



COURT OF APPEAL
    FOR ONTARIO

CITATION:

DeMichino v. Musialkiewicz, 2012
    ONCA 458

DATE: 20120628

DOCKET: C53250

Juriansz, LaForme and Epstein JJ.A.

BETWEEN

Michele DeMichino represented by his Guardian of Property,
The Bank of Nova Scotia Trust Company

Respondent (Plaintiff)

and

Bogdon
    Musialkiewicz, 1315437 Ontario Inc., Bill
    Thompson Transport Inc., 2810026
    Canada Limited c.o.b. as Frederick Transport Inc.

(Defendants)

and

Gary Neinstein and Neinstein and Associates LLP

Appellants

Paul J. Pape and David S. Steinberg, for the appellants

Archie Rabinowitz and Eric N. Hoffstein, for the
    respondent

Heard: April 17, 2012

On appeal from the order of Justice Lois B. Roberts of
    the Superior Court of Justice, dated January 7, 2011, with reasons reported at
    2011 ONSC 142.

Epstein
    J.A.:

[1]

The issue the parties initially brought
    before the court in this appeal was whether the motion judge committed a
    reviewable error in exercising her discretion to deny a law firm a premium on
    its account to its client.  During argument, the parties reached an agreement
    with respect to the legal costs in issue and proposed a settlement on the basis
    of this agreement.  As a result, the issue before the court became a matter of
    approving the settlement.

BACKGROUND

[2]

In the underlying action, Mr. DeMichino
    sought damages for catastrophic injuries he sustained in a car accident that
    took place in April 2003. His injuries were so severe that he was declared
    incapable of managing property. The respondent,
the Bank of Nova Scotia Trust Company, has acted
    as Mr. DeMichinos guardian of property since its appointment in September
    2008.

[3]

In November 2006, the appellants,
    Neinstein and Associates, the law firm that formerly acted for Mr. DeMichino,
    and Mr. Neinstein, the lawyer at the firm who had principle carriage of the
    file, negotiated a settlement of his tort claim whereby Mr. DeMichino would
    receive $4,000,000.  This amount was in addition to the approximately $2,000,000
    in Statutory Accident Benefits that the appellants also secured on Mr. DeMichinos
    behalf.

[4]

Because Mr. DeMichino is a person
    under a disability, court approval of the tort settlement, including the
    appellants fees and disbursements, was required under Rule 7.08 of the
Rules
    of Civil Procedure
, R.R.O., Reg. 194
.
The appellants claimed fees on
    a partial indemnity basis.  Pursuant to a court order, the Public Guardian and
    Trustee (PGT) reviewed the proposed settlement and concluded that the
    appellants had achieved a good result for the client, providing for his future
    care, based on projected needs, and recommended that the settlement be
    approved by the court, including the partial indemnity fees claimed by the
    appellants.

[5]

The appellants also sought a premium
    above the partial indemnity fees totalling $561,320.75 plus GST, and a further
    $29,512.81 in disbursements. This brought the total fees sought to $913,000
    plus disbursements of $79,512.81. The appellants claimed to be entitled to a
    premium on the basis of a number of factors including their assuming the risk
    associated with the outcome and their financing the tort action for three
    years. The PGT considered the claim for legal fees and disbursements and decided
    that the appellants were entitled to a premium but that more information was
    needed to determine the amount.

[6]

Court approval of the initial amount
    the PGT recommended was obtained and was paid to the appellants.  The court
    also ordered that $624,512.81, being the amount of the sought after fee premium
    plus the remainder of the disbursements the appellants incurred, be paid to
    Neinstein and Associates LLP, in trust, pending the PGTs further review and
    court approval.

[7]

Upon completion of its review, the
    PGT recommended approval of $432,000 in additional legal fees plus $25,920 for GST
    and $29,512.81 in disbursements yielding a total further payment to the
    appellants of $487,432.81, beyond the $368,000 already approved and paid.

[8]

After receiving this
    recommendation, but prior to obtaining court approval, the appellants
    transferred $562,426.41 from their trust account to their general account. This
    amount included the $487,432.81 the PGT recommended plus an additional amount
    for fees and disbursements the appellants claimed for work performed for Mr.
    DeMichino in related proceedings.   The appellants notified the PGT and Mr.
    DeMichinos guardians of property of this transfer and then later, when the
    necessity of court approval before transferring the funds out of trust became
    apparent, the appellants returned the entire amount to trust.

[9]

The appellants then sought court
    approval of the additional amount of $487,432.81 on a
nunc pro tunc
basis.

[10]

Notwithstanding that all parties
    consented to the order sought, the motion judge denied the appellants claim
    for any additional fees and reimbursement of the remainder of the disbursements
    incurred on behalf of their client.  This appeal is from that decision.

THE
MOTION JUDGES REASONS

[11]

The motion judge assessed the
    appellants claim on a
quantum meruit
basis. Given her view that such an
    assessment engages equitable principles and her finding that the appellants
    breached their fiduciary duty to Mr. DeMichino by transferring the amounts in
    issue into their general account prior to receiving court approval, the motion
    judge concluded that the appellants did not come to court with clean hands.  As
    a result, the motion judge held that they were not entitled to any additional fees
    or repayment of the rest of their disbursements.

[12]

The motion judge went further. 
    She also concluded that even without the breach of fiduciary duty, the
    appellants were not entitled to any further compensation for the work they did
    for Mr. DeMichino because excessive time was spent on the file, much work could
    have been done at lower rates, the action was not complicated and there was little
    risk that the appellants would not be compensated for their services.

THE APPEAL

[13]

Only the appellants and the
    respondent, guardian of Mr. DeMichinos property, participated in the appeal. Mr.
    Pape advanced a compelling argument that included the submission that the
    appellants conduct, if warranting sanction at all, did not warrant forfeiture
    of the total amount claimed.  At the conclusion of his submissions Mr. Pape
    proposed that the appeal be allowed and the additional legal costs be resolved
    on a solomonesque basis giving his client a further $216,000 in fees, and
    disbursements in the amount of $29,512.

[14]

At the outset of his argument, Mr.
    Rabinowitz, counsel for the respondent, candidly advised the court that he was
    in a difficult position.  Before the motion judge, his client had consented
    to the amounts claimed by the appellants and recommended by the PGT for
    additional fees and disbursements.  At this juncture, Mr. Rabinowitz conceded
    that the appellants were entitled to repayment of their disbursements.  In
    relation to the fee premium, he advised the court as follows: Im sticking to
    the exact same position that we took to the motions judge.  Counsel went on to
    explain that he was still consenting, but for the purposes of the appeal his
    clients position was that the order of the motion judge was reasonable and
    there was no palpable and overriding error.

[15]

It was in the context of these
    comments that the possibility of a settlement was raised.  After a brief recess,
    counsel for both parties advised the court that their clients had reached a
    settlement in accordance with Mr. Papes closing submissions as to the
    appropriate disposition of the appeal.

[16]

After some discussion with the
    court, it was agreed that court approval of the proposed settlement was necessary. 
    It was agreed that this court was in the position to determine whether it ought
    to be granted.

THE REQUEST FOR COURT APPROVAL

[17]

It is important to bear in mind
    that the aspect of the settlement for which approval is being sought is limited
    to a premium in legal fees above what has already been approved as appropriate
    on a partial indemnity basis. No issue is taken, nor is one available, as to
    the appellants clear entitlement to be reimbursed for the disbursements they
    incurred on behalf of their client.

[18]

With respect to a claim for a fee
    premium, this court laid down the following principles in
Christian Brothers
    of Ireland in Canada (Re)
(2003), 68 O.R. (3d) 1 (C.A.):

Many factors may bear on whether lawyers are entitled to a
    premium over their hourly rates. These factors include the difficulty and
    complexity of the case, the responsibility assumed by the lawyer, the amount in
    issue, the importance of the case to the client, the skill shown by the lawyer,
    the result achieved, the client's ability to pay and the lawyer's corresponding
    financial risk The judge or officer assessing or approving a lawyer's account
    must, in exercising discretion, take into account and weigh these factors in
    deciding whether to award a premium (at para. 17).

See also:
Ontario (Ministry of Transportation) v. Tripp

(1999), 123 O.A.C. 278.

[19]

As reconfirmed by the Court of
    Appeal in
Wu Estate v. Zurich Insurance Co.,
(2006), 268 D.L.R. (4th)
    670 (Ont. C.A.), leave to appeal to the Supreme Court of Canada dismissed,
    [2006] S.C.C.A. No. 289, the duty of the court in considering whether or not to
    approve a settlement reached on behalf of a party under a disability is to
    protect the party and to ensure that the settlement is in his or her best interests
    (at para. 10).

[20]

It goes without saying that any
    premium paid to counsel who helped a plaintiff in a tort action achieve a
    resolution of his or her claim will reduce the funds available to meet the
    plaintiffs needs and otherwise compensate him or her for damages sustained.  However,
    as important as those interests are, they must be balanced against the need to
    provide fair compensation for lawyers who assist in achieving the result.

[21]

Ensuring, to the extent possible,
    that the lawyers contribution to the result is appropriately recognized is
    important for several reasons.  First, lawyers are entitled to fair
    compensation for services rendered and to reimbursement of their cost outlays. 
    Second, lawyers who are willing to assume carriage of files in circumstances
    where the result is not certain and where unpaid fees and paid disbursements
    may have to be financed over a long period of time contribute to access to
    justice:
Christian Brothers
, at para. 21.

[22]

Against the background of these
    observations, I have concluded that approval of the proposed settlement is justified.

[23]

First, the proposed settlement totals
    just over half of what was recommended by an experienced representative in the
    PGT after obtaining additional information and carefully reviewing the premium
    claimed.  Of equal, if not greater, significance is the respondents support of
    the appellants position.  While the court must not simply rubber-stamp such
    endorsements, it should, in the absence of evidence that would suggest
    impropriety or lack of skill, demonstrate confidence in such representatives
    and give the recommendations considerable weight.  See:
Royal Bank of
    Canada v. Soundair Corp.
(1991), 4 O.R. (3d) 1 (C.A.),
Christian
    Brothers
, at para. 25.

[24]

Finally, in the light of the
    strength of Mr. Papes argument on behalf of the appellants, the outcome of the
    appeal was far from certain.

[25]

Focusing on Mr. DeMichinos best
    interests and taking into account the role the appellants played in protecting
    those interests as well as the other factors I have noted, I am of the view
    that the proposed settlement should be approved particularly given the
    acknowledgment of counsel for the respondent that Mr. MeMichinos needs will be
    met notwithstanding the additional payment to the appellants of the amount
    contemplated by the proposed settlement.

COMMENT AND DISPOSITION

[26]

I close these reasons with a brief
    comment about the services Mr. Neinstein provided to his client.  The motion
    judge commented that Mr. Neinstein brought his expertise to bear in securing
    the result that he did for his client and she endorsed the view expressed by
    the PGT that the result achieved was good. While Mr. Neinstein erred in his
    handling of a portion of the money that went into his trust account, there is
    no evidence that he tried to conceal the transfer; in fact, he issued invoices
    to Mr. DeMichinos guardians of property showing the money paid out from trust.
    Finally, I note that there is no evidence that Mr. Neinsteins client was adversely
    affected by the error: when the error was recognized the funds improperly
    transferred were immediately returned to trust.

[27]

I would allow the appeal and set
    aside para. 2 of the motion judges order.  I would approve the proposed
    settlement that provides that the appellants are entitled to further legal fees
    in the amount of $216,000 plus $29,512 (inclusive of tax) for disbursements.

[28]

Subject to the costs of this
    appeal set out below, I would order that the solicitors for the respondent pay
    to the appellants, from the funds it is holding in escrow:

(a)

the sum of $216,000 plus GST of $15,120 for fees, plus $29,512 for
    disbursements, inclusive of tax;

(b)

interest in the amount of $12,686.37; and

(c)

interest earned on the sum of $273,318.37 from May 20, 2011 to the date
    the aggregate amount is paid to the appellants.

[29]

I would also order that the
    balance of the funds held in the escrow account together with all interest
    earned be paid to the respondent as guardian of Mr. DeMichino.

[30]

On consent, the respondent is
    entitled to its costs of this appeal fixed in the amount of $20,000 including
    disbursements and applicable taxes.  This amount will be deducted from the
    amount payable to the appellants.

Gloria Epstein J.A.

J
uriansz J.A.: (Concurring in the result)

[31]

I
    have read the reasons of Epstein J. A. and while l agree that the proposed
    settlement should be approved, l am unable to concur with the reasons that she
    proposes.

[32]

I
    do not agree with my colleagues description of the appellants arguments on
    appeal as compelling.
Nor do I regard the Guardians
    position on appeal as difficult given that below it had consented to the
    appellants motion. The Guardians duty is at all times to defend the fund and
    its opposition to the appeal was in fulfillment of that duty.

[33]

I
    would approve the settlement simply on the basis that the Guardian of the
    respondents property, recognizing the uncertainty of any litigation, entered
    into an agreement to settle the appeal. In doing so, the Guardian exercised its
    judgment to protect the fund against the prospect that the appeal might be
    allowed. The Guardian indicates that the respondents needs will be met
    notwithstanding the additional payment to the appellants pursuant to the
    proposed settlement. l see no reason to regard the Guardians settlement of the
    appeal as unreasonable or reflecting any lack of skill in attending to the best
    interests of the respondent.

[34]

While
    as a technical matter, the appeal must be allowed in order to implement the
    settlement, both parties explicitly acknowledged the appeal was to be allowed
    on consent and not on the merits. I would allow the parties to take out an
    order of this court to implement the settlement with costs to the respondent in
    the amount of $20,000 all inclusive as agreed by counsel.

Released:

GE                                                  Russell
    Juriansz J.A.

JUN 27 2012                                    I agree
    H.S. LaForme J.A.


