



COURT OF APPEAL FOR ONTARIO

CITATION: Welsh v. Ontario, 2019 ONCA 41

DATE: 20190124

DOCKET: C65528

Sharpe, Juriansz,
    and Roberts JJ.A.

BETWEEN

Christopher Welsh

Plaintiff (Appellant)

and

Her Majesty the Queen 
    in Right of the Province of Ontario

Defendant (Respondent)

Michael Eizenga, for the appellant

Christopher A. Wayland and Jonathan Sydor, for the
    respondent

Stephanie DiGiuseppe, for the Intervenor, Aaron Zachary
    Smith

Heard: January 17, 2019

On appeal from the order of Justice Paul Perell of the
    Superior Court of Justice, dated May 24, 2018, with reasons reported at 2018
    ONSC 3217.

REASONS FOR DECISION

[1]

The appellant, the
    representative plaintiff in this class action proceeding, appeals from the
    order of the motion judge approving the legal fees of class counsel, subject to
    certain conditions.  There is no appeal from the motion judges order approving
    the settlement contained in a separate order, dated May 24, 2018.

[2]

This class action was commenced
    in August 2015 and certified on consent by the motion judge in August 2016. 
    The class consists of about 4,500 former students of three provincial schools
    for the Deaf.  The common issues centred on whether the respondent was
    negligent in its management and operation of these schools and whether it
    breached fiduciary duties to the class members.  The claims included very
    serious allegations of physical, sexual and emotional abuse.  Through mediation
    undertaken in November 2017, the parties achieved a settlement and entered into
    a settlement agreement.

[3]

The settlement agreement provided that the respondent would establish a
    $15 million settlement fund in full settlement of the action.  The settlement
    agreement sets out how the settlement funds are to be disbursed and provides
    that they are first to be applied towards payment of class counsels fees and
    disbursements, and applicable taxes.  It was agreed that class counsels fees
    could be up to 25% of the settlement funds, in an amount to be approved by the
    court.  The settlement funds are also to be used to pay the claims of class
    members, the costs of notice to the class and to administer the claims process,
    and the required levy to the Class Proceedings Fund.  The settlement agreement
    expressly provides in para. 5 that if any amounts remain after payment for all
    these fees, claims, and costs has been made and the claims period has come to
    an end, they are to revert to the respondent.

[4]

At the motion to approve the settlement, class counsel requested that
    the motion judge approve fees of $3.75 million, which represented 25% of the
    $15 million settlement fund.  The motion judge expressed serious concerns about
    the merits of the settlement achieved because under its terms, only about 10%
    of the class members would receive compensation while the remaining 90% would
    be required to forego their claims without any payment or other benefit.  Notwithstanding
    his concerns, the motion judge approved the settlement, finding it was within
    the range of reasonableness because the settlement agreement was better than
    the alternative of proceeding to a trial.  As earlier noted, the motion
    judges approval of the settlement was incorporated into a separate order,
    dated May 24, 2018, which has not been appealed.  Counsel advised that the
    settlement has been implemented and that the claims process provided for under
    the settlement agreement is underway.

[5]

With respect to the approval of class counsels fees, the motion judge found
    that a counsel fee of $3.75 million was not fair and reasonable to all the
    class members because he was of the view that the results achieved for the
    whole of the Class was disappointing in that only about 10% of the class would
    benefit from the settlement.  As a result, he approved class counsels fees of
    $3.75 million on the condition that class counsel would donate $1.5 million of
    its fees to a charity for the Deaf to be approved by the motion judge.  The
    motion judge also determined that the $2.25 million balance of class counsels
    fees would be subject to a proportionate reduction depending on
the reversion to the respondent of the
    settlement funds not taken up by the class claimants
.

[6]

The appellants principal
    submission is that the motion judge erred in his disposition of class counsels
    fees by effectively rewriting the parties settlement.  Specifically, the
    appellant submits that the motion judge erred by making the approval of class
    counsels fee subject to a $1.5 million charitable donation and to a
    proportionate reduction. The appellant asks that this court order without
    conditions the payment of class counsel fees in the amount of $3.75 million.

[7]

The respondent takes no position respecting the quantum of the fee to be
    paid to appellants counsel but agrees that the motion judge erred in imposing
    the impugned conditions and in failing to allow the parties to make further
    submissions.  The respondent points out that the order, in effect, directs
    public funds to a third party that might have reverted to the Crown.

[8]

The intervenor submits that the motion judges decision was fair and reasonable,
    and should not be disturbed.

[9]

In our view, the motion judge erred in making his approval of class
    counsels fees subject to the charitable donation condition that he imposed,
    particularly in the absence of submissions from the parties.

[10]

By
    requiring class counsel, without the parties input or consent, to donate part
    of its fees to a designated charity, the motion judge inserted into the
    settlement agreement a material condition not agreed to by the parties.  This
    altered the settlement provision that surplus settlement funds would revert to
    the respondent.  That this was the intended outcome of the motion judges order
    is evidenced in para. 105 of his reasons when the motion judge states that it
    is not appropriate to make Ontario the beneficiary of a reduction of Class
    Counsels fee.

[11]

Given
    the motion judges concerns, the appropriate course of action would have been
    for him to allow the parties an opportunity to make submissions and, if they
    desired to do so, agree to change the terms of the settlement in order to address
    those concerns and obtain approval of class counsels fees.  However, he was
    not permitted to modify unilaterally the terms of a negotiated settlement
    without the consent of the parties. See:
D
abbs v. Sun Life Assurance Co.
    of Canada
, [1998] O.J. No. 1598, at para. 10;
Ford v. F.
    Hoffmann-La Roche Ltd.
(2005) 74 O.R. (3d) 758, at para. 127.

[12]

There
    is no question that it was within the motion judges discretion to express
    concerns about the amount of class counsels fees, and to reduce the amount of
    class counsels fees and make them proportionate to the settlement result
    achieved.  However, the motion judge erred in law by imposing the donation term
    that altered the settlement agreement.

[13]

The appellant also submits the trial judge
    failed to appreciate the litigation risk and the benefits of the settlement;
    his assessment of these factors was tainted by his palpable and overriding
    error in finding as a fact that only victims of sexual and physical abuse would
    benefit from the settlement.

[14]

Given our conclusion that the motion judge
    erred in imposing the donation condition, it is not necessary for us to
    determine whether he also erred in his assessment of litigation risk and
    benefits of the settlement.  We set aside the motion judges order on the basis
    that the donation error permeated his entire decision.  We express no views on
    the other errors alleged by the appellant.

[15]

In our view,
the entire detailed
    analysis necessary to determine and approve class counsels fees must be
    undertaken afresh without regard to the motion judges findings.  The
    consideration of whether the fees proposed in the circumstances of this case
    are fair and reasonable involves the analysis of myriad factors.  These include
    the following oft-cited factors referenced by the motion judge and reiterated
    with approval by this court in
Smith Estate v. National Money Mart Co.
,
    2011 ONCA 233, at para. 80:

Factors relevant in assessing the
    reasonableness of the fees of class counsel include: (a) the factual and legal
    complexities of the matters dealt with; (b) the risk undertaken, including the
    risk that the matter might not be certified; (c) the degree of responsibility
    assumed by class counsel; (d) the monetary value of the matters in issue; I the
    importance of the matter to the class; (f) the degree of skill and competence
    demonstrated by class counsel; (g) the results achieved; (h) the ability of the
    class to pay; (i) the expectations of the class as to the amount of the fees;
    (j) the opportunity cost to class counsel in the expenditure of time in pursuit
    of the litigation and settlement.

[16]

It
    is clear from a review of these factors that their consideration and
    application necessitate a thorough consideration of the factual underpinnings
    of this class proceeding and the settlement.  While this court has the power
    under s. 134 of the
Courts of Justice Act
to undertake such an
    analysis, we decline to do so in this case.  It is neither appropriate nor
    feasible for us to hear the detailed submissions that would be required to
    carry out that analysis in this case. We are of the view that this decision is
    best made at first instance by one of the highly experienced and expert class
    action judges who regularly undertake this analysis.

[17]

Accordingly,
    the motion judges May 24, 2018 order approving class counsels legal fees is
    set aside.  The matter is remitted for a new hearing before a different judge
    on the class action list of the Superior Court of Justice.

Robert J. Sharpe J.A.

R.G. Juriansz J.A.

L.B. Roberts J.A.


