Legal Blog

Estimates of Legal Fees

Some lawyers, like us and many of you, have been using alternate fee arrangements, such as fixed fees, value driven fees, or contingency fees, rather than a fee determined by the product of hourly rate and time. However, even those lawyers who use straight hourly rates are called upon, on occasion, to estimate what the ultimate fees might be. Just as the setting of the fixed fee is difficult, so too is the setting of an estimate. The only difference is that a fixed fee is set in stone, and must be honoured, regardless of the time spent, but an estimate is still just an estimate.

Lawyers who provide an estimate have a duty to notify the client if they can reasonably determine, as the case progresses, that their estimate will be too low. If they fail to do so, they may find, on an assessment, that their fees will be cut back, regardless of the non-binding nature of an estimate.

For some clients, it is not sufficient just to attack fees as being too high. In Mitchinson v. Baker (2015) O.R. (3d) 220 (C.A.), the client wanted to go the extra mile.

Retainer

The client retained the lawyer to deal with the client’s employment-based, human rights complaint. He settled the matter favourably for the client, but charged significantly more than his $30,000 estimate. The client assessed the account, as was her right. However, that did not seem to suffice. Before the assessment was completed, the client commenced a number of actions against the lawyer, we assume for negligence and breach of retainer. LawPro, in accordance with its obligations, defended the lawyer.

The client then commenced an action against the lawyer and LawPro. She claimed that the lawyer had fraudulently misrepresented what his fees would be when he gave his estimate.

Against LawPro, she claimed “conspiracy, intentional infliction of mental distress, abuse of process, or accessory after the fact.” We kid you not. It seems that LawPro was engaged in a conspiracy and was an accessory after the fact, whatever that is, because LawPro had the audacity to defend the lawyer in the other actions, knowing full well, she said, of the lawyer’s fraudulent misrepresentation.

Strike

LawPro and the lawyer brought a motion to strike the statement of claim. The motions judge granted the motion. The client appealed to the Court of Appeal. We do not know whether the client was represented when she commenced the action or defended the motion; we do know that she was not represented at the appeal.

The Court agreed with the motions judge, who stated that there was no duty of care between an insurer and the insured’s adversary in litigation. As far as we are concerned, anything else would lead to chaos. As to the allegation of conspiracy, the motions judge noted, and the Court agreed, that “conspiracy requires an intention to cause harm to a person and that no such intention was pleaded or to be inferred from the facts pleaded.”

The Court also agreed with the two main grounds upon which the motions judge struck the plaintiff’s statement of claim against the lawyer. First, the action was an abuse of process. The general purpose of the doctrine of abuse of process is to bar “proceedings that are inconsistent with public policy considerations such as finality, judicial economy, consistency of results, and the integrity of the justice system.” The motions judge found that the action had been brought not to vindicate a wrong suffered, but to obtain leverage in the plaintiff’s application for assessment of the lawyer’s account.

As to fraudulent misrepresentation, an estimate of fees is not a representation of fact or a promise and the Court found that “no reasonable person could find that the respondent intended to mislead when he gave an estimate of his fees.”

Upshot

The Court dismissed the appeal and awarded costs to the lawyer of $6,500 and LawPro of $3,500. We could not readily find the decision of the motions judge and therefore do not know the amount of the costs awarded on the motion.

Seemingly undaunted, the client moved for leave to appeal to the Supreme Court of Canada. From the decision, it did not seem that the client was represented, but we cannot say for sure. The Supreme Court denied leave with costs.

Written by Jonathan Speigel Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.