Appeal arises from arbitration in business dispute, resulting in award of over $11.48 million
In a matter concerning unpaid legal fees arising from an arbitration award of over $11.48 million, the Court of Appeal for Ontario has ordered the client who prevailed during the arbitration to pay security for costs.
In this case, the respondent and his son were Mohawks of the Bay of Quinte and were subjects of the Indian Act, 1985. They had a family business dispute over the ownership and profits of an on-reserve business.
During the arbitration, the applicant represented the respondent under a retainer agreement. The respondent was awarded over $11.48 million and obtained full ownership of the business and the land on which it stood. The applicant was entitled to a 25-percent contingency fee.
Given that his son declared bankruptcy, the respondent has yet to recover the full amount of the substantial arbitration award. The bankruptcy trustee distributed a dividend under s. 147 of the Bankruptcy and Insolvency Act, 1985. The respondent, as his son’s largest creditor, received over $1.34 million.
The applicant, still unpaid for his services to the respondent during arbitration, took the case to court to recover over $2.87 million in legal fees.
The Ontario Superior Court of Justice granted summary judgment in the applicant’s favour. It ordered the respondent to pay the applicant over $2.85 million in outstanding legal fees after applying a set-off for a costs award.
The court noted that the respondent had not denied the applicant’s representation or the existence of the contingency fee agreement between them. The court found that the respondent put “every possible obstacle” in the way of the applicant’s efforts to collect his legal fees.
The respondent appealed the summary judgment. He alleged that he did not have to pay the applicant the contingency fee because he had not collected any money from the arbitration award.
The applicant filed a motion asking the court to order the respondent to pay security for costs. He also requested security for judgment in the amount of $1.5 million.
In Bogue v. Miracle, 2024 ONCA 643, the Ontario Court of Appeal ordered the respondent to pay the court security for costs in the amount of $115,026.90 to continue the appeal process. The appeal court found “other good reason” to order security for costs under r. 61.06(1)(c) of the Rules of Civil Procedure, RRO 1990, Reg 194.
The appeal court held that this litigation had been very expensive for the applicant. The respondent had been uncooperative in disclosing his off-reserve assets that could potentially satisfy a costs award, the appeal court noted. While some of the assets had been identified, they appeared to be heavily encumbered, the appeal court said.
However, the appeal court denied the applicant’s request for $1.5 million as security for judgment. The appeal court described this as an "extraordinary remedy" reserved for cases with exceptional circumstances and expressed concern that granting this remedy could violate s. 89 of the Indian Act, which protected on-reserve assets from seizure.
