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Representation - Lawyers - Contingency Fees (2). D.V. v. Cordocedo [party under disability]
In D.V. v. Cordocedo (Ont CA, 2026) the Ontario Court of Appeal partially allowed an appeal, this where the "motion judge approved the settlement and assessed counsel fees payable under a contingency fee agreement with the appellants at a lower amount than proposed".
The court canvasses the law of awarding contingency fees, here where the plaintiff was under disability:a. Approval process for contingency fee agreements and fees: general principles
[26] The motion judge’s assessment of the proposed counsel fee is subject to considerable appellate deference, absent overriding and palpable error or error in principle: Leduc (Litigation Guardian of) v. Dufour Estate, 2026 ONCA 3, at para. 16.
[27] The broad supervisory role of the courts and, therefore, the deference owed to the motion judge’s decision, arise from the public policy and history underlying the regulated nature of the approval process for settlements involving a person under disability and for contingency fee agreements.
[28] Rule 7.08(1) of the Rules of Civil Procedure stipulates that any settlement respecting a claim involving a person under disability requires a judge’s approval and, importantly, that without such approval, no such settlement is binding on the person under disability. Relatedly, r. 7.08(2) provides that no consent judgment involving a person under disability can be obtained without a judge’s approval.
[29] The requirement for court approval of settlements under r. 7.08 derives from the court’s parens patriae jurisdiction. On motions under r. 7.08, “[t]he duty of the court is to examine the settlement” to “protect the party under disability and to ensure that his or her legal rights are not compromised or surrendered without proper compensation”: Wu Estate v. Zurich Insurance Co. (2006), 2006 CanLII 16344 (ON CA), 268 D.L.R. (4th) 670 (Ont. C.A.), at para. 10, leave to appeal refused, [2006] S.C.C.A. No. 289.
[30] Section 24 of the Solicitors Act sets out the criteria for the enforcement of a contingency fee agreement:Upon any such application, if it appears to the court that the agreement is in all respects fair and reasonable between the parties, it may be enforced by the court by order in such manner and subject to such conditions as to the costs of the application as the court thinks fit, but, if the terms of the agreement are deemed by the court not to be fair and reasonable, the agreement may be declared void, and the court may order it to be cancelled and may direct the costs, fees, charges and disbursements incurred or chargeable in respect of the matters included therein to be assessed in the ordinary manner. In accordance with its public policy context, s. 24 of the Solicitors Act “must be interpreted and applied in light of its purpose of protecting clients from unfair and unreasonable retainer agreements, which are generally drafted by lawyers who are themselves party to the agreement”: Bimman v. Igor Ellyn Professional Corp., 2022 ONCA 781, 164 O.R. (3d) 481, at para. 49.
[31] Court supervision of the fairness and reasonableness of retainer agreements and counsel fees has a long history dating back to at least 1870: Bimman, at paras. 40-44. Moreover, contingency fee agreements have evolved over time: at common law, they were unenforceable as champertous; as recognized by amendments to the Solicitors Act in 2004, properly regulated contingency fee agreements provide “advantages to the administration of justice, in the form of increased access to justice”: Cookish v. Paul Lee Associates Professional Corp., 2013 ONCA 278, 305 O.A.C. 359, at para. 40; Raphael Partners v. Lam (2002), 2002 CanLII 45078 (ON CA), 61 O.R. (3d) 417, at para. 54.
[32] In addition to the Solicitors Act, contingency fee agreements are regulated under the CFA Regulation. Unless court approved, contingency fee agreements entered into by a litigation guardian representing a person under disability are not enforceable: Krukowski v. Aviva Insurance Company of Canada, 2020 ONCA 631, 61 E.T.R. (4th) 1, at para. 23. A motion to approve a settlement under r. 7.08 includes approval of a contingency fee agreement, unless the agreement has been pre-approved by a judge: CFA Regulation, s. 6.
[33] It is necessary to give courts wide discretion to assess the reasonableness and fairness of settlements and contingency fee agreements to protect the interests of vulnerable plaintiffs, notwithstanding the best intentions of counsel, the litigation guardian and the other parties. As is the case here, r. 7.08 motions usually proceed in writing on an uncontested basis. The court, as often the only questioning lens, must apply a rigorous analysis to ensure that the settlement and the proposed contingency fee are fair and reasonable. As this court helpfully explained in Krukowski, at para. 24:Court approval of settlements for persons under disability is founded on the need to protect those who cannot care for themselves. The court therefore has a responsibility to carefully consider the relevant materials, and to assess the fairness and reasonableness of the proposed fees to ensure that the settlement, including provision for legal costs, is in the best interests of the protected person for his or her benefit. [Citations omitted.] [34] The criteria for the assessment and approval of contingency fee agreements and fees produced thereunder are uncontroversial. As this court stated in Raphael, at para. 37, under s. 24 of the Solicitors Act, “[T]he solicitor bears the onus of satisfying the court that the way in which the agreement was obtained was fair and that the terms of the agreement are reasonable.”
[35] The fairness of the agreement is assessed as of the date it was entered into: Henricks-Hunter v. 814888 Ontario Inc. (Phoenix Concert Theatre), 2012 ONCA 496, 294 O.A.C. 333, at para. 13. As this court instructed in Raphael: “The fairness requirement … is concerned with the circumstances surrounding the making of the agreement and whether the client fully understands and appreciates the nature of the agreement that he or she executed”: at para. 37 (citation omitted).
[36] The reasonableness of the agreement and the fee produced under it are assessed as of the date of the hearing: Henricks-Hunter, at para. 13; Bimman, at para. 54. The inquiry into reasonableness is broad-based. Contingency fees, like all counsel fees, are to be assessed in the ordinary manner by determining what is reasonable in all of the circumstances: Lima v. Kwinter, 2021 ONCA 47, at para. 32; Raphael, at paras. 50, 57.
[37] Well-trod factors that have typically been applied in considering the reasonableness of the contingency fee agreement and the proposed counsel fee include:(i) the time expended by the solicitor;
(ii) the legal complexity of the matters dealt with;
(iii) the degree of responsibility assumed by the solicitor;
(iv) the monetary value of the matters in issue;
(v) the importance of the matters to the client;
(vi) the degree of skill and competence demonstrated by the solicitor;
(vii) the results achieved;
(viii) the ability of the client to pay;
(ix) the client's expectation of the amount of the fee;
(x) the financial risk assumed by the solicitor of pursuing the action, including the risk of non-payment, the likelihood of success and the amount of the expected recovery; and
(xi) the social objective of providing access to justice for injured parties. See: Krukowski, at para. 25 (citations omitted); Raphael, at para. 50.
[38] Here, trial counsel and the intervener take no issue with, and do not seek to alter, the application of these well-established factors. The focus of trial counsel, in particular, is on how the risk assumed by the solicitor should be assessed. They argue that this court’s decision in Leduc, at para. 31, clarified that the only risk that is relevant to the reasonableness assessment is the risk undertaken by counsel at the time that they entered into a contingency fee agreement.
[39] I would not accept these submissions. I do not read Leduc in the way suggested by trial counsel.
[40] Leduc concerned an appeal from a motion judge’s findings that the contingency fee agreement involving a minor plaintiff who suffered a brain injury during birth was unfair and unreasonable. This court saw no reversible error with respect to the motion judge’s finding that the contingency fee agreement was unfair when the agreement was entered into because of its significant regulatory non-compliance: at para. 30. In light of that conclusion, the court held that it was unnecessary to consider the motion judge’s additional finding that the contingency fee agreement was not reasonable: at para. 31.
[41] However, in obiter comments, at para. 31, the court noted that “nothing in these reasons should be taken as an endorsement of the motion judge’s analysis on [the reasonableness] prong of the Raphael Partners test.” The court then explained its comments in the following two sentences relied upon in the present case:In particular, we do not agree with the motion judge’s approach to the assessment of the risk undertaken by the appellant that focused on the risk of non-payment at the time the case was settled. Rather, “[t]he reasonableness of the fee should of course be assessed by reference to the risk as it appeared at the time the agreement was negotiated, and not as of the time of the assessment, when it may falsely appear with the benefit of hindsight that the risk of failure was minimal all along”: Laushway Law Office v. Simpson, 2011 ONSC 4155, 336 D.L.R. (4th) 632, at para. 131, citing Gavin MacKenzie, Lawyers & Ethics: Professional Responsibility and Discipline (Toronto: Thomson Reuters Canada, 2018) (loose-leaf updated April 2025), at § 12:1, appeal to Ont. C.A. dismissed for delay, 2013 ONCA 317. [42] These comments must be understood in context. Although unnecessary for the disposition of the appeal, they were responsive to the analytical error committed by the motion judge: he focused on the level of risk of non-payment at the end of the retainer when assessing the reasonableness of the proposed counsel fees: Leduc v. Dufour, 2024 ONSC 6882, at para. 87. This court corrected that error by instructing that the reasonableness analysis could not lose sight of the risk at the outset of the retainer. I do not read Leduc as suggesting that this was the only consideration to be taken into account when considering risk and the reasonableness of the proposed fee. Trial counsel’s reliance on para. 31 of Leduc is therefore misplaced.
[43] Further, in Laushway Law Office v. Simpson, 2011 ONSC 4155, 336 D.L.R. (4th) 632, appeal to Ont. C.A. dismissed for delay, 2013 ONCA 317, to which this court referred in Leduc, the motion judge did not consider risk as a static factor. Importantly, he did not confine his consideration of reasonableness to only the risk undertaken by counsel at the beginning but also looked at what happened over the course of the retainer, culminating in the proposed settlement: see paras. 132-141. In particular, he determined that the likelihood of success (and therefore the risk to the solicitors) was in doubt due to the difficult nature of the client, which emerged during the retainer, and would affect his credibility and the amount awarded to him: at paras. 24, 103, 135.
[44] The risk undertaken by counsel at the beginning of the retainer is an important consideration. It recognizes the goal of access to justice underlying contingency fee agreements, and informs the reasonableness of the other factors, such as the time spent by counsel, the disbursements incurred, the degree of counsel’s responsibility, and the overall financial risk assumed by counsel.
[45] At the same time, the risk at the beginning of the retainer cannot overwhelm the analysis. To hold otherwise would ignore that the reasonableness of contingency fees must be assessed in light of all the circumstances from the beginning of the retainer to the date of the motion to approve settlement under r. 7.08. The risk undertaken by counsel evolves throughout the retainer as the litigation progresses. Focusing on how risk appeared at a fixed point in time would skew the court’s reasonableness assessment.
[46] Accordingly, the reasonableness analysis must remain holistic: is the proposed contingency fee reasonable at the time of assessment, having regard to the beginning of the retainer, the progression of the proceedings, and the proposed outcome? This broad perspective obviates the danger of hindsight reasoning that could undermine counsel’s important work in attenuating risks and bringing the matter to a successful conclusion. At the same time, it recognizes what happened over the course of the retainer and is consistent with the court’s role on approval motions to ensure the best interests of vulnerable plaintiffs are served.
[47] For these reasons, I would not accept the submissions made by trial counsel that further judicially created criteria or percentage-based contingency fees should be introduced.
[48] As I have just described, the criteria for assessing the fairness and reasonableness of contingency fee agreements and fees are clear and well-established. Moreover, the suggested fixed percentage-based fee model, in my view, runs counter to the existing regulated nature of contingency fee agreements and fees involving persons under disability and the court’s approval role. It undermines the court’s broad-based, parens patriae supervision. Such agreements and fees are provisional only and unenforceable unless a court finds they are fair and reasonable. Further, it would be up to the legislature, not the courts, to mandate percentage-based contingency fees. The legislature has not opted to do so in its regulation of retainer agreements and fees over the last 166 years. Instead, it has left a wide discretion to the courts to assess the fairness and reasonableness of contingency fees agreements and the fees produced thereunder.
[49] Nor would I accept the intervener’s submission that fairness deems reasonableness by default. As Raphael and subsequent cases instruct, the fairness and reasonableness requirements of s. 24 of the Solicitors Act are not synonymous: the fairness of the contingency fee agreement at the beginning of the retainer does not automatically result in the reasonableness of the contingency fee produced under it as assessed at the time of the approval motion. Rather, the requisite analytical framework necessitates a holistic assessment of the proposed settlement and fees from the beginning to the end of the retainer.
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