[1] Cassie Hodge seeks to bring a class action against her former lawyer, Gary Neinstein, and his law firm, Neinstein & Associates. She alleges that the Neinstein firm, while acting under improper contingency fee agreements with her and other clients, took unauthorized fees, failed to obtain court approval when required by law, and charged illegal interest rates on disbursements.
[2] Ms. Hodge applied to certify her action as a class proceeding. Her application was dismissed by Perell J. for Reasons dated July 29, 2014.[1]Subsequently, for Reasons dated November 4, 2014,[2] Perell J. ordered Ms. Hodge to pay costs to the respondents in the amount of $328,758.45.
[3] Ms. Hodge appeals to this Court from the Order dismissing the certification application. She also seeks leave to appeal the costs Order, and if leave is granted, asks that the costs Order be set aside or reduced.
[105] When the two alternative procedures are compared, it is clear that the class proceeding provides the class members with the only realistic opportunity of advancing their claims. The common issues are all threshold questions that need to be answered. They are not insignificant or mere side-issues, but go to the heart of the dispute between the clients and their former lawyers. Under the class proceeding, all clients would receive notice of their potential claim. The preliminary issues with respect to the enforceability of the contingency fee agreements and propriety of some of the other charges would be settled in advance. Once the common issues were settled, all that would remain would be for the solicitors to establish what would be a reasonable fee in all the circumstances. This might require individual assessments, but if so, the burden would be on the solicitors to establish the fairness of their fees. If there is a finding that those solicitors knowingly entered into unenforceable agreements and failed to bring the application for approval required under the Solicitors Act, I find it completely appropriate that the onus should then be on the solicitors to initiate whatever individual assessments are required to obtain their fees.
[106] Unless this is done by way of a class proceeding, there is a real risk that the vast majority of any improper fees taken by the solicitors will be retained by them, simply because individual clients are unable to initiate proceedings on their own. It is important to the administration of justice that this should not happen. This is particularly so given the role of lawyers as the gatekeepers entrusted to protect their clients.
[107] I am also of the view that judicial economy favours the class proceeding rather than individual applications. Even assuming only 10% of clients come forward to assert individual claims, that would be an unwieldy number of claims to case manage effectively, particularly with multiple lawyers with different strategies. The overarching issues of enforceability of the agreements, the effect of s. 28.1(9), and the propriety of many of the billing practices need to be determined uniformly. There would need to be a system to avoid inconsistent verdicts, which would be difficult with actions being commenced at different times and in different places. In my view, going forward with one test case, or joinder, or consolidation of multiple claims would all be more cumbersome than adjudicating the common issues first in one proceeding that decides the rights of the whole class.
[108] Finally, I have considered the importance of behaviour modification. I find this to be a significant advantage to the class proceeding. Leaving individuals to pursue their own individual remedies will inevitably mean that even if some individuals are successful, there will be others who simply will not come forward. If individual clients are left to their own devices to right these wrongs, there will be little financial incentive for lawyers to follow the procedures demanded by the legislation. There will be no encouragement for lawyers to advise their clients of their rights in the contingency fee agreement as required by the Solicitors Act and Regulations and no incentive for lawyers to bring the appropriate applications for approval before taking their fees. It would be far too tempting for lawyers to simply take whatever fees they believe they can negotiate with the client, ignoring the legislation, and doing so with impunity unless the clients themselves go elsewhere for advice and take proceedings against their own lawyers after the fact. The notoriety of the class proceeding will serve as a reminder and a warning to all lawyers in Ontario that the fundamental requirements for contingency fee agreements must be followed and that those who ignore them do so at their peril.
[109] Taking all of these factors into account, I find the that a class proceeding is the preferable procedure. The motion judge erred in law and erred in principle in failing to so find.