SUPERIOR COURT OF JUSTICE – ONTARIO
RE: KHUSHPREET KARWAL, ARADHNA KARWAL, minors by their Litigation Guardian, JASWINDER KARWAL and JASWINDER KARWAL personally
Plaintiffs
V.
PARMINDER KARWAL, SHARON S. CAMERON, CATHERINE SUMSION, ROBERT J. SUMSION, PARMJIT KAUR SINGH, MANJIT SINGH, ELIZABETH MEDEIROS, MICHAEL R. MEDEIROS, JOHN DOE and AVIVA INSURANCE COMPANY OF CANADA
Defendants
BEFORE: Daley, RSJ.
COUNSEL: D. Balena, for the Plaintiffs
No one appearing for the Defendants
S. Preshner, for the Children’s Lawyer of Ontario
HEARD: April 21, 2017, May 21, 2017, followed by further written submissions
to June 13, 2017
R E A S O N S F O R D E C I S I O N
1Counsel for the minor plaintiffs brought a motion for approval of settlements of their tort and statutory accident benefit claims as well as the claims of their mother, the plaintiff Jaswinder Karwal, and for judgment in accordance with the minutes of settlement filed.
Background:
2On September 30, 2013 the minors Khushpreet Karwal (Khushpreet) and Aradhna Karwal (Aradhna) born May 26, 2007 and February 28, 2002, respectively, were passengers in a motor vehicle driven by their father, the defendant Parminder Karwal.
3Their father’s motor vehicle was travelling eastbound on Bovaird Dr. near the off ramp of Highway 410, in the City of Brampton. This vehicle mounted the south curb, entered the adjacent lane and struck a vehicle driven by the defendant Cameron. The Karwal vehicle then continued across the median separating the east and westbound lanes and struck the vehicle driven by the defendant Sumsion, which in turn was struck from the rear by vehicles driven by the defendants Singh and Medeiros.
4The minor Aradhna suffered minor soft tissue injuries and was cared for as an outpatient following initial treatment in the emergency department of a local hospital.
5The minor Kushpreet sustained very serious injuries including a closed head injury, as well as soft tissue injuries to her head and neck along with abdominal contusions. She was initially taken by ambulance to the Brampton Civic Hospital and then to the Hospital for Sick Children from which she was discharged on October 6, 2013.
Actions and Claims Made Following the Accident:
6The within action was commenced on behalf of the minors by their mother and Litigation Guardian Jaswinder Karwal and on her own behalf as a derivative plaintiff. The defendants Karwal, Singh, Sumsion, and Medeiros all brought tort actions seeking damages arising from this accident.
7Claims were also made on behalf of the minor plaintiff Kushpreet for Statutory Accident Benefits. She was designated as having a catastrophic impairment as a result of her closed head injury and as such she is entitled to the maximum statutory benefits for medical–rehabilitation treatment in the sum of $1,000,000. As well, she is entitled to the maximum in statutory attendant care benefits for her lifetime.
Liability for the Accident and Available Insurance Coverage:
8A pretrial conference in respect of all claims in the various actions was conducted by me. On all of the informational record adduced for this pretrial, I concluded, and all counsel agreed, that liability for the accident would rest fully with the defendant Karwal.
9I am satisfied that there was no realistic probability that any other defendant named in the action would be found to any degree liable for this accident and the injuries sustained.
10Thus, recognizing that Kushpreet’s claims far exceeded by many times the available insurance limits of $1,000,000, the focus of the discussion during the pretrial conference was the assessment of the other plaintiffs’ claims and their proportionate value to the claims of the minor plaintiffs, and most notably the claims of Kushpreet.
11The claims of the plaintiffs in the other actions were all settled out of the balance of the defendant Karwal’s remaining insurance limits in the total sum of $157,500.
The Proposed Settlements in Respect of Tort and AB:
12The settlement of the tort action is proposed as follows:
Allocation
Amount
Khushpreet Karwal’s Damages (net of legal fees, HST & disbursements
$475,188.75
Aradhna Karwal’s Damages
$25,000.00
Jaswinder Karwal for her FLA claim
$100,000.00
Subtotal Damages
$600,188.75
Partial Indemnity Costs (payable to the plaintiffs)
$85,000
Subtotal Partial Indemnity Costs
$85,000
Assessable Disbursements paid by the defendant Karwal’s insurer
$39,000
Additional Disbursements
$6,000
Subtotal Disbursements
$45,000.00
Legal Fees sought (25%)
$209,125.00
HST on Legal Fees
$27,186.25
Subtotal on Legal Fees and Taxes
$236,311.25
TOTAL
$966,500.00
13The proposed settlement of the AB claims is as follows:
Allocation
Amount
Khushpreet Karwal (net of legal fees)
$1,102,950.00
Aradhna Karwal
$32,000.00
Subtotal
$1,134,950.00
Legal Fees sought (20%)
$285,000.00
HST on Legal Fees
$37,050.00
Subtotal on Legal Fees and Taxes
$322,050.00
TOTAL
$1,457,000.00
14As to the proposed allocation of the settlement funds attributable to the minor plaintiff Khushpreet Karwal, the net total damages and AB benefits is $1,610,138.75, of which $1,500,000.00 is to be applied to the purchase of a structured settlement annuity. The proposed structured settlement annuity would generate $10,000 per month, non-indexed, for 3 years. After 3 years the payments would decrease to $7000 per month, non-indexed, over 6 years and thereafter decrease again to $2430.95 per month, non-indexed for the remainder of the plaintiff’s lifetime.
15Subsequent to the filing of the motion by counsel for the plaintiffs, and the receipt of the Children’s Lawyer’s Report, Counsel for The Children’s Lawyer filed a Supplementary Report of June 2, 2017 and in response to that further report, Counsel for the Plaintiffs filed further submissions dated June 13, 2017.
16It was unfortunate that the solicitor for the plaintiff had not earlier provided the subsequently received information as to other structured settlement options, as well as the information provided regarding the funding of attendant care. The manner in which some of the evidence on behalf of the plaintiffs has been presented has been piecemeal and this has had the unfortunate effect of delaying any meaningful review of the proposed settlements by several weeks following the submissions made by counsel in court.
The Contingency Fee Agreement – CFA:
17Before considering whether the proposed settlements in respect of the minor plaintiffs are fair and reasonable, including whether the proposed settlements in respect of Khushpreet are properly treated by way of a structured settlement, it must first be determined whether the plaintiffs’ counsel’s contingency fee agreement (CFA) is fair and reasonable and compliant with the Solicitors Act and Ontario Regulation 195/04.
18Contingency fee agreements were approved for use in Ontario in order to grant access to justice to litigants who ordinarily would not be in a position to pay legal fees associated with asserting their claims. However, a CFA is not a carte blanche to permit lawyers to charge what the agreement states. Fairness and reasonableness must still be considered: Mounce v. Rae, 2017 ONSC 2288; St. Jean v. Armstrong, 2015 ONSC 13 (affirmed on appeal, 2017 ONCA 145; Raphael Partners v. Lam (2002) 2002 CanLII 45078 (ON CA), 61 O.R. (3d) 417 (C.A.).
19The Court of Appeal has clarified how fairness and reasonableness must be examined, within the context of the CFA. In Henricks–Hunter v. 814888 Ontario Inc., 2012 ONCA 496, [2012] O.J. No. 3207, the court stated that the issue of fairness of the agreement is to be assessed as of the date the agreement was entered into and the reasonableness of the agreement could only be assessed as of the date of the hearing. A CFA can only be declared void or cancelled when the court determines that it is either unfair or unreasonable: Mounce (supra) at para 9.
20As provided for in s. 5 (1) of Ontario Regulation 195/04, pursuant to the Solicitors Act, a solicitor seeking to enforce a CFA with a party under disability shall, prior to finalizing any such CFA, apply to a judge for approval of the same or alternately include the CFA as part of the motion record when approval of the settlement or a consent judgment is sought pursuant to Rule 7.08 of the Rules of Civil Procedure.
21In this case, as no prior judicial approval of the CFA was sought, the CFA was included within the motion record filed by the plaintiffs’ solicitor for court approval of the minors’ proposed settlements and approval of the CFA was sought as part of the relief on this motion.
22The CFA was executed by Jaswinder Karwal on behalf of the minor plaintiffs October 2, 2013. The CFA provides that the plaintiffs’ solicitor will receive 30% of the settlement or award plus HST as well as reimbursement for disbursements. Notably, the CFA confirms that any party and party costs paid by the defendants belong to the plaintiffs.
23The CFA also included the hourly rates to be charged by plaintiffs’ solicitors’ law firm as follows:
(1) for solicitor Balena – $600 per hour;
(2) for services of a paralegal – $150 per hour; and
(3) for services of the law clerk – $90 per hour.
24Although not included in the motion materials filed with the court, at my request, counsel produced his firm’s time dockets with respect to both the tort litigation and AB claims. With the covering letter accompanying the dockets, the solicitor advised that the total time spent by the law firm on both the tort litigation and the AB claims was 486 hours. The dockets produced do not delineate between time spent on the tort litigation and time devoted to the completion of claims and applications for AB benefits.
25Similarly, the docket entries do not identify which person within the law firm is providing the described legal services. Clearly, this is of very little assistance to the court when it comes to considering the fairness and reasonableness of the fees claimed in respect of both the tort litigation and the AB claims. Counsel should be discouraged from presenting docketed time records in this form when court approval is sought as to a CFA and the settlement of any such related action.
26As to the CFA itself, I have concluded that it did meet the level of fairness required at the time the agreement was entered into and as such, the form of the agreement itself is approved.
A Fair and Reasonable Fee:
27Having received very detailed submissions and supplementary submissions from both counsel, I have concluded that it is appropriate that the fees being sought by the solicitor for the plaintiffs in respect of the conduct of the AB claims be reduced as discussed below, and further that the format of the structured settlement annuity proposed by the plaintiffs’ solicitor be rejected and the one recommended by counsel for The Office of the Children’s Lawyer be approved.
28The reduction in the fees being allocated to the plaintiffs’ solicitor in respect of the handling of the AB claim will result in an increase in the funds available for investment in the structured settlement as approved.
29As to the fees initially sought by the solicitor for the plaintiffs on the motion for approval of the settlements, the solicitor proposed a reduction from the legal fees sought under the CFA from 30% on the tort litigation and 30% on the AB claims to 25% on the tort action and 20% on the AB claim. Taking into account these proposed fee reductions and attributing the docketed time of 486 hours at the solicitor’s billing rate of $600 per hour, the fee reduction initially proposed by the plaintiffs’ solicitor including HST would be $226,819.24.
30In the supplementary written submissions filed by counsel for the plaintiffs, he proposed that the fee with respect to the AB settlement be further reduced from the initially reduced amount of 20% to 17.5%.
31When considering approval of a CFA and of the settlement of claims on behalf of a party under disability, there is a clear distinction between the fees that can reasonably and fairly be charged with respect to the conduct of tort litigation and the handling of an AB claim.
32While the tort action involved multiple vehicles and competing claims by injured parties for the $1,000,000 insurance limits available on the defendant Karwal‘s vehicle, it became evident very early on to all of the lawyers involved that this case should be resolved sooner than later and that by far the minor plaintiff Khushpreet had sustained the most grievous injuries and that the damages sustained by her far exceeded the liability insurance limits.
33As to her AB claim, there was an uncontested designation by her insurer that she was catastrophically impaired and as such the core issue outstanding at the time of the pretrial conference was not this plaintiff’s entitlement to ongoing statutory accident benefits, but rather the rate at which those benefits would be paid out over time or whether the plaintiff’s entitlement to those benefits could be resolved on a lump sum basis, as ultimately occurred in this case.
34Wilkins J. in Adler(LG of) v. State Farm Mutual Automobile Insurance Co. (2008) 2008 CanLII 32809 (ON SC), 92 OR (3d) 266 stated at para 33: “Generally speaking there is not a great deal of legal work required to process and collect all of the benefits to which an injured person is honestly entitled.” He further stated at para 35: “In my view, there is a significant difference between a contingency fee requiring court approval in a tort action in which many complex issues are at stake. Tort actions frequently involve issues of liability and they have the requirement of proof on the balance of probabilities.”
35In St. Jean (supra), the Court of Appeal affirmed the distinction made by the motion judge at first instance that legal fees in respect of a tort action and legal fees in respect of an AB must be examined differently, as had been proposed by Wilkins J in Adler.
36All counsel and their clients in this action and the related actions, having recognized the seriousness of the claims of this minor plaintiff and the limited insurance funds available, prudently began engaging in discussions towards resolution of this matter. No examinations for discovery were conducted. From a review of the rolled up dockets produced by counsel for the plaintiff, which contain both the time spent on the tort litigation and the AB claim, it appears that all of the time spent was preparatory in terms of collecting necessary medical documentation, clinical notes, delivery of pleadings, and affidavits of documents and the initial arrangements to schedule examinations for discovery.
37I accept the recommendation of counsel for The Office of the Children’s Lawyer with respect to the appropriate fee to be charged in regard to the handling of the AB claim and in the settlement of that claim, namely at 15% plus HST. Applying that calculation, the plaintiffs’ solicitors’ fees in respect to the handling of the AB claim would be $241,537.50 inclusive of HST in the sum of $27,787.50.
38Thus, the fee with respect to the AB claim has been reduced by $80,512.50, which sum will be added to the AB settlement amount and as well added to the funds earmarked for the purchase of the structured settlement at $1,500,000, thus resulting in a total amount to be structured of $1,580,512.50.
39I have concluded that the fee to be allocated with respect to the AB claim is fair and reasonable, not only to the plaintiffs but to the plaintiffs’ solicitor as well. Taking into account the 486 docketed hours and the solicitor’s hourly rate of $600 per hour, a reduction of 5% from the initially proposed fee level of 20% to 15% provides the plaintiffs’ solicitor with $146,306.74 more than would otherwise have been payable to the solicitors considering the applicable hourly rate and the docketed time.
40I am satisfied that the plaintiff’s solicitor’s reduced fee at 25% on the tort claim is fair and reasonable.
41As to the investment format of the structured settlement, counsel for the plaintiff proposes that the structured settlement be one involving level payments as distinct from indexed payments and that the annuity have a guaranteed payment period of 40 years. Thus, were the plaintiff to die prior to the end of the 40 year guarantee period her heirs would be entitled to receipt of the ongoing monthly structured settlement payments to the end of the guarantee period.
42Counsel on behalf of The Office of the Children’s Lawyer put forward structured settlement proposals, one of which has a guaranteed period of 40 years and the other has no guaranteed period but as a result generates more funds to the minor over her lifetime.
43The evidence placed before the court with respect to this plaintiff’s claims does not include any evidence as to the value of her future economic loss. That clearly represents a very significant portion of her claim for damages. Given her young age it is very difficult to quantify that loss with any degree of accuracy, however it is clearly the largest element of her damage claim. In view of that, I have concluded that as much money as is available must be allocated to the purchase of the structured settlement annuity in order to provide resources to, at least in part, compensate for the plaintiff’s significant future economic loss.
44I also agree with the position taken by counsel for The Office of the Children’s Lawyer that the structured settlement should be indexed starting at age 18 at 2%, compounded annually. Indexation of the structured settlement is appropriate in this case, given the very young age of the plaintiff. The indexation will provide some protection against inflation over time and in my view, the plaintiff must have that protection given the inadequacies of the compensation available to her given the limited insurance coverage.
45Counsel for the OCL has also provided proposed structured settlement terms taking into account impairment ratings by the life insurer, which take into account the significance of the minor plaintiff’s existing medical conditions which may adversely affect her life expectancy.
46One of the central positions taken by counsel for the plaintiffs is that he wishes to ensure that there is adequate money generated by the structured settlement on a monthly basis to compensate the plaintiff’s mother Jaswinder Karwal for her attendant care services.
47While it is clear that the plaintiff’s mother does provide attendant care services, I am of the view that as the minor plaintiff is being so under compensated as a result of the inadequate insurance limits available, all monies available to her, that could add to the investment growth of the proposed structured settlement, should be allocated to that investment tool and not be turned back to the plaintiff’s mother to fully compensate her for any attendant care services provided.
48As noted above in the structured settlement quotes produced by the plaintiffs’ solicitor, it is proposed that the payments be non-indexed and payable at the rate of $10,000 per month for the first 3 years following the settlement coming into force. Counsel for the OCL has delivered two alternate structured settlement quotes which were available as of June 2, 2017. The first quote provided a guarantee period of 40 years, which was indexed and the second quote with indexation and no guarantee period.
49These structured settlement quotes both provide for monthly payments for the first 3 years at $8000 per month as opposed to $10,000 per month as proposed by the plaintiffs’ solicitor and thereafter are reduced to $7000 per month through to age 18, following which indexation would commence for her lifetime.
50It was submitted by the plaintiffs’ solicitor that the monthly payments flowing from the structured settlement should be in the order of $10,000 per month for the initial 3 years in recognition of the anticipated cost of attendant care offered by this plaintiff’s mother, as well as with respect to other anticipated services and treatments that will be required for the plaintiff.
51Counsel for the OCL has provided documentation in the supplementary submissions filed, including the plaintiff’s Ontario School Record, which includes her Individualized Education Plan. The Plaintiff has been provided with accommodations and a modified curriculum in respect of English, French, mathematics, social studies, science and technology as well as health and physical education.
52She is also enrolled in an in-school support program which provides her with a special education teacher, in addition to her regular classroom teacher. She has also been approved for and has received Special Equipment Amounts, which funding may include services recommended by a qualified professional in respect of services to be provided by psychologists, psychology associates, physicians, speech-language pathologist and occupational therapists. The evidence regarding the availability of these additional services supports the view that the monthly payments from the settlement during the initial 3 years should be at the level of $8000 as opposed to $10,000 per month. There is no evidence in the available record as to what services are being provided to the plaintiff or are presently available to her
53The evidence with respect to the plaintiff’s forecasted monthly therapy and rehabilitation costs is set out in a letter of March 3, 2017 from Rosemary Whyte, R.N. The total forecasted cost of the monthly services set out in that letter is $6460.27 per month. The plaintiff’s litigation Guardian shall proceed with an application for approval of a management plan in the guardianship, following the approval of this settlement, and that plan may provide that out of the monthly structured settlement payment the sum of $6460.27 may be reallocated as between the enumerated therapies and rehabilitation services so as to best meet the child’s needs. The remaining funds from the monthly structured settlement payment would be then available to the child’s mother for her attendant care services.
54Thus, recognizing the plaintiff’s significant injuries and losses, the inadequacies of the insurance monies available to compensate her, and her need for long-term financial security and growth by way of a non-taxable investment, I have concluded that the funding of the structures settlement to be put in place must be maximized and as such I approve the allocation of $1,580,512.50 for the purchase of a structured settlement in favour of the plaintiff.
55For the reasons expressed, I am further of the view that a structured settlement with no minimum guarantee period, which is indexed from age 18 for life, with initial monthly payments of $8000 for the first 3 years, followed by monthly payments of $7000 through to age 18 and thereafter by monthly payments in the sum of $1871.66 indexed at 2% compounded annually, is in the best interest of the plaintiff. Attached as Schedule “A” to these reasons is a copy of a McKellar Structured Settlements quote referred to as Option (A1) in the OCL submissions. It is uncertain at this time whether funding of the structured settlement could presently be available in accordance with the terms of this option.
56The plaintiffs’ solicitor shall consult with McKellar Structured Settlements to determine if Option (A1) is presently available or can be replicated for the purpose of a judgment approving the settlement in this matter and counsel shall advise the court, counsel for the defendants, and the OCL accordingly.
57The plaintiffs’ solicitor shall also consult with counsel for the OCL with respect to the calculation error referenced at page 3 of the plaintiffs’ solicitor’s letter of June 13, 2017 so as to make any necessary corrections or adjustments in the calculations for the purpose of finalizing a draft judgment to be submitted to the court.
The Minor Plaintiff Aradhna Karwal:
58With respect to the other minor plaintiff, Aradhna, I have considered all the material submitted with respect to the proposed approval of her tort and AB claims and I have concluded that the settlements proposed in the sums of $25,000 and $32,000 respectively are fair and reasonable and in the interest of the minor. The total of the said sums at $57,000 shall be paid into court to the credit of the said minor plaintiff and to remain into court to her credit until she reaches the age of 18 years or until further order of this court.
Conclusion:
59Counsel for the plaintiffs shall prepare a draft judgment, including the terms detailed in these reasons as well as the cash and costs components of the settlements as approved. The draft judgment and minutes of settlement shall be in turn submitted to me for final approval and signature.
60In the event counsel wish to make any further submissions with respect to calculations or the specific format of the structured settlement, as ordered, they shall do so in writing.
Daley, RSJ.
DATE: September 14, 2017
CITATION: Karwal v. Karwal, 2017 ONSC 5485
COURT FILE NO.: 88700/14
DATE: 20170914
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: KHUSHPREET KARWAL, ARADHNA KARWAL, minors by their Litigation Guardian, JASWINDER KARWAL and JASWINDER KARWAL personally
Plaintiffs
V.
PARMINDER KARWAL, SHARON S. CAMERON, CATHERINE SUMSION, ROBERT J. SUMSION, PARMJIT KAUR SINGH, MANJIT SINGH, ELIZABETH MEDEIROS, MICHAEL R. MEDEIROS, JOHN DOE and AVIVA INSURANCE COMPANY OF CANADA
Defendants
BEFORE: Daley, RSJ.
COUNSEL: D. Balena, for the Plaintiffs
No one appearing for the Defendants
S. Preshner, for the Children’s Lawyer of Ontario
ENDORSEMENT
Daley, RSJ.
DATE: September 14, 2017