SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 06-CV-315750
DATE: 20130814

RE: STEPHANIE MARIE HENRICKS-HUNTER, by her litigation guardian, the Office of the Public Guardian and Trustee, BRITNEY STARR HENRICKS, by her litigation guardian, MICHAEL ALBERT HENRICKS, ARIANNA MONIQUE HUNTER, a minor by her litigation guardian, ATLEY HUNTER, MICHAEL ALBERT HENRICKS, CECILIA DELPRIMA HENRICKS and MICHAEL EDWARD HENRICKS, Plaintiffs

AND:

814888 ONTARIO INC. carrying on business as PHOENIX CONCERT THEATRE and SHERBOURNE COMMUNITY CLINIC INC., Defendants

BEFORE: Madam Justice Darla A. Wilson

COUNSEL:
J. Gardner Hodder, Counsel for Howie, Sacks & Henry LLP

Sidney Peters, Litigation Guardian for the Plaintiff, Stephanie Marie Henricks-Hunter and Counsel for the Public Guardian and Trustee

Richard Shekter, Independent Counsel for the Plaintiff Stephanie Marie Henricks-Hunter

HEARD: July 24, 2013

ENDORSEMENT

[1] This is a motion brought by Howie, Sacks & Henry, the law firm that acts for the Plaintiffs. It seeks an order that the contingency fee agreement [“CFA”] entered into between the Plaintiff Stephanie Henricks-Hunter [“Stephanie”] through her litigation guardian, the Public Guardian and Trustee [“PGT”] and the Plaintiffs’ counsel, Howie, Sacks & Henry LLP [“HSH”] dated March 2, 2006 be declared fair and reasonable in accordance with section 24 of the Solicitors Act, R.S.O. 1990, c. S.15. A further order is sought for approval of the settlement pursuant to rule 7.08 of the Rules of Civil Procedure, R.S.O. 1990, Reg. 194 [“the Rules”].

[2] In order to understand the motion, it is necessary to set out briefly the past events which give rise to this motion.

BACKGROUND

[3] Stephanie fell from a second storey balcony on October 27, 2005 while at a concert at the Phoenix Concert Theatre. According to the evidence before me, she climbed on to a balcony that had been marked “off limits” after having consumed a significant amount of alcohol. At the time, she was 34 years of age. As a result of the fall, she sustained a severe traumatic brain injury with associated serious cognitive deficits. She was deemed incapable of managing her finances and person and the office of the PGT was appointed to manage her financial affairs in 2006. Her parents retained authority over her person.

[4] Stephanie was at a long term care facility in Toronto receiving 24 hour a day care until 2009 when she moved to Missouri where her family resides.

[5] The law firm HSH was retained in November, 2005 to bring an action in negligence against the Phoenix and the owner of the premises. A Statement of Claim was issued July 26, 2006 claiming damages as a result of the fall. Claims were included for Stephanie’s parents and brother pursuant to the Family Law Act, R.S.O. 1990 c. F.3. Statements of Defence denying liability were served and the action proceeded in the usual fashion. HSH retained numerous experts on the liability issue. Other experts were retained on damages. The action required 5 or 6 days of discovery.

[6] On March 2, 2006, the PGT, on behalf of Stephanie, drafted a CFA that was subsequently entered into with HSH. That document was attached as exhibit B to the affidavit of Neil Sacks sworn February 13, 2013. This agreement provides that for amounts recovered as net damages on behalf of Stephanie, the solicitor is entitled to recover fees of 25% up to $2.5 million dollars plus taxes and disbursements. Pursuant to the CFA, the amount of party and party costs offered by the Defendant belongs to Stephanie.

[7] In 2007, the claim was amended to assert allegations against the Defendants that they permitted Stephanie to be served excessive amounts of alcohol. The Defendant Phoenix had insurance with liability limits of $2 million. The Defendant Sherbourne had additional insurance with limits of $2 million.

[8] The matter proceeded to mediation on October 22, 2009. The Defendants made an offer to settle, subject to court approval, of $2,050,000 all inclusive. The amount offered for party and party costs was $224,580.00 which included the disbursements of $46,831.27 and GST of $8,464.21.

[9] HSH recommended Stephanie accept this settlement offer, and this was the view of the PGT as well. The fee intended to be rendered by HSH for legal fees was $449,855. The disbursements were $46,831.27. With taxes, the all-inclusive amount sought to be charged for fees, disbursements and taxes was $516,536.98. The amount sought for legal fees was 25% of the sum offered for damages and interest.

[10] According to the affidavit evidence before me from her counsel, the damages of Stephanie could assess in the $9.2 million range. The solicitors for the Defendants assess the range of damages at between $7.2 million and $7.9 million. The offer from the Defendants was $1,825,000 for damages plus the costs. This represented a reduction of $175,000 off the insurance limits of the Defendant Phoenix.

[11] On January 9, 2012, HSH brought a motion for approval of the settlement pursuant to rule 7.08. The documentation contained sworn evidence from Mr. Sacks and from Ms. D’Lorio from the PGT setting out the reasons behind their recommendation that the settlement offer be accepted by Stephanie.

[12] On January 23, 2012, Justice Wilkins approved the settlement proposal but reduced the fees of HSH from the $449,855.00 that was sought to $309,523.80 plus taxes. HSH appealed this order. The PGT took no position on the appeal.

[13] On July 12, 2012, the Court of Appeal released its decision allowing the appeal. It stated that there is a two-step process that must be followed when enforcement of a CFA is sought: the fairness of the agreement must be assessed as of the date it was entered into; and the reasonableness of the agreement must be assessed as of the date of the hearing [emphasis mine]. The Court of Appeal determined that the CFA was fair. It allowed the appeal and remitted the matter back to a motion judge for a determination of the reasonableness of the CFA.

[14] On July 18, 2012, Justice Wilkins made an order directing the PGT to retain independent counsel to review the material for approval and make written submissions on behalf of Stephanie. In August, 2012, Justice Wilkins recused himself from the file. Richard Shekter was retained as counsel for Stephanie pursuant to the order of Justice Wilkins of July 18, 2012. His written materials were served and filed with the court and Mr. Shekter made submissions at the hearing of the motion.

ANALYSIS

[15] It is my task pursuant to the endorsement of the Court of Appeal released July 12, 2012, 2012 ONCA 496, to determine whether or not the CFA was in all of the circumstances reasonable at the time the account was rendered.

[16] Section 24 of the Solicitors Act reads as follows:

Upon any such application, if it appears to the court that the agreement is in all respects fair and reasonable between the parties, it may be enforced by the court by order in such manner and subject to such conditions as to the costs of the application as the court thinks fit….

[17] In Raphael Partners v. Lam[^1] the Court of Appeal dealt with the reasonableness of a fee agreement between a solicitor and client. The factors that are relevant to a consideration of the reasonableness are: the legal complexity of the matter; the results achieved; the risk assumed by the solicitor; and the time expended by the lawyer.

The Complexity of the Matter

[18] The law firm was retained to bring an action for damages arising from the alleged negligence of the defendants. The amended Statement of Claim sued the operator of the concert, Phoenix, as well as the owner of the premises, Sherbourne Community Clinic Inc. Allegations of negligence were asserted based in failure to comply with the provisions of the Occupiers’ Liability Act, R.S.O. 1990, c. O.2, negligent construction of the balcony and its maintenance, as well as allegations concerning the excessive amounts of alcohol Stephanie was permitted to purchase. Experts had to be retained in these areas which included engineers, a human factors expert and the alcohol serving practices of Phoenix.

[19] From the Plaintiff’s perspective, I have no hesitation in finding that this was a difficult liability case, one which would be vehemently opposed by the Defendants. Establishing liability would not be a simple task at trial and the contributory negligence of Stephanie made it even more problematic.

[20] Further, from the damages perspective, clearly the Plaintiff sustained catastrophic injuries as a result of the fall. Suffice it to say she suffered a severe brain injury with permanent cognitive impairments. She required intensive rehabilitation and while she made some gains, when she was discharged from hospital she was transferred to a long term facility which provided 24 hour care. Expert reports from a variety of specialists had to be secured in order to properly assess the damages in this case. Without a doubt, the damages were complex and required solicitors with an expertise in the area of personal injury.

The Results Achieved

[21] Independent counsel in his submissions has provided percentages in terms of the amount of the settlement proposal compared to the assessment of the damages, which was most helpful. The offer of net damages for Stephanie of $1,799,420 represents about 20% of the damages as assessed by HSH or 25% of the damages from the defence perspective.

[22] On the evidence that I have reviewed, I concur that there was no prospect of success on liability against the owner of the premises and consequently, accessing their $2 million policy of insurance had little chance of success. The other Defendant, Phoenix, had liability limits of $2 million. The offer received at mediation was just under those limits.

[23] Clearly, the damages of Stephanie would assess in the $7-$9 million dollar range; however, when determining whether or not the results achieved were poor or stellar or something in between, the Court must look at the facts of the case and the insurance monies available to respond to the claim. In this case, the maximum funds that could be accessed from Phoenix pursuant to the insurance policy were $2 million. As Mr. Shekter pointed out in his materials, the settlement proposal for Stephanie is 91% of that policy.

[24] In this case, the liability issue was significant. In my opinion, this is a case where there could have been a finding at trial that there was no liability on either Defendant. Independent counsel is of the view that a finding of contributory negligence of Stephanie in the 75% range was not beyond the realm of possibility. I agree. In all of the circumstances, I am of the view that the results achieved by HSH for Stephanie were very good.

The Risk Assumed by HSH

[25] There are some personal injury firms that would not accept any sort of retainer on this case because from the perspective of Plaintiff’s counsel, it was a risky case with no guarantee of success. In addition, it was a case that required significant expenditures on disbursements and solicitor’s time in order to put forth a case that created sufficient risk for the insurer that a reasonable settlement offer would be made. In particular, at the outset, the case was fraught with obstacles, most obviously the potential finding that Stephanie’s own behaviour was the cause of her injuries.

[26] Mr. Shekter submitted that recognition of contingency fee agreements such as the one at issue in this case increases access to justice. This was commented on by Justice Cronk in Raphael Partners where she noted, at para. 54, “This court has recognized that the advantages to the administration of justice, in the form of increased access to justice, from properly regulated contingency fee agreements are compelling.” I agree.

[27] In the initial stages of this matter, the prospect of success for Stephanie may well have appeared dim to her solicitors. The fact that eventually the insurer was prepared to offer 91% of its limits at the mediation is a testament to the work undertaken by HSH, including both time and disbursements expended without any guarantee of recovery. Had the law firm not been prepared to enter into a contingency fee agreement with Stephanie, given her situation, it is highly unlikely that she would have been able to bring the claim forward to obtain compensation. I have no hesitation in finding the case was a risky one from the perspective of the law firm.

The Time Expended by Counsel

[28] According to the affidavit of Neil Sacks sworn November 23, 2011, HSH had approximately 600 hours of time docketed at that point. In addition, Mr. Sacks deposes that the time spent was substantially higher than the dockets indicate, perhaps twofold.

[29] When the matter was initially reviewed by Justice Wilkins, he was of the view that the materials submitted by the solicitors in support of the requested fees were inadequate and he requested full particulars of docketed time and particulars of “undocketed work”. In refusing to approve the proposed fee he was mindful of the fact that the docketed time on the file from lawyers and clerks was $236,676.80 and he added an additional $88,323.20 in fees, approving a fee of $371,831.27 all inclusive. As the Court of Appeal noted, this amount was determined “almost exclusively” by dockets and hourly rates.

[30] I am guided by the comments of the Court of Appeal in Raphael Partners, where it was noted that the determination of the proper fee in a CFA is not based on the value of the time spent, but rather on the amount recovered for the client. Furthermore, it is not my function to determine the proper fee based on a review of the dockets and affidavit evidence from the solicitor, but rather to determine whether the CFA at issue is reasonable.

[31] Independent counsel submits that he accepts the solicitors’ time would be in the $350,000-$400,000 range regardless of hourly rates and he does not find the fee sought to be charged of $449,000 unreasonable.

[32] The proposed settlement includes party and party fees of $169,284.12 which is just over 9% of the damages of $1,825,000. While this is somewhat lower than the usual 10-15% that is paid in party and party costs, it must be considered that the action was not close to trial where costs demands are generally much higher. If the insurer was not prepared to pay more than the amount offered in party and party costs, in my view, HSH cannot be criticized for this. To have rejected the settlement offer because of the amount offered for costs would not have been in Stephanie’s best interests in light of the facts of the case and Stephanie’s personal circumstances.

Other Considerations

[33] In determining the reasonableness of the CFA, in my opinion, the court cannot look at the amount of the recovery by the Plaintiff against the full value of the case in isolation. The particular facts of the case must be considered including establishing liability against the Defendants, the potential finding of contributory negligence against the Plaintiff and if so, in what amount and the available insurance limits to name but a few of the more significant factors. In this case, the amount offered for Stephanie’s damages is perhaps 20% of the value of her claim on a 100% basis. However, the fact that the target Defendant did not have higher insurance limits is an unfortunate reality but it does not follow that the amount sought to be charged under the CFA is unreasonable.

[34] When looking at a proposed fee pursuant to a CFA, the court can and ought to consider the stage at which a case settles and the docketed time on the file as relevant factors bearing on the issue of the reasonableness of the CFA.

[35] As I have noted, the PGT has voiced no objection to the CFA. In its endorsement, the Court of Appeal stated, at para. 25, “In our view, it would also be incumbent upon the PGT to raise any concerns as to the fairness and reasonableness of a fee agreement. The failure by the PGT to raise any such concerns ought to be given substantial weight.” I have taken this fact into consideration when examining the CFA and whether or not it was reasonable.

CONCLUSION

[36] A CFA contemplates that the legal fees charged will be determined not by the docketed time but rather based on the amount recovered for the client. As noted by the Court of Appeal in Raphael Partners, at para. 54, “ …the time spent by the solicitors…while a relevant factor, does not control the question of whether the solicitors were entitled to the maximum fees charged through enforcement of the fee agreement…” I agree.

[37] In my opinion, for the reasons I have set out, I am satisfied the solicitors have met the test for reasonableness as set out in Raphael Partners. Accordingly, I find the CFA entered into between HSH and the PGT was reasonable at the date of settlement and remains reasonable in all of the circumstances of this case and ought to be enforced. The proposed fee of $449,855 plus taxes is hereby approved.

[38] I have been advised that no further accounts will be rendered by HSH to Stephanie notwithstanding the court attendances since early 2012. In addition, all interest that has accrued on the settlement funds will be credited to Stephanie. In my opinion, these two undertakings from HSH are entirely appropriate and are clearly in Stephanie’s best interests.

[39] I would be remiss if I did not thank Mr. Shekter as independent counsel for the Plaintiff for his submissions and written materials which were of great assistance to the Court. If there are any other matters that need to be addressed, I may be contacted.

D.A. Wilson J.

Date: August 14, 2013

[^1]: Raphael Partners v. Lam (2002), 2002 45078 (ON CA), 61 O.R. (3d) 417 (C.A.).