COURT FILE NO.: CV-2100668730

DATE: 20211221

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Chadwick Kelly, by his Litigation Guardian, Joseph Bernard Kelly, Applicant

AND: Wawanesa Mutual Insurance Company, Respondent

BEFORE: D. Wilson J.

COUNSEL: G. Joseph Falconeri and Leigh Harrison, for the Applicant Eric Sherkin, for BridgePoint Financial Services Limited Partnership I Sergio Grillone, former counsel for the Applicant

HEARD: December 8, 2021 (Zoom)

ENDORSEMENT

[1] An Application was filed with the Court seeking an urgent date for the approval of a proposed settlement on behalf of Chadwick Kelly, a party under disability [“Chad”]. Justice Dunphy agreed it ought to be heard on an urgent basis and ordered a timetable.

[2] An Application record was filed including the affidavit of the Litigation Guardian, Joseph Kelly, the father of Chad. An affidavit of solicitor Mr. Falconeri was also filed in support of the Application. Although not parties, BridgePoint Financial [“BridgePoint”] was served with the Application as was Sergio Grillone, the former counsel for Chad. In his endorsement of October 18, 2021, Justice Dunphy noted that both BridgePoint and Mr. Grillone might assert liens in relation to any settlement that the Court may approve.

[3] Mr. Grillone filed an affidavit sworn November 10, 2021 and he appeared on his own behalf although in September 2019 he signed an undertaking with the Law Society not to practice law. He also filed a factum.

[4] BridgePoint filed a responding record which included the affidavit of Stephen Pauwels and a factum.

[5] I heard oral submissions from counsel following which I reserved my decision.

Background

[6] By way of a brief background, Chad was involved in an accident on April 18, 2010 in the Town of Kawartha Lakes. He suffered catastrophic injuries in the accident, including a skull fracture and brain injury. He had a CSF leak and hemorrhagic infarctions. In 2013, he suffered a stroke which required surgery. Subsequently, while at the rehabilitation facility, he fell and injured himself which required further surgery and he was in a coma for several months. Chad is currently 39 years of age.

[7] Chad executed a Power of Attorney for Property and Personal Care on January 1, 2013 appointing his father as his Power of Attorney. A capacity assessment conducted in 2014 determined he did not have capacity to manage property or personal care.

[8] The solicitor Sergio Grillone was retained from March 2013 to May 2019 when solicitor Joseph Falconeri took over carriage of Chad’s claims arising from the accident. These included a tort claim as well as a claim for Statutory Accident Benefits from Wawanesa, the first party insurer. On June 27, 2019, Chad’s father signed a contingency fee agreement [“CFA”] with Mr. Falconeri by which he agreed to pay “30% of all amounts recovered on behalf of the client for injuries, damages, and losses, excluding disbursements.” The agreement also noted that any payments made by the opposing party towards the legal fees would be deducted from the fees charged under the CFA such that the client’s payment of legal fees under the contract would be reduced to 15-20%. The retainer of Mr. Grillone was not produced in the materials.

BridgePoint Loan

[9] BridgePoint lends money to injured parties who are involved in litigation. In June of 2014 on the recommendation of Mr. Grillone, Mr. Kelly obtained a litigation loan from BridgePoint in the sum of $40,500. In August of 2014, another loan in the sum of $115,000 was obtained and both were secured on the proceeds of any litigation for damages arising as a result of Chad’s accident of April 2010. The agreement that was signed by Mr. Kelly states that the BridgePoint loan would be paid as a first charge before solicitor’s fees and before any amounts to Chad. Mr. Grillone signed the loan document on August 21, 2014. The interest rate on the loan was set at 24%.

[10] There is a dispute about whether the loans were secured against all proceeds of Chad’s claims or just against proceeds from the tort action. The Applicant does not dispute that the sum of $155,500 was received and was used towards the purchase of the Toronto house and modifications needed due to Chad’s disabilities. As of April 2021, the accrued interest was $548,784.81 for a total outstanding amount of $704,284.81, according to BridgePoint.

The Evidence on the Application

The Applicant

[11] In his affidavit, Mr. Falconeri deposes that when he assumed carriage of these matters, specifically the accident benefits claim, Wawanesa was under the belief that the action had resolved with Mr. Grillone for $1,000,000 less any monies paid until the proposed settlement was approved by the Court. Wawanesa indicated that after the agreement on settlement with Mr. Grillone, it paid $300,000 in benefits to Chad, and Mr. Grillone failed to serve an application for approval by the Court. Mr. Falconeri deposes that he has been able to negotiate an offer of $900,000 for all benefits and he seeks approval from the Court of this proposed settlement. Mr. Falconeri has obtained a structure printout from McKellar Structured Settlements which the insurer has approved.

[12] In his affidavit he notes that the CFA would entitle him to a fee of $239,663 but he is prepared to reduce the amount to $102,074.65 plus HST and disbursements of $1,211.48. The settlement proposal this Application seeks approval of includes a payment of $33,444.16 to Mr. Grillone for disbursements and $50,000 to Mr. Kelly in trust for Chad’s use. The structure chosen would be funded in the amount of $700,000 with monthly payments of $6,038.12 for 10 years, when they would cease.

[13] When Mr. Falconeri wrote to Mr. Grillone in 2019 with a signed authorization for transfer of Chad’s file, he agreed to pay reasonable disbursements and fees as assessed. Mr. Grillone sent a list of disbursements totaling $180,635.59 many of which were disputed. Mr. Falconeri asserts that the disbursements related to the accident benefits file total $33,444.16, the bulk of which is comprised of expert reports. Mr. Grillone did not forward Chad’s file as requested; he ceased practicing law in 2019 and the Law Society took over his practice and provided the Kelly file to Mr. Falconeri. No fee account has been submitted by Mr. Grillone. Mr. Falconeri has issued a Statement of Claim against Mr. Grillone based on his negligent handling of the Kelly matter.

[14] Mr. Kelly purchased a property in Toronto in 2014 for he and Chad to live in and the house was registered in Chad’s name. The materials indicate that Mr. Grillone made the mortgage payments on the house until 2018, although the reason for this and the quantum paid are not set out. At a certain point, Mr. Grillone ceased making the payments and the mortgage went into default. The trust company brought an action against Chad and his father. Judgment was obtained for $388,107.25 on February 5, 2019 while Mr. Grillone was counsel of record. Eventually, after being notified that Chad was a party under disability, the trust company did not enforce possession and refinancing of the property was done. Mr. Falconeri deposes that the refinancing has placed the family in a difficult financial situation.

[15] Mr. Falconeri submits that of the $155,000 advanced by BridgePoint, Mr. Grillone retained $30,000 of it but there is no evidence of this in the affidavit materials that were filed. Indeed, there is a paucity of information from Mr. Grillone as to what transpired with the BridgePoint loan that he recommended to Mr. Kelly.

[16] In his affidavit sworn May 7, 2021, the Litigation Guardian Mr. Kelly deposes that he is in agreement with the settlement of the SABS claims for $900,000. He deposes that Mr. Grillone advised him to obtain the litigation loan from BridgePoint and told him it would be repaid from the tort action, not the SABS claims. He understood the mortgage payments for the new house were being paid for by Wawanesa, not by Mr. Grillone.

Mr. Grillone

[17] The former solicitor for Chad submits that his disbursements total $180,635.59 and that a list was forwarded to Mr. Falconeri on July 8, 2019. The disbursements are not broken down between those incurred for the tort action and those for the accident benefits. The unusual items are as follows: $89,016 for “advances from Grillone Law Firm for mortgage; $4,931.58 for advances from Grillone Law Firm for condo fees; $28,000 for KVM Loan paid by Grillone Law Firm; and $5,040 for KVM interest payments on loan”. Other disbursements that appear questionable are $2,616.93 for process server, $3,822.50 for office supplies and $4,721.24 for medical reports not specified.

[18] Mr. Grillone deposes that he personally agreed to help the family financially by paying the mortgage for a period of time. There is no calculation of the monies he alleges he paid on the mortgage. He did not release his file to Mr. Falconeri; rather an Application had to be launched for its production. Mr. Grillone notes that Mr. Falconeri agreed to protect the Grillone fee subject to it being assessed and he would pay reasonable disbursements.

[19] In his affidavit, Mr. Grillone offers the opinion that the loan from BridgePoint does not comply with the provisions of the Consumer Protection Act and the interest rate is exorbitant. Much of his affidavit is argument about the reasons that the BridgePoint loan should not be repaid.

[20] BridgePoint issued a claim against Mr. Grillone on a number of files for payment of loans provided on a variety of personal injury files totalling $1.7 million; the Kelly file is included in the claim. Mr. Grillone is defending the action on his own behalf and in May 2021 he issued a Statement of Defence and Counterclaim.

BridgePoint

[21] In the affidavit of Stephen Pauwels sworn November 5, 2021, it is stated that BridgePoint was contacted by Mr. Grillone in June 2014 who advised that Chad’s case was settling but funds were needed to purchase a house to accommodate Chad’s needs. Mr. Pauwels deposes that BridgePoint was advised by Mr. Grillone that he anticipated settling the accident benefits for $1 million structured plus another million in a lump sum. A loan of $155,500 was advanced to assist with Chad’s housing needs and Mr. Pauwels states that both Mr. Grillone and Mr. Falconeri agreed that the BridgePoint loan was the first charge on any proceeds of the litigation, in priority to solicitor’s fees. He disputes that the loan was to be paid only from the tort action, noting the liability situation in that case is tenuous.

Analysis

[22] By way of summary, the solicitor for the Applicant seeks approval of a proposed settlement of all accident benefits in the sum of $900,000. He seeks approval of a distribution which includes payment of legal fees to the Falconeri law firm of $102,074.65, HST of $13,269.71, disbursements of $1,211.48, disbursements to the Grillone law firm of $33,444.16 and $50,000 to Mr. Kelly in trust for Chad’s benefit. Additionally, the sum of $700,000 would be placed in a structure making monthly payments to Chad of $6,038.12 for 10 years with a reversionary guarantee for the benefit of Wawanesa.

[23] There are a number of issues in the Application before me. I have submissions from 2 entities who are not parties to the Application. Pursuant to Rule 7, I am tasked with the determination of whether or not the proposed settlement of Chad’s accident benefits past, present, and future in the sum of $900,000 is reasonable and is in his best interests. While I have a general understanding of the injuries Chad suffered in the 2010 accident, there is no updated medical or rehabilitation documentation. The most recent medical report is 2014 from the neuropsychologist Dr. Lemsky. She identifies a wide range of impairments, including visual, executive functioning, and attention and mental control as well as depression. In addition, Chad has significant physical impairments. She indicates that he requires 24-hour care which his father has undertaken to provide at home. Dr. Lemsky identifies a number of required therapies and other modalities of treatment for Chad. There is nothing in the materials indicating how Chad is functioning at the present time, or what treatment he has been undertaking since 2014.

[24] In the affidavit of counsel at paragraphs 36-42, Mr. Falconeri summarizes the amounts that have been paid out under each type of claim, the amount remaining under the policy and the amount offered by Wawanesa. After reviewing the report of Dr. Lemsky and considering the opinion of Mr. Falconeri, I am of the view that the proposed resolution in the sum of $900,000 is reasonable and is in the best interests of Chad and I approve the quantum proposed.

[25] I turn now to the proposed distributions and terms of Judgment. Of the settlement funds, it is proposed that $700,000 be placed in a structure with payments of $6038.12 per annum for 10 years at which point the payments cease. The rationale for that seems to be based on the fact that the accident benefits policy pays a maximum of $6000 per month for claimants who are catastrophically impaired. However, there is no evidence before me of the quantum of care that Chad needs on a monthly basis and there is nothing that speaks to his life expectancy. A supplementary affidavit from Mr. Kelly is to be submitted providing a summary of the medical treatment and rehabilitation that Chad has undertaken since 2014 along with any updated medical opinions that have been provided. An opinion on life expectancy must be secured.

[26] Mr. Falconeri in his affidavit supports the structure chosen because it will pay basically what Wawanesa has been paying historically in benefits. He deposes that during the course of the structure payments, the tort action will resolve and “Planning for Chad’s future after the structure runs out will take place after that matter is resolved.” I have no information about whether there will be a settlement offer in the tort action and if so, when it will be made or the anticipated quantum. Mr. Falconeri is of the opinion that the defendants will be found liable to some extent for Chad’s damages, but there is nothing more specific than that on the likelihood of recovery in the tort action.

[27] Mr. Falconeri also notes that if liability is found, Chad will be contributorily negligent for the accident. I have reviewed the police report which is attached as an exhibit to Mr. Falconeri’s affidavit. The investigating officer notes that Chad failed to stop at a stop sign, entered the intersection, and collided with another vehicle before ending up in the ditch. Information about liability evidence from the examinations for discovery of the Defendants in the tort action was not provided in the materials. The action is “being scheduled for trial”, but there is no information as to when the trial might take place.

[28] While I am prepared to approve the quantum of the proposed settlement with Wawanesa, I cannot approve the proposed structure without further information concerning the anticipated quantum and timing of a settlement in the tort action. It is possible that if there isn’t a significant settlement in the tort action, in 10 years, the structure will be at an end and there will be no monies to pay for Chad’s ongoing care.

[29] At the end of submissions on the application, I urged counsel for the Plaintiff and for BridgePoint to discuss a possible resolution of the BridgePoint claim but I was subsequently advised that counsel were unable to agree on a resolution. BridgePoint has sued Mr. Grillone for payment of this loan and a number of others and it is not a party on this application. As I have noted, it is unclear to me how much of the BridgePoint loan of $155,500 was, in fact, provided to Mr. Kelly and Mr. Falconeri is to confirm this.

[30] Mr. Grillone takes issue with the fact that he has fees and disbursements that were not paid when Mr. Falconeri assumed carriage of this file in 2019. However, Mr. Grillone was advised that Mr. Falconeri would pay his fee as assessed along with proper disbursements. The list totalling $180,635.59 does not constitute a list of proper assessable disbursements. In addition, Mr. Grillone has not produced his dockets or a CFA from which he calculates fees that are owing. He has taken no steps to have his account assessed. He has not submitted to the Court anything on which I can make an order for payment of fees and/or disbursements for work done on the accident benefit file. Mr. Falconeri has issued a Statement of Claim based in negligence in the handling of Chad’s claims and any fees to which Mr. Grillone may be entitled can be claimed in that action. I decline to direct any payments to Mr. Grillone on this Application.

[31] Any claim of BridgePoint on the settlement funds is not clear in the circumstances, based on the evidence filed on this Application. Counsel asks for a certificate of pending litigation or a mortgage on the house. It seems that through another lawsuit against Mr. Grillone, BridgePoint is seeking recovery of the amounts provided as loans in this action. Chad is a party under disability and this Application concerns the resolution of his claims for accident benefits arising from the 2010 accident in which Chad suffered very significant, life-altering injuries. It does not appear that Mr. Kelly was offered independent legal advice in 2014 when the loan was secured: Gnys v. Narbutt, 2016 ONSC 2594. I decline to approve payment of the principal amount of $155,500 at this time and will await the report of the PGT.

[32] Given the issues that require addressing, which in my view were created by the actions of Mr. Grillone, I am sending this matter to the Office of the Public Guardian and Trustee for a report and recommendations concerning the proposed distributions and the chosen structure as well as the issue of the loan from BridgePoint.

[33] Although it was not requested, I am ordering that the Court file for this Application be sealed on an interim basis. There is information in the materials that could be prejudicial to Chad and his counsel in the tort action.

[34] While I have approved the $900,000 quantum of settlement, I have set out a number of concerns that I have concerning the proposed distributions, which I do not approve at the present time. I am seized of this Application and any approval for the tort action.

Date: December 21, 2021