Court File and Parties

Barrie Court File No.: CV-20-869 Date: 2020-07-20 Superior Court of Justice - Ontario

Re: Melanie Meade by her Litigation Guardian, Lisabet Benoit, Applicant And: Echelon Insurance, Respondent

Before: Justice M.L. Edwards

Counsel: Sherilyn Pickering, Counsel for the Applicant Jamie Pollack, Counsel for the Respondent

Heard: In Writing

Endorsement

Overview

[1] The Applicant, Melanie Meade (“Melanie”), was involved in a motor vehicle accident on May 24, 2014. Lisabet Benoit (“Lisabet”) is Melanie’s sister and the proposed litigation guardian in this matter. Sherilyn Pickering is a lawyer with the Kahler law firm (“Kahler”), who swore an affidavit in support of the application to approve the settlement of Melanie’s claim for statutory accident benefits (“SABS”). In her affidavit, Ms. Pickering deposes to the fact that Melanie appears not to have the capacity to instruct legal counsel and, as such, judicial approval is required for the settlement.

The Facts

[2] In her affidavit Ms. Pickering deposes to the injuries that Melanie suffered in the accident; injuries that fall within the catastrophic designation under the SABS.

[3] Melanie’s claim against the Respondent for her SABS included claims for income replacement benefits; medical rehabilitation benefits; attendant care benefits; and housekeeping benefits. The claim for income replacement benefits was initially denied. Ultimately, the claim for income replacement benefits was resolved on a full and final basis on April 13, 2018; a date which was essentially on the eve of an arbitration that was scheduled with the Licence Appeal Tribunal (the LAT).

[4] The Respondent required that Melanie attend an assessment to determine whether she fell within the statutory designation of catastrophic impairment. As a result of an assessment conducted on October 22, 2019, Melanie was determined to be catastrophically injured. Despite such finding, the Respondent denied Melanie’s claims for attendant care benefits and other medical rehabilitation benefits associated with her injuries. As a result of the denial of such benefits, an application was filed with the LAT. A mediation took place on January 13, 2020 which failed. A case conference was held on April 30, 2020, which required the scheduling of a further case conference prior to an arbitration date being fixed with the LAT.

The Settlement

[5] Melanie’s SABS claim has been settled subject to court approval for $500,000, which includes $225,000 for medical and rehabilitation benefits; $225,000 for attendant care benefits; and $50,000 for housekeeping benefits.

[6] It is proposed that out of the aforesaid $500,000 settlement that the court should approve the following:

a) $175,000 shall be paid to Kahler with respect to fees and costs; b) $22,750 shall be paid to Kahler with respect to HST; c) $140,000 shall be placed into a structured settlement; d) Approximately $35,000 shall be paid to BridgePoint Financial Services for loans obtained by Melanie; and e) $127,456.10 shall be paid to Melanie.

[7] The funds which are payable to Melanie ($127, 456.10) are to be used to pay off a consumer proposal that she has entered into (approximately $53,000), and personal loans to family and friends ($45,000) which was used to pay for living and treatment expenses.

[8] In determining the adequacy of the proposed terms of settlement, it is worth noting that Melanie has received approximately $67,000 in medical and rehabilitation benefits. She has not received any attendant care or housekeeping benefits. As such, without the settlement Melanie would be giving up the ability to access up to approximately $933,000 in medical and rehabilitation limits; $1,000,000 in attendant care limits; and $100 per week in housekeeping limits.

[9] Ms. Pickering suggests in her affidavit that the proposed terms of settlement are fair and reasonable. Dealing with the issue of attendant care, it is noted by Ms. Pickering that the Respondent has consistently refused to pay for Melanie’s attendant care needs which have been estimated to range between $6,000 per month and $3,000 per month. It is noted in Ms. Pickering’s affidavit that Melanie would never exhaust her attendant care limits even if she were to continue to be eligible for attendant care. Ms. Pickering notes in her affidavit that the present value of her attendant care benefits over her lifetime using a 3.5% discount rate would total approximately $757,000. The basis for this calculation comes from McKellar Structured Settlements who would appear to have been asked to calculate the present value using a discount rate of 3.5%. The appropriate discount rate is set forth in Rule 53.09 of the Rules of Civil Procedure. The discount rate is not 3.5%.

[10] With respect to the claim for medical rehabilitation benefits Ms. Pickering references a number of medical assessments, some of which were conducted on behalf of the Respondent. At paragraph 43 of her affidavit, Ms. Pickering indicates that if Melanie did not succeed in seeking treatment of her physical or neurological impairments, then her treatment would not be expected to total more than approximately $177,000.

Analysis

[11] This court has a number of concerns with respect to the proposed terms of settlement. As it relates to the claim for the medical rehabilitation and attendant care benefits, it is entirely appropriate for this court and counsel to take into account litigation risk as well as how the continuation of a SABS claim might impact emotionally and psychologically on a claimant. These are entirely relevant considerations and were appropriate for Ms. Pickering to take into account.

[12] I am not satisfied, however, that without better up to date medical evidence that this court should approve this settlement. As such, I am directing that this matter be referred to the Office of the Public Guardian and Trustee for further input.

[13] This court also has significant concerns with respect to the proposed legal fees that Melanie would be charged, fees which are based on a contingency fee agreement (the Contract) that Melanie signed on October 4, 2017. If Melanie, as Ms. Pickering indicates at paragraph 3 of her affidavit, does not have capacity to instruct legal counsel, this court requires evidence that when she did sign the contract for legal services with Kahler that she was mentally competent. In addition, the court would require evidence as to what advice Melanie received prior to signing the contract.

[14] This court has additional concerns with respect to the contract, concerns which I reviewed in an earlier decision in Khokhar v. Aviva Insurance Company, 2020 ONSC 2464. Those concerns are identical concerns which I have with respect to the contract that Melanie signed. The contract relates to a tort claim. The contract refers to a lawsuit; a trial; party and party costs; and a damages award. There is no reference whatsoever to an accident benefit claim or arbitration before the LAT.

[15] If a law firm intends to rely on a contingency fee agreement, it must not only be fair but it must be an agreement that covers the legal services that the law firm will be providing to the client. The contract in question fails in numerous respects to provide any sense that the client would be provided with legal services in connection with a LAT/SABS claim.

[16] Leaving all of that aside, the contract – if it did apply to Melanie’s SABS claim, would nonetheless still have to be fair and reasonable. In a SABS claim where the law firm has taken on little to no risk, I fail to see how it is appropriate to charge a client a contingency fee of 35%. This does not remotely come close to anything that is fair or reasonable. Subject to receiving input from the Office of the Public Guardian and Trustee with respect to the other issues that I have raised in this Endorsement, I am not prepared to approve any settlement of counsel’s fee that exceeds 15% plus HST and disbursements.

[17] As it relates to the other terms in the proposed settlement and recognizing that Melanie is a party under disability, it is inappropriate without some further explanation to pay a lump sum to Melanie as proposed of $127,456.10 without some form of management plan. I have little confidence that the monthly income generated by the proposed structure and the lump sum that would be paid to Melanie, without any guidance in terms of how it is to be invested, will provide for Melanie’s further medical requirements.

[18] As it relates to the specifics of how the lump sum would be utilized, it is suggested that a significant portion of the monies to be paid to Melanie will be used to pay off a consumer proposal estimated at $53,000, as well as personal loans to family and friends in the amount of $45,000. No details are provided with respect to the aforesaid payments. No supporting documentation is provided with respect to the aforesaid payments. Perhaps most importantly, there is no explanation as to Melanie’s responsibility for the aforesaid payments given that she is presented to the court as a party under disability.

[19] Similar comments can also be made with respect to the payment of the BridgePoint loan in the suggested amount of approximately $35,000.

[20] Included in the motion materials is a letter dated May 20, 2020 from BridgePoint to Ms. Pickering, which provides details of when various loan amounts were extended to Melanie and the dates when the loan amounts were provided. Interest rates vary between 19.5% and 24%.

[21] What is not provided with respect to the BridgePoint loans is any information with respect to the advice provided to Melanie prior to her incurring such loan. More importantly, there is no information provided as to how Melanie could bind herself with BridgePoint at a point in time when she is apparently a party under disability.

[22] Until such time as all of the concerns that I have raised in this Endorsement have been dealt with by counsel, and until such time as I receive a report from the Office of the Public Guardian and Trustee, I am not prepared to approve the proposed terms of settlement. I will remain seized of this matter.

Justice M.L. Edwards Date: July 20, 2020