Court File and Parties

COURT FILE NO.: 60593/09 COURT FILE NO.: 93660/15 DATE: September 16, 2016 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Applicant, Stephan Markus a minor by his Litigation Guardian, Natalie Nicholas Respondent, Non-Marine Underwriters, Members of Lloyd’s

AND

Applicant, Natalie Nicholas Respondent, Stefan Markus and The Public Guardian and Trustee

BEFORE: Justice J. Bryan Shaughnessy

COUNSEL: Daniel J. Balena, for the Applicants Nicholas Hedley, for the Respondent, The Public Guardian and Trustee

HEARD: September 14, 2016

Endorsement

[1] There are two applications before me. Court File No. 60593/09 is a motion for court approval of the accident benefits action and Court File No. 93660/15 is a guardianship application.

[2] The plaintiff, Stefan Markus was 18 months old when involved in a motor vehicle accident on August 31, 1997. His date of birth is February 3, 1996. As a result of not being in a child restraint seat at the time of the accident he sustained a closed head injury and skull fracture.

[3] The tort action was commenced in 2006 (Court file No.42203/06). The accident benefits’ action was commenced in 2009. (Court file No. 60593/09 the “SAB action”). Natalie Nicholas, Stefan’s mother is guardian in both proceedings.

[4] In 2012, a motion was brought for Court approval in the Tort and SAB actions which I refused to approve as it was apparent from medical reports that the plaintiff should have been assessed for catastrophic impairment and the settlement amount was not adequate or reasonable in all the circumstances.

[5] An order was made directing that the Office of the Children’s lawyer become involved and a report was prepared by their office. I had all counsel appear in court before me on May 4 2012, where I detailed all of my concerns regarding the Tort settlement and as well any resolution of the SABS. Counsel for the Plaintiff wrote a lengthy letter dated June 27, 2012 addressing the concerns addressed by the Court. A report was also received from the office of the Children’s lawyer.

Tort Settlement (approved)

[5] On April 21, 2015 the Plaintiff brought another motion before me for a new proposed settlement of the Tort action. I approved of this settlement which provided for a global sum of $1,125,000.00. The breakdown and distribution of the funds were as follows:

Tort settlement funds $ 1,125,000.00 Disbursements $ 107,951.95 Legal Fees (25%) $ 254,262.01 HST on fees $ 33,054.06 Net Balance $ 729,731.98

The net balance of the tort settlement was distributed as follows:

Structured settlement $ 500,000.00 Balance held in trust by Mr. Balena $ 204, 731.98

[6] This settlement provided for among other things a $ 500,000.00 structured settlement for Stefan Markus and the payment of $ 204,731.98, in trust, to Plaintiff’s counsel Daniel J. Balena.

[7] On November 26, 2015, a motion was brought before me seeking approval of the accident benefit action (“SAB motion). My Reasons for Judgment are at Markus v. Non-Marine Underwriters, Members of Lloyd's, 2015 ONSC 7397. In my reasons, I stated that

….this proposal for settlement of the accident benefits claim is not approved. I remain seized with the matter. I direct further and better material is to be filed in affidavit form which addresses the issues outlined in these reasons, together with the other reports and documents that I have requested. I further direct that any application for guardianship of the person or property of Stefan Markus is to be brought before me.

[8] On December 3, 2015 I received Ms. Nicholas’ application for guardianship of person and property for Stefan Markus (Court file No. 93660/15 the “guardianship application”). In correspondence to the Public Guardian and Trustee on December 3, 2015 I advised that I had rendered a decision in relation to the accident benefits which did not receive court approval. I enclosed a copy of my Reasons for Judgment. In those reasons I had outlined a number of concerns including the appointment of a guardian of the person and property of Stefan Markus. I indicated that I wished to have the Public Guardian and Trustee’s input into these matters.

[9] On December 4 2015, I made the following endorsement on the guardianship application:

This application is adjourned sine die. On December 3, 2015 I forwarded to the Public Guardian and Trustee my Reasons in Markus v. Marine Underwriters not approving the proposed accident benefit settlement. Those reasons raise issues relating to the appointment of Natalie Nicholas as guardian of the person and property of Stefan Markus.

I am waiting for a future response from the Public Guardian and Trustee.

This application should be heard together with a further application for approval of the proposed settlement of the accident benefit claim.

[10] On February 18, 2016 the SAB and Guardianship application were before me in court. The following endorsement was made as follows:

Hearing held this day and to be continued. A new guardianship and management plan to be brought back to the Court for review. Mr. Balena also [to] take steps for ODSP application and sheltering and drug and health benefits as well as investment in RDSP and segregated funds. Mr. Balena advises that Dr. Cancelliere is going to provide a report in relation to these applications (approval of AB proposed settlement and guardianship).

I also direct the OPG[T] to provide a report to the Court concerning the proposed accident benefit claim settlement and whether it is reasonable and appropriate to meet the future needs of the Plaintiff Stefan Markus. This report from the OPG[T] will be provided after the new Guardianship and Management Plans are delivered by Plaintiff’s counsel.

Also the Court has identified a number of issues that it requires further and better information. This hearing is adjourned to a date agreed upon by counsel. However, I wish to speak to counsel by conference call within the next 40 days to discuss the return date of this matter. OPG[T] costs to be set at later hearing.

Proposed Settlement of the SAB Claim

[11] The proposed global settlement of the Plaintiff’s accident benefits claim and the distribution of the same is as follows :

AB settlement funds $ 650,000.00 Disbursements $ 70,048.04 Legal Fees (25%) $ 162,500.00 HST on fees $ 21,125.00 Net Balance $ 396,326.96

The sum held in trust by Daniel J. Balena ( $ 204,731.98 ) plus the proposed balance of funds from the SAB settlement ( $ 396,326.94 ) totals $ 601,058.94.

[12] The Amended Management Plan dated May 6, 2016 and filed by Natalie Nicholas provides for two further disbursements $ 2,930.00 for Dr. Caplan’s assessment report and $ 12,300 for legal fees for Ms. Nicholas guardianship application. Deducting theses disbursements reduces the proposed net balance available to Stefan Markus from both settlements to $ 585,828.94.

[13] Mr. Nicholas Hedley of the Public Guardian and Trustee Office delivered a fulsome report dated August 24, 2016 in response to my request of February 18, 2006. This report was also to provide comment on the proposed accident benefit settlement and whether it is reasonable to meet the future needs of the plaintiff Stefan Markus.

[14] Mr Balena delivered an affidavit sworn June 1, 2016 with attachments in relation to a number of objections I had raised on meeting with counsel. I then granted Mr. Balena’s request to deliver a responding affidavit to the PGT report. Mr. Balena’s responding affidavit and extensive attachments is sworn September 10, 2016. In this affidavit Mr. Balena responds to the various recommendations made by the PGT. I will discuss each of these matters in this endorsement. However, the bottom line is that the Plaintiff seeks approval of the accident benefit claim and distribution of the funds as follows:

Proposed accident benefit settlement $ 650,000.00 Legal Fees at 25% $ 162,500.00 HST $ 21,125.00 Disbursements $ 72,978.04 Net Balance $ 393,396.96 Remaining tort funds $ 204,731.98 Total funds available (393,396.96 +204, 731.98) $ 598,128.94 Fees for Guardianship application $ 12,300.00 Net Balance $ 585,828.94

The net balance to be distributed as follows

Proposed Structured Settlement $ 400,000.00 Cash Balance to be given to Ms. Nicholas $ 185,828.94

[15] I will be discussing the cash component being given to Ms. Nicholas later in this endorsement.

[16] The PGT was not sent a copy of Mr. Balena’s responding affidavit of September 10, 2016. Therefore I directed that to be done on September 14, 2016.

Guardianship Application

[17] The role of the Public Guardian and Trustee upon receiving a request for a Rule 7.08(5) Report is to “provide assistance to the court by way of comment and recommendations with reasons. Written reports are provided to the requesting Judge and plaintiff’s counsel, based on the facts contained in the written materials provided by counsel. The Public Guardian and Trustee does not act as opposing counsel to the Motion.” (Aywas v. Kirwan, 2010 ONSC 3690 para 3 per Hackland J”). Further the approval or absence of objection by the Public Guardian and Trustee is but only one factor among many for the Court to consider.

[18] The duty of counsel for the plaintiff is to “provide the Court with full and frank disclosure of the nature of the claim, damages, risks associated with the claim, particulars of the financial retainer, allocation of the funds and costs and the management of settlement funds on behalf of the party under disability.” (Aywas v Kirwan, 2010 ONSC 3690 supra at para.3)

[19] There is a need to file a further management plan as recommended by the PGT in the report of August 24, 2016. While Mr. Balena in his affidavit suggests that this is a meaningless exercise, nevertheless I order it as I find that the management plan of May 2016 lacks details regarding medical and rehabilitation therapies that Stefan Markus is planning to participate in and their associated costs. A management plan must, by its very nature, forecast expenditures into the future particularly when various modalities have been recommended even though the plaintiff at this stage is a reluctant participant.

[20] The mother, who makes application for the guardianship, has been the subject of my expressed concerns in prior reasons which I do not intend to repeat here. While Dr. Cancelliere chose to conduct a recent telephone interview to alter his opinion of Ms. Nicholas and her ability to manage Stefan, I nevertheless find her affidavit and Mr. Balena’s affidavit both sworn November 15, 2015 to be far from comforting and indeed internally inconsistent. In Ms. Nicholas affidavit she provides for monthly expenses in her management plan as follows:

Contribution to Rent $ 500.00 Gym/entertainment $ 50.00 Transportation $ 120.00 Medical Marijuana and food $ 950.00 Cell Phone $ 130.00 Clothing $ 200.00 Attendant care $ 1,384.69 *Attendant care was a projected expense by a Health expert but is not being incurred as mother is the only person involved in the care of Stefan. Registered Disability Savings plan $ 125.00

TOTAL $ 3,459.69

[21] In Ms. Nicholas plan (as set out in Mr. Balena’s affidavit sworn June 1 2016 para.70 Supplementary Motion Record Tab 1) provides that of the balance of funds for distribution relating to the accident benefits proposed settlement that $ 400,000.00 be placed into a structured settlement and that the remaining lump sum of $ 185,828.94 be managed by Ms. Nicholas on behalf of Stefan.

[22] Stefan Markus’s monthly income from the two structured settlement would be :

Tort structure (indexed plus arrears) $ 863.32 Second proposed structure (indexed) $ 641.49 Total $ 1,504.81

[23] While an application has been made for benefits under the Ontario Disability Support Program (“ODSP”) at the urging of the PGT there has been no response to the application to date. Stephan Markus is not eligible for benefits from the Ontario Trillium Drug Benefit.

[24] Stefan Markus’s shortfall ( not taking into account treatment and rehabilitation expenses and ODSP income that Stefan may be entitled to) is negative $ 1,954.83. Ms. Nicholas proposes that Stefan’s shortfall should be paid from the cash lump sum of $ 185,828.94 (affidavit of Mr Balena sworn June 1, 2016 paras. 74 and 76; Supplementary Motion Record Tab1). Yet at the same time Ms. Nicholas notes in Schedule 1 of her management plan in relation to a purchase of a condominium for Stefan:

Finally, Stefan would like to purchase a condominium unit with the objective of living there on his own, but with significant assistance and prompting from myself. A large portion of the cash of $ 188,758.94 would be applied to the purchase of that condominium unit and some of Stefan’s structure payments, together with any income he is earning, would be used to pay condominium fees, mortgage payments etc.

[25] In his responding affidavit sworn September 10, 2016, Mr Balena states:

• Stefan left school in June 2014, four credits short of a diploma. Since leaving school he has had a total of two jobs, each lasting for approximately a day (para.26)
• He has not been able to find employment.
• As detailed in Mr. Balena’s affidavit of June 10/16 and again in September 10/16 Stefan’s current plans are to obtain employment and purchase a small condominium unit on his own (para 27 and 28).
• In the most recent medical report Dr. Cancelliere as well as other reports have stated that Stefan will never likely to live completely on his own (para. 27).
• In prior reports submitted to the Court Dr. S.E. Scherer provided a vocational assessment of Stefan Markus and opined that it is unlikely that Stefan Markus would ever be able to maintain steady employment in the years ahead (para. 33)
• The reasoning in Dr. Scherer’s report is consistent with the medical assessments, that Stefan will likely remain in his mother’s care for many years to some, incapable of finding regular employment(para.34).
• Natalie Nichols currently resides with Stefan in a two bedroom apartment at 1205 Avenue Road in Toronto. She is employed at Global Television as a writer and coordinator with purportedly an annual income of $ 51,000.00 (para 24).

[26] Ms. Nicholas proposes that $ 188,758.94 from the SABS settlement be paid in cash to Stefan ($185,828.94 is the revised sum noted in Mr. Balena’s affidavit sworn June 1, 2016 para.70) and that these funds be used for:

(1) his share of the household expenses (2) attendant care (3) the purchase and carrying costs of a condominium unit.

[27] It is quite apparent on its face that this proposal is, as described by PGT, “unrealistic.” Whether or not Stefan receives ODSP assistance, he will nevertheless experience a significant monthly deficit, which would deplete any lump sum paid to Stefan in a few short years. Further, given Stefan’s challenges in securing any regular employment and the above noted deficit in his monthly income, it appears unlikely that Stefan will be in a position now or in the future to purchase and carry a condominium.

Structured Settlement

[28] As noted above, after assessing the cost of medical and rehabilitation therapies and possible ODSP assistance, Stefan Markus will likely run a significant monthly deficit. After considering all the submissions of counsel for the plaintiff in his affidavits of June 1 and September 10, 2016 and also taking into account the age of Stefan Markus, I come to the conclusion that all the remaining settlement funds should be paid into a structure, indexed at 2% for inflation and without a guarantee period. While Mr. Balena suggests that this form of structure with funding of $ 585,828.94 will not eliminate the deficit, nevertheless I find that it will be a means to reduce the deficit and enhance the ability to achieve some of the services that Stefan requires.

[29] Favourable tax treatment is the major reason for structuring settlement funds, even today in a time of low interest rates. Further structures without a guarantee period provide the most monthly income. A person such as Stefan Markus, who is not likely to recover and may require additional care in the future, a lifetime structure with inflation protection at 2% is appropriate.

[30] Therefore I order and direct as part of the new management plan that is to be submitted to the Court and the Public Guardian and Trustee will be a new structured settlement as detailed above.

[31] The first structure settlement involving the tort settlement has a guarantee period. This court had no knowledge of what would be the SABS settlement or if indeed, it would be settled, when the tort claim was presented for court approval. All that the Court was aware at the time of the tort settlement was that the sum of $ 204,731.98 was to be held in Mr. Balena’s trust account pending resolution of the SABS claim. Accordingly I ordered at the time of the court approval of the tort settlement that I was seized of the SABS claim in terms of future disposition. This was done to ensure continuity and consistency with respect to these actions.

Fees and Disbursements

[32] The PGT report of August 24, 2016 also comments on the fees and disbursements charged by counsel for the plaintiff. Mr. Balena vigorously challenges the PGT report in his responding affidavit sworn September 10, 2016. In this responding affidavit counsel attaches dockets approximately 64 pages and receipts for disbursements approximately 49 pages. These materials were absent in the Supplementary Motion record. The PGT was not provided with the material until after I directed service of Mr. Balena’s responding affidavit and attachments on September 14, 2016. Accordingly I await a further response from the PGT with respect to these late productions.

[33] The Public Guardian and Trustee in its report of August 24/16 suggests that the Retainer (found in the affidavit of Daniel J. Balena sworn February 16, 2016 para. 40 and Exhibit “N”; Supplementary Motion Record Tab1) is not a contingency agreement in accordance with the requirements of the Solicitors Act. The Retainer provides for a fee of 25% of all the amounts recovered with respect to Stephan Markus’ tort and accident benefit claims plus disbursements. It also provides that if Stefan Markus recovers costs on a partial or substantial indemnity scale that is more than 25%, then the fee payable to Mr. Balena shall be the full amount of the costs recovered. This type of arrangement with respect to costs is prohibited by the Solicitors Act (section 28.1: O.Reg. 195/04) without leave of the court. The material presented indicates that Mr Balena was retained on or about March 21, 2005. In response to this issue Mr. Balena states (1) that the contingency fee of 25% complied “with the requirements of the Solicitors Act at that time” and (2) that a 25% contingency fee was approved in the tort settlement. Mr. Balena’s argument fails in respect to the first objection as section 28.1 O.Reg 195/04 came into force on October 1 2004 and therefore was in place on the date of the retainer, namely March 21, 2005. In relation to the second argument it is baseless to argue that because the court erred in the first instance it should err again only to be consistent even though it breaches the Solicitors Act.

[34] I have been involved with this action for more than 4 years and I have rejected prior settlement proposals of both the tort and SABS claims for written Reasons provided which I do not intend to repeat here. Suffice to say that one of my earliest concerns was that there had not been a full assessment to determine if the plaintiff qualified as being catastrophically impaired in terms of the Insurance Act provisions. This issue required the plaintiff to get an assessment done hence the delay in this matter. The finding that he met the catastrophic impairment criteria opened the doors to new vistas of accident benefit recovery and hence a new improved accident benefits offer to settle.

[35] Therefore I am quite familiar with what work was required to get to the accident benefit proposal to settlement. I have also reviewed what benefits Stefan received and what amounts remained available to him going forward. Further, I am aware that if the matter of accident benefits proceeded to trial and the Plaintiff was successful, it would only result in a declaration of entitlement. This potentially could require a future involving more assessments and potentially more litigation. Accordingly, I approve of the overall SABS settlement in the amount of $ 650,000.00. However, I do not approve of the 25% contingency fee. In considering whether the fees charged pursuant to the contingency agreement meet the test of reasonableness, I have considered the following factors:

(1) the time expended by the solicitor; (2) the legal complexity of the matter at issue; (3) the results achieved, and (4) the risks assumed by the solicitor.

These factors are outlined in Hendricks-Hunter (Litigation Guardian of) v 814888 Ontario Inc., 2012 ONCA 496 at para.13. I have also referenced the cases provided to me by the PGT in the report of August 24, 2016. In particular I have referenced the decision in Adler (litigation Guardian of) v State Farm, [2008], 92 O.R.(3d) 266 para 30-41 where Justice Wilkins discusses the difference in the amount of work in tort and accident benefit matters.

[36] The time expended by the solicitor undoubtedly increased when the first proposal for settlement of the SABS was not approved. Further work was required to get the matter into position where it could be settled. However this does not warrant an increase in the legal fee percentage to 25%. This was not a matter that involved legal complexity outside the mainstream of cases involving settlement of accident benefits. The results achieved on the second application were good. There was no unusual risk assumed by the solicitor which is not otherwise part of the usual in resolution of these claims.

[37] Taking all factors into account including the time worked on the on this action as well as a consideration of the fees recovered in the tort settlement I find that a 15% fee is appropriate in this SAB settlement, and I so order. In relation to the disbursements I am waiting to see if the PGT comments on these items.

[38] In a Report to me dated February 7, 2013 in relation to the tort settlement the Children’s Lawyer concluded that, after having reviewed Mr. Balena’s dockets for the period 2005 to 2012 only 11.6% of Mr. Balena’s docketed time appears to have been spent working on the accident benefits claim although a 30% recovery in fees was being sought by Mr. Balena. (see Affidavit of Daniel J. Balena sworn November 5, 2015 para 20 and Exhibit “I” at pages 6-7; Motion Record Tab 2). The same report goes on to recommend that fees in the range of 10 to 15% for the SAB action would be appropriate (see page 8 of the report).

[39] In his disbursements Mr. Balena charges for his clerk’s time in the sum of $ 3,110.45. Disbursements usually include costs for photocopies, postage, courier expenses and sums paid to third parties for written and expert opinion reports but not for staff time. In response Mr. Balena states in his affidavit (para 19 and 20) that the clerk “works as a contractor and is not an employee. He has been with my office for fifteen years.” He goes on to state that the clerk did the following work on the file:

(a) All transportation to and from medical appointments for the client and his mother. (b) Meeting with the clients in their home and getting updated information. (c) Completion of forms for accident benefits and OCF-9.

[40] I am not prepared to approve the clerk’s time as a disbursement. While he may for whatever reason characterize himself as a contractor it is apparent he is doing what a clerk would provide to counsel in a law practise.

In Summary

[41] The settlement of the SAB action is approved in the all-inclusive sum of $ 650,000.00

[42] Dr. Joseph Caplan in his report dated May 24, 2016, in an assessment of Stefan Markus in respect to property and personal care, opines that Stefan is capable of making decisions in all areas of personal care. Accordingly Ms. Nicholas is now not seeking to be appointed guardian of personal care for Stefan.

[43] The total of all sums held in trust by Mr. Balena for Stefan and the net sum available to Stefan Markus from this settlement will be paid into a structured settlement for the benefit of Stefan Markus (the monthly amount to be paid to his guardian of property). The structured settlement is to be indexed for inflation and will have no guarantee period. A new structured payment report and schedule will have to be obtained by counsel for the plaintiff.

[44] The Judgment which will ultimately issue shall state that the guardian of property will be required to provide a passing of accounts before the Court within one year after the first structured payment is received and so often thereafter as the Court may direct.

[45] The disbursements of Mr. Balena are not approved until the Public Guardian and Trustee reviews the most recent receipts and documents released by counsel for the Plaintiff and decides whether to comment and make a recommendation.

[46] The disbursement for the law clerk’s time is not approved as a disbursement.

[47] The guardianship application for the property of Stefan is not approved at this time. A further Amended Management Plan is required and forwarded to the Court and the Public Guardian and Trustee providing a more viable plan for the management of Stefan Markus’ property and income.

[48] It is ordered and directed that all funds, including any structure payments, be paid into court until such time as an authorized person is appointed guardian of the property of Stefan Markus.

[49] The costs of the Public Guardian and Trustee have not been considered or fixed. I will require more information in relation to this issue.

[50] If any part of this endorsement requires clarification then, provided both counsel are available, I will agree to a conference call.

Date: September 16, 2016

Justice J. Bryan Shaughnessy