Superior Court of Justice

Court File No.: CV-17-582005 Date: 2019-02-25

Between: Kristine Zarras, Applicant – and – Neinstein and Associates LLP and Neinstein LLP, Respondents

Counsel: Matthew Armstrong, for the Applicant Jordan Katz, for the Respondent

Heard: January 21, 2019

Before: G. Dow, J.

Reasons for Decision

[1] The respondent Neinstein & Associates LLP and Neinstein LLP moves to dismiss the application of its former client, Kristine Zarras on the basis it was commenced without authority and it is an abuse of process, contrary to Rule 25.11(c) of the Rules of Civil Procedure. In the alternative, it seeks to have the affidavits of Kristine Zarras sworn August 22, 2017 and April 26, 2018, struck out on the basis of cross-examination evidence of Kristine Zarras that she does not understand portions of her affidavit evidence. The application is scheduled to proceed on April 8, 2019.

Background

[2] Kristine Zarras, born November 23, 1992, was seriously injured in a motor vehicle accident on January 24, 2009. She was 16 years old at the time and her mother, Lisa Zarras retained what I shall sometimes refer to as the Neinstein Law Firm. This occurred on January 28, 2009 being the date of a two page “Retainer and Contingent Fee Agreement”. The Agreement purported to pay the respondent, Neinstein & Associates LLP 20 percent of the damages recovered in addition to partial indemnity costs paid (which was not to exceed 35 percent of the total recovered) as well as disbursements. This Agreement was still in place when the accident benefit portion of her claim was settled with Aviva Insurance in June, 2011 for $1.1 million, all inclusive. Neinstein & Associates LLP rendered an account charging 20 percent of the settlement amount, that is, $220,000.00, plus HST and disbursements (which totalled $6,080.42). The remainder of the settlement was paid to Kristine Zarras, now of the age of majority, of which $750,000.00 was placed in annuity paying $1,586.38 per month to her for life indexed at 3 percent per year with the payments guaranteed for the next 45 years.

[3] There is no evidence that legal proceedings in the accident benefit claim had been commenced. The Neinstein Law Firm deposed that it obtained an expert opinion that Kristine Zarras had capacity to instruct them to complete the settlement.

[4] The tort claims were commenced by a Statement of Claim issued December 4, 2009 against the tortfeasor and subsequently, against the underinsured insurer, Aviva Canada Inc. on November 21, 2012. The Neinstein Law Firm relies on a second Contingency Fee Retainer Agreement signed by Kristine Zarras dated February 2, 2016. This altered the arrangement for fees to a sliding scale of 25 percent to 35 percent of the amount recovered depending on when settlement occurred. It also excluded any portion attributed to legal costs being paid. The case ultimately settled in March, 2017 following multiple pre-trials in advance of a trial.

[5] The settlement offer from the tortfeaser’s insurer was $750,000 for damages including interest plus a contribution towards costs, suggested at $212,397.48. This appears to have ultimately been rounded up to $1,000,000, all inclusive. In addition, despite the tort insurer paying less than its $1.3 million dollar policy limits, the underinsured insurer, Aviva agreed to contribute $80,000.

[6] The plaintiff’s instructions to accept the settlement offer was predicated on her receiving not less than $700,000 which was later reduced to $650,000 after payment of all outstanding legal accounts, disbursements, treatment accounts and litigation loans. In this regard, plaintiff’s counsel negotiated a reduction of more than $40,000 of outstanding protected treatment accounts, more than $7,500 of third party disbursements, and waiver by the Neinstein Law Firm of more than $7,500 of disbursements. Finally, there was reduction in the fees to be charged from the contingency fee amount of $234,000 to $207,500 and ultimately to $162,688.01.

[7] Again, given concern about the capacity of Kristine Zarras to instruct them, an expert opinion was obtained which concluded her fitness and capacity to instruct counsel. The report is dated February 20, 2017. The authorization and direction signed by Kristine Zarras to the settlement is dated March 27, 2017. Despite recommendations from the pre-trial judge, counsel, and the capacity assessor to also place a substantial portion of these settlement funds into an annuity, this did not occur.

[8] On September 17, 2018, Kristine Zarras commenced this application to declare the 2009 retainer and contingent fee void and unenforceable, return of the fees paid to the Neinstein Law Firm and other ancillary relief.

Analysis

[9] The evidence in support of the application includes the affidavits of Kristine Zarras sworn August 22, 2017 and April 26, 2018. Kristine Zarras was cross-examined on her affidavits November 13, 2018. It contains numerous responses by Kristine Zarras that she did not understand what she had deposed. The issue is compounded by the position taken by her counsel when Kristine Zarras was referred to individual paragraphs in her affidavits. Ms. Zarras was provided with an opportunity to read the paragraph and explain what it meant to her. The position of her counsel was, as stated at Question 411, (at page 118) of the transcript, “It’s quite clear at this point that her state today reading these documents she’s not able to properly interpret them and give any coherent responses as to what the effect of the sentences are. I think we’ve established that, as I said, many times today.”

[10] This is counterbalanced by various statements by counsel for Kristine Zarras that if counsel for the Neinstein Law Firm had questions beyond interpreting what is stated in the affidavits to (at page 120, line 20) “go ahead and please ask those.”

[11] With the inability to understand what Kristine Zarras had deposed and her admission that she does not remember signing the 2016 contingency fee retainer agreement, Question 280 (at page 76), counsel for the Neinstein Law Firm submits the legal conclusion should be that she did not authorize the bringing of this application. Counsel for the Neinstein Law Firm relies on the statement in Poulin v. Ford Motors Co. of Canada Ltd., [2007] O.J. No. 4988 (at paragraphs 56 and 57) that under Rule 15.02(4), the consent to proceed with litigation must be an informed consent.

[12] I agree with this statement of the law that a “palpably uninformed or misinformed consent” does not constitute the authority contemplated in Rule 15.02(4). However, I do not agree that the circumstances before me rise to the level necessary to conclude Kristine Zarras had not given an informed consent to commence this proceeding. The intention of this application is to recover all or a portion of the settlements she instructed her counsel to accept on her behalf that was paid to the Neinstein Law Firm as legal fees. Ms. Zarras did depose in a third affidavit, sworn December 19, 2018 at paragraph 9, that she was “aware and permitted my lawyers to start this application to get money back from Neinstein and Associates LLP for me”. The fact that she may not be able to articulate a more detailed reason upon which to base this evidence when under cross-examination may undermine the strength of her evidence. It does not vitiate her allegation that a legal wrong has been committed against her for which she seeks a legal remedy.

[13] I am reinforced in this conclusion by the following. First, with the admission by Kristine Zarras in her cross-examination that she could not explain or detail portions of her evidence tendered in her affidavit, it was open for counsel for the Neinstein Law Firm to confirm and determine from her counsel all “knowledge, information, and belief” being relied on by Kristine Zarras as provided for in the Rules of Civil Procedure. Specifically, both Rule 30.03 with regard to documentary evidence and Rule 31.06 with regard to examinations for discovery provide for same. There is a process to force answers to questions improperly refused. Alternatively, a party may choose not to obtain the answer as part of its litigation strategy.

[14] Second, I am mindful of Kristine Zarras’ mental state. In this regard, her capacity to give the Neinstein Law Firm instructions was of concern both at the time of the settlement of the accident benefits claim and the settlement of the tort action. In this regard, the capacity report of February 20, 2017 was addressed to an associate at the Neinstein Law Firm and was no doubt obtained and relied on in accepting Kristine Zarras’ instructions to effect the settlement of the tort action.

[15] The capacity report of the psychologist is clear in its opinion that Kristine Zarras (at page 11) had “some difficulties related to her restricted affect, slowed information processing and memory problems.” There are repeated references to the opinions of other medical experts that Kristine Zarras suffers from a cognitive disorder. At Question 34 of her cross-examination, (pages 11 and 12), she advises counsel “I’m stressing out. Sorry.” Then at Question 55 (page 17) her response is “It’s like I do, but I don’t know how to explain it.” There is also, at Question 72 (page 21) of her evidence “Like, I’m not good at, like, explaining stuff. I can’t, like--”. This is followed by counsel for the Neinstein Law Firm stating on the record “Ms. Zarras, I can see that you’re upset. It is not my intention to upset you and I don’t want this to be--”.

[16] Counsel for the Neinstein Law Firm also raised application of Rule 25.11 which provides authority to the court to strike out or expunge part of a pleading or other document that, as submitted here, is an abuse of the process of the court. Counsel relied on the statement in George v. Harris, [2000] O.J. No. 1762 (at paragraph 20), that a document which provides “no indication whether information is based on personal knowledge or information and belief, and may contain many irrelevant matters, will be rejected in their entirety”. The circumstances of this situation do not rise to that level. What weight can or should be given to what Kristine Zarras has deposed can be assessed along with her cross-examination evidence at the hearing of this application. It is not so clearly beyond what is the threshold for evidence to be an abuse of process or vitiate the authority of her current counsel to proceed with this application.

[17] In this regard, I rely on the comments of the court in Vokes Estate v. Palmer, 2009 70132 (ON SC) which examined the circumstances under which a litigant may be excused from being examined under oath or affirmation. As part of the reasoning, the court relied on case law that it should only occur in the clearest of cases. This protects the litigation process from having one litigant be denied its discovery rights based on extraneous evidence such as medical reports describing another litigant’s incapacity. The court specifically rejects the notion (at paragraph 39) that showing “the person will give unreliable evidence” was inadequate.

Conclusion

[18] The motion by the respondent Neinstein Law Firm is dismissed. The parties exchanged costs outlines at the conclusion of submissions. The respondents sought 60 percent as partial indemnity costs on its actual account totaling $10,484.79 inclusive of fees, HST and disbursements. Counsel for the applicant, Kristine Zarras sought substantial indemnity costs if successful based on actual costs of $19,714.96 inclusive of fees, HST and disbursements. I have considered the following in determining the appropriate award of costs:

(a) the costs outlines submitted and the amounts contained therein by both parties;

(b) the factors identified to consider in Rule 57.01;

(c) the success of the applicant to the respondent’s motion to have the application dismissed or the evidence being relied on as struck out;

(d) while not referred to by the parties, the direction by the Court of Appeal in Boucher v. Public Accountant’s Council for the Province of Ontario, 2004 14579 (ON CA), [2004] O.J. No. 2634 (at paragraph 26), is to “fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.”

[19] In accordance with the above and the discretion provided for in section 131 of the Courts of Justice Act, R.S.O. 1990, c.C. 43, the applicant, Kristine Zarras is awarded her costs of this motion against the respondent’s, Neinstein Associates LLP and Neinstein LLP in the amount of $15,000, inclusive of fees, HST and disbursements, payable forthwith.

Mr. Justice G. Dow

Released: February 25, 2019

COURT FILE NO.: CV-17-582005 DATE: 2019-02-25

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

KRISTINE ZARRAS Applicant

– and –

NEINSTEIN AND ASSOCIATES LLP and NEINSTEIN LLP Respondents

REASONS FOR DECISION

Mr. Justice G. Dow

Released: February 25, 2019