Judge scrutinizes contingency agreement and orders structured payout to protect injured party
In a case arising from a motor vehicle accident, the Ontario Superior Court of Justice scrutinized the legal fees charged in a settlement involving a disabled plaintiff, ultimately reducing the fees to ensure they were fair and reasonable.
Kevin Garnett by his litigation guardian Amanda Foster v. The Estate of Joseph Eldon, Economical Insurance, and Western Assurance Company, 2025 ONSC 5527 involved the court’s review of legal fees in the settlement of accident benefit and tort claims brought on behalf of a party under disability.
Kevin Garnett was involved in a motor vehicle accident on July 27, 2017. As a result of his injuries, his medical condition deteriorated to the point that he required a litigation guardian. Amanda Foster, his girlfriend, agreed to act in this role in March 2019.
On July 31, 2017, Garnett entered into a contingency fee agreement providing for a 35% fee on both accident benefit and tort claims. The accident benefit claim was settled on May 9, 2022, for an all-inclusive sum of $500,000. The tort claim was later settled for $390,000, bringing the total settlement to $890,000.
The court noted that settlements involving parties under disability must be approved by the court, as required by Rule 7.08(1) of the Rules of Civil Procedure. This requirement is derived from the court’s parens patriae jurisdiction, which is intended to protect the best interests of parties under disability and ensure their legal rights are not compromised or surrendered without proper compensation.
Justice M.L. Edwards reviewed the legal fees sought in the case. Fees already received from the accident benefit claim totaled $173,635, which had been previously approved by another judge. For the tort claim, the amount sought was $121,480. The combined fees sought amounted to $295,115, or approximately 33% of the total settlement.
The court examined relevant jurisprudence and found that contingency fees for accident benefit claims are generally approved in the range of 5% to 20%, and that a 35% fee is not fair or reasonable in such cases. Justice Edwards determined that a 15% fee would be appropriate for the accident benefit claim, amounting to $75,000, and that the appropriate fee for the tort claim would be $136,500, for a total of $211,500. Since $173,635 had already been received, the court approved only $37,865 in fees for the tort claim. This resulted in total approved fees of $211,500, which represents 24% of the total settlement.
The court also directed that, in the absence of a management plan for the plaintiff’s remaining funds, the net settlement be paid into a structure for Garnett’s benefit. Counsel was instructed to provide the court with an updated structure printout and any additional information required to implement the decision.
This decision reflects the court’s responsibility to scrutinize legal fees in settlements involving parties under disability and to ensure that such fees are fair and reasonable in the circumstances.
