Plaintiff class action legal fees under the microscope

A $28-million settlement reached with a Catholic religious order in a sexual abuse class action was rejected by Quebec Superior Court because of the high legal fees associated with the agreement, the second Quebec class action settlement in the past month whose legal fees have been the subject of a critical assessment.

The decision by Quebec Superior Court Justice Thomas Davis to rebuff a settlement for more than 375 alleged victims of sexual assaults committed by members and employees of the Clercs de Saint-Viateur of Canada follows on the heels of a ruling in mid-June by Quebec Superior Court Justice Daniel Dumais to curb plaintiff class action legal fees by 20 per cent in the so-called Dieselgate scandal in which German carmaker Volkswagen AG violated Canadian emissions standards.

The decisions underline that settlement approvals are not a rubber stamping exercise, demonstrate that the courts will take into account the Code of Professional Conduct of Lawyers (Code) when examining plaintiff class action legal fees, reiterate the importance of transparency vis-à-vis clients even in a class action setting, and illustrate why settlement approvals should be separate from and not contingent on class counsel fee approvals, according to class action legal experts.

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Total amount of legal fees not necessarily covered by solicitor-client privilege rules Quebec appeal court

The total amount of professional billings paid to lawyers working on a mandate for public bodies is not necessarily automatically protected by solicitor-client privilege ruled the Quebec Court of Appeal.

In what is described as a precedent-setting ruling, the Quebec appeal court decision provides much-needed guidance and strikes a delicate balance between professional secrecy and public access to documents, according to legal experts.

“The importance of this lies with the distinction the Quebec appeal court makes between professional secrecy and public access to documents regarding legal fees paid by public bodies to lawyers,” said Pierre Trudel, a former director of Université de Montréal’s Public Law Research Centre. “The decision provides helpful guidance over what should remain protected by professional secrecy and what should be accessible to ensure public access to documents.”

But Bernard Pageau, who successfully plead the case, is under no illusions. Even if a leave to appeal to the Supreme Court of Canada is not filed or if the decision is not overturned, Pageau expects the ruling to upend longstanding practices by Quebec public bodies and the provincial Access to Information Commission gradually and begrudgingly.

“If it is a final decision, it will take some time before public bodies react and implement the changes,” said Pageau, the senior director of legal affairs at Québecor Média inc. “There may be public bodies that erroneously interpret the ruling or who will refuse (to grant access to documents) and we will end up having to bring the matter before the Quebec Access to Information Commission. But having a hearing before the Commission takes up to a year. That is a denial of democracy which prevents a citizen from exercising his democratic rights.”

In a unanimous decision, the Quebec appeal court held that legal billings are prime facie protected by professional secrecy because it generally contains a description of accomplished tasks, services rendered and often advice given but the total amount of legal fees paid to a lawyer working on a mandate for public bodies, such as municipalities or school commissions, are not automatically covered by solicitor-client privilege.

In a bid to reconcile the fundamental importance of privilege attached to the solicitor-client relationship with the principle of public access to documents, Trudel points out that Quebec appeal court Justice Paul Vézina introduced a two-step test. The first part of the test involves determining the “scope of the secrecy, that is whether the information is covered by solicitor-client privilege,” said Justice Vézina in a 19-page ruling in Kalogerakis c. Commission scolaire des Patriotes, 2017 QCCA 1253. Justices Robert Mainville and Denis Jacques (ad hoc) concurred with the August 22nd decision.

If it is, then the second part of the test comes into play: “whether or not this is one of the rare cases where it is justified to dismiss and allow the disclosure of information that is otherwise inaccessible,” added Justice Vézina in a decision that overturned the judicial review by Quebec Superior Court Justice Suzanne Courchesne and restored a decision by Court of Quebec Justice Diane Quenneville in Kalogerakis c. Commission scolaire des Patriotes, 2014 QCCQ 4167.

“With this decision, citizens and taxpayers will have more access to the total amount of legal fees disbursed by public bodies,” said Pageau. “There will be exceptions. It will always depend on whether disclosing the total amount will disclose confidential information. But now the burden of proof rests with public bodies to prove that.”

The case dates back to 2010 when a journalist working for the tabloid Journal de Montréal sought to find out the amount that a Montreal suburb paid lawyers in a suit launched by a citizen. The newspaper also wanted to know how much four Quebec school commissions paid in legal fees in a class action suit that was filed against them. In both cases the Quebec Access to Information Commission refused to provide the information, holding that the amount of legal billings is information protected by solicitor-client privilege as per section 9 of the Canadian Charter of Rights and Freedoms. The Commission relied, as it has for more than a decade, on the decision Commission des services juridiques c. Gagnier, [2004] CAl 568 – a ruling that held that legal billings are automatically protected by professional secrecy. “Since 2004, we could obtain nothing,” said Pageau. “It was systematic. As soon as we made a request for an access to information document asking how much in legal fees was spent in a case, they would simply respond we cannot because it was covered by solicitor-client privilege.”

The City of Terrebonne, a Montreal bedroom community, and the four school commissions argued that disclosing legal billings would reveal the financial means it has to defend itself and could compromise its ability to reach an out-of-court settlements.

Justice Vézina dismissed the arguments as speculative and unconvincing. He said that disclosing the total amount of legal billings does not infringe solicitor-client privilege in these cases because it does not reveal the services or advice provided by lawyers.

Just as importantly, Justice Vézina held that the objective of the province’s Act respecting Access to documents held by public bodies and the Protection of personal information is to spur “informed debate” and that cities and elected officials are accountable to voters.

“Municipalities have public funds to manage, and it is in the public’s interest to know what kind of resources a municipality devotes to legal fees,” noted Trudel. “That can be an indicator of how a municipality is managed. That is of public interest.”

Legal counsel for both the City of Terrebonne and the school commissions did not return calls.

This article originally appeared in The Lawyer’s Daily, published by LexisNexis Canada Inc.

Amount of legal fees no longer necessarily protected by solicitor-client privilege

The amount of legal fees paid to lawyers is no longer automatically deemed to be protected by solicitor-client privilege following a recent ruling by the Court of Quebec that appears to be in conflict with guidance given earlier this year by the Quebec Court of Appeal, according to some legal observers.

In a ruling that will be the subject of a judicial review by Quebec Superior Court, Justice Diane Quenneville held that while billings are prime facie protected by professional secrecy because it generally contains a description of accomplished tasks, services rendered and often advice given, the amount of legal fees paid to a lawyer is not necessarily protected by professional secrecy.

“Context is a fundamental element in this issue,” noted Justice Quenneville in her 35-page ruling that provides a well-rounded analysis of Quebec and Canadian jurisprudence on the relationship between billings and solicitor-client privilege.

“There is no doubt that jurisprudence clearly states that a lawyer’s bill of account is covered by professional secrecy,” observed Danielle Ferron, a partner and the chair of the litigation group of Langlois Kronström Desjardins LLP in Montreal. “But insofar as the amount of the legal fees is concerned, nuances have to be made. The court comes to the conclusion that even though the principle of professional secrecy applies, it is a rebuttable presumption and that each case must be analysed in light of the facts. One cannot therefore automatically come to the conclusion that the amount of legal billings is covered by professional secrecy.”

But Francis Gervais, the former president of the Barreau du Québec, believes that Quenneville’s ruling is at odds with jurisprudence, including a ruling issued this March by the Quebec Court of Appeal in Canada (Procureur général) c. Chambre des notaires du Québec, 2014 QCCA 552. “The Quebec Court of Appeal held that in Quebec there exists a presumption of confidentiality for legal fees and that this is well established but our problem is that Justice Quenneville says there is no such presumption in Quebec. So it seems to be the opposite of what the appeal court found,” said Gervais, who is representing the City of Terrebonne, a Montreal bedroom community that is seeking judicial review of the Quenneville ruling.

The case dates back to three years ago when a journalist working for the tabloid Journal de Montréal sought to find out the amount that the Montreal suburb paid lawyers in a suit launched by a citizen. The newspaper also wanted to know how much four Quebec school commissions paid in legal fees in a class action suit that was filed against them. In both cases the Quebec Access to Information Commission refused to provide the information, holding that the amount of legal billings is information protected by solicitor-client privilege as per section 9 of the Canadian Charter of Rights and Freedoms.

But Justice Quenneville, who heard both cases at the same time, overturned the ruling, holding that the Access to Information Commission “erred by proceeding through automation” when it concluded that the information being sought was necessarily protected by professional secrecy even though it would not have revealed confidential information provided to lawyers or advice given by lawyers.

After reviewing Canadian and Quebec jurisprudence, Justice Quenneville held that it is “not appropriate” for a court to summarily hold in all circumstances that the amount of legal fees is automatically protected by professional secrecy. “Each case is unique,” noted Justice Quenneville. “The court must first determine whether it is a case of professional secrecy. It is therefore necessary to examine the legal context. To this end, it is necessary to determine whether the information that is requested reveals or does not reveal the nature of services rendered, advice or opinion given or if the information puts into question the confidentiality of the solicitor-client relationship,” regardless of whether it is a civil or a criminal case.

Heeding guidance from the Supreme Court of Canada in Foster Wheeler Power Co. v. Société intermunicipale de gestion et d’élimination des déchets (SIGED) inc., 2004 SCC 18, [2004] 1 SCR 456, Justice Quenneville held that in civil matters the scope and intensity of the protection varies according to the nature of the duties carried out and the services rendered. In the case of an individual professional act, simple or summary evidence is sufficient to establish the confidentiality of the information being sought. In this case, the burden of proof is placed on the person claiming professional secrecy. In matters however that are deemed to be complicated and prolonged mandates, a rebuttable presumption exists, in which all communications between client and lawyer and the information they shared would be considered prima facie confidential in nature. In such cases, the burden of proof rests with the party seeking the information.

But that burden was never established in the case involving the City of Terrebonne, argues Gervais. Besides seeking judicial review on the grounds that a presumption of professional secrecy covers legal billings, Terrebonne maintains that the Quebec Access to Information Commission never determined whether the lawsuit they were involved in should be considered as an individual professional act or a complicated and prolonged mandate. “Depending on the whether it is determined to be a simple or complex act, the onus of showing that that information is protected or not shifts from to us to them, and that has not been determined, “ said Gervais.

The reach of the decision may be extend well beyond the amount of legal fees paid to lawyers, notes Ferron. “The first point that Justice Quenneville makes in her ruling is that it is not appropriate for the courts to summarily hold that legal billings in all circumstances are automatically protected by professional secrecy,” said Ferron, adding that she does not believe that the reach of professional secrecy has been diluted by the Quenneville ruling. “The ruling does not diminish professional secrecy but it does remove the concept of automation, that there exists a rebuttable presumption.”

Gervais disagrees. He asserts that even revealing only the amount of legal fees paid to a lawyer infringes solicitor-client privilege. “There are decisions that have been rendered in other provinces that held that an astute person, knowing the total amount and being able to look at the public file, can understand some of the strategy that has been taken — and that goes against privilege,” said Gervais.

Quebec Superior Court granted the motion for judicial review, and suspended its execution, pointed out Raymond Doray, a Montreal lawyer with Lavery, de Billy, who is representing the school commissions. “Consequently, you will easily understand that this decision cannot for the moment be considered as a significant judgment,” said Doray, who successfully represented the Chambre des Notaires in the case that was heard by the Quebec Court of Appeal.

Mayor accused of corruption and fraud must pay for own defence, rules appeal court

The former mayor of a Montreal bedroom community facing corruption-related charges will have to foot her own legal defence bills after the Quebec Court of Appeal held that the municipality did not have to pay for her defence because the alleged acts did not take place while she was performing duties of an elected member.

The precedent-setting ruling sends a clear message to elected municipal councillors who were counting on jurisprudence and the seemingly clear-cut wording of the Quebec Cities and Towns Act to compel municipalities to cover their legal fees when faced with criminal proceedings, according to municipal law experts.

“It’s an important judgment because it will provide guidance to municipalities who face similar circumstances,” remarked Daniel Bouchard, the managing partner of the Quebec City office for Lavery, de Billy. “Municipalities will now systematically refuse to pay.”

Numerous Quebec mayors and municipal councillors face criminal charges. Former Montreal mayor Michael Applebaum faces a battery of corruption-related charges while Laval’s Gilles Vaillancourt, former long-time mayor of Quebec’s third-largest city, was charged with fraud and gangsterism. Quebec’s anti-corruption squad also charged the former mayors of several rapidly growing Montreal bedroom communities, including Sylvie Saint-Jean. A former mayor of the north-shore Montreal suburb of Boisbriand from 2005 to 2009, Saint-Jean faces eight charges of corruption, fraud and breach of trust. After she plead not guilty to the charges in 2011, she turned to the municipality to have her legal fees be paid out of taxpayers’ funds, but her request was rebuffed by the municipality. She then tried to force the municipality to pay her legal fees by mounting a legal challenge before Quebec Superior Court, and lost as she did before the Quebec Court of Appeal.

In a decision described as “pragmatic” by legal observers, the appeal court reaffirmed the legal protection granted to elected municipal councillors under the Quebec Cities and Towns Act but held that an elected municipal official accused of breach of trust, corruption or fraud against the municipality does not have the right to demand the municipality to cover their legal expenses for criminal proceedings. The three-member panel judge, rather unusually, each wrote their reasons in the 49-page ruling, probably because it is the first time the appeal court examined the issue. “It demonstrates that each of the judges had a different vision of the problem,” noted Jean Hétu, a law professor at the Université de Montréal whose books on Quebec municipal law were cited numerous times in the judgment.

Under the Quebec Cities and Towns Act, a municipality shall assume the defence of a member of muncipal council who is the defendant, respondent or accused “impleaded in judicial proceedings” due to an alleged act or omission in the performance of his duties. However, under Article 604.7 of the Act, it also states that a municipal councillor shall reimburse all or a portion of the legal expenses if the alleged act or omission that gave rise to the proceedings is a gross or intentional fault or a “fault separable” from the performance of his duties. But until the Quebec Court of Appeal ruling, Quebec courts almost always liberally interpreted the Act in favour of municipal councillors, pointed out Hétu.

“Judges were very reticent to even want to hear arguments that the act committed by the municipal councillor was not related to the performance of his duties,” said Hétu. “They interpreted the Act as saying it existed to protect elected members, and that municipal councillors had a right to for their defence to be paid. It was extremely difficult for municipalities to avoid paying legal defense bills for municipal councillors.”

Bouchard concurs, and adds that in the “strict sense of the law,” both Quebec Superior Court and the Quebec Court of Appeal should have ordered the municipality of Boisbriand to pay the legal fees of its former mayor and then seek reimbursement. “But the Quebec Court of Appeal said that that would have been completely illogical,” said Bouchard. “To come to its conclusions, it had to interpret the law rather liberally.”

Quebec Court of Appeal Justice Allan Hilton notes that while it is “true” that the legislator did not stipulate conditions governing the application of the protection regime outlined under the Act, “it does not mean that none exist.” It is well established that it is up to the courts to determine its application by interpreting the provisions of the law, he added. Justice Hilton found that while the former mayor “must be presumed to be innocent until a judgment declares her guilty,” the accusations she faces did not stem from her duties as an elected representative. “The cornerstone of the protection regime remains the compatibility of an act or the omission of an act in her role as a mayor or as an elected municipal representative,” said Justice Hilton in his 30-page ruling.

Quebec Court of Appeal Justice Pierre Dalphond gave slightly different reasons in his 14-page ruling. He held that the fact that a municipal councillor faces an allegation in a civil suit that he committed a gross or intentional fault or is accused of committing an illegal act in a criminal proceeding does not preclude him from benefitting from the protection granted under the Act. “Otherwise, the elected representative would be placed in a vulnerable position,” wrote Justice Dalphond in his 14-page ruling. That is why the legislator specified that a municipality can demand reimbursement of the legal fees only after the elected representative was found guilty and that the evidence revealed that there was no reasonable grounds to believe that his conduct complied with the law, added Justice Dalphond.

But Justice Dalphond proposes that in cases where there may be doubt that a municipal councillor should be granted the protection granted under the Act, the “finality and pertinence” of the act committed or allegedly committed by the elected representative must be examined. An act committed in the interests of the municipality should be covered while one that was perpetrated for personal motives should not.

“What is really interesting about the ruling is that the Court of Appeal reiterated the principle that the Act exist to protect an elected representative from things that he did while exercising his duties,” said Martin Bouffard, Esq., a municipal lawyer with Morency Société d’Avocats in Quebec City. “But the appeal court also says that if the alleged act had nothing to do with their duties as elected officials, then the municipality does not have to pay to defend them.”

In her succinct three-page ruling, Justice Dominique Bélanger seems to have left municipal councillors with a small window of opportunity. She held that a member of a municipal counsel accused of committing fraud against the municipality does not have the right to demand the municipality to pay for his legal defence fees, unless “there is an exceptional situation.”

“Appeal court judges are prudent, and in this case they wanted to keep their options open,” observed Bouchard.

P.S. The former mayor plead earlier this year guilty to four charges, including fraud.

Norbourg: Law firms seeking $11 million

A couple of days after an agreement in principle was reached in the Norbourg class action suit, allowing thousands of investors to recover nearly all the money they lost in one of the biggest investment frauds in the country, a lawyer warned me that the case was far from over.

That’s because the $55 million settlement against Quebec’s securities regulator, Northern Trust Co. of Canada, Concentra Trust, accountant Rémi Deschambault and accounting firms KPMG LLP and Beaulieu Deschambault did not cover legal fees. “The judge in the case has opened a can of worms,” told me the class action specialist. “It’s unheard of to reach a settlement without agreeing to the legal fees.”

The lawyer is right. The law firms that negotiated the settlement are seeking $11-million, representing 20 per cent of the $55-million settlement, in legal fees — and the victims are not happy. Three Norbourg victims are expected to be in court today arguing that the amount is far too much, with one saying that lawyers should be receiving up to five per cent while another asserting that 6.5 per cent is reasonable. “It’s disproportionate,” said François Leblanc, an industrial relations consultant whose family lost hundreds of thousands of dollars in the Norbourg scandal. “In my opinion, 6.5 per cent of the settlement is a reasonable remuneration. They’re calculating $400 an hour, which would give them salaries of $700,000 a year.”

Quebec Superior Court justice André Prévost is expected to render a decision by month end. “I am conscious that the Norbourg investors have lived through difficult times,” said the judge yesterday. “The conclusion is approaching.”

Norbourg class action good business for lawyers

A couple of weeks after an agreement in principle was reached in the Norbourg class action suit, opening the door for thousands of investors to recover nearly all the money they lost in one of the biggest investment frauds in the country, Quebec’s securities regulator is facing an expensive legal tab.

The Autorité des marchés financiers (AMF) has incurred $12 million in legal expenses to defend itself in the Norbourg scandal, according to a French-language television network. The law firm Heenan Blaikie ostensibly charged $9.275 million.

Over the past five years, five government bodies hired the services of private-sector lawyers at a cost of $51.9 million. Investissement Quebec spent $1.2 million, utility giant Hydro-Quebec $9.2 million, the Société générale de financement $9.8 million, the Caisse de dépôt et de placement du Québec $15.4 million — and the AMF $16.4 million.

Marc Lajoie, head of the Association des juristes de l’État (AJE), a union representing nearly 1,000 lawyers, notaries, and other legal professionals now on strike, does not understand.

“If they don’t have the money for prosecutors and government lawyers, then they surely don’t have the means to reach out to the private sector to hire people for cases,” Lajoie told me recently. “All we’re asking is that our salaries be pegged to the Canadian average.”