Client Update: A judge’s guide to settlement approval and contingency fee agreements in P.E.I.
In Wood v. Wood et al, 2013 PESC 11, a motion pursuant to Rule 7.08 of the Rules of Civil Procedure for court approval of a settlement involving a minor, Mr. Justice John K. Mitchell approved the settlement among the parties and in so doing, released reasons which included general comments on motions made pursuant to Rule 7.08 and contingency fee agreements. In Justice Mitchell’s words, the reasons “may serve as a guide to counsel in future cases”.
As Justice Mitchell set out, Rule 7.08 invokes the parens patriae jurisdiction of the court, meaning that it is the duty of the court to protect a person who has a disability (which, by definition, includes minors or those persons who are mentally incompetent or incapable of managing their affairs, whether or not so declared by a court) and to ensure that any settlement involving a party under disability is in the best interests of that party. This involves an examination of the reasonableness of the settlement, as well as an examination of how and to whom funds are to be disbursed.
The onus is on the party seeking approval of the settlement to prove that the settlement is fair, reasonable and in the best interests of the party under disability. Justice Mitchell stated that wise counsel will treat the requirements under Rule 7.08(5) as a bareminimum Generally the moving party should file such additional documentation as the pleadings; medical reports to explain the nature of the injuries and the prognosis; experts’ reports such as rehabilitation and actuarial reports; and any other material relating to any relevant issue to assist the court to conclude whether or not the settlement is in the best interests of the person under disability. He also stated that case law relevant to the quantum of damages in similar cases would be helpful.
Justice Mitchell explained that while it is often the case that a settlement is a global figure, he was not prepared to approve a settlement that did not separate the damages from the defendants’ contribution to the plaintiff’s costs. The contingency percentage charged on a contingency fee agreement should not be applied to costs. According to Justice Mitchell, it is incumbent on the plaintiff’s lawyer to negotiate a separate amount as the defendants’ contribution to the plaintiff’s costs and the contingency percentage would not apply to those costs. If the parties negotiate an all-inclusive settlement, the court should set aside a reasonable amount for costs and not apply the contingency percentage to that amount.
Justice Mitchell also highlighted the importance of clients being made aware of alternative payment options at the outset. A contingency fee arrangement should not be the automatic default arrangement; sometimes it will be in a litigant’s best interests to choose a more traditional fee arrangement. However, when a client does knowingly choose a contingency fee agreement, if the risk is low, the contingency percentage should reflect that fact. Justice Mitchell set out what he considered to be appropriate percentages in a contingency fee agreement as follows:
As a general rule, I should think it would be appropriate to have
a contingency fee agreement of 15-20% to the end of discovery,
20-25% if the matter settles at mediation and 25-30% or 33.3%
if the matter settles during trial or after trial. Contingency percentages above 30-33.3% are not inconceivable but would be rare indeed.
Justice Mitchell further stated that before signing a contingency agreement, litigants need to be made aware of what they are signing and the consequences of that document. It is the lawyer who has the knowledge and experience in litigation and an understanding of the nature of a contingency fee agreement and, therefore, the onus is on the lawyer to ensure that the client signs an agreement that is fair and reasonable. According to the decision, the purpose of contingency fee agreements is not to give lawyers extra fees for those cases where there is little or no risk.
WHAT THIS MEANS FOR YOU
Plaintiffs’ counsel may be more hesitant to agree to global settlement figures following this decision, particularly where court approval will be required. Further, the process for seeking court approval may be more costly. This decision confirms that the court’s role on a motion seeking court approval is one of scrutiny, to ensure the settlement is in the best interest of the minor or person otherwise under disability.
Jennifer Taylor In an important decision for the auto insurance industry, the Nova Scotia Court of Appeal has confirmed that future CPP disability benefits are indeed deductible from damages awarded in Nova Scotia cases for…Read More
Brian Johnston, QC and Matthew Jacobs Bill C-86, enacted as SC 2018, c. 27, will effect massive changes upon how federal labour and employment relations are regulated. They come into effect in 2019 with staggered…Read More
We can all make 2019 a success by building on the year that was. For employers, 2018 was a year of many notable developments in labour and employment law across the country. We saw Ontario…Read More
Level Chan and Dante Manna As 2018 comes to an end, we countdown some pension and employee benefits developments in the last year that we anticipate may lead to developments in 2019. Discrimination in benefits…Read More
Kevin Landry The first look at regulations for cannabis edibles, extracts and topicals has arrived. The Federal Government has opened a 60-day consultation period respecting the strict regulation of additional cannabis products. Notice of the consultation was accompanied…Read More
Erin Best and Kara Harrington “This case is about pain, how it was caused, by what accident and the opinions of dueling experts.”¹ “In this case, like so many, the assessment of the evidence depends…Read More
Jonathan Coady and Michael Fleischmann Overview Once again, the time has come to review the year that was and to chart the course for the year ahead. For municipalities, developers and planning professionals throughout Prince…Read More
Following the various Stakeholder Consultations (which Stewart McKelvey participated in on behalf of Nova Scotia Employers), the Government has changed the Labour Standards Code Regulations effective January 1, 2019 to: a) provide for up to…Read More
Version française à suivre Sara Espinal Henao Canada has expanded its permanent and temporary immigration requirements to include biometrics – the measurement of unique physical characteristics, such as fingerprints and facial features. The new requirements,…Read More
Many businesses rely on trade-mark, copyright, and patent law for the protection of their intellectual property (IP). The Federal Government recently proposed changes to IP laws, which may impact your business. Bill C-86, Budget Implementation Act,…Read More