A B.C. Supreme Court judge has knocked several million dollars off a law firm's bill after concluding that it's "not a proper fee for the work actually done".
Justice Richard Goepel substituted a $5-million fee for the $9-million imposed by registrar Kathryn Sainty in 2011, which was based on a negotiated contingency-fee agreement.
In 2010, Hungerford Tomyn Lawrenson and Nichols had issued a bill of $16,971,015 to client Kirsten Mide-Wilson. It was based on the law firm collecting 20 percent of any award obtained in the first year.
"A contingency fee agreement is not a lottery ticket," Goepel wrote in his ruling. "Success in the action does not guarantee a fee in the amount set in the agreement. Even if the agreement was neither unfair nor unreasonable at the time it was entered into, the final account must be reasonable and proper given the services provided and the risk undertaken."
Goepel's decision noted that lawyers Gavin Crickmore and Harry Tomyn of Hungerford Tomyn Lawrenson and Nichols "provided a most valuable service" to Mide-Wilson, granddaughter of construction magnate Jack Cewe.
"They deserve to be handsomely paid for their efforts," Goepel wrote. "That payment, however, must reflect the services they actually provided and cannot be for an amount that does not maintain the integrity of the profession."
Mide-Wilson was Cewe's only surviving grandchild after the death of his grandson, wife, and daughter.
Between 2007 and 2008, Cewe executed three new wills and two alter ego trusts. The final will, which was prepared two months before his death, left Mide-Wilson with her Port Moody residence and $500,000.
Mide-Wilson had been under the impression that she would inherit Cewe's business. However, the bulk of the estate was redirected to his long-term lover, Alice Gibson, and his financial adviser, George Home, until Crickmore and Tomyn obtained a successful settlement on Mide-Wilson's behalf.
Hungerford Tomyn Lawrenson and Nichols completed this work in less than a year, according to the decision.
Goepel wrote that prior to sending the $16,971,015 bill, the law firm offered to "discount" the fee to $12 million, which Mide-Wilson did not accept.
Mide-Wilson challenged the solicitors' conclusion that the settlement was worth $84.9 million. This was based on the law firm's estimate value of Cewe's estate after payments to Gibson and Home.
Mide-Wilson, on the other hand, argued that the Cewe estate was worth $44.7 million.
The registrar, Sainty, upheld the contingency-fee agreement, but imposed a $9-million fee after concluding that the estate was worth $74.5 million.
Goepel agreed with Sainty's conclusion that the contingency-fee agreement was fair and reasonable.
"It was the Client who wanted to go forward with a contingency fee agreement and put the risk of failure on the Solicitors," he noted in the decision.
Elsewhere in the ruling, Goepel wrote: "The Client was an experienced businesswoman. She and her husband had consulted several other counsel concerning this matter."
However, Goepel concluded Sainty's valuation of Cewe's estate appeared to have been reached "without any mathematical breakdown".
The registrar's decision referenced a KPMG report, claiming that it set the value of the estate at $60 million to $63 million. Mide-Wilson, on the other hand, argued that KPMG's actual estimate was $43.3 million to $46.3 million.
"An error in quantum can be so gross as to indicate an error in principle," Goepel wrote. "I find that has occurred in this case. There must be a relationship between the legal services actually provided and the ultimate fee."
Lawyer John Hunter, a former president of the Law Society of B.C., presented evidence that the fee linked to the contingency-fee agreement would bring the profession into disrepute.
"He suggested that the Law Society Rules which require a lawyer to charge 'reasonable fees' put a 'cap' on the fees that the Solicitors could charge regardless of the terms of the contingency fee agreement," Goepel wrote. "He opined that if the contingency fee agreement was cancelled a proper fee would be in the $2.5 million range."
Lawyer Darrell Roberts, on the other hand, presented evidence that there should be no cap, in part because Mide-Wilson chose to put all the risk on the lawyers, Crickmore and Tomyn.
"He suggested the ultimate fee should not be even as much as $1 million less than that called for under the agreement," Goepel noted. "Otherwise, he suggested the court would simply be encouraging litigants to freely abandon their honourably made agreements..."
The decision declared that Crickmore and Tomyn spent approximately 2,500 hours on the case. Based on a fee of $500 per hour for Crickmore and a fee of $300 per hour for Tomyn, Hunter concluded that the legal bill would have reached $1.1 million.
On a fee-for-service basis, Hunter maintained that the fee would have only been $2.5 million.
George Macintosh, who represented Mide-Wilson, argued that if the contingency-fee agreement was upheld, the solicitors should receive $4 million.
Goepel's ruling declared that Mide-Wilson made it clear from the outset that she didn't want a monetary settlement.
"She had one goal and one goal only: to get back the Cewe Group," he wrote.
She had previously worked for her grandfather's company, taking a larger and more significant role, according to the ruling.
However that ended after she had a "very public and heated argument with her grandfather about some aspect of the business".
"Following that incident, in which the Client swore at her grandfather, she left the office and never returned to work at JCL [Jack Cewe Ltd.]," Goepel stated in the ruling.
Prior to the litigation over the bill, Mide-Wilson expressed concerns to Hungerford Tomyn Lawrenson and Nichols about the fee. According to Goepel's decision, Crickmore encouraged her to consult counsel. Crickmore even mentioned Macintosh by name.
In the case before the registrar, Macintosh advanced evidence alleging a secret commission between Hungerford Tomyn Lawrenson and Nichols and chartered accountant David Rennie, who was advising Mide-Wilson. This was vehemently denied by the law firm.
Sainty's ruling rejected the secret-commission allegation, concluding "the preponderance of probabilities supports the Solicitors' position, not the Client's".
Under the law society's rules, it's professional misconduct if a lawyer directly or indirectly shares fees with nonlawyers who bring or refer business.
In handling the appeal, Goepel pointed out that it is "not the role of this Court to review and re-weigh the evidence and substitute its view of the evidence and findings of credibility".