K.A.K. v. British Columbia, 2013 BCSC 973

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: K.A.K. v. British Columbia, 2013 BCSC 973 Date: 20130531 Docket: 05-2992 Registry: Victoria Between: K.A.K., K.N.K., C.K., M.K., C.N.K., M.M.K, C.G.K., K.G.K., M.A.K.

By Their Litigation Guardian, The Public Guardian and Trustee of British Columbia Plaintiffs And Her Majesty the Queen in Right of the Province of British Columbia, G.K., M.H., Jane Doe and John Doe Defendants Restriction on publication: Pursuant to subsection 75(2) of the Child and Family Services Act , there is a ban on disclosing the name of any person involved in the proceedings as a party or a witness or any information likely to identify any such person. Before: The Honourable Madam Justice Fisher Reasons for Judgment Counsel for the Public Guardian and Trustee: P.A.

Mazzone Counsel for Gary Coad and Diana Davison: J.M.P. Firestone Place and Date of Hearing: Vancouver, B.C. May 21, 2013 Place and Date of Judgment: Vancouver, B.C. May 31, 2013 [ 1 ] This is an application by the Office of the Public Guardian and Trustee (the PGT) to amend an entered order approving the legal fees of counsel for the plaintiffs. [ 2 ] In 2004, the PGT retained Gary Coad as counsel to represent the plaintiffs in an action in negligence against the Province of British Columbia. Dyan Davison acted as co-counsel.

The plaintiffs are either under the age of 19 or under a disability, and the PGT was the Litigation Guardian. The matter was resolved after a 29 day trial on the issue of damages in a decision dated October 18, 2011. I assessed damages in favour of six plaintiffs for a total amount of $988,000.

On May 9, 2012, a further $118,000 was awarded for management fees, by consent, increasing the total award to $1,106,000. [ 3 ] On July 6, 2012, I approved the account of plaintiffs’ counsel for a total of $651,292.89, which consisted of $387,100 for legal fees, HST of $46,452, and $217,740.89 for disbursements (including interest). The fee represented a 35% contingency fee agreement between plaintiffs’ counsel and the PGT.

The order has been entered. [ 4 ] The PGT did not appear at the hearing on July 6, 2012 but provided a letter from Peter Brown, its solicitor, dated July 4, 2012, stating that he agreed that the proposed fee of 35% plus taxes and disbursements was reasonable given the complexity of the matter, the enormous time and skill involved, and the positive result. [ 5 ] The disbursements did not include $133,922 that the PGT had paid prior to trial. This was omitted from the material put before the Court due to inadvertence of plaintiffs’ counsel. The PGT was unaware of this omission as Mr.

Brown thought that the $133,922 was included in the $217,740.89 that was approved. [ 6 ] The disbursements did include $107,000 for the work of a legal assistant at $35 per hour, which was a term of the original retainer between the PGT and Mr. Coad. Mr. Brown did not realize that the disbursements put before the Court included this amount. [ 7 ] In September 2012, costs were settled at $265,000. This did not include recovery of the $107,000. There is no issue about this, as the PGT did not instruct, nor did Mr. Coad include this in the settled bill of costs.

[8] It was after costs were settled and counsel were reconciling the amounts to be paid to each plaintiff that these errors andomissions were discovered by both sides. [9] Despite the retainer agreement, the PGT is now of the view that the amount paid for the legal assistant’s work should be takeninto account as a fee or income item rather than a third party disbursement, and when this is properly considered, the contingency fee at35% is too high. [10] Plaintiffs’ counsel applied for an order approving the disbursements of $133,922 and this order was granted by consent on May21, 2013 at the conclusion of the hearing. [11] These reasons address the PGT’s application to amend the order of July 6, 2012 to reduce the amount of the approved legalfees.

Jurisdiction to amend orders [12] The Court is functus officio once an order has been entered, but there remains a limited jurisdiction to amend an order afterentry. [13] Rule 13-1(17) of the Supreme Court Civil Rules permits the Court to correct a clerical mistake or an error arising from anaccidental slip or omission, or to amend an order to provide for any matter that should have been, but was not adjudicated on. This rule isnarrow.

It does not permit the Court to amend a substantive finding and it does not permit parties to provide fresh details of mattersalready before the Court: see Chand v Insurance Corporation of British Columbia, 2009 BCCA 559 at para. 44. [14] However, there is inherent jurisdiction to amend an entered order where there has been an error in expressing the manifestintention of the Court and to avoid the perpetration of an injustice. The principle was outlined in Buschau v Rogers Communications Inc.,2004 BCCA 142. At para. 26, Newbury J.A. (for the Court) referred to this passage from Paper Machinery Ltd. v J.O.

Ross EngineeringCorp. (SCC), [1934] SCR 186: The question really is therefore whether there is power in the Court to amend a judgment which has been drawn up and entered. In such acase, the rule followed in England is, we think – and we see no reason why it should not also be the rule followed by this Court – thatthere is no power to amend a judgment which has been drawn up and entered, except in two cases:

(1) Where there has been a slip indrawing it up, or

(2) Where there has been error in expressing the manifest intention of the Court [emphasis added in Buschau; citations omitted] [15] In exercising this jurisdiction, the Court should consider if there is evidence that a party has taken an irrevocable step in relianceon the order or would suffer undue prejudice were it corrected: Buschau at para. 27. Absent such evidence, the Court may exercise itsjurisdiction to correct an order where it is in the interests of justice to do so.

Application in this case [16] This case presents unusual circumstances due to the Court’s overriding jurisdiction to approve legal fees for plaintiffs who areunder a legal disability. In order to determine if the order expresses the manifest intention of the Court, I must assess whether the feebased on a 35% contingency is reasonable on the basis of the evidence now before me, which includes additional disbursements of$133,922, clarification of the legal assistant’s charges of $107,000, and a different position of the PGT. [17] Both sides were mistaken about the evidence that was put before the Court.

The PGT did not realize that the $107,000 for thelegal assistant’s fees was included in the disbursements to be approved but thought that the $133,992 of prior disbursements wasincluded. Mr. Coad did not realize that he had not included the $133,992 of prior disbursements. The $107,000 disbursement was listedin an account that was before the Court, there was evidence about the fact that counsel were required to hire extra assistance to reviewand organize the large volume of documents, but the Court was not specifically apprised of the disbursement that related to this.

In thesecircumstances, due to errors or omissions of both sides, I did not have before me all of the information on which to assess thereasonableness of the fees. [18] I also relied substantially on the fact that the PGT had reviewed the accounts and considered the 35% contingency fee to bereasonable. That position has now changed. [19] Both Mr. Mazzone on behalf of the PGT and Mr. Firestone on behalf of plaintiffs’ counsel agree that the order in this case maybe amended under the Court’s inherent jurisdiction.

They say that both parties were mistaken about whether the $133,922 disbursementwas before the Court and this led the Court to be misinformed; thus its manifest intention is not set out in the order. They also agree thatonce I determine that I have jurisdiction to amend the order, the entire matter is “opened up” and I can then re-assess the reasonablenessof the fee on the basis of the proper information. [20] Mr.

Mazzone submitted that I may amend the order not only on the basis that it does not express the manifest intention of theCourt, but also on the basis that it was obtained by consent on grounds that would invalidate a compromise not contained in the order. Herelied on mutual mistake as the ground that would invalidate the PGT’s prior consent. [21] I have considerable doubt that the mistakes made here are sufficient to render the consent of the PGT invalid; such mistakesmust be of material facts common to all parties: see Buschau at paras. 28 and 29.

In any event, I do not consider my order to have beenmade by consent. Rather, it was an order made after reviewing the materials before me, which included the opinion of the PGT that thefees and disbursements were reasonable. The PGT neither appeared nor signed the order.

[22] I also have some doubt, notwithstanding the positions of counsel, that my inherent jurisdiction to amend the July 6, 2012 orderallows the entire matter to be opened up. What has really happened is that plaintiffs’ counsel has put new evidence before the Courtregarding the disbursements of $133,922 that were inadvertently omitted. At the hearing, I concluded that it was not necessary to amendthe order to approve these disbursements and instead I made a new order, which was by consent, approving them.

Importantly for thepurpose of this application, the PGT has changed its position due to its own mistake about the $107,000 disbursement.

I think it isquestionable whether the omission of the $133,922 of disbursements allows me to amend the order on another basis as proposed bycounsel, but I agree that the main question is whether the original order as it stands expresses my manifest intention to approve the 35%contingency fee knowing that the $107,000 disbursement was to be paid directly to counsel in addition to the fee. [23] Whether or not I have jurisdiction to amend the order as proposed by the PGT, I would not amend it, as I find the fee to bereasonable even when the $107,000 disbursement is taken into account, and in this sense the order does express my manifest intention.

The reasonableness of the fee [24] Mr. Brown deposed that had he realized his mistake about the disbursements that were before the Court, he would not havesupported plaintiffs’ counsel’s claim for fees and disbursements. His opinion is that the disbursement for the legal assistant was eitherpart of the law firm’s overhead or was income to the firm and is properly considered as such.

He calculates the total fee to plaintiffs’counsel as 44.75% if the cost of the legal assistant is part of the fee, which he says is too high and also more than the maximum feepercentage permitted under the Law Society Rules. [25] The PGT’s position today is that counsel’s fee should be reduced from $387,100 to $318,810. This results in a contingency feeof about 28% if the $107,000 is considered as money received by counsel. This would require Mr. Coad and Ms. Davison to repay$68,290 in fees and to adjust the amount of taxes payable. [26] Mr.

Coad deposed that he had an agreement with the PGT for a fee of 35% and an additional $35 per hour for a legal assistant.He and Ms. Davison are single practitioners who work together on certain cases, and neither of them had staff in place to handle thedocumentary reviews that were required. Taking on this retainer required them to hire an assistant specifically for this case. Mr. Coadsays that neither he nor Ms. Davison would have agreed to take the case without this agreement. In his affidavit, he deposed: 16.

I made it very clear to Peter Brown that this was an unusual file given the breadth of the documents and the likelihood that thePlaintiffs may not be of much assistance to our case. I explained to Peter Brown that if we were to do the file, we would require extrahelp and would have to hire a part time assistant to help us with file management. This assistance would be an extra cost to us and wewere not willing to take on this file without the extra help.

We were also not willing to pay for this help ourselves because we knew thatthe file would take up a great deal of our time focus and the remainder of our practices would suffer. 17. If we did not have this special disbursement, our fee would have been eaten up by our increased office overhead. [27] The PGT does not dispute that at the outset of the retainer (in January 2004), it agreed with Mr. Coad to a contingency fee of35% as well as the sum of $35 per hour for the services of a legal assistant, both sums to be paid out of judgment proceeds.

It says,however, that the retainer is not binding and at the end of the case is only a factor to take into account. [28] I am particularly mindful of the Court’s role in approving fees charged to plaintiffs who are infants or under a disability.Regardless of the terms of a retainer, the Court has an overriding jurisdiction to ensure that a contingency fee is reasonable: MacLeod vHarrington (1995), (BC CA), 14 BCLR (3d) 201 (CA).

Numerous factors go into such a determination, such as theextent and character of the services rendered; the labour, time and trouble involved; the character and importance of the litigation; theamount involved; the complexity of the case and the degree of skill and experience required; the length of the trial; the extent of the risk(including whether counsel has advanced disbursements); and the results achieved: see Yule v Saskatoon (City) (1955), (SK KB), 16 WWR 305 (QB), aff’d 17 WWR 296 (CA). [29] In this case, plaintiffs’ counsel took on a significant risk.

There were initially nine plaintiffs, all but one who were under adisability. The Crown did not admit liability until three weeks before trial. The trial was lengthy. The damage claims involvedpsychological injuries that were challenging to prove due to the nature and volume of the evidence. The legal issues were complex; theyincluded issues of divisible or indivisible damages, whether the plaintiffs would have suffered future losses in any event, and whethersignificant contingencies had to be made to avoid double recovery. Mr. Coad carried a considerable amount of disbursements.

All ofthese factors support a contingency fee in accordance with the original retainer. The only factor that could militate in favour of reducingthe fee is the amount of damages recovered. While substantial, the judgment was quite a bit less than the potential amount assessed bycounsel. [30] This last point was emphasized by the PGT in this application but I note that this is not the view it took in July 2012. In his letterof July 4, 2012, Mr. Brown expressed the view that counsel had obtained a positive result on behalf of their respective clients. [31] Mr.

Mazzone provided me with a list of cases addressing contingency fees. Most of these involved matters that never went totrial. In Audet (Guardian ad litem of) v Bates, [1998] BCJ No. 678 (SC), a medical negligence case, the plaintiff recovered a judgment ofover $1.8 million after a relatively short trial (seven and a half actual trial days), and the Court reduced a 35% contingency fee to about30%. The judge did not think the matter should have attracted the maximum fee of 35%, as he regarded the case as one of moderatecomplexity and difficulty and the issue a narrow one.

In contrast, the case at bar was considerably more difficult in both length andvolume and the issues were broad. [32] Unquestionably, this case had a high cost in relation to the $1,106,000 obtained in the judgment. However, while on the highend, I cannot conclude that the 35% contingency fee of $387,100 was unreasonable even when the additional $107,000 disbursement isconsidered. [33] The legal assistant’s fees were treated right from the start as a disbursement and were to be paid, in addition to the 35%

contingency, from the judgment proceeds. Counsel had to hire additional resources to perform work that was necessary for the proper preparation of the case. Mr. Firestone characterized this not as overhead but as a third party disbursement. My view is that it is more properly characterized as a special overhead expense, one that was over and above the firm’s general office overhead. And while I agree with Mr. Mazzone that the arrangement has the effect of reducing counsels’ expenses, it does so in a somewhat unique situation.

It cannot be forgotten that plaintiffs’ counsel worked for over seven years to bring this difficult case to trial. Mr. Coad carried the legal assistant’s cost throughout and took the risk of receiving no reimbursement and no fee. Additionally, he received no portion of any post- judgment interest and is continuing to work on the case until all judgment proceeds are distributed to the PGT in trust for each plaintiff. There is no question that Mr. Coad and Ms. Davison have devoted a tremendous amount of time, energy and skill to this case on behalf of the plaintiffs.

Undue prejudice [ 34 ] The issue of prejudice must also be considered. [ 35 ] Plaintiffs’ counsel relied on the 2004 retainer agreement with the PGT to take on the case in the first place, and to continue with it for so many years. They also relied on the PGT’s approval and the order itself and have received the fees. I am told it would be difficult for counsel to re-pay the $68,290 proposed by the PGT now. [ 36 ] The PGT’s position seems unfair given the long-standing importance of this issue to Mr. Coad and Ms. Davison. The PGT does not refute Mr. Coad’s evidence about the importance of this issue to him.

He had taken on a significant risk and at one point was personally carrying about $200,000 in disbursements. [ 37 ] That said, I would not consider this prejudice to be substantial enough to prevent the order from being amended if I had concluded that the fee was unreasonable. Both counsel knew that they were taking the risk of receiving nothing and they also knew that all fees and disbursements were subject to Court approval regardless of the retainer and regardless of the position of the PGT. [ 38 ] Mr.

Firestone submitted that as a matter of public policy, the PGT should not be permitted to repudiate an essential term of a retainer agreement when it acts in the role of client. He says that to permit this will have a chilling effect on the PGT’s ability in future to retain counsel to take on difficult cases. I understand the problems this raises but I would not accede to this argument.

Regardless of the terms of a retainer, fees will always be subject to review by this Court, and I would not wish to place constraints on the PGT’s obligations to act in the best interests of those for whom it acts as litigation guardian. Conclusion [ 39 ] I do not criticize the PGT for bringing on this application. As Mr. Mazzone said, the PGT was “duty bound” to do so. It candidly acknowledged its mistake and had second thoughts about the wisdom of the retainer agreement that had been made with plaintiffs’ counsel.

However, for the reasons I have expressed, it is my view that the circumstances do not justify the Court exercising its inherent jurisdiction (assuming it has such jurisdiction in these circumstances) to amend the previously entered order approving counsels’ fees. [ 40 ] Given these circumstances, each party will bear their own costs of this application. “Fisher J.”