Ruling notes regulations for such agreements are a form of consumer protection legislation
In proceedings arising from a medical malpractice claim, the Ontario Court of Appeal has dismissed a law firm’s appeal upon finding no error in a motion judge’s determination that a contingency fee agreement was unfair during its making in 2018.
In Leduc v. Dufour, 2026 ONCA 3, one of the respondents had a hypoxic ischemic brain injury during his birth at a hospital in November 2009. He received a cerebral palsy diagnosis in 2010.
His mother, another respondent in this case, wanted to bring a medical malpractice suit. In 2011, she hired a lawyer at the appellant law firm to investigate the claim.
During the investigation phase, the lawyer gathered records from the hospital and elsewhere and retained multiple experts to offer opinions on the medical negligence and causation issues.
After the investigation, the lawyer and the mother executed a contingency fee agreement in August 2015 (2015 CFA) and another in May 2018 (2018 CFA).
Under both CFAs, the law firm would get a third of the compensation, including interest and excluding costs and disbursements, from the injured party’s claim if it settled before trial. Without recovery, fees or disbursements were not chargeable.
Under the 2018 CFA, if the law firm had to prepare for or conduct a trial, it could charge 25 percent of the settlement or judgment, plus a prescribed hourly rate for trial preparation and trial time, disbursements, and harmonized sales tax (HST).
After the 2015 CFA’s signing, the lawyer brought an action against the attending obstetrician, the hospital, and the nursing staff.
Examinations for discovery concluded in 2018. The lawyer started obtaining expert reports on the damages issue.
The nursing defendants sought testing to address whether the injured party’s cerebral palsy had a genetic cause, which was later ruled out. Their service of an expert report, which suggested that meconium-induced vascular necrosis caused the injuries, led to the postponement of a mediation set for November 2020.
In 2021, after additional testing, the parties delivered competing expert reports. Following an unsuccessful mediation and two judicial pre-trials, an eight-week trial began in September 2023.
In January 2023, the action settled for $14 million, all inclusive. In February 2023, on the respondents’ behalf, the law firm moved for the approval of the settlement and the fee payable under the 2018 CFA, pursuant to r. 7 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
After deducting the defendants’ cost contribution and disbursements, the settlement’s damages portion was around $12.325 million. The law firm proposed a contingency fee, excluding HST, of approximately $4.108 million.
In December 2024, Justice M. Gregory Ellies of the Ontario Superior Court of Justice approved the overall settlement. However, he disallowed the proposed contingency fee and replaced it with a $3.25 million fee, plus HST and disbursements.
The judge found the 2018 CFA unfair at the time of its making and unreasonable at the time of the motion.
Unfairness finding upheld
The Court of Appeal for Ontario dismissed the appeal. First, the appeal court found that the motion judge did not err in determining that the 2018 CFA was unfair at the time of its making.
The appeal court found that the judge – consistently with the approach provided in Raphael Partners v. Lam, 2002 CanLII 45078 (ON CA) – focused on the circumstances surrounding the agreement’s making and the client’s full understanding and appreciation of the agreement’s nature.
The appeal court ruled that the judge’s conclusion that the mother was a vulnerable client had a firm basis in the evidence and had no reversible error. The appeal court held that the judge reasonably acknowledged:
- the nature of regulations governing CFAs as a form of consumer protection legislation
- the particular importance of complying with the governing legislation in this case, given the mother’s vulnerability
- the need for crucial information to address the lawyer-client imbalance and level the playing field between them
The appeal court noted that the judge considered relevant evidence and accepted the mother’s evidence that she believed that the 2018 CFA was a standard form agreement that needed no court approval.
Given its conclusion that the 2018 CFA was unfair at the time of its making, the appeal court deemed it unnecessary to consider whether the judge erred in finding the 2018 CFA unreasonable at the time of the motion.
