Minors and incapable persons are protected in a variety of ways in Ontario’s court system. One form of protection comes through Rule 7.08 of Ontario’s Rules of Civil Procedure (the “Rules”). In particular, Rule 7.08(1) provides:
“No settlement of a claim made by or against a person under disability, whether or not a proceeding has been commenced in respect of the claim, is binding on the person without the approval of a judge.”
Because settlement agreements are private contracts between parties, courts do not ordinarily need to pronounce upon their validity. However, Rule 7.08 ensures that a judge must review and determine the validity of any settlement agreement which purports to impact the rights of a minor or incapable person (often referred to in the litigation process as a “person under disability”). More particularly, the judge must ensure that the settlement agreement is in the best interests of the person under disability.
When it comes to ensuring that a settlement agreement is in the best interests of a person under disability, a judge may deem it necessary to alter or modify the settlement agreement in some way. This was recently illustrated in Abbas Sharifzadeh, represented by his Litigation Guardian, Azardokht Nejad, et al. v. The Corporation of the City of Toronto (“Sharifzadeh”).
Sharifzdeh was a trip and fall case where the injured plaintiff, born in 1950, had sustained various serious injuries. At a pretrial conference, the parties reached a proposed settlement of the litigation. However, at some point in the litigation, the plaintiff, who was experiencing cognitive decline, became a person under disability. As such, the proposed settlement had to be approved by a judge.
As part of the proposed settlement, the plaintiff initially, and subsequent to becoming a person under disability, agreed to a contingent fee Retainer Agreement which contemplated his counsel receiving a fee of 33% of all amounts recovered in the litigation. The plaintiff’s counsel calculated and sought $73,885.27 in fees (plus H.S.T. of $9,605.09), which would have netted the plaintiff $165,281.60 (after payment of other costs and disbursements).
The judge hearing the matter found that while the contingent fee Retainer Agreement was reasonable when it was first entered into, the contingent fee to be charged was not reasonable as of the date of the hearing. Among other things, the judge was concerned that twelve separate law clerks had worked on the plaintiff’s matter, which would have likely resulted in additional time being incurred by those individuals and the need to familiarize themselves with the intricacies of the matter. This concern was compounded by the fact that the plaintiff was represented by a law firm who regularly advertised its expertise in personal injury matters. One would therefore expect a significant level of efficiency from this firm in pursuing a personal injury claim. However, the judge acknowledged that the plaintiff received a favourable settlement proposal due to the skill and ability of counsel involved.
Ultimately, the judge found that capping the fees of the plaintiff’s counsel at $65,000 (plus H.S.T. of $8,450) was appropriate in the circumstances, and in the best interests of the plaintiff. As a result, the plaintiff was entitled to receive $175,321.96 as part of the final settlement (an increase of $10,040.36 from the proposed settlement).
Sharifzadeh serves as a useful reminder that court approval under Rule 7.08 is not a mere formality. Where a settlement involves a person under disability, the court must independently assess whether the proposed resolution—including the legal fees to be paid from the settlement—is in that person’s best interests.
