Justice Di Luca disallows “specious” disbursements.
Heard: In writing | Full Decision [PDF]
This was an application heard under Rule 7.08 for approval of a proposed settlement for two minor applicants.
Both minor applicants were bitten by a dog and suffered injuries. They retained the law firm Diamond & Diamond to act for them.
Diamond & Diamond did not commence an action on behalf of the applicants. They agreed to settle the claims of the minor applicants for $12,000.00 and $8,000.00. Diamond & Diamond charged fees, disbursements, and HST of $4,133.01 in relation to the first applicant, and $3,018.22 in relation to the second. The fees were based on a contingency fee agreement of 25%.
This matter first came before Justice Di Luca on November 3, 2017. Justice Di Luca approved the settlement on the basis that the disbursements were further particularized.
On April 4, 2018, the matter came before Justice Di Luca once again with the requested particulars. Upon inquiry, Justice Di Luca found that Diamond & Diamond had charged each applicant, among other things, a $500.00 file closing fee, a $250.00 fee for BICO costs insurance (that was never obtained), and a $100.00 “ACL file opening fee”.
Justice Di Luca requested answers to a number of questions about these fees.
On June 1, 2018, Justice Di Luca was informed that the $500.00 file closing fee was to:
…cover the costs of closing the client’s file, including mailing/sending by courier the settlement cheques to the client, sending a closing letter to the client to advise of the conclusion of the retainer, printing, storage fees and other expenses.
Justice Di Luca found that these fees were not a legitimate disbursement. He referred to them as “specious”. Diamond & Diamond claimed this fee was an estimated disbursement subject to final adjustment once the final closing costs were known. Diamond & Diamond claimed that this speculative disbursement was charged because they “…erred on the side of caution to account for any unforeseen disbursements that may be necessary in the process of closing the client’s file.” Justice Di Luca rejected this position noting that it was “astounding” that counsel would suggest that “erring on side of caution” required charging $1,000.00 to two minor clients. Justice Di Luca further remarked that he did not believe Diamond & Diamond would pay back the difference, if any, after the final accurate closing costs were known as this would have required a further application and Court Order. Finally, he remarked that the time required to send a client a cheque and closing letter was highly unlikely to be a legitimate disbursement. He concluded that these services, along with the added fees for postage, copies, printing, etc. which were included in the $1,000.00 fees were not legitimate disbursements.
With respect to the BICO fee, Diamond & Diamond acknowledged that the $250.00 fee for costs insurance that was never obtained was charged “in error”. Justice Di Luca was skeptical of this position as dog bite cases are strict liability and further noted that no action had actually been commenced by Diamond & Diamond. However, as Diamond & Diamond agreed to abandon this request, Justice Di Luca did not make a determination on this matter.
Finally, with respect to the $100.00 file opening fee, Justice Di Luca noted that while he was “skeptical” of this fee, he accepted that it “may be passed on to the client”.
Justice Di Luca ultimately approved the settlement and signed the judgment, but amended the amounts listed to disallow $1,500.00 in purported disbursements.
As a post-script, Justice Di Luca emphasized that the Court relies heavily on the accuracy and completeness of the materials provided in motions and applications under this Rule, particularly in ex parte proceedings.
Read the full decision [PDF]
