Court File and Parties

COURT FILE NO.: CV-21-86993 DATE: 2024/03/11

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

STEPHEN DUFFY, BY HIS LITIGATION GUARDIAN THE PUBLIC GUARDIAN AND TRUSTEE, JUNE DUFFY, TONY DUFFY, MICHELLE DUFFY, AND ADRIANA DUFFY, BY HER LITIGATION GUARDIAN THE PUBLIC GUARDIAN AND TRUSTEE Plaintiffs

– and –

NICOLETTA MCDANIEL AND DAVID MCDANIEL Defendants

Counsel: Sophie Luesby, for the Plaintiffs Thomas V. Ozere, for the Defendants

HEARD: In writing

Interim Ruling

(Motion Under rr. 7.08 and 7.09)

Corthorn J.

Introduction

[1] On February 1 2021, Stephen Duffy was struck by a car driven by one of the defendants and owned by the other. Stephen was crossing Hazeldean Road, from north to south, at a point slightly west of an intersection at which there was a crosswalk. It was dark at the time of the collision and Stephen was wearing dark clothing. In an interview given to the police shortly after the collision, a witness to the collision described Stephen as running across Hazeldean Road.

[2] As a result of the collision, Stephen suffered a traumatic brain injury, multiple fractures, soft tissue injuries, and lacerations of his spleen and liver. The Glasgow Coma Scale assessments of Stephen, conducted at the scene of the collision and on his arrival at The Ottawa Hospital, are indicative of a significant traumatic brain injury.

[3] The plaintiffs in the action are Stephen, and Stephen’s daughter (Adriana), mother (June), father (Tony), and sister, (Michelle). The action was commenced in July 2021.

[4] In May 2023, following the exchange of pleadings and mediation, the parties reached a tentative settlement of the plaintiffs’ claims. Stephen and Adriana are the only plaintiffs who will receive settlement funds. They are both parties under disability; the settlements of their respective claims require approval.

[5] The plaintiffs are represented by MG Law LLP (“the Firm”) pursuant to contingency fee retainer agreements entered into by the litigation guardians and the Firm:

• The account which the Firm proposes to render to Adriana is not based on a contingency fee retainer agreement. The account which the Firm proposes to deliver to Adriana is limited to the costs recovered from the defendants. Court approval of the contingency fee retainer agreement between Adriana’s litigation guardian and the Firm is not required; and
• The account which the Firm proposes to render to Stephen is based on a contingency fee retainer agreement and is in an amount in excess of the costs recovered from the defendants. Court approval of that contingency fee retainer agreement is required.

[6] Approval of the court is required for each of the accounts which the Firm proposes to deliver. The notice of motion does not include a request for that relief. The court infers, from the contents of the supporting affidavits, that such relief is, in any event, requested on the motion.

[7] The proposal is for the net settlement funds payable to Adriana to be paid into court pursuant to r. 7.09(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[8] For Stephen, the proposal is for the entirety of the net settlement funds payable to him to be utilized to fund a structure. Pursuant to r. 7.09(1), the plaintiffs require approval from the court for the net settlement funds payable to Stephen to be managed in that way.

[9] Last, the plaintiffs request an order dispensing with the requirement to serve their motion record on the defendants.

[10] I will first address the settlement of Stephen’s claim and the related issues and then the settlement of Adriana’s claim and the related issues.

Stephen Duffy

[11] The total to be paid to Stephen in settlement of his claims for damages, pre-judgment interest, and costs is $901,957.06. That amount is broken down as follows:

Damages and interest $ 789,471.43 Costs Fees $ 83,947.15 HST on fees $ 10,913.24 Disbursements $ 17,625.24

[12] By my calculation, the HST applicable to fees of $83,947.15 is $10,913.13. For the purpose of this interim ruling, the $0.11 cent discrepancy between my calculation and that set out in the motion record is not material.

a) The Request for Approval of the Settlement

[13] The affidavit evidence filed in support of the relief related to Stephen’s claim is from L. Craig Brown, counsel to the Firm and from Jennifer Vickers, a Team Leader with the Office of the Public Guardian and Trustee (“PGT”). Within that office, Ms. Vickers is delegated with the authority to make decisions in this proceeding on Stephen’s behalf.

i) Damages and Pre-judgment Interest

[14] In their respective affidavits, Mr. Brown and Ms. Vickers set out in detail the factors which were considered when a settlement of Stephen’s claim was negotiated. They considered, for example, the following factors:

• The third party liability limits available to the defendants are $1,000,000;
• The potential exists for Stephen to be found by a jury to be entirely responsible for the collision. That possibility exists because one of the witnesses to the collision, Stephen’s companion at the time, reported to the police that Stephen was running across Hazeldean Road with the intention of entering a Shopper’s Drug Mart and stealing a Play Station console or small laptop to give to his daughter. That possibility also exists because of the results of the urine toxicology screen conducted at the time of Stephen’s admission to The Ottawa Hospital. Those results indicate that Stephen was likely impaired by non-prescription drugs at the time of the collision;
• The client management issues in the years following the collision, which made it difficult for Stephen to find a stable home and to participate meaningfully in the litigation process; and
• Stephen’s pre-accident and post-accident unhealthy lifestyle habits.

[15] Stephen was born in August 1986 and was 34 years old at the date of the collision. He had no work or income history upon which to base a claim for loss of income or loss of competitive advantage. Stephen’s lack of a measurable work history is another factor which contributes to the potential for a jury to take a negative view of Stephen and his pre-accident lifestyle.

[16] Given Stephen’s age at the time of the collision, and the significant impairments resulting from his injuries, it is not surprising that the Firm obtained an assessment of his cost of future care which totals an eight-figure amount (i.e., in excess of $10,000,000). That assessment is based on Stephen’s needs as measured by a rehabilitation professional and an annuity value prepared by McKellar Structured Settlements.

[17] Of note, that assessment is based on Stephen’s attendant care needs and not on the historical amounts paid by the accident benefits insurer for attendant care. The client management difficulties include that Stephen has, to date, refused to accept attendant care from anyone other than an individual identified as his “girlfriend”. That individual’s name is not included in the affidavits; the lack of mention of her name is not intended as any disrespect to Stephen’s girlfriend.

[18] Despite Stephen’s history regarding his attendant care, a large portion of the settlement funds is allocated to that heading ($585,771.43).

[19] There is no mention in the supporting affidavits of examinations for discovery being scheduled or conducted. I infer from the lack of mention of such examinations, that the action proceeded to mediation prior to examinations for discovery being conducted.

[20] The court does not have the benefit of a summary and opinion of the defendant driver’s evidence as to how the collision occurred.

[21] A copy of the Ottawa Police Service General Occurrence Report is attached (hyperlinked) as Exhibit “B” to the Brown affidavit. That report is 184 pages. The supporting affidavits do not include any summary of the information available from the General Occurrence Report, including, for example, information obtained at the time of the collision or thereafter from the defendant driver.

[22] From my review of Exhibit B, it appears that, when speaking with the police at the scene of the collision, the defendant driver gave the following description of how the collision occurred:

• The driver had picked up her son and was heading eastbound on Hazeldean Road;
• As the defendants’ vehicle approached the intersection of Hazeldean Road with Carbrooke Road, the driver’s son told her to look out for a male running across the street;
• By that point, it was too late for the driver to respond and the defendants’ vehicle struck Stephen;
• The driver was uncertain whether she had time to apply the brakes of the defendants’ vehicle prior to the collision; and
• The driver believes the defendants’ vehicle was travelling at 60 k.p.h. (the posted speed limit) at the time of the collision.

[23] There was considerable damage to both the front end and the passenger side of the defendants’ vehicle. The full length of the hood was dented. There was a hole in the windshield above the passenger side wiper. The airbags of the vehicle did not deploy as a result of the collision.

[24] When contacted by the police in the days following the collision, the defendant driver responded that she remained distraught, was unable to provide a written statement, and wished to obtain legal advice before she did so. If there is a statement from the defendant driver in the 184 pages of Exhibit B, it would be helpful to have a summary of that statement as part of the evidence in support of the relief requested.

[25] As an alternative, where a motion record, including documents that are hyperlinked as exhibits, exceeds 250 pages, the party filing the record could provide a compendium. In accordance with a recent Notice to the Profession, for motions and applications heard in person or by videoconference, parties relying on a motion or an application record which exceeds 250 pages are required to file a compendium. That requirement applies to moving and responding parties.

[26] The list of disbursements upon which the plaintiffs rely in support of the request for approval of the proposed disbursement account appears to include a disbursement for an opinion from accident reconstruction expert addressing the potential for collision avoidance. The supporting affidavits do not include any discussion of the opinion, verbal or written, obtained from that expert. If that opinion is a factor upon which counsel and the litigation guardian rely in support of the request for approval of the settlement of Stephen’s claims, then the supporting affidavits should address that factor.

[27] Based on the description of the collision given by the defendant driver in the immediate aftermath of the collision, I accept that Stephen faces significant hurdles on the issue of liability. I also accept that there are “contextual factors” – the affiants’ term – such as Stephen’s pre-accident lifestyle, condition at the time of the collision, and apparent intention in crossing the road, which must be considered when negotiating a settlement of this claim.

[28] There is no mention in the supporting affidavits of exploration of the potential for the defendants to personally pay any damages and interest awarded in excess of the third party liability limits available to them. I infer from the lack of mention of that possibility that the affiants are of the view that the issues addressed in the preceding paragraph far outweigh any possibility that a jury would assess damages and liability in a combination such that the defendants would face personal exposure for amounts in excess of $1,000,000.

[29] Regardless of the deficiencies in the supporting evidence, I am satisfied that the approach taken by the Firm and the litigation guardian, when considering the risks involved in advancing Stephen’s claims resulted in a fair and reasonable settlement of his claims for damages and interest. The court approves the settlement of Stephen’s claims for damages and interest in the amount of $789,471.43.

ii) Costs

[30] I turn next to consider the costs component of the settlement of Stephen’s claims. The costs to be paid by the defendants total amount of $112,485.63. That amount includes $83,947.15 for fees, the applicable HST, and an additional amount for disbursements. No explanation is provided for the allocation of $83,947.15 to fees. By my calculation that amount represents slightly in excess of 10 percent of $789,471.43. I find that amount to be reasonable and fair in the circumstances, including because the action appears to have been settled prior to examinations for discovery being conducted.

[31] The defendants’ contribution towards disbursements is $17,625.24. That amount represents the full amount of the disbursements incurred by the Firm and for which they intend to deliver an account if given the approval of the court to do so. I am satisfied that full recovery of the disbursements to be charged to the client is fair and reasonable.

iii) Summary

[32] The court approves the settlement of Stephen’s claims for damages, interest, and costs in the total amount of $901,957.06. The next step in the approval process is to determine the net amount payable to Stephen. That step requires consideration of (a) the contingency fee retainer agreement, and (b) the proposed solicitor-client account.

b) Request for Approval of the Contingency Fee Retainer Agreement

[33] The contingency fee retainer agreement executed by the PGT, in their capacity as Stephen’s litigation guardian, provides for fees to be calculated based on 25 percent of the total amount recovered for damages and costs (the latter inclusive of HST, but exclusive of disbursements).

[34] The risks associated with a claim on behalf of a pedestrian, crossing a multi-lane road, at night, while wearing dark clothing, would have been evident to the Firm from the outset. The risks would have been compounded by some of the other elements of the case, which arose or became evident over time. By August 2022, when the contingency fee retainer agreement was signed, the Firm was well aware of the multitude of risks involved in this litigation.

[35] I have not cross-referenced the contingency fee retainer agreement with the requirements of the governing regulation. I accept the submission from counsel, an officer of the court, at para. 47 of the moving party’s factum, that the agreement satisfies the requirements of the governing regulation.

[36] The contingency fee retainer agreement was fair on the date on which it was entered into. The agreement is approved.

c) Request for Approval of the Proposed Solicitor-Client Account

[37] The Firm proposes to deliver a disbursement account in the amount of $17,625.24, with the intention that the disbursement account be paid entirely from the disbursement portion of costs recovered from the defendants. The disbursement account is approved.

[38] From para. 75 of the Brown affidavit, I infer that the Firm proposes to deliver a fee account in the amount of $218,354.64, with HST of $28,386.10 applicable to those fees (i.e., a total of $246,740.74). Mr. Brown’s evidence is that $218,354.64 equals 25 percent of the amounts recovered for damages and costs (including HST and excluding disbursements). No supporting calculation is included in the Brown affidavit.

[39] By my calculation, the total recovered for damages, the fee portion of costs, and HST on costs is $884,331.82 ($901,957.06 - $17,625.24). A contingency fee based on 25 percent of that amount is $221,082.96. I am unsure whose calculation of the amount of the contingency fee is incorrect – counsel’s or mine. The discrepancy between my calculation and the figure in para. 75 of the Brown affidavit matters not, at least for the moment.

[40] I am unable to approve the proposed fee without better supporting evidence. The only evidence in support of the proposed fee is a list of time docketed by various timekeepers. There is no evidence as to the year of call of any timekeepers. There is no evidence of the hourly rates charged over time by the various timekeepers.

[41] On a motion of this kind, the court assesses the fairness of the contingency fee retainer agreement when it was entered into. That step was carried out in the preceding section of this ruling. The court is also required to assess the reasonableness of the contingency fee retainer agreement on the date of the hearing: Henricks-Hunter (Litigation Guardian of) v. 814888 Ontario Inc., 2013 ONSC 5245.

[42] When assessing the reasonableness of a contingency fee retainer agreement on the date of the hearing, one of the relevant factors is the value of the work done based on time docketed and hourly rates of the timekeepers. The type of evidence helpful to the court in assessing the reasonableness of the agreement at the time of the hearing includes the following evidence:

• A chronology of the events in the action (discoveries, motions, mediation, etc.);
• The experience of the lawyer(s) with carriage of the file;
• A chart-form summary of work done that,
  • categorizes the work done by the steps in the proceeding;
  • identifies each timekeeper (experience level and hourly rate);
  • itemizes the hours docketed for each timekeeper by work category and step in the proceeding; and
• A computer-generated pre-bill.

[43] The portion of the motion regarding approval of the proposed solicitor-client fee account for Stephen is adjourned. The plaintiffs shall file additional evidence to address the concerns raised in this section of this ruling.

[44] It is not possible to determine the net amount of the settlement funds payable to Stephen. As a result, it is not possible to determine the request for an order pursuant to r. 7.09(1) approving the proposed structure. In any event, I address that portion of the motion on a preliminary basis. I do so to identify the additional evidence required regarding the proposed structure.

d) Request for Approval of the Proposed Structure

[45] The payment schedule for the proposed structure is Exhibit “T” to the Brown affidavit. The total funding is $637,590.96. That is the net amount payable to Stephen if the proposed solicitor-client account for fees and HST is approved.

[46] The Brown affidavit addresses a subrogated claim on behalf of the Ontario Disability Support Program (“ODSP”). Since July 2021, Stephen has been receiving ODSP benefits in the amount of $483.60 per month. By my calculation, in the 32 months from July 2021 to February 2024 (both inclusive), the ODSP benefits paid to Stephen amount to $15,475.

[47] Counsel for the plaintiffs and the PGT are hopeful of being able to negotiate a settlement of the subrogated claim on the basis that the settlement funds payable to Stephen are exempt from consideration regarding Stephen’s entitlement to ODSP benefits. ODSP refuses to negotiate a settlement until the settlement of Stephen’s claims is approved by the court. Counsel, the PGT and Stephen are in a Catch-22 situation with ODSP.

[48] The court assumes that reimbursement to ODSP, of benefits paid, will not impact the structure funding.

[49] The structure provides for monthly payments to Stephen in the amount of $2,580.20 for life. The monthly payments are not indexed. I understand the approach to budgeting set out in the Brown affidavit – with the combination of the anticipated monthly payments from the tort-funded structure and a structure to be funded from the related settlement of Stephen’s claim for Statutory Accident Benefits. The evidence of the proposed budget and the theory behind it is helpful.

[50] The combination of the settlement of the tort action and the maximum amount recoverable from the Statutory Accident Benefits (“SABS”) insurer (which is not the amount of the proposed settlement of the SABS claim) falls far short of the funds required to provide the type of care identified in the rehabilitation professional’s assessment of Stephen’s long-term needs. It would be helpful to have an example of a structure which provides for indexation – as a comparison to the proposed structure. It would also be helpful to have an explanation as to why a non-indexed option was chosen.

[51] The proposed structure provides that the monthly payments are guaranteed for 20 years. What is the cost of the guarantee? How is the cost being paid? Is it being paid from the principal net settlement funds payable to Stephen or from some other source? What is the purpose of the guarantee period? Is it intended as an estate planning mechanism – providing for Adriana in the event Stephen passes away in prior to the end of the guarantee period? What would the monthly payments be if the guarantee period were eliminated or was for fewer than 20 years?

[52] If Stephen passes away during the guarantee period, the balance of the payments during the guarantee period will be made to Stephen’s estate. Is Adriana the only beneficiary of Stephen’s estate? Does Stephen have a will that provides for someone other than Adriana to benefit from his estate?

[53] The supporting affidavits identify that Stephen has a girlfriend, with whom he has been living for some time. Is there any risk that the girlfriend might eventually have a claim against Stephen’s estate under the Family Law Act? To what extent has the risk of that type of exposure for the estate been factored into the designation of how the structure funds will be paid in the event of Stephen’s death during the guarantee period?

[54] The court requires additional evidence to explain the choices made regarding the proposed structure. I refer counsel to the Checklist available from the County of Carleton Law Association website. It contains a helpful list of the matters to be addressed in the evidence in support of a proposed structure.

[55] The portion of the motion regarding approval of the proposed structure is adjourned. The plaintiffs shall file additional evidence to address the concerns raised in this section of the ruling.

[56] I turn next to the request for the relief arising from the settlement of Adriana’s claims.

Adriana Duffy

[57] The total to be paid to Adriana in settlement of her claims for damages, pre-judgment interest, and costs is $48,042.94. That amount is broken down as follows:

Damages and interest $ 40,000.00 Costs Fees $ 6,000.00 HST on fees $ 780.00 Disbursements $ 1,262.94

[58] The claims advanced on Adriana’s behalf are subject to the same risks as the claims advanced on Stephen’s behalf. I shall not repeat those risks in this section of the ruling.

[59] I am satisfied that the settlement of Adriana’s claims for damages, interest, and costs is fair and reasonable. The settlement of the claims for damages and interest reflects a reasonable consideration of the monetary threshold and the statutory deductible for claims advanced pursuant to the Family Law Act, R.S.O. 1990, c. F.3.

[60] The request for approval of the contingency fee retainer agreement entered into with the Firm on Adriana’s behalf does not need to be determined. The proposed solicitor-client account is based on the costs recovered. As a result, the court need only determine whether the proposed fee and disbursement accounts are reasonable on a quantum meruit basis.

[61] The disbursement portion of the costs payable by the defendant covers the full amount of the proposed disbursement account. That portion of the proposed solicitor-client account is approved.

[62] The court requires the same type of evidence in support of the proposed fee account for Adriana as discussed regarding the proposed fee account for Stephen. That portion of the motion is adjourned. The plaintiffs shall file additional evidence.

Service of the Motion Record on the Defendants

[63] In the notice of motion, the grounds in support of the request for an order dispensing with the requirement to serve supporting affidavits on the defendants are summarized, as follows, at item 26: “The affidavits in support of this motion contain information and documents that are confidential and subject to solicitor-client privilege and litigation privilege. As such, the Public Guardian and Trustee requests that service of the affidavit evidence in the within Rule 7.08 Motion Record on the Defendants, be dispensed with”.

[64] The only evidence in support of that request is set out in para. 130 of the Brown affidavit. That paragraph repeats what is said in item 26 of the notice of motion. No effort has been made to list the portions of the evidence (substantive text or exhibits) for which the PGT asserts that a claim of privilege applies. It is not the function of this court to review the evidence (including hundreds of pages of exhibits) in an effort to identify the portions of it that may be subject to a claim of privilege.

[65] The notice of motion and all the supporting affidavits pre-date December 12, 2023 – the date on which the Court of Appeal for Ontario released its decision in S.E.C. v. M.P., 2023 ONCA 821. At para. 92 of that decision, Sossin J.A. reviewed the law regarding the incursion into solicitor-client privilege on motions of this kind:

In Boone, at para. 21, Corthorn J. stated, “I find that the disclosure of privileged information is neither mandated nor inevitable on a motion or an application for court approval of a settlement.” Corthorn J. came to this conclusion in dismissing a constitutional challenge to r. 7.08 on the basis that it lacked a factual foundation. Reflecting specifically on Pierce J.’s comment in Burns Estate, she clarified that r. 7.08 may require an incursion into solicitor-client privilege, but there is nothing in the rule itself requiring it: at paras. 55-64. Rather, what the rule requires is full and frank disclosure of the merits of a settlement. I agree.

[66] The two decisions to which Sossin J.A. refers are Boone v. Kyeremanteng, 2020 ONSC 198 and Burns Estate v. Falloon.

[67] The evidence filed in the matter before this court does not support granting an order dispensing with the requirement to serve the supporting affidavits on the defendants. Additional evidence is required if the plaintiffs maintain their request for that relief. That additional evidence shall identify the paragraphs in the supporting affidavits and the specific portions of each of the exhibits filed, which the plaintiffs assert are subject to a form of privilege. The additional evidence shall also identify the various forms of privilege claimed on a text-by-text and document-by-document basis.

Conclusion

[68] The motion is adjourned, to be continued in writing, upon the receipt by the court of the additional evidence upon which the plaintiffs rely in support of the relief requested. The relief granted and order made by the court shall be set out in a single ruling, upon completion of the hearing of the motion.

Madam Justice Sylvia Corthorn

Released: March 11, 2024