Decision Overview
On October 31, 2024, the Ontario Superior Court released an important decision ordering the review by the Court of the $510 million contingency fee charged by the Robinson Huron Treaty Litigation Fund’s legal team following a negotiated settlement between Robinson Huron Treaty First Nations, Canada, and Ontario. This decision sets an important precedent that First Nations involved in litigation with a contingency fee structure are entitled to seek an assessment of these fees to not “erode the public confidence in the administration of justice.”
In the application brought before the Ontario Superior Court (the “Court”) in Nootchtai v Nahwegahbow Corbiere Genoodmagejig,[1] the Court was asked to determine whether the Chiefs and one Councillor from Atikameksheng Anishnawbek and Garden River First Nations (the “Applicants”) could seek an assessment of the $510 million contingency fee charged by the Robinson Huron Treaty Litigation Fund’s (“RHTLF” or the “Trust”) legal team.
In its decision, the Court found that it has jurisdiction to assess the legal fees because:
- the $10 billion settlement forms part of the Trust;
- the Applicants are beneficiaries of the Trust;
- the Applicants were authorized by their bands to bring the application; and
- as beneficiaries of the Trust, the Applicants are entitled to compel the Court under subsections 9(1) and (4) Solicitors Act to assess the legal fees.
The Court then determined that even if the Applicants could not compel the Court to assess the legal fees under the Solicitors Act, the Court should exercise its jurisdiction to assess the legal fees since no independent legal advice was provided to the First Nation beneficiaries before entering the contingency fee arrangement. Based on these conclusions, Justice Steele directed that the partial contingency fee agreement and the legal fees be assessed by the Court in a future hearing.
Background
The Decision pertains to legal fees charged by the Lawyer Respondents[2] to the RHTLF for the negotiation of a $10 billion settlement agreement (the “Settlement Proceeds”) and the underlying Robinson Huron Treaty action. The settlement agreement includes a Compensation Disbursement Arrangement that provides a formula for its distribution to each First Nation.
The RHTLF is a litigation trust created by 21 Lake Huron First Nations to pursue their collective rights under the Robinson Huron Treaty (the “Treaty”). When the RHTLF retained the Lawyer Respondents, they signed a Partial Contingency Fee Agreement. After the $10 billion partial settlement was reached between RHTLF, Canada, and Ontario, the Respondent Lawyers sought payment of $510 million in contingency fees (the “Legal Fees”), in addition to the legal fees and disbursements of $22.7 million for the legal work to date.
The Applicants are the Chiefs and one Councillor from Atikameksheng Anishnawbek and Garden River First Nations, two of the 21 Lake Huron First Nations. They asked the Court for a direction that the $510 million contingency fee can be assessed by the Court. The Litigation and Management Committee of the RHTLF (the “LMC”) also asked the Court for guidance on whether the Settlement Proceeds form part of the Trust.
Issues
The Court separated its analysis into four issues:
- Do the Settlement Proceeds form part of the Trust?
- Can Atikameksheng and Garden River First Nations bring this application?
- Can the Applicants compel an assessment of the Partial Contingency Agreement and Legal Fees under the Solicitors Act?
- If the Applicants can’t compel an assessment under the Act, should the Court exercise its inherent jurisdiction and direct an assessment[3]?
Analysis
1. Do the Settlement Proceeds form part of the Trust?
If the Settlement Proceeds were considered to form part of the Trust (i.e., fall under the term “Assets” in the RHTLF Trust Indenture), then the beneficiaries of the Trust (the 21 First Nations and those entitled to receive annuities under the Treaty) would have a beneficial interest in the Settlement Proceeds. Being a part of a trust and having a beneficial interest attaches certain rights and obligations under trust law, including duties of Trustees to:
- exercise care and prudence when dealing with the trust property
- treat all beneficiaries impartially
- act in the best interest of the beneficiaries
- account to the beneficiaries, meaning that beneficiaries are entitled to a detailed report on the administration of the trust.
The LMC’s position was that the Settlement Proceeds do not form part of the Trust and that the RHTLF is only obligated to distribute the proceeds in accordance with the Compensation Distribution Agreement, with no additional obligations under trust law.
The Court disagreed and found that the Settlement Proceeds are an Asset of the Trust because “any property held by the trustees in their capacity as trustees… is an Asset of the Trust.”[4]
2. Can Atikameksheng and Garden River First Nations bring this application?
The question as to whether Atikameksheng and Garden River First Nations were entitled to bring this application asks whether they have their respective band’s authority to do so. The Court found that in this case, the “duly elected Chiefs of Atikameksheng and Garden River have given sworn evidence that they have their respective band’s authority to commence this application on behalf of their First Nation.”[5] The Court said that how each First Nation ascertains the consent of the band is not for the Court to encroach on and that it is satisfied that “authorization was sought in conformity with the internal practices of the respective First Nations” band.[6] For that reason, Atikameksheng and Garden River First Nations were authorized to bring this application.
3. Can the Applicants compel an assessment of the Partial Contingency Agreement and Legal Fees under the Solicitors Act?
The Court found that sections 9(1) and 9(4) of the Solicitors Act allow the applicants to compel an assessment of the Legal Fees.
Section 9(1) of the Solicitors Act provides that where a “person, not being chargeable as the principal party, is liable to pay… a bill… to a solicitor… may apply to the court for an order referring to assessment.” The Court reasoned that it is the 21 First Nations, including Atikameksheng and Garden River, who must discharge any liabilities of the RHTLF such as any legal fees. Therefore, the Applicants can compel an assessment of the Legal Fees under section 9(1) of the Act.
Even if 9(1) did not apply, the Court found that the Applicants could apply under section 9(4) of the Solicitors Act to have the Legal Fees assessed. Section 9(4) of the Act provides that when “a person, other than the client, applies for an assessment of a bill… and it appears that by reason of the conduct of the client the applicant is precluded from assessing the bill… [the person] may… refer it for assessment.” The client in this case is RHTLF, which owes certain duties to the Applicants as beneficiaries including an “obligation to have their accounts (which would include payment of legal fees from the Trust assets) ready at any time and available upon request.”[7] Section 9(4) provides beneficiaries with a ‘gateway’ to have the Legal Fees reviewed when the trustees have not applied for an assessment, as it was in this case.
4. If the Applicants can’t compel an assessment under the Solicitors Act, should the Court exercise its inherent jurisdiction and direct an assessment anyways?
Having found that section 9 of the Act applies, the Court did not need to decide whether they would exercise their inherent jurisdiction and direct an assessment. The Court considered the issue anyways and found that it would have exercised its inherent jurisdiction to order an assessment of the Legal Fees.
The Court found that it would exercise its inherent jurisdiction and direct an assessment of the Lawyer Respondents’ accounts for the following reasons:
- The only legal opinion on the fairness and reasonableness of the Legal Fees has been provided by the Lawyer Respondents
- The Lawyer Respondents did not recommend that LMC or the RHTLF trustees obtain independent legal advice at any point, either when they were retained, when the Partial Contingency Fee Agreement was made, or when the Legal Fees were charged. [8]
The Court concluded that:
I am concerned that given the significant number of beneficiaries under the Trust who are impacted by… the RHTLF trustee decision to pay the sizable partial contingency fee without any independent legal advice on the reasonableness of the fee, failure to have the Legal Fees reviewed by the Court may erode the public confidence in the administration of justice. [9]
Key Takeaway
The Decision provides guidance to both First Nations and their legal teams when entering contingency fee arrangements. The Court went out of its way to say that the legal fees should be assessed by a Court because no independent legal opinion was provided to the First Nation beneficiaries. If legal teams wish to avoid a court weighing in on their fee arrangements, it would be prudent to recommend that their clients obtain independent legal advice. It would be similarly prudent for First Nation clients to obtain independent legal advice before entering similar contingency fee arrangements with their legal counsel.
[1] 2024 ONSC 6088 [the “Decision”].
[2] Nahwegahbow Corbiere Genoodmagejig Barristers and Solicitors, David Nahwegahbow, Diane Corbiere, Roger Jones, Mark Stevenson, Donal Worme, and Connie Addario.
[3] Solicitors Act, RSO 1990, Chapter s 15 [the “Act”].
[4] The Decision, at para 39.
[5] The Decision, at para 56.
[6] The Decision, at para 56.
[7] The Decision, at para 82.
[8] The Decision, at para 89.
[9] The Decision, at para 89.