Federal Court Decisions

 

                                                                                           

 

 

Date: 20060406

 

Docket: T-2728-96

 

Citation: 2006 FC 446

 

BETWEEN:

 

ROBERT CHÂTEAUNEUF, personally and in his capacity as representative of all the natural persons, employees of the Singer company, who are registered in group pension contract G-522 and who on December 12, 1966 or after have acquired and retained the right to receive from the Pensions Branch of the Canadian federal government an annuity consisting of their contributions and those of their employer, and any beneficiaries who may have succeeded to the said natural persons on account of their death.

 

Plaintiff

 

and

 

HER MAJESTY THE QUEEN

 

Defendant

 

 

 

REASONS FOR ORDER

 

 

TREMBLAY-LAMER J.:

 

 

[1]        This is a motion for approval of the fees agreement reached between the representative of the group and his attorneys in the context of a class action under rule 4 and rule 299.42 of the Federal Court Rules, 1998, SOR/98-106 (the Rules), sections 30, 32 and 37.1 of the Act respecting the Class Action, R.S.Q., c. R-2.1, and sections 63 and 65 of the Rules of practice of the Superior Court of Québec in civil matters, R.R.Q., c. 25, r.8.

 

[2]        Since November 21, 2002, rules 299.1 to 299.42, establish a comprehensive scheme governing class actions. But there are no transitional provisions governing actions commenced prior to the new scheme. According to Brian J. Saunders et al., Federal Courts Practice (Toronto: Thomson Carswell, 2006), at page 666, however, these actions will as a general rule be governed by the new scheme.

 

[3]        With respect to agreements pertaining to extrajudicial fees that are reached between the representative and his or her counsel, rule 299.18(1)(e)(iv) provides that when the action is being certified as a class action, the representative plaintiff shall provide to the judge certifying the action a summary of any agreements respecting fees and disbursements between the representative and the representative's solicitor. However, at the time when the present action was commenced, no such condition existed.

 

[4]        It is important to note that although there is a fees agreement between the representative and his counsel, the payments are not automatic. Rule 299.42 provides that no payments, including indirect payments, shall be made to a solicitor from the proceeds recovered in a class action unless they are approved by a judge. Furthermore, as a general rule no costs may be awarded to any party at any stage of the proceeding (rule 299.41(1)).

 

[5]        However, the Rules, and previous judgments of this Court, are silent concerning the appropriate factors for consideration on a motion for approval of a fees agreement. This being the case, I think it is useful to conduct a short review of the precedents in various jurisdictions.

 

Applicable test in Quebec

[6]        In Quebec, in relation to a fees agreement between the representative plaintiff and his or her counsel, and provided the representative has been deemed qualified to represent the group, the Court is loath to exercise its discretion and confines itself to approving the fees agreement unless it considers it unreasonable: Nault v. Jarmark (1985), R.D.J. 180 (Q.S.C.).

 

[7]        Comartin v. Bordet, Quebec S.C., No. 500-06-000002-838, August 23, 1984, sets out the guiding principle that has been adopted in assessing whether or not a fees agreement is reasonable. Mr. Justice Greenberg adopted the tests of time and effort devoted to the case in preference to the test of a fixed percentage of the amount of the claim or the sums recovered for the benefit of the group members (see, likewise, Page v. Canada (Attorney General), [2000] J.Q. No. 3020 (Q.S.C.)).

 

[8]        The factors listed in the Code of ethics of advocates, R.R.Q. 1981, c. B-1, r.1, are also used to guide the Court in the determination of the reasonableness of the fees agreement:

 

Applicable test in Ontario

[9]        Class actions were instituted in this province in 1992, in the wake of a report by the Ontario Law Reform Commission that emphasized the importance of providing adequate financial incentives to encourage lawyers to accept the inherent risks in such proceedings, which facilitate access to justice of persons lacking the resources to engage in large-scale proceedings on their own.

 

[10]      The system adopted in Ontario is covered in subsection 33(7) of the Class Proceedings Act, 1992, S.O. 1992, c. 6. On the motion of a solicitor who has entered into an agreement, the court shall determine the amount of the solicitor's base fee. The base fee is calculated by multiplying the hours worked by the solicitor’s usual hourly rate, to which the court may add an additional fee, calculated by multiplying the base fee by a multiplier to reflect the risks incurred by the solicitor. The case law recognizes that a multiplier of between 1.5 and 3.5 is appropriate: Rachel Mulheron, The Class Action in Common Law Legal Systems: A Comparative Perspective (Oxford: Hart Publishing, 2004), at page 474. Finally, the court determines the amount of disbursements to which the solicitor is entitled, including interest calculated on the disbursements incurred, as totalled at the end of each six-month period following the date of the agreement.

 

[11]      Subsection 33(8) provides that the base fee must be reasonable. The Ontario courts have laid down tests for assessing the reasonableness of the base fee, which are appreciably similar to those in Quebec:

(a)  the factual and legal complexities of the matters dealt with;

(b)  the risk undertaken, including the risk that the matter might not be certified;

(c)  the degree of responsibility assumed by class counsel;

(d)  the monetary value of the matters in issue;

(e)  the importance of the matter to the class;

(f)  the degree of skill and competence demonstrated by class counsel;

(g)  the results achieved;

(h)  the ability of the class to pay;

(i)  the expectations of the class as to the amount of the fees; and

(j)  the opportunity cost to class counsel in the expenditure of time in pursuit of the litigation and settlement.

 

(See: Vitapharm Canada Ltd. v. F. Hoffmann-La Roche Ltd, [2005] O.J. No. 1117 (Ont. S.C.) (QL) at para. 67; Windisman v. Toronto College Park Ltd., [1996] O.J. No. 2897 (Ct. J. (Gen. Div.) (QL) at para. 8)

 

Applicable test in British Columbia

[12]      Subsection 38(2) of the Class Proceedings Act, R.S.B.C. 1996, c. 50 provides that a fees agreement must be approved by the court.

 

[13]      As in the other jurisdictions, British Columbia’s courts have developed tests for determining whether fees are reasonable. These are similar to those laid down by the courts in Ontario and Quebec (Cardozo v. Becton, Dickinson and Co., [2005] B.C.J. No. 2683 (S.C.). However, in Endean v. Canadian Red Cross Society (2000), 78 B.C.L.R. (3d) 28 (S.C.), the British Columbia Supreme Court rejected the use of the base fee/multiplier, holding that this approach was undesirable mainly because of its insufficient objectivity, the possibility of abuse by counsel who might bill excessive, unjustified hours or increase their normal rate, and the lack of predictability in its application.

 

The Federal Court

[14]      It is clear that the Federal Court may approve a fees agreement only if it is satisfied that the agreement is reasonable in light of the circumstances and the efforts devoted to the case. The tests adopted in the other jurisdictions are fully applicable to guide us in making this determination. These tests do not constitute an exhaustive list, but serve as examples. Each case is sui generis and must be analyzed in light of the particular facts and circumstances.

 

[15]      I will now turn, in succession, to the factors that are relevant in the circumstances of this case.

 

1.         Experience of counsel

[16]      The representative’s counsel have been pension plan specialists since 1988 and are well versed in class actions. They argued the first class action against Singer and won. They have argued successfully in numerous pension plan cases, many of them in the form of class actions. I am satisfied that the positive outcome obtained is due in large part to the competence of these counsel.

 

2.         Time devoted to the matter

[17]      As of December 31, 2005, the representative’s counsel had docketed 1,620 hours of work since January 1, 2000, to which they added 200 hours for work to come after December 31, 2005. The representative’s counsel argue that the number of hours devoted to the case is explained by the following facts: the case involves new law, since there are no documented cases involving the Canadian Government Annuities; the moving party’s counsel had to examine hundreds of exhibits that the Government Annuities filed, most of which were photocopies of carbon copies that had to be “deciphered”; the case was relatively complex both legally and technically; the representative’s counsel prepared the trial almost completely in 2005, negotiated the settlement and prepared the relevant documents including the motions for approval.

 

[18]      Having examined the summary of the total work performed in this case by the representative’s counsel over about ten years, I am satisfied that the number of hours devoted to the case is reasonable in the circumstances.

 

3.         Counsel’s present fees and charges

[19]      Given the figure of 1,820 total hours of work at an average rate of $225/hour, the fees of the representative’s counsel would amount to $409,500. But the fees agreement provides for fees and disbursements of $350,000. Since the disbursements amount to $17,000, that leaves $333,000, which represents 81% of the fees actually logged in the case. I note as well that counsel received no bonus for the risk incurred or for financing the action that they had assumed for ten years.

 

4.         Difficulty of the question involved

[20]      The representative’s counsel argue that although the facts go back as far as 1947, they involve new law since there is no documented case involving the Canadian Government Annuities. Furthermore, the operations of the Government Annuities are almost completely unknown in the Quebec legal community since the Government Annuities stopped issuing new group annuities policies around 1970. Finally, the case was complex both legally and technically. Legally, in addition to the difficulties concerning the limitation period, it was necessary to determine the scope of the articulation between provincial and federal law in the application of the Annuities Act. And it was necessary to interpret this act and the regulations thereunder, which is not easy given that they refer to a reality that no longer exists. Technically, it was necessary to understand the procedure by which group policies under the Government Annuities operated, without the benefit of technical works, legal authorities or case law on the subject. There were also some difficulties in terms of witnesses — deceased, “disappeared” or unable to testify.

 

5.         Importance of the matter

[21]      For the representative, Mr. Châteauneuf, it was of great importance. Following the company’s closure in 1986, he set himself the objective of restoring justice in the context of the Singer company’s pension plan for the benefit of his former coworkers. After succeeding on an initial class action in respect of the funded pension plan in force in the Singer company from 1964 to 1986, he commenced this class action.

 

[22]      For the members, the importance of the case pertains mainly to the benefit they will derive from the settlement reached between the parties. The group includes 342 members, about 60 of whom are still alive and will automatically receive a share. About 280 are deceased and their successors will have to come forward in order to receive a share. Since the settlement is confidential, the potential share of each individual cannot be disclosed. It suffices to say that the amount is not insignificant in comparison with the members’ current annual pension.

 

6.         Result obtained

[23]      In the decision approving the settlement, I found that the proposed settlement was reasonable and equitable given the risks of a trial, the difficulties raised, the uncertainty of the result and the quantum that was sought. I note as well that the mode of distribution among the members of the group is simple and will allow them quick recovery. Another indicator of success is that there will be nothing left over in this case since the total amount provided for the eligible members will be distributed to them in full.

 

7.         Responsibility assumed by the representative’s counsel

[24]      This factor concerns only the financial risk assumed by the representative’s counsel. They argue that in this regard this case must be divided into two stages. The first concerns the years 1996 to 2000, the second the years 2000 to 2006.

 

[25]      For the first stage, the representative’s counsel assumed 100% of the financial risk in respect of both their fees and disbursements and the funding of the case. In fact, at the time the Fonds d’aide aux recours collectifs was not allowed, under its enabling legislation, to assist the funding of class actions in the Federal Court. This meant that had the action failed, the representative’s counsel would have lost the fees invested, the disbursements incurred and the interest lost on the fees not received during this period. According to the plaintiff’s thesis, the limitation period ended on December 31, 1996. Had the representative’s counsel not agreed to handle this case in these conditions, the action would never have been commenced and the group members would have obtained nothing at all.

 

[26]      As a result of representations made to Quebec’s Ministère de la Justice, the representative’s counsel obtained some amendments to the Quebec Act respecting the class action so that, from 2000 on, the representative was able to obtain financial assistance, and this reduced some of the risk.

 

[27]      For the second period, the Fonds d’aide aux recours collectifs authorized total assistance to the representative of $87,750 for his counsel’ fees and their professional disbursements. Since the total amount of the counsel’ fees and disbursements is $409,600, the fees corresponding to the 450 hours worked (for the first period), or $101,250, must be subtracted from this amount, which leaves fees and disbursements of $308,250 for the second period. Because the Fonds d’aide authorized $87,750 in assistance, the Fonds assumed a 28.5% share in the risk. The representative’s counsel continued to bear 71.5% of the risk. If the $101,250 for the first period is added to the $220,500 for the second period, the total amount is $321,750, a substantial financial risk for the representative’s counsel, who will receive no bonus for the financing of the action that they assumed for ten years.

 

8.         Risk undertaken

[28]      In this case the counsel assumed a high risk, as the matter involves new law, there being no documented cases on Government Annuities group policies. As I stated in the reasons for decision approving the settlement, the probabilities of success in the litigation were modest, and entailed a relatively large risk. Moreover, there was a risk in terms of the trial since there were no longer many witnesses owing to the time elapsed and the advanced age of the participants. I have no hesitation in concluding that the result of this action was uncertain and the risk was high.

 

11.       Fees in similar cases

[29]      The British Columbia Supreme Court held that 20% was consistent with the percentage allowed in a number of decisions where they ranged from 10% to 33%, and that this represented a reasonable figure. The Quebec and Ontario courts have reached similar conclusions (see Doyer v. Dow Corning Corp., [1999] Q.J. No. 6203 (S.C.) at para. 14).

 

[30]      In class actions, fees agreements are reached between the representative and the counsel chosen by that particular representative. For this reason, the Court’s approval is important and necessary to protect the other members of the group who did not negotiate the agreement and to ensure that the fees correspond to the services rendered, taking into account the particular circumstances of the case. It is necessary to avoid a situation in which the representative’s counsel are unduly enriched to the detriment of the group’s members.

 

Conclusion

[31]      Notwithstanding the fact that the fees in this case represent a high percentage in comparison to the amount of the settlement, I am satisfied that the fees agreement is reasonable, taking into account the work performed by the representative’s counsel, the fact that these counsel assumed the financial risk in the case almost totally for about ten years and that their work was appreciably successful given the uncertainty of the result at trial. It constitutes an adequate financial incentive that allowed access to justice for a group of persons who did not have the resources to undertake an action of this scope. This is not in any way a situation in which the representative’s counsel are being unduly enriched to the detriment of the members of the group.

 

[32]      In view of the foregoing, on March 30, 2006, the Court allowed the motion and approved the extrajudicial fees agreement RC-1 reached between the representative of the group and his counsel.

 

“Danièle Tremblay-Lamer”

___________________________________

Judge

 

 

Ottawa, Ontario

April 6, 2006.

 

 

Certified true translation

Monica F. Chamberlain

 

FEDERAL COURT

 

SOLICITORS OF RECORD

 

 

DOCKET:                                                       T-2728-96      

 

STYLE:                                                           ROBERT CHÂTEAUNEUF

                                                                        v. HER MAJESTY THE QUEEN

 

 

PLACE OF HEARING:                                 Montréal, Quebec

 

DATE OF HEARING:                                   March 30, 2006

 

REASONS FOR ORDER:                           Tremblay-Lamer J.                  

 

DATE OF REASONS:                                   April 6, 2006               

 

 

APPEARANCES:

 

Marcel Rivest

Guy Desautels                                                                          FOR THE PLAINTIFF

 

Carole Bureau

Linda Mercier                                                                           FOR THE DEFENDANT

 

 

SOLICITORS OF RECORD:

 

RIVEST SCHMIDT

Montréal, Quebec                                                                    FOR THE PLAINTIFF

 

John H. Sims, Q.C.

Deputy Attorney General of Canada

Montréal, Quebec                                                                    FOR THE DEFENDANT