Arbitrating fee disputes

Today's decision of the Court of Appeal for Ontario in Jean Estate v. Wires Jolley LLP, http://www.ontariocourts.on.ca/decisions/2009/april/2009ONCA0339.htm <http://www.ontariocourts.on.ca/decisions/2009/april/2009ONCA0339.htm> offers a viable alternative. The Court of Appeal held that a client and lawyer may agree to have any fee dispute, including a contingency fee dispute, referred to arbitration---either domestic under the Arbitrations Act, 1991 or international under the International Commercial Arbitration Act (Model Law), with the caveat that the appointed arbitrator or arbitral panel must apply the Solicitors Act in the arbitral proceedings. In other words, the statutory protections afforded to clients under the Solicitors Act may not be waived by the parties based upon public policy concerns.
 
The competence/competence principle, where the issue of arbitrability is systematically referred to the arbitrator admits of two exceptions: (1) Where the challenge to the arbitrator's jurisdiction is based "solely on a question of law" or (2) a question of "mixed law and fact"  where the "questions of fact require only superficial consideration of the documentary evidence in the record" as opposed to "the production and review of factual evidence", a court may depart from the general rule of systematic referral: Dell Computer Corp v. Union des consommateurs, [2007] 2 S.C.R. 801 at paras. 84-85.  Weiler, J.A. (MacFarland JJ.A. concurring; Juriansz J.A. (concurring in the result) at para. 50 notes that "[t]hese exceptions, under which a court may rule first on questions of law relating to the arbitrator's jurisdiction, recognize that a court can itself find that an agreement is null rather than referring this issue to arbitration: Dell at para. 87." Justice Weiler concludes:
 
"(c)              Conclusion with regard to the enforceability of the arbitration clause

 

[84]           I would hold that the application judge erred in concluding that a solicitor and his or her client could not agree to have an arbitrator, as opposed to a Superior Court judge, hear a contingency fee dispute.  However, the two qualifications to the arbitrability of contingency fee disputes examined above lead me to the conclusion that public policy prevents the parties from contracting out of the statutory protections contained in the Solicitors Act, and that any arbitration must be conducted in accordance with them.  While the parties are free to select a different decision maker than the one contemplated in the Solicitors Act, any decision maker appointed to hear the dispute make his decision in accordance with the substantive statutory rights contained in the Solicitors Act.  There are two reasons for my conclusion.  First, the jurisprudence that I have reviewed regarding the enforcement of arbitration clauses has not considered or sanctioned the removal of any substantive statutory right affecting the merits of the underlying dispute.  Second, the jurisprudence in relation to the Solicitors Act holds that it would be contrary to the public interest to allow solicitors and their clients to contract out of any statutory remedy in relation to the assessment of solicitors' accounts.  
 
[85]          The jurisprudence is illustrative of broader principles at work.  One of the overarching principles that the law recognizes, albeit subject to the value of finality, is the right to have a dispute decided on the merits.  No doubt it is for that reason that the jurisprudence respecting enforcement of arbitration clauses considers whether enforcing the arbitration agreement will affect the merits of the dispute.  In addition, freedom of contract, the value recognized in the strong policy enforcing arbitration agreements, is tempered here by the jurisprudence removing the client's freedom to contract out of the remedies contained in the Solicitors Act on account of public policy."
 
James Morton
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