Executive Summary: Key Legal and Evidentiary Issues

• Scope and interpretation of a 30% contingency fee agreement and whether it covered both Superior Court and Court of Appeal work.
• Proof (or absence) of a new agreement for hourly billing on appeal, including the evidentiary value of invoices, emails, and the client’s financial situation.
• Weight given to testimony from the client and the former stagiaire regarding the parties’ understanding of the contingency arrangement.
• Allocation of the $59,994 paid by the bank between the lawyer’s fees, the client’s share, and the amount awarded to a dissolved corporation.
• Application of federal corporate law on undistributed assets of a dissolved corporation and whether the individual shareholder can claim those funds.
• Threshold for abuse of process and whether the lawyer’s second action for fees, after a first file was dismissed for delay, amounted to an abusive proceeding.

Factual background and underlying banking dispute
In 2013, Hossein Pourshafiey retained lawyer Me Alan M. Stein to represent him and his company, 4291921 Canada Inc., in a dispute against the Toronto-Dominion Bank. The company was wholly owned and administered by Pourshafiey. The litigation arose after the bank decided to close all of Pourshafiey’s personal and business accounts, leaving him in a precarious financial position. At the outset, Stein billed on an hourly basis and issued an interim account dated 20 November 2013. Pourshafiey paid $5,000 but then indicated, given his financial difficulties, that he could not continue on a traditional hourly-fee structure.
To address this, on 22 September 2014 the parties executed what became central in this later dispute: a contingency fee agreement providing that, in addition to the $5,000 already paid, Stein would receive “a contingency fee of 30% on any amount in capital and interest obtained through a final judgment, settlement and/or arbitration in the present matter.” The letter referred in its heading to the Superior Court file number for the action against TD Bank, but the text spoke more broadly of any amount obtained in the “present matter.”

Outcome of the Superior Court proceedings and appeal against the bank
On 20 July 2018, the Superior Court partly upheld the claim of Pourshafiey and his company against TD Bank. The court ordered the bank to pay three categories of amounts: a sum to the corporation, a sum to Pourshafiey personally, and reimbursement of extrajudicial legal fees. The reimbursed legal fees were calculated based on the 30% contingency agreement that had been filed in evidence. Shortly thereafter, on 27 August 2018, TD Bank appealed to the Court of Appeal. Stein continued to act and prepared the appeal record, including filing an incidental (cross-)appeal seeking, among other relief, punitive damages and additional extrajudicial fees incurred in the appeal.
During the appeal, the bank’s lawyers sent an initial payment of $29,105.75 in May 2019 into Stein’s trust account, representing the Superior Court’s award of extrajudicial fees plus interest, but expressly “under reserve” pending the outcome of the appeal. Later, following the Court of Appeal judgment, additional sums were remitted, bringing total payments from the bank to Stein to $59,994, all directed to his trust account.

Court of Appeal decision and its impact on fees
On 25 November 2020, the Court of Appeal partly allowed the bank’s appeal. It reduced the damages awarded to Pourshafiey and, crucially for the later fee dispute, set aside the Superior Court’s order reimbursing extrajudicial legal fees. As a result, the statutory/indemnity basis for TD Bank’s payment of Stein’s fees disappeared, but Stein continued to hold the $59,994 that had been paid. In time, he transferred the full amount from his trust account to his general account, despite the emerging disagreement with his client about entitlement to those funds.

The fee dispute between lawyer and client
The current case arises from Stein’s attempt to recover what he claimed were unpaid fees for his work in the Court of Appeal. Stein’s position was that the 2014 contingency agreement applied only to the Superior Court proceedings. According to him, once the Superior Court judgment was rendered, the contingency agreement was spent, and a new arrangement had come into effect for the appeal: he alleged that appeal work would be billed at an hourly rate (he invoked a rate of $600 per hour) and that his trainee, Me Patrycja Nowakowska, would also bill on an hourly basis.
Stein relied principally on a March 11, 2019 interim invoice for $10,000 relating to the appeal, sent with an email in which he pressed Pourshafiey for payment “on account” of appeal work and referred to the need to review the voluminous appellant’s brief and prepare their own factum and authorities. He argued that this invoice, combined with the absence of any protest from Pourshafiey, demonstrated either an agreement to hourly billing on appeal or at least the client’s knowledge and tacit acceptance of the new billing structure. He further pointed to the fact that, in the appeal proceedings, he filed detailed hourly-based invoices (for himself and for Nowakowska) in support of the incidental appeal’s claim for reimbursement of extrajudicial fees, rather than re-filing the contingency agreement.
On the other side, Pourshafiey admitted that Stein was entitled to 30% of the final amount awarded by the Court of Appeal, but he denied any agreement that would convert appeal work into an hourly-fee mandate. He maintained that the 2014 contingency agreement continued to govern the entire litigation, including the appeal. He also filed a counterclaim seeking repayment of all sums that Stein had received from the bank in excess of the 30% fee to which Stein was entitled under the contingency deal, and an additional $10,000 in damages for alleged abuse of process.

Evidence on the scope of the contingency agreement
The Court of Québec placed substantial emphasis on contract interpretation principles and on the factual matrix surrounding the fee agreement. It noted that in 2014 only the Superior Court file existed, so the caption on Stein’s letter naturally referred to that court file. However, the body of the agreement spoke in broader terms of “any amount … obtained through a final judgment, settlement and/or arbitration in the present matter.” The judge interpreted “final judgment” in light of Quebec procedural law and doctrine as a decision that is final in the sense of res judicata—i.e., passed in force of res judicata—which can include a judgment rendered on appeal.
From this, and from the absence of any separate, clear agreement specifically for the appeal, the court found that the contingency agreement was meant to cover the entire dispute against the bank, including appellate stages. The court stressed that, under the Civil Code of Québec and the Code of Professional Conduct for lawyers, a service provider must inform the client of the nature of the work and of the financial terms before conclusion of the contract, and that a lawyer must ensure the client is fully informed of the financial modalities and must obtain the client’s agreement. There was no contemporaneous communication at the time the appeal was launched in August 2018 that clearly informed Pourshafiey that the fee structure was changing from a contingency model to hourly billing.

Role of the interim invoice and the appeal invoices
The court examined in detail the March 11, 2019 interim invoice for $10,000 and the accompanying email. It acknowledged that Stein asked for an interim payment, but observed that: (a) this demand came more than seven months after the appeal was filed; (b) no follow-up was made when the invoice went unpaid; and (c) two months later, Stein received $29,105.75 from the bank for extrajudicial fees, undermining the idea that urgent payment from the client was essential.
Moreover, the judge found that Stein’s explanation—that he did not follow up because any effort would have been futile given the client’s financial distress—was less convincing than the alternative explanation that the subsequent bank payment rendered collection from the client unnecessary in Stein’s own mind. Critically, Stein did not include this interim invoice in the three invoices he later filed in support of his court action for unpaid fees, even though his theory depended on it. That omission further weakened its evidentiary weight.
The court also accepted evidence from both Pourshafiey and Nowakowska that the hourly invoices for appeal work were primarily created to support the incidental appeal’s claim against the bank for reimbursement of extrajudicial fees, not with a genuine intention to demand payment from the client. The fact that these invoices were filed in the Court of Appeal but not sent to the client for payment during the life of the appeal reinforced the conclusion that they did not reflect a negotiated shift in fee structure.

Testimony of Me Patrycja Nowakowska and its impact
Nowakowska’s testimony was particularly influential. She had completed a non-remunerated bar school internship with Stein starting in November 2018 and spent a substantial portion of her time working on the appeal: conducting research and drafting the factum. She testified that Stein frequently referred to the 30% contingency agreement and to the client’s fragile financial situation. According to her, the invoices were drawn up to be filed with the Court of Appeal in support of the incidental appeal and not as true billing instruments meant to be enforced against the client.
When she later left Stein’s office, Pourshafiey asked her to remain involved in the appeal given her deep familiarity with the file. Stein then told her that the 30% contingency would not be enough to cover both lawyers’ fees and that she would need to conclude a separate fee agreement with the client. On 16 August 2019, she entered into a written agreement with Pourshafiey under which she would effectively waive her fees if the appeal were unsuccessful. Following the Court of Appeal’s decision, she indeed received no payment.
An internal email Stein sent to Nowakowska in July 2020 about another file also became key evidence. In that message, he expressly referred to the Pourshafiey case and explained that he did not want misunderstandings about fees “in the event that the Court does not order the Bank to pay our fees or in the event that the appeal is maintained,” adding that “it has always been understood … that we were both representing the clients on a contingency basis.” The Court rejected Stein’s attempt to limit this reference to earlier stages or to another file: the message specifically mentioned the bank and the Pourshafiey case, and Nowakowska had only been involved at the appeal stage. The court accordingly read this as an admission that the entire representation, including appeal work, was on a contingency basis.

Corporate law issues and the dissolved company’s share
A significant secondary issue concerned the portion of the $59,994 paid by TD Bank that corresponded to the corporate plaintiff, 4291921 Canada Inc. Of the total, $22,497.77 related to the amount awarded to the corporation by the Superior Court, which the Court of Appeal did not modify. The remaining $37,496.23 corresponded to the personal award in favour of Pourshafiey.
However, by the time of this fee dispute, the corporation had been struck off and dissolved for non-compliance under the Canada Business Corporations Act (CBCA). The Court of Québec underscored settled corporate law principles: a corporation has a legal personality distinct from its shareholders; the right of action belongs to the corporation itself; and a shareholder cannot sue in his own name to recover what is owed to the corporation or to claim damages that are properly corporate.
Relying on CBCA provisions, the court held that any property of the dissolved corporation that was not distributed prior to dissolution becomes, by operation of law, property of the Crown in right of Canada. The statute does not provide for an automatic devolution to the shareholder. Consequently, neither Pourshafiey nor Stein had any legal right to retain the $22,497.77 that belonged to the corporation. That amount was, in law, vested in the federal Crown, subject to the possibility that Pourshafiey might later seek to revive the company and pursue restitution, within the applicable limitation periods. For the purpose of this judgment, the corporate portion was therefore carved out of the funds to be redistributed between Stein and the client.

Abuse of procedure allegation
In his counterclaim, Pourshafiey sought $10,000 in damages for abuse of process. He pointed out that Stein had previously launched an action against him on essentially the same basis, claiming appeal-related fees on the theory that the contingency agreement applied only to the first-instance proceedings. That earlier action had been dismissed by the Court of Québec in June 2023 because Stein was deemed to have discontinued by failing to set the case down for hearing within the strict six-month delay; no judgment had been rendered on the merits. Stein then filed the present action in August 2023.
The court reviewed the high threshold for abuse: it must avoid trivializing the concept of abusive procedure or unduly hindering access to justice. A fragile or ultimately unsuccessful legal thesis is not, by itself, abusive; abuse presupposes conduct such as bad faith, intent to cause harm, or manifestly unfounded, excessive, or dilatory proceedings. While the judge found Stein’s theory of a distinct hourly-fee agreement for the appeal “fragile,” she concluded that bringing a fresh action after a purely procedural dismissal, in a context where prescription had not expired, did not amount to an abuse of his right to sue. The claim for $10,000 in abuse-of-process damages was therefore rejected, and the proceedings were not branded abusive.

Determination of the amounts owed between Stein and Pourshafiey
Having determined that the 30% contingency agreement governed the entire dispute against TD Bank, including the appeal, the court next calculated the sums Stein could legitimately retain. It accepted that TD Bank had paid a total of $59,994 into Stein’s trust account over time, tied to the underlying litigation. Under the contingency agreement, Stein was entitled to 30% of the total amount recovered from the bank under the final judgment, plus applicable taxes. This worked out to $20,693.42 in extrajudicial fees.
The judge noted that Stein had already transferred all $59,994 out of his trust account into his operating account, despite the ongoing controversy. The court therefore formally authorized Stein to keep $20,693.42 as his extrajudicial fees for the entirety of his work, both in the Superior Court and in the Court of Appeal. The remainder of the bank’s payments—$39,300.57—had to be allocated between what the dissolved corporation was entitled to (but which had devolved to the Crown) and what was payable to Pourshafiey personally.
From the $39,300.57, the corporate share of $22,497.77 corresponding to the company’s unchanged award was subtracted, leaving $16,802.80 attributable to the personal award in favour of Pourshafiey. This was the amount that, on a proper application of the contingency agreement and corporate law principles, should have been remitted to him.

Final ruling, successful party, and monetary outcome
In the end, the Court of Québec partly granted Stein’s principal action and partly granted Pourshafiey’s counterclaim. It recognized Stein’s right to retain $20,693.42 as his global extrajudicial fees for the full course of the litigation against TD Bank, but it rejected his attempt to recover additional hourly-based fees for the appeal. Simultaneously, the court ordered Stein to pay Pourshafiey $16,802.80, representing the portion of the bank’s payment that rightly belonged to him personally once the 30% contingency fee and the dissolved corporation’s share were taken into account. Interest at the legal rate and the additional indemnity under article 1619 of the Civil Code of Québec were awarded from 25 November 2020, the date of the Court of Appeal judgment, but the exact monetary value of interest, indemnity, and costs cannot be determined from the judgment itself. Costs of the present proceedings were awarded in favour of Pourshafiey, who therefore emerged as the successful party overall, obtaining a net condemnation against his former lawyer in the amount of $16,802.80 plus interest, additional indemnity, and court costs, while Stein’s entitlement was confined to his 30% contingency fee.