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Posts from the ‘Legal Fees’ Category

Court Strikes Family Law Firm’s $72,500 “Premium” as Being a Contingency Fee

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Court Strikes Family Law Firm’s $72,500 “Premium” as Being a Contingency Fee

Most of you will be familiar with “contingency fees”, meaning the fees a client agrees to pay a lawyer only if the lawyer is successful in the litigation for which he or she is hired.   They are most often used in personal injury matters, with the lawyer’s fee being calculated as a percentage of the amount recovered for the client.

But what you may not know is that in Ontario Family Law matters, contingency fee arrangements are prohibited outright. And in a recent decision, the court “undid” an arguably creative approach by a Toronto-area Family Law firm, finding it was a prohibited contingency fee by another name.

In Jackson v. Stephen Durbin and Associates, the husband was involved in a contentious custody battle with his wife over their 6-year-old daughter.   Under the retainer he signed with the law firm chosen to represent him, the husband agreed to pay the lawyers an hourly rate for working on his case, but “with a daily counsel fee for court or tribunal appearances at ten-fold (solicitor’s) hourly rate and an increase in fees in the event of a positive result achieved (“results achieved fee”)”.

About two years into the litigation process, the husband had depleted the retainer funds and began to accrue arrears with the law firm.  After several accommodations and re-negotiations, the husband still owed the firm its fees totaling $132,500.

He challenged the law firm’s overall bill, especially the “results achieved fee” of almost $72,500, which had been rendered on a separate invoice.   He claimed this was tantamount to a contingency fee agreement in a Family Law matter, which is clearly prohibited by section 28.1(3) of the Solicitors Act.

After reviewing several prior cases on this point, the court agreed. The Act’s wording describes a contingency fee agreement as being one that provides that the remuneration paid to the lawyer for legal fees is contingent “in whole or in part” on the successful disposition or completion of the matter.  The retainer in question stipulated an increase in the event of a “positive result achieved”.  As the court put it:

The logical interpretation of that agreement is that the “results achieved fee” is only chargeable if a successful result is achieved.  I find that the language of the retainer agreement combined with the way the results achieved fee was charged (by way of a separate account), confirms the firm’s intention that the fee was contingent on the successful disposition or completion of the matter in respect of which services were provided.  As such, the results achieved fee charged by the respondent to the applicant is a contingency fee defined by the Solicitor Act and is a prohibited charge.

In short, the “results achieved fee” was merely a contingency fee arrangement in a creative wrapper.  The court accordingly ordered the law firm to refund the almost $72,5000 “premium” that the husband had been charged.

For the full text of the decision, see:

Jackson v. Stephen Durbin and Associates

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.  For more information, visit us at RussellAlexander.com

Wednesday’s Video Clip: Russell Alexander, Family Lawyers

Wednesday’s Video Clip: Russell Alexander, Family Lawyers

Our fees are based on the following elements:

(a) The time spent on your behalf, and the service which is performed;

(b) The complexities of the issues, and your potential emotional and monetary exposure;

(c) The results accomplished, and the extent to which the expertise of this firm contributed to a successful outcome;

(d) The degree and type of resistance encountered; and,

(e) The extent to which any work needs to be performed on an emergency basis.

None of these elements are capable of a precise arithmetic assessment, and no such assessment is attempted, except in a general way with respect to the time spent. A standard hourly rate, is applied to convert the time into a monetary figure. Any amount that exceeds the number of hours multiplied by the standard rates is the result of the weighing of the other elements mentioned.

We charge standard hourly rates for the work done by our law clerks and lawyers for the time spent on your case. Records are kept (in our computer time-keeping system) by us to the nearest one tenth of an hour, for all activity on your case, including conferences, telephone calls, e-mail, preparing correspondence and memoranda, drafting documents, research and travel time. Each hour billed to you is based on actual work done on your particular case.

Our absence from the office on your behalf is charged at the usual hourly rate. Travel time includes attending at court, settlement conferences, meetings, or consultations on your behalf. We will minimize travel expenses and courthouse time, if any, whenever possible. However, as you will be charged for our traveling time (in addition to the counsel fee), it may be worthwhile to consider whether a local lawyer is desirable for you if your litigation is taking place in another community.

If your appointment is for a consultation only, in order for you to receive advice on a limited number of issues, or, for example, for a second opinion, you will be billed a flat rate consultation fee, payable prior to the consultation. The consultation is not meant to deal with your whole legal problem. These rates are reduced rates, and apply only if the fee is paid at the time of the consultation. The rates are calculated on the basis of the average amount of time spent by our lawyers on consultations in the most recent year.

At Russell Alexander Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at RussellAlexander.com

For a Divorce Trial, is $430,000 in Legal Fees Too Much?

For a Divorce Trial, is $430,000 in Legal Fees Too Much?

Anyone who has gone through a divorce will know that legal costs can get out of control. But consider the recent Ontario case of McCabe v Tissot, where the court was asked to rule on whether the husband should pay the wife’s legal fees of $430,000, part of divorce litigation that “financially devastated” both former spouses, and which saw the wife alone rack up almost $1 million in legal fees overall.

The court’s first step was to determine which member of the sparring couple had been the successful party at trial, because under Ontario civil procedure this is essentially the starting-point for determining how costs should be apportioned, although additional factors come into play as well. Both parties claimed that they had been entirely successful on all significant issues.

Perhaps not surprisingly, in addition to disputing her entitlement the husband also took issue with the wife’s dollar-figure: the $430,000 she was claiming was both excessive and disproportionate, in his view. The wife had chosen to endlessly litigate to the point where both parties’ financial stability, and thus the well-being of their son, was in jeopardy.  He said that for his own part, he had been financially ruined by the whole process.

The court, after considering the various circumstances (including the reasonableness of the parties’ positions at trial, the offers to settle they had exchanged, and prior courts orders), agreed that the wife had been more successful overall. But it rejected the notion that she should receive the full costs she was claiming. The court said:

[t]he amount of legal fees spent by the parties on this litigation is astronomical and completely unreasonable. The [wife] has mortgaged her home and has very little equity left as was her evidence at trial and as set out in her sworn Financial Statements. The [husband] also spent an exorbitant amount on legal fees borrowing funds from his parents to finance the first trial. The [wife] alone has spent close to $1 million on legal fees and disbursements. The [husband] borrowed over $393,000 from his parents. The fees spent by the parties are completely disproportionate to the issues before the court.

The court continued:

The parties lost sight of what is reasonable and what is proportionate. The financial devastation suffered by this family will last a lifetime. Most importantly it will once again negatively impact their son….

And further:

…from the spring of 2013 onward conflict ensued and they attended court numerous times, obtaining approximately 41 court orders. Not only did this financially devastate the parties and affect Liam detrimentally as set out in my Reasons, but it also resulted in the use of an inordinate amount of judicial resources. My only hope is that the parties have now come to the realization that the destruction both financially and emotionally was not worth it and they will not become embroiled in further litigation in the future. Only time will tell.

After reviewing all the relevant factors, the court concluded that legal costs in the amount of $125,000 were payable by the husband to the wife in the matter.

For the full text of the decision, see:

McCabe v Tissot, 2016 ONSC 4443 (CanLII)

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at RussellAlexander.com

Father Who Paid $400K in Legal Fees to “Cause Financial Harm to the Mother and His Son” Ordered to Pay Mother’s Costs Too


Father Who Paid $400K in Legal Fees to “Cause Financial Harm to the Mother and His Son” Ordered to Pay Mother’s Costs Too

If a father runs up almost $400,000 in legal costs – including nearly $75,000 in expert fees – in pursuit of a low-dollar-value victory in court, should this be considered in assessing legal costs later on?

In Jordan v Stewart, court was asked to allocate legal costs in connection with the parents’ dispute over whether the father’s obligation to pay child support for their now-20-something son should be terminated. The young man had been attending University in London, Ontario but when the father learned that he was switching to a college in Toronto, he applied to have child support cut off, on the basis that the young man would be independent and no longer be living with his mother in London. In fact, the father asked for the termination of his support obligation to be back-dated three years.

The father brought a motion to have the support obligation end; the mother wanted the father’s motion dismissed. Although the issues were relatively straightforward, the hearing took up several days of court time, and required expert evidence and scrutiny of the father’s income.

The father did not get the order he wanted, but the mother wasn’t fully vindicated either, since there were additional legal issues that were also addressed at the same time. Given those rather mixed results, the judge was challenged to apportion legal costs, which under Ontario civil procedure are usually (but not always) given to the winning party. So the court had to determine which of the parents had been the “successful” one in the proceeding so far.

The stakes were potentially high: The father had incurred about $373,000 in costs in preparation for certain proceedings, including almost $75,000 paid to an expert to provide an opinion on his income for child support purposes, for the years 2010 and 2011, based on various financial scenarios. But despite the staggering run-up of costs, the father was asking for only 25% of it from the mother – which was still just under $90,000.

The court rejected the father’s claim that he was the successful party, stating that his rationale “stretch[ed] the reality of the outcome.” Instead, the judge stated that “even if I found the father was somehow technically successful, I would award the mother costs.”

The judge’s stern stance against the father was explained by the following passages from the 130-paragraph ruling:

This case is another example of courts struggling to determine entitlement and quantum of costs. The costs issue is made more complex by the father’s willingness to spend approximately $400,000 in legal and expert fees. This amount is significantly disproportionate to any amount that he advances as his best possible financial outcome. The father also knew that, if successful, he probably would not recover the costs in any significant way from the mother as she has limited financial resources and appeared in court without counsel.

This case is an extreme example of a person who was prepared, as he has been in the past, to spend significant sums of money without concern for costs or outcome.

While I cannot conclude that the father in this case deceived the court in any manner, his willingness to spend money on legal and expert fees so out of proportion to any economic benefit defies logic. The reasonable conclusion is that the father was prepared to cause financial harm to the mother and his son even at incredible expense to himself. He certainly never expected to recover his costs [from her].

He does not seek to recover most of the significant fees he spent, a signal that the money was not a factor in his pursuit of the case or relevant to any resolution. He was prepared to spend more money than any financial benefit to him if he succeeded.

The judge also observed that the mother had made multiple reasonable offers: she had suggested mediation, and offered to accept reduced support.  The judge found these offers were all “worthy of the father’s consideration”, and would have been far more financially beneficial to both parties than what transpired.

In the end, using the father’s own tally of his costs as a representative “measuring stick” of the fair compensation to which the mother should be entitled, the judge awarded her the nearly $90,000 in costs to be paid by the father, plus the $34,000 he already owed her.

For the full text of the decision, see:

Jordan v Stewart, 2013 ONSC 5037 (CanLII)

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at RussellAlexander.com

Self-Represented Wife Asks for $18K in Legal Costs; Court Awards $30K Instead

Self-Represented Wife Asks for $18K in Legal Costs; Court Awards $30K Instead

In McMurter v McMurter, the wife represented herself in the family matter against her former husband, who had a lawyer acting for him in their 15-day trial.

The husband had asked the court to terminate his $2,500-per-month spousal support obligations, but he did not prevail. After hearing all the evidence, the court found there was no material change in either spouse’s financial circumstances to justify such a change.

Pointing out that she had been totally successful at trial, the wife then asked for a court order forcing the husband to pay her full legal fees, including: 1) the legal fees she had already paid a lawyer for representing her up but not including trial, and 2) the fees for the 263 hours she personally spent preparing for and representing herself at the trial, using a rate of $35 per hour. (She had run out of money and was unable to afford to continue paying the lawyer’s retainer). All told, she was requesting a costs order for just over $18,000.

For his part, the husband was willing to pay for, at most, the 263 hours the wife spent preparing herself, but only at a rate of $18.32 per hour, which was what she would otherwise have earned at her regular job. This proposed rate was to compensate for “opportunity cost”, meaning the money she did not earn because she was preparing for trial.

The court was asked to fix the proper amount of legal fees the to which the wife should be entitled.

It started by pointing out that the Family Law Rules contain a presumption that a successful party, like the wife, is entitled to the costs of a case. From that basic premise, a court can adjust the costs award based on various factors, including the importance, complexity or difficulty of the issues, and the time spent on the case. Other decisions have expanded on whether non-legally-trained litigants who ask for costs can automatically expect to be paid the same hourly rate as a lawyer doing the identical work. (Hint: They cannot).

Here, the wife was entirely successful in resisting the husband’s motion to change, and the case was complex. The outcome was of great importance to her, since there was a lot at stake. The court commented that she was exceptionally well-organized and presented her position well, and dealt with complex family legislation and legal issues. As the court put it, “She did the work of a lawyer in addition to the work expected of her as a litigant.”

While it was not appropriate to grant her the full lawyers’ rate, the court awarded the wife 263 hours at $100 per hour, rather than the requested $35 which was “woefully inadequate considering the nature and quality of the work” she did. That higher hourly fee was “reasonable and appropriate for a well prepared and self-represented litigant” who had done work comparable to a junior lawyer in some respects, and to an experienced law clerk in others.

The court also allowed an added 50 hours for legal preparation, for a total of 313 hours. After making some minor deductions, the court awarded a total of $30,000 in costs. It concluded the ruling by saying:

Litigants cannot and should not assume that if a party is self-represented that they will not bear the consequences of a significant cost award in the litigation in the appropriate circumstances if they are unsuccessful.

For the full text of the decision, see:

Costs award:

McMurter v McMurter, 2017 ONSC 725 (CanLII)

Main judgment:

McMurter v. McMurter 2016 ONSC 1225 (S.C.J.)

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at RussellAlexander.com

Ontario Superior Court Justice Pazaratz Speaks Out Against Legal Aid Squandering – Again

Ontario Superior Court Justice Pazaratz Speaks Out Against Legal Aid Squandering – Again

A recent Family law decision by Justice Pazaratz of the Ontario Superior Court of Justice caused a stir this past few weeks. In his written endorsement of a consent order, he bluntly stated that the case before him should not have been dragged out so long, and should not have been funded by public coffers so indiscriminately. He chastised both Legal Aid Ontario and the parties themselves for “squandering scarce judicial and community resources”, writing:

After confirming that Legal Aid was paying for all of this, I couldn’t help but ask some obvious questions:

a. Is it fair for people who have never paid any taxes to be so cavalier about how they spend other people’s money?

b. Is it fair that Legal Aid has decided to fund this easily resolvable case, when every day I see people with much more serious and complex problems who have been denied any help by Legal Aid?

c. Is it fair that more important cases, many involving the well-being of children, couldn’t be dealt with on March 9, 2017 because our court was required to devote one of our limited timeslots to this case?

The balance of the decision has much the same no-holds-barred tone. And while his comments might be unusually critical and frank for a judge, this isn’t the first time Justice Pazaratz has spoken out this way.

In several prior cases he provided similar disapproval of profligate spending on needless motions and other procedural wrangling — whether paid by from the public purse or otherwise.

For example, in Scipione v Scipione, he railed against Family law litigants who run up legal costs, and then ask the losing party to pay them. In explaining that costs rulings are to be directed by an “overall sense of reasonableness and fairness”, he added that “The Rules [of court] do not require the court to allow the successful party to demand a blank cheque for their costs.”

Next, displaying perhaps a little more creative flair, in Izyuk v Bilousov, Justice Pazaratz wrote:

The popular beverage has a catchy slogan: “Red Bull gives you wings.”

But at this costs hearing, the self-represented Respondent father suggested a wry variation:  “Legal Aid gives you wings.”

He now seeks costs in relation to a 1- day custody trial … He won; sole custody.  The Applicant mother was represented by counsel.  Her poor finances qualified her for Legal Aid.   Now she says those same poor finances should excuse her from paying costs.

The Respondent asks a valid question:   Does she have wings?   Can she do whatever she wants in court, without ever worrying about fees – hers or anyone else’s?

Justice Pazaratz ultimately made the following ruling:

In the case at bar, the Applicant conducted herself as if her Legal Aid certificate amounted to a blank cheque – unlimited resources which most unrepresented Respondents would be hard-pressed to match.  A scheduled 3-4 day trial turned into 17 days, largely because the Applicant fought every issue and pursued every dubious allegation, to the bitter end.  She appeared to make up evidence and allegations as she went along.  She defied court orders directly impacting on the child, even while the trial was underway. There have to be consequences.  Either we sanction this irresponsible and destructive behaviour, or we invite more of the same.

Encouraging settlement and discouraging inappropriate behaviour by litigants is important in all litigation – but particularly in family law, and most particularly in custody cases.  No litigant should perceive they have “wings” – the ability to say or do anything they want in court, without consequences.

Returning to the most recent of decision that is now under controversy: It’s a 2017 case called Abdulaali Salih in which Justice Pazaratz simply turns up the volume a little, on what has apparently become a recurring theme with him.

To give his latest comments context: The divorcing husband and wife, both of whom had immigrated from Iraq and had never worked in Canada, were both monthly recipients of government money from the Ontario Disability Support Program. Their litigation was being funded by Legal Aid Ontario, and since they had “no children. No jobs. No income. No property. Nothing to divide.”, he added that it should be “a simple case”.

Yet the couple had repeatedly returned to court to settle even minor issues, and seemed to have no impetus to slow down the steady stream of hearings between them. In expressing his exasperation at the needless dissipation of public money, Justice Pazaratz wrote:

At the March 9, 2017 attendance, apart from paying for the lawyers, taxpayers also had to pay for the following government employees to be present in Courtroom #5 to deal with this matter:

 a. A Court Services Officer.

 b. A Court Reporter.

 c. A Court Registrar.

 d. And me.

I have no idea how much the other players in the courtroom get paid. But as a Superior Court Judge I receive approximately $308,600.00 per year. So you can see that not even counting overhead charges and administrative staff in the building, every hour of court time is hugely expensive.

Many taxpayers can’t afford their own lawyers, and don’t qualify for free assistance through Legal Aid. So they end up representing themselves in court. Or facing financial reality and settling without going to court.

But when you pay no taxes and Legal Aid gives you a free lawyer, there’s no incentive to be sensible. Why worry about the cost when some unsuspecting taxpayer out there is footing the bill?

Clearly Justice Pazaratz has an axe to grind. Does he go too far? Or is he right?

For the full text of the decisions, see:

Scipione v Scipione, 2015 ONSC 5982 (CanLII)

Izyuk v Bilousov, 2011 ONSC 7476 (CanLII)

Abdulaali v Salih, 2017 ONSC 1609 (CanLII)

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at RussellAlexander.com

 

Wednesday’s Video Clip: Two necessary evils – know your obligations re: income tax and spousal/ child support

Wednesday’s Video Clip: Two necessary evils – know your obligations re: income tax and spousal/ child support

Income tax: Not a popular concept even at the best of times. But add in the obligations, which arise in the context of paying child or spousal support, and it’s enough to cause heart palpitations in most Canadians.

This is because the Canada Revenue Agency rules relating to how support payments are to be treated are quite complex. To make things more confusing, the federal Income Tax Act has separate rules for spousal support as opposed to child support. Here are the key points:

Spousal Support

Spousal support is generally deductible for the person who is paying, and is taxable as income for the recipient. In contrast, child support is neither deductible nor taxable.

This means that a spouse who is receiving regular spousal support must report the payments as income, and the spouse who is paying it can deduct it off the top of his or her income in the same way that RRSP contributions may be deducted. Lump-sum spousal support does not qualify for this, however, nor does spousal support paid indirectly (for example with one separated spouse agreeing to pay the mortgage payments of the other).

Note that this taxability/deductibility of spousal support payments only applies to payments being made pursuant to a written agreement or court order – informal arrangements made between the separating couple are not eligible for a tax deduction by the paying spouse. Any written agreement of this type must state the date of separation, the terms and exact dollar-amount of the support payments that are to be made, and the date the support payments will commence.

Child Support

Child support payments are usually neither deductible by the parent who is paying them, nor taxable in the hands of the parent who is receiving them. Once again, the payments must be made as a result of a written agreement or court order, which sets out the nature of the support being paid, the amount, and other details. A lump-sum payment, which does not specify that it is made in respect of child support, or that does not delineate between the spousal and child support portions, will not qualify for the deduction. It is therefore important to ensure that any separation agreement or court order makes the terms and amount of the child support payments eminently clear.

Legal Fees and Expenses

The CRA also allows a deduction to the recipient spouse or parent for the costs of obtaining or enforcing a spousal or child support order, which includes legal fees and certain enforcement-related expenses. However, the cost of defending a claim for support, or for the payment of arrears of support, is not deductible.

Get Advice Beforehand

Needless to say, this is just the tip of the iceberg in connection with how spousal and child support payments are treated for tax purposes in Canada. Legal advice is a must. But what most partners on the verge of separation or divorce often overlook is that it’s best to obtain competent legal advice before coming to any agreement as to support. Otherwise, you may fail to foresee the tax ramifications of an informal spousal and child support arrangement, which can result in unpleasant surprises at tax time. Expert, early advice from a lawyer is essential.

We hope you have found this video helpful. If you require further information about income tax and spousal/ child support please give us a call or visit our website at www.russellalexander.com