In a brief endorsement released January 24, 2019, in Welsh v. Ontario, 2019 ONCA 41, the Court of Appeal for Ontario considered the propriety of requiring Class Counsel to donate a significant portion of approved class counsel fees to a charitable organization as a condition of approving Class Counsel’s fee approval motion.
Class Counsel represented a certified class of about 4,500 former students of three provincial schools for the Deaf relating to allegations of abuse suffered by the class members while they were students at those schools. Through the representative plaintiff, the class entered into a settlement agreement following mediation in November 2017 which established a $15 million settlement fund in full settlement of the action. Despite concerns about the merits of the settlement, on a motion to approve the settlement, Justice Perell did approve the settlement noting it was “within the range of reasonableness” because “the settlement agreement was better than the alternative of proceeding to a trial.”
On a fee approval motion, required by the Class Proceeding Act, 1992, Class Counsel sought court approval of a fee of $3.75 million, representing 25% of the $15 million settlement fund. On this motion, Justice Perell found the requested fee was not fair and reasonable to all class members because the results achieved were “disappointing”. Accodingly, he approved the requested fee, but imposed a condition that Class Counsel would donate $1.5 million of that fee to a charity for the Deaf, to be approved.
The representative plaintiff appealed Perell J.’s decision, arguing that imposing the charitable donation condition effectively re-wrote the parties’ settlement.
The Court of Appeal agreed, rejecting the charitable donation condition, stating: “By requiring class counsel, 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 further explained:
Given the motion judge’s concerns, the appropriate course of action would have been for him to allow the parties an opportunity to make submissions and, if they desired to do so, agree to change the terms of the settlement in order to address those concerns and obtain approval of class counsel’s fees. However, he was not permitted to modify unilaterally the terms of a negotiated settlement without the consent of the parties.
The Court of Appeal set aside the fee approval decision “on the basis that the donation error permeated his entire decision” and remitted the matter for a new hearing before a different Superior Court class proceedings judge.
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Jacob Damstra is a member of Lerners LLP’s Class Proceedings and Appellate Advocacy Practice Groups.”
