Date of Release: June 11, 1996 No. C932683 Vancouver Registry IN THE SUPREME COURT OF BRITISH COLUMBIA BETWEEN: ) ) ASHLEY DAWN COOK, an infant, ) by her mother and guardian ad ) litem, MARY LOU COOK, and the ) said MARY LOU COOK ) )REASONS FOR JUDGMENT PLAINTIFFS) ) AND: ) ) OF THE HONOURABLE MISSION MEMORIAL HOSPITAL and ) DR. JOHN KINAHAN ) ) DEFENDANTS) MR. JUSTICE OLIVER ) AND: ) ) THE PUBLIC TRUSTEE on behalf ) of the infant ASHLEY DAWN COOK) ) PARTY) ) Counsel for the Plaintiffs: Nathan H. Smith Counsel for the Public Trustee: Duncan J. Manson Date and place of hearing: Nov. 28, 1995 and May 13, 1996 Vancouver, B.C. 1 This case was before me for approval of a proposed settlement involving an infant who, owing to the negligent management of her mother's labour and delivery, suffered hypoxic brain damage. 2 The infant's claim with a theoretical optimum assessment of damages of $3,350,000.00 was settled for $2,600,000.00 on the day the two week trial was scheduled to commence. That settlement and the question of approval of the plaintiffs' solicitors' fees were before me. I approved the settlement and directed that a further hearing was required on solicitors' fees. I also allowed an interim payment of fees to the plaintiffs' solicitors in an amount equal to 12.5% of the settlement amount. 3 The only remaining issue to be determined is whether some reduction to the solicitors' proposed 35% contingency fee is necessary. 4 At the hearing of this application, I was provided with a 12-page letter from the Public Trustee which provides an overview of the facts of the case and the Public Trustee's opinion regarding the work done on the case by the plaintiffs' counsel. The letter stated in part: No admission of liability in any form was ever made by either defendant prior to the matter being settled on the morning of trial. Had this case proceeded to trial, counsel for the infant plaintiff would have introduced evidence supporting four different theories of liability any one of which would, if accepted by the Court, have resulted in judgment to the plaintiff. The theories are based primarily on failure to adequately monitor the baby's fetal heart rate. Dr. Williams, an expert for the plaintiff, was of the view that continuous electronic monitoring should have been carried out after prostaglandin was administered to the patient because of the risks associated with prostaglandin and because of the mother's high blood pressure. Dr. [John] Kinahan, characterized Mrs. Cook as a "moderate risk" patient and he expected a fetal strip to be run at least every two hours. 5 The Public Trustee goes on to discuss what, in fact, occurred and sets out in detail the four alternative theories of liability put forward by the plaintiff. The cost of future care which forms a substantial part of this claim is reviewed as is the amount of the settlement which includes a structured settlement providing a monthly income for the infant. The Deputy Public Trustee states "[i]n my opinion, the settlement reached is a good one and I recommend approval by the court." 6 I may say that in perusing the material filed I have reached the conclusion that the Public Trustee's view was a correct one. 7 There follows a discussion on lawyers' fees and the Public Trustee says this: The British Columbia Law Society and the British Columbia Legal Profession have historically recognized contingency fee agreements as an acceptable arrangement for retaining counsel. In this case, as in many personal injury cases, the infant's family were not in the position to carry the costs of litigation. This is essentially why they found a contingency fee agreement to be workable for them. Mr. MacLeod was prepared to carry the disbursements and to wait to be paid until the conclusion of the case. It would appear that the fee arrangement was fair but the question also has to be asked whether the fee, at the end of the day, is reasonable. Mr. MacLeod worked on the infant's case on his own from April 22, 1993 to May, 1995. on May 1, 1995, Mr. Nathan Smith, Barrister and Solicitor, joined Mr. MacLeod's practice and from that time onward both counsel worked on the infant's case. Mr. Smith explained to counsel for the Public trustee that both he and Mr. MacLeod were very much involved in the infant's case from May 1, 1995 until a settlement agreement was reached on October 16, 1995, on the morning a two-week trial was scheduled to commence. It was the main case that Mr. Smith worked on during this period. Both infant's counsel prepared for trial. Since liability was never admitted by the doctor or the hospital until the morning of trial, the plaintiff's lawyers had to prepare on liability as well as quantum. Mr. Smith was going to present the case in chief and address quantum, while Mr. MacLeod prepared to cross- examine the experts on liability and address the life expectancy issue. Mr. Smith has practised in the area of professional negligence since his call to the Bar in 1982. From 1984 to 1989, he was associated with Mr. John Laxton, Barrister and Solicitor, and worked on medical negligence claims specifically. Mr. Smith joined Mr. MacLeod this year so that he may once again focus on medical negligence cases. Mr. Smith is the President of the British Columbia Trial Lawyers Association. Mr. MacLeod was called to the Bar in 1964 and has worked in personal injury litigation since that time. Mr. MacLeod has worked primarily in the field of medical negligence litigation for approximately the last 15 years, with the majority of those cases involving birth injuries. In discussing the case generally with both defence counsel, I understand that liability would have been strongly denied by Dr. Kinahan had the matter proceeded to trial. Liability would not have been strongly contested by the nurses. Both defence counsel stated that had this matter proceeded to trial, quantum would have been hard fought. They both consider the settlement reached to be very favourable to the infant. 8 Medical malpractice cases are amongst the most complex types of litigation coming before these courts. Though in theory any member of the legal profession can appear as counsel in such cases, in practice solicitors are well advised to seek out one of the small number of experienced practitioners concentrating in this highly technical branch of the law. Both of the lawyers involved in the presentation of the plaintiffs' case form part of that small band. Not only are such cases of great complexity and technical difficulty but they are also very frequently fought by the defence to the bitter end. 9 Few things can be more damaging to a medical practitioner, particularly to a careful and conscientious practitioner, than to suffer judgment in what are called medical malpractice cases, more properly referred to as medical negligence cases. The professional reputation of the medical practitioners involved (the most precious asset any doctor has) rides on each case, and - once impaired - is difficult to recover. For this reason, a large majority of such cases when brought are hotly contested by an organization specifically set up for that purpose by the medical profession. The battle then tends to be a somewhat uneven one between a well-funded professional organization on the one hand and the injured party, in this case an infant, on the other. Were it not for the existence of the contingency fee system by which plaintiffs' solicitors may, if the client wishes it, enter into contracts for remuneration based upon a percentage of any recovery obtained, only the very rich would have the opportunity of pursuing a medical malpractice claim through trial. 10 There are medical negligence actions brought which are without merit. There are many others brought which are meritorious. In the vast majority of these cases, liability is denied by the defendants at the outset. In some, liability is admitted at some stage during the waiting period between the making of the claim and the trial of the action - a period frequently of many years. On occasion, cases are settled on the courthouse steps as counsel are entering the courthouse for trial, and in the remainder of the cases, the trial proceeds and is either won or lost. Even in a strong case, the chances of failure in a medical malpractice action are very substantial. There is frequently great difficulty in finding expert witnesses willing and able to testify of the professional conduct of a colleague. It follows that from the plaintiffs' lawyers' point of view it is a very problematical field of litigation. The chances of success are very circumscribed. The defence is normally represented by outstanding counsel of great technical skill in this extremely specialised field of advocacy. The costs of preparing for trial can be enormous. If expert witnesses who are believable and who are willing to testify can be located, their professional fees are substantial. Sums of many tens of thousands of dollars normally have to be advanced by the plaintiffs' lawyer to make it possible for the action to proceed at all. 11 In the case of contingency fee agreements, the Law Society of British Columbia has placed limits on the maximum fees which may be contracted for by a solicitor. It is noteworthy that where medical negligence is alleged, the maximum according to the Law Society's rules which can be sought is exceptionally 40% of the recovery. The fact that this is one of the only types of litigation in which that high percentage is set as the maximum is an indication of the view of the governing body of the legal profession as to the risks and complexities of such litigation. 12 In personal injury litigation of every sort, the fees payable under a contingency fee agreement, or for that matter on a straight solicitor and client non-contingent bill, will of necessity always reduce the amount ultimately available to the injured; that is the nature of the beast. It can be argued that in a socially conscious and caring society all legal costs payable in adversarial proceedings arising from wrongful death, personal injury, and medical negligence ought to be borne by the state, and should be paid by the taxpayers at large or, alternatively, in their entirety by the unsuccessful litigant. That, however, is not the system under which we live and move and have our being. 13 Contingency fee agreements, sometimes described as the poor person's key to the courthouse door, are currently the only way by which many a deserving injured individual may procure legal representation in a medical negligence case. Once counsel has been retained under such an agreement, a settlement has been reached or trial has been won, and the solicitor seeks the fee in the percentage of the recovered sum contracted for, it will - in infant cases where the only agreement is between the infant's guardian ad litem and the solicitor - become the role of this Court to determine whether that fee is reasonable after consideration of the surrounding circumstances. 14 The British Columbia Court of Appeal dealt with the determination of whether a solicitor's contingency fee was reasonable in another infant settlement case involving one of the plaintiffs' solicitors, Mr. MacLeod, in Harrington (Guardian ad litem of) v. Royal Inland Hospital, (1994) 89 B.C.L.R. (2d) 165. While certain of the issues in that case in no way arise in the present case, Harrington is helpful in establishing the proper approach in infant settlement cases. 15 The Harrington majority decisions of Hinds J.A. and Finch J.A. affirm this Court's inherent jurisdiction to determine whether a solicitor's fee is reasonable when reviewing infant settlements. The factors which Hinds, J.A. took into consideration are set out on pages 100-102 of the judgment, and represent what my brother the Chief Justice would refer to as the "Yule v. Saskatoon factors" in his decision on a similar issue in Richardson v. Low and Surrey Memorial Hospital, (Vancouver Registry C927555, May 1, 1996) (at p. 4-5), which is discussed below. 16 After considering the reduction by Thackray J. of the solicitor's fee from $500,000 to $175,000, the majority in the Court of Appeal stated that $175,000 was at "the lower end of the range", yet held that "it was not so inordinately low as to justify intervention by this Court." (at p. 102). 17 In dissent, Southin J.A. disagreed with the majority's approval of such a drastic reduction in the solicitor's fee. She stated at p. 55: To fix a fee which is the equivalent of approximately 11 1\2 %, where the bargain was for a percentage fee and approved by the court, in my opinion is simply not right. The result was inordinately low. No solicitor, except one perhaps of independent means, would have entered, in this case, into a contingency fee contract for approximately 11 1\2% of recovery. The idea is absurd. Had Mr. MacLeod's contract been for, say, 20% of recovery if settled before trial, this Court would never have heard of this case. That the appellant, whatever his legal right, in a moral sense may have wanted too much in light of the case being settled before trial, does not warrant the court giving him too little. The amount fixed here has an aura of both punishment and a continuing disapproval of contingency fees in the face of legislative mandate. In the circumstances, it is my opinion that the fee should be 20% of the settlement, or $300,000.00. 18 A more recent application to approve an infant settlement involving the same counsel for the plaintiff was heard by Esson CJSC in Richardson v. Low and Surrey Memorial Hospital (Vancouver Registry C927555, May 1, 1996). In that case, an infant settlement in the amount of $2.27 million had been approved, and plaintiff's counsel, Mr. MacLeod, sought approval of a 35% contingency fee. During the course of the proceedings, Mr. MacLeod together with counsel representing the Public Trustee made a joint proposal to reduce that fee to 20%, or $454,000. 19 The Chief Justice relied on the Harrington decision, and stated at p. 4: The factors to which Hinds, J.A. had regard were essentially those which have come to be known as the Yule v. Saskatoon factors. The reference is to the reasons of the Saskatchewan Court of Appeal [reported at (1955) 1 D.L.R. (2d) 540] which are summarized in the headnote: In fixing the remuneration of a lawyer for work done on behalf of a client many factors must be taken into account and the circumstances to be considered in arriving at the proper amount are the extent and character of the services rendered; the labour, time and trouble involved; the character and importance of the litigation; the amount of money or value of property involved; the professional skill and experience required; the character and standing in his profession of the lawyer; the results secured, and to some extent at least, the ability of the client to pay. 20 In considering whether Mr. MacLeod's fee was reasonable in the Richardson case, the Chief Justice noted at p. 7-8: This was not a case of settlement on the eve of trial. The action had been set once for trial and adjourned by consent - no trial date had been set when the case was settled. No party had consulted experts except on quantum issues. The pleadings were routine. Mr. MacLeod had conducted one day of examinations for discovery and there had been one uncontested chambers application to add a defendant. The Chief Justice went on to state at p. 20: The Public Trustee suggests that, on the basis of the facts known to counsel for the plaintiffs and defendants at the point of settlement, and on the basis of the position taken by the defendants, this was a case in which the defendants had virtually admitted liability. As I observed in my reasons of August 21, 1995, there seems to have been little doubt from the beginning that there had been negligence on the part of the defendant and that, although there was reason for plaintiff's counsel to be concerned on the issue of causation, the defendants appear not to have assessed very highly their chances on the liability issue. 21 The Chief Justice noted that on this basis, a reasonable fee would have been in the 12-15% range. He stated that the Public Trustee's joint proposal with Mr. MacLeod that 20% would be reasonable was based on evidence which had arisen after the settlement. For this reason, my learned brother held that 20%, or $450,000, was unreasonable, and reduced the fee to $325,000, which is 14% of the settlement amount. I should note however that the learned Chief Justice did not express the fee as a percentage, but rather as a dollar amount. He stated at p. 23: The question "what is the reasonable fee?" must be answered, not as a percentage, but in dollars. That is particularly so where, as here, there never was a binding contingency fee agreement between the infant and Mr. MacLeod. 22 It is not without some difficulty that I can appreciate this difference, particularly when in the result the dollar amount approved in Richardson is slightly over 14% of the settlement amount, which is within the range which the learned Chief Justice noted at p. 22 of his judgment. 23 There will be circumstances where it would not be appropriate for a solicitor to insist upon payment of the full amount which would be generated by strict adherence to a contingency fee agreement. In Richardson, the learned Chief Justice refers at page 17 to "the well-recognized principle that a lawyer has a professional duty to not insist upon payment according to the express terms of a contingency fee agreement if the circumstances at the end of the case make it appear that such a fee would not be reasonable". 24 The Chief Justice had before him the expert evidence of Mr. Adrian Chaster, Barrister and Solicitor, Past Chairman of the Trial Lawyers Association of British Columbia, who has extensive experience with fee arrangements commonly used by members of the Bar. The Chief Justice cited the following excerpts of Mr. Chaster's affidavit as being "consonant with the law and with the integrity of the legal profession" (at pp. 18-20): 6. In fixing percentage fees in contingency cases, the two principal factors are risk and damages; the higher the risk, the higher the percentage fee; the higher the damages, the lower the percentage fee. Myriad other factors are also considered, of course, such as the complexity of the case, the expected length of trial, whether the solicitor must advance disbursements, and the like. In successful case[s], the percentage fee is generally higher than would have been charged under an hourly rate fee arrangement because the lawyer assumes risk, waits until the end of the case for payment, frequently advances disbursements, and sometimes loses. Fees in successful cases partially offset the fact of no fees being earned in unsuccessful cases. 7. Although some solicitors charge a single flat percentage rate, the standard contingency fee agreement more commonly involves a sliding scale of fees depending upon when the action settles or whether it goes to trial. Some contingent fee agreements call for increased percentages at various steps during the course of the claim, such as the filing of process or the completion of discovery procedures. More commonly, in my experience, contingent fee agreements envisage one percentage if the case is settled prior to final trial preparation and an increased percentage if settlement is not achieved until the trial is imminent or it actually proceeds. In my experience, proceedings after judgement are invariably the subject of a fresh fee agreement. 8. At the conclusion of a claim, it is common practice to consider adjusting the fee to something less than the full percentage envisaged in the fee agreement. Examples of all factors which militate against charging the full fee entitlement are: a) The settlement was achieved early enough and in a large enough amount that the effective hourly rate at the allowed percentage would be disproportionately high when measured against the time, risk and cost of the action; b) Where the fee agreement calls for an increased percentage at a fixed point before the trial, say thirty days, the settlement was achieved early enough within that period, say twenty nine days, that the lawyer was not obliged to conduct final trial preparation; c) The trial takes much less time than originally expected; d) The lawyer has not had to carry the disbursement cost of the case, or has had to carry disbursements in a lower amount than originally expected; e) With a pretrial settlement, the lawyer is able to fill the time set aside for trial with other remunerative activities; f) The sympathies of the case are important. For example, some counsel are more inclined to reduce the fee where the client was injured and requires the settlement funds or damages in order to survive than they would in a commercial case. To illustrate the point, I recently settled a medical negligence claim for brain injuries resulting from problems during the labour and delivery of an infant. Settlement was for a low seven figure amount and was achieved the day before the trial was scheduled to commence. I had previously obtained Court approval of a fee agreement under which I was to take 25% of the damages or settlement amount. My fee entitlement, subject to Court approval of course, was a little under $500,000. For various reasons outlined above, I actually sought and obtained approval of a fee in the amount of $365,000, being approximately 18%. 25 This sliding scale approach described by Mr. Chaster is an appropriate way for a solicitor to approach the collection of a contingency fee once a settlement has been reached. 26 In the present case, the solicitors contracted not for the 40% maximum allowed by statute, but for 35% of the damages recovered. In deciding whether the fee was not only fair initially but also reasonable at the end of the day, it is interesting to note the views expressed by the Deputy Public Trustee in the letter which has been filed: In my opinion, counsel for the plaintiff has obtained a very good settlement. Some of the reasons for this opinion are presented in the Comments, others are found in the material submitted by plaintiff's counsel and from my solicitor's discussion with the defence counsel. Having said this, I am concerned that the size of the settlements continues to increase largely due to increasing costs of caring for multi-disabled children and adults and inflation. I question whether it is appropriate to tie legal fees to escalating cost of care via contingency fee arrangement. I am also concerned that fees, of the magnitude claimed here, will significantly reduce the amount of money available to the infant, all of the award having been negotiated as necessary and fair compensation to the child. 27 I have before me a contract fair on its face, entered into by the child's legal guardian. I have before me a most carefully prepared case and evidence of negotiations conducted with great skill. This is not one of those cases where there never was any major doubt as to the probability of success, where a percentage fee is agreed and a week later settlement is obtained. This is a case which was set for trial for an estimated length of two weeks. It might have gone longer and it was not until the day of trial that admissions of liability thitherto violently contested were finally obtained and the settlement negotiated. 28 The legal guardian of the infant does not suggest that the fee is not a reasonable one. Nor as I read the Public Trustee's opinion is that the position taken by the Public Trustee. The Public Trustee expresses concern in general which I have referred to. The court shares that concern, but that surely is a matter to be dealt with, if desired, by some form of appropriate legislation and not by seeking to rewrite an agreement freely entered into for the benefit of the infant to which no objection has been taken before. 29 I have given consideration to whether I should require evidence as to all the different steps undertaken in this action and in the preparation of it and the number of hours spent on various tasks by the solicitors. It has been suggested, and there is authority to support the proposition that in a case involving a contingency fee, time records need not be kept by the solicitors. Nevertheless, having regard to the way in which the law is developing and the way that Yule v. Saskatoon has been applied in recent contingency fee review cases, it is my view that any lawyer who hereafter fails to keep time records when undertaking contingency fee litigation in circumstances where there is a possibility of his bill being taxed is foolhardy - for the lack of detailed time records deprives the Court of important information necessary to protect the legitimate interests of the provider of legal services. 30 There is no way for me to determine exactly how much time was spent by the solicitors in the preparation of this case, but it was substantial. If I consider the loss which the solicitors would have suffered in the event of an unsuccessful outcome, I am led to the conclusion that they would in all probability have been left out of pocket to the tune of some $30,000 for disbursements, enormous amounts of pre-trial preparation time and at least two weeks of trial time by two experienced and specialized counsel. This lost time can only on rare occasions be filled with other remunerative activities by a solicitor with so specialized a practice. This is high-risk litigation where an action may be lost through no fault of counsel. Nobody in such an eventuality would be likely to turn around and say "You may have a fee agreement in this case which entitles you, in the circumstances, to nothing but it is not reasonable that you should get nothing whatsoever, here is some money for you". By the same token, where prima facie a good result has been obtained through the efforts of the solicitor, either after trial or on the courthouse steps, the court should not lean over backwards to try and find some basis for saying that the fee is now not a reasonable one because it is very substantial. In the present case, without representation by Mr. MacLeod's firm on a contingency fee basis and without the willingness of that firm to invest large sums of their own money and large amounts of their valuable professional time, the client would have received nothing. 31 That having been said, the plaintiffs' solicitors were spared two weeks of trial and the possibility of obtaining no award at all. The fee agreement was intended to include any eventuality and many unforeseen contingencies which might raise the complexity of a particular action beyond what is reasonably expected. Though an excellent job was done, the solicitors prepared carefully, and a splendid result was achieved, extraordinary contingencies did not arise and a provident settlement was achieved virtually on the courthouse steps. 32 The solicitors for the plaintiffs have asked for 35% of the $2.6 million dollar settlement, or $910,000, less $60,000 which they argue would have been the cost for two trial lawyers for the ten day trial. This translates to a requested fee of $850,000. 33 This was a complex and strongly contested case and substantial work was done. It is difficult for a solicitor to fill two weeks on such short notice. As Esson CJSC noted in Richardson, the solicitors are entitled to be well compensated. On the facts of this case that compensation should amount to considerably more than was awarded by my brother the Chief Justice on the particular facts of the Richardson case. This settlement eliminated the need for the trial itself as well as the ever-present risk factor involved in any trial, and so some reduction in the contingency fee is warranted. I would reduce the plaintiffs' solicitors' fee by $200,000 and approve a total fee of $650,000. As I have already allowed the interim payment of 12.5%, or $325,000, to the plaintiffs' solicitors, they are entitled to a further $325,000. The learned Chief Justice in Richardson has held that these reasonable fees should be represented by a dollar amount, and if the final award in this case resembles some particular percentage, that is purely coincidental. "Oliver J." Oliver J. Dated this 11th day of June, A.D. 1996 Vancouver, B.C.