Prophet River First Nation v. Rath & Company, 2011 ABQB 408

Court of Queen ’ s Bench of Alberta Citation: Prophet River First Nation v. Rath & Company, 2011 ABQB 408 Date: 20110629 Docket: 1001 03640 Registry: Calgary Between: Prophet River First Nation Applicant - and - Rath & Company Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice A.D. Macleod _______________________________________________________ [ 1 ] This is an application by Prophet River First Nation pursuant to the Alberta Rules of Court , Alta.

Reg. 390/68, to allow the taxation of Bills of Costs issued by Rath & Company Barristers and Solicitors (the lawyer) related to a number of matters and to allow the taxation of two retainer agreements. Under Rule 647 the taxations are out of time unless this Court “otherwise orders”. [ 2 ] While the parties did not argue that this matter should be heard under the new Alberta Rules of Court , Alta. Reg. 124/2010, Rule 15.2 of the new rules stipulates that the new rules apply to existing proceedings.

I find, however, that the application of the former Rule 647 and the combination of Rules 10.7 and 13.5 of the new rules, result in the same test being applied to this issue. Moreover, it was not argued that a different result would be obtained under the new rules. Given that virtually all of the history of this file occurred under the old rules, I will for simplicity sake, treat this matter as if the old rules apply. Rule 15.6 of the new rules affords the Court the discretion to do so.

[ 3 ] The most contentious account relates to a federal court action which the lawyer prosecuted on behalf of the First Nation over a period of nearly ten years. The action revolved around whether or not Prophet River got its equitable share of lands and oil and gas resources in the division of the Fort Nelson Indian Band in 1974. It is common ground that the litigation was complicated and involved a number of interlocutory examinations a great deal of discovery, both oral and documentary.

A retainer agreement had been entered into in April 1997 under which the lawyer was to be paid $5,000 per month during the course of the litigation and there were a number of contingent upsides for the lawyer as set out in the agreement. [ 4 ] At the end of the litigation a settlement agreement was entered into between the First Nation and the Government of Canada. The First Nation was successful in recovering $120 million plus approximately 5,400 acres of Reserve Lands.

While the settlement was negotiated at the close of 2007, the formal agreement was dated May 1, 2008. [ 5 ] Not surprisingly, the litigation did not play out as originally contemplated by the retainer agreement. While it may be that the trial did technically commence by the taking of some commission evidence it came down to mostly interlocutory applications at least one of which went to the Federal Court of Appeal, a number of case conferences and mini trials and a great deal of negotiation.

In addition, there is the complication of putting a value on the Reserve Lands. [ 6 ] There seems little doubt that the lawyer achieved an excellent result for the First Nation and had a reasonable expectation that there would be a significant contingent upside to the fee. [ 7 ] In fact, when the tentative deal was struck the lawyer wrote to the First Nation on December 4, 2007. That letter included the following: Please be advised that we remain extremely pleased that you have accepted the $120 million offer made by Canada on November 28, 2007.

As you are aware, this offer is a full $40 million more than you had instructed us that you would have been willing to accept as full and final settlement of this matter at the outset of negotiations in March of 2004. ... In calculating our final fee with regard to this matter, we have taken into account the Contingency Fee Agreement, all of the work that we have done which was not contemplated within the framework of that Agreement and are of the view that an additional fee of 4.5% would be entirely appropriate, we have rounded this additional fee down to approximately 4.33%.

In that regard, please find attached our final account with regard to this matter in the amount of $10 million, obviously, the payment of this amount is subject to your agreement. [ 8 ] The letter attached a Band Council Resolution confirming the Band’s agreement to pay the final invoice and he indicated that they would not charge any further legal fees with regard to bringing the matter to a conclusion. [ 9 ] The Band Council which consisted of the Chief and two Councillors executed the Band Council Resolution on December 5, 2007 approving the $10 million invoice. [ 10 ] Subsequently the Government offer was sweetened by including some other claims and an additional $10 million was added to the settlement which was agreed to by a Band Council Resolution dated January 11, 2008.

On the same date a Band Council Resolution was passed approving an additional invoice of $840,000 representing the lawyer’s fee for the increased settlement. [ 11 ] On that same date, January 11, 2008, the Chief and Council of the First Nation passed the following Band Council Resolution: WHEREAS the Chief and Council of Prophet River First Nation has agreed in principal to a settlement of $120 million with Canada in the matter of Wolf v. HMTQ Federal Court Action Number T-705-97 on November 28, 2007 and an additional $10 million on January 11, 2008, for a total settlement amount of $130 million;

AND WHEREAS upon the advice of Peter Brynolfson, Prophet River First Nation Auditor, the Chief and Council of Prophet River First Nation directs Rath and Company, Barristers & Solicitors to compensate Liza Wolf, Lorraine Chipesia and Loretta McAllister in the amount of $800,000 each representing $80,000 per person per year for management services provided throughout the litigation process; THEREFORE BE IT RESOLVED THAT: Rath and Company as directed by Chief & Council of Prophet River First Nation hereby agree to pay the sum of $800,000 each to Liza Wolf, Lorraine Chipesia and Loretta McAllister as third, fourth and fifth charges against the settlement proceeds. [ 12 ] Ms.

Wolf was the Chief and Ms. Chipesia and Ms. McAllister were the councillors.

On January 15, 2008 the Band Council by Band Council Resolution of that date directed that Canada forward $20 million out of the settlement proceeds to be held in trust by the lawyer to cover “all legal fees, disbursements, management fees, administrative fees and all other fees associated with the litigation and the establishment of the Prophet River First Nation Trust contemplated by this settlement.” The lawyer was directed to disburse those funds upon the conclusion of the matters and to forward the remaining funds to Prophet River First Nation administration.

Canada was directed to send $110 million to the administrative trustee for immediate investment. The payments to Chief and Council of $800,000 each were made on July 31 and the $10 million was transferred to the lawyer in payment of its final invoice on August 5, 2008. [ 13 ] In June 2009 the First Nation elected a new Chief and Council.

At a meeting of June 29, 2009 the new Council and Chief expressed disagreement with previous Band Council Resolutions directing payment of invoices from the lawyer’s trust account and resolved to discontinue the lawyer’s services until such time as all agreements with the lawyer had been reviewed. The Band retained its present counsel and by November 2009 virtually all of the files had been transferred.

On November 24, 2009 the lawyer wrote to the Band’s present Council along with forty-nine boxes of material under trust conditions including the following: As the volume of files provided has made it entirely impractical to photocopy these files in their entirety, in the event of the taxation of any of our accounts to immediately return all file material provided in order that we can adequately prepare for such taxation, in such event we reserve all rights including limitations in this regard. [ 14 ] On December 23 Maurice Law, the Band’s present counsel, brought an Originating Notice of Motion for advice and directions of this Court concerning the reasonableness and enforceability of the trust conditions attached to its letter of November 24, 2009.

That matter was resolved between counsel and the Originating Notice which came before me was issued March 9, 2010. Issue [ 15 ] During argument counsel appeared to agree that the issue is whether or not to exercise my jurisdiction to extend the time provided for in Rule 647 which provides that unless the Court otherwise orders, no bill of costs is subject to taxation. c. If it was fully paid before the completion of the services for which it was rendered, after six months from the date of completion or the delivery of the bill whichever is later, or, d.

If it was fully paid following the completion of the services, after six months from delivery. [ 16 ] What is not clear to me is whether sub-paragraph c or d applies because the account was paid on August 5, 2008 as evidenced by the lawyer’s trust reconciliation records. It is not clear whether any service in connection with that matter were rendered following that date. Further law suits were commenced in connection with the settlement agreement - the social assistance action commenced in 2009 and the B.C.

Minerals claim in 2008 with respect to the 5,400 acre parcel which was the subject of the settlement agreement. The parties agree however, that those were separate retainers although there is some connection with the subject matter of this retainer. Those two matters were on-going at the time the First Nation terminated the services of the lawyer and retained new counsel. [ 17 ] The lawyer’s position is that all of the accounts on the large matter were paid pursuant to Band Council Resolutions and the monies were transferred to pay the account on August 5, 2008.

A trust account reconciliation confirming the receipt of settlement

proceeds and the payment of accounts was forwarded to Prophet River in August 2008 and a further trust account reconciliation was provided to Prophet River on May 25, 2009. Jurisdiction [ 18 ] Payment of the fees was sanctioned by a Band Council Resolution and it has never been the subject of judicial review in the Federal Court of Canada which the lawyer says has exclusive jurisdiction with respect to the judicial review of Band Council Resolutions. But I am not being asked, as I understand it, to overturn the Band Council Resolution approving the payment of the account.

The passing of a Band Council Resolution is simply the mechanism by which the Band decides to pay the account. But that does not mean that the account cannot be subsequently taxed. It is clear that under our rules accounts can be taxed subsequent to their payment. The question before me is whether I should exercise my jurisdiction to allow taxation of the accounts following the expiration of periods under Rule 647. It would seem clear that this Court has jurisdiction to do that. Factors to Consider [ 19 ] I have been referred to a decision of the Ontario Court of Appeal in Glanc v.

O’Donohue & O’Donohue 2008 ONCA 395 , 90 O.R. (3d) 309. That case talks about the inherent jurisdiction of the Court as the guardian of public confidence in the administration of justice. In my view, it serves public confidence that legal accounts should be subject to the scrutiny of taxing officers and the Court particularly when they are based on contingency fee agreements and are very large. However, my discretion is not unfettered.

The parties agree that the time limit has passed and the question is what factors should I consider in deciding whether to exercise my discretion to order the taxation to go ahead notwithstanding that this period has passed. [ 20 ] A number of factors were suggested by Read J. of this Court in Poundmakers Lodge v. Scott & Company 2002 ABQB 745 at para. 13 : a. Did the delay in filing the taxation cause prejudice to the solicitor? b. When did the client express the intent to tax the accounts? c. Were the accounts part of a continuing file and therefore interim accounts? d.

Is there evidence that there was an overcharging and that it is just and equitable that the accounts be taxed? [ 21 ] To those I would add the following: e. Is there evidence that the parties have come to an agreement as to the amount of the account? f. Does the evidence of the entire relationship between the solicitor and client support any extension of the time? Analysis [ 22 ] With respect to factor (e), the evidence is that the Council, based in part upon the advice of its independent auditor, agreed to the $10 million account and the subsequent $800,000 account.

However, Chief and Council’s decision to agree to that number and its direction to pay that amount out to the lawyer takes place at or about the same time as it decided to vote its members and its independent financial advisor very significant amounts of money each. Each the Chief and the two Councillors received $800,000 for their role in

instructing the lawyer with respect to the litigation. I do not think the Court can give much weight to the agreement of Chief and Councilwith respect to the lawyer’s account when those individuals helped themselves to a large amount of money over and above thecompensation they receive in their positions as Chief and members of Council. [23] With respect to factor (a), the lawyer points out that he has paid a bonus of $1 million to one of his associates out of themoney received. That is not something which cannot be adequately taken into account by the taxing officer or the Court.

I am notsatisfied that the lawyer has suffered much prejudice beyond the fact that up until the election of the new Chief and Council in June2009, he did not think his account would be taxed and he had been in possession of the money since August 2008. [24] With respect to factor (b), Chief and Council had approved the payments to the lawyer and consultants (and themselves) inDecember 2007 and January 2008. There was no reasonable prospect of Prophet River taxing the account except under a new Chief andCouncil. They were elected in June 2009 and Council immediately terminated the services of the lawyer.

The lawyer forwarded files tothe new lawyer but attached trust conditions under its letter of November 24, 2009 related to the taxation of any of his accounts. On December 23rd new Council for the Band brought an Originating Notice for advice and directions with respect to the enforceability ofthat trust condition.

Under all the of the circumstances I do not consider that the delay is egregious. [25] With respect to factor (c), the $10 million invoice would appear to represent the final account although it was part of acontinuing file. [26] With respect to factor (d), it seems clear that the ultimate fee contemplated in this instance would not be based solely on timespent and that there would be a considerable upside depending upon whether or not a favourable result was achieved. It is commonground that a very excellent result was achieved.

Upon the evidence before me, I am satisfied that a reasonable band council could haveconcluded that the $10 million account was fair. Accordingly, there is no evidence of overcharging. [27] With respect to factor (f), the lawyer was the Band’s counsel for much of the period during which the former Chief andCouncil were in office. Many of the retainers were of long duration and this particular matter was ongoing for some ten years. [28] The lawyer forcefully argues that the change in Band governance should not be considered. He cites the decision of the B.C.Court of Appeal in Holmes Greenslade v.

Starcom International Optics Corp. (1997) (BC CA), 86 B.C.A.C. 66 inwhich the Court held that mere change of control of a corporation should not cast a different light on the issue of taxation of accounts.But Bands are not corporations and the extent of Band consultation varies considerably. There is no evidence in this case of anyconsultation on the amount of the lawyer’s fee before it was agreed to.

Moreover, under the circumstances here, it is clear that notaxation of this account would be pursued by Prophet River under the previous Chief and Council. [29] The lawyer is very familiar with First Nations governance and the ups and downs of Band politics which often do not providefor optimal transparency. There is evidence that the Band Council Resolutions in question were placed in an envelope (sealed orunsealed) and put in the administration’s safe where it was uncovered by the newly elected Chief and Council.

Decision [30] Upon consideration of all the factors I come to the view that public confidence in the administration of justice carries the dayand I exercise my discretion to extend the time for taxation. Furthermore, to the extent that it is needed, I also exercise my discretion toextend the time with respect to the other accounts and the two retainer agreements at issue. There is no reason to differentiate amongthem. [31] Nevertheless, there has been delay. While I have exercised my discretion to extend the time in spite of this delay I would notaward costs to the Applicant.

The parties shall bear their own costs.

Heard on the 24 th day of May, 2011. Dated at the City of Calgary, Alberta this 29 th day of June, 2011. A.D. Macleod J.C.Q.B.A. Appearances: Michael Bailey Maurice Law for the Applicant J.P. Peacock, Q.C. Peacock Linder & Halt LLP for the Respondent