Lawyer Contingency Fee: 8 months of part time work = $5 million dollars and that’s not enough.
Lawyer Contingency Fee Agreements are disallowed in Family Law by the Law Society of British Columbia’s Rules because of the lesson you will learn below.
Vancouver and British Columbia Family Lawyers cannot take on contingency clients unless the Court expressly allows it. They must charge per hour or provide an estimate/flat fee for the work done. They cannot charge for a percentage of the settlement or Court Order Award (Lawyer contingency fee) unless they seek the court’s permission first.
Table of Contents
Rich People’s Problems
On New Year’s Eve of 2013, the British Columbia’s highest court, the BC Court of Appeal gave judgment on the case of Wilson v. Hungerford where lawyers were asking for a whopping $17,000,000 for 8 months of part-time work on a case. It determined that $5,000,000 was more suitable. I am guessing the lawyers did not start 2014 on the right footing, having lost $12 million dollars.
How it All Started
This was a story of a super-rich daughter with even a richer father. The father of Ms. Wilson was worth approximately $100 million dollars at the time of his death. Earlier when he was alive, his daughter worked for the father’s company. The father and daughter had a blowout one day and the daughter left her father’s office, never to come back.
When the father died, he left his entire estate to his long-time friend and business partner to distribute the estate to charities. The daughter only got a house and some cash out of the estate and she was of course not happy about it.
The daughter went to a firm and asked the firm to help her recover the $100 million dollars. She told the firm that she did not want to pay per hour and wanted the firm to charge her based on a Lawyer contingency fee agreement which means the lawyer will charge a percentage of the settlement/Order at the end of the case.
The 20% Lawyer Contingency Fee Agreement
After some negotiations, the firm and the daughter agreed that the firm would receive 20% of the settlement and 25% if the case went to Court. After a short 8 months, there was suddenly a settlement where the business partner and friend agreed to settle the case by obtaining $8 million dollars from the estate. So around $90 million went to the daughter after having deducted taxes and other payments.
Once the case was settled, the firm asked for $17,000,000 for their fee which represented 20% of the settlement. The daughter was not happy about this.
The daughter then sued the firm to recover some of the fees she had to pay the firm.
The BC Supreme Court awarded $9 million and then reduced it to $5 million
The case first went before the Registrar of the Supreme Court who determined $9 million for pay was reasonable. The daughter then appealed the Registrar’s ruling and it went to a BC Supreme Court Judge. The Judge determined that $5 million was more suitable.
The daughter still was not happy and appealed the case to the BC Court of Appeal. The firm also cross-appealed for the original $17 million dollar payment.
The Court of Appeal said that Lawyers are not Venture Capitalists
The Court of Appeal recognized that the contract between the daughter and the firm posed no concerns and that the daughter had freely entered into the agreement knowing the financial consequences she was facing. However, the BCCA said that lawyers are NOT venture capitalists and their fees must be fair and proportionate to the work that is actually done on the file.
The Court said that:
An important purpose of contingent fee agreements was to ensure access to justice. However, such agreements have always been regulated and subject to court supervision, in large part to ensure the integrity of the legal profession is maintained.
The starting point for the Court’s assessment of a ‘fair fee’ remains the parties’ agreement, but the dollar amount ultimately charged must not be so disproportionate to the work done as to impugn the integrity of the legal profession. Lawyers are not venture capitalists, and there exists a risk that the amount payable under a contingency agreement will be arbitrarily high, particularly where the underlying assets recoverable (and therefore the fee payable) may fluctuate greatly. In this case too, that value was not a function of the work done by the firm.
Family Law litigants cannot ask a lawyer to charge them based on a percentage of what they would get at the end of the case because it can result in the litigant having lost a part of their settlement or future security to their lawyer. The percentage may be unfair and disproportionate to the actual work done on their file.
My Advice
It is always the best practice of pay your lawyer as you go. Even if your lawyer says that he/she will charge you per hour at the end of your case, this means the lawyer will likely focus and put more work into files that provide ongoing and consistent payment, not those who are not paying right now. Human nature.
Ronak Leena Yousefi is a family lawyer and the founder of Yousefi Law Group. For questions or suggestions, please email us at [email protected] or call 604-974-9529.
This article is for information only and does not constitute legal advice. It does not create a lawyer–client relationship with YLaw or any of its lawyers. Laws and policies change, and information here may not reflect the most current legal developments. For full details, please contact us to obtain advice about your specific situation.