2020 ONSC 3559

Court File No.: CV-20-000115-00 Date: 20200618 Superior Court of Justice - Ontario

Re: Jamie George Norwegian, a person under disability, by his litigation guardian, Andrew Stastny, Applicant And: Royal & Sunalliance Insurance Company of Canada, Respondent

Before: Mr. Justice Graeme Mew

Counsel: David E. Preszler, for the Applicant

Heard: in writing, at Kingston

Endorsement

(Application for Approval of Settlement pursuant to Rule 7.08 of the Rules of Civil Procedure)

[1] Jamie Norwegian, who was 24 years old at the time, was catastrophically injured in a pedestrian knock-down accident. The accident occurred in the early hours of Saturday, 13 October 2018, on Highway 2, near its intersection with Niagara Park, in the City of Kingston.

[2] The applicant litigation guardian now moves for approval, pursuant to Rule 7.08 of the Rules of Civil Procedure, of a settlement of Jamie Norwegian’s accident benefit claim against Royal & Sun Alliance Insurance Company of Canada (“RSA”).

[3] The application record discloses that there remains an outstanding tort action.

[4] The applicant litigation guardian seeks the court’s approval of a lump sum settlement with RSA of all future accident benefits to which Mr. Norwegian may be entitled. The application also seeks approval of an amount to be paid to the solicitors for the applicant, pursuant to a contingency fee agreement (“CFA”). Furthermore, although not particularised in the relief requested in the notice of application, the applicant also requests an order pursuant to s. 137(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43, sealing the application record held in the court’s file.

Background

[5] Jamie Norwegian was born and raised in Fort Providence, Northwest Territories, and moved to Kingston in spring 2018. At the time of the accident, he lived alone in an apartment and worked at “The Rustic Spud” pub and restaurant as a line and prep cook. His gross earnings in the three weeks prior to the accident were $1,310.40, or an average of $436.80 for each of those weeks.

[6] Jamie Norwegian had been walking in an easterly direction along Highway 2 near Niagara Park when he allegedly attempted to cross Highway 2 and was struck by a car. As a result of the accident, he sustained catastrophic injuries and impairments, including severe traumatic brain injury, concussion, multiple fractures and internal injuries. He will likely never work again. It is also unlikely that he will be able to live completely independently. Accordingly, he will require care and support, either from family members or professional service providers, for the rest of his life.

[7] Mr. Norwegian was hospitalised in Kingston until 29 April 2019, when he moved to Glenrose Hospital in Edmonton, Alberta (his mother, Nellie, lives in Edmonton).

[8] In the short-to-medium term, the hope is that Mr. Norwegian will be discharged from the facility where he is currently being cared for in the late summer or early fall, but first he will undergo facial reconstruction and dental surgery. After his discharge, he would be cared for primarily by his mother and a cousin, Rosemarie Lowe. He will, however, also require ongoing occupational therapy, speech-language therapy and physiotherapy. Some of the costs associated with this are covered by Alberta Health Services. The balance will have to be paid for by the accident benefits insurer (or from the settlement funds that are received).

[9] In the longer term, the current expectation is that once Mr. Norwegian’s mother, who is currently 57 years old, and Ms. Lowe, also 57 years old, are no longer able to provide supervisory care to Mr. Norwegian, that other family members will step in, in keeping with the cultural practices of Mr. Norwegian’s community.

Proposed Settlement

[10] The accident benefits claim has been conditionally settled, subject to court approval, for the following amounts:

Income Replacement Benefits $ 290,000 Medical Benefits $ 100,000 Rehabilitation Benefits $ 200,000 Attendant Care Benefits $ 480,000 Housekeeping Benefits $ 130,000 Total $1,200,000

Less: Legal fees @ 22.5% $ 267,798.29 HST on legal fees 34,813.78 Disbursements 9,785.37 $ 312,397.44 Net to Client: $ 887,602.56

[11] The lawyer for the applicant advises in his affidavit that the fee claimed discounts the fee chargeable in accordance with the CFA from approximately 33% to 22.5%. Applying the CFA agreed to by the client, the fees and disbursements element of the settlement would have been:

Legal fees as per CFA $ 382,700.00 HST on legal fees 51,051.00 Disbursements 9,785.37 $ 443,536.37 Net to Client: $ 746,383.59 [1]

[12] It is proposed that of the total net amount payable to the applicant of $887,602.56, $840,000 will be placed in a structured settlement annuity with a twenty-year reversionary guarantee in favour of the insurer. The proposed structure would deliver a monthly amount of $4,248.69 for the next twenty years, a total of $1,019,685.60.

[13] It is proposed that the balance of $47,602.56 will be placed in a bank account, managed by Nellie Norwegian (who holds a power of attorney), and used to secure housing for both Mr. Norwegian and his mother and to pay for eventual discharge and convalescence at their joint residence. I am advised that there are also other funds in court – some $12,612.60 – which can be released.

[14] The maximum amount available under the respondent’s insurance policy for medical rehabilitation and attendant care benefits is $1,000,000. To date, Mr. Norwegian has used only $8,380.46 of those benefits. Accordingly, $991,619.54 remains available. The settlement proposal includes medical, rehabilitation and attendant care benefits of $780,000, some $211,619.54 less than the insurer’s total potential exposure.

[15] To date, Jamie Norwegian’s resort to medical rehabilitation and attendant care benefits has been minimal. This may remain the case for some time. In a supplementary affidavit, provided in response to questions asked by the court by way of endorsement, Mr. Preszler explains that the figure of $780,000 could well exceed what Mr. Norwegian would actually be able to recover, because of the current low rate of consumption of these benefits by reason of the fact that many of his medical expenses are currently covered out of public funds, and that he will be able to draw on non-compensable support and services from family members.

[16] Furthermore, it is said to be very advantageous for Mr. Norwegian to be able to obtain the funds by way of lump sum settlement now which, invested in a structure, will yield a total amount greater than the remaining available balance of medical rehabilitation and attendant care benefits.

[17] Although Mr. Norwegian is currently entitled to income replacement benefits of $228.32 per week, with an overall present value of future income replacement benefits of approximately $547,000, it can be anticipated that Mr. Norwegian will, at some point in the future, receive a Canada Pension Plan disability benefit, for which the insurer would be entitled to a complete offset. He might also be entitled to Income Support from the Province of Alberta (the equivalent in that province to the Ontario Disability Support Program). Given these contingencies, Mr. Preszler expresses the view that the negotiated lump sum settlement of future income replacement benefits of $290,000 is reasonable.

[18] Similarly, the respondent has agreed to pay $130,000 for housekeeping and house maintenance benefits. The maximum entitlement that Mr. Norwegian would have for this benefit is $100 per week. To date, he has not utilised any housekeeping services. Although it is anticipated that he may have the need for such services in the future, Mr. Preszler expresses the opinion that a lump sum settlement of $130,000 for this element is fair and reasonable.

[19] The court’s responsibility is, of course, to ensure that a settlement is fair and reasonable. The settlement does not have to reflect the best possible terms that could have been negotiated. An important consideration, particularly in an accident benefits situation, where there is no ongoing dispute between the claimant and the accident benefit insurer, is that the insurer is under no obligation to pay anything above and beyond provable ongoing claims that are presented by the claimant. In other words, the insurer is not obliged to pay anything with respect to its potential future liability.

[20] An inevitable result of this reality is that lump sum settlement of future accident benefit claim payments will almost always result in a discounted amount being recovered by the claimant.

[21] In the present case, the respondent has, as a condition at the settlement, required that the funds be placed in a structured settlement with a term of twenty years, and where any remaining balance in the structured settlement would revert to the respondent in the event of Mr. Norwegian’s death. This is an arrangement that enures very much to the benefit of the insurer.

[22] On the other hand, putting the money in a structured settlement avoids the risk of improvident depletion of what would otherwise be a large lump sum amount.

[23] An obvious concern is that payments out of the structured settlement will, under the proposed structure, come to an end in twenty years’ time. Because the amount of coverage for medical, rehabilitation and attendant care benefits is limited to $1,000,000, and Mr. Norwegian is a young man, a longer-term structure could be employed, but it would result in much lower monthly payments. Conversely, as Mr. Preszler notes, a shorter-term structure would not provide any appreciable interest accumulation. According to him, the “middle ground, balancing all interests, suggests that the 20-year structure is most prudent”.

[24] I take no particular issue with the settlement amounts, or with the rationale that is offered for the discounts that have been taken against the insurer’s total future potential liability.

[25] I remain concerned, however, about what happens to Mr. Norwegian in twenty years’ time, when the structured settlement will have been exhausted. Mr. Norwegian will only be in his late 40s. There is no evidence that his life expectancy has been significantly reduced by the accident. The affidavits in the application record suggest that once the structured settlement payments are exhausted, and assuming that nothing is left of the remaining lump sum element of the settlement, he will be able to rely on a combination of family support and public funds.

[26] There is, of course, an outstanding tort action, but there is no indication from the evidence before the court what, if anything, might be recovered and, in particular, what the liability exposure of the defendants and the possible contributory negligence of Mr. Norwegian look like.

[27] I must also bear in mind that if there was no settlement at this time, Mr. Norwegian would at least have the security of being able to draw upon the accident benefits provided by RSA for the rest of his life, or the exhaustion of the remaining available limits of coverage, whichever occurs first. That said, based on his current “burn” rate of benefits, it is possible that the value of those future benefits would not be as great as the amount he can now obtain by way of settlement (although he is likely to require more by way of medical, rehabilitation and attendant care benefits the older he gets).

[28] Mr. Norwegian and the family members supporting and caring for him will, of course, be under no obligation to spend all of the monthly payments out of the structured settlement as they are received. If they are not all required, they can be reinvested.

[29] Balancing the undoubted benefits of securing a lump sum settlement now against my concerns about Mr. Norwegian’s long-term future, I conclude, but not without some misgivings, that the amount of the settlement is fair and reasonable.

Legal Fees

[30] With respect to legal fees, the CFA provides that the applicant’s lawyers may charge an amount representing 33% of both the tort and accident benefits claims. As already noted, however, for the purposes of settlement, the applicant’s lawyers, Preszler Injury Lawyers, have agreed to reduce their contingency fee to 22.5%. HST and disbursements are in addition.

[31] A contingency fee agreement in the case of an incapable person is not binding on the court, but it is certainly a matter of importance to be considered in relation to client expectations: Re Cogan (2007), 88 O.R. (3d) 38 (S.C.J.), 2007 ONSC 50281.

[32] It is generally not appropriate to apply the same contingency fee rate to both the statutory accident benefits settlement as well as the tort settlement: Aywas (Litigation guardian of) v. Kirwan, 2010 ONSC 2278.

[33] In addition to questions of fairness and reasonableness of the fee, consideration should also be given to other factors, including:

a. The time expended by the lawyer; b. The legal complexity of the matters dealt with; c. The degree of responsibility assumed by the lawyer; d. The monetary value of the matters in issue; e. The importance of the matters to the client; f. The degree of skill and competence demonstrated by the solicitor. g. The results achieved; h. The ability of the client to pay; i. The client’s expectation of the amount of the fee; j. The financial risk assumed by the lawyer of pursuing the claim, including the risk of non-payment, the likelihood of success and the amount of the expected recovery; and k. The social objective of providing access to justice for injured parties. [2]

[34] Mr. Preszler takes the view that of these elements, the ones which are particularly pertinent to an assessment of the reasonableness of the fee in this case are:

a. The time expended by the lawyer; b. The legal complexity of the matter; c. The results achieved; and d. The risk assumed by the lawyer.

[35] Mr. Preszler says that the time expended has been significant. The firm’s dockets total $110,324.

[36] This may be so, however, on closer examination, the dollar figure is based on extremely high notional hourly rates (some of which are spelled out in the CFA), namely $759.75 per hour for Mr. Preszler, who was called to the Bar in 2008 and $300 per hour for paralegals, principally the time of Ovi Klein who is described as the head of the Accident Benefits department of the firm with “extensive experience dealing with serious motor vehicle accident cases and catastrophic cases”. Mr. Preszler has claimed 116 hours for his time and there are 43 hours claimed for “paralegal”. There is also a further 34 hours for “legal assistant” which I understand, based on further information provided by Mr. Preszler, represents what in former times might have been described as secretarial assistance. $143 per hour is the notional rate for this assistance.

[37] I find myself unable to agree with Mr. Preszler’s view that the time expended by the firm has been “significant”. The notional hourly rates for paralegals and for Mr. Preszler are unreasonably high. The services of a legal assistant (secretary) are typically part of a lawyer’s overhead expense and ought not to be a factor at all: Mark M. Orkin, The Law of Costs, 2nd ed. (Toronto: Thomson Reuters, 2018), loose-leaf, at §311.12.

[38] Furthermore, although I accept that the claim had its complexities, and that the insurer was not immediately prepared to acknowledge that Mr. Norwegian’s claim would be deemed “catastrophic”, it seems to me that it was always highly likely that Mr. Norwegian would, in fact, be designated as catastrophic and, hence, entitled to the accident benefit entitlements flowing from that designation.

[39] It follows that, with respect to the accident benefit claim, I do not agree that the lawyers accepted a high degree of risk. The situation might well be very different with respect to the tort claim. But that is not what is currently before the court.

[40] With respect to the result achieved, as I have already indicated, I have no quarrel with the amount. I do have concerns about the long-term provision for Mr. Norwegian but accept Mr. Preszler’s explanation that a balancing act was involved. While I have ultimately concluded that the settlement should be approved by the court, in terms of the impact which it has on my consideration of the reasonableness of the fee, the result achieved is a neutral factor.

[41] Taking into account all of the foregoing, I am of the view that a fee based on 22.5% of the amount recovered, plus H.S.T. and disbursements is not reasonable. I would allow a fee based on 16.5%, namely $198,000 plus H.S.T. and disbursements. The draft judgment prepared by counsel should, therefore, be adjusted accordingly, and submitted to me for approval by email via Kingston.SCJ.Courts@ontario.ca.

Sealing of the Court File

[42] Finally, the applicant asks that the court file be sealed. The reason given, as previously indicated, is that the affidavits contain legal opinions and/or privileged information. No specifics are given. I am simply referred to Mr. Preszler’s affidavit dated 6 May 2020. It is asserted that there would be “significant prejudice” to the applicant if the application record was not sealed.

[43] The applicant’s request has to be reconciled with the open court principle. A helpful and comprehensive summary of the applicable principles was recently provided by Madam Justice Corthorn in Carroll v. Natsis, 2020 ONSC 3263. As she explains at the beginning of her decision, public openness is required in both the proceedings of the dispute and the material that is relevant to its resolution.

[44] In Sierra Club of Canada v. Canada (Ministry of Finance), [2002] 2 S.C.R. 522, 2002 SCC 41, the Supreme Court of Canada set out a two-part test for a sealing order, which should only be granted when:

a. Such an order is necessary in order to prevent a serious risk to an important interest, including a commercial interest, in the context of litigation because reasonably alternative measures will not prevent the risk; and b. The salutary effects of the confidentiality order, including the effects on the right of civil litigants to a fair trial, outweigh its deleterious effects.

[45] Corthorn J. in Carroll notes in her discussion of the application of the Sierra Club principles, that requests for sealing orders are frequently made in motions or applications for approval of a settlement on behalf of a party under a disability. I pause to note that unlike in some other cases, the applicant does not ask for redaction of sensitive parts of the application record, but, rather, he asks for the entire record to be sealed, at least until after the tort action has been concluded.

[46] Furthermore, in this case, in contrast to some of the cases discussed by Madam Justice Corthorn in Carroll, including my own decision in Schuringa v. Trent Lakes (Municipality), 2016 ONSC 7882, there is no confidentiality clause contained in the settlement agreement entered into between the parties.

[47] In Carroll, one of the concerns that the plaintiff had was prejudice which, it was said, would arise from a non-settling defendant having access to the evidence filed in support of the application for approval of the settlement. However, just as the respondent in this case will have disclosure of the terms of the settlement, the non-settling defendant in Carroll was aware of the terms of the settlement in that case.

[48] I have reread Mr. Preszler’s affidavit of 6 May 2020. It is comprehensive, as one would expect, and confirms and sets out the factors which he took into account in negotiating the settlement and the reasons for him recommending it to the litigation guardian. However, without more, the bald statement by Mr. Preszler that disclosure of his opinion and recommendations will, in his opinion, cause “significant prejudice” to the applicant if disclosed to the defendants in the tort action, is not a sufficient basis for me to seal the file, something which is only ever granted in very limited circumstances: Carroll at para. 10.

[49] Accordingly, I am not prepared to grant the sealing order requested.

Disposition

[50] The application for approval of the settlement is granted, subject to a reduction of the lawyers’ fees as described above. The request for a sealing order is denied.

Graeme Mew J. Date: 18 June 2020

[1] The correct figure should be $756,463.63. The figure of $746,383.59 is taken from Mr. Preszler’s affidavit. [2] Aywas, at para. 18