Law Times

www.lawtimesnews.com LAW TIMES COVERING ONTARIO'S LEGAL SCENE | FEBRUARY 4, 2019 5 BY JULIUS MELNITZER For Law Times THE Ontario Court of Appeal took just seven days to issue a ruling reminding the province's judiciary that it will not tolerate a court's unilateral modification of the terms of a negotiated class action settlement. The court released its reasons in Welsh v. Ontario on Jan. 24, exactly one week after reserv- ing its decision following oral argument — an unusually short lapse for a case where an oral decision was not delivered from the bench or the matter did not smack of urgency. Justice Paul Perell of the On- tario Superior Court of Justice, the unanimous appellate bench ruled, had erred in requiring class counsel, Toronto's Koskie Min- sky LLP, to donate to a charity $1.5 million of the $3.75-million fee he had approved. The condition did not form any part of the settlement that Perell had previously sanc- tioned. In the result, the court over- turned Perell's decision, re- moved him from the case and directed that another Superior Court judge review the fees is- sues. Kirk Baert, head of Koskie Minsky's class action group, did not mince words in welcoming the decision. "This is an important deci- sion from the Ontario Court of Appeal that once again con- firms that judges ought not to make decisions based on facts, evidence and law that were not before the judge or that were not the subject of oral submissions from the parties," he says. "This is not the first time that the Ontario Court of Appeal has had to tell this particular judge not to do that. Hopeful- ly, the message will sink in this time." This is the fourth time since 2013 that the OCA has called out Perell for going in his own dir- ection, with the three previous occasions found in Fontaine v. Canada, Levac v. James and Brown v. Canada. In 2014, the Divisional Court had its say on the matter in Cavanaugh v. Grenville. But Stephanie DiGiuseppe, who practises civil rights, con- stitutional and criminal law as a partner at Ruby Shiller Enena- jor DiGiuseppe LLP in Toronto, says that, despite the favourable result, class counsel may not have achieved all that they de- sired on the appeal. "The court did not say the fee was completely appropriate or that reducing it would be a dis- incentive to class counsel taking cases, so it's very possible that this fee could be cut when it's reconsidered," says DiGiuseppe, who represented the intervenor Aaron Smith, a class member. The class action, certified by Perell in 2016, alleged that Ontario was negligent in its management and operation of three provincial schools for the deaf. The case included serious allegations of physical, sexual and emotional abuse. Following mediation, the parties achieved a settlement in 2017. The settlement agreement provided that Ontario would set up a $15-million settlement fund, with the first monies to be applied toward class counsel's fee, which were capped at 25% of the settlement funds, subject to court approval. The agreement expressly provided that if any funds remained after payments to the class and counsel, they were to revert back to the prov- ince. At the motion to approve the settlement, class counsel sought $3.75 million in fees, or 25 per cent of the settlement fund. But Perell was skeptical of the settle- ment because, under its terms, only about 10 per cent of the class members would receive compensation, with the rest re- quired to forego their claims without receiving any payments or benefits. Still, Perell approved the settlement in May 2018, stating that is "within the range of rea- sonableness" and "better than the alternative of proceeding to a trial." But on the fee issue, Perell found that $3.75 million was not fair and reasonable, as "the results achieved for the whole of the Class was disappointing." Although he ultimately ap- proved the $3.75-million fee, Perell did so only on the condi- tion that class counsel donate $1.5 million of its fees to an ap- proved charity for the deaf. He also ruled that if there was any reversion of funds to the prov- ince, the $2.25-million balance of class counsel's fees would be proportionately reduced. As Perell saw things, ". . . it is not appropriate to make Ontario the beneficiary of a reduction of Class Counsel's fee." The settlement and fee ap- provals were incorporated in separate orders. Only the fee rul- ing was appealed. Pending the appeal, the settlement was implemented by initiating the claims process provided for under the agree- ment. On appeal, class coun- sel sought approval of the $3.75-million fee without con- ditions. Christopher Wayland and Jonathan Sydor, counsel at the Ministry of the Attorney Gen- eral, took no position on the quantum of fees but agreed that Perell had erred in imposing conditions without allowing the parties to make further sub- missions — conditions that, in effect, directed public funds to a third party (a charity) that might have reverted to the Crown. DiGiuseppe, on behalf of the intervenor, supported Perell's decision. Justices Robert Sharpe, Rus- sell Juriansz and Lois Roberts agreed that Perell had erred. "By requiring class coun- sel, without the parties' input or consent, to donate part of its fees to a designated charity, the motion judge inserted into the settlement agreement a material condition not agreed to by the parties," the court wrote. "This altered the settlement provision that surplus settle- ment funds would revert to the respondent." Here, the Court of Appeal distinguished between Perell's "discretion to express con- cerns about the amount of class counsel's fees, and to reduce the amount of class counsel's fees and make them propor- tional to the settlement amount achieved" and his error of law in "imposing the donation term that altered the settlement agree- ment." As Perell's "donation error permeated his entire decision," the "entire detailed analysis ne- cessary to determine and ap- prove class counsel's fees must be undertaken afresh without regard to the motion judge's findings." The upshot was that, going forward, the "determination is best made at first instance by one of the highly experienced and expert class action judges who regularly undertake this analysis." The court remitted the mat- ter "for a new hearing before a different judge on the class action list of the Superior Court of Justice." Brian Gray, spokesman for the Ministry of the Attorney General, declined to comment as the matter was still before the courts. LT Kirk Baert says he welcomes a recent Ontario Court of Appeal decision that found a judge had erred in requiring his firm to provide a $1.5-million donation to charity. Decision overturned Court of Appeal rejects $1.5-million payment to charity NEWS ONTARIO LAWYER'S PHONE BOOK 2019 The Ontario Lawyer's Phone Book 2019 has more than 1,400 pages of indispensable legal references that can connect you with anyone you need. Updated throughout the year, it contains names, phone numbers, mailing addresses and emails so you don't have to search anywhere else. Order your copy today! Visit www.store.thomsonreuters.ca or call 1.800.387.5164 for a 30-day no risk evaluation. Perfectbound • Published December each year On subscription $87.50* • One time purchase $91* Order No. L7798-8405 • ISBN 978-0-7798-8405-6 Multiple copy discounts available *Plus applicable taxes and shipping & handling. Prices subject to change without notice. CONNECT INSTANTLY TO ONTARIO'S LEGAL COMMUNITY Untitled-9 1 2019-01-30 11:01 AM

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