The Court Of Appeal Rejects Unilateral Addition By A Judge To An Executed Settlement Agreement On Procedural Grounds Only

Can a judge unilaterally "rewrite" an executed settlement agreement that approves class counsel fees by lowering the amount payable and putting conditions on those fees, when neither party agrees to the changes? In Welsh v. Ontario,1 the Court of Appeal held that the answer is "no"; however, the Court based its decision on a procedural error rather than the substance of the motion judge's concerns that led him to put conditions on class counsel's fees in the first place.

This class action, commenced in 2015, was certified on consent in 2016. About 4,500 former students of three provincial schools for the Deaf claimed that the Province was negligent in its management and operation of these schools, and breached its fiduciary duties stemming from "very serious allegations of physical, sexual and emotional abuse".2

The parties arrived at a settlement through mediation in late 2017, and entered into a mutually agreed upon settlement agreement. As part of that settlement agreement, class counsel, Koskie Minsky, would receive $3.75 million – 25% of the $15 million settlement fund. There was also a reversion provision: if any amounts remained after payment of the fees, damages, and costs and the claims period had ended, the remaining funds were to revert to the Province.

In finalizing the matter, there were two separate motions at play: one to approve the settlement agreement and one to approve class counsel fees. At the motion to approve the settlement,3 Perell J. expressed serious concerns about the merits of the settlement, but nonetheless approved it because it fell "within the range of reasonableness".

With respect to class counsel fees, Perell J. found that the fees were unfair and unreasonable because only about 10% of the class would benefit from the settlement and the settlement was "disappointing". As such, he approved class counsel's fees on the condition that class counsel donate $1.5 million of its fees to a charity for the Deaf (the "Donation Condition") approved by the judge, and the balance of those fees, $2.25 million, would be subject to a proportionate reduction depending on the reversion of settlement funds to the Province that have not been taken up by class members (the "Reversion Condition"). Perell J. did not allow parties to make submissions on the matter. Class counsel appealed the fee order.

On appeal, the fee order was set aside, and the matter was remitted for rehearing before a different judge. Class counsel's...