Court File and Parties
COURT FILE NO.: 4591/14 DATE: 20181101 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
The Estate of Ivo Lepan, by way of his Estate Trustee, Mirjana Lepan Plaintiff – and – Lofranco Chagpar Barristers (A.K.A. Lofranco Chagpar Corriero Personal Injury Lawyers) Rocco Carmen Lofranco, Francis Joseph Burns and Michael Dewayne Pryce Defendant
COUNSEL: A. Rady, for the Plaintiff A. Rachlin, for the Defendant
HEARD: July 20, 2018
BEFORE: McArthur J.
Introduction
[1] Ivo Lepan was in a motor vehicle accident and retained the defendants to pursue tort, accident benefits and long-term disability claims. Accident benefit and long-term disability claims were resolved with the defendants in April 2011. Mr. Lepan then retained other counsel who took over the tort claim that was settled in July 2013.
[2] Mr. Lepan then brought an action in December 2014 for damages alleging negligence against the defendants in their handling of the accident benefits and long-term disability claims.
[3] Mr. Lepan died on July 4, 2017. He is survived by his spouse, Mirjana Lepan who is also the estate trustee in this action.
[4] Counsel who took over the tort claim also represents the plaintiff-estate in this proceeding.
[5] Pleadings have been exchanged but examinations have yet to be conducted.
[6] The defendant Pryce consents to all relief sought by the other moving defendants in this motion.
[7] The defendants requested initially to amend their Statement of Defence to plead that, amongst other things, Mr. Arvai advised Mr. Lepan as to the value of the tort claim, counselled him to accept an improvident settlement and that, if Mr. Arvai had recommended that he not accept the settlement, he voluntarily compromised his claim breaking the chain of causation against the defendants. The defendants now request leave to amend based on Appendix A attached.
[8] The defendants also requested that Mr. Arvai be disqualified from acting any further in this action by reason of a conflict of interest and removed as solicitor of record for the plaintiff.
The Legal Issues
[9] One issue is whether leave should be granted for the defendants to amend the Statement of Defence as now proposed in Appendix A attached.
[10] The other issue is whether Mr. Arvai ought to be disqualified in this action and be ordered removed as solicitors of record for the plaintiff.
Issue # 1: Amendment of Pleadings
General Legal Principles
[11] Rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides that the court shall grant leave to amend a pleading on such terms as are just unless prejudice would result that could not be compensated by costs or an adjournment.
[12] Rule 25.11 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides that the court may strike out or expunge all or part of a pleading on the ground that the pleading is scandalous, frivolous or vexatious.
Factual Background & Position of the Parties
[13] Mr. Lepan was injured as a result of a motor vehicle accident on June 11, 2008. The defendants were retained to pursue tort, benefits and long-term disability claims.
[14] The defendants issued a claim as to long term disability benefits as a result of a denial of long-term disability benefits to the plaintiff.
[15] The defendants also issued a tort claim on behalf of the plaintiff.
[16] In April 2011, the accident benefits claim involving the plaintiff’s insurer was settled by the plaintiff while represented by the defendants.
[17] In May 2012, Mr. Arvai assumed carriage of the tort claim of Mr. Lepan, ending the defendants’ retainer.
[18] In July 2013, Mr. Lepan settled the tort claim while represented by Mr. Arvai on a full and final basis and which was less than the third party liability policy limit available to indemnify him in that action.
[19] Mr. Lepan then brought this action against the defendants seeking general, aggravated, exemplary and punitive damages for negligent representation and misrepresentation in relation to the accident benefits and long-term disability settlements.
[20] The defendants have responded by Statement of Defence and submit, among other things, if there was a breach in the standard of care then if the plaintiff sustained any losses, the plaintiff was entitled to make up any shortfall in the long-term disability or accident benefits settlements in the tort claim.
[21] After submissions and with this court’s permission, the defendants refined the amendment request to the Statement of Defence which is attached as Appendix A. These amendments significantly walked-back the position initially taken by the defendants that had made specific reference to Mr. Arvai, amongst other features.
Defendants’ Position
[22] The defendants submit the Statement of Defence at Appendix A should be permitted to be amended particularly as to additional clauses 10.1, 10.2 and 10.3.
[23] The defendants submit that to establish negligence, the plaintiff must establish that he sustained damages from the alleged breach of duty of care.
[24] Section 267.8 of the Insurance Act, R.S.O. 1990, c. I.8 provides that the damages to which a plaintiff is entitled for income loss and loss of earning capacity shall be reduced by all payments in respect of the incident that the plaintiff received or was available before the trial of an action for statutory accident benefits in respect of the income loss and loss of earning capacity, under any laws of any jurisdiction or under an income continuation benefit plan and under a sick leave plan arising by reason of the plaintiff’s occupation or employment.
[25] The defendants submit that the implication of this statutory provision is whatever the amount that the plaintiff receives, improvident or otherwise, the plaintiff has recovered the full amount of the income loss from the tort defendant. If this statutory off-set is recognized as correct in law, the plaintiff should recover the full value of the income loss and there should be not be any loss. In such a circumstance, the defendants assert that the only routes the plaintiff could have recovered less than his full economic loss are as outlined in the defence.
[26] The defendants submit this is not mitigation but rather an outcome that flows from the particular legislation and amounts to a claim in a highly-regulated context.
Estate’s Position
[27] The plaintiff-estate’s position is that amended paragraph 10.1 is a fair pleading of fact but that 10.2 and 10.3 do not disclose a reasonable defence and are not tenable at law.
[28] The plaintiff asserts that the burden of proving causation rests with the plaintiff who will put forward evidence how the defendant’s alleged negligence caused him to sustain a loss. The defendants then would have to prove that the plaintiff failed to act reasonably to avoid to mitigate his damages.
[29] The plaintiff submitted that the defendants are doing indirectly what they do not intend to do directly, that is, allege that the plaintiff failed to mitigate its loss and shift the burden of proof onto the plaintiff regarding the steps the plaintiff ought to have taken to reduce losses caused by the defendants. The plaintiff argues that this otherwise improperly shifts the burden of proof to refute a defence and is inconsistent with the plaintiff’s duty to only need act reasonably to mitigate losses.
[30] More specifically, the plaintiff asserts that the defendant’s pleading based on the legal advice provided to the plaintiff is entirely irrelevant, is a privilege and does not bear upon the analysis of failure to mitigate or whether the voluntary compromise constituted a novus actus interveniens.
[31] Furthermore, the plaintiff argues damages will be based on the evidence on the case and not the plaintiff’s lawyer’s opinion of value in the tort claim, the pleadings suggested are improper and disclose no reasonable defence and ultimately confuses and complicates legal principals with the intention and effect to raise a disqualifying conflict of interest of the plaintiff’s lawyers.
Analysis and Commentary
[32] Under Rule 26, leave must be granted to amend a pleading on such terms as are just unless prejudice would result that could not be compensated by costs or an adjournment. In this case where examinations have yet to proceed, the issue as to prejudice does not arise.
[33] I am also mindful that this is not a motion under Rule 21 for the determination before trial of a question of law or striking out a pleading where it discloses no reasonable defence.
[34] I find that the proposed amendments are legally tenable. That is not to say that I am making any determination as to the law in this respect. I am mindful that the Insurance Act provision does not appear to a deeming provision or an expressed presumption. The legal interpretation of the statutory provision is an issue to address at another point in this proceeding and on a properly argued basis. A determination of the law at this point is not the issue before the court.
[35] Likewise, the concerns as raised by plaintiff’s counsel ought not to be overlooked. There are certainly valid and legitimate concerns that have been raised by the plaintiff and these may well yet be addressed in another context if and when raised by the parties.
[36] This court grants leave for the defendants to amend the statement of defence as provided in Appendix A.
Issue # 2: Removal of plaintiff lawyers as solicitors of record
General Legal Principles
[37] The court has the inherent jurisdiction to remove a lawyer from the record who has a conflict of interest. A conflict arises where there is a substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interests, amongst other reasons. The risk must be more than a mere possibility; it must be a genuine and serious risk to the duty of loyalty or to client representation arising from the retainer.
[38] A substantial risk means a risk is significant or even plausible that the material adverse effect will occur.
[39] In addition, professional commentary has indicated that a lawyer who is a necessary witness to testify should entrust the case to another lawyer.
[40] The law also recognizes the right of the litigant to its choice of counsel and that a litigant should not be deprived of this without good cause.
[41] The test is whether a fair-minded reasonably informed member of the public would conclude the proper administration of justice requires the removal of the lawyer.
[42] The determination is objective, fact-specific and based on an examination of all factors of the case. The factors that have been consistently applied in Ontario include the following:
- Stage of the proceeding;
- Likelihood that the witness will be called;
- The good faith or otherwise of the party making the application;
- The significance of the evidence to be led;
- Impact on the parties’ right to counsel of choice;
- Nature of the proceeding including a trial by judge or jury;
- Likelihood of a real conflict arising or evidence being tainted;
- Who is to call the witness and general trial fairness;
- Connection or relationship between counsel and the parties to the litigation;
- Any other relevant factor or consideration.
Additional Factual Background
[43] Although this action was commenced in December 2014, this action remains yet in its early stages with discoveries still to be conducted. There has been no discovery or expert opinion regarding whether the tort settlement of the plaintiff was fair and reasonable in the circumstances.
Position of the Plaintiff
[44] The plaintiff submits that there is nothing to suggest that the tort settlement the plaintiff entered into was improvident. The plaintiff pointed to the evidence of the defendant Mr. Burns that the settlement of the plaintiff’s tort claim was exceptionally good, significantly more than had been recommended by the defendants.
[45] The plaintiff also submits the application is premature, the defendants have yet to examine the spouse/estate trustee, the assertion by the defendants is blind speculation and without regard to the plaintiff’s right to counsel of its choosing and Mr. Arvai’s advice and recommendations are irrelevant to the analysis whether the plaintiff properly mitigated its losses arising from the defendants’ negligence in handling the accident benefits and long-term disability claims.
[46] In relation to the long-term disability settlement, the plaintiff maintains no evidence would be relevant from Mr. Arvai on how this effected the tort settlement and, further, any evidence of the defendants’ conduct on the tort settlement would properly come from expert opinion, the spouse of the deceased plaintiff and the tort defendants’ counsel in the underlying accident benefits and long-term disability settlements as to the amounts its’ clients preparedness to the plaintiff to settle the tort claim.
[47] The plaintiff has specifically not waived privilege in this case. Any communications between the plaintiff and Mr. Arvai remain privileged and confidential and, in any event, the plaintiff assert that Mr. Arvai’s advice and recommendations have no probative value to the analysis of whether the plaintiff failed to mitigate.
Position of the Defendants
[48] The defendants essentially allege that Mr. Arvai is a necessary and crucial witness to the proceedings since he will have to testify to recommendations and opinions in respect of the tort settlement, amongst other things in the action.
[49] The defendant’s position is largely predicated on the pleadings and not on established law at this point.
Analysis and Commentary
[50] Much of the position of the defendants is derived from the pleadings. As mentioned in the earlier discussion, this motion and the relief did not involve determinations of law. There is no doubt that the interpretation of the Insurance Act provision as cited earlier is novel and without precedent at this point.
[51] I agree with the plaintiff that the request at this stage is premature and would otherwise invite unwarranted speculation that cannot be properly weighed in relation to the plaintiff’s the right of counsel of choice.
Conclusions and Summary
[52] The defendants’ request for leave to amend the Statement of Defence in accordance with Appendix A is granted.
[53] The defendants’ request to remove plaintiff’s counsel as solicitor of record is dismissed.
[54] Although I am inclined not to award costs to either party, if either party requests costs, such submissions shall first be made by the plaintiff within 10 days of the date of this decision. If no submissions are made by the plaintiff within 10 days, the defendants shall make submissions within 20 days of the date of this decision. The responding party in either case shall serve and file responding submissions within a further 10 day period from receipt of submissions. The parties shall be restricted to written submissions of 2 pages plus supporting cases.
“Justice M. D. McArthur” Justice M. D. McArthur Released: November 1, 2018