COURT FILE NO.: CV-16-205
DATE: 20210927
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: JARROD SETH VAN EVERY by his Litigation Guardian, ANDREW STASNY, Plaintiff
AND:
D. ROBERT FINDLAY and FINDLAY PERSONAL INJURY LAWYERS, Defendants,
BEFORE: The Honourable Robert B. Reid
COUNSEL: A. Zaltz, Counsel, for the Plaintiff
A. Rachlin, Counsel, for the Defendants
HEARD: July 21, 2021
decision on motions
[1] The parties seek orders in three separate but related motions:
a. The plaintiff asks that a portion of the statement of defence alleging improvident settlement be struck.
b. The defendants ask that the court review allegedly privileged portions of an affidavit filed by the plaintiff. After review, to the extent that privilege is not established, the defendants request that the plaintiff be ordered to produce the previously redacted material.
c. The defendants ask that counsel for the plaintiff be removed from the record since counsel is a likely witness in the trial. It was conceded that if the improvident settlement allegation is struck, this motion would necessarily fail.
[2] The material over which privilege has been claimed may be relevant to the motion to remove counsel. Therefore, if the disclosure order is granted, the parties have requested an opportunity to provide supplementary written submissions on the removal motion according to a timetable, if so advised.
Background:
[3] The plaintiff was injured in a pedestrian/motor vehicle accident on May 28, 2004. He was seven years old at the time.
[4] The defendants were retained in June 2004 to represent the plaintiff in his Statutory Accident Benefits Schedule (“SABS”) claim.
[5] The plaintiff received SABS payments totaling $12,981 for care, medical, and rehabilitation benefits between 2004 and 2006.
[6] In 2014, the plaintiff changed counsel and retained the Preszler Law Firm LLP to act on his behalf.
[7] On November 12, 2014, the plaintiff was declared “catastrophically impaired” under s. 2(1.2)(e)(i) of the Insurance Act, R.S.O. 1990, c. I.8, O. Reg. 403/96.
[8] In February 2016, during his retainer of the Preszler Law Firm, the plaintiff settled his SABS claim. Under r. 7.08 of the Rules of Civil Procedure (“Rules”), the settlement required court approval because the plaintiff was a minor at the time.[^1] The parties brought an application for approval to the court supported by several documents including a capacity assessment, an assessment of attendant care needs, structured annuity schedules, minutes of settlement and an affidavit of the litigation guardian for the plaintiff. Pursuant to r. 7.08(4)(b) of the Rules, counsel Jeffrey Preszler filed an affidavit setting out the lawyer’s position in respect of the proposed settlement, sworn April 6, 2016.
[9] The settlement was approved on April 27, 2016 by the judgment of Maddalena J. A sealing order was requested and granted. The total settlement was for the sum of $1.15 million.
[10] The statement of claim in this action was issued in June 2016 alleging professional negligence. The plaintiff claims general damages in the amount of $2 million on the basis that the defendants failed to properly and professionally represent his best interest and did not take steps to secure appropriate funding for treatment and attendant care, based on the plaintiff’s psychological and physical impairments.
[11] The statement of defence was served in April 2018. In it, the defendants include an assertion that at the time the plaintiff changed lawyers, he was fully entitled to claim SABS arising from the accident, less what he had received to that date, plus his tort losses. To the extent that the judgment of Maddalena J. did not fully compensate the plaintiff, the defendants allege that an improvident settlement was recommended to the plaintiff by the Preszler Law Firm.
Issues to be decided:
[12] Resolution of the motions requires an answer to the following questions:
a. Should the allegation of improvident settlement contained in paragraph 16 of the statement of defence be struck?
b. Should any or all of the content of Jeffery Preszler’s affidavit over which solicitor-client privilege is claimed be produced to the defendants?
c. Should the Preszler Law Firm be removed as counsel of record for the plaintiff?
Improvident settlement defence:
[13] The plaintiff moves under r. 21.01(1)(b) of the Rules to strike paragraph 16 of the statement of defence (in which the improvident settlement allegation is raised), on the basis that it discloses no reasonable defence.
[14] There is no dispute that the test to be applied on a motion to strike a pleading on the basis that it discloses no reasonable defence under r. 21.01 is that:
• it must be plain and obvious that the allegation discloses no reasonable defence;
• the material facts pleaded are to be taken as proven unless they are patently incapable of proof;
• neither the complexity of the issues, the novelty of the defence, nor the potential of a strong response should prevent a party from proceeding with its case; and
• a pleading should be read generously so as not to unfairly deprive a party of the benefit of the pleading.[^2]
[15] According to the plaintiff, the doctrine of res judicata by way of issue estoppel applies to the approval of the settlement by Maddalena J. Relitigating the merits of the settlement would amount to an abuse of process.
[16] The plaintiff submits that when a court reviews an application for approval of a settlement under r. 7.08, it can deny the request if the settlement is not in the best interest of the minor plaintiff. Once approved, however, in the absence of fraud or the presence of an incomplete record, it is inappropriate to indirectly challenge the correctness of the final judgment by pleading improvident settlement.
[17] It is not controversial that issue estoppel arises if three preconditions exist: the judgment was final, it related to the same question, and it involved the same parties or their privies. Even if the three preconditions are established, a court must still determine as a matter of discretion whether issue estoppel ought to be applied.
[18] In this case, clearly the first two preconditions are met.
[19] The plaintiff submits that while the parties were not the same as between the SABS action and this claim, the circumstances are such that the defendants here and in the SABS claim were privies. In support of this position, the plaintiff refers to a previous motion between the parties. There, the defendants moved to vary the sealing order granted on April 27, 2016 so as to allow them access to the application for approval of the settlement. The motions judge allowed the varying of the sealing order, reasoning that it would be “ludicrous to suggest that evidence submitted to Justice Maddalena by both the litigation guardian and Mr. Preszler that tells the court why the settlement should be approved should not be produced.”[^3]
[20] The Divisional Court overturned the motions judge’s decision, holding that the correct legal issue concerned privilege.[^4] The Court reasoned at para. 18 that the defendants had the right to seek access to documents filed in support of the application for judgment pursuant to the normal disclosure rules quite apart from the presence of the sealing order:
The Sealing Order shielded the documents from scrutiny by the public. However, it did not limit or otherwise speak to the independent rights of litigants to documentary discovery. It did not relieve the plaintiff of his documentary disclosure obligations under the Rules of Civil Procedure. Nor did it bar discovery by the defendant of documents relevant to the negligence claim against him.
[21] On that basis, the plaintiff submits that the defendants were privies or else the sealing order would have precluded their access to the court file.
[22] The defendants respond that the judgment can be accepted as correct while still permitting a challenge to the advice given by counsel who sought court approval. If the evidence discloses that the advice given by current counsel to the plaintiff was imprudent, the defendants may be relieved from liability.
[23] The analysis must begin with the underlying principles behind issue estoppel.
[24] The first of those principles is finality. An issue, once decided, generally should not be re-litigated to the potential benefit of the losing party and the harassment of the winner. There is a possibility of inconsistent results, undue costs and inconclusive proceedings, all of which are to be avoided.
[25] However, as noted by the Supreme Court of Canada in Danyluk v. Ainsworth Technologies Inc., “estoppel is a doctrine of public policy that is designed to advance the interests of justice.”[^5]
[26] In this case, it is the plaintiff who has alleged professional negligence against the defendants arising from their actions on the plaintiff’s behalf when retained as counsel. To establish that claim, the plaintiff must show that the defendants breached the applicable standard of care owed to the plaintiff and that damages resulted. The damages would be the difference between what was actually received by the plaintiff and the amount the plaintiff says he should have received but for the actions of the defendants. An essential part of that analysis relates to the propriety of the amount recommended to the plaintiff and ultimately approved by the court.
[27] Issue estoppel is a shield, not a sword. It is designed to prevent unfair re-litigation of a decided point.
[28] In this case, the defendants are not privies with the defendant in the SABS claim. They were not involved in the resolution of the plaintiff’s claim in the SABS action, and they cannot take responsibility for the terms of the settlement. To be able to defend themselves in this action, they must be able to scrutinize the propriety of the settlement. The amount of the settlement, as between the SABS defendant and the plaintiff which is established in the final judgment of Maddalena J. is not being questioned in that there is no suggestion that the plaintiff should be able to receive more compensation from the SABS defendant. It would be unfair for the defendants in this action not to be able to defend themselves fully from the plaintiff’s claim.
[29] This was essentially the same point being made by the Divisional Court in its related decision, quoted above: it would be unfair to prevent the defendants in this action from having access to the materials available in the SABS claim that could be relevant to their defence.
[30] Even if the defendants were privies to the judgment of Maddalena J., public policy dictates that issue estoppel should not apply if doing so would prevent a proper defence from being advanced in response to the professional negligence claim.
[31] For the foregoing reasons, the improvident settlement defence will not be struck out, and that claim in the motion by the plaintiff is dismissed.
Claim of Privilege:
[32] The plaintiff provided the defendants with a redacted copy of the affidavit of Jeffrey Preszler sworn April 6, 2016 which had been filed by the plaintiff in support of the motion for judgment in the SABS action.
[33] The redactions contain information over which solicitor-client privilege is claimed. An unredacted copy was provided to the court.
[34] The defendants ask that this court review and order disclosure of the allegedly privileged portions of the Preszler affidavit. They claim that the full content of the affidavit is relevant to their defence in this action, which in part is that the plaintiff suffered no reduction in his SABS recovery as a result of their actions.
[35] The normal disclosure obligation under r. 30.02(2) provides that: “Every document relevant to any matter in issue in an action that is or has been in the possession, control or power of a party shall be produced for inspection… whether or not privilege is claimed in respect of the document.” As well, if a party asserts that disclosure cannot be made based on solicitor-client privilege, that party bears the onus of stating the reasons for the privilege.[^6]
[36] Rule 7.08(4)(b) of the Rules requires that on a motion for the judicial approval of a proposed settlement involving a party under disability, the lawyer acting for the litigation guardian must set out the lawyer’s position in respect of the proposed settlement. Courts have recognized the statutory incursion on privilege and have limited it to the extent necessary to approve the settlement.[^7]
[37] As might be expected, the Preszler affidavit summarizes the details of the motor vehicle accident in which the plaintiff was injured. It also includes background information about the plaintiff as well as details of his injuries including diagnoses, prognoses, and a summary of treatment. Reference is made to services provided to the plaintiff by his former counsel, (the defendants in this action), and to subsequent efforts made by plaintiff’s current counsel to secure a reasonable settlement. Details of the proposed fees to be paid to the plaintiff’s lawyer are also included. All that information was provided to the court in the SABS action to assist it in its duty to assess the reasonableness of the recommended settlement. By affidavit, the plaintiff’s litigation guardian accepted that the proposed settlement was reasonable.
[38] The content of the Preszler affidavit is full of information that would otherwise be protected by solicitor-client privilege. Privilege is claimed over those portions of the affidavit that contain Mr. Preszler’s rationale for the quantum of the proposed settlement.
[39] To answer the question about whether the privileged information should be disclosed, it is important to consider the context of the request. The plaintiff, having already received a court approved judgment for his SABS claim, seeks damages from the defendant based on alleged professional negligence in the handling of his case. He alleges that he would have been entitled to greater benefits accruing during the period prior to the settlement as well as in the future if the defendants had represented him properly. The defendants seek the information upon which the settlement was based to support their defence that the plaintiff’s new counsel gave advice that led to an improvident settlement which, if proven, could reduce or eliminate any damages for which the defendants are responsible.
[40] There has been no express waiver of privilege. The question therefore is whether there has been an implied waiver in the circumstances of the case. The protection of communications between a solicitor and client is fundamental to the administration of justice, and therefore should not be waived lightly.[^8] When determining whether privilege should be deemed as waived, the court must balance the protection of the privilege with the interests of ensuring a fair trial. Privilege will be deemed to have been waived when required by the interests of fairness and consistency, or when a communication is legitimately brought into issue in an action.[^9]
[41] In the case of Norhal Quarries & Holdings Ltd. v. Ross & McBride the court considered whether the contents of a plaintiff’s previous litigation file should be disclosed in its subsequent action against its former solicitors despite a claim of solicitor-client privilege.[^10] The court found that the privilege had been implicitly waived. It would have been unfair to the defendants to proceed to trial without that information. The court found that privilege was deemed to have been waived when the interests of fairness and consistency required it or when communication between a solicitor and client was made an issue in the action.[^11]
[42] In this case, the theory of the plaintiff is that, but for the actions of the defendants, he would have been entitled to recover a greater amount for both past and future SABS benefits than he was able to achieve in the court-approved settlement.
[43] The quantum of the settlement tells only half the story. For success in his claim against his former counsel, the plaintiff must show that certain advice, action, or lack thereof, on the part of the defendants prevented a greater recovery. Since the ultimate recovery was not the result of a trial decision, the advice given by counsel to the plaintiff justifying the settlement, which was accepted by the plaintiff’s litigation guardian and ultimately by the court, is relevant. It would be unfair for the defendants to have to proceed to trial in the absence of the information by which counsel justified the settlement.
[44] If the plaintiff’s claim related only to losses that arose before the settlement and during his retainer of the defendants, the rationale for the settlement of future claims would be irrelevant. However, the plaintiff has claimed future losses against the defendants. Since the court-approved settlement dealt with future losses, the advice given by plaintiff’s counsel is clearly relevant to the professional negligence claim.
[45] Therefore, I conclude that the portions of the Preszler affidavit over which privilege has been claimed should be disclosed. The full content of the affidavit of Jeffrey Preszler sworn April 6, 2016 is to be disclosed by the plaintiff to the defendants on or before October 1, 2021.
[46] As requested, counsel may provide supplementary written submissions on the removal motion according to the timetable below, if so advised:
a. from the defendants, to be served and filed by October 15, 2021;
b. from the plaintiff, to be served and filed by October 29, 2021;
c. from the defendants, reply if any, to be served and filed by November 5, 2021.
[47] If no submissions are received by November 5, 2021, I will proceed to make my decision on the removal motion based on the submissions received orally at the hearing on July 21, 2021.
[48] As to costs, I encourage the parties to discuss and resolve the issue of costs of the motions. If they are unable to do so, I will provide a further timetable for written costs submissions with my decision on the removal motion. If the parties advise that they have resolved the removal motion in advance of a decision, I will provide a timetable for written costs submissions at that time.
Reid J.
Date: September 27, 2021
[^1]: R.R.O. 1990, Reg. 194.
[^2]: See, for example, Municipality of Sioux Lookout v. Goodfellow, 2010 ONSC 1812, at para. 35.
[^3]: Van Every (Litigation guardian of) v. Findlay, 2018 ONSC 4213, at para. 29.
[^4]: Van Every v. Findlay, 2019 ONSC 6854, at para. 24 (“Divisional Court Decision”).
[^5]: 2001 SCC 44, [2001] 2 S.C.R. 460, at para. 19.
[^6]: Toronto Bd. of Education Staff Credit Union Ltd. v. Skinner, 1984 CarswellOnt 477 (Ont. H.C.), at para. 10.
[^7]: See, for example Burns Estate v. Falloon, 2007 38558 (Ont. S.C.), at paras. 18 – 21.
[^8]: Canada v. Solosky, 1979 9 (SCC), [1979] S.C.J. No. 130.
[^9]: Bank Leu AG v. Gaming Lottery Corp., [1999] O.J. No. 3949 (Ont. S.C.), at para. 5, affirmed in [2000] O.J. No. 1137 (Div. Ct.).
[^10]: [2000] O.J. No. 1082 (Ont. S.C.).
[^11]: Norhal at para. 5.