Duckett v. Velletta

2015 BCSC 429 Duckett v. Velletta IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Duckett v. Velletta, 2015 BCSC 429 Date: 20150319 Docket: 14-0799 Registry: Victoria Between: Robert Gabriel Duckett Client And: Michael J. Velletta Solicitor Before Master McCallum Reasons for Judgment Client appearing in person: R.G. Duckett Counsel appearing for Solicitor: M.J. Velletta H. Shook (A/S) Place and Date of Hearing: Victoria B.C. September 15, November 24, 2014 February 18, 2015 Place and Date of Judgment: Victoria, B.C. March 19, 2015 INTRODUCTION [1] Robert Duckett hired Michael Valletta of Velletta & Company ('the Firm") to act for him in an action against Mr. Duckett's former solicitor, Elizabeth McKinnon. Mr. Duckett and Mr. Velletta eventually entered into a contingent fee agreement (the "Agreement"). The Firm billed Mr. Duckett in accordance with the Agreement for work done on the original retainer involving Ms. McKinnon and for work done in respect of appeals filed by Ms. McKinnon. [2] Mr. Duckett applied to have the Agreement examined and the accounts reviewed pursuant to the Legal Profession Act, S.B.C. 1998, c. 9 (the "Act"). He says the Agreement was unfair and/or unreasonable when it was made and should be cancelled or modified. Mr. Duckett says he did not authorize the work done that lead to the other accounts rendered in respect of the appeals and should not be responsible for those charges. [3] The Firm says the Agreement was fair and reasonable and should not be disturbed. The Firm says it was properly retained for the other work and billed Mr. Duckett fairly for that work. [4] For the reasons that follow, I have concluded that the Agreement should be confirmed and that the other accounts should be allowed as presented. BACKGROUND [5] Mr. Duckett was the owner of a business that he sold in late 2006. He agreed to "carry" $50,000 of the purchase price by lending the vendors that amount. Mr. Duckett retained lawyer Elizabeth McKinnon to represent him in the transaction to complete the sale of the business and secure the loan. The purchasers and Mr. Duckett arranged for the purchasers to take over Mr. Duckett's insurance policy, but they made no arrangements for Mr. Duckett to be listed as a named payee in the event of a claim. [6] Ms. McKinnon undertook various steps on behalf of Mr. Duckett, including preparation of a promissory note in Duckett's favour and a Financing Statement. The Financing Statement was registered in the Personal Property Registry in February 2007. [7] There was a fire in the premises of Mr. Duckett's former business in April 2007, and most to the material assets were damaged or destroyed. The purchasers made a claim under the insurance policy, as did Mr. Duckett. The insurer refused to pay Mr. Duckett on the basis that he had no security interest in the assets that had been lost in the fire. [8] Mr. Duckett retained other counsel to pursue that issue and was persuaded that he had no security interest in the assets and no claim to the insurance proceeds. The proceeds were paid to the purchasers who, very shortly, ceased to make payments on the promissory note and eventually left the area. Mr. Duckett was owed just over $45,000 as at the date of his loss in October 2007. [9] Mr. Duckett was advised by previous counsel that Ms. McKinnon had acted negligently and that he could pursue a claim against her with a view to recovering any award from the Lawyer's Insurance Fund ("LIF") in respect of that negligence. Previous counsel initiated discussions with LIF but was unsuccessful. Mr. Duckett was advised to look for counsel who might take on litigation to pursue claims against Ms. McKinnon with a view to obtaining relief from LIF. [10] In July 2008, Mr. Duckett met Mr. Velletta and Mr. Hundleby of the firm to get advice. There is no doubt Mr. Duckett told the lawyers he had no income and no savings with which to pursue his claim. He was advised by Mr. Velletta that he appeared to have a good case against Ms. McKinnon and ultimately LIF. Mr. Duckett agreed to go ahead with that claim and gave the Firm a retainer of $2,000. Mr. Velletta advised that Mr. Hundleby would take on the work under supervision of Mr. Velletta to keep costs to a minimum. [11] Through the fall of 2008, Mr. Hundleby was responsible for the file. On October 31, 2008, he advised Mr. Duckett that he had achieved little in the way of success with LIF and rendered the Firm's account of that date for $2,274 plus various disbursements. The account was paid. [12] By mid-April 2009, LIF had suggested a settlement (without instructions from Ms. McKinnon) of $30,000. Mr. Hundleby advised against settling the claim in those terms, and a writ and statement of claim were issued against Ms. McKinnon advancing claims for breach of contract and negligence. LIF advised Ms. McKinnon was, in any event, unwilling to settle for that amount and instructions were given for service of the pleadings. [13] Time passed with no discernible results as far as settling the claims were concerned. The litigation proceeded with Lists of Documents exchanged and an examination for discovery conducted of Ms. McKinnon on November 25, 2009. Mr. Hundleby and other members of the Firm working on the file recorded their time and kept Mr. Duckett apprised of their efforts on his behalf. [14] The firm's timekeeping records are in evidence (Exhibit 22) and it is apparent how much time the firm devoted to the file. There is also a draft account in evidence (Exhibit 31) that was not sent for fees amounting to approximately $7,000 by May of 2010. [15] The action against Ms. McKinnon was apparently set for trial in early 2011 and Mr. Hundleby went about preparation for that event. The trial was then adjourned for reasons not made out in the evidence. By May of 2011 (or perhaps earlier) the Firm had determined it would be necessary to have an expert report on the issue of solicitor negligence. Mr. Hundleby discussed the issue with Mr. Duckett and advised the Firm would bear the upfront cost of the disbursement. Mr. Duckett says he was told the report would cost between $3,000 and $5,000, and agreed to it on that condition. Mr. Hundleby denies there was any discussion about a permitted amount for the report. [16] Mr. Hundleby retained an expert who produced a report and an account in the amount of $10,685.14 on August 17, 2011. All involved were surprised at the amount of the account but efforts by Mr. Hundleby to have it reduced by the expert were, not surprisingly, unsuccessful. The report was relied upon by the trial judge and allowed at $9,540.31 (as claimed) in the subsequent assessment of Mr. Duckett's costs following the trial. Mr. Duckett continues to assert he only approved production of the report on condition he not pay more than $5,000 for it [17] By the fall of 2011, the Firm had determined to bring on an application for summary trial to resolve the matter. Mr. Hundleby and another lawyer took on the task of arranging that and commencing preparation of the required material. Mr. Hundleby left the Firm for other employment in December 2011, and Mr. Velletta took over primary conduct of the matter with assistance from a junior as required. [18] Prior to Mr. Hundleby departing from the Firm, he had discussed the question of fees with Mr. Duckett. Mr. Duckett's financial circumstances had not changed and the Firm was aware that he could not pay interim accounts if they were rendered. Mr. Duckett said he told the Firm that he could arrange a line of credit to pay his account at the conclusion of the matter. Both Mr. Hundleby and Mr. Velletta knew Mr. Duckett had few financial resources. [19] At some point in the summer of 2011, Mr. Hundleby and Mr. Duckett discussed the suggestion of converting the fee arrangement then in place (essentially an hourly rate arrangement) to a contingent fee arrangement. Nothing formal resulted from those discussions but the question came to the fore in early 2012 when Mr. Velletta took over conduct. [20] Mr. Duckett met Mr. Velletta to discuss the issue and was advised that fees amounting to something in the order of $22,000 had been docketed to date. In addition to those amounts, the Firm had accumulated various disbursements including the expert report. The Firm had not been successful in persuading the LIF to settle the claim and Ms. McKinnon continued to be intractable. Settlement had proved impossible and Mr. Velletta believed that a summary trial remained the best avenue for getting the action resolved. [21] Mr. Duckett requested and was given information about his account billings to February 2012. Mr. Duckett said in evidence he was asked to pay his outstanding account, but it is clear no account had been rendered except the account of approximately $2,200 in October of 2008 that had been paid. Mr. Valetta said in evidence that he believed Mr. Duckett had a strong case that should be pursued and that he wanted to find a way to accomplish that. [22] Mr. Duckett was sent a draft of a contingent fee agreement in mid February 2012 for his consideration. The Agreement called for a fee of 50% of the amount recovered in the litigation and payment by Mr. Duckett of the disbursements incurred by the Firm in the litigation in any event of the outcome. The Agreement also provided that it applied only to settlement or judgment of the claim against Ms. McKinnon and not any other costs such as execution proceedings or appeals. Those matters were agreed to be billed on an hourly rate basis. [23] The Agreement was signed on March 22, 2012, after Mr. Duckett was given an opportunity to consider his position. Mr. Duckett knew the amount of unbilled fees at the time but said in his evidence that he always wanted to pay the account at the conclusion of the litigation through the mechanism of a line of credit he believed he could arrange. He said he felt "strong-armed" into signing the agreement by Mr. Velletta and believed he had a very strong case against Ms. McKinnon. [24] Mr. Velletta said in his evidence that the notion of a contingent fee arrangement was first suggested by Mr. Duckett. Mr. Velletta knew Mr. Duckett could not pay accounts as rendered and finally agreed to continue on that basis. He too believed Mr. Duckett had a strong case but knew the matter would have to go to trial to get a resolution. It was clear to all then that neither Ms. McKinnon nor LIF were likely to settle the matter. [25] The Agreement provides for credit to be given to Mr. Duckett for the payment he had already made of $2,652.69 on the earlier account. That change was inserted into the agreement at Mr. Duckett's request. In all the circumstances, I conclude that Mr. Duckett was fully aware of the terms of the Agreement and entered into it voluntarily. There was little upside to the Firm in the Agreement given the amount of unbilled time at the date the Agreement was made. Mr. Duckett was relieved of the obligation to pay interim accounts and removed the risk of a bad result at trial. [26] Although all involved believed Mr. Duckett had a strong case, this was not a matter without risk. Ms. McKinnon had made the litigation time consuming and expensive and she was determined to take it through trial. The expert opinion was a strong one but the result could not be said to be pre-ordained. This matter was not analogous to a personal injury action where liability is not at issue and the only question is "how much", not "if". [27] The summary trial came on for hearing on October 19, 2012, and judgment was given on October 29, 2102. The trial judge found in favour of Mr. Duckett on both contractual and negligence grounds and gave judgment against Ms. McKinnon in the amount of $46,794.92 plus interest and costs. The reasons for judgment demonstrate the thoroughness with which the case for Mr. Duckett was presented and rely heavily upon the authorities presented by the Firm and the expert opinion. [28] Mr. Duckett said in his evidence that he was convinced Ms. McKinnon would appeal the judgment if the case went against her. He testified that he told Mr. Velletta immediately following the trial on October 19 that he had no money to pay for an appeal and that the Firm should not do work that was not covered by the Agreement. Mr. Duckett took the position that the Agreement was then terminated and that he was not responsible for fees for work following that date. [29] Following release of the judgment, Ms. McKinnon declined to approve the order and the Firm was required to apply to settle the order and assess the costs. The order was settled and the costs assessed at $19,533.38 on April 13, 2013.The costs amount included the expert opinion charge of $9,540.31. [30] Ms. McKinnon filed a Notice of Appeal on November 28, 2012. Although Mr. Duckett maintained he had terminated the Agreement and advised the Firm that he would not be responsible for further charges, he continued to work closely with Mr. Pedersen of the Firm on the appeal. Mr. Valetta sent Mr. Duckett a letter on December 10, 2012, confirming the terms of Mr. Duckett's retainer of the Firm for the appeal and post judgment work (Exhibit 24). The essence of that arrangement was payment of fees billed on an hourly rate. [31] Ms. McKinnon was not diligent in pursuing her appeal. She was finally required, because of the effluxion of time, to apply to extend time and for a stay of execution on the order at trial. The Firm successfully resisted that motion on Mr. Duckett's behalf in June 2013, and an order was made dismissing the appeal as abandoned with costs against Ms. McKinnon. [32] On August 1, 2013, Ms. McKinnon filed a motion in the Court of Appeal (on short notice) to have the June decision of a judge in chambers reviewed. That motion was dismissed by the Court of Appeal on October 21, 2013, with costs against Ms. McKinnon. Mr. Pedersen was responsible for the majority of the Firm's work in the Court of Appeal. [33] The Firm also took proceedings against Ms. McKinnon to realize on the judgment. A subpoena to debtor hearing was conducted and the judgment registered against property in which Ms. McKinnon apparently had an interest. The execution proceedings were largely unsuccessful because Ms. McKinnon is impecunious. She has little income, many debts, and no property from which to recover on the judgment. The Firm exhausted every practical alternative in that regard. [34] Concurrently with the appeal and the execution proceedings, the Firm continued to pursue LIF for payment as Ms. McKinnon's insurer and complained on Mr. Duckett's behalf to the Law Society of British Columbia. LIF responded on October 31, 2013, with a payment of $48,357.32 said to be "the extent of the insurance proceeds available". [35] The settlement proceeds were applied as set out in Exhibit 19 headed "Trust Reconciliation" and dated November 19, 2013. The Firm charged Mr. Duckett, pursuant to the Agreement, fees of 50% of the amount paid by LIF ($21,904.66 after credit for the amount Mr. Duckett had previously paid) plus disbursements and taxes for a grand total of $24,641.78. Mr. Duckett had previously (May 10, 2012) been billed for trial disbursements only in the amount of $12,455.44 and paid $6,227.72 on account. The balance of that account was also paid from the amount in trust. [36] Mr. Duckett was also billed as follows: Fees Total a) Subpoena to debtor: $275.00 $470.24 b) Appeal: $8,142.50 $9,523.10 c) Collection proceedings: $3,443.50 $4,876.43 All of those accounts were paid from the funds held in trust. [37] Of the total amount paid by LIF, Mr. Duckett received $3,097.38. The balance was paid to the Firm as set out above in satisfaction of the amount owing under the Agreement and costs for collection work and the appeal proceedings. Mr. Duckett has a judgment registered against Ms. McKinnon's property on which he is owed approximately $33,700 plus additional costs not yet determined. The Firm has not been instructed to finalize those costs amounts because of this dispute. DISCUSSION [38] The first question is the examination of the Agreement per s. 68 of the Act: Examination of an agreement 68 (1) This section does not apply to agreements entered into before June 1, 1988. (2) A person who has entered into an agreement with a lawyer or law firm may apply to the registrar to have the agreement examined. (3) An application under subsection (2) may only be made within 3 months after (a) the agreement was made, or (b) the termination of the solicitor client relationship. (4) Subject to subsection (3), a person may make an application under subsection (2) even if the person has made payment under the agreement. (5) On an application under subsection (2), the registrar must confirm the agreement unless the registrar considers that the agreement is unfair or unreasonable under the circumstances existing at the time the agreement was entered into. (6) If the registrar considers that the agreement is unfair or unreasonable under the circumstances existing at the time the agreement was entered into, the registrar may modify or cancel the agreement. (7) If an agreement is cancelled under subsection (6), a registrar (a) may require the lawyer to prepare a bill for review, and (b) must review the fees, charges and disbursements for the services provided as though there were no agreement. (8) A party may appeal a decision of the registrar under subsection (5) or (6) to the court. (9) The procedure under the Supreme Court Civil Rules for the assessment of costs, review of bills and examination of agreements applies to the examination of an agreement. [39] This Agreement was made under somewhat unique circumstances given that it was made some considerable time after the original retainer. Mr. Duckett had told the Firm that he did not have resources to pay interim accounts. According to his evidence, he also told the Firm that he could pay via a credit facility at the conclusion of the matter, but the Firm clearly was concerned about the viability of that promise even assuming it was made. [40] The Firm had accumulated over 100 hours of unbilled time on Mr. Duckett's behalf by March of 2012 when the Agreement was executed. Mr. Duckett knew that, and was advised by the Firm that the likely cost to him to carry the matter to conclusion might exceed any amount he could recover. Mr. Duckett and the Firm believed recovery was a strong possibility from LIF, but that had not materialized and it was clear a judgment would have to be obtained. [41] Ms. McKinnon was a determined litigant who had made each step difficult and time consuming. By March of 2012, the chances of an economically sensible recovery for Mr. Duckett, given the hourly rate arrangement, were slim. There is a dispute in the evidence about the genesis of the suggestion of a contingent fee agreement but that dispute need not be resolved. The contingent fee agreement, in these unique circumstances, was a good result for Mr. Duckett. He was able to cap his fees to an amount certain (absent the appeal costs) and continue the litigation to a point where LIF might pay on Ms. McKinnon's behalf. [42] The percentage fee agreed at 50% of the amount recovered was high but not unreasonably so given the accumulated time to date and the certain knowledge that no step would be easy. I do not accept Mr. Duckett's evidence that he was somehow pressured into signing the Agreement. He is a knowledgeable, experienced businessman who had been very involved with lawyers in the Firm for nearly four years at the time the Agreement was signed. He was aware of the difficulty that had been encountered throughout the file until then and that a trial would be required. [43] Both Mr. Hundleby and Mr. Pedersen of the Firm testified about their extensive dealings with Mr. Duckett. The lawyers and Mr. Duckett agreed they had a good working relationship and Mr. Duckett was kept fully informed in writing and orally of the Firm's activity on his behalf. Mr. Duckett and Mr. Velletta did not enjoy the same satisfactory relationship, but that did not go to the fairness or reasonableness of the agreement. [44] This was a case of genuine contingency in that the Firm had to persuade the court that Ms. McKinnon had failed in her duty to Mr. Duckett. The Firm then had to collect from either or both of LIF or Ms. McKinnon, and neither had shown any inclination to settle at the time the Agreement was signed. The Firm had a significant investment in the file in March 2012, and much to lose in the event they did not succeed in establishing liability on the part of Ms. McKinnon. Mr. Duckett had little to lose by way of a contingent fee arrangement given the unbilled fees for which he was then responsible. He would be liable only for disbursements if no recovery was made and potentially no more in fees than he then owed if the recovery was made. [45] In the circumstances existing at the time the Agreement was entered into, the Agreement could not be said to be unfair or unreasonable. [46] The Appointment filed by Mr. Duckett to initiate this matter refers to an examination of the agreement and a review of the accounts of the Firm. During the hearing, the parties' focus was on the circumstances surrounding the Agreement and the accounts for post-trial work including the appeal. There was little attention paid to the account rendered pursuant to the Agreement, but the authorities are clear that where the review provisions of the Act are invoked, the Registrar must review the account once the examination of the agreement is concluded. (Pattinson v. Derek C. Creighton Law et al, 2003 BCSC 970.) [47] In Pattinson, Registrar Blok held at para. 155: [155] The court in Long, Miller and Mullins v. Sawchuk concluded that the second appeal in the Commonwealth Investors case, Commonwealth Investors Syndicate Ltd. v. Laxton (1994) 94 B.C.L.R. (2d) 177 (C.A.) ("Commonwealth No. 2"), set out the appropriate criteria which a Registrar should follow in reviewing an account rendered pursuant to a contingency fee contract. In Commonwealth No. 2 the court held that all the circumstances are to be considered, including the familiar factors stated in Yule v. Saskatoon (City) (1955), 1 D.L.R. (2d) 540 (Sask. C.A.), the risks and expectations, and the terms of the bargain which is the subject-matter of the inquiry. The purpose of the inquiry is to decide whether the agreement operates reasonably in the context. The ultimate question to be asked is whether the fee fixed by the agreement is reasonable and maintains the integrity of the profession. [48] I do not propose to review the factors in detail. I am satisfied that the matter was reasonably complex, that a reasonable level of skill and a high degree of tenacity were required of the Firm, that the amount involved was significant and of importance to Mr. Duckett, that the time recorded was time reasonably spent and reasonably delegated where appropriate and an excellent result was achieved. The fees charged for the trial amounted to approximately $22,000. Taking all the factors into account, I am satisfied that the fee fixed by the Agreement is reasonable and maintains the integrity of the profession. [49] I turn now to the question of the disbursement for the expert opinion. Mr. Duckett maintained that he had been promised by Mr. Hundleby that he would not be charged more than $3,000 to $5,000 for such an opinion. Mr. Hundleby testified that he had made no such promise, but it is clear that both he and Mr. Velletta were surprised by the amount charged by the expert. Efforts to have the account reduced were unsuccessful. [50] I am not persuaded that a promise was made that Mr. Duckett would not be charged more than $5,000 for the expert report. There was no reason for Mr. Hundleby to make such a promise and, had he done so, it would have been easy for him to have made the appropriate inquiry with the expert before commissioning the report. The Firm was well aware of Mr. Duckett's financial circumstances and made every effort to keep costs to a minimum. The disbursement in question was allowed by the Registrar when the bill of costs was assessed and the report was relied on by both the trial judge and the Court of Appeal. The disbursement was both necessary and reasonable. [51] Mr. Duckett maintained that he had terminated the Firm's retainer on the day of the trial in conversation with Mr. Velletta. Mr. Velletta had no such recollection of their discussion and proceeded to continue to act for Mr. Duckett. He wrote Mr. Duckett on December 10, 2012, confirming the terms of the ongoing retainer. Mr. Duckett made no complaint then or thereafter that the Firm's retainer was at an end. He continued to work closely with Mr. Pedersen on the appeal and collection proceedings. Mr. Pedersen testified that he and Mr. Duckett had a good working relationship and that he was very aware of Mr. Duckett's financial circumstances. [52] Mr. Pedersen testified that Mr. Duckett had never said to him that the retainer was terminated. Mr. Duckett was diligent in his dealings with Mr. Pedersen to reinforce the notion of keeping costs to a minimum and Mr. Pedersen followed those instructions. Mr. Pedersen conducted the appeal hearings and believed Mr. Duckett was entitled to costs arising from those hearings, but the Firm's retainer was terminated before he was able to have those costs fixed. Mr. Pedersen testified that he had discussed the costs of the appeal proceedings with Mr. Duckett as matters progressed. [53] I am not persuaded that Mr. Duckett terminated the Firm's retainer on the day of the trial in discussion with Mr. Valetta. If he had done so, Mr. Duckett would have been quick to respond to Mr. Valetta's letter of December 10, 2012, and would not have engaged with Mr. Pedersen with respect to the appeal proceedings. [54] Mr. Duckett testified that he was content with the appeal work and the steps taken. His position was that he was not responsible for fees billed following the trial. He has not established that was the case. [55] The accounts rendered for the post-trial work and the appeals are amply supported by the evidence of Mr. Pedersen. The issues were of ordinary complexity requiring a modest amount of specialized skill and knowledge. The amount involved was certainly significant to Mr. Duckett and was very important to him. It was essential to have the appeal proceedings resolved in order to pursue payment from LIF. The execution proceedings against Ms. McKinnon were a necessary step in endeavouring to secure Mr. Duckett's judgment and realize upon it. The time recorded (primarily by Mr. Pedersen) was well spent and the result achieved was a good one. CONCLUSION [56] I do not consider the contingency fee agreement to be unfair or unreasonable under the circumstances existing at the time the agreement was entered into. The agreement is confirmed. [57] I conclude that the account of November 19, 2013, arising from the agreement is reasonable and I allow it in full, including the disbursements as presented. [58] I conclude that the accounts of November 19, 2013 for "Costs and Collection" and "Appeal" are reasonable and I allow them in full, including the disbursements as presented. [59] I conclude that the accounts of May 10, 2012 and April 30, 2013 are reasonable and I allow them as presented. [60] The Firm is entitled to its costs of this proceeding. "W. McCallum" Master W. McCallum