Court File and Parties

COURT FILE NO.: 54947 DATE: 2018-05-25 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mary Kampers, Sharral Kampers, Bill Kampers, and Montana Mason, by her Litigation Guardian, Mary Kampers, Plaintiffs – and – Marcelo Acevedo, Aurelio Santoszepeda, Moises Nunez, and York Fire & Casualty Insurance Company, Defendants

BEFORE: Garson J.

COUNSEL: Karl Arvai, for the Plaintiffs Todd J. McCarthy, for the Defendant, York Fire & Casualty Insurance Company

HEARD: May 9, 2018

Endorsement

Introduction

[1] The sole remaining defendant, York Fire and Casualty Insurance Company (“York”), brings a cross-motion to the original motion under r. 21.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for an order declaring that the choice of law for the purposes of the determination of this action at trial is Ontario law, in accordance with an apparent agreement between the parties’ counsel, which was recorded in a June 30, 2016 Pre-Trial Conference Report made under r. 50.08.

[2] The brief reasons that follow explain why I conclude that no agreement was reached by the parties at the June 30, 2016 pre-trial conference and that any admission made by the plaintiffs is properly withdrawn by them in the circumstances.

Background

[3] This proceeding dates back to a motor vehicle accident on August 8, 2005 in Las Vegas, Nevada, USA. The plaintiffs suffered injuries as a result of the accident.

[4] The action was commenced on July 31, 2007. The plaintiffs settled their claims with the foreign defendants. The only claim remaining is the underinsured claim as against the defendant York.

[5] By letter dated June 13, 2016 to Chris Nichols, counsel at Arvai Personal Injury Lawyers, from former counsel for York, Bruce R. Mitchell, Mr. Mitchell offered his view that Ontario law applies to the assessment of damages in this matter and, more specifically, that the threshold provisions and other collateral provisions of the Insurance Act, R.S.O. 1990, c. I.8 (related to statutory deductibles or restrictions on recovery for past income loss) apply. At the time of writing this letter, Mr. Mitchell was aware of the 2002 Court of Appeal decision of Chomos v. Economical Mutual Insurance Co. (2002), 2002 CanLII 45021 (ON CA), 61 O.R. (3d) 28 (C.A.), but believed the decision was wrongly decided. The letter also stated that s. 10 of the OPCF-44R Endorsement applies. Section 10 reads as follows:

In determining the amount that an eligible claimant is entitled to recover from the inadequately insured motorist, issues of quantum shall be decided in accordance with the law of Ontario and issues of liability shall be decided in the accordance with the law of the place where the accident occurred. [Emphasis added]

[6] Counsel for the plaintiff not being familiar with the decision in Chomos, and relying on the letter from counsel and the plain wording of s. 10 of the OPCF-44R Endorsement, acquiesced to the defence counsel’s position. During a pre-trial of this action on June 30, 2016 before Leitch J., the parties advised Leitch J. that they had agreed that Ontario law applies to all issues in the remaining action and Leitch J. recorded this in her r. 50.08 report at para. 4.

[7] Both counsel signed a certificate confirming their understanding of the contents of the report.

[8] The initial trial date, which was set for the week of October 17, 2016, was adjourned on consent. A further pre-trial was scheduled for January 25, 2018 and a second trial date was set for the week of May 7, 2018.

[9] By the time of the second pre-trial, the plaintiffs’ counsel had now become aware of the decision in Chomos, which counsel believed was applicable to the determination of the law that ought to apply to issues of liability (and not quantum), including the threshold and collateral benefits provisions of the Insurance Act.

[10] On January 25, 2018, Mitchell J. noted in her r. 50.80 report at para. 3 that

…contrary to note of Leitch J. in pre-trial memo of June 30, 2016, choice of law is not resolved.

[11] On January 31, 2018, Mr. Mitchell transferred carriage of the York file to current counsel, Todd McCarthy. Thereafter, counsel agreed that this court should, as a preliminary matter, determine the issue of whether the June 30, 2016 agreement apparently reached by the parties is final and binding.

Positions of the Parties

[12] The plaintiffs argue that the counsel were never ad idem and that there was no intention on the part of the plaintiffs to abandon any legal rights or entitlements under s. 10 of the OPCF-44R Endorsement. The plaintiffs concede that counsel was not aware of the Court of Appeal decision in Chomos on June 30, 2016. They submit that counsel’s agreement to applying Ontario law as the prevailing substantive law for the Ontario action involved no compromise or consideration. The plaintiffs submit that they are prejudiced by issues surrounding threshold, statutory deductibles, and limits on past income loss that may not exist under Nevada law. The plaintiffs suggest that their intention was to be bound by relevant jurisprudence and existing law.

[13] The defendant York submits that the parties reached a litigation agreement that was confirmed by Leitch J. on June 30, 2016 and that is binding and enforceable as against the plaintiffs. York suggests that the choice of Ontario at that time benefitted both parties by streamlining the process and reducing delay and eliminating additional costs associated with retaining experts to prove Nevada law and to distinguish between Ontario procedural law and Nevada substantive law.

Discussion

[14] As a starting point, I note that what is before me is not an agreement between two contracting parties, but rather an admission by plaintiffs’ counsel based on a misunderstanding of the law in relation to the meaning of s. 10 of the OPCF-44R. The admission was recorded in a r. 50.08 report. It was not something the parties separately negotiated or reduced to writing themselves.

[15] There was no consensus ad idem, because there was no “meeting of the minds”[^1], and there was no consideration flowing between the parties. Simply put, counsel for the plaintiffs mistakenly believed that the plaintiffs were agreeing to the governing jurisprudence at the time. Counsel for the defendant York at that time was well aware of Chomos but considered it to be wrongly decided and expressed his opinion that in fact Ontario law would apply. This misunderstanding acted as a barrier and prevented the minds of the parties from meeting.

[16] It is regrettable that counsel for the plaintiffs was not aware of the Chomos decision at the June 30, 2016 pre-trial. Having reviewed Chomos, it is apparent to me that had the plaintiff’s counsel been familiar with the Court of Appeal’s direction, there would be little reason for the plaintiffs to agree to be subject to threshold deductibles for pain and suffering and a collateral benefits deduction, which may not have otherwise been available to York under Nevada law. The language in Chomos is clear: accidents that take place outside of Ontario are not subject to the limiting provisions of the Insurance Act regarding threshold deductibles on pain and suffering and collateral benefits.[^2] Put another way, threshold deductibles and collateral benefits are issues of liability or substantive issues to be dealt with by the law of the jurisdiction in which the accident occurred under s. 10 of the OPCF-44R.

[17] I disagree with the views of counsel for the defendant (at that time) as set out in para. 7 of his letter of June 13, 2016 to the plaintiffs’ counsel that Ontario law would apply to the assessment of damages in this matter in accordance with s. 10 of the OPCF-44R. Whether or not counsel for the defendant agreed with the Chomos decision is of no consequence to whether it reflects the prevailing jurisprudence at the time in interpreting the applicable substantive law in this action.

[18] The defendant relies on the decision of Wilkins J. in Gagno v. Morrison, 1995 CarswellOnt 999 (Ont. Ct. J. (Gen. Div.)), which dealt with the common practice of a defendant admitting liability in exchange for a plaintiff agreeing to limit a claim to the policy limit. In such a situation, ample consideration flows to both parties. That is not the case before me.

[19] I accept that some mutual benefits were available to the parties in agreeing to have Ontario law prevail, including potential cost and time savings. However, there is no evidence before me of any discussions between counsel regarding the streamlining of the trial or the challenges in applying Nevada law or the desire for or importance of costs and time savings. To the contrary, the extended and protracted history of litigation suggests that neither time nor cost appeared paramount or concerning at this point in time to the parties. In any event, there is now one expert (Bradley S. Mainor) who appears to have been sought out and retained, and the expert is in a position, if required, to satisfactorily explain the law of Nevada to a jury particularly as it relates to assessing damages.

[20] The situation before me is not dissimilar to the issues that often arise under r. 51.05, which permits a party to withdraw an admission in a pleading either on consent or with leave of the court. In those circumstances, courts look to whether the amendment raises a triable issue; whether the admission was inadvertent or resulting from wrong instruction; and whether the withdrawal will result in any prejudice that cannot be compensated for in costs.[^3]

[21] Having already determined that the plaintiff did not intend to be bound by the limitations of the Insurance Act, it is apparent to me that it was through inadvertence that the plaintiffs’ counsel had neither read Chomos nor appreciated how the case defined substantive law under s. 10 of the OPCF-44R. The plaintiff will suffer real prejudice if the withdrawal is not allowed, because their recovery will be limited by the provisions in the Insurance Act. Any prejudice that may accrue to York can be compensated in costs.

[22] Upon becoming aware of Chomos, the plaintiffs’ counsel clarified its position to both the court and opposing counsel at the second pre-trial conference of January 25, 2018. This is further evidence of the plaintiffs’ intent throughout the proceedings.

[23] I remain mindful of the need to promote early settlement of issues and to give effect to such settlements. However, the court must accept that on rare occasions and through inadvertence, counsel may overlook an important decision that if known would fundamentally alter its admission. Simply put, it defies logic and common sense in these circumstances for the plaintiffs to abandon their legal right to have Nevada law apply to an underinsured claim arising from a motor vehicle accident occurring outside of Ontario.

[24] Even if I accept that the parties may have reached a form of agreement, I am guided by situations that often arise under r. 49.09 where the Court is asked to enforce terms of an apparent settlement or agreement. In determining whether one party may resile from an agreement, the Court must consider the following factors:

(i) evidence of mistake; (ii) reasonableness of the agreement; (iii) prejudice to the party who seeks to uphold the settlement (if the settlement is not enforced); (iv) prejudice to the party who seeks to set aside the settlement (if the settlement is enforced); and (v) any effect on third parties if the settlement is not enforced.[^4]

[25] Having already found an omission or mistake on the part of the plaintiffs’ counsel, I repeat my earlier comments that it makes little sense for the plaintiffs to forego their potential entitlement to a larger quantum of recovery under Nevada law in these circumstances. If I found an agreement to exist, it would not be reasonable.

[26] There is little actual prejudice to York other than the potential additional time and expense, much of which has already been incurred and which can be compensated for in costs, as noted. A legal opinion is available to the parties and the jury on issues of Nevada law relevant to this action. There is clear evidence of real prejudice to the plaintiffs in terms of the potential amounts available for recovery. No third parties are affected by any agreement.

[27] Accordingly, even if the parties reached a form of agreement, the plaintiffs should be permitted in these rare and unusual circumstances to resile from it.

[28] Parties are free to contract out of legislation. However, agreements that do so must be clear and unequivocal in their meaning. There is no such agreement before me nor any evidence of a clear intent by both parties to have such an agreement.

[29] Coincidentally, this is not the first time York has been before the Court on an issue of setting aside an agreement reached at a pre-trial. In Mohammed v. York Fire and Casualty Insurance Company (2006), 2006 CanLII 3954 (ON CA), 79 O.R. (3d) 354 (C.A.), the parties formed a settlement agreement involving signed minutes of settlement and the dismissal of a plaintiff’s action without costs based on an alleged misinterpretation by the plaintiff’s counsel of case law regarding the admissibility of certain incriminating evidence. In that case, the Court of Appeal did not find a mistake sufficient to set aside the settlement, holding that nothing turned on counsel’s alleged misinterpretation of the law, and in any event, the appellant, having relied on his own counsel for advice in the settlement must seek recourse from his own lawyer and not the opposing party.

[30] The following factors before me distinguish the circumstances of this case from Mohammed:

(i) unlike Mohammed, where both parties were not aware of the leading jurisprudence at the time of the first pre-trial, opposing counsel’s opinion may well have influenced plaintiffs’ counsel on the interpretation of Chomos and to agree to Ontario law at that time; (ii) significant findings turn on counsel’s error as it was the basis of the agreement and potentially changed the amount and types of recovery available to the plaintiffs; (iii) absent potential time and costs savings, there are no other apparent or compelling reasons why the plaintiffs’ counsel would have agreed to Ontario law; and (iv) having become aware of Chomos, the plaintiffs took immediate and clear steps to communicate their new understanding of existing law and intent to resile from the earlier admission.

[31] Relying on the advice of experienced counsel, a party may well find that the remedy it seeks is not against the opposing party, but rather against its own counsel. This is not one of those situations.

Conclusion

[32] For the above reasons, the defendant York’s cross-motion is dismissed, and Nevada law will apply as the prevailing substantive law in this action in accordance with the Chomos decision and the OPCF-44R Endorsement.

Costs

[33] At the request of the parties, costs in favour of plaintiffs are reserved to the trial judge. I observe that the defendant York was acting entirely appropriately in bringing this motion and advanced relevant and legitimate legal arguments in a timely fashion.

“Justice M. A. Garson”

Justice M. A. Garson

Released: May 25, 2018

[^1]: See Chambers v. Prouse, 2017 ONSC 186 at para. 11; Jedro Investments (U.S.A.) Ltd. v. Jacyk, 2007 SCC 55 at paras. 16–17; Equitable Life Assurance Society of the United States v. Larocque, 1942 CanLII 48 (SCC), [1942] SCR 205 at 227.

[^2]: See paras. 51–52.

[^3]: See Antipas v. Coroneos, 1988 CanLII 10348 (ON SC), [1988] O.J. No. 137 at para. 3 (Ont. H.C.) cited in Stickel v. Lezzaik, 2015 ONSC 4659 at para. 29.

[^4]: See Richard (Litigation Guardian of) v. Worth, 2004 CanLII 34517 (ON SC), [2004] O.J. No 4340 at para. 17 (Sup. Ct.)