IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20120803

Docket: 08-5321

Registry:
Victoria

Between:

E.B.
by her Litigation Guardian, Kimberley Ross Brown

Plaintiff

And:

Avtar
Rashi Basi, Micheline Slader, The Provincial Director of
Child Welfare and Her Majesty the Queen in Right of the Province of
British Columbia (Ministry of Children and Family Development)

Defendants

Before:
The Honourable Mr. Justice Macaulay

Reasons for Judgment

(In
Chambers)

[1]          
Arising out of the settlement of the infant
plaintiff’s tort claim, her lawyers, Acheson Whitley Sweeney Foley (the “law
firm”), seek court approval of their fees. At a separate hearing on April 16,
2012, I approved the settlement of the infant’s claims for $13,000,000.
However, I bifurcated the process insofar as legal fees are concerned and
directed a separate hearing on June 29, 2012. Counsel for the law firm and for
the Public Guardian and Trustee (“PGT”) participated in the hearing and, at its
conclusion, I reserved judgment. These are my reasons for judgment.

[2]          
Various members of the law firm, including three
of the partners, Acheson, Sweeney and Foley, swore affidavits, as did the
litigation guardian, Kimberley Ross Brown. The affidavits were filed in support
of the law firm’s contention that I should approve fees of $3,045,204.71,
calculated in accordance with the contingency fee agreement that Mr. Brown and
the infant’s mother signed. Mr. Brown acted as the infant’s litigation guardian
and is fully supportive of the law firm’s claim.

[3]          
Pursuant to s. 40(10) of the Infants Act,
R.S.B.C. 1996, c. 223, the PGT is required to provide written comments
regarding any infant settlement for which court approval is sought. It is well
understood that approval of the legal fees payable to counsel for the infant is
a necessary part of the settlement process.

[4]          
By written report dated June 25, 2012, the PGT
commented on the proposed fee and recommended that I approve a reduced fee of
$2 million, and, in addition, approve reimbursement for the disbursements and
special damages that the law firm has paid on behalf of the infant and her
claim.

[5]          
There is, accordingly, an issue between the law
firm and the PGT whether I should approve the fee as calculated under the
contingency fee agreement. I intend, first, to address the law as it applies to
that question.

[6]          
The existence of a contingency fee agreement
does not alter my responsibility to only approve a fee that is reasonable (Harrington
(Public Trustee of) v. Royal Inland Hospital (1996), 131 D.L.R. (4th) 15 (B.C.C.A.),
at para. 255). In Murphy, Battista v. Tejani (Guardian ad litem of),
2009 BCSC 1782, at para. 32, Butler J. referred with approval to the following
extract from Thibodeau et al. v. Stanevicius et al., 2006 BCSC 1403 at
para 10:

Although the nature of the
retainer agreement signed by the parent or other guardian should not be ignored
and the vital role of contingency fees should not be discounted … [ss. 40(8)
to (10) of the Infants Act] require the court to give specific approval
to the legal fees that are to be paid out of infant settlement funds and to
be satisfied that the fee is reasonable in all the circumstances.

[Emphasis added.]

Justice Butler went on to point out that
the assessment of a reasonable fee is similar to a quantum meruit
analysis and the “precise terms of the contingency fee agreement do not weigh
heavily in that consideration” (para. 33).

[7]          
Justice Butler also pointed out that when an
adult signs a contract to obtain legal services for a child, the contract is
not binding on the child. In the result, the court must determine a reasonable
fee, taking into account, but only as a factor, that the guardian ad litem
entered into the contingency fee agreement (paras. 31-33). I agree with his
analysis.

[8]          
In British Columbia (Pubic Guardian and
Trustee of) v. Ralston (Guardian ad litem of), 2008 BCCA 372, also arising
from an infant settlement, Saunders J.A., for the court, summarized the
factors to be considered in assessing the reasonableness of a contingency fee,
based on Harrington, at para. 21:

1.         the financial circumstances of the plaintiff;

2.         the risk to the law firm where it carries
disbursements;

3.         the complexity of the issues;

4.         the experience and skill of defendant’s counsel;

5.         the experience and skill of plaintiff’s counsel;

6.         the
risk assumed by plaintiff’s counsel that there would be no pay for effort
expended;

7.         the
time expended by plaintiff’s counsel;

8.         the
importance of the case to the plaintiff; and,

9.         whether the settlement is a
good settlement.

It is not suggested in Harrington or
Ralston that the list of factors is exhaustive. The factors must be
considered and extended, as necessary, in light of the circumstances of the
individual case. Some factors may take on more importance than others.

[9]          
For example, as will be seen, the risk assumed
by plaintiff’s counsel in the present case extended beyond a risk of no pay for
effort to include non-reimbursement of over $500,000 in expenses that the law
firm paid on behalf of the plaintiff. Further, I am satisfied that, were it not
for the willingness of the law firm to fund those expenses and proceed on the
basis of a contingency fee agreement, the financial circumstances of the
plaintiffs would have prevented them proceeding with the litigation. While it
is possible that some other law firms would have also agreed to proceed on a
contingency fee basis, only a very small number of local firms, if any, would
have had both the requisite legal expertise and the financial capability to
assume the risk for the expenses that needed to be incurred in this case.

[10]       
In spite of Murphy and Ralston,
the law firm contends that the question for me is whether the fee payable under
the contingency fee agreement is reasonable. With respect, I disagree. Framing
the question in that way restricts the court’s inquiry. It tends to overly
focus on the apparent fairness of the agreement rather than a determination of
what is a reasonable fee, taking into account, among other things, the need for
and terms of the agreement.

[11]       
For this reason, I cannot accept that the
reasoning of the Ontario Superior Court of Justice in Cogan (Re) (2007),
88 O.R. (2d) 38 (Ont. S.C.), applies in this province, even though the Alberta
Court of Appeal commented favourably upon it, albeit in a different context, in
Morrison v. Rod Patony Professional Corp., 2008 ABCA 145.

[12]       
In Cogan, the court addressed the
fairness and reasonableness of a contingency fee after approving an infant
settlement. The court pointed out that contingency fees are “intended to promote
access to justice and to ensure that the cost of our legal system [does] not
act as a barrier to justice” (para. 37) and further, that the fees are
considered “particularly important for very complex cases that involve lengthy
and costly preparation” (para. 37). The court then went on to apply the factors
identified by the Law Society in Ontario relating to the approval by the court
of contingency fees.

[13]       
These factors were listed as:

…a) the
financial risk assumed by the lawyer, which is included under likelihood of
success, the nature and complexity of the claim, and the expense and risk of
pursuing it; b) the results achieved and the amounts recovered; … e)
achievement of the social objective of providing access to justice for injured
parties, including injured children and parties under disability (para. 42).

It is obvious that this list primarily
focuses on the purposes and fairness of a contingency fee agreement. Further,
the list takes some, but not all, of the Harrington and Ralston
factors into account. There is also no reference to the quantum meruit
analysis mandated by law in British Columbia with respect to assessing the
reasonableness of the fee for legal services provided to an infant.

[14]       
Similarly, in Morrison, the focus of the
court was not on the considerations applicable to legal fees in relation to an
infant settlement, but instead on the taxation of an account rendered to the
clients pursuant to a contingency fee agreement. There is no indication in the
style of cause or the reasons for judgment to suggest that either of the
clients was an infant. Accordingly, neither Cogan nor Morrison
alter the law that applies in this province respecting the determination of a
reasonable fee for legal services in relation to infant claims.

[15]       
The settlement in this case stemmed from an
alleged intentional assault in November 2008 upon a child who was only two and
one-half months old at the time. The child suffered severe traumatic brain injuries.
At the material time, the child, having been removed from her mother, was in
foster care. The alleged perpetrator, Mr. Basi, was the then-boyfriend of Ms.
Slader, the foster parent. Basi was living in the Slader home at the time but
had not been approved by the Ministry of Children and Family Development
(“MCFD”) as a foster parent or caregiver.

[16]       
The child’s mother and grandfather, Mr. Brown,
retained the law firm in early December 2008. Mr. Brown became the litigation
guardian of the infant in the proceeding. Basi, Slader and Her Majesty the
Queen, as represented by the Director and the MCFD (the “Crown” and the
“Director”), were all named as defendants.

[17]       
Ultimately, by December 20, 2011, and shortly
before a three month long trial scheduled to commence February 6, 2012, the
parties reached an all-inclusive settlement of $13,000,000, subject to the
approvals of the PGT, Treasury Board and the Court, all of which were later
provided. The Crown funded almost all of the settlement. Slader’s insurer contributed
$1,000,000 but Basi, who had no assets, did not contribute anything. The child
will require, as the amount of the settlement attests, lifelong care. In fact,
the settlement was successfully negotiated on the basis that the child is
entitled to one-to-one care at an annual cost of $250,000.

[18]       
Both Mr. Brown and the child’s mother signed the
contingency fee agreement on December 5, 2008. The fee, excluding GST and PST,
is expressed as a varying percentage on “all money recovered” and is stated as:

·        
25% on the first million dollars;

·        
15% on the second million; and

·        
25% on anything in excess of the second million.

As the PGT points out, the fees calculated
pursuant to the agreement amount to $3,041,528.24, plus taxes of $364,983.38,
on a net recovery of $12,566,112.97.

[19]       
The agreement also states that the law firm will
pay disbursements, defined as expenses relating to the claim; and, at its
discretion, advance cash payments, including for special needs, special
damages, wage loss or for treatment-related expenses. Although the agreement
provides for interest (not compounded) at 10% per year on any expenses carried
by the firm that the insurer does not promptly repay, it expressly states that
the clients will not be responsible for paying them if the insurer is not
responsible. In such event, “the firm assumes financial responsibility for the
above treatment related expenses and disbursements.”

[20]       
By the terms of the agreement, the law firm
committed to “all steps up to and including trial” subject only to the firm’s
entitlement to cease acting if the clients “misrepresent a fact which affects
the claim” or “refuse to accept sound legal advice.” In such case, the
agreement provides that the law firm may charge for services rendered by three named
partners at $350 per hour; by other lawyers at $250 per hour; and by paralegals
at $125 per hour.

[21]       
In the result, the law firm not only committed
to carrying the matter through to trial, if necessary, at a very early stage,
but also agreed to underwrite the expenses. The firm also provided other legal
services that benefitted the infant and assisted in developing the case for
settlement purposes and trial.

[22]       
Ms. Foley addressed this in her letter to the
PGT dated December 20, 2011, respecting the provisional settlement under the
heading “Other issues”, as follows:

Moving the Child to Living with Family

This issue alone
took two years of litigation, negotiation, strategy and consultation with
family law lawyers in Provincial Court as well as an application in Supreme
Court to have this child moved to the guardian, Mr. Brown’s, residence and
allow him full custody in February 2011. The Ministry clearly wanted to keep
the child in foster care in a group home type setting, to the exclusion of
family. The family, i.e., the mother and grandfather, were treated horribly
throughout this process. The same risk management people in the litigation were
overseeing and involved in the family law matter. There were reports that the
grandfather was over-stimulating and making the child worse during visits. This
was unfair and inaccurate. It was only until our firm provided the demands of
24-hour LPN care in a private home that we were able to move Baby E back to her
family and guardian, Mr. Kim Brown. She is extremely happy and described by all
caregivers as being a happy child and physicians have described that she has
improved since she had been with family. She was overweight when she came to
the family; she is now getting a proper diet and exercise and is a stable weight.
Her seizures are well in control. If we had not been able to move this child
back with family, she would not have had the benefit of daily, hourly family
contact. Nor would she have the one-to-one care model she needs for optimal
involvement, rehabilitation and ongoing stability and quality of life. The
foster care model was not in the best interests of this child, medically or
socially. Moreover, the Ministry was cognizant of the fact that the model of
one-to-one care, unlike group home foster care, would be much more expensive in
any tort settlement.

In my view, these additional services are
sufficiently related to the retainer so as to include them in the quantum
meruit analysis.

[23]       
The PGT’s comments focus on the Harrington
factors. I summarize, and respond to, them, as follows.

1. Financial circumstances of client

[24]       
As the PGT points out, the child’s family would
not have been able to prosecute a claim of this magnitude except on a
contingency fee basis. The PGT suggests a generous approach to compensation
“given the need to encourage such arrangements in risky cases and the PGT
concedes this is warranted here.” I agree.

2. Carrying of disbursements

[25]       
Disbursements totaled $243,224 and special
damages totaled $354,809. The law firm began funding rehabilitation costs in
February 2009 and care costs in February 2011. The law firm paid Mr. Brown’s
rental costs commencing in April 2011. The PGT suggests this was “a major
undertaking for a relatively small firm.” I characterize it as a major
undertaking for any size firm, keeping in mind that the monies were only
recoverable in the event of success.

[26]       
In spite of that, the PGT suggests that the
benefit is mitigated by the interest charged on the advances. I consider that a
minor factor as I expect the interest charged simply offsets, in whole or in
part, the cost of the firm utilizing its own borrowing power to fund the
expenses.

[27]       
The PGT also suggests that the risk of
non-recovery decreased substantially after the conclusion of the examination
for discovery of a social worker in May 2011. I will return to this topic under
number 6 below as it arises in other contexts as well.

3. Complexity and difficulty of issues

[28]       
The PGT agrees that the issues in the case were
complicated but suggests not as complex as those in infant birth malpractice
cases that have led to the approval of lesser fees than the law firm seeks
here. The PGT contends that at the end of the day, this case “was difficult but
not complex.”

[29]       
Every case has its own degree of complexity.
From my perspective as the trial management judge, this case was more complex
than some medical malpractice claims. Keeping in mind the various decisions
relating to the child being in care for the first two years and effectively
under the day-to-day control of the government defendant, the overall case was
extremely challenging at the beginning and for a considerable time thereafter.
While the risk of non-recovery reduced as the parties got closer to trial, that
was also the result of effective tactical planning; the obtaining of opinions
from the most qualified experts available respecting shaken baby syndrome; and,
finally, overall execution by counsel.

4. Experience and competence of defence counsel

[30]       
I agree with the PGT’s observations in this
regard. The most well known and experienced of the defence counsel was
appointed by Ms. Slader’s insurer. He did not appear to take a lead role
in the case.

5. Experience of plaintiff’s counsel

[31]       
The PGT comments that the three partners
involved in the case are all experienced litigators. They did good work and, in
the view of the PGT, effectively won the case at the examination for discovery
stage. The law firm was also involved in another successful shaken baby case
that was prosecuted to a successful conclusion while the present proceeding was
ongoing.

6. Degree of risk

[32]       
The PGT acknowledges that the risks of
non-recovery were very significant at the outset but suggests that the risk was
substantially lower after the conclusion of examinations for discovery and the
obtaining of expert medical reports regarding the severity of the shaking
necessary to cause the injuries. Those views are consistent with the views of
the law firm as it approached settlement negotiations and trial, at least,
insofar as the claims against Basi and the MCFD are concerned. The law firm
was, however, justifiably less confident about its case against Slader.

[33]       
Even with the increased likelihood of success
against the MCFD after discoveries, the law firm still had to face the risks
associated with proceeding to trial on liability if it could not negotiate
successfully on quantum. In his second affidavit, Mr. Sweeney, one of the
partners responsible for the conduct of the litigation, details the continuing
associated risks. I accept his evidence in such regard and need not restate it
here.

7. Time expended

[34]       
This is a significant area of contention between
the PGT and the law firm. While the PGT recognizes that time spent is not, in
itself, usually a significant factor for the court’s consideration, it asserts
that the law firm’s estimate of hours spent is over-inflated. The law firm
responds to that assertion aggressively but I am satisfied that the estimate is
unreliable and place no weight on it.

[35]       
Having said that, I am persuaded that the law
firm expended a considerable and appropriate amount of time throughout its
involvement in the matter but not as much as 5,000 to 6,000 billable hours over
three years as was estimated after the fact. Because the individual partners did
not keep track of their time, the attempts to reconstruct and establish a
conservative estimate of individual time expended were almost bound to fail.
For these reasons, and in spite of the law firm’s assertions, I do not accept
the estimates of minimum time spent that the law firm put forward.

[36]       
It is curious, given the provision in the
contingency fee agreement, for hourly billing in the event the retainer was to
be terminated as set out above, that the partners did not maintain time
records. Given that time spent is also a recognized factor in Harrington,
and, as pointed out in previous cases, it is foolhardy for a lawyer not to keep
time records in a case such as this. See Adams (Guardian ad litem of) v.
Emmott, 2000 BCSC 1812, and Richardson (Guardian ad litem of) v. Low,
[1996] B.C.J. No. 954. Taking these risks into account, the law firm should not
now expect the court to take its after-the-fact time estimates at face value.

[37]       
Time spent is a factor for consideration. For
example, a settlement early in a proceeding, when relatively little time may
have been spent, cannot reasonably result in the same fee as time spent through
to conclusion of trial. Far more important than the number of hours spent,
however, is how the law firm used its time.

[38]       
Was the law firm efficient or non-efficient? Did
it direct its resources, including time spent, rationally and intelligently
such that the infant benefited? The purpose behind considering time is not to
reward the inefficient. A more experienced and talented lawyer will usually
accomplish a given task more efficiently than a lawyer who has less experience
and talent. Effective advocacy requires a substantial amount of time
appropriate to the task at hand. In that sense, time spent is, at best, sometimes
a proxy for effective representation and is not to be slavishly applied as a
factor.

[39]       
I am satisfied that the law firm took all
necessary and reasonable steps that were appropriate in the circumstances. The
lawyers went the extra distance in committing time to resolving the dispute
over the living arrangements for the infant. That important tactical
consideration paid off in the end. The law firm invested significant extra time
in the examination for discovery process, knowing that was their opportunity
for success and did succeed.

[40]       
Even after settlement, the law firm skillfully
and effectively negotiated with competing bidders for necessary financial
management and administrative work. This resulted in potential savings to the
infant’s estate of $500,000.

[41]       
The time spent by the law firm was obviously
considerable, whatever the actual hours were, but, more important, I find that the
time spent was necessary, focused and effective. That is, in my view, the
hallmark of success. By the time of settlement, this difficult and relatively
complex case was very close to being ready, if not actually ready, for trial.

8. Timing of settlement

[42]       
The PGT describes the case as settling two
months before trial. It actually settled just before the traditional holiday
break in December. There was probably, at most, five to six weeks of working
time available before trial. The PGT believes that there should be a fee
reduction to reflect an early settlement.

[43]       
The quantum meruit analysis focuses on a
reasonable fee for the services actually performed and it is unnecessary, in my
view, to focus on whether it is appropriate, in the circumstances, to reduce
the fee chargeable under the contingency fee agreement because of an early settlement.
As a fee calculation under the agreement, it is either reasonable in all the
circumstances or it is not. If not, a reasonable fee will be set independently,
taking into account the stage of the proceeding at the time of resolution.

9. Importance of case to
plaintiff

[44]       
The PGT accepts that this factor warrants a
generous fee that takes into account the importance of contingency fees.

10. Was the settlement a good one?

[45]       
The PGT accurately describes the settlement as
excellent with a good recovery. It recommends a fee of $2,000,000 as
reasonable, with taxes and repayment of disbursements and special damages to be
paid in addition. The PGT emphasizes that $2,000,000 is larger than any past
fee approved in similar circumstances in this jurisdiction.

[46]       
The PGT also suggests that the court could
achieve the same result, in effect, by modifying the contingency fee agreement
and “stipulating that in the event the case is settled well before trial the
percentage fee on any recovery over $1,000,000 is 15%.” According to the PGT,
this would result in a maximum fee less than $2,000,000.

[47]       
I am not persuaded that approach is necessary or
appropriate. As stated in Richardson, at para. 35:

The question “what
is the reasonable fee?” must be answered, not as a percentage, but in dollars.

My task is to determine the reasonableness
of the fee, not to focus on the fairness of the contingency fee agreement that
the mother and grandfather both agreed to. Nor, as I have set out above, do I
accept that this case was “settled well before trial.”

[48]       
It also follows from the above that I decline to
award the amount calculated under the contingency fee agreement as reasonable
in the present circumstances. The contingency fee agreement is important, for
the reasons I earlier set out, but it is not determinative of reasonableness.

[49]       
I have considered the fees found to be
reasonable in other cases. The PGT conveniently summarized them in an appendix
to the statutory comments and I attach a copy as Appendix A to my reasons.

[50]       
Two of the cases involve shaken babies and the
rest are medical malpractice cases. The highest recorded fee in a medical
malpractice case is $1,800,000 against a settlement of $8,500,000 (including
costs) achieved on the eve of trial. The settlements in the shaken baby cases
were under $5,500,000, reached during trial in one and before retrial in the
other, with reasonable fees set at $1,347,000 and $1,475,000 respectively. The
current settlement, at $13,000,000, is roughly one and one-half times the
previous high of $8,500,000 and more than double the settlement in the two
shaken baby cases.

[51]       
Taking into account all the circumstances in
this case, a reasonable fee is $2,400,000. In addition, the law firm is
entitled to applicable taxes and repayment of disbursements and treatment-related
expenses, and special damages, as recommended by the PGT. Although counsel made
limited submissions on costs, I think it is preferable that they reconsider
their positions in light of my conclusion. If there is a disagreement on the
costs outcome, they may provide written submissions.

             “M.D.
Macaulay, J.”                 

The Honourable Mr. Justice Macaulay

APPENDIX A