



COURT OF APPEAL FOR ONTARIO

CITATION: Krukowski v. Aviva Insurance Company of Canada,
    2020 ONCA 631

DATE: 20201007

DOCKET: C67490

Juriansz, Hourigan and Thorburn JJ.A.

BETWEEN

Adam Krukowski, a party under disability
    by his

Litigation Guardian, Ewa Krukowski

Applicant (Respondent)

and

Aviva Insurance Company of Canada

Respondent

Nick de Koning, for the
    appellant, Deutschmann Law Professional Corporation

No one appearing for the respondent, Adam Krukowski

Heard: October 1, 2020 in writing

On appeal from the judgment of Justice C. Stephen
    Glithero of the Superior Court of Justice, dated June 10, 2019, with reasons
    reported at 2019 ONSC 3557.

REASONS FOR DECISION

I.

OVERVIEW

[1]

The appellant, Deutschmann Law Professional Corporation (Deutschmann) appeals
    the quantum of costs ordered in a settlement
of an action
brought on
    behalf of a person under disability pursuant to Rule 7.08 of the
Rules of
    Civil Procedure
, RRO 1990, Reg. 194.

[2]

The application judge approved the settlement but reduced the award for
    legal fees.

[3]

Deutschmann claims the application judge cited the correct legal test
    for consideration of legal fees in respect of a settlement on behalf of a
    person under disability, but failed to consider those factors and apply them to
    the facts at hand. Deutschmann submits the failure to consider all of the
    factors constitutes an error of law, to which the correctness standard applies.

II.

THE ISSUE

[4]

The only issue on this appeal is whether the application judge erred in
    law by failing to apply the correct legal test to the determination of whether
    legal costs of the accident benefits claim are reasonable.

III.

ANALYSIS AND CONCLUSION

Evidence Regarding the Plaintiffs Condition

[5]

On January 2014, Adam Krukowski, the plaintiff, had a serious snowmobile
    accident. He ran into a ditch, hit a culvert and was thrown from the
    snowmobile. He suffered a brain injury, right femur fracture and a fractured
    sternum.

[6]

The snowmobile was insured only for use on Mr. Krukowskis familys
    rural property and he was therefore operating a vehicle that was not insured. As
    such, he was not eligible for income replacement benefits or housekeeping and
    home maintenance benefits.

[7]

His accident benefits were limited to medical or rehabilitation and attendant
    care benefits.

[8]

On May 6, 2014, a health practitioner certified that Mr. Krukowskis
    physical and cognitive deficits would prevent him from returning to work.

[9]

On June 3, 2014, Mr. Krukowski was diagnosed by a neuropsychologist as
    having rather severe neurocognitive impairments relative to his severe
    traumatic brain injury. The neuropsychologist determined that Mr. Krukowski
    was unable to return to work and would require supervision once he returned
    home.

[10]

On
    November 17, 2014, one month after Mr. Deutschmann, the principal of
    Deutschmann, was retained, Mr. Krukowski was found to have suffered a
    catastrophic impairment. Mr. Krukowskis severe brain injury and related
    cognitive symptoms were found to require ongoing attendant care. Mr. Krukowski was
    also found to have serious difficulties with speech and language, ongoing
    cognitive and behavioural difficulties, and unable to manage his own financial
    affairs.


The Retainer Agreements

[11]

On October 10, 2014, Mr. Krukowskis sister, on his behalf,
    entered into a contingency fee retainer agreement (the first retainer
    agreement). It provided that counsel would receive 15% of any full or partial
    settlement reached with the accident benefits insurer, including costs and
    interest, disbursements and H.S.T. If no settlement was reached, no fees would
    be charged. Upon termination of the retainer, the fee would be $350 per hour
    for a partner, $200 per hour for an associate, and $100 per hour for a law
    clerk.

[12]

On December 11, 2017, the office of the Public Guardian and
    Trustee (PGT) advised that it was now the statutory guardian of Mr.
    Krukowskis property, pursuant to the
Substitute Decisions Act
, 1992,
    S.O. 1992, c. 30.

[13]

On
    March 15, 2018, a second contingent fee agreement was signed between
    Deutschmann and PGT acting as litigation guardian (the second retainer
    agreement). The second retainer agreement provided for a contingent fee of 15%
    on the amount recovered, exclusive of costs taxes and disbursements and H.S.T.
    It provided that Mr. Krukowski was entitled to any costs. It provided that if
    the retainer was terminated, fees would be calculated on the basis of $192 per
    hour for Mr. Deutschmann and $60 per hour for clerks.

[14]

On
    August 2, 2018, Mr. Krukowskis sister was appointed guardian of his property
    from that point on, and a third contingent fee agreement was signed in October
    2014 (the third retainer agreement). The terms of the third retainer
    agreement were identical to those in the first retainer agreement.

The Terms of Settlement

[15]

The
    proposed settlement before the application judge provides for a settlement
    figure of $1,200,000 by the insurer. Counsel was to receive a total of
    $205,691.91. The remaining $994,308.09 would be used to purchase a structure to
    provide for a non-indexed monthly income of $3,085.53 for life, with a
    guarantee to a secondary payee or beneficiary for 35 years. In addition, Mr.
    Krukowski would continue to receive ODSP in the amount of $1,151 for a combined
    monthly income of $4,236.53.

[16]

The
    sum payable for legal fees was calculated on the basis of the 15% contingent
    fee (being $180,000 and H.S.T. in the amount of $23,400), plus disbursements.

[17]

The
    application judge sought the opinion of the PGT in respect of the settlement and
    legal fees. PGT advised that in its opinion, the settlement was a favourable
    one for Mr. Krukowski as it generated an income which is expected to exceed his
    monthly expenses. PGT recommended that 10% of the settlement amount plus tax
    was appropriate for costs. This would amount to $135,600.

[18]

PGT
    advised that 15% of the remainder of the settlement be allocated for legal fees
    which would result in fees to counsel in the amount of $180,415.80 ($159,660
    plus H.S.T.). PGT took the position that this sum was reasonable in view of the
    work completed and results achieved.

[19]

Mr.
    Krukowskis sister agreed with the view expressed by PGT.

[20]

Mr.
    Deutschmann accepted the PGT response and agreed to reduce his fee to
    $180,415.80 with the amount created by the reduction in fees to be placed into
    the proposed structure.

Time Actually Spent by Legal Counsel

[21]

The
    value of the time spent by everyone at Deutschmann who worked on this file
    amounted to $18,743.99 and $2,291.91 was spent on disbursements. Time spent
    working on this file by everyone in the office was 115.6 hours of which 24.7
    hours were spent by Mr. Deutschmann, himself.

[22]

Mr.
    Deutschmanns legal fees were calculated on the basis of $350 per hour while
    working under the first and third retainer agreements, and $192 per hour while
    working under the second retainer agreement. Clerks time was docketed at $100
    per hour under the first and third retainer agreements and $60 per hour under
    the second retainer agreement.


Considerations to
    be Taken into Account in Arriving at Fair and

Reasonable
    Legal Costs

[23]

The
    fixing of costs is a discretionary exercise by the court. A fee agreement is
    not binding on a party under disability until it is approved by the court:
Henricks-Hunter
    v. 814888 Ontario Inc.
, 2012 ONCA 496, 294 OAC 333.

[24]

Court
    approval of settlements for persons under disability is founded on the need to
    protect those who cannot care for themselves. The court therefore has a
    responsibility to carefully consider the relevant materials, and to assess the
    fairness and reasonableness of the proposed fees to ensure that the settlement,
    including provision for legal costs, is in the best interests of the protected
    person for his or her benefit:
Wu (Estate) v. Zürich Insurance Company
(2006), 268 D.L.R. (4th) 670 (C.A.), leave to appeal refused, [2006] S.C.C.A.
    No. 289.

[25]

As
    noted by the application judge at para. 49 of his reasons, the factors to be
    considered when fixing costs to be paid to counsel for a party under a
    disability include:

(i)      the time expended by the solicitor;

(ii)      the legal complexity of the matters dealt with;

(iii)     the degree of responsibility assumed by the
    solicitor;

(iv)     the monetary value of the matters in issue;

(v)     the importance of the matters to the client;

(vi)     the degree of skill and competence demonstrated by the
    solicitor;

(vii)    the results achieved;

(viii)   the ability of the client to pay;

(ix)     the client's expectation of the amount of the fee;

(x)     the financial risk assumed by the solicitor of pursuing
    the action, including the risk of non-payment, the likelihood of success and
    the amount of the expected recovery; and

(xi)     the social objective of providing access to justice
    for injured parties.

Aywas v. Kirwan
, 2010 ONSC 2278, at para. 18,
    per Hackland J. and
Re Solicitor
, [1973] 1 O.R. 652 (C.A.).

[26]

The
    solicitor has the onus to satisfy the court that the contingent fee agreement
    is fair:
Raphael v. Lamb
(2002), 61 O.R. (3d) 417 (C.A.), at para 37.

Application of the Relevant Factors in this Case

[27]

The
    application judge agreed that the terms of settlement were fair and that were
    it not for the structured settlement proposed, medical/rehabilitation benefits
    would be exhausted well before the period of life expectancy, as with attendant
    care benefits, under the proposed settlement. He concluded that the
    settlement was adequate to meet Adams foreseeable needs.

[28]

The
    application judge also addressed the monetary value of the matter in issue and
    the importance of the settlement to Mr. Krukowski and his family. The
    application judge noted that the settlement would provide for Mr. Krukowskis
    present and future care costs:

Without a settlement, there is
    no guarantee that Aviva would continue to fund the various benefits or at the
    level now being paid.  The proposed settlement provides finality and security
    to Adam and his family caregivers as opposed to a future or greater
    uncertainty.

[29]

The
    application judge also found that the retainer agreement was obtained in a fair
    manner, it was in writing, it was clear, the terms were discussed with the
    litigation guardian, and they were freely understood.

[30]

He
    noted that there was no objection to the fees sought and carefully laid out the
    terms of the settlement such that the ability to pay was included.

[31]

The
    application judge referred to the degree of experience and expertise of the law
    firm. He noted that the are very experienced in this field and that 75% of
    their work involves motor vehicles and accident benefits. He added that he
    accepts Mr. Deutschmanns assertions that he has considerable experience in
    this field as do his clerks.

[32]

He
    also noted the time actually spent on the file including the time spent by Mr.
    Deutschmann.

[33]

The
    application judge noted however that:

(i)

Mr. Deutschmann conceded the legal issues were not complex;

(ii)

Accident benefits were already being paid by Aviva before Mr.
    Deutschmann was retained;

(iii)

The
    determination that Mr. Krukowski was catastrophically injured and thus entitled
    to a substantial settlement was received shortly after Mr. Deutschmann was
    retained;

(iv)

There
    was therefore was essentially no risk assumed by the law firm;

(v)

While the settlement was approved, it was simply acceptable; and

(vi)

The
    fees claimed were many multiples of the docketed time valued at counsels
    chosen rates.

[34]

Notwithstanding
    his assessment of all of the factors including the fact that there was little
    or no risk and the fees were many multiples of the fees docketed, he took into
    account the fact that the quality of time spent is not always measured by the
    time expended.

[35]

He
    therefore fixed fees to counsel in the amount of $60,000 plus disbursements and
    H.S.T. This represents 5% of the settlement amount and more than three times
    the docketed time invested in the file.

[36]

It
    is clear from the above that the application judge addressed and weighed all of
    the appropriate factors to be considered in deciding whether it would be fair
    and reasonable to approve the legal fees sought.

[37]

As
    such, we disagree with Mr. Deutschmanns assertion that the application judge
    did not address the factors to be taken into account in deciding whether legal
    fees are reasonable.

[38]

We
    see no error in the application judges articulation of the law or his
    application of the law to the facts in this case.

[39]

For
    these reasons, the appeal is dismissed.

R.G. Juriansz J.A.

C.W. Hourigan J.A.

J.A. Thorburn J.A.


