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:
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3.08.02.
The fees are fair and reasonable if they are warranted by the circumstances
and correspond to the professional services rendered. In determining his
fees, the advocate must in particular take the following factors into
account:
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3.08.02.
Les honoraires sont justes et raisonnables s’ils sont justifiés par les
circonstances et proportionnés aux services professionnels rendus. L’avocat
doit notamment tenir compte des facteurs suivants pour la fixation de ses
honoraires :
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(a)
experience;
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a) l’expérience;
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(b)
the time devoted to the matter;
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b) le temps consacré à l’affaire;
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(c)
the difficulty of the question involved;
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c) la difficulté du problème soumis;
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(d)
the importance of the matter;
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d) l’importance de l’affaire;
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(e)
the responsibility assumed;
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e) la responsabilité assumée;
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(f)
the performance of unusual professional services or professional services
requiring exceptional competence or celerity;
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f) la prestation de services professionnels inhabituels ou
exigeant une compétence ou une célérité exceptionnelles;
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(g)
the result obtained;
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g) le résultat obtenu;
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(h) the judicial and
extrajudicial fees fixed in the tariffs.
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h) les honoraires judiciaires et extrajudiciaires prévus aux tarifs.
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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
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