Court File and Parties

COURT FILE NO.: CV-17-133112-00 DATE: 20180606

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Fatima Raufi and Feroza Raufi, minors by their Litigation Guardian Abdul Jabbar Raufi, Applicants AND: Jeyanthi Jeyaratnarajah and Thalayasingan Jeyaratnarajah, Respondents

BEFORE: Justice J. Di Luca

COUNSEL: Stephanie Zwicker Slavens, Counsel, for the Applicants No one appearing for the Respondents

HEARD: In writing

ENDORSEMENT

[1] This is an application seeking approval of a proposed settlement with respect to the minor Applicants.

[2] The background facts are very simple. The minor Applicants were bitten by a dog and suffered injuries. They retained the law firm of Diamond and Diamond to seek compensation.

[3] No action was commenced as the Defendants, through their insurer, quickly agreed to settle the claim for $12,000 in favour of one minor Applicant and $8,000 in favour of the other.

[4] The matter first came before me in writing on November 3, 2017. On the material before me, Diamond and Diamond sought approval for fees, disbursements and HST of $4,133.01 in relation to one Applicant and $3,018.22 in relation to the other. The fees were calculated on the basis of a 25% contingency fee agreement. At that time, I issued an Endorsement indicating that the proposed settlement was approved subject to further information being provided regarding the particulars of the purported disbursements charged.

[5] On April 4, 2018, the matter came back before me with further affidavit material. Upon my review of this material, I had a number of questions regarding the disbursements which I asked by way of Endorsement dated that same date. In particular, I asked for an explanation as to why each minor Applicant was charged a $500 file closing fee as a disbursement. I also asked for documentation confirming BICO costs insurance, which had been billed to each client in the amount of $250. Lastly, I asked for an explanation for the $100 charge per client for “ACL file opening fee”.

[6] On June 1, 2018, I received a further affidavit in response to my questions. This affidavit advises that:

a. The $500 “closing disbursement” is to cover the costs of closing the client’s file, including mailing/sending by courier the settlement cheques to the client, sending a closing letter to the client to advise of the conclusion of the retainer, printing, storage fees and other expenses. It is not an actual incurred disbursement. Rather, it is an estimate of what it will cost to close the file. In this regard, counsel advises that if closing costs are less than $500, the balance is added to the net recovery. Counsel further indicates “Our firm errs on the side of caution to account for any unforeseen disbursements that may be necessary in the process of closing the client’s file”. Apparently this is done in order to “allow the client to have certainty in knowing that he/she will receive a specified amount of fund and nothing less”.

b. In relation to the $250 per client that was purportedly dedicated to obtaining costs insurance, counsel advised that there was “a mistake” and that the insurance should never have been charged as a disbursement. I pause to note that on the face of the account provided to the Court, costs insurance was apparently obtained on a claim that was never commenced and in relation to which there is strict liability.

c. In relation to the “ACL fee” of $100 per client, counsel advises that this fee relates to an Automated Civil Litigation software licensing fee that is billed in relation to the software used by the firm to manage its files.

[7] In my view, the $500 file closing “fee” is not a legitimate disbursement for a number of reasons.

[8] First, it is now revealed that the $500 is only an estimated disbursement subject to final adjustment once the actual file closing costs are known. There was no mention in any of the materials initially placed before the Court that this amount was subject to a final adjustment in the client’s favour. On this point, I find it astounding that counsel suggests that “erring on the side of caution” requires charging $1,000 to two minor clients so that they can have “certainty” in the outcome.

[9] Second, I reject the assertion that Diamond and Diamond was prepared to pay back the difference, if any, after the final accurate closing costs were known. This would have required a further motion and Court Order. The costs associated with obtaining such an Order would likely outstrip any amount left over.

[10] Third, I highly doubt that the time required to send a client a cheque and closing letter is a legitimate disbursement. It may be a service that falls within the 25% contingency fee, but it seems specious to suggest that it also is a disbursement. In addition, I note that the accounts provided in the materials already separately charge for items such as postage, copies, printing, et cetera. As such, it also seems specious to suggest that the $500 per client is in part dedicated to printing, postage and courier fees.

[11] Lastly, while I accept that in many cases a file storage fee is a legitimate disbursement, I question how in this case, where no action was commenced and the matter was quickly brought to resolution, a legitimate file storage fee has been incurred. The expense of storing the minimal file material created in this matter seems to be part and parcel of the cost of running a law office.

[12] In terms of the costs insurance, while I am skeptical of the explanation given for the “mistake” of billing these clients $500 for insurance that was never obtained, I need not determine the issue as counsel has abandoned the request in this regard. That said, I expect this type of mistake will not happen again.

[13] Lastly, while I am skeptical of the $100 file opening fee, I accept that this is a licensing fee that may be passed on to the client.

[14] In the result, I will approve the settlement and sign the judgment provided amending the amounts listed to disallow $1,500 in purported disbursements.

[15] I wish to add a post-script. These motions are generally provided to the Court ex-parte and in writing. The issues raised are important as the Court has a supervisory role to ensure that settlements involving minors and legal fees related to those settlements are appropriate and justified in the circumstances, see Mounce v. Rae, 2017 ONSC 2288 per McKelvey J. and St. Jean v. Armstrong, 2015 ONSC 13 (affirmed on appeal, 2017 ONCA 145). The Court relies heavily on the accuracy and completeness of the materials provided in making these determinations. In this regard, see the recent comments of Trotter J.A. in R. v. C.L., 2018 ONCA 470, which are all the more pressing in the context of ex-parte proceedings.

Justice J. Di Luca

Date: June 6, 2018