CITATION: Kee Kwok v. State Farm Mutual, 2016 ONSC 7339
COURT FILE NO.: CV-16-559520
DATE: 20161202
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
KEE KWOK, by his Litigation Guardian Grace Kwok
Applicant
– and –
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY and CERTAS HOME AND AUTO INSURANCE COMPANY
Respondents
Neil E. Sacks, for the Applicant
No one for the Respondents
HEARD: In Writing
REASONS FOR DECISION
firestone J.
[1] The applicant Kee Kwok, by his Litigation Guardian Grace Kwok, brings this application under rule 7.08(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) for court approval of the proposed full and final settlement of his Statutory Accident Benefit claim.
[2] Pursuant to the terms of the proposed settlement, the defendants are to pay the amount of $373,000 for all claims to be allocated as follows:
(1) To Kee Kwok, $319,320 to be paid to his Co-Guardian of Property Grace Kwok to be dealt with in accordance with the updated management Plan to be filed with the office of the Public Guardian and Trustee.
(2) To Howie, Sacks & Henry LLP, for their solicitor and client account, $40,680 inclusive of H.S.T; $10,000 for partial indemnity costs inclusive of H.S.T.; and $3,000 for assessable disbursements.
[3] On November 13, 2016, I approved the proposed settlement by way of endorsement and signed the judgment. I indicated that written reasons would follow. These are my reasons.
The Requirement for Court Approval
[4] The requirement for court approval for settlements on behalf of a party under disability is explained in Wu Estate v. Zurich Insurance Co. (2006), 2006 CanLII 16344 (ON CA), 268 D.L.R. (4th) 670 (Ont. C.A.), at para. 10, as follows:
The requirement for court approval of settlements made on behalf of parties under disability is derived from the court’s parens patriae jurisdiction. The parens patriae jurisdiction is of ancient origin and is “founded on necessity, namely the need to act for the protection of those who cannot care for themselves…to be exercised in the ‘best interest’ of the protected person…for his or her ‘benefit’ or ‘welfare’”: Eve, Re, 1986 CanLII 36 (SCC), [1986] 2 S.C.R. 388 (S.C.C.) at para. 73. The jurisdiction is “essentially protective” and “neither creates substantive rights nor changes the means by which claims are determined”: Tsaoussis (Litigation Guardian of) v. Baetz (1998), 1998 CanLII 5454 (ON CA), 41 O.R. (3d) 257 (Ont. C.A.), at 268. The duty of the court is to examine the settlement and ensure that it is the best interests of the party under disability: Poulin v. Nadon, 1950 CanLII 121 (ON CA), [1950] O.R. 219 (Ont. C.A.). The purpose of court approval is plainly to protect the party under disability and to ensure that his or her legal rights are not compromised or surrendered without proper compensation.
[5] This requirement for court approval is codified in rule 7.08(1). This rule provides that “No settlement of a claim made by or against a person under disability, whether or not a proceeding has been commenced in respect of the claim, is binding on the person without the approval of a judge.” The term “proceeding” is defined in rule 1.03 as an action or application.
[6] Rule 7.08(4) specifies the material required to be included in the motion or application for court approval as follows:
(a) an affidavit of the litigation guardian setting out the material facts and the reasons supporting the proposed settlement and the position of the litigation guardian in respect of the settlement;
(b) an affidavit of the lawyer acting for the litigation guardian setting out the lawyer’s position in respect of the proposed settlement;
(c) where the person under disability is a minor who is over the age of sixteen years, the minor’s consent in writing, unless the judge orders otherwise; and
(d) a copy of the proposed minutes of settlement.
[7] In addition, where the form of retainer is a contingency fee agreement, section 5(1) of O. Reg. 195/04, Contingency Fee Agreements (the “regulation”) states that a solicitor for a person under disability represented by litigation guardian shall either (a) apply to a judge for approval of the agreement before the agreement is finalized, or (b) include the agreement as part of the motion or application for approval of the settlement or a consent judgment under rule 7.08.
[8] In Rivera v. LeBlond (2007), 44 C.P.C. (6th) 180, Thorburn J., at para. 23, confirms the principle that “[r]ule 7.08(4) and the obligations of the court pursuant to its parens patriae jurisdiction require a party seeking approval to submit sufficient evidence to make a meaningful assessment of the reasonability of the proposed settlement of the claims of a person under a disability.”
[9] Justice Thorburn goes on to confirm, at para. 27, that:
Typically the applicants will have to provide sufficient evidence to demonstrate that:
(a) an appropriate investigation with respect to liability and damages has been completed;
(b) an appropriate assessment of liability issues has been made;
(c) an appropriate assessment of damages issues has been made; and
(d) the fees and disbursements which the plaintiff’s lawyers propose to charge are reasonable in all the circumstances.
[10] I have reviewed the evidentiary record filed in this matter. This record provides me with the evidence necessary to make a meaningful assessment of both the reasonableness of the proposed quantum of the Statutory Accident Benefit Settlement and the proposed fee account.
Factual Background
[11] On February 2, 2007, Kee Kwok was walking across a roadway when he was struck by a motor vehicle. At the time of the collision, he was 75 years of age and retired. He is now 85 years of age.
[12] As a result of the collision, Kee Kwok sustained the following injuries: right epidural hematoma; right subdural/subarachnoid hemorrhage; left intracranial bleed; and bilateral temporal cerebral contusions. At the scene of the collision, he had a Glasgow Coma Score (“GCS”) of 6.
[13] Kee Kwok was transported by ambulance to Scarborough Grace Hospital and was subsequently airlifted to Sunnybrook Health Sciences Centre (“Sunnybrook”). While at Sunnybrook, he underwent a tracheostomy and a PEG tube insertion. He says he developed pneumonia and became septic, which complicated his recovery. He required, for a time, sedation and restraints due to his agitation.
[14] From April 4, 2007 to May 23, 2007, Kee Kwok was then an inpatient at the Toronto Rehabilitation Institute, after which time he was discharged home to his family with intensive therapeutic intervention. The therapy included: a speech language pathologist, a physiotherapist, a rehabilitation support worker, kinesiology, and regular Occupational Therapy intervention.
[15] Dr. Ron Keren MS, FRCPC, geriatric psychiatrist with the Toronto Rehabilitation Institute, conducted a generic psychiatric assessment on May 1, 2008. In his subsequent report, he states:
In summary, Mr. Kwok is a 77 year old man who suffered a significant head injury over a year ago. He does have evidence both on history and from objective testing of progressive memory problems. His family denies noticing any cognitive difficulties prior to the accident. However, the head injury may have uncovered a pre-existing neurode generative disorder and may have accelerated the development of this. The other possibility is that all of his cognitive difficulties are secondary to his brain injury. In terms of his mood, he does have symptoms consistent with depression, including neurovegetative symptoms and loss of interest. Another prominent feature is that Mr. Kwok was quite restless throughout the assessment. His restlessness could be due to a number of different factors. One is that the Risperidone that he is on could give a side effect of restlessness or akathisia. As well, feeling restless could be a manifestation of low mood or anxiety. Finally, restlessness could be as a result of some of his cognitive difficulties as more of a behavioural manifestation.
[16] The plaintiff’s injuries and impairments meet the definition of “catastrophic impairment” as defined in the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, O. Reg. 403-96, s. 2(1.2) (“SABS”). Catastrophic impairment increases the level of coverage for medical and rehabilitation benefits to a maximum of $1,000,000, with no maximum duration, and increases attendant care benefits to a maximum payment of $6,000 per month, to a maximum of $1,000,000, with no maximum duration.
[17] The record confirms that as of March 2016 the following SABS benefits have been paid:
(a) Non-Earner - $26,054.19
(b) Attendant Care - $603,416.29
(c) Housekeeping - $3,280.00
(d) Medical-Rehabilitation - $672,884.72
The Proposed Settlement
[18] The total proposed settlement is $373,000, which consists of the following:
• Future attendant care - $180,000
• Future medical and rehabilitation benefits - $180,000
• Costs - $10,000
• Assessable disbursements - $3,000
[19] The proposed settlement amounts for future attendant care benefits and future medical and rehabilitation benefits represent approximately 50% of the remaining amounts available under each of these categories. The plaintiff is 85 years of age. Based on the applicable normal life expectancy tables, I accept that his remaining life expectancy would have been 6-7 years. I accept that Kee Kwok has a reduced life expectancy in the range of 3.6 to 4.6 years as a result of the injuries sustained in the subject collision.
[20] Based on the record before me, I am fully satisfied that the plaintiff solicitors have obtained a settlement which is in the best interests of Kee Kwok and which will adequately look after his needs. I accept that resolution of the SABS claim on a full and final basis will bring an end to the claim and negate the need to participate in the dispute resolution process regarding any future denial of benefits requested. I agree that the proposed settlement represents a fair and appropriate resolution of the plaintiff’s claims for SABS having regard to the complete factual matrix of this case.
The Retainer Agreement and Proposed Fees
[21] Section 16(1) of the Solicitors Act, R.S.O. 1990, c. S.15 (the “Act”) states that a solicitor may, subject to the conditions and restrictions set forth in sections 17-33, enter into a variety of agreements with his or her client respecting the amount and manner of payment for services provided. One type of permissible agreement is a “contingency fee agreement” as provided for and defined in section 28.1 of the Act. A contingency fee agreement is not the only type of agreement or retainer permissible in a tort-related or Statutory Accident Benefit action or application.
[22] Section 2.3(i) of the regulation specifically provides that a written contingency fee agreement must contain a provision “that the client and the solicitor have discussed options for retaining the solicitor other than by way of a contingency fee agreement, including retaining the solicitor by way of an hourly rate retainer” (emphasis added).
[23] If the form of retainer agreed to is a contingency fee agreement, there must be strict compliance with the requirements of both the Act and the regulation regarding the form and content of the agreement. If the agreement is non-compliant it may, depending on the deficiency, be deemed unenforceable. This does not necessarily mean that the solicitor is disentitled to any fees for services provided. The quantum of any fees owing can be based and assessed on a quantum meruit basis. Hodge v. Neinstein, 2015 ONSC 7345, 129 O.R. (3d) 111, at para 81 (Div. Ct.).
[24] Section 15 of the Act provides that a “contingency fee agreement” means an agreement referred to in section 28.1. Section 28.1(2) of the Act is titled “Remuneration dependent on success”. This section defines the term contingency fee agreement for the purpose of the Act. It provides:
A solicitor may enter into a contingency fee agreement that provides that the remuneration paid to the solicitor for the legal services provided to or on behalf of the client is contingent, in whole or in part, on the successful disposition or completion of the matter in respect of which services are provided.
[25] Subsections (5) and (6) provide that, if a contingency fee agreement involves a percentage of the amount or of the value of the property recovered, then the amount paid to the solicitor shall not be more than the maximum percentage, if any, prescribed by regulation unless approved by a judge by way of joint application.
[26] Regarding the issue of costs under a contingency fee agreement, section 28.1(8) of the Act states that any award of costs or costs obtained as part of the settlement is not payable to the solicitor. Such costs are payable to the client unless ordered otherwise. The solicitor and client can jointly apply to a judge for approval to include the costs or a proportion of the costs in the contingency fee agreement because of exceptional circumstances.
[27] The agreement entered into in this case incorporates the “Explanation of Costs to Client” provided to the client (“the “agreement”).This agreement is not a contingency fee agreement. Under the agreement, the amount and manner of payment is established on a fee-for-service basis. Whether remuneration is to be paid for legal services provided is not contingent, in whole or in part, on the successful disposition or completion of the matter. It is not a “no win-no fee” agreement. The agreement provides that an account will be rendered at the conclusion of the case.
[28] The agreement provides an anticipated fee range in percentage terms for the benefit of the client. The agreement further provides an explanation of party and party costs payable by the defendant upon settlement or judgment and that such party and party costs would defray a portion of the total legal bill. It further provides that the account rendered by his solicitors would be in excess of party and party costs recovered.
[29] The agreement states, in part, as follows:
In the province of Ontario, plaintiffs who achieve any reasonable degree of success in their lawsuit are entitled to recover, from the defendant; partial indemnity costs or substantial indemnity costs (also known as lawyers’ costs), in addition to any damages to which they are entitled. This happens whether your case is settled or proceeds through trial to judgment. These indemnity costs are calculated according to a schedule of fees and disbursements and will defray a portion of our total legal bill to you. Invariably, we will have an account to render to you at the conclusion of your case in excess of the indemnity costs paid, which we will recover from the defendant. Assuming a reasonably successful result in your case, the portion of our bill which you as our client will be responsible for will likely be in the range of 15% to 25% of the amount recovered for you, over and above the indemnity costs. This is an anticipated fee range, not a percentage fee. We are able to provide this estimate after a careful analysis of the costs involved in conducting personal injury litigation for our clients over many years…
It is extremely important to remember that if you are unsuccessful in their lawsuit, Howie, Sacks & Henry will have the option to insist you pay our total bill and you may be required to pay a portion of the defendant’s legal costs as well. If your lawsuit carries with it a risk, however small, that the case could be lost, rest assured that we will discuss the problems with you in detail so that you may properly assess the risks involved and make a decision about whether or not you wish to proceed further.
[30] A similar form of agreement was considered with approval by Shaw J. in Melvin v. Ontario (Correctional Services), 2013 ONSC 5432.
[31] Reference in the retainer agreement to a percentage estimate of an anticipated fee range for the client’s benefit does not in and of itself make the agreement a contingency fee agreement. The agreement must be examined in its entirety in the context of section 28.1(2) of the Act. Having concluded that the agreement is not a contingency fee agreement, section 28.1(8) of the Act has no application. The solicitor is entitled to have the costs obtained as part of the settlement paid to him in accordance with the agreement.
[32] In Aywas (Litigation Guardian of) v. Kirwan, 2010 ONSC 2278, 99 C.P.C. (6th) 199, at para. 18, Hackland J. summarized the factors to consider in determining the reasonableness of a solicitor’s proposed fees to be paid by a party under disability. These are as follows:
The time expended by the solicitor;
The legal complexity of the matters dealt with;
The degree of responsibility assumed by the solicitor;
The monetary value of the matters in issue;
The importance of the matters to the client;
The degree of skill and competence demonstrated by the solicitor;
The results achieved;
The ability of the client to pay;
The client’s expectation of the amount of the fee;
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
The social objective of providing access to justice for injured parties. See: Solicitor, Re, 1973 CanLII 653 (ON CA), [1973] 1 O.R. 652 (Ont. C.A.).
See also Giusti (Litigation guardian of) v. Scarborough Hospital (2008), 2008 CanLII 22555 (ON SC), 57 C.P.C. (6th) 275, at para. 81 (Ont. S.C.).
[33] Rule 3.6-1 of the Law Society of Upper Canada’s Rules of Professional Conduct states that “[a] lawyer shall not charge or accept any amount for a fee or disbursement unless it is fair and reasonable and has been disclosed in a timely fashion.” The commentary to rule 3.6-1 provides that what is a fair and reasonable fee will depend upon such factors as:
(a) the time and effort required and spent,
(b) the difficulty of the matter and the importance of the matter to the client,
(c) whether special skill or service has been required and provided,
(c.1) the amount involved or the value of the subject-matter,
(d) the results obtained
(e) fees authorized by statute or regulation,
(f) special circumstances, such as the loss of other retainers, postponement of payment, uncertainty of reward, or urgency,
(g) the likelihood, made known to the client, that acceptance of the retainer will result in the lawyer’s inability to accept other employment,
(h) any relevant agreement between the lawyer and the client,
(i) the experience and ability of the lawyer,
(j) any estimate or range of fees given by the lawyer, and
(k) the client’s prior consent to the fee.
[34] In determining a fair and reasonable fee, both the cases referred to above and the Rules of Professional Conduct provide that one of the factors to consider is the result achieved in the litigation. Consideration of the result in this context in order to arrive at a fair and reasonable fee amount does not make the agreement a contingency fee agreement.
[35] Plaintiff’s counsel proposed account for legal fees is $36,000, plus H.S.T of $4,680, over and above the partial indemnity costs recovered in the sum of $10,000 inclusive of H.S.T. payable to the solicitor in accordance with the fee agreement. The total fees payable are $50,680 inclusive of taxes plus $3,000 for assessable disbursements.
[36] Based on the record and the application of the legal principles set forth above, I am satisfied that the quantum of the proposed settlement is in the best interests of Kee Kwok and that the proposed fees are fair and reasonable. In accordance with my written endorsement dated November 13, 2016 and the signed Judgment, this settlement is approved.
Firestone J.
Released: December 2, 2016
CITATION: Kee Kwok v. State Farm Mutual, 2016 ONSC 7339
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
KEE KWOK, by his Litigation Guardian Grace Kwok
Applicant
– and –
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY and CERTAS HOME AND AUTO INSURANCE COMPANY
Respondents
REASONS FOR DECISION
Firestone J.
Released: December 2, 2016