“The CFA [contingency fee agreement] crafted by SK required Mr. Lima to pay a percentage fee based on the amount he recovered and, in addition, authorized payment of costs to SK. Sections 28.1(8) and (9) of the Solicitors Act, when read together, provide that a contingency fee agreement, which includes both a fee payable under the agreement and an amount “arising as a result of an award of costs or costs obtained as part of a settlement”, is unenforceable unless that agreement is approved by a justice of the Superior Court. Approval is granted only if the lawyer and client make a joint application for approval of the contingency fee agreement, and satisfy the justice there are “exceptional circumstances” warranting including payment of costs to the lawyer as part of the fees owed under a contingency fee agreement. SK knew an application to the court for approval was necessary, but did not make any application. SK did not tell Mr. Lima court approval was required.
Sections 28.1(8) and (9) are consumer protection legislation. The requirements of a joint application for approval and judicial approval predicated on exceptional circumstances protect clients from excessive fees and fees determined, according to contractual terms, lacking in transparency and predictability: Almalki v. Canada (Attorney General), 2019 ONCA 26, at paras. 47-50. The lack of transparency is apparent from a review of the CFA entered into by SK and Mr. Lima. Under the terms of that agreement, it was left to SK to unilaterally attribute an amount from the settlement amounts to costs. Mr. Lima could not know, from the terms of the CFA, what amount from any settlement SK would attribute to costs paid by the defendant, and therefore ultimately payable to SK as part of its total fee.”