Law Times

January 28, 2019

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Page 1 of 15 LAW TIMES 2 COVERING ONTARIO'S LEGAL SCENE | JANUARY 28, 2019 Court ruling, which allowed his award for legal costs to be subject to the contingency agreement he signed with his lawyers at Stock- woods LLP. "The court reminded us that they will scrutinize contingency fee agreements more closely than for another commercial contract," says Kate Mazzucco, a partner at Beyond Law LLP in Toronto. Mazzucco says the case con- tained instructive points for lawyers who use contingency agreements. It was important to the court that the terms were set out at the outset of the relationship as op- posed to the end of the relation- ship, that the client was encour- aged to seek independent legal advice to look at the agreement and that the language of the agreement was clear and free from ambiguity and uncertain- ty, she says. According to s. 28.1(8) of the Solicitors Act, you can't arrange a contingency fee on a legal costs award unless the lawyer and cli- ent jointly ask the judge for ap- proval, satisfying the judge that the litigation was one of excep- tional circumstances, which jus- tify the payment. The case revolved around paragraph 16 of Almalki's con- tingency fee agreement, which stated that any award for legal costs be included in the con- tingency fee amount and, as re- quired under s. 28.1 of the act, if requested by their lawyers, the clients agree to jointly apply to get the judge's approval. Almalki argued that Stock- woods should not have pro- ceeded by way of motion to seek approval for the contingency fee agreement and rather should have commenced a new pro- ceeding by way of application. The court rejected Almalki's ar- gument. Almalki also asked the judge to determine whether paragraph 16 of the contingency agreement is enforceable, argued he was wrongly denied the opportunity to make submissions regarding the existence of exceptional cir- cumstances and proposed that the lower court was wrong in finding that those exceptional circumstances existed. The Court of Appeal, how- ever, found Almalki's reading of paragraph 16 "untenable." Steven Rastin, managing partner of Rastin & Associates in Barrie, Ont., says suing the federal government for extra- territorial conduct, with the kind of resources and teams of lawyers they can summon to fight a case, sounds like it is probably high-risk litigation and a good candidate for exceptional circumstances. "Had these guys gone to 50 law firms, back when this case started, I bet you 47 of them would have refused to take the case," Rastin says. The Court of Appeal found that the motion judge had prop- erly considered the factors indi- cating this litigation was that of exceptional circumstances. There was factual and legal complexity, it put Stockwoods at "substantial financial risk," took several years, had significant importance to the public and Stockwoods spent "immense re- sources" to achieve a "very good result." Stockwoods had advised its client Almalki to seek indepen- dent legal advice before signing the fee agreement, which he did. Darcy Merkur, a personal injury lawyer and partner at Thomson Rogers in Toronto, says the ruling counters the growing assumption that con- tingency fees are easy profit for personal injury lawyers. "The Court of Appeal makes it very clear that contingency fee work has its challenges," he says. "There has been a growing philosophy that personal injury lawyers profit regularly by way of contingency fee agreements. And while that is often true, the opposite proves to be true quite often as well. And a lot of these cases do not turn out to be prof- itable, especially ones that go to the doorsteps of trial or beyond." Peter I. Waldmann, who acted for the attorney general of Canada, and J. Thomas Curry, who acted for Stockwoods, de- clined to provide comment. LT Canadian falsely accused of terrorism Continued from page 1 Title insurance fees face LSO consultation The Rules of Professional Conduct that govern the legal profession already specify that lawyers tell their clients that title insurance is not mandatory, as well as providing full disclo- sure of "all financial dealings" between the law firm and title insurance company, the report said. But the law society found that about a third of law firms did not disclose the fees in writing to cli- ents, based on audits in 2016 and 2017, the report said. The tactics that some title insurance companies use to build relationships with some real estate lawyers have already faced scrutiny in the United States, says Maurizio Romanin, a Toronto lawyer who runs a legal technology company and is board chairman of a U.S. title insurance underwriter. "You shouldn't really be mak- ing a decision on which title insurance underwriter you're working with because you get free hockey tickets or to go to a Christmas party where the booze is free or on a cruise . . . they stopped that in the phar- maceutical business," says Ro- manin, a barrister and solicitor, president of LawyerDoneDeal Corp. and chairman at Attor- neys' Title Guaranty Fund, Inc. For instance, he says, New York State recently decided to ban the practice, after an inves- tigation by the New York State Department of Financial Ser- vices found that "lavish gifts were routinely being offered in anticipation of receiving busi- ness from intermediaries such as lawyers, generally unbeknownst to and at the expense of consum- ers, who ultimately pay higher premiums as a result," wrote a panel of judges in an appeal decision, Matter of New York State Land Tit. Assn., Inc. v. New York State Dept. of Fin. Servs. "Some of the people who sup- port this say it is not an incen- tive, but I disagree — one of the ways that incentives are being provided to lawyers is through a fee that the title insurer is paying the lawyer," he says. "Nominally, that is supposed to be for work provided by the lawyer to the title insurer. . . . But what has happened [with the fees] is the title insurance pre- mium ends up costing the con- sumer more." Thornhill, Ont.-based real estate lawyer Alan Silverstein says that, if he gets a reduced rate because of the title insurer he is dealing with, he passes the sav- ings on to his client instead. "It doesn't matter what pro- fession you are in, there is always a concern about referral fees. 'Referral fees' can be, in some re- spects, a nice way of saying kick- backs," says Silverstein. "Personally, I think what we have in place is fine. If there are problems, there has to be greater enforcement. I don't know if we have to start prohibiting rela- tionships. Leave it to the lawyer to decide if they want to accept the fee and pass it on to the cli- ent or give the client the benefit of the lower fee, which is what I do. If someone is taking it, they have to disclose it, and if they don't, there are rules in place to deal with that . . . but it is an issue that affects the public, no ques- tion about it." Romanin, on the other hand, says the issue raises questions about whether the cost of in- creased enforcement is worth it for the profession. Mercer says the renewed look at the issue in the real estate bar follows the law society's exami- nation of referral fees in other areas, such as personal injury. Last year's Professional Regu- lation Committee Report said the issue of title insurance was likely to come before Convocation in late 2018 or early 2019. LT NEWS Continued from page 1 LawSociety_LT_Jan14_19.indd 1 2019-01-08 3:16 PM

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