Court File and Parties

COURT FILE NO.: 43375/06 DATE: June 26, 2017

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Alexia Alexander, a minor by her Litigation Guardian, Elroy Mounsey and Judith Singh Plaintiffs – and – Brief & Associates Limited, The Trustee of the Estate of Michael R. Willie, a Bankrupt and Carrying on business as Irish Times and O’Hara’s Irish Times and Kathleen MacEachern, Dorel Juvenile Group, Inc., Dorel U.S.A., Inc., Dorel Design and Development, LLC., Dorel Canada, Dorel Industries Inc., Les Industries Dorel Inc., and Sears Canada Inc. Defendants – and – Kathleen MacEachern Third Party

Counsel: D. Balena, for the Plaintiffs S. Preshner, Office of the Children’s Lawyer

COURT FILE NO.: 86345/13

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Alexia Alexander, a minor by her Litigation Guardian, Alexis Alexander, and Alexis Alexander personally Plaintiff – and – Wawanesa Mutual Insurance Company Defendant

Counsel: D. Balena, for the Plaintiff

Endorsement

SALMERS, J.

Background and Procedural History

[1] This is a further endorsement on a motion for approval of the settlements of the tort and accident benefit claims of the minor, Alexia Alexander, who sustained injuries of catastrophic severity, primarily a brain injury with lifelong sequelae. The injuries were sustained in a July 10, 2004 car accident. Alexia was less than two months old at the time. During the accident, she was thrown from a car driven by her father. Her mother was killed in the accident.

[2] My first involvement with this motion was in late March 2016. I reviewed the voluminous materials submitted in support of the motion for approval, consisting of four bound volumes, each of which contained hundreds of pages. I then released my endorsement on March 24, 2016. [1] In that endorsement, I discussed several concerns and problems that I had with the proposed judgment. Pursuant to Rule 7.08, for my assistance, I referred the matter to the Office of the Children’s Lawyer (OCL) to prepare its usual thorough report to address not only concerns raised by me, but also any other concerns or problems that might be identified.

[3] In late May 2016, Alexia’s counsel responded to my first endorsement by filing two more voluminous volumes of materials. In those materials, he responded to some of the concerns and problems raised in my first endorsement.

[4] The Children’s Lawyer provided her report on December 9, 2016. The report is very lengthy. The Children’s Lawyer shared all of my concerns regarding the issues and problems raised in my March 24, 2016 endorsement. Additionally, the OCL report identified several other problems and concerns.

[5] Alexia’s counsel requested to have until January 6, 2017 to file materials in response to the OCL report. I allowed counsel until January 25, 2017 to file such responding materials.

[6] On January 23, 2017, Alexia’s counsel requested further time to file his responding materials.

[7] On February 24, 2017, the court received the responding materials from Alexia’s counsel which consisted of a bound book containing many pages and a draft of the anticipated guardianship application.

[8] On March 7, 2017, the OCL faxed to the court a letter with comments about the materials most recently received from Alexia’s counsel.

[9] On March 10, 2017, Alexia’s counsel faxed a letter to the court, commenting on the March 7, 2017 letter of the OCL.

[10] Having reviewed all of these materials, I continue to have concerns and will not be approving the proposed judgment. To assist counsel, I will set out my concerns.

[11] I am satisfied that the overall settlement amounts are reasonable. However, my primary concern is that the amount available for the purchase of Alexia’s structure is being improperly reduced by proposed payments from the total settlement funds.

Proposed Payments to Alexia’s Father

[12] Except for $500.00 paid for Alexia’s private nursery school costs and $686.13 monthly for attendant care services from the date of settlement until approval of the settlement, I am not prepared to approve payment of further sums to Alexia’s father, Alexis Alexander.

Repayment of Debts

[13] The proposed settlement contemplates that two debts of Alexia’s father shall be paid from Alexia’s settlement funds. One debt is owed by Mr. Alexander to Dan Balena, Alexia’s counsel. The second debt is owed to a person named Bano Noor. For the following reasons, I am not prepared to approve a settlement that contemplates repayment of loans incurred by Alexia’s father.

[14] Mr. Balena states that it was necessary to loan money to Mr. Alexander due to financial expenses and difficulties encountered as a result of Alexia’s injuries sustained in the accident. That explanation must be considered in the context of all of the circumstances.

[15] Alexia’s father, Alexis Alexander, is a defendant to Alexia’s tort action. Mr. Balena, loaned $160,020.21 to Mr. Alexander. As part of the mediated settlement, part of Alexia’s settlement funds are coming from her father, no doubt from his insurer. Mr. Balena was also counsel for Mr. Alexander, as plaintiff in his accidents benefits (AB) action against Wawanesa Mutual Insurance Company. The OCL has agreed with my previous statement that the perception of conflict of interest is palpable. I continue to be of that view.

[16] Further, like every parent, Mr. Alexander has an obligation to support his daughter.

[17] Additionally, Mr. Alexander has received significant attendant care payment from the AB insurer: $6,000.00 per month until July 2008; then, $4,114.12 per month until August 2013; and then $686.13 monthly until the date of settlement.

[18] Also, in his own actions, Mr. Alexander has advanced claims for income replacement benefits and past and future loss of income. As a result of the death of his wife (Alexia’s mother), he is also advancing a loss of dependency claim.

[19] There is insufficient evidence to satisfy me that Mr. Alexander has reduced the potential value of his tort and accident benefit claims in order to enhance Alexia’s claims.

[20] Finally, Mr. Balena is earning very significant fees for his work on behalf of Alexia and her father.

[21] In all of these circumstances, I am not satisfied that there is any basis for Alexia’s settlement to be reduced in order to pay her father’s debts to Mr. Balena.

[22] Mr. Alexander also owes approximately $41,550.00 to Bano Noor. The evidence contains very few details about this debt. For that and most of the factors referred to with respect to the debt to Mr. Balena, I am not prepared to approve a reduction of Alexia’s settlement in order to pay her father’s debt to Bano Noor.

Home Improvement Request

[23] Part of the proposed settlement is that $250,000.00 be paid to Mr. Alexander for home improvements to create a separate apartment for Alexia. It is submitted that this is necessary because Alexia will be unable to live independently as an adult.

[24] There is insufficient, if any, evidence and no details about what construction is proposed for this apartment. There are no quotes or estimates from any contractor. Apart from a single line in one report, there is no evidence to support that $250,000.00 is the amount required for such an apartment.

[25] Also, none of the expert reports expressly conclude that Alexia will be unable to live independently as an adult. Alexia’s teachers advise that she is doing relatively well at school. In 2013, when she took the Grade 4 Canadian Cognitive Abilities Test, her results placed her exactly in the middle of the “average” category. The comments on her report cards are all either good or excellent. Her teachers advise that she is not disruptive or of poor behaviour, and although somewhat shy, she works and plays well with others and is liked by both children and adults.

[26] Based on the evidence before me, it is premature to find: that Alexia will not be able to live independently as an adult; that her best interests as an adult will be to live with her father; and that if such an apartment is necessary, $250,000.00 is a reasonable amount to set aside for its construction.

[27] Accordingly, I will not approve a settlement that proposes to make such payment to Mr. Alexander.

Lump-sum Payment

[28] In addition to the request of $250,000.00 for home improvements, the proposed settlement seeks additional funds to be paid to Mr. Alexander. In the materials, this additional amount varies from $100,479.38 (in the original motion record) to $118,017.75 (in Mr. Balena’s March 10, 2017 letter).

[29] The proposed settlement is that together with the aforesaid $250,000.00, the additional funds should be paid to Mr. Alexander to manage for certain purposes. One purpose is the alleged monthly shortfall in Alexia’s treatment. The remaining $70,772.00 is to be allocated to one-time costs recommended by an occupational therapist.

[30] I am not prepared to have the additional sum paid to Mr. Alexander without being subject to accounting. I would be prepared to have the additional sum paid to Mr. Balena in trust to be held by him and conveyed to Alexia’s guardian of property after the court appointment.

Transportation Costs

[31] Mr. Alexander has agreed that his request for future transportation costs will be brought as part of the ongoing management plan and at this time should not be paid to him from Alexia’s settlement funds.

Legal Fees

[32] There was a contingency fee retainer agreement in this case. It may not have been in accordance with the Solicitors Act, but in considering the legal fees requested, I will consider the fairness and reasonableness of the requested fees.

The Tort Action

[33] Alexia was an infant at the time of the accident. Her father, while hard-working and very well-intentioned, is not highly educated or sophisticated. There is no evidence that the litigation guardians, Mr. Mounsey and Ms. Singh, are otherwise. There had to be tremendous reliance by all of them on Mr. Balena’s skills, judgment, and advice. In these circumstances, it was very fair to all concerned to enter into the contingency fee retainer agreement.

[34] Mr. Balena has spent tremendous time and effort on this file. He has spent a very large amount of money on disbursements. Although there was little, if any, risk of Alexia never recovering anything, Mr. Balena assumed the risk that all contingency fee lawyers take in cases of this nature. Alexia’s progress had to be monitored and carefully considered by Mr. Balena at all times. The split of liability amongst the various defendants added to the complexity of the case. The amount of Mr. Balena’s compensation was uncertain until settlement was reached.

[35] I am also satisfied that the settlement is very satisfactory for Alexia. Her lifetime needs are very well-addressed.

[36] In all of these circumstances, I am satisfied that fairness and reasonableness are met by tort action legal fees in accordance with the retainer agreement in the amount of 30% of Alexia’s tort settlement less disbursements. As set out in the OCL report, cited at paragraph 89 of Mr. Balena’s February 22, 2017 affidavit, this amount is $1,208,697.21 plus HST of $157,130.63 for a total of $1,365,827.85.

The Accident Benefits (AB) Action

[37] Mr. Balena requests that the amount of this settlement also be subject to the 30% contingency fee of the retainer agreement. Relying on the facts of this case and the law as set out in Adler (LG of) v State Farm Mutual Automobile Insurance Co, [2] the OCL submitted that the legal fees for this action should be 15% of the AB settlement.

[38] In this case, the insurer did not contest that Alexia should be designated as catastrophically impaired. The issues were how and when the available funds would be spent. To a large degree this is a clerical function in a lawyer’s office.

[39] Also, much of the lawyer’s work on the tort action would have been useful in the AB action. Further, in this case, the lawyer made efforts to obtain attendant care fees at the highest or very high levels. Those requests were successful for some time, but eventually the attendant care payments were very significantly reduced when it was determined that full-time attendant care had not been required for some time.

[40] Lastly, the overall compensation that the lawyer will receive is a consideration.

[41] In all of these circumstances, with respect to the AB claim, I am not satisfied that fairness and reasonableness are achieved by the 30% contingency fee set out in the retainer agreement. After considering fairness and reasonableness, including the time spent by counsel on the AB claim, the relative lack of legal complexity of the AB claim, the results achieved, and the relatively low level of risk assumed by the lawyer on the AB claim in this case, I would be prepared to approve legal fees of 15% of the AB settlement, less disbursements, on the AB claim. This amount is $143,944.69 plus $18,712.81 HST for a total of $162,657.50. Approval in this amount also increases Alexia’s net AB settlement by the same amount.

Total Legal Fees

[42] For the above reasons, I am not prepared to approve legal fees as requested by Alexia’s counsel. As set out above, I would be prepared to approve total legal fees of $1,528,485.45, inclusive of HST. Overall, considering the time and monies spent by the lawyer, the complexity, the risk assumed, and the result, I am satisfied that such fees achieve fairness and reasonableness to all concerned.

Summary

[43] For all of the above reasons, I am not prepared to approve the proposed settlement as submitted to me in the materials before me.

[44] I would be prepared to approve a settlement on the following terms:

a) Total settlement of $5,331,073.05; b) Payment of disbursements of $342,469.07; c) Payment to Alexia’s father of $500.00 paid by him for private nursery school fees and $686.13 monthly for attendant care since the date of the settlement; d) Legal fees of $1,528,485.45, inclusive of HST; e) Payment of outstanding treatment invoices of $73,664.38; f) Payment of $118,017.75 to Alexia’s counsel, Mr. Balena, to be held in trust by him and conveyed to Alexia’s guardian of property after the court appointment; and g) The remaining balance of the settlement to be paid into a tax-exempt structure with monthly payments for Alexia and lump sum payments at specific ages to take into account potential housing needs of Alexia. Payments shall be made to the Accountant of the Superior Court of Justice until such time as a guardian of Alexia’s property has been appointed. If there is a cost for the guarantee period, that must be known and approved by the court.

[45] If counsel wishes to make further submissions, he is to contact the trial coordinator to schedule an appearance before me.

[46] The court office recently located a motion that had been left in the court office. The motion has to do with amending the style of cause with respect to the now discharged bankrupt. If necessary, that matter can be addressed by counsel when he attends to speak to me with respect to the motion for approval of the settlement.

[47] After the settlement has been approved, then the guardianship application shall be brought before me.

Order to go accordingly

Justice D. Salmers

Released: June 26, 2017

Footnotes:

[1] [2016] O.J. No. 1509 [2] (2008) , 92 O.R. (3d) 266