COURT FILE NO.: CV-20-00000101

DATE: 20210322

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Clifford Riley and Michael Marsh, Plaintiffs

AND:

The Director of the Motor Vehicle Accident Claims Fund, Norma Sturgeon, Karl Arvai Professional Corporation, Chris Nicolis, Karl Arvai and Harrison Pensa LLP, Defendants

BEFORE: Justice M.A. Garson

COUNSEL: Afsoun Amirsolaimani, for the Plaintiff

Todd Wasserman, for The Director of The Motor Vehicle Accident Claims Fund

HEARD: March 3, 2021

ENDORSEMENT

Introduction

[1] This is the plaintiff’s motion for the removal of Todd Wasserman (“TW”), counsel of record for the defendant, The Director of the Motor Vehicle Accident Claims Fund (“MVAC”).

[2] The plaintiffs contend that TW cannot act for his client in both the Accident Benefit (“AB”) claim and the tort claim and, accordingly, seek his removal as counsel on the tort claim.

[3] The defendant MVAC opposes the motion and submits that no conflict exists. The defendant MVAC further argues that the fund should not be treated as an insurer and that it owes no duty of good faith to the plaintiffs. The defendant MVAC submits that, in any event, by signing the Notice of Collection of Personal Information (“the Notice”), the plaintiffs irrevocably consented to MVAC’s use of all information submitted in both the AB and the tort context.

[4] In these reasons, I explain why I conclude that TW’s removal is warranted in these circumstances.

Background

[5] This claim arises from a July 10, 2008 motor vehicle and bicycle collision on the Muncey Reserve near Caradoc, Ontario. Plaintiff Riley, a minor at the time, suffered serious injuries after being struck by the vehicle.

[6] Neither party had any form of car insurance to respond to the claim. After the driver of the vehicle, Norma Sturgeon (“NS”), was noted in default, MVAC responded to the AB claim and has defended the tort claim in the name of, and on behalf of, NS, pursuant to s. 8 of the Motor Vehicle Accident Claims Act, R.S.O. 1990, c. M.41 (“MVACA”).

[7] Due to the severity of minor plaintiff Riley’s injuries, plaintiff’s counsel applied, by way of OCF-19, for a catastrophic impairment designation, which was denied.

[8] The plaintiffs disputed the denial and commenced a review application before the License Appeal Tribunal (“LAT”). TW, who was already defending the tort claim, responded to the application as counsel for MVAC.

[9] On November 19, 2020, the plaintiff’s counsel wrote to TW requesting that he recuse himself from acting on both the tort and the separate AB proceeding before the LAT. He declined to do so.

[10] On November 26, 2020, at 10:50 a.m., TW sent a letter to and emailed the plaintiff’s counsel to advise them that MVAC was now accepting the catastrophic designation for the plaintiff’s injuries, which, in turn, would resolve the LAT issue.

[11] The plaintiff’s counsel then notified the co-defendant’s counsel of this new development. At 12:32 p.m., TW faxed a second letter to the plaintiff, noting that MVAC was not an insurer. TW again confirmed that MVAC was accepting the catastrophic designation for the plaintiff’s injuries.

[12] At 1:09 p.m., the co-defendant’s counsel sent an email to both the plaintiff’s counsel and TW, taking the position that his clients (the plaintiff’s initial lawyers and their firms) no longer had any exposure to liability.

[13] At 3:58 p.m., TW sent a further e-mail reversing MVAC’s acceptance of the catastrophic designation and officially withdrawing MVAC’s position that the minor plaintiff sustained a catastrophic injury. No reasons for this sudden reversal were provided at that time or at any subsequent time. Scheduled examinations were cancelled and this motion was set down.

Issues

[14] The parties raise the following issues for determination:

i. Is MVAC “an insurer”?

ii. Does the plaintiff have a “reasonable expectation of privacy” in the information provided to MVAC as part of the AB claim process?

iii. Is the plaintiff’s “consent” required to share this information?

iv. Does MVAC stand as “a fiduciary” to the plaintiff and owe him “a duty of good faith”?

v. Is TW in a conflict sufficient to warrant his removal?

[15] As I will discuss later in these reasons, given the unique circumstances before me and, more specifically, the events of November 26, 2020, the primary issue for determination is whether, by acting for MVAC in both the AB and tort claims, including appearing on MVAC’s behalf before the LAT, TW has placed himself in a position of conflict worthy of disqualification.

The Law

[16] Section 258.3(1)(a) of the Insurance Act, R.S.O. 1990, c. I.8 (“Insurance Act”) requires any person – in this case, the plaintiff – to apply for statutory accident benefits (“AB”) before commencing a tort claim.

[17] Section 268(2)(iv) of the Insurance Act identifies MVAC’s fund as the payor of last resort. Pursuant to s. 6 of the MVACA, the plaintiff must make an application, in prescribed form, to commence an AB claim against the fund. This includes the requirement to submit to an independent medical examination (“IME”) and to provide other personal and confidential health-related information.

[18] Section 8 of the MVACA permits the Minister to file a defence or consent to judgment on behalf of, and in the name of, the defendant. Accordingly, by operation of statute, the Minister is both the effective insurer on the AB side as well as the defender on the tort side of the claim.

[19] In Dervisholli et al. v. Cervenak and State Farm, 2015 ONSC 2286, 333 O.A.C. 367 (Div. Ct.) [Dervisholli], the court was asked to determine whether an insurance company can retain the same counsel to act for both an AB claim and a tort claim.

[20] In that case, both the plaintiff and the defendant were, coincidentally, insured by State Farm, which was required to respond to both the plaintiff’s AB claim and to defend the tort claim.

[21] The Divisional Court in Dervisholli made reference to the Insurance Bureau of Canada (IBC)’s Internal Bulletin 184, dated July 22, 1997, which recommended the use of a “firewall” so that information gathered on an AB claim doesn’t find its way into the hands of the tort adjuster without the consent of the plaintiff. Although IBC’s internal bulletins are not binding on a court, the Divisional Court acknowledged that this direction from the internal bulletin was “the standard accepted by the insurance industry.”

[22] In recognizing the distinct and competing roles of the insurer, the Divisional Court identified:

a. the plaintiff’s disclosure duties to the AB insurer, triggered by the Insurance Act requirements for an AB claim, and the AB insurer’s duty of good faith to the plaintiff; and contrasted these duties with

b. the insurer’s obligations to defend the tort claim, and the triggering of a different set of rights, where the plaintiff now stands in an adverse position to the insurer

[23] The Divisional Court concluded that the same law firm cannot act for the same insurer for both the AB and tort claim involving the same plaintiff without the consent of the plaintiff. In other words, the insurer had an obligation to maintain the plaintiff’s confidentiality in the AB disclosure and to separate its interests and obligations on the AB claim from those on the tort claim.

[24] The Divisional Court also recognized a privacy interest, a “reasonable expectation of privacy,” in favour of the plaintiff in medical files. While acknowledging that the insurer would ultimately come to possess much of what was in the AB file through the tort file disclosure process, the court still imposed an obligation on the insurer to erect a “firewall” between the separate claims and to only permit confidential medical information from the AB side of the wall to cross over to the tort side with the plaintiff’s consent.

[25] In MacDonald Estate v. Martin, 1990 32 (SCC), [1990] 3 S.C.R. 1235 [MacDonald Estate], the Supreme Court of Canada addressed the situation of the same solicitor acting for two opposing clients. The court made clear that it must look to the “possibility” that the lawyer could misuse confidential information against her former client. The Supreme Court identified the following test to determine whether a law firm’s conduct would disqualify them from acting:

Would a reasonably informed member of the public be satisfied that no use of confidential information would occur?

[26] Stated differently, a client should not be deprived of his counsel of choice unless a reasonably informed member of the public believes his removal is necessary for the proper administration of justice: Re Kaiser, 2011 ONCA 713, 285 O.A.C. 275.

[27] It is the integrity of the court, the legal profession, and the AB scheme that must rank first in assessing these situations: Wood v. Jones, 2017 ONSC 3946, 70 C.C.L.I. (5th) 66 at paras. 10 and 11.

Discussion

[28] Although the parties list a series of issues for determination, the relief sought in the Notice of Motion is limited to the removal of TW as lawyer of record for defendant MVAC for the tort claim. Accordingly, I will begin and focus my discussion on whether TW has a disqualifying conflict of interest.

[29] I am concerned by the events of November 26, 2020. MVAC’s materials are silent as to why it reversed its 10:50 a.m. decision to accept the plaintiff’s catastrophic designation a few hours later.

[30] The defendant’s suggestion that this reversal does not prejudice the plaintiff is simply not true. The potential prejudice to the plaintiff in terms of lost access to future funds and treatment is significant.

[31] While I appreciate that the facts in this case are different from those in Dervisholli and MacDonald Estate, the principles arising from those cases have implications for this case. Those principles include the integrity of counsel, the court, the AB system, and the administration of justice.

[32] MVAC wears two hats. Those two hats stand in adverse or conflicting positions in dealing with the plaintiff. The AB hat triggers mandatory disclosure requirements. The AB claim is a pre-condition to moving to the tort claim. The plaintiff must submit to an examination under oath, to an IME, and to the disclosure of other private and confidential medical information.

[33] TW represents MVAC on both the AB and tort claims. I reject the suggestion that TW cannot be in conflict when representing the same client in multiple claims or that MVAC has an unfettered and absolute right to appoint the same counsel for every interest regarding the use of MVAC’s fund.

[34] Rule 2 of the Law Society Rules of Professional Conduct define a “conflict of interest” to mean an interest that is “likely to affect adversely a lawyers judgment on behalf of …a client.” The argument that, with only one client, there can be no conflict fails to recognize that a lawyer’s “judgment” may be sufficiently adversely affected by his interests to constitute a conflict.

[35] I also reject the submission that the plaintiff’s consent on the Notice, as per his litigation guardian’s signature, constitutes irrevocable consent and bars the plaintiff from alleging a conflict because of a potential misuse of information. The test for the disqualification of counsel is based on the perception and possibility of a conflict of interest. Although the Notice may serve many purposes, it does not stand as a bar to advancing a claim for the disqualification of counsel based on a conflict of interest. Any other interpretation would undermine the integrity of the entire process and effectively license and sanction inappropriate and unwarranted conduct from counsel.

[36] I return to the test for disqualification: would the reasonably informed person, mindful of the events of November 26, 2020, perceive an appearance or a possibility of conflict?

[37] I believe they would.

[38] The reasonably informed onlooker is left to wonder why TW made an unexplained and sudden 180-degree turn on behalf of his client. Is it a coincidence that the letter from the co-defendants’ counsel appears to be the only intervening event between the decision to accept the plaintiff’s catastrophic designation and the hasty decision to reverse it?

[39] Is the reasonably informed onlooker left wondering whether the tactical decision to reverse the catastrophic designation – only a few hours after granting it – was the result of MVAC’s obligation to attempt to collect repayment of any judgment from the individuals (i.e., the co-defendants) for whom it has paid out funds?

[40] How is it that the catastrophic designation was met earlier that day but somehow not met a few hours later? No explanation. No reasons offered.

[41] Stated differently, in the absence of any explanation for the ad hoc and rushed reversal of the designation, the actions of TW that day raise many concerns about the basis for, and the judgment exercised in, reaching the designation decisions; the potential use or misuse of information interchanged between the competing claims; and the overall integrity of the process.

[42] TW’s swift, sudden, and unexplained actions that day are, in many ways, comparable and analogous to a decision to withdraw an admission, contemplated by r. 51.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[43] Rule 51.05 requires any party attempting to withdraw an admission to have either “the consent” of the opposing party or the “leave of the court.” Clearly, in this matter, the plaintiff does not consent to TW’s actions. The test for leave for a court to permit such a withdrawal includes whether a “reasonable explanation” was provided for the withdrawal and whether the withdrawal resulted in any non-compensable prejudice: Kostruba and Sons Inc. v. Pervez, 2011 ONSC 4894, 38 C.P.C. (7th) 100 at para. 42.

[44] There is no explanation for the withdrawal of the catastrophic designation before me, let alone a reasonable one. TW is privy to information on both the AB and tort claims and now wishes to appear, on behalf of MVAC, before the LAT after abruptly and unexplainably reversing an earlier decision to accept a catastrophic designation on the plaintiff.

[45] The court maintains both a gatekeeping and supervisory role to remove counsel who place themselves in a conflict of interest worthy of disqualification. TW is an officer of the court. Therefore, his duties and loyalties extend beyond his client: R v. Neil, 2002 SCC 70, [2002] 3 S.C.R. 631 at para. 31.

[46] A reasonably informed onlooker, looking upon the actions of November 26, 2020, would be satisfied that there is a possibility or at least a perception that TW’s access to, and potential use and misuse of, information on both the AB and tort claims somehow tainted the integrity of the decision-making that day and constituted disqualifying conduct.

[47] While I am mindful that both Dervoshilli and MacDonald deal with a conflict involving private insurers, the overriding principles of integrity in the legal profession and the administration of justice remain relevant and of paramount concern.

[48] Stated differently, TW’s conduct on that fateful day fails the sniff test. It offends judicial sensibilities. It fails the reasonable-onlooker test.

[49] In these circumstances, the only protection to disqualification rests with the consent of the plaintiff. The plaintiff does not consent.

[50] Accordingly, TW’s actions, as outlined above, warrant TW’s removal to prevent the possible misuse of information and to maintain the integrity of the administration of justice.

[51] Considering my findings, I need not address the other issues raised by the parties, which are best left to be addressed by another court. More specifically, I need not address the issues relating to the application of fiduciary duties to MVAC’s fund or to the Crown.

[52] The issue decided today is a narrow one. It focuses on TW’s conduct, the perception or possibility of a conflict, and the remedy to be imposed where such a conflict is highly prejudicial, wholly unexplained, and undermines public confidence in the integrity of the process and the administration of justice.

Conclusion

[53] For the above reasons, I find that a reasonable possibility and/or perception of conflict exists with respect to TW acting as counsel of record for MVAC on both the AB and tort claims, including appearing as counsel before the LAT. TW is disqualified from acting for MVAC on the tort claim and shall immediately be removed as counsel of record on that claim. MVAC shall have 15 days from today to appoint new counsel of record on the tort claim.

Costs

[54] The plaintiff seeks costs, on a partial-indemnity scale, in the amount of $5139.10, inclusive of HST and disbursements. They rely on the complexity of the issues raised and the importance of the outcome to the plaintiff.

[55] MVAC seeks costs, on a partial-indemnity scale, in the amount of $7895.54, inclusive of HST and disbursements, and echoes the plaintiff’s comments regarding the complexity of the matter and the importance of the issues.

[56] Costs normally follow the event and normally are awarded to the successful party: in this case, the plaintiffs.

[57] Rule 57.01 outlines the relevant factors I may consider when exercising discretion to award costs. This was a nuanced and somewhat complex proceeding. Arguments and materials filed were relevant, helpful, and for the most part, clear and concise.

[58] In my view, this matter required a hearing, as each party raised legitimate arguments and supplemented those arguments with helpful written materials. The rather unique facts took this case out of the realm of the ordinary so neither party can be faulted for advancing their reasonable positions. The importance of this determination to both parties is clear.

[59] Rather than undertaking a mathematical calculation based on the hours spent to determine the costs to be awarded, I intend to make a costs’ award that is reasonable and fair in the circumstances.

[60] Taking the above factors into consideration, I conclude that a reasonable and fair award is an award payable by the defendant MVAC to the plaintiff, on a partial-indemnity scale, in the amount of $5000. The award is to be paid out within 90 days.

“Justice M.A. Garson”

Justice M.A. Garson

Date: March 22, 2021```