Lauesen v. Silverman et al.

[Indexed as: Lauesen v. Silverman]

Ontario Reports

Court of Appeal for Ontario,

K.N. Feldman, Lauwers and Benotto JJ.A.

May 3, 2016

130 O.R. (3d) 665 | 2016 ONCA 327

Case Summary

Limitations — Discoverability — Plaintiff settling action for damages arising from car accident for approximately $26,000 on advice of her lawyer despite her unhappiness with amount — Plaintiff subsequently consulting another lawyer who obtained expert opinion that plaintiff's injuries met "catastrophic impairment" threshold under statutory accident benefits regime — Plaintiff suing her former lawyer for breach of contract, negligence and breach of fiduciary duty more than two years after entering into settlement — Former lawyer never advising plaintiff that she had made error — Claim against former lawyer not discoverable until plaintiff received legal advice that settlement was improvident — Claim not statute-barred.

L sustained physical and psychological injuries in a car accident and sued the at-fault driver. In 2005, her lawyer, S, advised her to accept a settlement offer of just over $26,000. L was unhappy with the amount, but followed S's advice. S continued to act for L in L's pursuit of statutory accident benefits. The solicitor-client relationship was terminated in 2009, when L was unable to afford a further retainer fee. L continued to suffer from injuries related to the accident and, in April 2010, retained another lawyer to pursue her statutory accident benefits claim. That lawyer obtained an expert opinion in June 2011 that L's injuries met the "catastrophic impairment" threshold under the statutory accident benefits regime. In August 2011, L commenced an action against the defendants for breach of contract, negligence and breach of fiduciary duty. On a motion by the defendants for summary judgment, the motion judge found that L knew or should have known that she had a claim against S when she entered into the settlement agreement and that the action was statute-barred. L appealed.

Held, the appeal should be allowed.

L's claim against S was not discoverable until L obtained legal advice, based on the expert report, that the settlement was improvident. A reasonable person with L's abilities and in her circumstances would not have realized that she had a claim against S when no one, including S, ever indicated that S may have made an error. It was not unreasonable for L to take just over a year before seeking further legal assistance to pursue her statutory accident benefits claim after her solicitor-client relationship with S ended. L exercised due diligence in discovering her claim.

Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors (2012), 113 O.R. (3d) 401, [2012] O.J. No. 5683, 2012 ONCA 851, 299 O.A.C. 151, 357 D.L.R. (4th) 480, 221 A.C.W.S. (3d) 460, consd

McSween v. Louis, 2000 5744 (ON CA), [2000] O.J. No. 2076, 187 D.L.R. (4th) 446, 132 O.A.C. 304, 97 A.C.W.S. (3d) 327 (C.A.), distd

Other cases referred to

Clarke v. Faust, [2016] O.J. No. 1486, 2016 ONCA 223; [page666] Nicholas v. McCarthy Tétrault, [2009] O.J. No. 4061, 2009 ONCA 692, 254 O.A.C. 197, 181 A.C.W.S. (3d) 49, affg [2008] O.J. No. 4258, 2008 54974, 171 A.C.W.S. (3d) 83 (S.C.J.) [Leave to appeal to S.C.C. refused [2009] S.C.C.A. No. 476]

Statutes referred to

Limitations Act, 2002, S.O. 2002, c. 24, Sch. B [as am.], ss. 4, 5, (1), (a), (b), (2)

Authorities referred to

Law Society of Upper Canada, Rules of Professional Conduct, rule 7.8, (1), (2),

APPEAL from the summary judgment of Pollak J. of the Superior Court of Justice dated April 16, 2015 dismissing an action.

Bryan D. Rumble and Alissa P. Goldberg, for appellant.

B. Robin Moodie and Bronwyn M. Martin, for respondents.

The judgment of the court was delivered by

[1] K.N. FELDMAN J.A.: — The appellant did not know she should sue her former lawyer for making an improvident settlement of a car accident action until she went to another lawyer who advised her to do so, after he obtained an expert opinion about the extent of her injuries. The issue in this case is discoverability for limitation purposes: when is it reasonable for a lay person to know that she should sue her former lawyer?

[2] The appellant was injured in a car accident on November 16, 2002. Her car was stopped at a red light when another driver struck her vehicle violently from behind. The appellant consulted the respondent solicitor, Ms. Fern Silverman (the respondent), who commenced an action against the other driver for damages suffered in the accident. At mediation on November 14, 2005, the appellant relied on the advice of the respondent to accept $26,169.36 in full settlement of the tort claim.

[3] The appellant continued to suffer from her injuries and asked the respondent to continue to assist her in obtaining statutory accident benefits. In 2009, the solicitor-client relationship between the parties ended when the respondent asked the appellant for a further monetary retainer to pursue her statutory accident benefits claim. In 2010, the appellant consulted another lawyer about pursuing that claim. When that lawyer obtained an opinion from a psychiatrist in June 2011, that the appellant's injuries met the "catastrophic" threshold under the statutory accident benefits regulation, the appellant commenced an action against the respondents for breach of contract, negligence and breach of fiduciary duty for advising her to accept an improvidently low settlement amount for her tort claim, as well as for failing to explain to her that the settlement was full and final. The action against the respondents was commenced [page667] on August 26, 2011, almost six years after the date of the impugned settlement.

[4] On a motion for summary judgment, the motion judge framed the issue as whether the appellant's claim was discoverable prior to August 26, 2009, two years before she issued her statement of claim against the respondents. The motion judge accepted the respondents' argument that the appellant had the necessary knowledge to bring her claim against them when she entered into the settlement, or at least that she should have had that knowledge more than two years before the claim was issued. The motion judge therefore granted summary judgment dismissing the action. This is the appeal of that order.

Facts

[5] The appellant sustained both physical and psychological injuries in a car accident in November 2002, where the other driver was at fault. In May 2004, she retained the respondent, who commenced an action against the driver of the other vehicle in November of that year. Following examinations for discovery in October 2005, the appellant attended a mediation in November with the respondent, who recommended that she settle the tort claim for the final offer of $26,169.36. Although she was unhappy with the amount, the appellant accepted the respondent's advice and agreed to the settlement. Her evidence before the motion judge was that although she felt the amount of the settlement was too low, she attributed the unfairness of it to the law and the legal system, and not to the respondent.

[6] The respondent continued to represent the appellant for the purposes of obtaining statutory accident benefits. The appellant continued to suffer pain and psychological trauma, and in May 2008, she wrote to the respondent, asking whether anything more could be done with respect to the car accident. In February 2009, the respondent advised the appellant that she would require a further retainer fee of $500 to continue to pursue her statutory accident benefits claim. The appellant's evidence was that she could not afford the retainer, and the solicitor-client relationship was terminated at that time. The respondent never indicated to the appellant that she had erred in recommending the settlement, nor did the appellant terminate the relationship for that reason. In fact, the respondent continues to maintain that she made no error.

[7] On the recommendation of a law clerk she spoke with, the appellant consulted and retained her current counsel, Mr. G. Joseph Falconeri, in April 2010, to assist her in obtaining her statutory accident benefits. He sent her for a medical-legal [page668] assessment in November 2010 to a psychiatrist, Dr. Richard Guscott, who provided a report in June 2011.

[8] That report provided his opinion that the appellant had suffered physical and psychological damage as a result of the accident that was sufficiently severe to meet the definition of "catastrophic impairment" under the statutory accident benefits regulation. Specifically, he found that the appellant showed Class IV marked impairments with respect to activities of daily living, social functioning, concentration, persistence and pace, as well as an increased likelihood of deterioration or decompensation in a work or work-like setting.

[9] Upon receipt of Dr. Guscott's report, Mr. Falconeri determined that it was appropriate for the appellant to sue the respondent for breach of contract, negligence and breach of fiduciary duty for recommending the improvident settlement, and he issued the statement of claim on August 26, 2011.

Summary Judgment

[10] Because the claim was issued more than two years after the impugned settlement, the respondents took the position that the action was statute-barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, and brought a summary judgment motion to determine that issue. The parties agreed that no trial was necessary and that the issue could be determined on summary judgment.

[11] The motion judge outlined the appellant's and respondents' positions and arguments. In granting summary judgment to the respondents, she agreed that the appellant had the necessary knowledge at the time of the settlement to bring her claim, or else that she ought to have taken steps to discover her claim and failed to do so. The motion judge specifically accepted the respondents' argument that the plaintiff's evidence was deficient because she did not explain how Dr. Guscott's report caused her to realize that she had a cause of action against the respondents, given that the report did not address either the settlement or the standard of care the respondent owed to the appellant.

Issues

[12] The issue to be resolved on this appeal is whether the motion judge erred in her interpretation and application of s. 5(1) of the Limitations Act, 2002 by finding that the appellant's claim was discovered or discoverable prior to August 26, 2009. [page669]

Analysis

[13] The governing statutory framework is ss. 4 and 5 of the Limitations Act, 2002, which state:

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

5(1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1)(a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

[14] In this case, the "injury, loss or damage" is the impugned settlement of the car accident claim that the appellant made with the driver of the other car, on the advice of her lawyer, the respondent.

[15] When a person settles an action, it is most often for an amount that is less than the full amount of the claim. It is based on a compromise reached by both sides in order to finalize the litigation without incurring the additional cost, time and risk of an uncertain result in proceeding to trial. Many factors go into the decision to settle an action rather than have a trial. They include the perceived strength of the case, the availability of necessary evidence, the credibility and reliability of that evidence, and the delay until a trial date, to name but some of the factors.

[16] The fact that a person accepts a settlement that is less than the full amount of the claim does not mean the person has suffered an actionable loss. The person has made a calculated assessment of all of the relevant factors and decided to accept an amount that reflects that assessment and is acceptable on that basis.

[17] That is what occurred in this case. At the time, the appellant was not happy with the amount she was receiving. That is [page670] quite normal. But she accepted it based on her lawyer's advice. It would be anomalous indeed if every settlement of an action for less than the amount of the claim were viewed as an injury, loss or damage based on breach of contract, negligence or breach of fiduciary duty by the lawyer acting for the settling party.

[18] The respondent's position continues to be that the settlement was appropriate. She maintains there was no injury, loss or damage at all. However, as the alleged improvidence of the settlement forms the basis of the appellant's claim, the issue for limitation purposes is when the appellant knew about it and when she ought to have known about it.

[19] The respondents submitted on the motion that the appellant was aware of the following facts before August 26, 2009, which was two years before the statement of claim was issued:

the appellant had settled her tort claim arising out of the accident at the mediation on November 14, 2005;

the appellant was unhappy with the settlement amount, and had been told by her parents that it was insufficient;

the appellant continued to suffer from significant physical and psychiatric injuries;

the appellant had been diagnosed with chronic pain syndrome, post-traumatic stress disorder, fibromyalgia, chronic psychiatric difficulties, anxiety and major depression;

the appellant was unable to pay for her needs and treatments; and

-- the appellant required ongoing help and treatment.

[20] The respondents argued before the motion judge that the appellant was unhappy with her 2005 settlement, but did nothing to investigate its propriety until 2010. They submitted that ignorance of the law or the legal consequences of the facts does not postpone the running of the limitation period. They also argued that Dr. Guscott's expert report added nothing new to the appellant's knowledge of the facts supporting her claim, nor did it comment on the settlement or the appropriate standard of care, and it therefore was irrelevant to the determination of when the limitation period began to run. In the alternative, they argued that the appellant was not duly diligent in seeking to acquire the material facts that gave rise to her claim.

[21] The motion judge did not make a finding whether the appellant had actual knowledge of the material facts underlying her claim at the time of the settlement, or when a reasonable [page671] person with the appellant's abilities and in her circumstances first ought to have known of them. It was implicit in the finding that the appellant's action was statute-barred that the motion judge accepted the respondents' argument that the appellant knew or ought to have known she had a claim more than two years before the statement of claim was issued on August 26, 2011.

[22] I will address each of the respondents' arguments. Accepting that the appellant knew the facts set out above, at para. 19, those facts were also known to the respondent, who continued to act as the appellant's lawyer to pursue her statutory accident benefits claim until February 2009. Those facts did not cause the respondent to consider that the appellant had a claim against her. Had she thought otherwise, she was obliged by rule 7.8(1) of the Law Society of Upper Canada's Rules of Professional Conduct to advise the appellant that she had made an error. And in accordance with rule 7.8(2), she would also have had to notify her liability insurer, LAWPRO, to ensure the client would be indemnified, if required.

[23] Advising a client of an error or omission will normally give the client knowledge of the facts necessary to know that she has a claim, and thereby commence the running of the limitation period under s. 5(1)(a). However, that did not occur in this case.

[24] The appellant's uncontradicted evidence was that although she felt the settlement was unfair as far back as 2005, she did not know the settlement was improvident or that she had a claim against the respondent until she was so advised by her new lawyer, based on Dr. Guscott's report. That responds to s. 5(1)(a) of the Act. It also responds to s. 5(2), as it rebuts the presumption that she knew of the matters referred to in s. 5(1)(a) on the day she entered into the settlement.

[25] Under s. 5(1)(b), the question is when a reasonable person with the appellant's abilities and in her circumstances ought to have first known that she had a claim against the respondent for breach of contract, negligence or breach of fiduciary duty for recommending an improvident settlement. In other words, when is it reasonable for a lay person to know that she should sue her lawyer?

[26] Until the appellant retained her current counsel, no one advised her that the respondent may have made an error in recommending the settlement. A leading recent decision on this issue is Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors (2012), 113 O.R. (3d) 401, [2012] O.J. No. 5683, 2012 ONCA 851.[^1] [page672] In that case, a lawyer erred in his calculation of a statement of adjustments for the purposes of minutes of settlement, leaving his client liable for a deficiency. The lawyer assured his client he had not made an error. When the client sued the lawyer within two years of the court finding against the client on the deficiency, the lawyer moved for summary judgment on the basis that the claim was statute-barred because the client should have known about the lawyer's error once the statement of claim in the deficiency action had been issued. The motion judge granted summary judgment, but this court allowed the appeal.

[27] The appellant in that case had been a client of the respondent lawyer for 20 years. The lawyer repeatedly assured the client he had not made an error and was also involved in the defence of the deficiency action. He never advised the client in accordance with rule 7.8 (then rule 6.09) of the Rules of Professional Conduct that he might have made an error. Furthermore, none of the senior litigation lawyers the appellant retained to defend the deficiency action ever told him he had a claim against his lawyer.

[28] Those two factors were determinative for Laskin J.A. in concluding, based on the modified objective test under s. 5(1) (b), that the claim was not discoverable until the court in the deficiency action found that the lawyer had made an error in his calculation. Laskin J.A. observed that it lay ill in the mouth of the lawyer to say that although he had maintained throughout that he made no error, the client should have known that he did.

[29] Unlike in Ferrara, where the correctness of the statement of adjustments prepared by the lawyer was in dispute in the deficiency action, in this case, no issue was ever raised about the propriety of the settlement. The respondent never advised or suggested to the appellant that she had made an error, and she continued to act for the appellant in pursuing her further rights arising out of the car accident.

[30] Moreover, although the appellant in this case did not consult other senior litigation lawyers -- as was the case in Ferrara -- neither did she receive legal advice from anyone else while the solicitor-client relationship with the respondent was ongoing as to any potential problem with the settlement.

[31] For these reasons, although the facts of Ferrara are different in some respects, the factors relied upon by Laskin J.A. are nevertheless applicable. On the record in this case, a reasonable person with the appellant's abilities and in her circumstances would not have realized that she had a claim against the respondents, when no one, including the respondent, indicated to her that an error might have been made with respect to the settlement. [page673]

[32] The next argument, accepted by the motion judge, was that the appellant did not explain how the opinion of Dr. Guscott caused her to realize that she had a claim against the respondent because it did not address the respondent's alleged negligence or the settlement.

[33] This conclusion constitutes a misapprehension of the evidence by the motion judge. The expert opinion of Dr. Guscott made clear for the first time that the extent of the appellant's injuries from the accident was legally significant in that it met the "catastrophic" threshold for the purposes of a statutory accident benefits claim. The appellant's evidence was that on the basis of that opinion, Mr. Falconeri concluded that the appellant should not have settled her tort claim for such a low amount and that her former lawyer was at fault for advising her to do so.

[34] It was only with that information, and with the legal advice of her new lawyer, that the appellant first knew or had the ability to know that she had a claim against the respondents.

[35] The motion judge equated the case to McSween v. Louis, 2000 5744 (ON CA), [2000] O.J. No. 2076, 187 D.L.R. (4th) 446 (C.A.), a medical malpractice action commenced only after the plaintiff patient obtained a medical expert opinion. In that case, this court held that the action was statute-barred and that the receipt of the expert opinion was not a determinative factor.

[36] The court explained that it was the type of case where a medical opinion was not necessary for the plaintiff to know the material facts on which to base an action against her doctor. That was because when the medical procedure was performed, the plaintiff knew something had gone wrong. In any event, the expert's letter did not add any new information to what the plaintiff already knew about the circumstances of the injury, or offer an opinion as to its cause. The McSween case is wholly distinguishable.

[37] The motion judge also accepted the respondents' submission that the appellant's ignorance of the law or the legal consequences of the facts did not postpone the running of the limitation period. However, that proposition does not assist the respondents in this case because the appellant did not know the material facts that would constitute the elements of a cause of action against the respondents. Perell J. explained the concept in Nicholas v. McCarthy Tétrault, 2008 54974 (S.C.J.), at para. 27, affd [2009] O.J. No. 4061, 2009 ONCA 692, 254 O.A.C. 197, leave to appeal to S.C.C. refused [2009] S.C.C.A. No. 476:

The circumstance that a potential claimant may not appreciate the legal significance of the facts does not postpone the commencement of the limitation [page674] period if he or she knows or ought to know the existence of the material facts, which is to say the [constituent] elements of his or her cause of action. Error or ignorance of the law or legal consequences of the facts does not postpone the running of the limitation period: Coutanche v. Napoleon Delicatessen (2004), 2004 10091 (ON CA), 72 O.R. (3d) 122 (C.A.); Calgar v. Moore, [2005] O.J. No. 4606 (S.C.J.); Milbury v. Nova Scotia (Attorney General) (2007), 2007 NSCA 52, 283 D.L.R. (4th) 449 (N.S.C.A.); Hill v. South Alberta Land Registration District (1993), 1993 ABCA 75, 100 D.L.R. (4th) 331 (Alta. C.A.).

(Emphasis added)

[38] The respondents' alternative argument was that the appellant did not exercise due diligence in attempting to gain knowledge of the material facts underlying her claim. The motion judge did not address this issue because she found that a reasonable person in the appellant's circumstances would have known the facts necessary to bring this claim at the time of the settlement, or at least two years prior to the date on which the statement of claim was issued.

[39] In order to analyze this allegation, it is necessary to examine the timeline of events. The settlement was made in November 2005. The respondent continued to represent the appellant with respect to her ongoing statutory accident benefits claim until February 2009. The respondent never advised the appellant of any error in her advice to accept the settlement. In February 2009, the solicitor-client relationship ended because the appellant was not able to pay a further monetary retainer -- not because she was dissatisfied with the respondent as a lawyer.

[40] As she continued to suffer from injuries related to the accident, and needed money to cover her expenses, about a year after the termination of the solicitor-client relationship, the appellant accepted the advice of a law clerk to consult and retain her current lawyer. Until Mr. Falconeri received the expert medical-legal opinion, he did not have enough information to decide whether to pursue a claim against the respondents. It took almost a year to obtain that opinion, but that delay was not the subject of complaint on the motion record.

[41] In my view, it was not unreasonable for the appellant to take just over a year before seeking further legal assistance to pursue her statutory accident benefits claim, and she exercised due diligence in discovering her claim. This is especially so in the circumstances of this case for two reasons: (1) she left her first lawyer, the respondent, only because she was unable to afford her further assistance, and not because of any concern about the propriety of the settlement; and (2) she had no basis to believe that she might have a claim against the respondent or that the respondent had made any error or breach of duty in [page675] advising her to accept the settlement, and therefore there was nothing for her to investigate.

Conclusion

[42] The motion judge erred in her interpretation and application of s. 5(1) of the Limitations Act, 2002 to the circumstances of this case. The appellant did not have knowledge that she had a claim against her former lawyer, the respondent, until she learned about it from her current counsel, based on an expert medical-legal opinion he obtained. The motion judge misapprehended the significance of that expert opinion. It was the first indication to the appellant and her new lawyer that her injuries from the accident were very significant and warranted more compensation than she had received from the settlement.

[43] Furthermore, given that the appellant had no reason to believe there was anything to investigate with respect to a potential claim against the respondent, she exercised reasonable due diligence in the circumstances of this case.

[44] I would therefore allow the appeal and set aside the order of the motion judge that the appellant's claim is statute-barred, with costs to the appellant in the amount of $10,000, inclusive of disbursements and HST. Given that the parties agreed that the motion should be decided by summary judgment, I would order judgment to go that the claim is not statute-barred and may proceed to trial on the merits.

Appeal allowed.

Notes

[^1]: See, also, Clarke v. Faust, [2016] O.J. No. 1486, 2016 ONCA 223, which was decided after the argument in this case.

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