Executive Summary: Key Legal and Evidentiary Issues

• Stevens & Company Law Corporation appealed a Federal Court decision that approved contingency fees of 3%, lower than the 5% (and 4% in one case) the appellant had sought for representing 33 Indian Day Schools claimants.

• Rule 334.4 of the Federal Courts Rules empowers the Federal Court to review fee arrangements in class proceedings to ensure fairness, transparency, and reasonableness.

• The motion judge determined the appellant bore much reduced risks compared to counsel with full carriage of a class proceeding, as the settlement agreement with the Government of Canada had already been negotiated.

• Deficient dockets prepared by the appellant made it difficult—if not impossible—to determine the amount of work done on behalf of each client and whether that work was performed by a lawyer or an administrative staff member.

• A discretionary decision is entitled to substantial deference on appeal.

• The Federal Court of Appeal found no reviewable error and dismissed the appeal; as no costs were sought, none were awarded.

Background of the Indian Day Schools settlement

This case arises from a settlement agreement between the Government of Canada and former students at Indian Day Schools, approved by the Federal Court in 2019. Under the Settlement Approval Order, class members were entitled to free legal services from class counsel to file their individual claims. However, class members could also retain different counsel, such as the appellant, at their own expense, which is the path taken by the 33 individuals represented by Stevens & Company Law Corporation.

The fee dispute at the Federal Court

Stevens & Company Law Corporation sought approval under Rule 334.4 of the contingency fees negotiated with their clients—5% for each client in all but one case, where they requested 4%. Under Rule 334.4 of the Federal Courts Rules, counsel fees for individual claims were subject to approval to ensure their fairness, transparency, and reasonableness. Justice Grammond of the Federal Court was unable to conclude that 5% was "fair and reasonable" in the circumstances and, exercising his discretion under Rule 334.4, determined that 3% was.

The motion judge's reasoning

The Federal Court found that the appellant bore much reduced risks compared to counsel with full carriage of a class proceeding, as the settlement agreement with the Government of Canada had already been negotiated. Additionally, the motion judge noted that the deficient dockets prepared by the appellant made it difficult—if not impossible—to determine the amount of work done on behalf of each client and whether that work was performed by a lawyer or an administrative staff member. Given this uncertainty, it was appropriate for the motion judge to exercise his discretion and depart from the contracted fee percentage, substituting a fee which he determined was fair and reasonable to the clients.

Arguments on appeal

Before the Federal Court of Appeal, Stevens & Company submitted that the motion judge erred in principle by departing from the typical approach used to calculate contingency fees in class proceedings, by disregarding the terms of the fee arrangements made with their clients, and by failing to consider factors relevant to a fee assessment. The appellant also submitted that the motion judge erred by applying excessive scrutiny to the appellant's records.

The appellate decision

The Federal Court of Appeal rejected these arguments, finding that the motion judge was well aware of the context and properly exercised discretion under Rule 334.4. The Court noted that a 3% contingency fee was considered to be "fair and reasonable" for class counsel that had complete responsibility for the case in the Indian Day Schools proceeding—making it appropriate to apply the same rate to counsel with a more limited role. The Court found no reviewable error in the Federal Court's Decision, which, at the end of the day, was a discretionary one. The appeal was dismissed, and as no costs were sought, none were awarded.