Background
The plaintiff (Aylmer Meat Packers) hired a lawyer to represent it on a contingency fee basis. The terms of the agreement were such that the lawyer would be paid only if they won at trial or if there was a settlement. The lawyer, at Harrison Pensa LLP, represented the plaintiff through an 18-day trial. The plaintiff lost at trial – see Aylmer Meat Packers Inc. v. Ontario, 2020 ONSC 6053.
Aylmer Meat Packers then hired different counsel to assist with an appeal of the trial decision. They were successful on appeal as the trial judge had misapplied the law. The Court of Appeal overturned the trial judge’s decision and substituted its own decision, awarding the damages assessed by the trial judge – see Aylmer Meat Packers Inc. v. Ontario, 2022 ONCA 579.
The Court of Appeal awarded Aylmer $475,000 for the costs of trial, inclusive of disbursements and HST, and $600,000 in prejudgment interest – see Aylmer Meat Packers Inc. v. Ontario, 2022 ONCA 629.
The damages and costs were sent in trust to Harrison Pensa LLP, which calculated its fees to be approximately $1.7M. This represented less than the 40% contingency fee agreed to with credit for previously received costs awards from procedural motions in advance of trial. Harrison Pensa LLP issued its invoice and transferred the funds from its trust account to general account while disbursing the $3M net to Aylmer Meat Packers.
The Application
Aylmer Meat Packers then brought an application seeking its fees back from Harrison Pensa LLP – see Aylmer Meat Packers Inc. and Richard Walter Clare v. Harrison Pensa LLP, 2025 ONSC 3383. Harrison Pensa LLP brought a cross-application claiming that it was entitled to the money under the terms of the retainer, or in the alternative, on a quantum meruit basis.
The application judge held that the appellant was entitled to fees under the retainer only if it recovered damages before or at trial and was not entitled to a quantum meruit award. There had been a partial settlement with one of the defendants prior to trial. The application judge held that Harrison Pensa LLP was only entitled to a contingency fee on that settlement before trial but must otherwise return the money held following the appeal.
The Appeal
Harrison Pensa LLP appealed the application judge’s decision.
The appellant argued that:
- the application judge made legal errors and palpable and overriding errors of fact in interpreting the retainer; and
- it should be awarded a share of the damages awarded to the respondent on appeal, whether pursuant to the retainer or on a quantum meruit basis.
Held
The Appeal was dismissed.
Reasons
In the absence of an error in principle or palpable and overriding error, the application judge’s interpretation of the retainer contract is entitled to deference.
The appellant did not establish any such error.
With respect to the retainer agreement, the appellant argued that the application judge failed to interpret the contract as a whole. It emphasized clauses that tie its fees to money recovered on the claim. However, the claim expressly stated that fees are owed when damages are recovered through negotiation, mediation, settlement or trial judgement – but it does not include damages awarded on appeal.
The appellant argued this list was simply examples of the circumstances in which it was to be paid and insisted that these circumstances were subordinate to the overarching duty to pay if the claim succeeded.
The Court of Appeal found that it was open to the application judge to conclude otherwise and gave deference to that decision.
With respect to the quantum meruit award, the appellant argued that the application judge conflated contractual and restitutionary quantum meruit and erred by stating that quantum meruit was not available.
Quantum meruit means “the amount one deserves” and is an equitable remedy for a reasonable sum in respect of services supplied to the defendant. The application judge noted that the doctrine can be applied in either
- a contractual setting, where although a contract is found to exist, there is no clause addressing in express terms the consideration for the contract, or
- in a restitutionary setting, where no contract exists or a contract cannot be recognized or enforced.
Contractual quantum meruit is a discretionary remedy that may be granted when a contingency fee retainer agreement is unenforceable but work is done for the benefit of a party such that one of the contracting parties should be compensated.
The application judge found that neither party argued that the contingency fee agreement was unenforceable, and therefore the contractual quantum meruit did not apply.
The application judge also rejected Harrison Pensa LLP’s argument that recovery on appeal by the client was only made possible by Harrison Pensa LLP’s work at trial. She wrote:
[64] …With respect, the Client was required to retain and pay new counsel to secure the judgment on appeal after HP declined to act for the Client. The Client paid for those services under a separate retainer agreement. In this case, the Client was enriched by the services provided by LOLG on the appeal, not by services provided by HP.
[65] I find that the Agreement compensated HP for the work they were retained to do. There was no gap in services provided. HP may not be happy with the fees that it is entitled to under the Agreement, but it is compensated for the work that it did. In the result, I decline to order relief based on the principles of quantum meruit.
The Court of Appeal rejected the appellant’s argument that the application judge conflated contractual and restitutionary quantum meruit. The Court of Appeal concluded that:
[12]…the parties specified the circumstances in which the appellant would be paid. They chose not to agree to an entitlement to fees in the event the respondent was successful only on appeal. That has proven to be an improvident bargain for the appellant, but it is the bargain the appellant chose to make. The application judge made no palpable and overriding error in so concluding. There is no room for quantum meruit to operate in these circumstances.
Observation
On July 1, 2021, the Law Society of Ontario standardized Ontario contingency fee agreements (see here). The contingency fee agreement at issue in this case pre-dated the standard contingency fee agreement language.
