CITATION: Zhau v. 2100950 Ontario Inc. (Congee Queen), 2015 ONSC 785
COURT FILE NO.: CV-08-00365213
DATE: 20150203
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Brian Zhau, a minor by his litigation guardian, Anthony Ngai, and Wendy Tan, Plaintiffs
AND:
2100950 Ontario Inc., operating as Congee Queen, Bayview Summit Development Ltd., and Wycliffe Property Management Limited, Cho Design Inc., Lonna Wai-Fong Cho, Joe Cho, Tran Dieu and Associates Inc., ISI Contracting Limited, Defendants
BEFORE: Justice Spies
COUNSEL: P. Michael Rotondo, for the Plaintiffs
Ramon V. Andal, for the Defendants
HEARD: In Writing
ENDORSEMENT
[1] The plaintiffs have brought a motion in writing pursuant to Rule 7.08 of the Rules of Civil Procedure, seeking court approval of a proposed settlement of this action and the granting of a consent judgment in accordance with Minutes of Settlement dated March 17, 2014. This tort action was brought by the minor plaintiff Brian Zhau (“Brian”), by his Litigation Guardian, Anthony Ngai, for damages for bodily injuries sustained by Brian on August 30, 2008 at a restaurant operated by the defendant, Congee Queen. The other plaintiff, Wendy Tan, is Brian’s mother and she is a Family Law Act plaintiff. She was Brian’s Litigation Guardian until Congee Queen brought a counterclaim against her. That claim is to be dismissed as part of this settlement.
[2] In summary Brian suffered serious injuries to his left wrist and left hand when he pushed open a door which led to the washrooms and a window located in the frame of the door fell onto him. His injuries required emergency surgery. He was assessed by Dr. Grant who prepared a Chronic Pain Assessment Report dated March 6, 2012. Dr. Grant is of the opinion that although Brian had an excellent surgical outcome, given the severity of his initial injury, he continues to have residual problems and any future employment or activity requiring fine motor skills would be impaired. In his opinion the residual symptoms are expected to be permanent and may even worsen over time.
[3] The pleadings and court orders are included in the Motion Record. The action was commenced on October 29, 2008 against a number of defendants and over the years various defendants have been added and let out of the action for various reasons leaving the defendants noted above. Liability was disputed by the defendants. On March 17, 2014, the parties attended a mediation and reached a settlement subject to this Court’s approval. The defendants agreed to pay to the plaintiffs the sum of $225,000.00 “inclusive of all damages, Family Law Act claims, interest, costs, disbursements and taxes and OHIP claims.”
[4] The Motion Record was not filed with this Court until July 31, 2014. It was then pre-screened in accordance with this Court’s practice at which time it was suggested that a structure settlement be considered. This was rejected by the Litigation Guardian. On August 20, 2014, I advised Mr. Rotondo by email that I had been assigned to review his Motion Record. In my email I asked five straightforward questions. I also advised that given the amount of the settlement proposed to be payable to a minor; namely $125,000, a structured settlement would be advantageous and directed that various structures be obtained and considered by the Litigation Guardian.
[5] I received a response from Mr. Rotondo's law clerk on September 4th, advising that I would receive the information requested in 7-10 days. By email dated October 7, 2014, she advised me that four options for a structured settlement had been received but that Brian's mother wanted to seek advice from her "personal financial advisor to see if they would be agreeable with the structured settlement plan". Thereafter I followed up a number of times until I finally received a Supplementary Motion Record on January 12, 2015.
[6] I have now had an opportunity to review these further materials and am dismayed that two of my questions have not been answered at all and in the case of two others, the response is totally unsatisfactory. Furthermore, updated options for a structured settlement dated December 15, 2014, reveal that the payouts have declined by several thousand dollars and so the delay has clearly adversely impacted Brian’s interests.
[7] Given that my questions were clear, and given the delay and wholly unsatisfactory response and for the reasons that follow, I will not engage in a further "back and forth" discussion with counsel as I have sufficient information to at least deal with some of the settlement funds so that Brian’s interests are not further adversely impacted.
[8] From my understanding of the circumstances surrounding the events that led to Brian’s injuries, the liability issues, and the nature of his injuries, as set out in the affidavit of Mr. Rotondo sworn June 12, 2014, I am prepared to approve the settlement for the global amount of $225,000. In fact, I must say that Mr. Rotondo has achieved an excellent result. The question then is how should this “all inclusive” settlement amount be distributed?
[9] Ms. Tan has not claimed any amount from the settlement funds as a Family Law Act claimant. She has asked however, that from the global settlement, she be reimbursed for costs incurred with the law firm that she retained to represent her, Benson Percival Brown LLP, in the amount of $3,294.05 ($2,000 for fees + HST and $792.50 for disbursements + HST). The Motion Record did not include this firm’s account or dockets in the original motion material which was a glaring oversight. That is the one question that has now been answered, at least partially, and I have the firm’s account. I presume the file was handled by Mr. Holland who has signed the account. I do not have the usual details required to approve of legal fees for a minor but given the amount claimed and given that the account states that it includes filing a statement of defence to the counterclaim and preparing and attending at examinations for discovery, following up to undertakings and preparation and attendance at mediation and negotiating the settlement, I am prepared to approve this account. As such this account can be paid in full; $3,294.05, from the settlement funds.
[10] In addition it is proposed that $5,320.02 be payable to the Minister of Finance which is the Ministry of Health and Long-Term Care’s subrogated interest, that $6,070.54 be payable to the order of North Toronto Rehabilitation and Physiotherapy for Brian’s physiotherapy treatments that have yet to be paid for and that $2,008 be payable to the order of Wendy Tan for out of pocket expenses she incurred for acupuncture and massage treatments for Brian. The OHIP subrogation summary and receipts for the other services were included in the Motion Record and these payments are approved.
[11] The Rotondo law firm requests $79,843.78 for costs and disbursements including HST. The only information I received in the Motion Record that supported this claim was in the affidavit of Mr. Rotondo where he deposed that “Given the amount of work conducted by my law firm and in accordance with the agreement with the minor Plaintiff’s Litigation Guardian and my law firm this amount represents $14,000 for disbursements and $58,268.83 for legal fees and $7,574.95 for HST.” I was not given a copy of the agreement or a breakdown of the $14,000 claimed by the firm for disbursements. The only information from which I could glean some idea of the work done was that the Motion Record included the pleadings and a copy of all the orders.
[12] In the affidavit of Mr. Ngai in the Motion Record he referred to being present for examinations for discovery. As to the fees claimed by the firm, all Mr. Ngai deposed was that in accordance with the “agreement” he approved of the settlement and the fees and disbursements to be charged by the firm.
[13] Given that the Motion Record was totally deficient in providing the information needed to assess the fees and disbursement claimed, in my email to Mr. Rotondo of August 20th, 2014, I asked the following question:
You claim legal fees and disbursements in para. 39(b) of your affidavit and make mention of the “amount of work” and an agreement with the Litigation Guardian as justifying the amount claimed. As I am sure you know, any agreement as to fees is not binding on a minor and I must have sufficient information to consider the reasonableness of the fees and disbursements. However you have not provided a copy of the agreement nor have you provided any explanation or justification of the amount claimed and in particular the hours spent on the file including the usual information as to who is billing, year of call or experience in the case of a para legal, hourly rate and work done. I trust dockets were kept and they should be provided. Please also make any further submissions you wish to justify the amount you propose to charge in this matter which I note, without considering disbursements, is about 26% of the amount recovered. I suggest you have regard to the 11 factors in Re Cogan, 2007 50281 (ON SC), [2007] O.J. No. 4539 and Henricks-Hunter v. 814888 Ontario Inc., 2012 ONCA 496. With respect to the agreement I assume it was executed by Ms. Tan, please advise what steps were taken to ensure her consent was fully informed. Given my understanding from the material that her English is limited, please advise if an interpreter was available to her to assist in explaining the agreement to her.
[14] In response to that question, Anthony Ngai, the Litigation Guardian has deposed in his supplementary affidavit sworn on December 20, 2014 that:
Mr. Rotondo advised me and I verily believe it to be true that in light of the contingency fee agreement in relation to this matter, the detailed dockets have not been prepared as it is not their practice to do so. However, upon estimation of the hourly rates incurred in relation to this matter, it appears that the amount of work Mr. Rotondo’s office put into the matter exceeds the amount of $80,000, not including disbursements. I reviewed the list of disbursements and they appear reasonable as to reflect actual expenses and payouts to advance the claim. I understand that the action involved multiple parties, attendances at examinations for discovery, mediations and motions.
I was advised by Mr. Rotondo and believe it to be true that the liability issues arising in this matter render the case risky, and it took over six years to advance the claim to the point of resolution.
[15] Mr. Rotondo’s law clerk provided further information in her email to me of January 12, 2015 which accompanied the Supplementary Motion Record. She stated in that email:
We also draw your attention that in the course of the action, our office was required to attend a motion to amend the claim and to substitute litigation guardian, to consequently amend the claim, summary judgment motion, a motion for inspection and motion for destructive testing, as well as discoveries of numerous parties, mediation, and other related proceedings, including requesting [sic]. As the matter involved issues of liability, and the firm took risk on prosecuting the case.
… please note that our firm’s retainer is on a contingency basis of 30% of recovery, in addition to disbursements. Perhaps unfortunately, as we are plaintiff’s lawyers office engaged mostly in contingency fee services, it is not our practice to maintain precise dockets in the action. We are available, upon request, to provide a list of activities performed, which in this case is quite voluminous, and reflects that estimated (sic) of services performed are in larger amount as claimed, since 2008. In fact, our office legal fees in this matter are even lesser than 30% of the net amount after application of disbursements and payments to third party service providers and OHIP subrogation. Our office incurred thousands of dollars for expert reports/opinions, including Mr. Jason Young, and medical experts.
[16] Finally I was advised in the supplementary affidavit sworn on December 20, 2014 by Ms. Tan that when the contingency agreement was signed, it was translated to her by Anthony Ngai. My question, however, asking for further particulars of Anthony Ngai’s friendship with Ms. Tan and his relationship with Brian relevant to his role of litigation guardian, has not been answered.
[17] Even including the unsworn response provided by Mr. Rotondo’s law clerk, this is a totally inadequate response to my question. First of all, I still do not have a copy of the contingency agreement, which I note is not binding on this Court in any event, nor have any particulars been provided of disbursements that are claimed by the firm. As for the fees claimed, I can appreciate that a fair amount of work was done given the pleadings and the orders in the Motion Record. However, that does not give me the information that I need to approve of the fees. This Court is not a “rubber stamp” and the fact that the Litigation Guardian finds the fees to be reasonable is not enough. Given there are no dockets, at the very least I require some idea as who did the work and when and what hourly rates were being charged by that person at the time and hours spent. I presume some particulars can be provided with respect to the information provided by Mr. Rotondo to the Litigation Guardian that estimating “the hourly rates incurred in relation to this matter, it appears that the amount of work Mr. Rotondo’s office put into the matter exceeds the amount of $80,000, not including disbursements.”
[18] It is unfortunate that experienced counsel are not following the guidelines that have been repeatedly set out by the Court, as to what is required insofar as solicitor’s fees are concerned, in numerous cases dating back to at least 2007. See, for example, Marcoccia v. Gill, [2007] O.J. No. 12 (S.C.J.) and Lau v. Bloomfield, 2007 34443 (S.C.J.). Furthermore, in an effort to provide assistance to counsel in their preparation of written motion material for these motions Justice Wilkins of this Court, who deals with the vast majority of these motions, issued the Rule 7.08 Best Practices Guidelines in late April 2013 (“the Guidelines”).
[19] I note as well that this was an all-inclusive settlement for the plaintiffs and must have included damages, special expenses and legal fees and disbursements although they are not broken down in the settlement. This will become important once I have the necessary information and am in a position to review the request for payment of certain legal fees on behalf of the minor.
[20] I am, therefore, not in a position to determine what amount should be approved for the legal fees and disbursements of the Rotondo firm. If they wish me to consider any further information in support of their claim for fees and disbursements I require a copy of the contingency agreement, the particulars of the disbursements and whatever further information they wish to provide to support the claim for legal fees. The firm will have until February 13, 2015 to provide this information to me. If this information is not provided by that date I will do my best to determine their fees and disbursements based on the information provided as any further delay may adversely impact Brian’s interests.
[21] I come then to what in my view is a key question. How and when should the amount that will be ultimately be payable to Brian be paid out to him? In my email to Mr. Rotondo I stated that in my view, given the amount to be paid to Brian, a structured settlement would be advantageous. I proposed that some money to cover anticipated future costs be paid into court with the balance in a structure which would provide for payments over time depending on expected future costs for school and items related to his injuries. I also advised that given the position of the Litigation Guardian I required an affidavit sworn by him that he had seen at least two sample printouts illustrating various structures and payout plans and if he still rejected a structure, his reasons for doing so.
[22] Based on the supplementary record it is clear that McKellar Structured Settlements (“McKellar”) was approached quite quickly; they were contacted by phone on August 25, 2014 by Mr. Rotondo’s law clerk and provided four sample printouts, assuming a funding amount of $98,385.66, to Mr. Rotondo on August 26, 2014. When these numbers were updated on December 15, 2014, there was a reduction in the various lump sum payments at age 25 in the range of $2,500.
[23] Based on the proposed structure, the option that seems most advantageous in my view is one which would provide for annual payments of $15,000 commencing when Brian turns 18 (August 1, 2019) payable for a period of four years only. These payments could be used to assist with the cost of post-secondary education tuition and room and board. The balance of the funding would be applied to a lump sum payment, ideally at age 25. That could be used to pay off any debts for graduate education or provide for a down payment on a home. All payments are guaranteed to be paid, are tax free and I understand that McKellar has never lost any money invested in a structure they have arranged.
[24] In his supplementary affidavit sworn on December 20, 2014, Mr. Ngai states that Ms. Tan told him that a structured settlement “did not make sense to her” and she wanted to obtain special advice to consider the structured settlement. He states that Ms. Tan obtained an opinion from Cecilia Ho, Elite Advisor, who provided “estimations of estimated interest” and that:
…. Ms. Wendy Tan is agreeable with Cecilia Ho’s advice that taking into consideration that the amount of the funds payable is not large enough to justify structured settlement and that Brian will be at advantage to invest a lump sum amount payable to him at the age of 18 into the Manulife GIC account. He will have control over his resources, and if necessary amounts are required for his treatment or schooling he will be able to withdraw such necessary amounts. [Emphasis added]
[25] He goes on to state that:
Wendy Tam and myself are providing instructions against structured settlement as it would be in Brian’s best interest to receive a lump sum payment at his 18th birthday which will be deposited into Manulife bank’s GIC account, which in our opinion, is a better financial option for Brian Zhau, considering that the amount is not large.[Emphasis added]
[26] Ms. Tan repeated essentially the same evidence in her affidavit also sworn December 20, 2014. She states that:
I am confident that Brian is better off financially if the lump sum payment is paid … at his 18th birthday, which my financial advisor will be put into Manulife bank’s GIC account for accumulation of better rates than what may be offered by structured settlement. I do not instruct litigation guardian or Brian’s lawyers to proceed by way of structured settlement. [Emphasis added]
[27] I am very concerned that neither Mr. Ngai nor Ms. Tan seems to appreciate that it is for this Court to decide what is in Brian’s best interests. Although I welcome their views, I am not looking for their instructions. My mandate is make an order in the best interests of Brian, which may or may not accord with their views and preferences.
[28] Both affidavits attached a letter from Cecilia Ho dated September 19, 2014. That letter is not on Manulife letterhead although under Ms. Ho’s signature, there is a reference to Manulife Financial, Toronto Asia Centre. The email address for Ms. Ho is a Hotmail account. This in of itself gives me concerns about who exactly Ms. Ho is and what her qualifications are as an “Elite Advisor”.
[29] Having read Ms. Ho’s “opinion” I am satisfied that she clearly has no understanding of structured settlements and no understanding that these funds are currently being held for the benefit of a minor and for the reasons that follow, what she has suggested is neither possible nor does it make any sense. Ms. Ho states in her letter that she has prepared a “settlement proposal for Brian Zhau. This is based upon a funding amount of $128,385.66.” She states all payments are guaranteed to be paid even in the unlikely event of Brian’s premature death and that “this option provides a lump sum payment of $128,385.66 plus accumulated interest at age 18.” Attached to this letter is a schedule that suggests that five lump sum payments would be made for interest and that the $128,385.66 would earn 2.45% interest per annum with the lump sum payments starting on August 3, 2015 and ending on August 3, 2019, Brian’s 18th birthday, and at that point it would be deposited into Manulife bank’s GIC. No explanation is provided as to how the money would achieve a return of 2.45% and how interest could be paid for the period of August 2, 2014 to August 3, 2015 is a mystery. Ms. Ho also does not seem to appreciate that if the money payable to Brian is not invested now into a structured settlement that it will have to be paid into court until his 18th birthday unless a guardian of property for a minor is appointed.
[30] In my view it is clear that it is in Brian’s best interests that most of his money NOT be paid to him in one lump sum at age 18. Brian is currently 14 years old and will not turn 18 until August 1, 2019, some four and one half years from now. If he is like most adolescents he will have no idea on his own how to manage this money and he cannot be put in a vulnerable position where he might dissipate this money for his own personal use or for his family’s. There is no evidence to suggest that Brian would be in any better position than any other 18 year old teenager to decide what to do with such a significant amount of money.
[31] As stated in the Guidelines, in determining this motion I am mindful of the fact that Brian cannot speak for himself and that as a judge to whom this application has been brought, I stand in a position of total neutrality to ensure the result is in his best interests and that given that he is a minor and thus vulnerable, that he is protected from mismanagement, abuse and neglect.
[32] I disagree vigorously with Mr. Ngai’s evidence that the amount is “not large” and the “opinion” of Ms. Ho that it is not large enough for a structured settlement. In my opinion this is precisely the type of case where a structured settlement is in the best interests of the minor. By analogy to s. 6 of the Insurance Act, R.S.O. 1990 c. 1.8; O. Reg. 461/96, which deals with settlements of damages resulting from an automobile accident, a structured settlement is required where the amount excluding costs is for $100,000 or more. Structures are useful to stagger the payout over a few years and, as stated in the Guidelines, even awards of $30,000 can profitably be structured and spread out over a number of years.
[33] An amount that might be required for Brian’s expenses between now and age 18 can be paid into court and the balance can be put into a structure provided by McKellar. I appreciate that this will require the cooperation of the insurers for the defendants but expect that my decision will not surprise them. This option does not deny Brian any money at age 18 as he will receive the balance held in court at that time plus accrued interest.
[34] In light of my decision I contacted Ms. Webber from McKellar and asked her to prepare new and updated printouts for Options D and E but assuming a funding amount of $110,000. She has now provided those and at my request she added an Option F, also with a funding amount of $110,000, with four lump sum payments starting at age 18 in the amount of $15,000 each, with a final lump sum payment at age 25. What this structure would do is ensure that Brian receives periodic payments to fund any post-secondary education that he wishes to pursue. Graduating without any student debt will be a benefit many students never receive. It would then give him the remaining settlement funds at age 25. These options are however only available until February 9, 2015 and so to avoid a further decline in annuity rates a decision on which structure and how it will be funded must be made this week.
[35] In my view the funding amount can be at least $110,000 as it does not appear that a large sum will need to be held in court. Included in the Supplementary Record is a handwritten note on a letter from Mr. Rotondo’s legal assistant to Dr. Leung, Brian’s family physician, apparently written by Dr. Leung, stating “at this point, there is no further plan for treatment except physio if there is development of contractives of his joints”. Ms. Tan has deposed that she has not incurred expenses for physiotherapy for Brian since his last treatments in 2011 and if Brian requires treatments prior to his reaching 18 she will pay for them on his behalf.
[36] It was, however, recommended that Brian receive therapy and tutoring. Accordingly, one of my five questions to Mr. Rotondo was as follows:
At page 7 of Mr. Kajuk’s/Dr. Bodnar’s report of May 17, 2013, they recommend that Brian participate in individual and family therapy and strongly recommend that he receive individual tutoring. In addition at page 6 of the report it is stated that because of the lack of any psychological intervention since the accident Brian’s psychological issues have become of a chronic nature and that any undue delays in his psychological treatment could prolong his recovery and adversely affect his development. I am troubled by the fact that no mention is made in the affidavits of these recommendations or of any therapy and tutoring being done. I presume that these recommendations have not been followed as no claim has been made for associated expenses. If this is so, why have they not been followed through and what if any are the plans for the future in this regard?
[37] In her supplementary affidavit, presumably to address this question, Ms. Tan refers to the examination of her son by Dr. Bodnar/Mr. Kajuk and she states that she understands that they diagnosed Brian with “stress disorder and chronic pain”. She states “currently I am not noticing much deviation from Brian’s moods and he does not complain of pains that much. I am taking my son to sports activities, including YMCA gym, and he is doing fine, from my observations.” I am prepared to accept that Brian no longer needs psychological intervention as his mother is in the best position to decide that absent a further assessment. However, I remain concerned about the need for tutoring.
[38] Ms. Tan goes on to state that Brian is “doing satisfactory at school. He is currently attending Grade 8 …” and she goes on to set out that he is involved in physical education and various sports. Ms. Tan attaches her son’s report cards from 2014; Grade 7. If passing is considered satisfactory then I suppose Brian’s report cards are “satisfactory”. I would not characterize them as such, however, and in my view there is still a need for tutoring. His learning skills and work habits which include responsibility, independent work, initiative, organization, collaboration and self-regulation were all noted to need improvement for both the February report card and the June report card.
[39] As for his marks, Brian does very well in math where his June marks ranged from 68% to 97%. But for the 68%, his marks in mathematics were all above the median, I presume of the class. He also did well in science. For his language and history marks, however, Brian was consistently below the median. Given Brian’s strength in mathematics, it appears that he would have the ability to go on to post-secondary education at a university or college. That, however, would require an improvement in his language skills. It is for that reason, in my view, tutoring would be of assistance. In fact his teacher states in his report card that as next steps “Brian is advised to work diligently to improve his English language skills and to be prepared to spend much more time and effort on his work in this subject in order to succeed in Grade 8.”
[40] Unfortunately I do not believe I have the power to compel Ms. Tan to arrange tutoring for Brian but by this endorsement, which I direct be given to her and translated for her; I implore her to do so. With tutoring in subjects such as English, French and the humanities, it seems that Brian’s ability to excel in mathematics and science would permit him to continue on with college or university after high school. The more options he has the better in the event that his injury restricts some types of employment requiring fine motor skills. Some of the settlement funds that will be paid into court should be used for that purpose. Requests for payments out to cover the cost could be presented to me for approval.
[41] For these reasons I have decided that a structured settlement in the range of $110,000 be purchased for Brian through McKellar and that it provide for payment over four years starting at age 18, with a lump sum of the remaining amount to be paid out at age 25 in accordance with Option F. Although I am firm on requiring that a structured settlement be used for the bulk of the settlement payable to Brian, I am willing to receive any views on which structure is preferable from his Litigation Guardian and/or mother, provided, however, for reasons already stated that can only be accommodated if their views are obtained immediately as every effort possible must be made so that this structure can be put in place before a further decline in annuity rates.
[42] The balance of the settlement, after other payments are approved and made will be paid into court to be used for Brian’s expenses; hopefully for tutoring, until he turns 18. At that time the balance can be paid to him in a lump sum with interest.
SPIES J.
Date: February 3, 2015