COURT FILE NO.: CV-18-00001825-0000
DATE: 20220930
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: C.D., R.T., and Jo.T. ,Ja.T., and Je.T., by their Litigation Guardian C.D., Plaintiffs
AND:
A.S., Finlay Mill Investments Inc., Mac’s Convenience Stores Inc., Alimentation Couche-Tard Inc., Defendants
BEFORE: Justice V. Christie
COUNSEL: William J. Leslie Q.C., Counsel for the Plaintiffs (C.D. was also in attendance at the hearing)
No one else attended
HEARD: Initially brought in writing as a chambers motion, followed by a hearing on September 28, 2022
APPROVAL OF SETTLEMENT INVOLVING A MINOR
ENDORSEMENT
Overview
[1] Approval of settlements involving minors is not a “rubber-stamping” exercise. If this court is incorrect, and “rubber-stamping” is all that is required, then there is no point to having the process at all. Each time the court is presented with one of these motions, the judge should conduct the review as if they had never reviewed one of these motions before, with careful consideration of the specific facts of the case before them.
[2] This suggested careful review includes a consideration of the fairness and reasonableness of the legal fees sought. Surely it cannot be the case that simply because a particular percentage contingency fee has been accepted in the past leads to the inevitable conclusion that it must be accepted in the future.
[3] This approval process must be a meaningful one. The process must be one that provides neutral oversight. The process must be one that truly looks out for the best interests of the minor(s) involved. The process must be one that ensures fairness and justness.
[4] Counsel must not present these motions in a hurried fashion with the expectation that consent from all parties will carry the day.
[5] In this case, the Plaintiffs brought this motion in writing, on consent, requesting approval of a settlement reached on behalf of the minor Plaintiffs, Je.T. (now 10 years old), Jo.T. (now 11 years old), and Ja.T. (now 14 years old).
[6] It is of note that when this motion was filed, counsel for the Plaintiffs, William Leslie, included a letter to the Civil Registrar dated July 25, 2022, stating that there was “urgency that this material be reviewed by a judge for approval as soon as possible” and “please provide me with a copy of the issued and entered Judgment as soon as possible”. Mr. Leslie referred to the fact that funds had been paid into a structure by the insurer for the Defendant, A.S.
[7] This matter first came before me as a chambers motion on July 29, 2022. With respect to the issue of legal fees, the initial affidavit of William Leslie for this approval simply stated as follows:
I was retained on the basis that I would charge 25% of the settlement recovery plus HST, which is in this case, as you will see below, is $565,000.00 so that to the approval of the court, this matter has settled for $2,370,000.00.
[A.S.]’s insurer, Economical, contributed $2,020,000.00. Intact who is the insurer for FMI contributed $350,000.00.
No contingency fee agreement was provided. No dockets were provided. At that time, this court did not grant the relief sought, but rather questioned the extraordinary amount of legal fees, and requested further information regarding the actual legal fees and disbursements in affidavit form.
[8] On August 23, 2022, this motion came back before this court. Supplementary affidavits were provided from the litigation guardian, C.D., and from counsel for the Plaintiff, William Leslie. C.D., in her affidavit sworn August 2, 2022, stated that the affidavit had been prepared by Mr. Leslie’s office but that she was making the comments voluntarily. She stated in part:
Firstly, Mr. Leslie’s Affidavit sworn today is correct. When we first retained Mr. Leslie in the fall of 2017, he explained the contingency retainer of 25% and that we could challenge his fees at any time by expressing our contrary view to the court and / or retain independent legal counsel. At no time have we ever had any second thoughts about the advice we have received from Mr. Leslie. Mr. Leslie, in our strong opinion, is entitled to the fee of $500,000 plus HST. He guided us through a maze of issues. He and his staff have worked tirelessly on our behalf since the fall of 2017.
We could not have afforded to retain Mr. Leslie on his normal hourly rate of $500. That would have been far beyond our financial scope. If it was not for the fact that we retained excellent counsel who agreed to represent us on a contingency fee of 25%, we could not have afforded to litigate the matter.
Mr. Leslie, in his affidavit sworn August 2, 2022, attached a summary of his disbursements totalling $18,360.11 (including HST) and stated in part:
I normally charge a contingency fee of 30% however, in this case, I charged 25% for two reasons. Firstly, I knew [C.D.] and her family. Secondly, this is a tragic case.
I applied the 25% to the limit settlement of $2 million. I did not apply it to the total settlement of $2,370,000.
Because I charged a contingency fee on this file, my docket keeping records for my work and work of our staff is not thorough nor complete. If requested, I could try and generate same…..
Having considered this new information, this court held that it required some understanding of the hourly rates billed and hours spent by those involved, at least with respect to significant events in this litigation.
[9] On September 15, 2022, this motion returned before this court in writing for a third time. At that time, counsel provided, at the request of the court, a costs outline demonstrating that actual legal fees in this case total $83,290.00, plus HST, and disbursements total $17,624.10 (inclusive of HST where applicable), for a grand total of $111,741.80. In his affidavit sworn September 8, 2022, Mr. Leslie stated in part as follows:
…My assistant Shannon reviewed the file and determined, as best as she could, the firm’s time spent on the file. As stated earlier, I did not keep dockets on this matter because I was working under a contingency fee retainer agreement.
The Costs Outline is not a complete summary of my time on this file.
I have not increased my hourly rate of $500.00 since 2017.
[10] While this court recognized that counsel claimed that dockets were not kept and that this was “not a complete summary” of time counsel spent on the file, this court noted the enormous difference between the contingency fee agreement amount and the total provided in the costs outline - over $400,000. On the basis of the evidence presented, this court was left questioning the reasonableness of the contingency fee agreement in this case. This court offered a brief hearing on this issue and encouraged counsel to schedule same as soon as possible.
[11] Counsel did take the opportunity to have a virtual hearing, at which they were permitted to file further evidence and call viva voce testimony. William Leslie appeared at the hearing, along with the litigation guardian, C.D., and both made submissions, focused on convincing this court to approve the settlement including the legal fees proposed. Counsel did not file anything further in preparation for this hearing. In summary, counsel submitted that there was a significant and concerning counterclaim seeking full indemnity for all damages the Defendant might have had to pay by virtue of the alleged negligence of the litigation guardian mother who failed to properly supervise her children. Counsel also pointed out that, in relation to the co-Defendants, brought in after the case was started, even though there were no building code violations or property standard deficiencies, in other words no liability, the settlement included a payment by the property owner of $350,000, simply based on “best practices”. Counsel also summarized the significant impact that this has had on the injured child and this family. Counsel argued that legislation allows for a 33% contingency percentage, but that his requested fee is only 25% of the policy limit amount, not the entire settlement amount. Counsel submitted that the contingency fee agreement is fair and reasonable. In addition, C.D., the litigation guardian indicated her full support to Mr. Leslie’s position.
[12] Following the hearing, this court requested to see the contingency fee agreement, given that after a careful review of the motion materials, it was realized that the agreement had never been provided. The contingency fee agreement provided to this court, upon request on September 29, 2022, was one dated September 8, 2022, with the explanation that counsel realized by oversight that it had not been signed earlier. The agreement referred to the client being given a copy of the document “Contingency Fees: What you need to know”, with the instruction to read the guide and “take as much time as you need to read this agreement….Do not sign until you feel you have answers to all of your questions and you have decided to proceed”. As to how the contingency fee would be calculated, the agreement states:
The fee that you will pay us for legal services is a percentage of the money you get as a settlement or award. It also applies to any amount you receive for costs if you win your case or any amount specified as costs as part of a settlement. The percentage does not apply to any amount you receive specifically to help you pay for disbursements and taxes.
Our contingency fee cannot be more than the amount that you recover as an award or settlement from the other side, including costs and excluding disbursements and taxes.
Your Fee
Your contingency fee will be 25% of your settlement or award, plus HST.
The agreement advises that if the final account is considered unreasonable, the person can contact the Superior Court to ask for a review. The hourly rates of William Leslie and the Law Clerk are set out as $500 and $175 respectively.
Facts
[13] There is absolutely no question that Jo.T. was catastrophically injured in a pedestrian / motor vehicle collision that occurred on August 1, 2017. C.D. and all of her three children were walking toward Mac’s Convenience Store on that afternoon. They were all walking along the sidewalk adjacent to the south brick wall of the Mac’s Convenience Store, in single file, with Je.T. (5 years old at the time) in the lead, followed by Jo.T. (6 years old at the time), followed by C.D., and Je.T. (9 years old at the time) at the end. The Defendant, A.S., at the time 17 years of age, had parked his car perpendicular (facing north) to the sidewalk where the Plaintiffs were walking. Suddenly, A.S., rather than reversing the car as he intended, mistakenly accelerated forward from a parked position. The vehicle jumped the sidewalk, violently struck Jo.T., and pinned him against the brick wall. A.S. was charged with dangerous driving causing bodily harm, however, the Crown later withdrew the charge.
[14] Jo.T., through his litigation guardian, his mother, C.D., brought a claim in November 2018 in relation to this event. The other Plaintiffs, who include the parents and siblings of Jo.T., all seek Family Law Act damages. Initially, A.S., was the only named Defendant. However, in the fall of 2020, the Plaintiffs brought a successful, unopposed motion, to add the other Defendants, namely Finlay Mill Investments Inc. (“FMI”), Mac’s Convenience Stores Inc., and Alimentation Couche-Tard Inc. FMI were the owners of the property where these events occurred, and leased an area to Mac’s Convenience Store, which was operating under the corporate name of Alimentation Couche-Tard Inc. at this location.
[15] The Amended Statement of Claim claimed as follows:
a. For the minor Plaintiff, Jo.T., by his Litigation Guardian, C.D., general damages in the sum of $5,000,000.00;
b. For the Plaintiff, C.D., on her own behalf, for general and special damages in the sum of $500,000.00;
c. For the Plaintiff, R.T., on his own behalf, for general and special damages in the sum of $500,000.00;
d. For the Plaintiffs, Ja.T. and Je.T., by their Litigation Guardian, C.D., general damages in the sum of $200,000.00 each;
e. Special damages, amounting to all medical, rehabilitation, hospital, loss of income and other out-of-pocket expenses incurred to the date of Judgment;
f. Prejudgment and postjudgment interest;
g. Costs on a substantial indemnity basis, plus assessable disbursements, plus applicable HST
[16] The Plaintiffs claimed negligence on the part of A.S. in various respects. With respect to FMI, Mac’s and Alimentation, the Plaintiffs claimed that they had a duty of care to maintain the property in respect of dangers to persons entering, and that they breached their obligations as set out in the Occupiers Liability Act in various ways.
[17] A.S. filed a Statement of Defence, and Counterclaim on December 20, 2018, later amended to include a Crossclaim on November 20, 2020. Of note, A.S. pleaded the negligence and/or contributory negligence of Jo.T., and negligence of FMI, Mac’s and Alimentation. As against the co-defendants, A.S. crossclaimed for contribution and indemnity and his costs. As against the Plaintiff, C.D., A.S. counterclaimed for contribution and indemnity, a declaration that the alleged damages were caused or contributed to by the fault or neglect of C.D., a declaration of the proportionate fault or negligence of C.D., and his costs.
[18] FMI and Mac’s each filed a Statement of Defence, Crossclaim, and Counterclaim on January 6, 2021 and December 9, 2020, respectively. These pleadings also included a claim of negligence or contributory negligence on the part of C.D. and Jo.T., and/or negligence on the part of the other co-defendants.
[19] A report dated March 10, 2021, prepared by DWAN Karim Consulting Engineers at the request of the Plaintiffs, concluded that the Defendant property owner (FMI) did not provide a minimum distance between parked vehicles and the pedestrian walkway, which would have minimized the conflict between parked cars and pedestrians. Also, a lack of sidewalk width reduced the distance between the parked vehicles and pedestrians, and additional barriers such as concrete wheel stops would have provided a safe barrier between parked cars and pedestrians which were not installed. There were no regulations violated by FMI, rather these were seen as “best practices”.
[20] Sometime in 2021, counsel for the Defendant A.S. indicated that he hoped this matter would settle quickly because obviously from early medical reports disclosed, his client was facing a policy limits, plus, payout.
[21] It would appear that discoveries occurred in September 2021. By that time, the Defendant A.S. had a grade 12 education, lived with his parents, and had been basically unemployed for two years.
[22] Following discovery, counsel for the Defendant A.S. advised that because of the limits exposure his client faced, corporate instructions would come from the highest corporate level. Counsel for A.S. advised that they needed expert reports to justify a $2 million policy limit payout.
[23] In light of this information, counsel for the Plaintiffs retained Joel Kumove to prepare a vocational assessment in relation to Jo.T., which is set out in a report dated November 2, 2021. The report states in part as follows:
Having reviewed [Jo.T.]’s health and educational history in detail, and having interviewed his parents, I have come to understand that [Jo.T.] suffered injuries in a traumatic MVA, and that he has been left with long-term consequences affecting all aspects of normal living, including advancement in education, earnings and future participation in the labour force.
It would have been most reasonable and likely in my opinion, that [Jo.T.]’s special needs associated with ADHD would have received much more supports and much better addressed, were it not for the urgent and ongoing medical care needs that occurred over several years shortly following the original identification of his special needs. As noted by Dr. Colvin, [Jo.T.]’s ADHD had gone untreated because of the focus on much more urgent health issues.
Adding to the problem of ADHD that was under-addressed post-MVA, was [Jo.T.]’s frequent absences from the school, which would only further result in [Jo.T.] falling behind in terms of his educational and psychosocial development.
Were it not for the consequences of the traumatic accident of August 1, 2017, it would have been reasonable to anticipate future lifetime earning capacity for [Jo.T.] based on the norms for holders of apprenticeship trade certificates and working fulltime in Ontario. I would not have predicted with confidence that [Jo.T.] would have completed a community college diploma or a university degree programs, however.
As a best-case scenario, [Jo.T.] might be expected to work in a physical trade occupation, based on the guidance and example of his father. However, taking into account the physical and mental consequences of the subject accident, I would at best, expect a 50 percent reduction from pre-MVA expectations. As a worst-case scenario, there is a risk that his disability may result in a total inability to participate in gainful employment at all. In such a case, great care and support would be needed to assist [Jo.T.] to develop another social role, such as volunteering to provide a sense of meaning and a structure to his time.
[24] Also, in light of the information from counsel for the Defendant A.S., counsel for the Plaintiffs obtained a preliminary economic loss report, which is dated March 22, 2022 from Blake DeClark from Williams Meaden & Moore. Based on the vocational assessment, this report assumed that Jo.T. will not earn any income in the future and this report did not consider the impact of any potential future benefits that may be available to him. The projected loss of earnings was estimated at approximately $2.5 million.
[25] The impact that this has had on Jo.T. and his family must be summarized in order to properly assess this settlement:
a. Jo.T. was six years old at the time of this life-changing event.
b. He was taken by ambulance to Royal Victoria Regional Health Centre in Barrie and then to SickKids. He was in hospital from August 1, 2017 to August 22, 2017.
c. Jo.T. sustained significant injuries to his pelvis and urethra. Specifically, his urethra was completely severed from his bladder. His pelvis was fractured in multiple places. He received emergency surgery, catheterization and several transfusions.
d. Jo.T. was an in-patient at Holland Bloorview Rehabilitation Hospital from August 22, 2017 to October 5, 2017.
e. He has endured multiple surgeries and procedures. His surgeries ranged from attempts to align his urethra to reconstruction, in order to allow him to function in a normal manner, voiding and emptying his bladder from his penis. Unfortunately, all of these procedures were unsuccessful. He developed urinary tract infections. He underwent major reconstruction whereby his appendix was connected to his bladder, allowing Jo.T. to empty his bladder by doing catheterizations from his belly button, which is done every two hours with the assistance of his mother.
f. Jo.T. continuously leaks urine from his belly button, which causes a constant smell of urine, leading to social and personal problems.
g. It is expected that, as Jo.T. ages, the erectile dysfunction, psychosexual and psychosocial disabilities will cause a series of problems for him. For example, if he could obtain a trade / skill, it is not clear how he would work in an environment when he constantly smells of urine from the continuous leaking of urine and can only void himself by catheterizing himself from his belly button every two hours.
h. Jo.T. has had approximately 50 visits to SickKids as a result of his injuries.
i. His parents have struggled to find a way to provide for his every need and provide the care and attention needed by their other sons.
j. C.D. has been on a leave of absence from her job from May 2018 which will continue until May 2023. There were initially many interruptions to her job because she was constantly taking Jo.T. to SickKids for his medical care.
k. The brothers are overly protective of Jo.T. Initially, they all slept in the same room. Jo.T. and Je.T. continue to share a bed as they find comfort in this.
l. Jo.T. has been separated from his family during hospitalizations, and when at home, he has often been recovering from surgery, dealing with infections, or is medicated. This has affected his relationships with family.
[26] The Defendants have offered the Plaintiffs a settlement in the total sum of $2,370,000.00 to settle all tort claims, which the Plaintiffs have accepted, subject to the approval of this court. It is proposed that $2,020,000.00 is to be paid by the Defendant A.S. (through his insurer, Economical), and the balance of $350,000.00 is to be paid by the Defendant, Finlay Mill Investments Inc (through their insurer, Intact). The payment is to be made as follows:
a. A.S., by Definity Insurance Company, and Finlay Mills Investments Inc. is to pay to Stewart, Esten LLP, in trust, a total of $770,000.00 in non-structure consideration, which shall be distributed as follows:
i. For Family Law Act damages, the sum of $30,000.00 to the Accountant of the Superior Court of Justice, to the credit of each of Ja. T. and Je. T. to be paid (together with accrued interest) to each of them upon their attainment of the age of majority;
ii. For Family Law Act damages, the sum of $45,000.00 to R.T.;
iii. For Family Law Act damages, the sum of $80,000.00 to C.D.;
iv. To Stewart, Esten LLP, the sum of $565,000.00 in satisfaction of legal fees (inclusive of H.S.T.); and
v. To Stewart, Esten LLP, the sum of $20,000.00 for outstanding disbursements, inclusive of applicable H.S.T.
b. A.S., by BMO Life Insurance Company, is to pay periodic payments set out in a schedule, funded by $1,600,000.00 of the settlement funds, which payments are to be irrevocably directed to Jo. T. as follows:
i. To Jo.T., who will have attained the age of majority in Ontario in 2029 at the time of payment commencement, payments starting at $593.22 and $5,315.36 each month, increasing each year by 2% compounded, to continue to death or for 50 years (to age 68) which ever is earlier; and
ii. In the event of Jo.T.’s death before all the guaranteed payments have been made, to such secondary payee(s) as Jo.T., while he remains alive, may subsequently direct in writing, from time to time (upon his attainment of the age of majority), to BMO Life Assurance Company, with such direction being effective once accepted by BMO Life Assurance Company, and provided that in the absence of such direction or if there is no secondary payee living at the time of Jo.T.’s death, to Jo.T.’s Estate.
It is stated that this structured settlement renders the most non-taxable income to the age of 68 and the most income guaranteed.
[27] William Leslie, counsel for the Plaintiffs, has recommended this settlement. According to counsel, even though Jo.T.’s damages and costs far exceed Economical policy limits, given A.S.’s age and the fact that he has no known assets, the chances of any collection of monies in excess of the policy limits is unlikely. Further, even though contribution from FMI is reasonable on the basis of “best practices”, almost every mall in Ontario has sidewalks adjacent to parking lots and there is no liability on their part.
[28] As for the Accident Benefits Claim, Certas is the Plaintiffs’ automobile insurer. Up to February 14, 2022, Certas has paid $24,201.10 in medical benefits, $2,062.58 in visitor expenses, and $151,191.79 in attendant care benefits. Certas has declared Jo.T. to be catastrophically injured. At some point, Jo.T. will be entitled to receive non-earner benefits. These benefits continue.
[29] It must be noted that C.D., Litigation Guardian, is fully supportive of the settlement and legal fees. In her affidavit sworn on July 18, 2022, she stated:
When we retained Mr. Leslie in 2017, he agreed to act for us, on a 25% contingency fee, plus HST, basis.
We agree to pay his law firm, the sum of $565,000.00 inclusive of HST for his work representing us based on his contingency fee retainer.
She has continued to strongly state this position.
Analysis
[30] Setting aside the legal fees being charged, the overall settlement in this case is a reasonable one in the best interests of the minor Plaintiffs. It is likely that there will never be any more money available from the Defendant A.S. other than the limits of his insurance policy, which is $2 million. A.S. is young and unemployed with no assets. Further, it would seem that A.S. has also suffered as a result of this incident. Everyone accepts that it was a terrible error on the part of A.S. but certainly not intentional.
[31] As for FMI, there are no breaches of regulations or codes alleged or demonstrated. The argument against them is based solely on its failure to use “best practices” in the layout of the parking area and sidewalks as an occupier.
[32] Clearly this action is stressful on everyone, and it would be best brought to an end if possible.
[33] This court has looked at a number of cases to determine the appropriate legal principles to be considered in the context of approving a settlement for a minor, and more specifically, in approving the legal fees requested.
[34] In Raphael Partners v. Lam, 2002 CanLII 45078 (ON CA), [2002] O.J. No. 3605 (C.A.), the Court of Appeal was considering the enforceability of a contingency fee arrangement between solicitors and their client, the plaintiff in a catastrophic personal injury action. The court explained the components of fairness and reasonableness as set out in the Solicitors Act. With respect to fairness, the court stated:
[37] When a fee agreement is challenged under the Act, the solicitor bears the onus of satisfying the court that the way in which the agreement was obtained was fair and that the terms of the agreement are reasonable. The fairness requirement of s. 24 of the Act is concerned with the circumstances surrounding the making of the agreement and whether the client fully understands and appreciates the nature of the agreement that he or she executed: Best v. Yegendorf, Brazeau, Seller, Prehogan & Wyllie (1998), 1998 CanLII 14646 (ON SC), 37 O.R. (3d) 633 (Gen. Div.).
With respect to reasonableness, the court stated as follows:
[50] The factors relevant to an evaluation of the reasonableness of fees charged by a solicitor are well established. They include the time expended by the solicitor, the legal complexity of the matter at issue, the results achieved and the risk assumed by the solicitor. The latter factor includes the risk of non-payment where there is a real risk of an adverse finding on liability in the client's case: Cohen v. Kealey & Blaney (1985), 10 O.A.C. 344 (C.A.); Desmoulin v. Blair (1994), 1994 CanLII 333 (ON CA), 21 O.R. (3d) 217, 120 D.L.R. (4th) 700 (C.A.).
[35] In St. Jean v. Armstrong, 2015 ONSC 13, Del Frate J. considered a motion for approval of a proposed settlement with respect to an accident benefit proceeding and a tort action. The factual background to the litigation was that the minor Plaintiff, who was six and a half years of age at the time, was riding his bicycle down a hill, proceeded through a stop sign without stopping, and struck the side of a motor vehicle. He suffered serious injury. Days following the collision, the Plaintiffs retained counsel and a few months later a statement of claim was issued. The action proceeded through discoveries, a mediation, pre-trial, and obtaining a trial date, a further mediation, and obtaining a second trial date. Before the second trial date, settlement was reached as follows:
Tort Action: Damages - $550,000; costs including HST - $110,000; and disbursements - $84,510 – total of $744,510.
Accident Benefit Claim: $850,000; costs - $125,000 – total of $975,000
Global settlement: $1,719,510
[36] Counsel sought costs of one-third of the damages awarded in both the accident benefit claim and the tort claim pursuant to the contingency fee agreements, which would have amounted to fees of $466,000, HST of $37,280, and disbursements of $84,510 for a total of $587,790. In considering this request, Del Frate J. stated in part:
[14] Contingency fee agreements (“CFA”) were permitted in Ontario to grant access to justice to litigants who ordinarily would not be in a position to pay for legal fees. However, a contingency fee agreement is not a carte blanche to permit lawyers to charge what the CFA states. Fairness and reasonableness must be considered.
[15] The test for approval of CFAs was set out by the Ontario Court of Appeal in Raphael Partners v. Lam….
[16] In Henricks-Hunter v. 814888 Ontario Inc. (Phoenix Concert Theatre), 2012 ONCA 496, 294 O.A.C. 333, the Court of Appeal reiterated certain key principles:
[13] In our view, the motion judge erred in failing to consider whether the CFA should be enforced and by proceeding directly to the determination of the amount of fees without regard to the CFA. In Raphael this court explained the two-step process to be followed by a judge where enforcement of a contingency fee agreement is sought pursuant to s. 24 of the Solicitors Act. First, the fairness of the agreement is assessed as of the date it was entered into. Second, the reasonableness of the agreement is assessed as of the date of the hearing. A contingency fee agreement can only be declared void, or be cancelled and disregarded, where the court determines that it is either unfair or unreasonable.
[14] In this case, the motion judge's analysis of the proposed fees focussed almost exclusively on the amount of time spent by the solicitors and their hourly rates. As noted in Raphael, at para. 54, because of the important role played by contingency fee agreements in the administration of justice, the time spent by solicitors on a file is a relevant factor, but it does not control the question of whether a solicitor is entitled to the fees charged through enforcement of a contingency fee agreement. [Emphasis added.]
[15] When a solicitor seeks to enter into an enforceable contingency fee agreement with a party under a disability, the solicitor must comply with the regulations passed pursuant to the Solicitors Act…
[16] Therefore, the solicitor can choose to have the agreement approved by the court before it is finalized with the PGT. If a contingency fee agreement is approved by the court before being finalized, the fairness of the agreement is no longer an issue.
[17] Alternatively, the agreement can be finalized and presented on a motion or application for approval of a settlement under rule 7.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Upon hearing a rule 7.08 motion or application, the judge cannot simply disregard a finalized contingency fee agreement. Rather, the motion judge must assess both the fairness and reasonableness of the agreement. If the agreement is fair and reasonable, the motion judge may give effect to it.
[24] If a judge faced with a contingency fee agreement calls into question the fairness or reasonableness of the agreement, the judge should normally raise the issues with the solicitors and seek their submissions.
[17] In Symington (Litigation guardian of) v. Adam, [2008] O.J. No. 1923 (S.C.), Gunsolus J. succinctly summarized the law regarding approval of CFAs in Ontario and enumerated the factors to consider when assessing contingency fees, at paras. 9-14:
[9] Contingency agreements have no force and effect in the absence of approval by a judge and there is no obligation on the judge to award solicitor fees and disbursements in accordance with such an agreement, unless the judge is satisfied, having regard to the total circumstances of the settlement, that such additional fees and disbursements are correct and justified. See: Marcoccia v. Gill, 2007 CanLII 33 (Ont. S.C.); Sonny v. Sonnylal, [2007] O.J. No. 861 (S.C.); Rivera v. LeBond, [2007] O.J. No. 889 (S.C.).
[10] The court must determine whether or not the question of damages in a case of this nature were complicated; the quantum of the disbursements assumed by the law firm; the risk to the solicitor undertaking the action on a contingency basis; and the length of time during which the solicitor carried such disbursements and risk. See: Beaulieu (Litigation guardian of) v. Conseil scolaire de district catholique du Nouvel-Ontario, [2007] O.J. No. 2951 (S.C.)
[11] As set out in the Morris v. Sparling case, rule 2.08(3) of the Law Society of Upper Canada's Rules of Professional Conduct, in relation to contingency fees provides that the test to be applied is whether in all of the circumstances the fee is fair and reasonable: see Morris v. Sparling, [2007] O.J. No. 3497 (S.C.). The factors to be considered include the likelihood of success, the nature and complexity of the claim, the expense and risk of pursuing it, the amount of recovery, and who is to receive any award of costs.
[12] Further, section 5 of Ontario Regulation 195/04, deals with contingency fee agreements under the Solicitors Act, R.S.O. 1990, c. S-15, for parties under a disability. Under this provision, a solicitor may apply to a judge for approval of the agreement before it is finalized or for approval as part of the motion for approval of settlement under rule 7.08 of the Rules of Civil Procedure.
[13] In light of all of the foregoing, contingency fees may be reduced for the following reasons:
(a) The contingency fee agreement was not approved at the outset by a judge;
(b) If the risk assumed by the law firm of an unsuccessful outcome is low;
(c) The length of time within which a settlement was reached and the risk carried by the law firm being of a relatively short duration;
(d) The amount of time that the solicitor actually spent on the file according to docketed time; and
(e) The amount of damages recovered as opposed to having been suffered by the plaintiff.
[14] Factors which may support awarding an amount above a solicitor's docketed hourly rates, which I may consider, are as follows:
(a) The litigation guardian and the solicitor actually having entered into a contingency fee agreement, which bound the law firm to complete the action without payment, possibly for a lengthy period of time;
(b) The length of time for which the law firm carried disbursements for the benefit of the plaintiff;
(c) The amount of time to be spent and the disbursements to be paid for being unknown at the outset of assuming carriage of such an action;
(d) The premium for assuming risk of financing litigation for several years without payment of a fee;
(e) Encouraging lawyers to assume part of the risk of financing actions promotes access to justice for those persons of modest means and should be encouraged;
(f) A result being achieved relatively quickly; and
(g) The complexity of liability and damage claims.
[18] In Lau (Litigation guardian of) v. Bloomfield, [2007] O.J. No. 3200 (S.C.), Spies J. described the information required to assess a claim for solicitor’s fees, at paras. 35-37: 2015 ONSC 13
[35] In my view, and to expand on what Justice Wilkins stated, in order for there to be meaningful court approval, in the motion record counsel must provide a copy of the retainer agreement, the dockets, hourly rates claimed, a list of the lawyers/law clerks who worked on the file, the total number of hours spent by each person on the file and in the case of lawyers, their year of call and in the case of law clerks whether they are a junior or senior clerk.
[36] In addition a summary of the nature of the work done by each person must be included. That summary is not to be simply a list of specific matters that were done, as was provided to me by counsel in this case as this obviously does not give the reviewing judge any assistance whatsoever. Particulars must be provided such as the number of hours spent to prepare an examination, the number of days spent at the examinations and whether it was for the purpose of examining a witness or simply accompanying the client. The same applies to court attendances. To simply state there were motions is meaningless without particulars of the nature of the motion, a summary of the material prepared for the motion and whether it was argued and if so the length of the court attendance. This is also obviously the case for mediations and other hearings and settlement conferences. Counsel may also wish to consider reference to some of the factors set out in Rule 57.
[37] The summary of the nature of the work done is of critical importance and should be carefully prepared. It is totally unacceptable to simply refer to the dockets. The difficulty with dockets is that they can be very cryptic, as most were in this case, and very time consuming for the court to review. The court cannot be expected to try to ascertain the value of the work done by a review of the dockets. That is the job of counsel. The dockets are provided so that if questions arise they can be referred to. They are not a substitute for the summary of work done by each person who worked on the file.
[37] Del Frate J. held:
[22] A judge’s responsibility in cases of this nature is to ensure that the settlement and the fees being charged are in the best interest of the child.
[38] Ultimately, Del Frate J. distinguished between the level of complexity required to resolve the tort claim versus the accident benefit claim. While he approved the 33% contingency fee on the tort claim, he reduced the amount on the accident benefit claim. In reducing the fees on the accident benefit claim to be fixed at $170,000, inclusive of HST, Del Frate J. did a careful review of some of the dockets and questioned the reliability of same.
[39] The solicitor appealed to the Court of Appeal. In St. Jean v. Armstrong, 2017 ONCA 145, the Court allowed the appeal in part. The Court held that the motion judge did not err in considering the fee claims for the tort action and the accident benefits separately or in reducing the fee for the accident benefit claim. However, the court found that the judge erred in not awarding GST / HST. The court stated in part:
[22] We are not persuaded that the motion judge made any errors in his consideration of these claims. We agree with his conclusion that the AB claim did not entail the sort of risk and complexity that the tort claim did.
[24] In our view, it was not an error for the motion judge to consider the fee claims for the tort action and the AB action separately. The claims were different with different risks associated with each of them.
[27] Every case must be considered on its own particular facts and we are satisfied the motion judge carefully considered the issues raised in relation to this settlement and we would not interfere with his overall conclusion.
[40] In Mounce v. Rae, 2017 ONSC 2288, McKelvey J. was considering settlement of a claim for damages arising from a dog bite incident. The minor was three-years-old at the time of the application. Under the terms of the settlement, which occurred in about 15 months of the commencement of the action, the Respondents would be required to pay $130,000, all inclusive. After payment of the other claims, the amount available for the minor plaintiff’s claim would be just over $115,000 which included an allocation of the costs recovered. Having received this as a chambers motion, McKelvey J. was satisfied with the quantum of the settlement but requested further details with respect to legal costs, which was suggested to be just over $40,000, calculated as 33% on a contingency fee agreement. In reviewing the contingency agreement, McKelvey J. found that there was inconsistency about how the fee was to be calculated. The court stated:
[13] …In my view, however the basis of how the contingency fee is to be calculated is simply not clear. I consider this discrepancy to be very significant in considering the fairness requirement of section 24 of the Solicitors Act. As noted in the Ontario Court of Appeal decision in Raphael Partners v. Lam, 2002 CanLII 45078 (ON CA), [2002] O.J. No. 3605, the Court of Appeal has commented that the fairness requirement is concerned with the circumstances surrounding the making of the agreement and whether the client fully understands and appreciates the nature of the agreement that he or she executed
[41] As to the reasonableness of the contingency fee agreement, McKelvey J. considered the factors in the Raphael Partners decision. The applicants’ counsel acknowledged that there was no significant risk on liability, given that it was a straightforward dog bite case with no significant issue of contributory negligence and that the risk of losing the action was close to zero. By reviewing the dockets, McKelvey J. determined that the matter was not overly complex. The court stated:
[22] …I accept that the time spent by counsel on a file does not dictate whether the amount charged by the applicants’ solicitor is a reasonable amount. It is, however, a relevant factor which I have taken into account.
[42] While McKelvey J. accepted that the result obtained was “excellent” he concluded that the fee proposed by the applicants’ counsel was not reasonable and reduced the fee to 20% of the total recovery for the minor applicant, being 20% of $115,485.68, or $23,097.13. The Court stated that “the figure includes a significant premium based on the time spent for the result achieved…”
[43] It is the position of Mr. Leslie that the principles enunciated in the cases have been met in this case for the following reasons:
a. The settlement reached in the tort action is fair and reasonable, considering that the policy limits were $2 million in relation to A.S.’s insurer, Economical, and considering that FMI did not breach any regulation, rather the payout was based on best practices.
b. Liability was an issue, in light of the counterclaim relating to contributory negligence;
c. The firm undertook a risky venture for some five years and incurred substantial disbursements during that time;
d. The firm spent considerable time in attaining the result, seemingly being available to this family whenever called upon, even during what would otherwise be personal time;
e. Even though 33% of the total award would have been an acceptable contingency percentage, counsel only seeks 25% of the policy limit amount.
[44] In considering fairness, this court is to consider the terms of the agreement and the circumstances under which it was signed. In this case, the event occurred on August 1, 2017. It would appear that Mr. Leslie was engaged in this file very early on. The contingency fee agreement ultimately provided to this court, only upon the court’s request, was signed on September 8, 2022, in the midst of this court’s inquiries. While counsel states that it was an oversight that this agreement was not signed earlier, this court has no confidence in the fact that the specific terms of this agreement were discussed with C.D. or this family at the outset. Having said that, this court is fully aware that C.D. is completely content with the settlement and the fees being proposed. C.D. swore in an affidavit prepared by counsel on this motion that when they first retained Mr. Leslie in the fall of 2017, he explained the contingency retainer of 25% and that they could challenge his fees at any time by expressing a contrary view to the court and / or retaining independent legal counsel. At the hearing on September 28, 2022, C.D. added in part:
…I completely agree and support everything that Mr. Leslie has said. He has absolutely gone above and beyond what I believe that a lot of lawyers would have in a case like this. There were countless times that Mr. Leslie contacted me or was researching and communicating with me from his cottage, over Thanksgiving weekend last year, Christmas holidays when his office wasn’t even open. He put so much time and effort into this case, that I don’t know how we would have gone through it without him having our backs. I just commend in so much for everything that he’s done and he absolutely…his legal advice and the support that he has given my husband and I and our entire family is just insurmountable. In terms of docket, I honestly believe that if he were to submit full dockets and everything had of been docketed, his time would have, would definitely been an amount more than what he has submitted to the court….it was a complicated case… there were a lot of professionals that we had to retain to give different opinions….and he just worked so tirelessly and his office as well just to try to help us get through this the best we could…
[45] Having considered all of the circumstances, this court remains deeply troubled by the fact that the contingency fee agreement was not signed until September 8, 2022, in the midst of the concerns raised by the court, long after this action commenced and, quite some time after this settlement was reached. This court is not convinced that the fee structure was discussed in detail at the outset as it should have been. From the costs outline ultimately provided to this court, even though the dockets provided are undated, the first indication of a discussion with the client “regarding legal fees, assessable disbursements, out of pocket expenses” appears as the seventy-fourth docket, after settlement negotiations were underway. This is the only reference in the dockets to a discussion with the clients regarding legal fees.
[46] As to the reasonableness of this contingency fee arrangement, this court also has a number of concerns.
[47] In his submissions on this hearing, Mr. Leslie stated in part as follows:
There is no jurisprudence that says the gap between docketed time and a contingency fee is not fair or unreasonable. It’s a contingency fee. The client agreed to it. The dockets aren’t accurate but… bluntly speaking or being candid as possible… if I docketed every moment in this file….it would certainly be higher than the amount I submitted to the court but it wouldn’t be $500,000. I can tell you that. But there’s no jurisprudence that says that that’s unfair or unreasonable…You have to look at the risk involved and see whether or not that is fair for this kind of case. It took 5 years to resolve. I’m not gonna say to the court it was an outstanding settlement or an excellent settlement…I’ll let the court quantify it. I can tell you that my client thinks it’s a good settlement. But…..I can tell you that I’ve had harder cases in terms of liability, but this case was no walk in the park because of the contributory negligence allegations made by the driver of the car and because of the difficulty of trying to deal with an infant and where he’ll fit into the workplace given the injuries that we understand he suffers from today.
Mr. Leslie suggested that there will likely always be a gap between docketed time and a contingency fee on this kind of file, but that the court must look at the risk and the outcome. He then went on to state at the end of his submissions:
You can probably sense in my material that I sent to you and in my comments this morning….there’s a bit of frustration because it’s my view, or my belief that what I’m asking the court to do in this case would not be….your brother judge’s would approve by other lawyer’s who do this on a full time basis….I’m frustrated that this…different judges are dealing with this differently I guess…that’s my frustration.
This court is troubled by these latter comments.
[48] Despite this court’s repeated concerns, and the onus on counsel, this court has never been provided with detailed timed dockets of the work done. The suggested hours are arrived at by reconstructing the dockets. Given that the dockets were reconstructed years after the fact, little weight can be placed on the estimate of time involved.
[49] It was only upon this court’s request that counsel provided a reconstructed accounting of time spent on this file. While, in an earlier endorsement, this court accepted that counsel might not keep detailed dockets where a contingency agreement was in place, this court now strongly questions that conduct. Given that one of the factors this court is asked to consider is the time expended by the solicitor, there will be no way to know what time was actually spent unless detailed dockets are kept. The fact that a lawyer would not keep dockets where there is a contingency fee arrangement leaves this court with the impression that an assumption exists that contingency fee agreements will inevitably be approved without question. This cannot possibly be the case. If this were the case, then there is absolutely no value to this court being asked to approve legal fees in minor settlements. An absence of dockets would also leave the lawyer in a precarious position if the client challenged the fees. It is also worth pointing out that there is a process by which counsel can have a contingency agreement pre-approved by the court. That was not done in this case.
[50] A review of the dockets in this case provides this court with no appreciation as to when the work began or ended as no dates are provided. I also note that there are numerous dockets that would seem to pertain to the accident benefits claim that would not apply to this tort claim and should have been kept separate.
[51] It is the view of this court that, in order to consider the time expended by the solicitor, there must be some consideration of dockets. What else would this court consider? The time expended by the solicitor is to be considered in the context of the reasonableness of the contingency fee agreement. How would reasonableness be fully considered in this context unless the court does some comparison between true legal fees versus the amount sought on the contingency fee agreement? This court accepts that gaps will often exist between actual legal fees and contingency fees. This court accepts that this would never, on its own, be determinative of reasonableness. However, surely it cannot and must not be ignored. If it were to be ignored, dockets would never be considered. In Raphael, the court stated at para 54: “Accordingly, the time spent by the solicitors on Mr. Lam's file to the date of the settlement, while a relevant factor, does not control the question of whether the solicitors were entitled to the maximum fees charged through enforcement of the March 2000 fee agreement.” Certainly, the contingency fee arrangement in this case did not contemplate the determination of legal fees based on the value of time spent by the solicitor on the file. However, it is still a relevant factor.
[52] This court must also consider the legal complexity of the matter at issue. The dockets provide a window into the complexity of the case, such as the time that may have been expended researching complicated issues, etc. In this case, the undetailed docketed amount reflects legal fees totalling $83,290.00 before HST. Accepting that this might not be every minute spent on this file, it would seem to capture the major events. Frankly, the amount of these dockets and the details that are provided do not indicate the complexity to this matter that counsel suggested. The dockets suggest a quite straight forward action where liability on the part of A.S. was, frankly, obvious. While this court appreciates that there was a counterclaim for negligence and contributory negligence on the part of Jo.T. and his mother, in this court’s view, this was never a winnable issue.
[53] As for liability in this case, this court is not satisfied that liability was a substantial issue in any way. This is not a case like St. Jean where the child drove through a stop sign and hit a car. In the case at bar, charges were laid against the driver initially, even though withdrawn. There was no need for reconstruction evidence to be obtained by the Plaintiffs to place responsibility on the driver. There really never was any question that A.S., mistakenly, drove forward instead of backward. Jo.T. was on a sidewalk at the time he was hit. While this court appreciates that negligence and contributory negligence on the part of Jo.T. and his mother were claimed, frankly, in this court’s view, there was never any real chance of success in that regard.
[54] In this court’s view, the result achieved, as it related to A.S., was predictable. Once the insurance policy limits were known, it seemed fairly obvious that those policy limits would be reached in this case given the long-term consequences. This is reflected in the comments from counsel for A.S. as outlined in the Plaintiffs’ motion materials. The added recovery from FMI was an addition that may have been unexpected given that it was based on best practice as opposed to liability. Overall, this court is satisfied that it was a good, but somewhat predictable, result.
[55] As for the risk, there is always some degree of risk in a contingency fee arrangement. Lawyers are often taking on matters at an early point, not having all information to fully assess the strengths and weaknesses of the matter. Lawyers are taking on the responsibility of paying out of pocket for disbursements which may never be recouped. Lawyers are expending valuable time for which they might never be compensated. However, in this case, given the obvious liability of A.S., this court is not convinced that the situation was as uncertain as counsel submitted. In this court’s view, the negligence and contributory negligence was never a real risk in this case given the facts and circumstances.
[56] A consideration of the reasonableness of the legal fees sought on a contingency fee agreement is more than just accepting that the “client agreed to it” as Mr. Leslie argued. This would render this approval process meaningless and that just cannot be the case. In order for this approval process to have any meaning, there must be a considered and reasoned approach taken by the court – an approach that does not assume the fairness and reasonableness of the arrangement without question.
[57] Having considered the entirety of the circumstances, this court does not find the contingency fee arrangement to be either fair or reasonable. Having considered all of the factors in this case, this court has determined that a fair and reasonable amount of legal fees would be 15% of the total award. In this case that total award is $2,370,000. Therefore, a fair and reasonable amount of legal fees is $355,500.00, plus HST, plus disbursements of $17,624.10 ($15,913.61 + $1,710.49) as reflected in the costs summary.
[58] Based on this decision, a newly structured settlement, which reflects these legal fees, is to be provided to this court for approval.
Justice V. Christie
Date: September 30, 2022