Court File and Parties

Citation: Anderson v. McKellar, 2017 ONSC 967 Court File No.: CV-11-436787 Date: 2017-02-10 Superior Court of Justice - Ontario

Re: Charles Anderson, Plaintiff And: James McKellar, John Doe #1, John Doe #2, Peter Trebuss, Leanne Rapley, and Maddie Trebuss Madelyn Strader, Defendants

Before: Madam Justice Darla A. Wilson

Counsel: Ian Furlong, Counsel for the Plaintiff Patrick Wymes, Counsel for the Defendant McKellar in his personal capacity; Sheldon Gilbert Q.C., Counsel for the Defendant McKellar; Todd J. McCarthy, Counsel for the Defendants Trebuss, Rapley & Strader

Heard: February 6, 2017

Endorsement

[1] Today’s attendance was arranged for the hearing of the motion by Mr. Wymes for an order granting leave to permit the Defendant James McKellar [“McKellar”] to have more than one counsel of record. That motion was originally presented to me when I presided at a pre-trial in this action and I declined to hear it at that time. I advised Mr. Wymes the motion ought to be brought before the trial judge.

Background

[2] This action is a claim for damages sustained by the Plaintiff, Charles Anderson [“Anderson”], arising from an incident that occurred at a party held at the home of the Defendant Leanne Rapley [“Rapley”] and hosted by Rapley’s daughter, the Defendant Madelyn Strader [“Strader”] on October 31, 2009.

[3] The Plaintiff was at the party and was struck in the eye by a beer bottle allegedly thrown by McKellar. At the time, McKellar was seventeen years of age, in high school, and living at home with his parents.

[4] The claim was issued on October 27, 2011 naming as defendants McKellar, as well as the owners of the house and Rapley’s daughter who organized the party. It was served on McKellar shortly thereafter. McKellar’s parents referred the claim to Allstate, with whom they had their house insured. After a preliminary investigation, Allstate advised James McKellar and his parents that if it were found that he threw the beer bottle at the Plaintiff there would be no insurance coverage as that would be an intentional or criminal act for which the policy would not respond. Allstate requested that the McKellars sign a non-waiver agreement, which Mr. and Mrs. McKellar did on October 25, 2011. That agreement permitted Allstate to investigate the claim, defend the action on behalf of James McKellar and settle the case. The relevant portions of the non-waiver agreement are as follows:

The insurer may carry on negotiations toward possible settlement in respect of claims or actions arising from the occurrence without judgment against the undersigned or without the further consent of the undersigned.

The insurer may settle and pay any claims arising from the occurrence without a judgment having been obtained against the undersigned…

[5] After the execution of the non-waiver agreement, Allstate retained counsel, Sheldon Gilbert, Q.C. [“Mr. Gilbert”] who delivered a Statement of Defence and Crossclaim on behalf of McKellar which denied that McKellar threw a beer bottle at the Plaintiff. The other defendants were represented by Todd McCarthy [“McCarthy”].

[6] By letter dated January 19, 2012, Mr. Gilbert wrote to McKellar and advised him that he had been retained by the insurer to defend him in the lawsuit. His correspondence contained the following statements:

You are being provided with a defence to this lawsuit pursuant to a reservation of rights and non-waiver agreement, and with no obligation or commitment on the part of Allstate to provide you with any indemnity in respect of the claim brought against you as there may not be coverage under the Allstate policy for such claims, depending on the ultimate findings of fact as to what transpired.

I am enclosing herewith copy of the Statement of Claim which has been delivered in this matter. You will note that the total amount claimed against you and others in this lawsuit is $6,000,000 plus pre-judgment interest, plus legal costs.

I am informed by your insurance company that your applicable homeowner’s policy limit at the time of this occurrence was $2,000,000. While the amount claimed rarely, if ever, reflects the actual value of the claim, it does nonetheless represent a maximum potential exposure.

As there is a potential coverage issue and this amount is substantially in excess of your policy limit, you have the right to retain a personal solicitor at your own expense to protect your interest in this regard. Should you elect to do so, I would be pleased to cooperate with such solicitor in the mutual defence of this lawsuit.

I shall, in any event, be continuing to defend you in this matter in accordance with the instructions received from your insurance company… [emphasis mine].

[7] By letter dated September 13, 2012, Mr. Wymes advised Mr. Gilbert that James McKellar had retained him “with respect to his exposure over policy limits”. Mr. Wymes confirmed in that letter that Mr. Gilbert acted for McKellar pursuant to a homeowner’s policy of insurance issued by Allstate, with policy limits of $2 million.

[8] The action proceeded through the usual stages, and was fixed for trial on January 30, 2017. I presided over the pre-trial conference on October 24, 2016. All counsel were in attendance including Mr. Wymes. At that time, he advised that he was personal counsel for McKellar for the claims above policy limits and he stated that he would be bringing a motion to be appointed as co-counsel for McKellar at the trial.

[9] Efforts were made at the pre-trial to resolve the case but the action did not settle at that time. I arranged a continued pre-trial conference before me on January 12, 2017. A joint offer to settle was made by Mr. McCarthy and Mr. Gilbert. The day following the continued pre-trial the Plaintiff accepted the joint offer to settle of the defendants.

[10] Shortly thereafter, I was contacted by counsel requesting an appointment before me as Mr. Wymes had written advising that his client did not consent to the settlement.

[11] The date of February 6 was provided and Mr. Wymes advised he was bringing his motion for an order granting leave to McKellar to have two counsel of record. Mr. Gilbert filed responding materials. As well, the Plaintiff brought a motion for judgment in accordance with the settlement. Mr. Wymes filed responding materials to the Plaintiff’s motion and I advised counsel that I would hear both motions.

[12] Prior to the hearing date for the motions, Mr. Wymes delivered to the other lawyers a letter from McKellar terminating Mr. Gilbert’s representation of him on this claim. As well, he served and filed a Notice of Change of Solicitors with the Court indicating that he, Mr. Wymes, acted for McKellar, and not Mr. Gilbert. Mr. Wymes instructed other counsel and their assistants not to correspond with Mr. Gilbert any further as he, Mr. Wymes, was counsel of record for McKellar.

Positions of the Parties

Mr. Wymes

[13] It was difficult to ascertain with any precision exactly what Mr. Wymes’s position was on his own motion. Initially, he advised that he was withdrawing the motion for an order appointing him co-counsel of record for McKellar, because it was no longer necessary since he had served and filed a Notice of Change of Solicitors and consequently, he was counsel of record and he did not require an order to that effect. Later, however, he indicated that he wished to argue his motion.

[14] Mr. Wymes asserts that Mr. Gilbert’s retainer arose from the non-waiver that was signed October 25, 2011. He argues that the non-waiver was not signed by James and as such, it is improper and not binding. He submits that Mr. Gilbert’s retainer was “unlawful” and that he “abandoned” McKellar. He requests an order that he be formally appointed as counsel for McKellar, in the event that such an order is necessary.

[15] Mr. Wymes acknowledges that he has been advised that the Plaintiff accepted the settlement offer made by the Defendants in the sum of $250,000, of which Allstate is contributing $25,000. He will not consent to the settlement on behalf of McKellar because he has fees of approximately $60,000 as a result of his retainer with McKellar and he expects the fees to be paid out of the settlement proceeds. He wrote to the solicitor for the Plaintiff on numerous occasions requesting that he restrict the claims to the policy limits of the Allstate policy and they refused to do so. As a result, Mr. Wymes submits, McKellar had to retain counsel to represent him for the amount over the policy limits and McKellar should have those fees paid by the Plaintiff.

Mr. Gilbert

[16] Mr. Gilbert submits that through his parents’ homeowner’s policy with Allstate, McKellar was entitled to potential liability coverage, subject to the terms and conditions of the policy. A non-waiver was signed by the McKellars, given the coverage issue. After that, the insurer appointed Mr. Gilbert to defend McKellar in this lawsuit and Mr. Gilbert was counsel of record for McKellar. He notified McKellar that the claim as pleaded exceeded the policy limits and advised that he could retain his own counsel at his expense. As counsel for McKellar, Mr. Gilbert attended the examinations for discovery, mediation and pretrial conferences.

[17] Mr. Gilbert points out that Mr. Wymes never raised the issue of Mr. Gilbert’s retainer until very recently when the case was in the process of being settled. In fact, in earlier correspondence, Mr. Wymes acknowledged that Mr. Gilbert acted for McKellar pursuant the insurance policy issued to his parents. Furthermore, Mr. Wymes was aware throughout that he was not counsel of record because the solicitor for the Plaintiff refused to allow him to ask questions of the Plaintiff at the examination for discovery in 2013 and told him he was not counsel of record so he had no entitlement to participate. Mr. Wymes knew he required a court order to permit him to be co-counsel of record, so his recent filing of the Notice of Change of Solicitor, particularly in light of his pending motion, was highly improper, as was instructing other counsel not to communicate with Mr. Gilbert.

[18] In any event, the law is clear that the choice of counsel lies with the insurer and an order granting leave to an insured’s personal counsel to be appointed co-counsel is extraordinary. Mr. Gilbert negotiated a settlement on McKellar’s behalf in the sum of $25,000 for which the insurer agreed not to pursue McKellar, so he did precisely what his mandate was. The insurer has no obligation to pay any fees incurred by McKellar through his retainer of Mr. Wymes.

Mr. McCarthy

[19] Mr. McCarthy acts pursuant to the homeowner’s policy issued to the owners of the premises where the party was held. He advises he is in complete agreement with the position articulated by Mr. Gilbert.

Mr. Furlong

[20] Mr. Furlong acts for the Plaintiff and he submits that the Plaintiff accepted the settlement offer of the Defendants on January 13, 2017 in the sum of $250,000 all inclusive. There is no basis upon which the Plaintiff ought to pay the legal bill of Mr. Wymes, nor should it be an impediment to finalizing the settlement. It is abundantly clear that an offer to settle was made and accepted and judgment should issue.

Analysis

The motion for an order appointing Mr. Wymes co-counsel

[21] I will deal first with the motion brought by Mr. Wymes. An order appointing co-counsel is an unusual order; the law is clear that there must exist special circumstances justifying such an order: Lau v. Bayview Landmark Inc.[^1] If there was, for example, a conflict of interest, that might constitute such special circumstances, but that does not exist in the case before me. Mr. Wymes does not suggest that Mr. Gilbert was in a conflict of interest. It is important to note that the interests of Mr. Wymes and Mr. Gilbert were the same: to settle the case within the policy limits and eliminate any personal exposure of McKellar to a large award. In my opinion, Mr. Gilbert did exactly what McKellar would have hoped he would do: he resolved the claim well under the policy limits and eliminated any personal exposure McKellar might have to pay a large damage award. Further, Mr. Gilbert confirmed that the insurer was not going to seek payment from McKellar for the amount of its contribution to the settlement.

[22] Mr. Wymes relies on 755568 Ontario Ltd. v. Linchris Homes Ltd.[^2], a decision of Master Sandler, as support for the relief sought on his motion. However, this decision is so factually different from the case before me that it is of little, if any, assistance, to his position. In the Linchris Homes case, there was a counterclaim advanced against the Plaintiff and the Master correctly noted that “in personal injury litigation where there is a counterclaim, the plaintiff will typically be covered by liability insurance and the terms of the policy will entitle the insurer to conduct the defence of the counterclaim...” This statement is completely at odds with the position Mr. Wymes advances before me on his motion and instead, supports the argument of Mr. Gilbert: that his retainer emanates from the insurance policy which provides coverage for the loss and thus, according to its terms, the insurer is entitled to select counsel for the insured.

[23] An order for separate representation is an exceptional one and is only rarely granted. Generally, such orders are requested when there are multiple Plaintiffs or Defendants whose interests maybe different: Lau v. Bayview Landmark. There are cases where there are claims advanced against a defendant, some of which may be covered by an insurance policy and some which are not; in those cases, clearly there will be two counsel of record for the Defendant.

[24] In response to my inquiry, Mr. Wymes advised me that he had never read the homeowner’s policy of insurance issued by Allstate to Mr. and Mrs. McKellar. Mr. Gilbert provided the court with a copy and I set out the relevant provisions from the Liability portion of the policy:

We will pay all sums which you become legally liable to pay as compensatory damages because of unintentional Bodily Injury or Property Damage;

We will defend any suit against you alleging bodily injury or property damage and seeking compensatory damages, even if it is groundless, false or fraudulent. We reserve the right to investigate, negotiate, and settle any claim or suit if we decide this is appropriate. We reserve the right to select legal counsel, and reserve the right to only pay for the legal counsel we select. [Emphasis mine].

[25] The provisions in this homeowner’s policy are standard terms, they are not unusual: the insurer has the right to select counsel to represent an insured named as a defendant in a negligence suit. When claims as pleaded exceed the limits of the policy of insurance, counsel retained by the insurer are required to notify the insured of the potential for personal exposure if the value of the claims exceed the available policy limits. It is up to the insured to decide if he or she wishes to retain their own counsel in these circumstances. If they choose to do so, the policy makes it clear that the legal fees incurred are the responsibility of the individual, not the insurer.

[26] Here, not only does the insurance policy stipulate that the insurer shall appoint counsel on behalf of the insured who is named as a defendant in a lawsuit, the letter from Mr. Gilbert dated January 19, 2012 advising McKellar of the amounts claimed in excess of the policy limits, confirms that if McKellar decides to retain a personal solicitor, he does so at his own expense. Thus, from the outset of this litigation, both McKellar and Mr. Wymes knew that any account delivered by Mr. Wymes would not be paid by the insurer.

[27] In his submissions, on multiple occasions, Mr. Wymes described the retainer of Mr. Gilbert as “unlawful”, “improper” and asserted that he had “no legal authority to act”. When I asked Mr. Wymes if he had any legal authority to support this position, he acknowledged that he did not.

[28] In Hoang v. Vicentini[^3] the Ontario Court of Appeal set out the governing principles of law dealing with the divergence of interest between the insurer and the insured. The Court stated that the timing of a motion dealing with personal counsel for an insured is important:

The potential tension between insurer and insured which is manifested by a reservation of right by the insurer is not, in itself, sufficient to require the insurer to surrender control of the defence…Generally, an insured should take prompt action when it thinks appointed counsel has a conflict of interest. Where an insured is of the view that a sufficient divergence of interests with its insurer exists to justify the insurer paying for counsel retained by the insured, the insured generally moves before the court for declaratory relief to that effect at the early stages of the defence of the action.

[29] Here, the motion was brought at the last moment, right before commencement of trial. As Brown J.A. stated in Hoang, “In my view, where a party forms the view that the divergence of interests between the insurer and its insured is such that the insured’s representation by counsel appointed by the insurer might prejudice the fairness of a trial, the party is obliged to seek appropriate relief promptly from the court, certainly well before trial. Consequently, the appellants’ lengthy delay in raising the issue weighs heavily against their submission.”

[30] It is significant that Mr. Wymes took no issue with the retainer of Mr. Gilbert until very recently, when the action was settling. Although he advised me that he wished to be counsel of record at the trial, Mr. Wymes never submitted at either pretrial that he objected to the settlement of the action or that the non-waiver agreement was not binding or that Mr. Gilbert’s retainer was improper. It was only after he learned that the Plaintiff was intending to accept the offer to settle made by the Defendants that he purported to terminate Mr. Gilbert’s retainer and he served and filed a Notice of Change of Solicitor.

[31] After serving the Notice of Change of Solicitors, Mr. Wymes advised counsel and their assistants not to send any further communication to Mr. Gilbert. He also advised the Trial Co-Ordinator at the court to remove Mr. Gilbert from any future communications. When the assistant for Mr. Furlong sent Mr. Gilbert the email from Mr. Wymes on February 3, Mr. Wymes sent her a caustic email stating that she had “breached privilege” for which she and the lawyers for the Plaintiff would be held responsible. That email was marked as Exhibit A at the motion.

[32] Mr. Wymes sent a letter on February 3, 2017 to Mr. Gilbert, which was marked as Exhibit B at the hearing of the motion. In that letter, Mr. Wymes told Mr. Gilbert he was no longer counsel for record for McKellar. He went on to state, “As such and without limitation, if you appear before the court on Monday 6 February 2017 in any capacity whatsoever, Mr. McKellar will object and deem your conduct to be a further breach of the fiduciary duties you owe him and continue to owe him in your capacity as his former lawyer.”

[33] The retainer of Mr. Gilbert by the insurer to defend McKellar in this action was entirely proper and in accordance with the terms of the policy issued to Mr. and Mrs. McKellar. There was no divergence of interest between Mr. Gilbert and McKellar and furthermore, Mr. Wymes and Mr. Gilbert had the common objective of ensuring the claim was settled within the policy limits of McKellar. There is no basis upon which to make an order appointing Mr. Wymes as co-counsel for McKellar. The motion is dismissed.

[34] The Notice of Change of Solicitors that was filed by Mr. Wymes the morning of the motion, February 6, 2017, is improper and is of no force or effect.

The Plaintiff’s motion for judgment

[35] The Plaintiff moves for judgment in accordance with the accepted offer. It is not disputed that on January 13, 2017, following the continued pre-trial before me, the Defendants made a joint offer of settlement for the all-inclusive sum of $250,000. That offer was accepted by the Plaintiff and counsel sent a letter on the same date confirming the settlement.

[36] The Plaintiff signed a released and it was sent to Mr. Gilbert and Mr. McCarthy by letter of January 27, 2017. Mr. Wymes wrote a letter on January 18 advising that McKellar did not consent to the settlement and that “the over limits claims against McKellar remain extant—notwithstanding any purported acceptance of the co-defendants’ two offers to settle.” In that letter, Mr. Wymes added “Accordingly, we hereby put all parties on notice that if any one or more of you disburse funds prior to the resolution of James McKellar’s claim for legal costs and disbursements, our client will hold your clients fully responsible for any losses that might be incurred as a result thereof.”

[37] When I inquired of Mr. Wymes whether the sole reason for the objection to the settlement of the action is his outstanding account to Mr. McKellar of approximately $60,000, he confirmed that it was.

[38] In response to the Plaintiff’s motion for judgment, Mr. Wymes filed the affidavit of Kathryn McKellar sworn February 5, 2017 along with the affidavits of James McKellar dated February 3 and February 5, 2017.

[39] Most of what is contained in the McKellar affidavits is information provided by Mr. Wymes and consists almost entirely of argument, which is improper. The statements contained in the McKellar affidavit of February 3 demonstrate a lack of understanding of basic insurance principals. He criticizes the handling of his defence by Mr. Gilbert-- “he took no steps to advocate on my behalf” --while at the same time complaining that he was not kept apprised by Mr. Gilbert of what was transpiring in the litigation. He asserts that the solicitors for the Plaintiff were negligent for failing to reduce the damages claimed to the policy limits. He accuses Mr. Gilbert of failing to protect his interests and suggests that somehow, it was Mr. Gilbert’s responsibility to ensure that the bill delivered by Mr. Wymes was paid.

[40] McKellar states that although he was a minor when the incident giving rise to the claim allegedly occurred, he was born in 1992 and as such, attained the age of majority during the course of the lawsuit. He complains that he was not asked to sign the non-waiver in 2011, his parents were. Kathryn McKellar in her affidavit confirms that she and her husband signed the non-waiver agreement on October 25, 2011 and while James was present during the meeting with the adjuster, it was not discussed with him. In my view, nothing turns on this; at the time of the events in question, McKellar was a named insured under his parent’s homeowner’s policy. In any event, Mr. Wymes had the non-waiver from the time he was retained and if he was of the view that the non-waiver was not binding or was somehow improper, it was incumbent on him to advise Mr. Gilbert of his view and to bring the appropriate motion at an early date. He failed to do so; rather, he sent correspondence confirming that Mr. Gilbert was retained by the insurer to defend McKellar pursuant to the homeowner’s policy. The first time the issue of the non-waiver was raised or the propriety of Mr. Gilbert’s retainer was following the settlement of the action.

[41] There is no basis for the criticism levelled at the solicitors for the Plaintiff or at Mr. Gilbert. The Plaintiff was entitled to claim whatever quantum of damages he saw fit in the Statement of Claim; he was not obligated to restrict the claim to the policy limits of McKellar. As I have indicated earlier in these reasons, Mr. Gilbert protected the interests of McKellar by settling the case for a modest contribution prior to trial, which amount the insurer agreed not to claim from McKellar and Mr. Gilbert’s fees for the defence were paid by the insurer in accordance with the terms of the policy. McKellar knew from the outset that if he chose to retain personal counsel, he did so at his expense.

[42] It is beyond dispute that the Plaintiff accepted the offer to settle made by the Defendants and the action is settled. There is no reason why judgment ought not to issue in accordance with the terms of the settlement. The fact that McKellar has an account from Mr. Wymes for legal services has no bearing on whether or not there is a valid settlement in this action. The fees of Mr. Wymes is a matter between him and James McKellar, who retained him.

[43] There is no evidence before me concerning the nature of the retainer, what McKellar expected Wymes’s involvement to be or the quantum of the account that he anticipated he would pay. The affidavit of McKellar suggests that he understood that the account of Mr. Wymes would be paid by someone at the resolution of the case and that he need not worry about its payment. If that is, indeed, what McKellar believed, it is difficult to comprehend on what basis he held this belief. The insurance policy which afforded him coverage and the letter sent by Mr. Gilbert early on made it abundantly clear that any lawyer McKellar retained would be at his own expense.

[44] Lastly, Mr. Wymes suggests that the sum of $60,000 be held back from the settlement funds until such time as “settlement or other resolution of our client’s claims for costs.” There is no reason that the Plaintiff should be deprived of the full amount of his settlement proceeds. The issue of payment of the account of Mr. Wymes is between McKellar and Mr. Wymes.

Conclusion

[45] The motion brought by Mr. Wymes was devoid of merit, particularly in light of the settlement of the case prior to trial. The motion for judgment should not have been necessary. The filing of the Notice of Change of Solicitors, in light of the pending motion to have himself appointed co-counsel, was improper. Mr. Wymes ought not to have instructed the other lawyers, their assistants and the court staff to cease communicating with Mr. Gilbert. The allegations of impropriety against Mr. Gilbert were without foundation.

[46] The motion by Mr. Wymes for an order that he be appointed co-counsel for McKellar is dismissed.

[47] The motion by the Plaintiff for judgment in accordance with the settlement is granted and judgment is to issue.

[48] On a final note, in closing submissions, Mr. Gilbert requested I make an order barring Mr. Wymes from any further proceedings in this litigation. He made this request as a result of the threatening email and correspondence which were marked as exhibits at the motion. At that point, I was advised that just prior to attending before me to argue the motion, Mr. Wymes had issued a Notice of Action naming Charles Anderson, David Macdonald, Ian Furlong and Sheldon Gilbert as defendants. I reviewed a copy of the notice of action. It seeks damages, injunctive relief concerning the settlement proceeds and no fewer than nine declarations concerning the conduct of the defendants in the course of this litigation. It also alleges all of these named defendants were negligent in the initiation, prosecution and settlement of the action.

[49] There is no evidence before me on the issue of whether Mr. Wymes ought to be prohibited form initiating further legal proceedings arising out of the case before me. Should counsel wish to attend before me on a proper record, I will hear the motion.

[50] I will accept brief written submissions of no more than 10 pages on the issue of costs within 20 days of the release of these reasons, following which I will fix the costs.

D.A. Wilson J.

Date: February 10, 2017

[^1]: Lau v. Bayview Landmark, [2004] 71 O.R.(3d) 487 (Ont. S.C.J.) [^2]: 755568 Ontario Ltd. v. Linchris Homes Ltd., 1989 4332 (ONSC) [^3]: Hoang v. Vicentini, 2016 ONCA 723