Almalki was one of three Canadians falsely accused of having terrorist links and detained and tortured in Egypt and Syria. A 2008 federal inquiry by then Supreme Court Justice Frank Iacobucci found that actions of Canadian officials had indirectly contributed to the ordeal. In 2006, the three men sued the Government of Canada and received more than $31 million.
“The court reminded us that they will scrutinize contingency fee agreements more closely than for another commercial contract,” says Kate Mazzucco, a partner at Beyond Law LLP in Toronto.
Mazzucco says the case contained instructive points for lawyers who use contingency agreements.
It was important to the court that the terms were set out at the outset of the relationship as opposed to the end of the relationship, that the client was encouraged to seek independent legal advice to look at the agreement and that the language of the agreement was clear and free from ambiguity and uncertainty, she says.
According to s. 28.1(8) of the Solicitors Act, you can’t arrange a contingency fee on a legal costs award unless the lawyer and client jointly ask the judge for approval, satisfying the judge that the litigation was one of exceptional circumstances, which justify the payment.
The case revolved around paragraph 16 of Almalki’s contingency fee agreement, which stated that any award for legal costs be included in the contingency fee amount and, as required under s. 28.1 of the act, if requested by their lawyers, the clients agree to jointly apply to get the judge’s approval.
Almalki argued that Stockwoods should not have proceeded by way of motion to seek approval for the contingency fee agreement and rather should have commenced a new proceeding by way of application. The court rejected Almalki’s argument.
Almalki also asked the judge to determine whether paragraph 16 of the contingency agreement is enforceable, argued he was wrongly denied the opportunity to make submissions regarding the existence of exceptional circumstances and proposed that the lower court was wrong in finding that those exceptional circumstances existed.
The Court of Appeal, however, found Almalki’s reading of paragraph 16 “untenable.”
Steven Rastin, managing partner of Rastin & Associates in Barrie, Ont., says suing the federal government for extra-territorial conduct, with the kind of resources and teams of lawyers they can summon to fight a case, sounds like it is probably high-risk litigation and a good candidate for exceptional circumstances.
“Had these guys gone to 50 law firms, back when this case started, I bet you 47 of them would have refused to take the case,” Rastin says.
The Court of Appeal found that the motion judge had properly considered the factors indicating this litigation was that of exceptional circumstances.
There was factual and legal complexity, it put Stockwoods at “substantial financial risk,” took several years, had significant importance to the public and Stockwoods spent “immense resources” to achieve a “very good result.”
Stockwoods had advised its client Almalki to seek independent legal advice before signing the fee agreement, which he did.
Darcy Merkur, a personal injury lawyer and partner at Thomson Rogers in Toronto, says the ruling counters the growing assumption that contingency fees are easy profit for personal injury lawyers.
“The Court of Appeal makes it very clear that contingency fee work has its challenges,” he says.
“There has been a growing philosophy that personal injury lawyers profit regularly by way of contingency fee agreements. And while that is often true, the opposite proves to be true quite often as well. And a lot of these cases do not turn out to be profitable, especially ones that go to the doorsteps of trial or beyond.”
Peter I. Waldmann, who acted for the attorney general of Canada, and J. Thomas Curry, who acted for Stockwoods, declined to provide comment.