ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO: CV-13-481216
DATE: 20140821
BETWEEN:
TERRA CRUZ and CARMEN CRUZ
Plaintiffs
– and –
JASON MCPHERSON, 546291 ONTARIO INC. OPERATING AS CITY CORE MECHANICAL LTD., 190207431 ONTARIO INC. OPERATING AS SUMMIT LEGAL SERVICES, MILKA POPOVA, FIREMAN WOLFE LLP, JACK FIREMAN AND WILLIAM WOLFE
Defendants
Doug Wright, for the Plaintiffs
Darren Kirupa, for the Defendants, Fireman Wolfe LLP, Jack Fireman, and William Wolfe
HEARD: August 19, 2014.
PERELL, J.:
REASONS FOR DECISION
A. INTRODUCTION
[1] The Plaintiff, Terra Cruz, was injured in an automobile accident. She and her husband, Carmen Cruz, sue, amongst others, Jack Fireman and William Wolfe, who are civil litigation lawyers, and their limited liability law partnership, Fireman Wolfe LLP.
[2] The Statement of Claim against Mr. Fireman, Mr. Wolfe, and Fireman Wolfe LLP asserts various causes of action for their allegedly missing the limitation period in the Cruzs’ personal injury claim against the co-Defendants, Jason McPherson and 546291 Ontario Inc., operating as City Core Mechanical Ltd.
[3] Pursuant to Rule 21 of the Rules of Civil Procedure, Mr. Fireman, Mr. Wolfe, and Fireman Wolfe LLP bring a motion to have the Cruzs’ claim struck out for failure to disclose a reasonable cause of action. They submit that the Cruzs’ Statement of Claim discloses no reasonable cause of action because the Cruzs were not clients of Fireman Wolfe LLP, but rather, they were clients of a licensed paralegal, the co-Defendant, 190207431 Ontario Inc., operating as Summit Legal Services.
[4] The co-Defendant, Milka Popova, is the principal of Summit Legal Services.
[5] Mr. Fireman, Mr. Wolfe, and Fireman Wolfe LLP submit that they have no contractual relationship and no duty of care to a non-client and, therefore, the Cruzs’ Statement of Claim should be struck out without leave to amend. Further, at a minimum, they assert that the claims against Mr. Fireman and Mr. Wolfe should be struck because these individual defendants are entitled to the protection of being members of a limited liability partnership.
[6] During the course of the argument, Mr. Fireman, Mr. Wolfe, and Fireman Wolfe LLP conceded that there was a viable claim against only Fireman Wolfe LLP for practicing in partnership with Summit Legal, and they conceded that there could be a viable claim for negligent misrepresentation against Fireman Wolfe LLP, but not against Mr. Fireman nor Mr. Wolfe. They, however, submitted that the claim for negligent misrepresentation as against Fireman Wolfe LLP had not been properly pleaded for want of a proper pleading of the reliance element of the tort.
[7] In my opinion, for the reasons that follow, the claim against Mr. Fireman, Mr. Wolfe, and Fireman Wolfe, LLP should be struck with leave to deliver a Fresh as Amended Statement of Claim with claims only as against Fireman Wolfe LLP, which amended pleading may assert claims for: (a) vicarious liability as a partner with Summit Legal; (b) professional negligence; and (c) negligent misrepresentation.
B. FACTUAL BACKGROUND
[8] As pleaded in the Cruz’s Statement of Claim, the Cruzs’ vehicle was stopped on Highway 403, in the City of Mississauga, when it was struck by a vehicle driven by Mr. McPherson, for whose vehicular negligence City Core Mechanical is liable.
[9] The Cruzs retained Summit Legal, a licensed paralegal, to provide them with legal services with respect to their automobile accident claims.
[10] The Statement of Claim pleads that there is a connection between Summit Legal and Fireman Wolfe LLP.
[11] For present purposes, the pertinent pleadings in the Statement of Claim are paragraphs 6-10, and 13-23, which state:
The Defendant 190207431 Ontario Inc. operating as Summit Legal Services. Summit is a Paralegal firm licenced by the Law Society of Upper Canada to provide legal services in the Province of Ontario. It has offices in the City of Scarborough in the Province of Ontario.
The Defendant Milka Popova resides in the City of Toronto in the Province of Ontario. She was at all material times the principal of Summit.
The Defendant Fireman Wolfe LLP was a limited liability partnership at all material times carrying on business as a law firm with offices located in the City of Toronto in the Province of Ontario.
The Defendant Jack Fireman resides in the City of Toronto in the Province of Ontario. He is a barrister and solicitor licensed to practise law by the Law Society of Upper Canada. At all material times he was a partner in Fireman Wolfe LLP
The Defendant William Wolfe resides in the City of Toronto in the Province of Ontario. He is a barrister and solicitor licensed to practise law by the Law Society of Upper Canada. At all material times he was a partner in Fireman Wolfe LLP.
Claim against Summit Popova, Fireman Wolfe LLP, Fireman and Wolfe
A representative of Summit attended at the Plaintiffs home on January 15, 2010 to discuss the details of the Plaintiffs’ accident.
During the meeting, Summit’s representative presented the Plaintiffs with an advertising brochure outlining their services. On the cover of the brochure in bold print were the names of Fireman Wolfe LLP and Summit. Fireman Wolfe LLP was identified as Summits’ legal counsel. The brochure represented that Summit works in partnership with Fireman Wolfe LLP
As a result of the meeting, the Plaintiffs signed a retainer agreement with Summit.
The Plaintiffs plead that the plain and ordinary meaning of the brochure and the thrust of the representations made by Summit’s representative was that Summit and Fireman Wolfe LLP would jointly prosecute all of the Plaintiffs’ claims arising from the subject motor vehicle accident.
The Plaintiffs plead that Fireman Wolfe LLP was aware that Summit was advertising its services and that it was representing to members of the pubic that there was a partnership between Summit and it.
Summit sent correspondence to the Plaintiffs accident benefits insurer TD Insurance Company in the course of prosecuting the claim for accident benefits. Summit’s letterhead included a reference to Fireman Wolfe LLP who represented to be Summit’s litigation counsel.
The Plaintiffs attempted to communicate with Summit beginning at the end of 2010 in order to determine the status of their claims, but no one from Summit responded. The Plaintiffs ultimately became so dissatisfied with Summit’s representation that they terminated the retainer in or about June 2011.
Summit wrote to the Plaintiff by letter dated June 8, 2011 advising that it would no longer be representing her. In that same letter, Summit advised if it is your intention to pursue a claim against the party or parties responsible for the accident you must commence a lawsuit by issuing and filing a Statement of Claim with the Court within two 2 years of the date of the accident. It was only at this point that the Plaintiffs discovered that a Statement of Claim had not been issued.
The Defendants Summit and Fireman Wolfe LLP did not advise the Plaintiffs that they were not commencing an action on their behalf against the parties who were responsible for the accident until more than two years after the date of the accident.
The Plaintiffs relied on the representations made by Summit’s representative at the initial meeting that they would manage all of her claims arising from the accident.
In the event that the Plaintiffs claim against the Defendants McPherson and City Core is statue barred because the limitation has expired, this is due to the negligence and or breach of contract of the Defendants Summit, Popova, Fireman Wolfe LLP, Fireman and Wolfe the particulars of which are as follows:
(a) they failed to meet the appropriate standard of care;
(b) they failed to commence an action in time;
(c) in the alternative, they failed to notify the Plaintiffs that they would not be commencing an action on their behalf before two years from the date of the accident; and,
(d) they failed to purchase utilize maintain and or manage a proper reminder tickler system.
[12] While the text is not set out in the Statement of Claim, save by incorporation by reference, the brochure prepared by Summit Legal contains the following description of Summit Legal Services:
Summit Legal Services specializes in the needs of accident victims injured in auto collisions. Located in Scarborough, our team of experienced paralegals, law clerks, and legal administrators are committed to the effective representation of all cases. We recognize that a serious car accident can leave you physically, emotionally and financially disabled. This is why we are here to help you assess your potential for a successful lawsuit against the at-fault party.
Summit Legal services works in partnership with Fireman Wolfe LLP a well-known and respected litigation firm which handles all serious motor vehicle accident cases.
[13] In the brochure, there is a banner heading with the title FIREMAN WOLFE LLP. Under the banner, is a photograph of Mr. Fireman and the following text:
Mr. Fireman is a member of the Canadian Bar Association, the Ontario Bar Association, the Ontario Trial Lawyers Association, the Advocates’ Society, and the American Trial Lawyers Association, and is a speaker and lecturer much in demand by many professional organizations.
For over thirty-four years, Mr. Fireman represented the Insurance Industry as defence counsel, before switching to the Plaintiff side in May 2000. Mr. Fireman continues to be available to act as counsel for other firms.
In the annual survey conducted by Lexpert, Jack has been honoured as ‘Most Frequently Recommended’ in the category of personal injury lawyers in the Toronto area for each of the 13 years the survey has been published. Additionally, Mr. Fireman was ranked as ‘Consistently Recommended’ in the area of commercial insurance litigation and was ‘Repeatedly Recommended’ in the area of products liability litigation.
In 2007, Mr. Fireman was honoured by the National Post/Financial Post in their inaugural listing of the ‘Best Lawyers in Canada’ under the category of Personal Injury Lawyers.
C. DISCUSSION AND ANALYSIS
1. Mr. Fireman, Mr. Wolfe, and Fireman Wolfe LLPs’ Argument
[14] At the argument of the Rule 21 motion, Mr. Fireman, Mr. Wolfe, and Fireman Wolfe, LLP withdrew their request that, as against them, the Statement of Claim should be struck in its entirety without leave to amend. They made a more focussed attack on the pleading.
[15] Assuming for the sake of argument that the Cruzs’ personal injury action is statute-barred, which may or may not be the case, Mr. Fireman, Mr. Wolfe, and Fireman Wolfe LLP conceded that the Cruzs had pleaded a viable claim that Fireman Wolfe LLP and Summit Legal were partners in a legal service business, that one of the partners; i.e,. Summit Legal, was negligent or in breach of contract, and that Fireman Wolfe LLP was vicariously liable for the negligence or breach of contract of its partner Summit Legal.
[16] However, even with this concession, Mr. Fireman and Mr. Wolfe, respectively, submitted that they, as individual lawyers, have no personal liability, because they are the limited partners of Fireman Wolfe LLP and, therefore, they are not vicariously liable. They submitted that the claims against them personally should be struck out without leave to amend.
[17] Mr. Fireman and Mr. Wolfe rely on the exemptions to liability for limited liability partners found in s. 10 of the Partnership Act, R.S.O. 1990, c. P. 5, as amended, which states:
Liability of partners
10.(1) Except as provided in subsection (2), every partner in a firm is liable jointly with the other partners for all debts and obligations of the firm incurred while the person is a partner, and after the partner’s death the partner’s estate is also severally liable in a due course of administration for such debts and obligations so far as they remain unsatisfied, but subject to the prior payment of his or her separate debts.
Limited liability partnerships
(2) Subject to subsections (3) and (3.1), a partner in a limited liability partnership is not liable, by means of indemnification, contribution or otherwise, for,
(a) the debts, liabilities or obligations of the partnership or any partner arising from the negligent or wrongful acts or omissions that another partner or an employee, agent or representative of the partnership commits in the course of the partnership business while the partnership is a limited liability partnership; or
(b) any other debts or obligations of the partnership that are incurred while the partnership is a limited liability partnership.
Limitations
(3) Subsection (2) does not relieve a partner in a limited liability partnership from liability for,
(a) the partner’s own negligent or wrongful act or omission;
(b) the negligent or wrongful act or omission of a person under the partner’s direct supervision; or
(c) the negligent or wrongful act or omission of another partner or an employee of the partnership not under the partner’s direct supervision, if,
(i) the act or omission was criminal or constituted fraud, even if there was no criminal act or omission, or
(ii) the partner knew or ought to have known of the act or omission and did not take the actions that a reasonable person would have taken to prevent it.
Same
(3.1) Subsection (2) does not protect a partner’s interest in the partnership property from claims against the partnership respecting a partnership obligation.
Partner not proper party to action
(4) A partner in a limited liability partnership is not a proper party to a proceeding by or against the limited liability partnership for the purpose of recovering damages or enforcing obligations arising out of the negligent acts or omissions described in subsection (2).
Extra-provincial limited liability partnerships
(5) This section does not apply to an extra-provincial limited liability partnership.
[18] Next, Mr. Fireman, Mr. Wolfe, and Fireman Wolfe LLP argue that the acknowledged to be viable vicarious liability claim against Fireman Wolfe LLP is, however, distinct from the negligence and negligent misrepresentation claims. They assert that it is plain and obvious that these distinct claims are not viable. They submit that the negligence claim should be struck out without leave to amend and the negligent misrepresentation claim should be struck out with leave to amend to properly plead the constituent element of reasonable reliance.
[19] They submit that the negligence claim is not viable because the Cruzs were not clients of any of Mr. Fireman, Mr. Wolfe, and Fireman Wolfe LLP, and it is only in rare and extraordinary circumstances, not present in this case, when a lawyer or law firm will be liable to a non-client.
[20] They submit that it is not reasonably foreseeable that Mr. Fireman, Mr. Wolfe, and Fireman Wolfe LLP should have a duty of care to non-clients and that in the circumstances of the immediate case, none of these Defendants had a duty of care with respect to the legal services provided by Summit Legal, an independent legal service provider. Mr. Fireman, Mr. Wolfe, and Fireman Wolfe LLP submit that they had no duty of care with respect to the clients of an independent legal service provider.
[21] Assuming that a duty of care was found to exist, Mr. Fireman, Mr. Wolfe, and Fireman Wolfe LLP also argue that it is plain and obvious that the Cruzs have not pleaded a viable negligent misrepresentation claim against them.
[22] They submit that the negligent misrepresentation claim should be struck but with leave to amend. They submit that the misrepresentation claim relates to the representation that Fireman Wolfe LLP and Summit Legal were partners, but that this misrepresentation claim is deficient because there is no allegation that the Cruzs relied on this representation.
[23] With respect to the negligence claim and also the negligent misrepresentation claim, Mr. Fireman and Mr. Wolfe repeat their argument that in their personal capacity they should not be parties to this litigation.
2. The Plain and Obvious Test
[24] Where a defendant submits that the plaintiff’s pleading does not disclose a reasonable cause of action, to succeed in having the action dismissed, the defendant must show that it is plain, obvious, and beyond doubt that the plaintiff cannot succeed in the claim: Dawson v. Rexcraft Storage & Warehouse Inc. (1998), 164 D.L.R. (4th) 257 (Ont. C.A.).
[25] Matters of law that are not fully settled should not be disposed of on a motion to strike: Dawson v. Rexcraft Storage & Warehouse Inc., supra, and the court's power to strike a claim is exercised only in the clearest cases: Temelini v. Ontario Provincial Police (Commissioner) (1990), 73 O.R. (2d) 664 (C.A.).
[26] The law must be allowed to evolve, and the novelty of a claim will not militate against a plaintiff: Johnson v. Adamson (1981), 34 O.R. (2d) 236 (C.A.), leave to appeal to the S.C.C. refused (1982), 35 O.R. (2d) 64 n. However, a novel claim must have some elements of a cause of action recognized in law and be a reasonably logical and arguable extension of established law: Silver v. Imax Corp.; Silver v. DDJ Canadian High Yield Fund.
[27] Generally speaking, the case law imposes a very low standard for the demonstration of a cause of action, which is to say that, conversely, it is very difficult for a defendant to show that it is plain, obvious, and beyond doubt that the plaintiff cannot succeed with the claim.
3. The Claims against Mr. Fireman and Mr. Wolfe
[28] Turning to the case at bar, it is conceded that the Cruzs have pleaded a viable claim for the vicariously liability of Fireman Wolfe LLP for the liability of its alleged partner, Summit Legal. Relying on s. 10 of the Partnership Act, it is submitted, however, that there is no viable claim for vicarious liability of Mr. Fireman and Mr. Wolfe and, therefore, the claim as against them should be struck.
[29] I agree – but for a different reason – that the vicarious liability claim should be struck as against Mr. Fireman and Mr. Wolfe.
[30] Based on the information contained in the marketing brochure, the Cruzs’ Statement of Claim alleges that there is a partnership between Summit Legal (a corporation) and Fireman Wolfe LLP. The Statement of Claim, however, does not allege - nor could it allege - that there is a partnership comprised of a corporation (Summit Legal), a limited partnership (Fireman Wolfe, LLP), and two lawyers (Mr. Fireman and Mr. Wolfe).
[31] In other words, Mr. Fireman and Mr. Wolfe are not alleged to be partners of the pertinent partnership comprised of Summit Legal and Fireman Wolfe LLP nor could that be alleged, because the brochure discloses a connection only between Summit Legal and Fireman Wolfe LLP. Mr. Fireman and Mr. Wolfe’s position is akin to that of Ms. Popova, who is the principal of Summit Legal, but not a partner of the requisite partnership.
[32] In still other words, it is not a matter of s. 10 of the Partnership Act that justifies striking the claim against Mr. Fireman and Mr. Wolfe. The reason that Mr. Fireman and Mr. Wolfe are not vulnerable to a claim based on vicarious liability is that they are not partners to the pertinent partnership. This is particularly true for Mr. Wolfe, who like the other partners and employees of Fireman Wolfe LLP, has only an indirect connection to Summit Legal.
[33] Section 10 of the Partnership Act may or may not be available to Mr. Fireman and Mr. Wolfe insofar as Fireman Wolfe LLP is being sued, because the qualifications found in s. 10 (3) of the Partnership Act may negate the exclusions of liability, but the pertinent point is that Mr. Fireman and Mr. Wolfe are not partners of the partnership comprised of Summit Legal and Fireman Wolfe LLP. Therefore, the claims for vicarious liability against Mr. Fireman and Mr. Wolfe should be struck out without leave to amend.
[34] For similar reasons, the claims against Mr. Fireman and Mr. Wolfe for negligence and negligent misrepresentation should be struck without leave to amend.
4. The Claims Against Fireman Wolfe LLP
[35] As noted above, it is now acknowledged that there is a tenable claim for vicarious liability as against Fireman Wolfe LLP.
[36] Although the claims as pleaded are sketchy and the Statement of Claim is not eloquent and wants for particularly, in my opinion, the Statement of Claim does plead novel but legally tenable tort claims against Fireman Wolfe LLP.
[37] With respect to the professional negligence claim against Fireman Wolfe, LLP, I agree that it is rare that a law firm will have a duty of care to a non-client and rarer still that a law firm will be liable if another legal-service provider is independently providing services to its client. However, the Cruzs do not fit the profile of a non-client of Fireman Wolfe LLP, who for the purposes of this motion are to be taken as promoting a connection with Summit Legal. During the argument of the motion, I suggested that the Cruzs might be better described as quasi-clients, where quasi has the meanings “seeming” “almost” or “as if it were.”
[38] Fireman Wolfe, LLP would have no conflict of interest in acting for the Cruzs and, indeed, if the brochure is to be believed, it is anticipated that a lawyer and client relationship will be established, if it is not already established by the fact, to quote the marketing brochure, that “Summit Legal Services works in partnership with Fireman Wolfe LLP a well-known and respected litigation firm which handles all serious motor vehicle accident cases.”
[39] When one recognizes that paralegals, like Summit Legal, are not licensed to act for personal injury plaintiffs to advance their tort claims in the Superior Court, the brochure that is incorporated into the factual context of the Statement of Claim does more marketing for Fireman Wolfe LLP than it does for Summit Legal. Given what the brochure describes, it is arguable that it was reasonable for the Cruzs, as lay persons, to believe that they had retained not only Summit Legal but also Fireman Wolfe LLP.
[40] One has the impression from the Statement of Claim that Fireman Wolfe LLP was outsourcing legal work to its business partner, Summit Legal. The marketing brochure suggests that there is a close connection between Summit Legal and Fireman Wolfe LLP. The pleaded facts in the Statement of Claim suggests that the connection between Fireman Wolfe LLP and Summit Legal was such that Fireman Wolfe LLP anticipated that after preparatory legal work had been performed for the Cruzs by Summit Legal, the law firm would take over and prosecute the Cruzs’ tort claims. It is, thus, not much of a stretch to accept that at this juncture of the case at bar, Fireman Wolfe LLP would have a duty of care to clients of outsourced legal work.
[41] The allocation of legal services between Summit Legal and Fireman Wolfe LLP has something of a reciprocal or reverse referral to it. The impression of a close connection between Summit Legal and Fireman Wolfe LLP makes it arguable that it is reasonably foreseeable that Fireman Wolfe LLP could and should have envisioned that they would have a duty of care to the clients of Summit Legal who would be quasi-clients of Fireman Wolfe LLP.
[42] By way of analogy, a family doctor might refer a patient to a specialist to perform a medical procedure and thereby discharge his duty of care to the patient by selecting an accredited specialist in that procedure; however, that is a different situation from the family doctor having a nurse practitioner prep a patient for a procedure that could only be performed by a doctor. In those circumstances, the family doctor would not have discharged his or her duty of care by the involvement of the nurse practitioner and would foresee a duty of care to the patient who he or she may not have met until after the nurse practitioner had done his or her preparatory work.
[43] I am not saying that it is plain and obvious that there is a duty of care in the circumstances of the case at bar. A judge on a summary judgment motion or after a trial may determine that the connection between Fireman Wolfe, LLP and Summit Legal does not give rise to a duty of care; however, for present purposes, on a Rule 21 motion, it is not plain and obvious that a conclusion of no duty of care is inevitable.
[44] The claims in the case at bar are novel, and it is still early days in the development of the law to govern the relationship between lawyers and licensed paralegals now that both have come under the regulation of the courts and the Law Society of Upper Canada.
[45] I am also not saying that there may be cases where it is plain and obvious that there is not a close enough connection between a law firm and an independent paralegal that the law firm would not have a duty of care to the paralegal’s client. However, that is not the case at bar, where, in my opinion, the Cruzs have pleaded enough so that at this juncture it is not plain and obvious that Fireman Wolfe LLP does not have a duty of care to the Cruzs.
[46] With respect to the negligent misrepresentation claim as against Fireman Wolfe, LLP, I do not necessarily agree with Fireman Wolfe LLP’s argument that the Statement of Claim is deficient in pleading the constituent element of reasonable reliance. However, I do agree that the Statement of Claim needs to be amended, if for no other reason than the claims against Mr. Fireman and Mr. Wolfe should be removed.
[47] The necessity of amending the Statement of Claim provides an opportunity to provide particulars and to better and more expressly plead the misrepresentation and the reliance elements of the negligent misrepresentation claim.
[48] In these circumstances, I think the appropriate order to make is to strike the claims against Mr. Fireman, Mr. Wolfe, and Fireman Wolfe, LLP in their entirety with leave to deliver a Fresh as Amended Statement of Claim with claims only as against Fireman Wolfe LLP, which amended pleading may assert claims for: (a) vicarious liability; (b) professional negligence; and (c) negligent misrepresentation.
D. CONCLUSION
[49] Order accordingly.
[50] In my opinion, success on the motion was divided and the appropriate order is to make the costs in the cause fixed at $4,000, all inclusive.
Perell, J.
Released: August 21, 2014
COURT FILE NO: CV-13-481216
DATE: 20140821
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TERRA CRUZ and CARMEN CRUZ
Plaintiffs
– and –
JASON MCPHERSON, 546291 ONTARIO INC. OPERATING AS CITY CORE MECHANICAL LTD., 190207431 ONTARIO INC. OPERATING AS SUMMIT LEGAL SERVICES, MILKA POPOVA, FIREMAN WOLFE LLP, JACK FIREMAN AND WILLIAM WOLFE
Defendants
REASONS FOR DECISION
PERELL J.
Released: August 21, 2014