COURT OF APPEAL FOR ONTARIO

CITATION: Krukowski v. Aviva Insurance Company of Canada, 2020 ONCA 631

DATE: 20201007

DOCKET: C67490

Juriansz, Hourigan and Thorburn JJ.A.

BETWEEN

Adam Krukowski, a party under disability by his

Litigation Guardian, Ewa Krukowski

Applicant (Respondent)

and

Aviva Insurance Company of Canada

Respondent

Nick de Koning, for the appellant, Deutschmann Law Professional Corporation

No one appearing for the respondent, Adam Krukowski

Heard: October 1, 2020 in writing

On appeal from the judgment of Justice C. Stephen Glithero of the Superior Court of Justice, dated June 10, 2019, with reasons reported at 2019 ONSC 3557.

REASONS FOR DECISION

I. OVERVIEW

[1] The appellant, Deutschmann Law Professional Corporation (“Deutschmann”) appeals the quantum of costs ordered in a settlement of an action brought on behalf of a person under disability pursuant to Rule 7.08 of the Rules of Civil Procedure, RRO 1990, Reg. 194.

[2] The application judge approved the settlement but reduced the award for legal fees.

[3] Deutschmann claims the application judge cited the correct legal test for consideration of legal fees in respect of a settlement on behalf of a person under disability, but failed to consider those factors and apply them to the facts at hand. Deutschmann submits the failure to consider all of the factors constitutes an error of law, to which the correctness standard applies.

II. THE ISSUE

[4] The only issue on this appeal is whether the application judge erred in law by failing to apply the correct legal test to the determination of whether legal costs of the accident benefits claim are reasonable.

III. ANALYSIS AND CONCLUSION

Evidence Regarding the Plaintiff’s Condition

[5] On January 2014, Adam Krukowski, the plaintiff, had a serious snowmobile accident. He ran into a ditch, hit a culvert and was thrown from the snowmobile. He suffered a brain injury, right femur fracture and a fractured sternum.

[6] The snowmobile was insured only for use on Mr. Krukowski’s family’s rural property and he was therefore operating a vehicle that was not insured. As such, he was not eligible for income replacement benefits or housekeeping and home maintenance benefits.

[7] His accident benefits were limited to medical or rehabilitation and attendant care benefits.

[8] On May 6, 2014, a health practitioner certified that Mr. Krukowski’s physical and cognitive deficits would prevent him from returning to work.

[9] On June 3, 2014, Mr. Krukowski was diagnosed by a neuropsychologist as having “rather severe neurocognitive impairments relative to his severe traumatic brain injury”. The neuropsychologist determined that Mr. Krukowski was unable to return to work and would require supervision once he returned home.

[10] On November 17, 2014, one month after Mr. Deutschmann, the principal of Deutschmann, was retained, Mr. Krukowski was found to have suffered a catastrophic impairment. Mr. Krukowski’s severe brain injury and related cognitive symptoms were found to require ongoing attendant care. Mr. Krukowski was also found to have serious difficulties with speech and language, ongoing cognitive and behavioural difficulties, and unable to manage his own financial affairs.

The Retainer Agreements

[11] On October 10, 2014, Mr. Krukowski’s sister, on his behalf, entered into a contingency fee retainer agreement (“the first retainer agreement”). It provided that counsel would receive 15% of any full or partial settlement reached with the accident benefits insurer, including costs and interest, disbursements and H.S.T. If no settlement was reached, no fees would be charged. Upon termination of the retainer, the fee would be $350 per hour for a partner, $200 per hour for an associate, and $100 per hour for a law clerk.

[12] On December 11, 2017, the office of the Public Guardian and Trustee (“PGT”) advised that it was now the statutory guardian of Mr. Krukowski’s property, pursuant to the Substitute Decisions Act, 1992, S.O. 1992, c. 30.

[13] On March 15, 2018, a second contingent fee agreement was signed between Deutschmann and PGT acting as litigation guardian (“the second retainer agreement”). The second retainer agreement provided for a contingent fee of 15% on the amount recovered, exclusive of costs taxes and disbursements and H.S.T. It provided that Mr. Krukowski was entitled to any costs. It provided that if the retainer was terminated, fees would be calculated on the basis of $192 per hour for Mr. Deutschmann and $60 per hour for clerks.

[14] On August 2, 2018, Mr. Krukowski’s sister was appointed guardian of his property from that point on, and a third contingent fee agreement was signed in October 2014 (“the third retainer agreement”). The terms of the third retainer agreement were identical to those in the first retainer agreement.

The Terms of Settlement

[15] The proposed settlement before the application judge provides for a settlement figure of $1,200,000 by the insurer. Counsel was to receive a total of $205,691.91. The remaining $994,308.09 would be used to purchase a structure to provide for a non-indexed monthly income of $3,085.53 for life, with a guarantee to a secondary payee or beneficiary for 35 years. In addition, Mr. Krukowski would continue to receive ODSP in the amount of $1,151 for a combined monthly income of $4,236.53.

[16] The sum payable for legal fees was calculated on the basis of the 15% contingent fee (being $180,000 and H.S.T. in the amount of $23,400), plus disbursements.

[17] The application judge sought the opinion of the PGT in respect of the settlement and legal fees. PGT advised that in its opinion, the settlement was a favourable one for Mr. Krukowski as it generated an income which is expected to exceed his monthly expenses. PGT recommended that 10% of the settlement amount plus tax was appropriate for costs. This would amount to $135,600.

[18] PGT advised that 15% of the remainder of the settlement be allocated for legal fees which would result in fees to counsel in the amount of $180,415.80 ($159,660 plus H.S.T.). PGT took the position that this sum was reasonable in view of the work completed and results achieved.

[19] Mr. Krukowski’s sister agreed with the view expressed by PGT.

[20] Mr. Deutschmann accepted the PGT response and agreed to reduce his fee to $180,415.80 with the amount created by the reduction in fees to be placed into the proposed structure.

Time Actually Spent by Legal Counsel

[21] The value of the time spent by everyone at Deutschmann who worked on this file amounted to $18,743.99 and $2,291.91 was spent on disbursements. Time spent working on this file by everyone in the office was 115.6 hours of which 24.7 hours were spent by Mr. Deutschmann, himself.

[22] Mr. Deutschmann’s legal fees were calculated on the basis of $350 per hour while working under the first and third retainer agreements, and $192 per hour while working under the second retainer agreement. Clerks’ time was docketed at $100 per hour under the first and third retainer agreements and $60 per hour under the second retainer agreement.

Considerations to be Taken into Account in Arriving at Fair and

Reasonable Legal Costs

[23] The fixing of costs is a discretionary exercise by the court. A fee agreement is not binding on a party under disability until it is approved by the court: Henricks-Hunter v. 814888 Ontario Inc., 2012 ONCA 496, 294 OAC 333.

[24] Court approval of settlements for persons under disability is founded on the need to protect those who cannot care for themselves. The court therefore has a responsibility to carefully consider the relevant materials, and to assess the fairness and reasonableness of the proposed fees to ensure that the settlement, including provision for legal costs, is in the best interests of the protected person for his or her benefit: Wu (Estate) v. Zürich Insurance Company (2006), 2006 CanLII 16344 (ON CA), 268 D.L.R. (4th) 670 (C.A.), leave to appeal refused, [2006] S.C.C.A. No. 289.

[25] As noted by the application judge at para. 49 of his reasons, the factors to be considered when fixing costs to be paid to counsel for a party under a disability include:

(i) the time expended by the solicitor;

(ii) the legal complexity of the matters dealt with;

(iii) the degree of responsibility assumed by the solicitor;

(iv) the monetary value of the matters in issue;

(v) the importance of the matters to the client;

(vi) the degree of skill and competence demonstrated by the solicitor;

(vii) the results achieved;

(viii) the ability of the client to pay;

(ix) the client's expectation of the amount of the fee;

(x) the financial risk assumed by the solicitor of pursuing the action, including the risk of non-payment, the likelihood of success and the amount of the expected recovery; and

(xi) the social objective of providing access to justice for injured parties.

Aywas v. Kirwan, 2010 ONSC 2278, at para. 18, per Hackland J. and Re Solicitor, 1973 CanLII 653 (ON CA), [1973] 1 O.R. 652 (C.A.).

[26] The solicitor has the onus to satisfy the court that the contingent fee agreement is fair: Raphael v. Lamb (2002), 2002 CanLII 45078 (ON CA), 61 O.R. (3d) 417 (C.A.), at para 37.

Application of the Relevant Factors in this Case

[27] The application judge agreed that the terms of settlement were fair and that “were it not for the structured settlement proposed, medical/rehabilitation benefits would be exhausted well before the period of life expectancy, as with attendant care benefits, under the proposed settlement.” He concluded that “the settlement was adequate to meet Adam’s foreseeable needs.”

[28] The application judge also addressed the monetary value of the matter in issue and the importance of the settlement to Mr. Krukowski and his family. The application judge noted that the settlement would provide for Mr. Krukowski’s present and future care costs:

Without a settlement, there is no guarantee that Aviva would continue to fund the various benefits or at the level now being paid. … The proposed settlement provides finality and security to Adam and his family caregivers as opposed to a future or greater uncertainty.

[29] The application judge also found that the retainer agreement was obtained in a fair manner, it was in writing, it was clear, the terms were discussed with the litigation guardian, and they were freely understood.

[30] He noted that there was no objection to the fees sought and carefully laid out the terms of the settlement such that the ability to pay was included.

[31] The application judge referred to the degree of experience and expertise of the law firm. He noted that the are “very experienced in this field” and that 75% of their work involves motor vehicles and accident benefits. He added that he accepts “Mr. Deutschmann’s assertions that he has considerable experience in this field as do his clerks.”

[32] He also noted the time actually spent on the file including the time spent by Mr. Deutschmann.

[33] The application judge noted however that:

(i) Mr. Deutschmann conceded the legal issues were not complex;

(ii) Accident benefits were already being paid by Aviva before Mr. Deutschmann was retained;

(iii) The determination that Mr. Krukowski was catastrophically injured and thus entitled to a substantial settlement was received shortly after Mr. Deutschmann was retained;

(iv) There was therefore was “essentially no risk” assumed by the law firm;

(v) While the settlement was approved, it was simply “acceptable”; and

(vi) The fees claimed were many multiples of the docketed time valued at counsel’s chosen rates.

[34] Notwithstanding his assessment of all of the factors including the fact that there was little or no risk and the fees were many multiples of the fees docketed, he took into account the fact that the quality of time spent is not always measured by the time expended.

[35] He therefore fixed fees to counsel in the amount of $60,000 plus disbursements and H.S.T. This represents 5% of the settlement amount and more than three times the docketed time invested in the file.

[36] It is clear from the above that the application judge addressed and weighed all of the appropriate factors to be considered in deciding whether it would be fair and reasonable to approve the legal fees sought.

[37] As such, we disagree with Mr. Deutschmann’s assertion that the application judge did not address the factors to be taken into account in deciding whether legal fees are reasonable.

[38] We see no error in the application judge’s articulation of the law or his application of the law to the facts in this case.

[39] For these reasons, the appeal is dismissed.

“R.G. Juriansz J.A.”

“C.W. Hourigan J.A.”

“J.A. Thorburn J.A.”