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Leave being sought in battle over legal fees

|Written By Robert Todd

Lawyers involved in a landmark class action that allowed same-sex spouses to collect Canada Pension Plan survivor funds are taking their fight over legal fees to the Supreme Court of Canada, saying a recent Court of Appeal decision could restrict access to justice.

Douglas Elliott says the implications for access to justice are ‘pretty grim’ if the fees decision stands.

“We are seeking leave to appeal,” Roy Elliott O’Connor LLP founding partner Douglas Elliott, a member of the plaintiffs’ counsel group in Hislop v. Canada (Attorney General), tells Law Times.

“We feel that this is an important issue of access to justice, and it’s not something that has arisen before, and we think it’s important to have the guidance of the Supreme Court on the circumstances under which the first charge for class action lawyers can be displaced. Because the implications for access to justice are really pretty grim if this decision is allowed to stand.”

He added, “To quote my partner Peter Roy on the subject, he said, ‘We really owe it to the class action bar not to leave this decision out there the way it is now.’”

The Ontario Court of Appeal recently upheld Superior Court Justice Ellen Macdonald’s February 2008 decision on the matter. She ruled that a retainer agreement she approved in 2004 does not comply with s. 65 of the CPP, which prevents funds from being assigned to others. Under the agreement, the class action lawyers’ fees were to be covered by a payout of half of prejudgment arrears owed to the survivors, with half of that amount owing to Elliott’s firm.

The lawyers accrued over $5.3 million in fees during the seven-year case, which was the first successful constitutional class action in Canadian history. Macdonald rewarded the lawyers for their hard work by adding a multiplier of 4.8, bringing their total payout to over $15 million.

The appeal court agreed with Macdonald’s rejection of the lawyers’ argument that s. 32(3) of the Ontario Class Proceedings Act should prevail over s. 65 of the CPP. It states, “Amounts owing under an enforceable agreement are a first charge on any settlement funds or monetary award.”

Ontario Court of Appeal Justice David Watt, writing for a panel that also included Justice Susan Lang and Justice Paul Rouleau, offered the following in determining that s. 94A of the Constitution Act does not back the class action lawyers’ position:

“In this case, the CPP qualifies as a law ‘in relation to old age pensions and supplementary benefits.’ But the CPA cannot claim any such constitutional foundation. The CPA is a statute of general application, a law that deals with procedure in civil matters.

The CPA, in its current form, is not and does not purport to be a law ‘in relation to old age pensions and supplementary benefits.’ In the result, the conditions precedent to the rule establishing provincial paramountcy are not established.”

Elliott says he is “very disappointed” with various aspects of the eight-page ruling.

“Given the length of the reserve, which is seven months, frankly I was expecting a lot more detailed and comprehensive analysis of the very important public policy issues,” he says.

“The analysis, with all due respect to Justice Watt, I think is pretty superficial. It gives short shrift to the evidence we put forward that was unchallenged about the negative impact on access to justice of this interpretation.”

Elliott fears that some who read the decision will view it as a “trite situation that doesn’t seem to be much of an argument from our perspective. But, in fact, there is a considerable argument.”

Elliott noted that the case could only have succeeded as a class action, a point acknowledged by Macdonald upon approving lawyers’ fees in the case. He adds that class members would have, in violation of the Charter, never received their pensions if the class action were not pursued.

“That just doesn’t seem to have hit the Court of Appeal’s radar screen in this decision,” he says. “And it wasn’t for lack of trying, I can tell you. These are not arguments that we failed to make to the Court of Appeal. They are just arguments that they didn’t seem to take into account.”

While the class action lawyers can still collect their fees, the appeal court’s decision means they must go to each of the 1,000 claimants to collect, notes Elliott.

“It’s the difference between a bank having a mortgage, and a bank having a credit card debt,” he says. “You still owe the money to the bank one way or the other, but it’s a lot easier for the bank to collect on your mortgage than it is for them to collect on your credit card debt. And there’s a much greater chance that they won’t recover on your credit card debt.”

He says that collecting from individual claimants is “expensive, time consuming, and fraught with risk. And that is exactly what the lien under the Class Proceedings Act is intended to avoid. It’s intended to ensure that when you’re successful - and we invested millions of dollars trying to recover these pensions for these folks, which we would not have recovered if we had failed - you get your money off the top, before the client sees a penny.

So you have that comfort of knowing that you won’t face any collection problems if you’re successful.”

Adds Elliott, “We all know when we start a class proceeding that we face the risk of losing. This is the first time that we have faced the risk of winning.”

Elliott suggests that while the case was the first successful constitutional class action in Canadian history, it could be the last.

“No law firm is going to invest $7 million in a pro bono exercise,” he says. “It’s just not going to happen.”

Stikeman Elliott LLP partner and class action lawyer Adrian Lang says, “The issue on the pension benefits side is there is a very clear prescription against being able to put liens on people’s pensions and benefits, for good reason.”

She says, “I certainly thought it was the right decision for a whole bunch of reasons. As a constitutional question, it seemed to me to be a bit of a no-brainer that they weren’t going to be able to find that the Class Proceedings Act was going to overrule that provision of the Canada Pension Plan.”

Thomson Rogers managing partner and class action lawyer Alan Farrer says the appeal court “took a very narrow approach that the provincial Class Proceedings Act, which as a provincial statute, gets trumped by the federal statute, and they were quite comfortable just deciding it on that basis.”

Farrer, like Elliott, would have liked further discussion on access to justice implications.

“It could have used some light being shone on that particular aspect of things,” he says. “But this is a very peculiar situation and probably is not going to come up in very many class actions going forward.”

The underlying case was originally brought by gay activist George Hislop and is believed to be the first class action in the world to put forth the claim that gay and lesbian rights had been violated.

Elliott acknowledged the difficulty the lawyers will face in obtaining leave to appeal from the top court.

“We hope that because of the importance of the access to justice issues - and there’s also some related constitutional questions that have never really been considered by the Supreme Court either - that they’ll find these issues of interest and that we will have better luck in

Ottawa,” he says.

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