Court analyzes exceptional circumstances for awarding premium costs on contingency fees

Connolly and Connolly Obagi LLP, a recent decision from the Ontario Superior Court of Justice, eases some of the uncertainty surrounding what amounts to “exceptional circumstances” that entitle plaintiffs’ counsel to add costs recovered to their contingency fees in non-medical malpractice cases.

“Connolly is a significant case in clarifying this whole area of the law,” says Tom Connolly of Connolly Obagi LLP in Ottawa, who represented Taylor Connolly and his litigation guardian Michelle Connolly (neither of whom are related to their counsel). “There’s very little jurisprudence on this issue in motor vehicle litigation.”

Taylor was eight years old in 2003 when a car hit and injured him. Although he was 23 years old at the time of the hearing, he did not have the capacity to instruct counsel and required a litigation guardian.

Michelle chose a contingency fee as the basis for the retainer of counsel. The agreement provided that her initial lawyer, Christopher Moore of Christopher Moore Professional Corporation in Ottawa, would receive 10 per cent of any award; Connolly Obagi would receive 15 per cent of any award “together with any and all costs recovered.”

Court approval of the agreement was required both because Taylor was a person under a disability and because counsel’s compensation included costs recovered in addition to the contingency fee. The Solicitors Act prohibits the inclusion of this type of “premium” unless a court is “satisfied that exceptional circumstances apply.” The legislation, however, does not define “exceptional circumstances.”

Earlier in 2019, the Ontario Court of Appeal considered the issue in Almalki v. Canada, a case that involved Abdullah Almalki’s detention and torture in Syria, and the alleged complicity of the Canadian government in that detention and torture.

In holding that “exceptional circumstances” existed, the court listed the following as appropriate for consideration:

  • The factual and legal complexity of the litigation;
  • The substantial financial risk assumed by counsel;
  • The importance of the litigation to the parties and the public; and
  • The immense resources expended by counsel in achieving a very good result.

But as Justice Sylvia Corthorn saw it, the challenges faced by counsel in the instant case, including liability issues, were those “frequently faced by plaintiffs’ counsel in personal injury litigation” and therefore “alone do not give rise to ‘exceptional circumstances’.” Nor did the fact that counsel carried the file for several years, put in a significant amount of work and incurred significant expense create such circumstances.

Indeed, Connolly’s partner, Joseph Obagi, and an expert witness, both testified that the complexity of the case and the risk involved were analogous to that found in medical malpractice litigation — where “exceptional circumstances” costs awards were not uncommon.

“Medical negligence cases tend to be more complex and require more experts than accident-type cases,” says Ashley Bennett of Soloway Wright LLP in Ottawa, who represented Moore.

Additionally, the instant case involved third party liability limits which could have substantially affected the amount of the contingency fee payable to counsel.

It was also the case that the contingency percentage of 25 per cent (for Moore and Connolly Obagi combined) was reasonable and reduced from counsel’s usual 30 to 33 “specifically because of the inclusion of the premium as part of the fee agreement.”

Otherwise, the litigation was “very significant” to Taylor and “significant” to Michelle as “a vehicle by which she was able to achieve some peace of mind about her son’s long-term future.” Finally, the applicants were “well-aware of the significant resources to be expended.”

The upshot, Corthorn concluded, was that exceptional circumstances existed in 2011 when the fee agreement was reached.

“This was a pedestrian darting-out case that most personal injury lawyers would not have taken on and, in the end, the court understood the very serious risk associated with this case,” says Tom Connolly. “The decision indicates that the bar can’t be set so high so that it can never be met except in medical malpractice cases.”

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