Written By Cheryl M. Woodin and Christiaan A. Jordaan

The decision of the Ontario Court of Appeal in Hodge v Neinstein, 2017 ONCA 494 [Hodge], released on June 15, 2017, was surprising with respect to its treatment of the balance between common and individual issues in a class proceeding. It is hard to know how significant the decision will prove to be, as the outcome was likely influenced by the subject matter at issue.

The case dealt with lawyers' fees, over which the court exercises an inherent regulatory jurisdiction. The plaintiff sought to certify a class proceeding for clients who had engaged a law firm on a contingency fee basis, and alleged that at the conclusion of the mandates, the firm charged fees in breach of the statutory restrictions under the Solicitors Act.

The most significant issue in Hodge was whether a class proceeding was appropriate given the many individual issues that would likely have to be resolved for the class to succeed. While the existence of individual issues is not a bar to proceeding on a class basis, the justification for mobilizing the elaborate procedure of a class action loses force as the significance of the common issues to the success of the action recedes. At a certain point, it makes more sense for the putative class members' claims to be brought by individual actions, particularly where the amounts in issue for each claimant would be significant.

The argument of the defendants in Hodge was pitched along those lines. They argued that even if the class obtained a favourable determination of the Solicitors Act issues from the court, it would still be necessary to inquire into the particulars of each retainer to determine whether a breach had occurred. Furthermore, in order to determine the appropriate remedy, the court would have to determine what portion of the charged fees for each retainer was reasonable in the circumstances.

That argument was accepted by the certification judge. He held that the proceeding "would inevitably lead to individual assessments of each Class Member's claim with nothing or almost nothing added by a common issues trial that would decide not much more than if a lawyer breaches the Solicitors Act, then he or she may have to refund all, a part, or none of his or her fee."¹

Notwithstanding the deference that is owed to the certification judge's decision on such issues, both of the Divisional Court and the Court of Appeal disagreed. The Court of Appeal certified a number of issues that, as it said several times, were "arguably" common. Yet even it refused to certify the proposed common issue that would determine the critical element of whether prohibited fees had in fact been collected from class members.

While the Court of Appeal's decision could be justified on a number of bases (for example, the Class Proceedings Act, 1992 expressly provides that the need for individual assessments of damages is not a bar to certification), it does result in an apparent imbalance between the common and individual issues. Moreover, the amounts at issue meant that individual actions by anyone who was wronged would be viable.

But where the law is indeterminate, the facts of the case take on more significance, and the allegations in Hodge were hard to ignore. The defendants were alleged to have routinely disregarded the requirement of the Solicitors Act that contingency fee retainers may not, without court approval, include in the fee payable any amount arising as a result of an award of litigation costs. The plaintiff's own circumstances demonstrated the problem. She signed a contingency fee retainer that provided for fees of 25 percent of the ultimate recovery, plus costs and disbursements. Yet it seems the firm took $127,000 of the plaintiff's total recovery of $235,000—or 54 percent—without seeking approval. To ask the plaintiff and others like her to address the alleged wrongdoing individually would mean that each of the class members would have to hire another law firm.

It remains to be seen whether Hodge will have influence beyond the context of the case. If so, certification could be granted even where the proposed common issues would only marginally advance the case. Until that issue is resolved, Hodge demonstrates the importance of advocacy in telling the right story.

¹ Hodge v Neinstein, 2014 ONSC 4503 at para 26 (Sup Ct).

Download PDF