COURT FILE NO.: CV-18-00591180-0000 MOTION HEARD: 20211203

Superior Court of Justice - Ontario

RE: SEMA CETIN, Plaintiff AND: THOMAS PERCIVAL, JASON LAM AND KRYLOV AND COMPANY ALSO KNOWN AS KRYLOV LAM AND COMPANY, Defendants

BEFORE: ASSOCIATE JUSTICE R. FRANK

COUNSEL: J. Katz and A. Singer for the Moving Party/Plaintiff L. Hedayati for the Responding Parties/ Defendants

HEARD: December 3, 2021

Reasons for Decision

A. Introduction

[1] This is a motion to lift the stay of proceedings in this action (the “Stay”) made pursuant to the order of Master Short dated July 12, 2019 (the “Stay Order”). For the reasons that follow, the motion is granted.

B. Background Facts

[2] On October 18, 2010, the Plaintiff was involved in a motor vehicle accident. She retained the Defendants to represent her in making claims against her accident benefits insurer, Unica Insurance Inc. (“Unica”). The Defendants also represented the Plaintiff in an action against the negligent driver in an action in the Superior Court of Justice (the “Motor Vehicle Action”).

[3] In this action, the Plaintiff alleges that the Defendants missed the limitation period in her claim for accident benefits. She alleges that, as a result, she was prevented from receiving various accident benefits from Unica and settled her accident benefits claim with Unica for much less than what it was worth.

[4] After this action was commenced, the Defendants advised the Plaintiff of their intention to seek a stay of the action pending the outcome of the Motor Vehicle Action. Following an exchange of correspondence between counsel for the parties regarding the Defendants’ proposal to stay the action, the Plaintiff agreed to the Stay, and the Stay Order was made on consent of the parties.

[5] The Stay Order provides that this action was “stayed pending the outcome of the trial of [the Motor Vehicle Action] and the determination or any appeals therefrom”.

[6] The Motor Vehicle Action was settled on May 7, 2020. Following the settlement, the Plaintiff sought to resume this action. The Defendants take the position that the action is permanently stayed because there was no trial of the Motor Vehicle Action.

C. Law and Analysis

1. Submissions of the parties

[7] The Plaintiff’s position is that as a result of the settlement of the Motor Vehicle Action, the circumstances that led to the Stay no longer exist and the Stay should be lifted pursuant to the terms of the Stay Order. The Plaintiff submits that the correspondence between counsel demonstrates that her consent to the Stay Order was only provided on the basis that: (1) her right to pursue this action would be preserved; and (2) the Stay would be lifted following the resolution of the Motor Vehicle Action, by any means. Alternatively, the Plaintiff argues that the court has discretion to lift the Stay because the Stay Order is an interlocutory procedural consent order, and it is in the interests of justice for this action to be determined on its merits.

[8] The Defendants’ position is as follows:

1. The clear and unambiguous terms of the Stay Order provide that the Stay would only be lifted following a trial of the Motor Vehicle Action. As the Plaintiff chose to settle the Motor Vehicle Action before trial, there will never be a trial of that action and there is no basis to lift the Stay.
2. Varying or setting aside the Stay Order, which was granted with the Plaintiff’s consent, would be contrary to the clear terms of the order and the rationale for entering into it.
3. The basis for the Stay was that the Plaintiff’s claim against the Defendants was contingent upon the Plaintiff first establishing that the Defendants’ handling of her accident benefits claim affected the successful prosecution of her tort claim.
4. Having settled the Motor Vehicle Action for less than the tortfeasor’s insurance policy limit, the Plaintiff’s claim against the Defendants is effectively extinguished because: (a) if the settlement accurately reflected the value of the Plaintiff’s accident-related losses, then there is no tenable action against the Defendants; or (b) the settlement breaks the chain of causation between any damage sustained by the Plaintiff and the alleged acts or omissions on the part of the Defendants.

2. Does the Stay Order require a trial in order for the Stay to be lifted?

(a) Legal background, discussion and analysis

[9] The Court has wide discretion to grant or lift a stay of proceedings in any action. Pursuant to Section 106 of the Courts of Justice Act, a stay may be granted on such terms as are considered just. As well, “[t]he Court has always had an inherent jurisdiction to grant a stay of proceedings whenever it is just and convenient to do so, in order to control its process or prevent an abuse of that process.”

[10] The Defendants argue that the Stay Order was entered into on consent and must be treated as a contract. Relying on Gutierrez v. Tropic International Ltd., they submit that under the parol evidence rule, extrinsic evidence is not admissible to vary, qualify, add to, or subtract from, the clear and unambiguous terms of the Stay Order. The Defendants submit that the Stay under the Stay Order clearly and unambiguously applies “pending the outcome of the trial of [the Motor Vehicle Action] and the determination of any appeals therefrom”. As noted above, there will never be a trial of the Motor Vehicle action because it was settled.

[11] In my view, the Defendants read the Stay Order too narrowly. They disregard the context and surrounding circumstances within which that consent order was agreed to by the Plaintiff and granted by the court, and they misinterpret the effect of the parol evidence rule. In this regard, the Supreme Court has held as follows:

It is necessary to say a word about consideration of the surrounding circumstances and the parol evidence rule. The parol evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing ( King, at para. 35; and Hall, at p. 53). To this end, the rule precludes, among other things, evidence of the subjective intentions of the parties (Hall, at pp. 64-65; and Eli Lilly & Co. v. Novopharm Ltd., [1998] 2 S.C.R. 129, at paras. 54‑59, per Iacobucci J.). The purpose of the parol evidence rule is primarily to achieve finality and certainty in contractual obligations, and secondarily to hamper a party’s ability to use fabricated or unreliable evidence to attack a written contract (United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2 S.C.R. 316, at pp. 341-42, per Sopinka J.).

The parol evidence rule does not apply to preclude evidence of the surrounding circumstances. Such evidence is consistent with the objectives of finality and certainty because it is used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words. The surrounding circumstances are facts known or facts that reasonably ought to have been known to both parties at or before the date of contracting; therefore, the concern of unreliability does not arise.

Some authorities and commentators suggest that the parol evidence rule is an anachronism, or, at the very least, of limited application in view of the myriad of exceptions to it (see for example Gutierrez v. Tropic International Ltd. (2002), 63 O.R. (3d) 63 (C.A.), at paras. 19-20; and Hall, at pp. 53-64). For the purposes of this appeal, it is sufficient to say that the parol evidence rule does not apply to preclude evidence of surrounding circumstances when interpreting the words of a written contract.

[12] In interpreting the Stay Order, it is critical to consider the context and surrounding circumstances regarding the parties’ agreement that resulted in that consent order. The surrounding circumstances – as memorialized in the correspondence between counsel – include the following:

1. It was the Defendants who sought the Plaintiff’s consent to the Stay Order. The Defendants requested a stay “until the outcome of the tort claim” was known. In their view, the Plaintiffs’ claim would “not crystalize” until the Motor Vehicle Action resolved. Correspondence from the Defendants’ counsel made reference to a stay that would “preserve the plaintiff’s rights”.
2. From the outset, the Plaintiff expressly disputed the Defendants’ position that the Motor Vehicle Action would finally determine the damages that could be claimed in this action. The correspondence made it clear that, from the Plaintiff’s perspective, there were various issues that would not be addressed in any resolution of the Motor Vehicle Action, and that those issues would have to be addressed in this action. There is express reference in the correspondence to the Plaintiff’s intention to preserve the right to argue that additional types of damages are available in this action than would be available in the Motor Vehicle Action. The Defendants were aware of the Plaintiff’s position and did not dispute the Plaintiff’s right to assert it.

[13] The key pieces of the correspondence between counsel include the April 11, 2019 letter from the Plaintiff’s counsel to the Defendants’ counsel, and the May 10, 2019 response from the Defendants’ counsel. The April 11, 2019 correspondence included the following:

My client is prepared to consent to a stay pending final resolution of her tort claim. However, she takes the position that she may still have losses that are not claimable or compensable in the tort action [i.e. the Motor Vehicle Action]…

Also, on settlement or judgment in the tort action, various contingencies such as maternity leave and early retirement may be factored into any award. These would not apply in her accident benefit claim and by extension in her claim against her former lawyer. [emphasis added]

[14] In my view, this is a clear articulation that the Plaintiff’s agreement to the Stay Order was made on the basis that the Stay would be in place pending “final resolution” of her tort claim, which is not limited to a determination of that action after trial. This is consistent with other correspondence between counsel.

[15] Similarly, the May 10, 2019 response from the Defendants’ counsel included the following:

Our client does not concede that Ms. Cetin is not entitled to recover 100 percent of her losses in tort, but acknowledges that Ms. Cetin is entitled to make those arguments following resolution of her tort claim.

I enclose a consent and order for stay in the form that we have used previously in this situation… [emphasis added]

[16] The statements in the April 11 and May 10, 2019 correspondence are objective evidence of the background facts at the time the Stay Order was agreed to between the parties and part of the common knowledge of the parties at the time the Stay Order was submitted to the Court.

[17] The Defendants argue that the May 10, 2019 correspondence must be read in the context of earlier correspondence between the parties’ counsel. They point to prior correspondence from the Defendants’ lawyer requesting that the Plaintiff agree to a stay of the action pending the outcome of the trial of the tort action and any appeal therefrom. However, the exchanges between counsel must be read as a whole, and statements in earlier correspondence may be qualified by later statements. Here, the continued correspondence between counsel used broader language than “trial and any appeal therefrom”. Specifically, the correspondence between counsel included language such as “preserve the plaintiff’s rights”, “following resolution of her tort claim”, “pending final resolution of her tort claim”, “until the outcome of the tort claim”, and “on settlement or judgment in the tort action”. This is consistent with the Plaintiff’s position that the agreement preserved her rights and that the Stay would be lifted on resolution of the tort claim, whether by settlement or judgment.

[18] In summary, considering the surrounding circumstances, I find that the Defendants’ interpretation of the Stay Order is inconsistent with the common knowledge and objective evidence of the background facts at the time the parties agreed to that order. I interpret the terms of the consent Stay Order more broadly than do the Defendants, and find that the parties’ agreement was to stay the action pending resolution of the Motor Vehicle Action, whether through trial, motion for summary judgment, settlement, or otherwise.

3. Should the Stay Order be Varied or Set Aside?

(a) Legal background, discussion and analysis

[19] Relying on Chitel v. Rothbart, the Defendants argue that the Stay Order can only be set aside or varied by subsequent consent, or upon grounds of common mistake, misrepresentation or fraud, or on any other ground which would invalidate a contract. The Defendants argue that there is no basis to lift the Stay because none of the grounds provided for in Chitel apply in the circumstances of this case.

[20] The Plaintiff argues that even if the Defendants’ restrictive interpretation of the Stay Order is accepted, the court should lift the Stay and allow the action to proceed to a determination on its merits. The Plaintiff submits that Chitel is no longer good law in Ontario. Instead, the Plaintiff relies on a long line of cases in which the assessment of whether to set aside an interlocutory procedural consent order is based on whether it is in the interests of justice for the dispute to be heard on its merits. The “interests of justice” approach has been explained as follows:

Thus, a court is not limited to setting aside an order in instances of fraud or facts arising or discovered after the order has been made. This is reflected in a review of this court’s decisions, which demonstrates a willingness to depart from finality and set aside court orders where it is necessary in the interests of justice to do so.

[21] In Okarlo Holdings Limited v Wilmara Holdings Inc, 2018 ONSC 1409, Master McGraw (as he was then titled) considered whether it was appropriate in the circumstances of that case to lift a stay of proceedings that had been granted on consent, and recognized the following principles:

In Quadrangle Holdings, cited by the Court of Appeal in Kaynes, the Court stated the following:

A stay of proceedings may be temporary or permanent. A stay based on abuse of process is usually permanent. Other kinds of stays are usually temporary: Linda S. Abrams & Kevin P. McGuinness, Canadian Civil Procedure Law, 2nd ed. (Markham: LexisNexis Inc., 2010), para. 8.142. The authors go on to say:

Normally, a stay is not a final order of a court, because a motion can always be made for the lifting of the stay. The inherent nature of such an order contemplates the possibility that the court which made the order will revisit the question of whether proceedings should be instituted or allowed to proceed, on the motion of a person affected by it. ... In dealing with that question, the judge from whom leave is sought should consider whether the refusal to lift the stay has (or, if left in place, would have) the practical effect of extinguishing or severely prejudicing the rights of the party seeking leave.

[22] At the hearing of the motion, much of the argument with respect to the issue of prejudice was devoted to submissions about whether there are any differences between: (i) the tort claims that were available to the Plaintiff in the Motor Vehicle Action; and (ii) the accident benefit claims that would have been available to the Plaintiff, which form the basis of her claim in this action against her former lawyers.

[23] The Defendants argue that there are no claims the Plaintiff could have made in the latter category that were not also available to her in Motor Vehicle Action. They also assert that the Plaintiff has not put forward any evidence of such claims, and that, having settled her tort claim, the Plaintiff’s claim in this action for damages against her former lawyers has effectively been extinguished. On this basis, the Defendants argue that:

1. Allowing this action to proceed after the settlement of the Motor Vehicle Action would be prejudicial to them because the Plaintiff compromised her recovery in the Motor Vehicle Action from what would have been available to her at trial, and the Defendants lost their ability to participate in the Motor Vehicle Action.
2. By settling the tort claim in the Motor Vehicle Action for an amount less that the policy limit, the Plaintiff must be precluded from looking to the Defendants for any deficit; it would be unfair to allow the Plaintiff to seek to recover any deficit from the Defendants when the Plaintiff chose to compromise her tort claim.

[24] I do not accept these arguments by the Defendants. The Plaintiff has consistently taken the position that the claims in this action do not entirely overlap with those that had been made in the Motor Vehicle Action. This is made abundantly clear in the correspondence between counsel, including the Defendants’ express acknowledgement that the Defendants “[do] not concede that Ms. Cetin is not entitled to recover 100 percent of her losses in tort, but [acknowledge] that Ms. Cetin is entitled to make those arguments following resolution of the tort claim.” Thus, the difficulty with the Defendants’ position is that it is essentially asking the Court to determine on this motion that any claims the Plaintiff is asserting in this action were also available to her in the Motor Vehicle Action. While the Defendants may choose to advance that argument at trial or on a motion for summary judgment, it is not something the Court can or should determine in the context of this motion.

[25] Further, I do not accept the Defendants’ argument that the Stay was put in place in order for the Plaintiff to establish via the tort claim (i.e. the Motor Vehicle Action) that acts or omissions by the Defendants prevented her from being fully compensated for her motor vehicle accident-related damages. As noted above, that has been expressly and consistently contested by the Plaintiff. Further, I do not accept the Defendants’ assertion that settlement of the tort claim effectively extinguished the Plaintiff’s claim for damages against her former lawyers. Again, while this is something the Defendants may choose to argue as part of a determination of the merits of this action, it is not something the Court can or should determine in the context of this motion to lift the stay.

[26] If the Stay is lifted and the action proceeds, it will still be open to the Defendants to argue that the tort claim was improvidently settled – which puts the Defendants in the same position they would have been in if there had not been a stay and the tort claim had been settled. However, if the Stay is not lifted, the Plaintiff will be prejudiced as she will lose the ability to obtain a determination as to whether the accident benefit claims that would have been available to her were lost as a result of the Defendants’ negligence. Again, it will remain open to the Defendants to argue that the Plaintiff has no losses that were not claimable or compensable in the tort action, or that by entering into an improvident settlement with the tortfeasor, the Plaintiff has prejudiced the Defendants by increasing the share of the Plaintiff’s losses they will have to pay. But it is in the interests of justice for those issues to be determined on their merits.

[27] Finally, the Defendants argue that the stay should not be lifted because, based on the principles outlined in Hryniak v Mauldin, 2014 SCC 7, not every case need be tried on its merits. I find that the Defendants’ reliance on Hryniak is misplaced. In Hryniak, the court noted the need for “simplifying pre-trial procedures and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case”. However, I do not read this as an endorsement that a party should be disentitled to some form of a merits-based assessment. Rather, the Supreme Court described the need for a process of adjudication that is fair and just as follows:

…The principal goal remains the same: a fair process that results in a just adjudication of disputes. A fair and just process must permit a judge to find the facts necessary to resolve the dispute and to apply the relevant legal principles to the facts as found. However, that process is illusory unless it is also accessible — proportionate, timely and affordable. The proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure.

[28] In summary, even if the Defendants’ narrow reading of the consent order were to be accepted (which I find is not the case), applying the “interests of justice” approach outlined in the Clatney line of cases, I find that it is necessary and in the interests of justice to lift the Stay.

D. Disposition

[29] The Plaintiff’s motion is granted, and I order that the Stay pursuant to the Stay Order is lifted.

[30] If the parties cannot agree on costs of this motion, they may make written submissions, limited to three pages, exclusive of attachments, as follows:

(a) by the Plaintiff, within 20 days of the release of these reasons; and (b) by the Defendants within 10 days of receipt of the Plaintiff’s submissions.

R. Frank Associate J.

DATE: April 4, 2022