Court File and Parties

COURT FILE NO.: CV-14-129457 DATE: 20170530

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

MACKENZIE MOUNCE, a minor under the age of 18 years by her Litigation Guardian, REBECCA CROSS, REBECCA CROSS and RYAN MOUNCE Applicants

– and –

MARILYN DARLENE RAE and DOUGLAS MURRAY RAE Respondents

COUNSEL:

S. Ibrahim, for the Applicants

HEARD: April 11, 2017

REASONS FOR JUDGMENT

MCKELVEY J.:

[1] Counsel for the applicants have brought an application for the following relief on this application:

1. A judgment appointing Rebecca Cross as Litigation Guardian for the minor applicant, Mackenzie Mounce.
2. A judgment approving the settlement of the claims for damages arising from a dog bite incident which occurred on September 11, 2015.
3. An order that service of the Notice of Application upon the Children’s Lawyer be dispensed with.

[2] The minor applicant, Mackenzie Mounce, was born on June 30, 2013 and at the time of the application was three years old. On January 11, 2017, the claimant’s counsel entered into a settlement of the claim, subject to the approval of this Court. Under the terms of the settlement the respondents are obliged to pay the sum of $130,000 inclusive of pre-judgment interest, disbursements, costs, and HST and the subrogated OHIP claim as well as the claims for the Family Law Act claimants. The plaintiffs’ solicitor advises that after payment of the other claims the amount available for the minor plaintiffs’ claim is $115,485.68 which includes an allocation of the costs recovered which are estimated at $16,667.50.

[3] I initially reviewed the application which was filed as a basket motion on January 25, 2017. I endorsed on the record that while I had no difficulty with the quantum of the settlement I did require further details with respect to the legal costs claimed and how this was calculated.

[4] With respect to legal costs, the applicants’ counsel relies on a contingency fee agreement which provides for a contingency fee of 33% and claims the sum of $40,578.30 for fees.

[5] On March 23, 2017, counsel on behalf of the applicants’ solicitor attended before me to address the issue of legal fees claimed. The matter was adjourned so that the applicants’ counsel could provide further details with respect to the calculation of the fees proposed to be charged to the applicants. On April 11, 2017, I heard further argument from the applicants’ counsel with respect to the issue of the legal fees to be charged.

[6] The applicants’ counsel, Tina Radimisis has delivered 3 affidavits in support of her application. The first dated January 7, 2017 was filed with the application. Supplementary affidavits dated February 6, 2017 and April 10, 2017 were filed prior to each of the subsequent attendances before me.

The Contingency Fee Agreement

[7] The Contingency Fee Agreement with the law firm of Jewell Radimisis Jorge LLP is dated October 7, 2015. It is signed on behalf of Mackenzie Mounce by her Litigation Guardian, Ryan Mounce as well as by Ryan Mounce in his personal capacity and Rebecca Cross. Ryan Mounce and Rebecca Cross are the father and mother of Mackenzie Mounce. The relevant provisions of the Contingency Fee Agreement are found in paragraph 4, as follows:

4. The contingency fee is payable on the settlement or judgment in favour of the Client for damages, Family Law Act, and/or lump sum buy out of Statutory Accident Benefits, prejudgment interests and costs.

TORT

It is agreed that the LAWYERS’ compensation shall be (33% plus applicable taxes) of the amount of the recovery of the CLIENT’S claim for General Damages (pain and suffering), Special Damages (economic loss), Family Law Act and Prejudgment Interest, whether by settlement or judgment, inclusive of legal costs and applicable taxes and exclusive of disbursements and any applicable taxes on the disbursements. Please note that any monies paid by way of settlement or judgment for costs and/or disbursements (to be paid by the defendants’ insurance company) are not included in the amount on which the contingency fee is based and are to be paid to the JRJ, and the costs award which would have gone to the client should effectively reduce the client’s total cost in fees of brining this action to approximately 20% of the total award.

Applicable Principles of Law

[8] As noted by Justice Del Frate in St. Jean v. Armstrong, 2015 ONSC 13 (affirmed on appeal, 2017 ONCA 145), contingency fee agreements were permitted in Ontario to grant access to justice to litigants who ordinarily would not be in a position to pay for legal fees. However, a contingency fee agreement is not a carte blanche to permit lawyers to charge what the agreement states. Fairness and reasonableness must still be considered.

[9] In Henricks-Hunter v. 814888 Ontario Inc., 2012 ONCA 496, [2012] O.J. No. 3207, the Ontario Court of Appeal clarified how fairness and reasonableness must be considered. The issue of fairness of the agreement is to be assessed as of the date the agreement was entered into. The reasonableness of the agreement is to be assessed as of the date of the hearing. A contingency fee agreement can only be declared void or cancelled when the court determines that it is either unfair or unreasonable.

[10] When a solicitor seeks to enter into an enforcement contingency fee agreement with a party under a disability, the solicitor must comply with the regulations passed pursuant to the Solicitors Act, R.S.O. 1990, c. S.15. Section 5(1) of Ontario Regulation 195/04 provides that:

5. (1) A solicitor for a person under disability represented by a litigation guardian with whom the solicitor is entering into a contingency fee agreement shall,

   (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 a settlement or a consent judgment under rule 7.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[11] In the present case, counsel for the applicants did not obtain approval of the agreement before it was finalized. Thus, as part of the approval process for the settlement I am required to consider both the fairness and reasonableness of the Contingency Fee Agreement.

The Fairness of the Contingency Fee Agreement

[12] In the Supplementary Supplementary Affidavit of Tina Radimisis dated April 10, 2017, she states that she initially met with the applicants to discuss the case and the Contingency Fee Agreement. She further states that she discussed the agreement with both the applicants, Rebecca Cross and Ryan Mounce in detail and advised that her firm would, “charge 33% of the settlement award exclusive of taxes on the legal fees and disbursements and applicable taxes on disbursements”. She further notes that neither parents have claimed that the agreement was unfair or that the proposed fees are unreasonable.

[13] In reviewing the provisions of the Contingency Fee Agreement, there appear to be inconsistent statements as to how the contingency fee will be calculated. In the first half of the paragraph setting out the calculation of the fee it states that the lawyer’s compensation will be 33% of all sums recovered inclusive of legal costs but excluding disbursements. In the second half of the paragraph, however the agreement states that any monies paid by way of settlement for costs and disbursements are not “included in the amount in which the contingency fee is based and are to be paid to JRJ”. The description given by Ms. Radimisis does not appear to be consistent with either of the options described above. In questioning counsel about whether legal costs were included for purposes of the fee, he agreed that it looked like there was some discrepancy in the wording of paragraph 4 of the Contingency Fee Agreement. He suggested, however, that the second portion of the paragraph related to how the fees would be distributed. In my view, however the basis of how the contingency fee is to be calculated is simply not clear. I consider this discrepancy to be very significant in considering the fairness requirement of section 24 of the Solicitors Act, R.S.O. 1990, c. S.15. As noted in the Ontario Court of Appeal decision in Raphael Partners v. Lam, [2002] O.J. No. 3605, the Court of Appeal has commented that the fairness requirement is concerned with the circumstances surrounding the making of the agreement and whether the client fully understands and appreciates the nature of the agreement that he or she executed (see para. 37).

[14] It is also significant in my view that the fee agreement states that taking into account the costs award should, “effectively reduce the client’s total cost in fees in bringing this action to approximately 20% of the total award”. This further confuses the question of how much will be owed by the clients.

[15] The lack of precision as to how to properly calculate the contingency fee payable for this settlement is highlighted by the fact that the applicants’ counsel was not able to provide an accurate calculation as to how the fee for the minor applicant in this case was calculated. As noted previously, the Affidavit of Ms. Radimisis stated that the total of fees to be paid to her firm is $40,578.30. When asked how this figure was calculated, counsel advised that they started by charging 20% of the value of the claim (excluding costs) which by their calculation totalled $19,666.47 (by my calculation the correct amount would in fact be slightly higher at $19,763.60). To this figure the sum of $2,556.64 is added on account of HST, bringing the total to $22,223.11. To this amount, the sum of $16,667.50 is added as the legal costs recovered in the action, for a grand total of $38,890.61. This was supposed to represent the amount the minor applicant was to be charged. However, counsel was unable to explain the discrepancy between this amount and the sum of $40,578.30 which is the fee quoted in the affidavit of Ms. Radimisis.

[16] It is significant to note that under section 5 of the Solicitors Act, R.S.O. 1990, c. S.15 Regulations, the agreement must set out the method by which the fee is to be determined and section 6 requires that a simple example must be provided which shows how the contingency fee is calculated. The Contingency Fee Agreement in this case does not contain any example that shows how the contingency fee is to be calculated. And given the apparent inconsistencies in the paragraph describing the fee to be charged and the inability of the plaintiffs’ solicitor to explain how the fee was calculated, the failure to comply with this provision is a significant violation of the Regulations. Based on the above analysis, I have a serious concern about the fairness of the fee agreement and whether the client would be in a position to fully understand the nature of the fee which was to be charged.

[17] There are other concerns with respect to the fairness of the agreement. Section 28.1(8) of the Solicitors Act, R.S.O. 1990, c. S.15 provides as follows:

(8) A contingency fee agreement shall not include in the fee payable to the solicitor, in addition to the fee payable under the agreement, any amount arising as a result of an award of costs or costs obtained as part of a settlement, unless,

(a) the solicitor and client jointly apply to a judge of the Superior Court of Justice for approval to include the costs or a proportion of the costs in the contingency fee agreement because of exceptional circumstances; and (b) the judge is satisfied that exceptional circumstances apply and approves the inclusion of the costs or a proportion of them.

[18] Under section 28.1(9), a contingency fee that is subject to approval under subsection 8 is not enforceable unless it is so approved. I conclude that there are no exceptional circumstances which apply in this case.

[19] The Divisional Court considered the provisions of section 28.1(8) in Hodge v. Neinstein, 2015 ONSC 7345. That decision is currently under appeal but at present time has not been ruled on by the Ontario Court of Appeal. In that decision, the Divisional Court notes that section 28.1(8) prohibits a lawyer from entering into an agreement under which he gets a fee and also any portion of costs recovered in an award or settlement (para. 23). At paragraph 39, the Court notes that if a contingency fee agreement is subject to approval and approval is not obtained, the agreement is not enforceable.

[20] Taken all of the circumstances into account, I have concluded that the Contingency Fee Agreement in this case did not meet the level of fairness required at the time the agreement was entered into. The agreement lacks clarity as to how the fee will be calculated and does not comply with the requirements of the regulations under the Solicitors Act, R.S.O. 1990, c. S.15.

Reasonableness

[21] In the Raphael Partners v. Lam decision, the Court of Appeal sets out the factors to be considered on the reasonableness of fees charged by a solicitor. They include the time expended by the solicitor, the legal complexity of the matter at issue, the results achieved and the risk assumed by the solicitor. In the present case, the applicants’ counsel acknowledged that there was no significant risk on liability in this case. It was a straightforward dog bite case and there was no significant issue of contributory negligence by the minor applicant. Thus, the risk of losing the action was close to zero, in light of the provision of s. 2 of the Dog Owners’ Liability Act, R.S.O. 1990, c. D.16.

[22] Similarly, the legal complexity of a matter cannot be considered to be particularly onerous. This is reflected in the fact that the claim settled very promptly. The dockets which were produced at my request indicate that the applicants’ counsel had an initial interview with her clients on October 7, 2015. On November 29, 2016, the applicants’ counsel spent two hours preparing for a settlement meeting with a tort adjuster. By December 5, 2016, the applicants’ counsel had concluded a settlement and called the clients to report the settlement to her clients. Between October 7, 2015 and December 5, 2016, the applicants’ counsel spent a total of 6.5 hours on the file. There was, of course, additional time spent by other staff members who were working on the file together with Ms. Radimisis. As of February 6, 2017, the total hours spent by all time keepers was 63.1 hours. Based on the hourly rates charged, the total value of the dockets was $15,047.50. This includes a total of approximately 24 hours which was docketed by secretarial assistants who were charged out at $175 per hour which I consider excessive. I accept that the time spent by counsel on a file does not dictate whether the amount charged by the applicants’ solicitor is a reasonable amount. It is, however, a relevant factor which I have taken into account.

[23] I do accept that the result obtained in this case was excellent and represented a very good settlement for the minor applicant. However, taking all of the factors into account as outlined above, I have concluded that the fee proposed by the applicants’ counsel based on the Contingency Fee Agreement is not reasonable.

[24] As I have concluded that the requirements for fairness and reasonableness have not been met, I have concluded that the Contingency Fee Agreement is not enforceable. This of course leaves the question as to what amount should be paid to the applicants’ counsel for their services in representing the minor applicant on this claim. Taking the factors which I have referred to above into consideration, I have concluded that a fee based on 20% of the total recovery for the minor applicant would provide an appropriate basis to compensate the applicants’ counsel. Based on a total recovery for the minor applicant of $115,485.68, I find that the sum of $23,097.13 is appropriate to compensate the applicants’ counsel for legal services provided to the minor plaintiff. That figure includes a significant premium based on the time spent for the result achieved and the fact that the applicants’ solicitor took the case on a contingency basis. In this regard, I have taken into account that additional time has been spent by the applicants’ counsel in obtaining court approval. It also reflects the fact that there was virtually no risk on liability and the settlement was achieved quickly and without the necessity of commencing an action. In addition to this amount the applicants’ counsel is entitled to payment for all disbursements, plus HST on both the counsel fee and disbursements. I therefore grant judgment approving the settlement of the claim for damages of the minor applicant and appoint Rebecca Cross as Litigation Guardian for the minor applicant with fees to be paid to the applicants’ counsel in accordance with this decision.

Justice M. McKelvey Released: May 30, 2017

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: MACKENZIE MOUNCE, a minor under the age of 18 years by her Litigation Guardian, REBECCA CROSS, REBECCA CROSS and RYAN MOUNCE Applicants – and – MARILYN DARLENE RAE and DOUGLAS MURRAY RAE Respondents REASONS FOR JUDGMENT Justice M. McKelvey

Released: May 30, 2017