Leduc v. Dufour, 2024 ONSC 6882

Court File and Parties

Court File No.: CV-15-4263 Date: 2024/12/10 Ontario Superior Court of Justice

Between: TYLER LEDUC, an infant under the age of eighteen years by his Litigation Guardian, Angele Vanier, ANGELE VANIER, and Angele Vanier, Litigation Administrator of the Estate of JEAN LOUIS LEDUC, Plaintiffs

– and –

MEGHAN O’BRIEN ESTATE TRUSTEE DURING LITIGATION FOR THE ESTATE OF THE LATE MARC DUFOUR, FRANCE DUCLOS, JEAN MCKAY, LILY BUGG, TINA HOOD, GLENDA PETRENKO, JOANNE DESPATIE, TINA HART, KRISTA ZIELGER, ERICA SALO, LYNE BAIRD, SALLY EDWARD, AND HEALTH SCIENCES NORTH (formerly Sudbury Regional Hospital), Defendants

Before: Ellies J.

Counsel: J. Simmons, K.C., for the Plaintiffs G. Adair, K.C., for Almeda Wallbridge, Counsel for the Plaintiffs

Heard: September 3, 2024

Corrected Reasons for Decision

Corrections are listed on page 20.

Overview

[1] Tyler Leduc was severely injured during his birth on November 22, 2009, as a result of which he is profoundly disabled.

[2] In 2015, his mother, Angele Vanier, retained Almeda Wallbridge of the law firm of Wallbridge, Wallbridge (the “Wallbridge firm”), to commence an action on behalf of Tyler and his family against the doctor who delivered Tyler, the nurses who were assisting him, and the hospital at which Tyler was born.

[3] In 2023, the action was settled for the all-inclusive sum of $14 million.

[4] In this motion under r. 7 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”), Mrs. Wallbridge seeks the court’s approval to charge a fee of approximately $4.1 million, in addition to taxes and disbursements, under the terms of a Contingency Fee Agreement (“CFA”) entered into between Ms. Vanier as Tyler’s litigation guardian and Mrs. Wallbridge on May 3, 2018.

[5] For the following reasons, the fee is disallowed as being neither fair when the CFA was entered into, nor reasonable at present. Instead, the fee is set at $3,250,000, exclusive of HST and disbursements.

Background

Tyler's Injuries

[6] During his birth, Tyler Leduc suffered what is known medically as an “hypoxic ischemic” brain injury, meaning that his brain did not get enough oxygen. As a result, he was diagnosed about one year later with cerebral palsy.

[7] Tyler cannot stand on his own. He cannot walk. He cannot talk. He cannot feed himself or relieve himself the way most people can. Tyler has no purposeful movements and suffers from seizures. He is totally dependent on his caregivers for survival.

[8] Since his birth, Tyler’s main caregiver has been his mother, Ms. Vanier, a woman whose love for her son is matched only by her ability to persevere through his many challenges.

[9] Tyler’s parents separated not long after he was born and, for years, Tyler’s father, Jean Louis Leduc, also cared for Tyler. Unfortunately, Mr. Leduc died in August 2020 at a young age, leaving Ms. Vanier alone to care for Tyler.

The Initial Consultation

[10] In January 2011, Ms. Vanier and Mr. Leduc met with Mrs. Wallbridge about the possibility of suing those whom they believed were responsible for what happened to Tyler. This included Dr. Dufour, the doctor responsible for his delivery; the nurses who were assisting Dr. Dufour; and the hospital in Sudbury where Tyler was born.

[11] Mrs. Wallbridge agreed to investigate the possibility of a lawsuit and began to gather the records from the hospital and elsewhere. In addition to gathering the records, Mrs. Wallbridge retained an expert on the issue of nursing standards and eight or nine medical experts to provide her with opinions on the issues of medical negligence and causation.

[12] No written agreement regarding Mrs. Wallbridge’s fees was signed at that time.

The CFAs

[13] Approximately four years later, on August 5, 2015, once Mrs. Wallbridge had conducted her investigation, Ms. Vanier and Mr. Leduc signed the first of three CFAs. Two of the CFAs were entitled “Contingency Fee Agreement” and were identical. The first one was signed by Ms. Vanier on August 5, 2015, but not by Mr. Leduc. The second was signed on August 20, 2015, by both Ms. Vanier and Mr. Leduc. However, their signatures were not witnessed in the way that Ms. Vanier’s signature was witnessed on the earlier CFA. Although nothing turns on it, it appears that Ms. Vanier intended to sign the September CFA as a witness to Mr. Leduc’s signature, but signed in the wrong place. For the purpose of these reasons, I will refer to the two CFAs signed in 2015 simply as the “2015 CFA”.

[14] On May 3, 2018, Ms. Vanier signed the third CFA, this time entitled “Retainer Fee Agreement”. Although there was a place in the document for Mr. Leduc to sign, it was never signed by him. This omission might be explained by evidence that Mr. Leduc was absent from Tyler’s life for a period of about two years before he died. For the sake of simplicity, I will refer to the May 3, 2018, Retainer Fee Agreement as the “2018 CFA”.

[15] Under both the 2015 and 2018 CFAs, the Wallbridge firm was to be paid one-third of the “compensation” received by the client, defined as being the total amount of money received for the client’s claim, excluding costs. [^1] Both CFAs also provided that the Wallbridge firm would be paid nothing if the client did not receive any compensation, subject to being paid on the basis of a percentage of total work done in the event that the file was transferred to other counsel for completion, or on the basis of payment of the Wallbridge firm’s fees and disbursements by the opposing party, in the event that the client decided to abandon the claim on that basis.

The Action

[16] Shortly after the 2015 CFA was signed, Mrs. Wallbridge commenced the action in which this motion is brought. As is usual in medical malpractice cases, the action was vigorously defended on behalf of the defendants. It was complicated to some extent procedurally by the fact that Dr. Dufour had already passed away at the time it was commenced. However, the last of the statements of defence was eventually delivered on January 26, 2017. Examinations for discovery of the defendant nurses were completed by the end of August 2017, and of the representative for the doctor by December 4, 2017. The examinations for discovery of the plaintiffs were completed by August 22, 2018.

[17] Following the examinations for discovery of the defendants, Mrs. Wallbridge began to obtain expert reports on the issue of damages. A judicial pre-trial conference (“JPT”) was scheduled for December 17, 2019. However, it had to be adjourned when counsel for the nurses and the hospital moved for an order that testing be done to determine if the cause of Tyler’s cerebral palsy was genetic. The plaintiffs undertook the testing, the results of which were negative.

[18] In July 2020, the parties agreed to participate in a mediation, which was arranged for November 23, 2020. However, before the mediation took place, counsel for the nurses served a new expert report, suggesting that Tyler’s injuries were caused by meconium-induced vascular necrosis, meaning prolonged exposure of the placenta to what is essentially the unborn infant’s feces. This necessitated further testing on behalf of the plaintiffs, this time of the placental tissue samples that had been collected at the time of Tyler's birth and preserved on slides. This resulted in competing experts’ reports, with one expert supporting the defendants and many experts supporting the plaintiffs.

[19] The mediation proceeded as planned, but failed to resolve the case.

[20] A second JPT was held on March 17, 2021, and continued on December 2, 2021. Again, the case did not settle. At the end of the JPT, however, the plaintiffs agreed to strike their jury notice in order to have the matter proceed to trial as expeditiously as possible and the case was placed on the January 5, 2022, assignment court list. On that date, the trial was set for eight weeks, to commence on September 5, 2023.

[21] As the trial date began to approach, Mrs. Wallbridge revisited the prospect of settlement. During the December 2021 JPT, defence counsel had offered to settle the action for the all-inclusive sum of $13 million. The plaintiffs had countered with an offer of $15 million. The settlements proposed included placing $6.5 million of the settlement funds into a structure that would pay Tyler money monthly for a guaranteed period of 30 years. According to Mrs. Wallbridge, between the time that she had first obtained a quote for the structured settlement in 2021 and February 2023, the amount of the 30-year guaranteed monthly payments had increased by approximately $4,600 tax-free dollars, making the $14 million settlement figure considerably more attractive.

[22] And so it came to be that, on January 27, 2023, the action was settled for the all-inclusive sum of $14 million.

The Rule 7.08 Motion

[23] In late February 2023, Mrs. Wallbridge moved on behalf of the plaintiffs for approval of the settlement and of the fee payable under the 2018 CFA.

[24] As originally proposed, the settlement contemplated that, in addition to the $6.5 million structure, approximately $1.5 million would be paid to Ms. Vanier in trust for Tyler, to be used to purchase certain items, including upgrades to Ms. Vanier’s home designed to assist Tyler. The sum of approximately $730,000 was to be held in trust by Ms. Vanier to be used to pay for non-specified items, and Ms. Vanier was to receive the sum of approximately $800,000 for her own damages.

[25] In an endorsement dated April 12, 2023, I approved the overall settlement, but expressed concerns about a number of things. These included the cost to the structure of the survivorship provisions in favour of Ms. Vanier, the need to ensure that the funds paid on Tyler’s behalf were used for that purpose even in the event of Ms. Vanier’s death, the validity of the 2018 CFA, and the size of the fee contemplated by it. Given my concerns, I ordered that the motion materials be served on the Office of the Children’s Lawyer (the “OCL”).

[26] Although Mrs. Wallbridge objected to my order that the OCL become involved, the OCL’s involvement proved to be very helpful. In a report dated July 5, 2023, the OCL shared some of my concerns and raised others. On behalf of Tyler, the OCL objected to the proposal that the costs of the survivorship terms of the structure be paid from Tyler’s settlement funds. Importantly, the OCL also pointed out that Ms. Vanier was not the legal guardian of her son’s property and that, to become the legal guardian, she would have to bring an application under ss. 47 - 60 of the Children’s Law Reform Act, R.S.O. 1990, c. C.12 (the “CLRA”). Otherwise, the OCL submitted that the settlement funds had to be paid into court under r. 7.09(1) of the Rules.

[27] Following my endorsement of April 12, 2023, Ms. Vanier retained the law firm of Weaver, Simmons LLP to represent her. The Wallbridge firm retained Adair Goldblatt Bieber LLP. With the help of the Weaver, Simmons firm and the cooperation of the OCL, an application was made under the CLRA, as a result of which I appointed Ms. Vanier and a semi-retired lawyer from Sudbury as joint guardians of Tyler’s property and approved a detailed plan to manage his money.

[28] The only issues remaining from the original motion to approve the settlement are the validity of the 2018 CFA and the quantity of the fees sought thereunder by Mrs. Wallbridge.

[29] As is common in cases where the damages are significant, the settlement figure of $14 million is an all-inclusive number and was not broken down. Therefore, Mrs. Wallbridge calculates the contribution of the defendants towards the plaintiffs’ costs, the remaining “compensation”, and the amount of the fees payable under the 2018 CFA as follows:

$14,000,000.00

• $281,400.09 (disbursements) = $13,718,599.91
• $1,392,814.00 (costs contribution from the defendants at 10 % + HST) = $12,325,785.00 (damages) Contingency Fee is one-third of damages: 1/3 of $12,325,785 = $4,108,595.00 plus HST of 13% = $534,117.35 Fees + HST payable to the Wallbridge firm (rounded): $4,642,712.00 Remainder payable to the plaintiffs: $12,325,785.00
• $4,642.712.00 $7,683,073.00

• $1,392,814.00 (costs contribution from the defendants) = $9,075,888.00

[30] No issue is taken with the way in which Mrs. Wallbridge calculated the defendants’ costs contribution, nor with the disbursements. The only issues are with respect to the fee.

The Law Relating to CFAs

[31] To understand the issues, a brief discussion of the statutory and regulatory governance of CFAs is necessary.

[32] “Compensation agreements” are governed by ss. 15 - 33 of the Solicitors Act, R.S.O. 1990, c. S.15 (the “Act”). Under ss. 16(1) and (2) of the Act, a lawyer may make an agreement in writing with her client, including a CFA, respecting the amount and manner of payment for the whole or a part of any past or future services, including payment by way of a percentage.

[33] Under ss. 23 and 24 of the Act, no action may be brought to enforce a compensation agreement unless the court is satisfied “that the agreement is in all respects fair and reasonable between the parties”. Where it is not, the agreement may be declared void. The court may then order that the fees and disbursements be assessed “in the ordinary manner.”

[34] As a subset of compensation agreements, CFAs are dealt with specifically under s. 28.1 of the Act. Under s. 28.1(12) of the Act, the Lieutenant Governor in Council may make regulations governing CFAs, including setting the maximum percentage of the fee chargeable thereunder. No such maximum has yet been prescribed. However, under both the current governing regulation and the regulation that governed the 2015 and 2018 CFAs, a CFA is required to state that the lawyer is not entitled to recover more in fees than the client recovers in damages, which effectively caps the percentage chargeable under a CFA at 50 percent: Cogan (Re) (2007), 88 O.R. (3d) 38 (S.C.), at para. 64.

[35] At the time the 2015 and 2018 CFAs were entered into, CFAs were governed by Contingency Fee Agreements, O. Reg. 195/04 (the “Regulation”). The Regulation set out the formal requirements for CFAs under the Act. In addition to the requirement of s. 28.1 of the Act that CFAs be in writing, the Regulation required, among other things:

(1) that the agreement be entitled “Contingency Fee Agreement”;

(2) that it be signed by both the client and the solicitors;

(3) that it contain a statement that: (a) the client and the solicitor have discussed options for retaining the solicitor other than by way of a CFA, including retaining the solicitor by way of an hourly-rate retainer, (b) that the client has been advised that hourly rates may vary among solicitors and the client can speak with other solicitors to compare rates, (c) that the client has chosen to retain the solicitor by way of a CFA, and (d) that the client understands that all usual protections and controls on retainers between a solicitor and client, as defined by the Law Society of Ontario (the “LSO”) and the common law, apply to the CFA, (4) that it contain a statement that informs the client that the client retains the right to make all critical decisions regarding the conduct of the matter; (5) that it contain a statement that the solicitor shall not recover more in fees than the client recovers as damages or receives by way of settlement; and (6) if the client is a party under disability represented by a litigation guardian, as Tyler is here, that it contain a statement: (a) that the CFA must be reviewed by a judge either before the agreement is finalized or as part of the motion or application for approval of the settlement or consent judgment under r. 7.08 of the Rules, (b) that the amount of the legal fees, costs, taxes, and disbursements are subject to the approval of a judge when the judge reviews a settlement agreement or consent judgment under r. 7.08, and (c) that any money payable to a person under disability under an order or settlement shall be paid into court unless a judge orders otherwise under r. 7.09.

[36] The 2018 CFA complied with none of these requirements. The 2015 CFA complied only with the first.

Positions of the Parties

[37] On behalf of the Wallbridge firm, Mr. Adair submits that, although the 2018 CFA fails to comply fully with the requirements of the Regulation, it complies “substantially” with them. He submits that Ms. Vanier was informed verbally by Mrs. Wallbridge about those aspects of the Regulation that were not set out in writing. He submits that the 2018 CFA was, therefore, fair at the time it was entered into.

[38] Mr. Adair further submits that when one considers the complexity of the case, the risk assumed by Mrs. Wallbridge, the result obtained, the time spent, and the level of skill demonstrated, the fee is reasonable now.

[39] On behalf of Ms. Vanier, Mr. Simmons submits that the 2018 CFA was neither fair at the time it was made, nor is it reasonable now. He submits that, at the time the 2018 CFA was signed, Mrs. Wallbridge was aware that the risks associated with proceeding were substantially less than they were when she was first retained in 2011 and when the first CFA was signed in 2015.

[40] Mr. Simmons also submits that, at the time Mrs. Wallbridge recommended that the plaintiff settle for $14 million, she was aware that the defendants had unlimited financial resources such that recovery of any award in favour of the plaintiffs at trial was assured. He submits that Mrs. Wallbridge was also aware at the time the case was settled that the amount of the settlement fell far short of the plaintiffs’ actual damages. As a result, he submits that it would be unreasonable to permit Mrs. Wallbridge to charge a fee that so vastly exceeds the time spent on the file and falls so severely short of the damages that could have been obtained at trial.

Issues

[41] There are two issues to be decided in this motion:

(1) Is the 2018 CFA fair? (2) Is the 2018 CFA reasonable?

Analysis

Is the 2018 CFA fair?

[42] A CFA entered into by a litigation guardian on behalf of a party under disability is not binding unless approved by a judge under r. 7.08 of the Rules. However, such CFAs are not to be disregarded simply on that basis: Henricks-Hunter v. 814888 Ontario Inc. (Phoenix Concert Theatre), 2012 ONCA 496, 294 O.A.C. 333, at para. 17.

[43] In Raphael Partners v. Lam (2002), 61 O.R. (3d) 417 (C.A.), at para. 37, the Court of Appeal for Ontario held that, to satisfy the requirements of s. 24 of the Act, the onus is on the solicitor to show that the way in which a fee agreement was obtained was fair and that the terms of the agreement are reasonable at the time of the hearing. With respect to the fairness requirement, the court wrote, at para. 37:

The fairness requirement of s. 24 of the Act is concerned with the circumstances surrounding the making of the agreement and whether the client fully understands and appreciates the nature of the agreement that he or she executed [Citations omitted.]

[44] Nothing in the Regulation speaks to the consequences of non-compliance with its provisions. A number of cases have held that substantial compliance by lawyers with the law relating to CFAs is enough: Du Vernet v. 1017682 Ontario Limited, 2009 ONSC 29191; Laushway Law Office v. Simpson, 2011 ONSC 4155, 336 D.L.R. (4th) 632; Peter B. Cozzi Professional Corporation v. Szot, 2019 ONSC 1274, aff’d 2020 ONCA 397; and Shay v. Saron Legal Professional Corporation, 2022 ONSC 5557. I am not inclined to be as forgiving as some of my colleagues.

[45] In one respect, the formation of a solicitor and client relationship is like the formation of most other commercial relationships: both sides are looking out for their own interests. However, unlike the formation of most other commercial relationships, the formation of the relationship between a lawyer and her client usually involves a serious power imbalance. Lay people know little or nothing about the complexities of the law, the practicalities of litigation, and the broad scope of arrangements available to those who wish to retain a lawyer. Lay people, therefore, must rely on the lawyer to inform them fully of their rights, their risks, and their potential rewards.

[46] CFAs have been regulated since they were first permitted in Ontario in 2002. On July 1, 2021, the Regulation that governed the 2015 and 2018 CFAs was replaced by the present Contingency Fee Agreements, O. Reg. 563/20. Under s. 7(1) of the present regulation, a CFA for legal services to be provided wholly or partly in exchange for a percentage or proportion of the amount or the value of the property recovered under an award or settlement must be in a form entitled “Standard Form Contingency Fee Agreement”, published on the LSO’s website. In addition, the LSO requires that lawyers and paralegals provide clients considering a contingency fee arrangement with a copy of a guide published by the LSO: Law Society of Ontario, “Contingency fees: What you need to know” (Apr 2021), online: <www.lso.ca>.

[47] Collectively, the Act, the governing regulation, the Standard Form CFA, and the guide now require lawyers to provide even more information in writing than was required by the Regulation that governed the 2015 and 2018 CFAs. This additional information includes some of the different ways contingency fees can be set up (such as staged or graduated contingency fees) and the potential disadvantages of a CFA (such as the possibility that the client may pay more under a CFA if the case settles early than she would if she had been paying fixed fees).

[48] The Act and the regulations governing CFAs serve as a form of consumer protection legislation: Law Society of Ontario, “Contingency fee reform – enhancing consumer protection & reducing licensee burdens” (24 June 2021), online: <www.lso.ca>. Such consumer protection legislation generally requires strict compliance with the governing statute and regulations. For example, under s. 43(2) of the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A (the “CPA”), agreements made at a place other than the seller’s place of business or other specified commercial sites (“direct agreements”) may be cancelled by a consumer up to one year after they are made unless the consumer receives a copy of the agreement that complies fully with the CPA and the governing regulation. Under s. 93(1) of the CPA, agreements between suppliers and consumers for goods or services (“consumer agreements”) are presumptively unenforceable against the consumer unless the agreement complies with the CPA and the regulations made under it. There is no requirement under these provisions that a consumer demonstrate that the breach of the Act or regulations resulted in unfairness; it is presumed. [^2]

[49] As evidenced by the way in which the Legislature and the LSO have acted to increase the protection afforded to people entering into CFAs with lawyers, I conclude that the requirements of the Regulation that governed the CFAs in this case were not mere formalities. They were a means of providing crucial pieces of information designed to ensure that the lawyer-client imbalance was attenuated. For this reason, it seems to me that the further a CFA strays from compliance with the governing legislation and regulations, the more difficult it should be for the lawyer to satisfy her onus that the CFA was entered into fairly.

[50] Compliance with the governing legislation was particularly important in this case. Ms. Vanier was a vulnerable client. She was born and raised on a farm in Espanola. She had only a high school education, which she acquired in French. After high school, Ms. Vanier worked as a heavy equipment operator for about six years. Prior to Tyler’s birth, she was working at a gas bar. She had no experience dealing with lawyers outside of a single real estate transaction.

[51] Mrs. Wallbridge concedes that Ms. Vanier’s life changed dramatically after Tyler was born. Ms. Vanier and her husband were at a loss as to how they would care for and raise Tyler on their modest incomes given Tyler’s severe impairments. I have no difficulty concluding that, at the time that Ms. Vanier first went to see Mrs. Wallbridge and throughout their relationship thereafter, Ms. Vanier was in dire circumstances. I also have no difficulty concluding that, when Ms. Vanier met with Mrs. Wallbridge to sign the 2015 CFA, her hopes that Mrs. Wallbridge could help her had been raised because Mrs. Wallbridge had concluded her investigation and recommended that the family sue those whom they believed were responsible for Tyler's injuries.

[52] If Mrs. Wallbridge kept Ms. Vanier fully informed of developments on the case, as she was required to do, then Ms. Vanier’s hopes must have been raised even further when she signed the 2018 CFA, three years after the lawsuit was commenced. As Ms. Vanier’s hopes grew, so did the need for information to level the playing field between the lawyer and the client. And yet, crucial information was missing from both the 2015 and 2018 CFAs, including the fact that there were other options available besides a fixed percentage contingency fee, that Ms. Vanier had the right to make all critical decisions regarding the conduct of the matter, and that the CFA must (not “may”) be reviewed by a judge.

[53] One piece of missing information was particularly important here. While the 2015 and 2018 CFAs provided for a contingency fee of one-third of the compensation, that percentage only applied if the action was settled before “trial preparation” (a term that was not defined in either CFA). The CFAs provided that if, however, the action was settled “during trial preparation, during trial or following judgment”, the contingency fee changed. In almost every conceivable case, it went up.

[54] In the 2015 CFA, although the fee changed to 25 percent of the compensation (versus 30 percent), the client was also required to assign the costs awarded at trial to the Wallbridge firm. An example of how this might work was included in the CFA. In the example, the overall fee, (including the costs award, but excluding the disbursements and taxes) was 45 percent of the damages awarded.

[55] According to Mrs. Wallbridge, the 2015 CFA was amended because it had come to the Wallbridge firm’s attention that it might be improper to require a client to assign her costs award to the firm: see Hodge v. Neinstein, 2015 ONSC 7345, 129 O.R. (3d) 111, aff’d in part 2017 ONCA 494, 136 O.R. (3d) 81, leave to appeal to S.C.C. refused, 37739 (December 7, 2017). Thus, the 2018 CFA provided that, if the lawyer was required “to prepare for trial and/or to conduct a trial” the legal fees would be 25 percent of the settlement or judgment and “the total preparation and/or trial time of the lawyers and support staff at the hourly rate set out [elsewhere in the agreement] up to the amount paid by the defendant for trial preparation and trial time”. Although the 2018 CFA provided that the client would receive the costs, in my view, the amendment to the CFA really only converted those costs into legal fees recoverable from the award, rather than by assignment.

[56] The 2018 CFA also included an example of the calculation of the contingency fee in the event that the case was settled after trial preparation began. Like the example in the 2015 CFA, the example in the 2018 CFA included a costs award of 20 percent of the damages, exclusive of HST and disbursements. Also like the 2015 example, the overall percentage charged equated to 45 percent. However, had the costs awarded at trial risen to 25, 30, or even 50 percent, as they might have through the skillful use of a formal offer to settle, the Wallbridge firm would have collected more in fees than the client would have recovered in damages. Nowhere in either the 2015 or the 2018 CFA was it explained to the client that this was improper and that the lawyer could not recover more in fees than the lawyer recovered in damages.

[57] Mrs. Wallbridge deposes that she discussed the terms of both the 2015 and the 2018 CFAs with Ms. Vanier and that she explained to Ms. Vanier the missing information, including the limit on counsel’s fee. I have trouble with this evidence. I cannot understand why, if Mrs. Wallbridge realized that she had to discuss these important features of a valid CFA with Ms. Vanier, Mrs. Wallbridge would not have added the information to the 2015 CFA. This would have conclusively demonstrated that the information had been conveyed to the client.

[58] I also have trouble understanding why, even if it seemed unnecessary to amend the 2015 CFA to include these regulatory requirements once she explained them to Ms. Vanier, Mrs. Wallbridge would not have included them when she drew up the 2018 CFA. This would have ensured compliance with the Regulation, which Mrs. Wallbridge deposes was the purpose of amending the 2015 CFA to begin with.

[59] In these circumstances, I accept the evidence of Ms. Vanier that she simply assumed that the CFAs she had been asked to sign were “a standard agreement”, that they would be “fair and reasonable for Tyler and for [herself]”, and that she was unaware at any time that the CFA required court approval.

[60] For all the foregoing reasons, even if I accepted the “significant compliance” test used by my colleagues in the cases I mentioned earlier, I would not be satisfied that the 2018 CFA was entered into fairly.

[61] I now turn to the reasonableness requirement.

Is the 2018 CFA reasonable?

[62] In Raphael Partners v. Lam, at para. 50, the Court of Appeal referred to four “well[-]established” factors in assessing the reasonableness of the CFA in question: the time expended by the solicitor, the legal complexity of the matter at issue, the results achieved, and the risk assumed by the solicitor: see also Henricks-Hunter v. 814888 Ontario Inc. (Phoenix Concert Theatre), at para. 22.

[63] The Act requires that the CFA be both fair and reasonable. Although the Court of Appeal in Raphael Partners v. Lam held that reasonableness should be assessed as of the date of the hearing and fairness as of the date of the agreement, it seems to me that the two requirements are very closely related. I cannot see how an agreement that was unreasonable when it was entered into could be fair, nor how an agreement that is unfair when the fee is due could be reasonable.

[64] Nonetheless, I propose to assess the reasonableness of the CFA in this case by considering the four factors listed above only as of the date of the hearing.

The Time Expended by the Solicitor

[65] Mrs. Wallbridge deposes that she spent approximately 3,189 hours working on this case and that her law clerk spent approximately 130 hours. At the hourly rates set out in the 2015 and 2018 CFAs of $650 for Mrs. Wallbridge and $150 for the clerk, Mrs. Wallbridge deposes that the total fees on an hourly basis would be roughly $2,092,030, plus HST and disbursements.

[66] The problem is that Mrs. Wallbridge did not keep contemporaneous track of her time. There are no dockets. When Mrs. Wallbridge was asked during cross-examination on her affidavit how she was able to reconstruct more than 3,000 hours of work spread out over more than 12 years, she responded that it was because she “recalls these things.” I have trouble accepting that.

[67] Mrs. Wallbridge's estimate is based on what I expect must have been a pain-staking reconstruction of the time she spent on this file. However, any such reconstruction is bound to be subject to the kinds of biases, including subconscious biases, inherent in every such effort. On the evidence in this case, the opportunity for such bias to creep into the exercise is high. I need only go to the second page of the 220 pages comprising the reconstructed account to demonstrate my point.

[68] The reconstructed account states that Mrs. Wallbridge spent 15 hours (exactly) on February 10 and 11, and another 15 hours (exactly) on February 14, 15, and 16, 2011, reviewing, organizing, and making notes from records obtained from the hospital. It also shows that Mrs. Wallbridge spent 20 hours (exactly) over the weekend of February 26 and 27, 2011, “determining and directing” that records be organized in a certain fashion. The same is true for entries throughout the account, such as the entry on March 6, 2011, of 10 hours for time spent “reviewing the file and determining course of action" and 5 hours for time spent on October 31, 2013, “to file review and notes”.

[69] Without some supporting documentation showing when work began and when it finished over the course of these multi-day file reviews, it is difficult to understand how the numbers could be so “round”.

[70] While I am prepared to accept that Mrs. Wallbridge spent a lot of time working on this case, I am not persuaded that her reconstructed accounts are accurate.

The Legal Complexity of the Matter

[71] Counsel for Ms. Vanier concedes that there is “an inherent complexity in birth trauma cases”. This is certainly true. Professional negligence, causation, and damages are almost always hard-fought issues in these cases. This is because the damages are usually very high.

[72] The issue in this motion is whether the legal complexity rose to a level beyond what is normal for this type of case. There is competing evidence on that issue.

[73] Mrs. Wallbridge deposes that she and her partner are two of only about 20 lawyers in Ontario who practice in the area of birth trauma. On behalf of the Wallbridge firm, Mr. Adair has filed the affidavit of Richard Halpern, a lawyer practicing in Toronto who specializes in prosecuting birth trauma cases. Mr. Halpern deposes that the number of lawyers in Ontario who could capably handle a case like this is even lower. He says that there are no more than a dozen.

[74] Mr. Halpern deposes that this case was even more difficult than many birth trauma cases because Tyler's SOGC score immediately after birth appeared to deny a causal link between the substandard care he received and the injury he suffered. The SOGC score is a guide devised by the Society of Obstetricians and Gynecologists. Mr. Halpern deposes that many lawyers practicing in the area of medical malpractice are not aware that there is competing scientific data, including guidelines from the American College of Obstetricians and Gynecologists (ACOG), the American counterpart to the SOGC, that undermines the validity of the SOGC guidelines, including the absence of multi-organ injury. In Mr. Halpern's opinion, Mrs. Wallbridge prosecuted this action “with consummate skill and experience”.

[75] On the other side of the issue, although he agrees that Mrs. Wallbridge handled the case well, Lorenzo Girones, K.C., disagrees with Mrs. Wallbridge and Mr. Halpern about how complex the case was and how many lawyers could also have competently handled it. Mr. Girones is highly experienced in the area of birth trauma litigation, perhaps even more experienced than Mr. Halpern. Whereas Mr. Halpern was called to the bar of Ontario in 1984, Mr. Girones was called to the bar in 1970 and has practiced mainly in the medical malpractice area since then. He has taken many birth trauma cases to trial. In fact, Mrs. Wallbridge and her partner got their start practicing in this area of the law while working for Mr. Girones in Timmins for about 10 years.

[76] Mr. Girones deposes that he knows Mrs. Wallbridge and respects her abilities. His evidence is that she is well qualified to act as plaintiffs’ counsel on birth trauma cases of this nature. He deposes that it would be unfortunate if, as Mrs. Wallbridge deposes, she would not take on birth trauma cases in the future if she was unable to recover fees like the ones sought in this case, as he believes she is competent, even if neither she nor her partner have ever taken a birth trauma case to trial.

[77] Nonetheless, on behalf of the litigation guardian, Mr. Girones deposes that this case was typical of birth trauma cases; it was neither extraordinarily difficult, nor extraordinarily complex. In Mr. Girones' opinion, in a case where the defendants paid $14 million to settle the case before trial, “it is difficult to understand how the defence had any merit” at all.

[78] Contrary to the views expressed by Mrs. Wallbridge and Mr. Halpern, Mr. Girones deposes that there are more than only 12 or even 20 lawyers competent enough to have handled this case. During the cross-examination on his affidavit, Mr. Girones provided the names of over 40 such lawyers, although not all of them were still practicing.

[79] Notwithstanding the conflict between the evidence of Mr. Halpern and Mr. Girones, I accept that Mrs. Wallbridge demonstrated skill and experience in investigating and preparing this case for trial. I also accept that the number of lawyers in Ontario who could competently do that is limited. The fact that Mrs. Wallbridge has never tried a birth trauma case, however, remains an issue for reasons I will come to shortly.

The Result Achieved

[80] At first blush, a settlement of $14 million seems like an outstanding result. As Mr. Adair points out, Mr. Girones testified during his cross-examination that the most he ever settled a birth trauma case for was $12 million. However, the result must be assessed in light of the damages suffered in the case and the degree to which it was possible to recover those damages at trial. I propose to deal with the extent of the damages in this part of my analysis. I will deal with the probability of recovering those damages at trial when I address the degree of risk assumed by Mrs. Wallbridge, below.

[81] Mrs. Wallbridge prepared two damages estimates for use at the March 2021 JPT. In the first, she set out the plaintiffs’ position on damages; in the second, she set out that of the defendants. The plaintiffs’ estimate totalled $32,250,468.12; the defendants’ estimate totalled $19,539,829.67. When one “backs out” the costs portion of the settlement, the damages recovered fall about $10 million dollars short of even the defendants’ figures for the damages suffered. The only way in which the money the plaintiffs will receive can hope to cover Tyler's damages is if Ms. Vanier continues to be responsible for 100 percent of his care, an expense that the defendants themselves estimated at over $15 million.

[82] On behalf of the Wallbridge firm, Mr. Adair relies on the decision in Cogan (Re) in support of the amount of the fee sought in this case. Cogan (Re) does, indeed, provide a useful comparison when it comes to assessing the result achieved here. However, I do not see it as being very helpful to the Wallbridge firm.

[83] There are a number of similarities between Cogan (Re) and this case. In Cogan (Re), as in this case, the child suffered from cerebral palsy which was alleged to have been caused by the negligence of the delivering doctor and attending nurses: at para. 1. The case was settled before trial for payment of the sum of $12,543,750 in damages: Cogan (Re), at para. 3. In Cogan (Re), the lawyer acting for the plaintiffs sought approval of a fee of roughly $4.2 million on the basis of a CFA in which the litigation guardian and the lawyer had agreed upon a fee of one-third of the total amount recovered: at paras. 2-3. [^3] In Cogan (Re), as in this case, the lawyer agreed to recover nothing if he was not successful: at para. 10. In Cogan (Re), the fee was approved: at para. 75.

[84] However, there are also a lot of distinguishing features in Cogan (Re). One of them is the fact that, as the motion judge in Cogan (Re) held in his reasons, at para. 22, the amount available to meet the injured child's needs was very close to the maximum amount claimed for the child's possible future needs. Thus, in Cogan (Re), the settlement funds were more than what the defendants had estimated was necessary to pay for the costs of future care. Indeed, the amount of the settlement was approximately three times what the defendants had alleged were the plaintiffs’ overall damages: Cogan (Re), at para. 45. That is not the situation here. Here, the amount of the settlement falls far short of the amount of the actual damages suffered, even as estimated by the defendants.

[85] I will return to some of the other distinguishing features of Cogan (Re) in the next part of my analysis.

The Risk Assumed by the Solicitor

[86] In Raphael Partners v. Lam, the Court of Appeal explained that this factor includes the risk of non-payment “where there is a real risk of an adverse finding on liability in the client's case”: Raphael Partners v. Lam, at para. 50, citing Cohen v. Kealey & Blaney (1985), 10 O.A.C. 344 (C.A.); Desmoulin v. Blair (1994), 21 O.R. (3d) 217 (C.A.).

[87] In my view, the risk that Mrs. Wallbridge would not be paid was low at the time that this case was settled.

[88] At the time the 2015 CFA was entered into, Mrs. Wallbridge believed that Tyler's case had potential. Notwithstanding Dr. Dufour's notes that Tyler appeared normal at birth and that the Apgar scores did not meet the SOGC guidelines for perinatal asphyxia, Mrs. Wallbridge deposes that she felt from the beginning of her investigation that the nurses were negligent in their administration of oxytocin and in their failure to respond to the fetal heart rate in the latter part of the delivery.

[89] By the time Ms. Vanier was asked to sign the 2018 CFA, Mrs. Wallbridge was even more confident of the chances of success. As she admits, she was satisfied following the completion of the examinations for discovery of the defendants in 2017 that the nurses were liable. One of the nurses had admitted that she was inexperienced at the time of Tyler's birth and that she could not remember if she had called for the doctor at a time when she admitted she should have. The lawyers for the doctor were also of the view that the nurses were at fault. Thus, the chances were good that the nurses, or at least one of them, would be found liable.

[90] By the time of the JPTs and the mediation, the issue of causation had also become much less of a threat to success. As I explained earlier, genetics had been eliminated as a potential cause. With respect to the theory that Tyler's injuries were caused by meconium-induced vascular necrosis and mild chorioamnionitis, the great weight of the medical evidence was against it. Only one doctor, whose opinion had not been served on behalf of the nurses until 2020, supported such a theory. Every plaintiffs’ doctor who was qualified to render an opinion on the issue disagreed with it, for what appeared to be very good reasons. Even the expert doctors whose opinions had been served on behalf of Dr. Dufour agreed that the fetal heart rate records showed that an hypoxic environment existed in the last one to one and one-half hours before Tyler's birth. In these circumstances, I can understand why Mr. Girones was of the view that there was no obvious defence in this case.

[91] In my opinion, therefore, the risk of non-payment in this case was very different than the risk of non-payment in Cogan (Re). In Cogan (Re), in order to succeed, the plaintiffs had to prove that the injuries to the child occurred during a 15-minute period of time during which the doctor was attending to another woman giving birth at the same time and that the doctor was negligent for having done so: at para. 54.

[92] Of course, there is always some risk in proceeding to trial. However, on behalf of Ms. Vanier, Mr. Simmons argues that there was no risk at the time that this case was settled, because Mrs. Wallbridge never intended to go to trial.

[93] It is true, as Mr. Simmons submits, that Mrs. Wallbridge admitted during her cross-examination that neither she nor her partner have ever taken a birth trauma case to trial. For that reason, I accept Ms. Vanier's evidence given on cross-examination that Mrs. Wallbridge told her that she never took her cases to trial and that she always settled out of court, instead. I also accept the uncontroverted affidavit evidence of Ms. Vanier that Mrs. Wallbridge told her that the $14 million settlement was “better than a kick in the head”. However, in this case, Ms. Vanier has candidly admitted that Mrs. Wallbridge also told her that she would likely “have obtained a larger settlement at trial or closer to trial”, but that Ms. Vanier did not want to wait and did not want to take the risk associated with a trial or an appeal.

[94] On behalf of his clients, Mr. Adair points out, quite rightly, that Ms. Vanier not only approved “wholeheartedly” of the settlement of $14 million, but that she also went to see Mr. Girones himself to obtain his advice about the proposed settlement and the legal fees involved in that settlement. [^4] That does not end the matter, however.

[95] As R. Smith J. pointed out in Cogan (Re), at para. 20, the task of a court asked to approve a settlement, including the legal fees agreed to by a litigation guardian on behalf of a party under a disability, is to determine whether the disabled party needs to be protected from “any mistakes which may have been made by the litigation guardian.” He concluded in that case that the litigation guardian had not made a mistake: Cogan (Re), at para. 27. I reach the opposite conclusion in this one.

[96] In Cogan (Re), the injured child's parents were both accountants: at para. 8. The mother was acting as the litigation guardian: Cogan (Re), at para. 8. The parents had initially hired a lawyer on an hourly basis. After five years, they had incurred legal fees of $168,000 and were in default on five orders by virtue of which they had been ordered to provide an expert report within a certain time period: Cogan (Re), at para. 9. The parents decided that they could not risk further eroding their ability to pay for their injured child's needs by continuing to pay a lawyer on an hourly basis: Cogan (Re), at para. 10. Therefore, they retained Mr. Cogan, who agreed to take the case on a contingent fee basis: Cogan (Re), at para. 10.

[97] Without meaning in any way to be disrespectful, Ms. Vanier is not like the parents of the injured child in Cogan (Re). She has only a high school education. She and her late husband did not earn the kind of income that the parents did in Cogan (Re). Ms. Vanier had to quit her job after having Tyler in order to take care of him. At the time the present action was settled, she and Tyler were living in geared-to-income rental housing.

[98] As Ms. Vanier deposed in her 2023 affidavit in support of the settlement, the settlement will allow her to overcome these challenges and to give Tyler a better life, but at a cost: she will have to care for Tyler herself for the rest of her life. She was, and remains, willing to do that. However, while Ms. Vanier may always be willing to care for Tyler, she will not always be able to do so. At the time the action was settled, Ms. Vanier could no longer lift Tyler alone from the ground. She had early-onset arthritis. She could not push his wheelchair in the snow.

[99] With respect, I have concluded that Ms. Vanier made a mistake in agreeing to the terms of the CFA. Because of the single percentage applicable regardless of the amount of the settlement, it results in an unreasonable fee in the context of this settlement. It over-compensates the lawyer and under-compensates the clients. In fairness to Ms. Vanier, she did realize after agreeing to settle the case for $14 million that there would not be enough money to properly care for Tyler. For that reason, she asked Mrs. Wallbridge if she would reduce her fees. However, Mrs. Wallbridge refused to do so.

[100] In these circumstances, I conclude that it would be unreasonable to permit Mrs. Wallbridge to charge the fee she seeks.

Determining a Reasonable Fee

[101] As I mentioned earlier, under the Act, where the court concludes that a CFA is not fair and reasonable, the court may order that the solicitor's fees be assessed “in the ordinary manner”, which usually means that they are referred to an assessment officer. However, neither party has suggested that this be done in the event that the fee under the CFA is not approved in this case.

[102] On Ms. Vanier's behalf, Mr. Simmons submits, instead, that the fee be set on the basis of a “staggered” scale, which I believe is a reference to the type of CFA referred to in the affidavit evidence of Geoffrey Larmer, a North Bay lawyer practicing in the personal injury field. In this type of arrangement, the percentage fee goes down as the amount of the recovery goes up. This is in contrast to other “staggered” arrangements, in which the percentage fee goes up the closer the matter gets to trial. This latter arrangement is the type contemplated by the 2015 and 2018 CFAs, as I have explained.

[103] In his affidavit, Mr. Larmer deposes that he met with Ms. Vanier at the request of Mr. Simmons to explain alternatives to a single fixed-percentage CFA of the type at issue here. He provided her with a copy of a CFA that had been approved by the court prior to settlement in a case involving an injured infant, although not one who was injured at birth, and significant damages. The case was settled for $15 million. The CFA in that case involved a percentage fee that decreased as the amount recovered increased. The CFA provided that the fee would be:

… thirty (30%) percent of gross recovery on all monies recovered up to a maximum of $4 million dollars, plus twenty-five (25%) percent on any monies recovered in excess of $4 million dollars up to $8 million dollars, plus fifteen (15%) percent on all monies recovered in excess of $8 million dollars, plus all solicitor and client disbursements and HST on all fees and appropriate disbursements, less all monies recovered by way of costs be they substantial or partial indemnity costs from the Defendants. The Client understands that the Solicitors and Client contingent fees are not set by law but rather are negotiable between the Solicitors and the Client.

[104] Ms. Vanier concedes that it is not appropriate for me to re-write the CFA to accord with Mr. Larmer's precedent. Instead, my task it to determine a fee that is reasonable in all of the circumstances, considering the time spent by Mrs. Wallbridge and members of her firm, the legal complexity of the matter, the result achieved, and the risk assumed.

[105] Taking all of these things into account, I have concluded that a fee of $3,250,000 is both fair and reasonable in the circumstances of this case. Although I have not attempted to re-write the CFA, I have used the following staggered percentages as a rough guide:

• 33 percent of the first $5 million recovered as damages,
• 25 percent of the next $5 million recovered as damages, and
• 15 percent of the remaining amount recovered as damages.

[106] In my respectful view, this formula properly balances the factors set out above with the fact that the recovery in this case is as high as it is because of the devasting effect on the plaintiffs of the injuries suffered by Tyler. As I will explain, in a case involving catastrophic damages, the formula I have used as a rough guide results in what I believe is a fair and reasonable fee regardless of the amount of damages recovered.

[107] If, notwithstanding the actual damages suffered, it had been reasonable to settle this case for $5 million (or less), there would necessarily have been a more significant risk of non-recovery. In such a situation, a fee of 33 percent of the damages ($1,650,000 on $5 million) would ensure that Mrs. Wallbridge recovered roughly the value of the time I believe she spent on the file.

[108] If, however, it had been reasonable to settle the case for $5 million to $10 million in damages, this would necessarily have reflected a reduced risk of non-recovery or greater skill on the part of Mrs. Wallbridge, or both. In such a situation, a further fee of 25 percent on the amount of damages recovered above $5 million ($1,250,000 on $5 million) would ensure that Mrs. Wallbridge was rewarded for her skill and the risks she took in pursuing the matter to a more successful conclusion.

[109] Where the case results in damages recovered of more than $10 million, as it did here, a further fee of 15 percent on the amount recovered above $10 million (roughly $350,000 on $2,325,785, in this case) ensures that Mrs. Wallbridge is rewarded for securing an amount that more closely approximates the damages actually suffered by her clients, while at the same time ensuring that as much of the amount recovered as is reasonable is used to remedy those damages.

Conclusion

[110] I understand and accept that CFAs serve as a means of providing access to justice for litigants like Ms. Vanier and her son who would not otherwise be able to afford to retain a lawyer. I also understand and accept that lawyers who do birth trauma litigation need to be well compensated because they often risk their own resources investigating and prosecuting such cases. However, CFAs must be fair and reasonable in the context of each and every case, not in the context of the lawyer's practice as a whole.

[111] For the reasons expressed above, I have concluded that the CFA in this case was neither fair nor reasonable. Instead, I have allowed a fee that I believe appropriately balances the interests of the lawyer with those of the clients in the context of the settlement in this case. An order will issue allowing legal fees in the amount of $3,250,000, plus HST and disbursements.

Costs

[112] I understand from the submissions made during the hearing of the motion that the issue of costs may require a further hearing. Unfortunately, there is no more court time available in 2025. For that reason, the parties are encouraged to agree on costs. If that is not possible, the parties are further encouraged to file written submissions, rather than waiting for a hearing date, limited to 10 typewritten pages, exclusive of attachments, as follows:

(1) on behalf of the plaintiffs, within 30 days of the release of these reasons; and (2) on behalf of Mrs. Wallbridge, within 30 days of the receipt of the plaintiffs’ submissions.

[113] If counsel still believe a hearing date is required, one may be set through the office of the trial coordinator in North Bay.

[114] I would like to close by thanking Mr. Adair and Mr. Simmons for their very helpful submissions and for the pleasure of having the assistance of such experienced and capable counsel.

M.G. Ellies J.

Released: December 10, 2024

Corrected Decision

The text of the original decision was corrected on December 16, 2024, and the description of the correction is appended below:

• The general heading has been amended to correct an error in which Mr. Simmons, K.C., was listed as counsel for the plaintiffs and Mr. Adair, K.C., as counsel for the defendants.

Footnotes

[^1]: The 2015 CFA used the words “33.33 percent”, rather than the “1/3” used in the 2018 CFA, the effect of which was the same.

[^2]: Section 93(2) of the CPA does provide a mechanism for a seller or supplier to seek enforcement of the agreement notwithstanding the non-compliance. However, the onus is on the seller or supplier to demonstrate that non-enforcement would result in inequity.

[^3]: There appears to have been no issue raised in Cogan (Re) about the legality of a fee calculated on the amount received for costs, including disbursements. However, the decision does refer to the sum of $12,543,750 as being in respect only of damages: Cogan (Re), at para. 11.

[^4]: It is not clear whether Ms. Vanier consulted with Mr. Girones about the $13 million settlement or the $14 million settlement. In his cross-examination, Mr. Girones seems to suggest that it was the $13 million settlement because he said that he encouraged Ms. Vanier to ask Mrs. Wallbridge to settle for $14 million, rather than $13 million: transcript, at p. 17, qq. 88-90. However, during her cross-examination, Ms. Vanier seems to suggest that she consulted Mr. Girones about the $14 million settlement: transcript, p. 38, q. 135.