COURT FILE NO.: 16-69865 DATE: 2019/04/24 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
Olga Elizabeth Torres, Jose Maria Flores, Giselle Flores-Torres by her litigation guardian Olga Elizabeth Torres, Kalum Jose Flores-Torres, by his litigation guardian Olga Elizabeth Torres, Jaden Isai Flores-Torres by his litigation guardian Olga Elizabeth Torres Plaintiffs – and – Lobna Ayari and Tawfiq Al Daqqaq Defendants
Counsel: Thomas W. Brooker, for the Plaintiffs Lawrence Elliot, for the Defendants
HEARD: In Writing
INTERIM ENDORSEMENT
Introduction
[1] The plaintiffs’ motion is for approval of (a) a settlement reached of the claims on behalf of the minor plaintiffs, and (b) a retainer agreement. The former relief is sought pursuant to r. 7.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”). The latter relief is sought pursuant to s. 5 of Contingency Fee Agreements, O. Reg. 195/04 (“the Regulation”).
[2] This is the second time that the matter has come before me. As noted in my original, handwritten endorsement, the overall settlement amount appears to be reasonable. In that endorsement, however, I raised concerns with respect to (a) the contribution by the minor plaintiffs to payment of the proposed solicitor-client account, and (b) the contents of the retainer agreement upon which that account is based.
[3] A copy of the retainer agreement entered into by the litigation guardian on behalf of the minor plaintiffs was not part of the record originally filed with the court. A copy of that document has now been filed.
Background
[4] Olga Elizabeth Torres was injured as a result of a car accident that occurred on September 14, 2014. She was driving her car, alone, when it was involved in a collision with a car driven by the defendant, Lobna Ayari.
[5] Ms. Torres is married to Jose Maria Flores. The couple have three children, who now range in age from 8 to 15 years old. All five family members are plaintiffs in the action.
[6] It appears that, at the time of the collision, Mr./Ms. Ayari was driving a car owned by the defendant, Tawfiq Al Daqqaq. I say “appears”, because ownership of the defendants’ car is not addressed in either of the supporting affidavits filed on the motion. The pleadings in the action are not included in the motion record. Allegations and admissions made, the latter if any, as to ownership and operation of the defendants’ car are not before the court.
[7] A settlement of the plaintiffs’ claims was reached at mediation. The settlement is in the amount of $125,621.59. In the supporting affidavits of plaintiffs’ counsel and the litigation guardian, the settlement is described as one “pursuant to which the plaintiffs will receive $125,621.59 all-inclusive of damages, interest and costs”.
[8] There is no evidence that, when the settlement was reached, specific amounts were attributed for each of damages, pre-judgment interest, and costs. Instead the evidence is that “[the] plaintiffs propose allocating the settlement as follows”, with a breakdown provided of the net settlement funds to be paid to each of the plaintiffs. In addition, the “legal costs” to be paid to plaintiffs’ counsel are set out. The latter term means the fees, disbursements, and HST to be charged by plaintiffs’ counsel.
[9] The proposed allocation of the $125,621.59 settlement is as follows:
a. $83,172.60 to the Plaintiff Olga Elizabeth Torres; b. $1000.00 to the Plaintiff Jose Maria Flores (husband); c. $1000.00 for the minor Plaintiff Giselle Flores-Torres; d. $1000.00 for the minor Plaintiff Kalum Jose Flores-Torres; e. $1000.00 for the minor Plaintiff Jaden Isai Flores-Torres; f. Legal Costs (i) $31,854.27 to Brooker Law Office Professional Corporation for Legal Fees; (ii) $4,141.06 to Brooker Law Office for HST on Legal Fees; and (iii) $2,453.67 for disbursements.
Total: $125,621.59
[10] I note that the amounts listed above add up to $125,621.60. The difference of one cent is not meaningful for the purpose of this endorsement.
[11] On August 15, 2016, the plaintiffs entered into a retainer agreement with their counsel (“the Agreement”). The Agreement was signed by Ms. Torres personally and in her capacity as the litigation guardian for the three minor plaintiffs. Mr. Flores and plaintiffs’ counsel also signed the Agreement.
[12] The Agreement provides for the solicitor-client fees to be calculated pursuant to one of two alternative methods:
- The first method is a contingency fee: “30% (plus applicable taxes thereon) of all amounts recovered for claims (inclusive of interest) of all persons for whom I have been hired pursuant to this agreement (“the amount of recovery”)” [Emphasis in original]; and
- The second, or alternative, method is based on costs recovered from the opposing party. The Agreement provides that if (a) the plaintiffs become entitled to an order for the payment of costs, and (b) the costs so ordered are in excess of the 30 per cent contingency fee that would otherwise be calculated, then the solicitor-client fee is based on the amount the opposing party is ordered to pay for fees.
The Issues
[13] In the notice of motion, the only substantive relief requested is an order that “the minutes of settlement dated December 3, 2018 is [sic] approved as it [sic] relates to the claims of the minor plaintiffs”. The issue of approval of the settlement reached on behalf of the minor plaintiffs is, however, secondary to the approval required of the Agreement. Approval of the settlement of the claims on behalf of the minor plaintiffs cannot be determined unless and until the issue of the net settlement funds payable to those plaintiffs is addressed.
[14] The issues to be determined on this motion are:
- Does the Agreement comply with the requirements of the Regulation?
- Are the settlements reached on behalf of and proposed net settlement funds payable to the minor plaintiffs in their best interests?
Issue No. 1 - Approval of the Agreement is Required
a) The Law
[15] There are two circumstances in which court approval of a contingency fee agreement (“CFA”) is required. One is when a litigation guardian representing a person under a disability enters into a CFA (Contingency Fee Agreements, O. Reg. 195/04, s. 5 (“the Regulations”)). The other is when the CFA provides that the lawyer’s fee will include a portion or all of the costs recovered from an opposing party, in addition to the stated percentage contingency fee (Solicitors Act, R.S.O. 1990, c. S.15, s. 28.1 (“the Act”)).
[16] Section 28.1 of the Act 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.
[17] I turn to the terms of the Agreement.
b) The Agreement
[18] Section 2.2 of the Agreement sets out the basis upon which counsel’s fee, whether for the adult or the minor plaintiffs, is to be calculated:
My Fee for the negligence claim will be equal to the following:
30% (plus applicable taxes thereon) of all amounts recovered for claims (inclusive of interest) of all persons for whom I have been hired pursuant to this agreement (“the amount of recovery”) regardless of the source of the recovery, whether by settlement, court order or other dispute resolution mechanism, if a recovery is obtained at any time up to and including judgment at a Trial or other final resolution by any dispute resolution mechanism including a negotiated settlement. [Emphasis in original]
For the purposes of calculating my Fee, the amount of recovery excludes any amount awarded or agreed to that is separately specified as being in respect to costs and disbursements. In the event that the settlement of a claim includes a structured settlement, the fee will be calculated on the lump sum amount agreed to by the parties prior to the funding of the structured settlement annuity contract.
If you become entitled to an order for payment of costs (exclusive of assessable disbursements) which is more than the amount calculated in accordance with the percentage set out above, then my Fee to you will be the full amount of the costs (exclusive of assessable disbursements) to which you are entitled as a result of such an order in place and instead of the amount calculated in accordance with the percentage set out above.
[19] For the reasons that follow, I find that the Agreement does not comply with either the Act or the Regulation.
c) Analysis
[20] I shall first deal with the alternative methods by which it is proposed that the lawyer’s fees may be calculated. In summary, the alternative methods are (1) a contingency fee based on 30 per cent of the amount recovered for damages and interest, and (2) that same contingency fee plus, the difference between the fee portion of costs ordered and the contingency fee (i.e., where the former amount is greater than the latter amount).
[21] I find that the second method of calculation falls within s. 28.1(8) of the Act—that method includes “any amount arising as a result of an award of costs or costs obtained as part of a settlement”. Not only is approval of the Agreement required in the context of the r. 7.08 motion; approval of the Agreement is required with respect to the adult plaintiffs as well.
[22] Although approval of the Agreement is not before me, I make the following general observations about the inclusion of the alternative methods of calculating counsel’s fee. First, I have never seen a CFA that includes alternative methods of payment like those included in the Agreement.
[23] Second, I am concerned that the Agreement is the usual retainer agreement used by plaintiffs’ counsel. It appears unlikely that the Agreement was drafted solely for the purpose of this particular matter. But for the request for approval of the settlement of the minors’ respective claims, the terms of the Agreement would not have been brought to the attention of the court. Yet, regardless of the age of the clients, approval of the Agreement is required. (See: Burke v. Snow, 2019 NSSC 57, at paras. 104 and 105).
[24] Whether for the purpose of this matter or any other, if plaintiffs’ counsel intends to rely on the Agreement, it requires approval of the Court by way of an application pursuant to s. 28.1(8) of the Act. The application would be made jointly on behalf of the plaintiffs and their counsel. In the absence of such an application, the Agreement cannot be approved for any purpose, including the r. 7.08 motion.
[25] Not only does the Agreement not comply with the Act, it does not comply with the Regulation. For example, the Agreement:
- Is not titled “Contingency Fee Retainer Agreement” (s. 1(1)(a) of the Regulation);
- Does not include the signature of a witness to Mr. Flores’ signature (s. 1(1)(c));
- Appears to include Mr. Flores’ signature as witness to Ms. Torres’ signature each time the latter appears. Query whether that constitutes the verification by a witness required pursuant to s. 1(1)(c) of the Regulation;
- Does not include the telephone number of each of the clients (s. 2, item 1); and
- Does not properly address the client’s entitlement to costs paid by an opposing party (s. 3, item 3i).
[26] There may be other ways in which the Agreement does not comply with the Regulation. The matters listed above are not intended to be an exhaustive list of deficiencies in the Agreement.
d) Summary
[27] The request for approval of the Agreement as it relates to the minor plaintiffs is denied. I also find that the Agreement does not comply with the Act for the purpose of the solicitor-client relationship between the adult plaintiffs and their counsel.
[28] There are two options available to the plaintiffs and their counsel. They may execute a new contingency fee retainer agreement that complies with the Act. If they do so, then the new contingency fee retainer agreement must be submitted to the court for approval as it relates to the minor plaintiffs. Depending on the terms of that agreement, additional evidence may be required with respect to the contribution, if any, of the infant plaintiffs to payment of the proposed solicitor-client account.
[29] In the alternative, plaintiffs’ counsel may propose an account on a fee-for-service basis. If the minor plaintiffs are to make any contribution from their respective settlement funds towards payment of the account, then (a) the account must be submitted to the court, and (b) evidence is required with respect to the calculation of the portion of the account to be paid by the minor plaintiffs.
Issue No. 2 - Request for Approval of Settlement
[30] I am satisfied that the gross recovery proposed for the minor plaintiffs, of $1,220 each, is reasonable and in their best interests. I am, however, unable to approve the settlement of the claims on behalf of the minor plaintiffs until:
a) There is certainty as to the extent, if any at all, to which they will each contribute to payment of the proposed solicitor-client account; and b) There is evidence before the court as to the manner in which it is proposed that the settlement funds payable to the minor plaintiffs (the “Funds”) will be managed.
[31] None of the affidavits address in any way whatsoever how the settlement funds payable to the minor plaintiffs are to be managed. If the proposal is for the Funds to be paid other than to the Accountant for the Superior Court of Justice, then plaintiffs’ counsel and the litigation guardian must address the requirements of r. 7.09 and the case law related to that subrule.
Disposition
[32] The request for approval of the settlement reached on behalf of the minor plaintiffs shall be considered further upon receipt by the court of additional motion record including:
a) Copies of the pleadings as discreet documents. (Note: The pleadings are part of the record and need not be attached as an exhibit to an affidavit from either plaintiffs’ counsel or the litigation guardian.); b) If the intention is to have the minor plaintiffs contribute to the payment of the solicitor-client account either: i) A contingency fee retainer agreement that is in compliance with the Regulation and evidence setting out the calculation of the fee proposed on the basis of that agreement; or ii) The proposed account on a fee-for-service basis and evidence setting out the calculation of the portion of the fees it is proposed the minor plaintiffs pay; c) Evidence with respect to the proposed management of the settlement funds payable to the minor plaintiffs.
[33] With the additional materials filed, the plaintiffs shall include a draft order approved as to form and content by counsel for the defendants.
[34] If he has not already done so, counsel for the plaintiffs shall provide a copy of the handwritten endorsement dated January 21, 2019 to counsel for the defendants and to each of Ms. Torres and Mr. Flores. A copy of this endorsement shall be served on counsel for the defendants and provided to each of Ms. Torres and Mr. Flores. The copies of the endorsements provided to Ms. Torres are for her personally and in her capacity as litigation guardian.
[35] If an application is made pursuant to s. 28.1(8) of the Act, that application shall be heard by me. I am seized of this matter and of the related application, if made.