficulty or novelty of the issues involved,

(b) the skill,
specialized knowledge and responsibility required of the lawyer,

(c) the
lawyer’s character and standing in the profession,

(d) the amount
involved,

(e) the time
reasonably spent,

(f) if there
has been an agreement that sets a fee rate that is based on an amount per unit
of time spent by the lawyer, whether the rate was reasonable,

(g) the
importance of the matter to the client whose bill is being reviewed, and

(h) the result
obtained.

(5) The discretion of the registrar
under subsection (4) is not limited by the terms of an agreement between the
lawyer and the lawyer’s client.

Application of the Principles

[37]        
Although the client’s case involved a motor vehicle accident in which
liability was admitted, it was not ordinary or run of the mill. The client’s
pre-existing brain tumour, the difficulty in asserting the future wage loss
claim given the lengthy period during which the client was on social
assistance, the issue of causation, and the fact the case involved a
low-velocity impact, all combined to make the case somewhat complex and novel.

[38]        
The lawyer was required to exercise skill, specialized knowledge, and
bring his 10 years of experience in personal injury litigation to bear in
dealing with the legal issues. In addition to the legal issues arising, the
lawyer was required to invest considerable time managing the client whom he
found to be in need of “extra care”. The lawyer estimated the time invested by
him and his claims manager exceeded 150 hours, which did not include the time
spent by his other staff, which the lawyer opined exceeded 100 hours.

[39]        
Having heard the client testify, it is apparent that he would have
required a considerable amount of extra time and patience to maintain his
confidence within the solicitor-client relationship. The client, although
articulate, tended to ramble off topic, often repeated himself, made outrageous
accusations without evidence in support, concocted conspiracy theories, and was
repeatedly and unjustifiably rude towards the lawyer during the course of
giving his evidence.

[40]        
There is no question that the case was important to the client. The
client was unemployed and impecunious. The client had expected, however
unreasonably, to receive $3.0 million dollars in the course of the litigation.
The result which the lawyer obtained through settlement negotiations was an
offer of $100,000 plus taxable costs and disbursements, considerably less than
what was expected by the client, but twice the $50,000, without costs, the
client was awarded through summary trial.

[41]        
With the benefit of hindsight, the pre-trial offer obtained by the
lawyer was “at the deep end of the pool” and ought to have been accepted. The
lawyer exercised his skill and expertise to elicit the offer for the benefit of
the client, and provided sound advice concerning why the offer ought to have
been accepted. Advice that was proved to be correct.

Conclusion

[42]        
Having considered the applicable principles in the circumstances of the
case, there is no basis upon which to reduce the contingency fee agreement. The
lawyer is entitled to the full 33 and 1/3 percent contingency fee on the
$50,000 court award, being $16,666.07, together with applicable taxes of
$2,000, for a total of $18,666.67.

[43]        
This amount is the total owed by the client for fees, which is to be
apportioned between the lawyer and the prior lawyer, on a quantum meruit basis,
pursuant to their agreement.

[44]        
Although the client did not take issue with any of the disbursements
listed in the lawyer’s bill, other than the photocopy charges, all the disbursements
have been examined for the purpose of this review.

[45]        
Considering the context and nature of the case, the amount of
photocopies produced is high. The assessment of the reasonableness of photocopy
charges is not an arithmetical exercise but rather requires a consideration of
what is reasonable in the circumstances of the case. See Sovani v Jin,
2006 BCSC 855. Applying a rough and ready approach, the amount allowed for
photocopies is reduced to $2,000. All the remaining taxable disbursements are
allowed as presented. The lawyer is therefore entitled to his taxable disbursements
in the amount of $2,127.56 plus $255.30 in taxes. The non-taxable disbursements
totalling $14,509.92, as itemized in the bill dated November 21, 2012, and
attached to the Appointment dated February 19, 2013, and filed February 22,
2013, are allowed in full.

[46]        
The lawyer is entitled to court order interest in accordance with the Court
Order Interest Act, RSBC 1996, c. 79, on both his fees and
disbursements, exclusive of the costs of this review, calculated from November
21, 2012, to present.

[47]        
As the lawyer has been successful on the review, he would ordinarily be
entitled to costs. However, the lawyer has advised he is not seeking costs of
the three day hearing, but is only seeking reimbursement of his disbursements incurred
in the review, which total $2,328.27. The bulk of these disbursements involved
locating and serving the client for the purposes of this review. As a result of
the client’s failure to provide an address for delivery these disbursements
were necessarily and properly incurred and are allowed in full.

[48]        
A certificate can be submitted through the Registry for signature.

“District
Registrar Nielsen”