Court File and Parties
COURT FILE NO.: CV-14-4591 DATE: 20230316 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: THE ESTATE OF IVO LEPAN, BY WAY OF HIS ESTATE TRUSTEE, MIRJANA LEPAN, Plaintiff AND: LOFRANCO CHAGPAR BARRISTERS (A.K.A. LOFRANCO CHAGPAR CORRIERO PERSONAL INJURY LAWYERS), ROCCO CARMEN LOFRANCO, FRANCIS JOSEPH BURNS AND MICHAEL DEWAYNE PRYCE, Defendants
BEFORE: Justice K. Tranquilli
COUNSEL: K. Arvai, for the Plaintiff/Responding Party A. Rachlin, for the Defendants/Moving Parties
HEARD: December 12, 2022
Endorsement
Overview
1This motion arises from a solicitor negligence action in respect of a motor vehicle accident on June 11, 2008. The plaintiff retained the defendants to pursue tort, accident benefit and long-term disability benefit claims as a result of the accident. The plaintiff died in 2017. His action is continued by his estate.
2His estate alleges the defendants improperly and improvidently settled his long-term disability and accident benefits claims through dishonest and negligent acts. The plaintiff further asserts the defendants improperly pressured the plaintiff to accept an improvident settlement of his tort claim. The plaintiff did not accept the defendants’ recommendation and retained new counsel, who resolved the claim on more favourable terms and then commenced this action against the defendants.
3At issue on this motion is whether the plaintiff estate made an enforceable representation to limit its claims to only those damages arising from the alleged improvident settlement of the long-term disability claim and not any damages in respect of the defendants’ management of the accident benefits and tort claims.
4The defendants contend the plaintiff did so limit his claim through representations made by plaintiff counsel in correspondence to defence counsel and later in submissions by plaintiff counsel to an appellate court.
5The plaintiff claims that the estate only withdrew its pecuniary claims in respect of the accident benefits settlement and recommended tort settlement. The plaintiff contends the estate is still entitled to pursue non-pecuniary damages arising from the defendants’ management of those claims.
Background
6The plaintiff settled his long-term disability claim through the defendants in November 2009 for $40,000. He settled his accident benefits claim through the defendants in April 2011. However, he rejected the defendants’ recommended settlement of his tort claim and changed counsel to the plaintiff counsel on this matter in 2012. In 2013, he settled his tort claim through his current counsel for a sum substantially higher than was recommended by the defendants.
7The plaintiff commenced this action in December 2014 against his former counsel, law firm and paralegal. As mentioned, this claim is continued by his estate.
8The plaintiff’s estate alleges the settlement of his long-term and accident benefit claims were improvident and achieved by the defendants through negligence, bad faith, or fraud; and that the defendants repeated the same pressure tactics in recommending an improvident settlement of his tort claim. He also alleged that the improvident settlement of his accident benefit and long-term disability claims had a negative impact on the eventual settlement of his tort claim.
9His estate claims $525,000 in general, aggravated, and punitive damages from the alleged mismanagement of his claims by the defendants.
10In July 2018, the defendants moved to remove plaintiff counsel as solicitor of record. The defendants alleged plaintiff counsel was in a conflict of interest arising from his involvement in the eventual settlement of the tort claim, which was material to the allegations of negligence and misconduct by the defendants and the assessment of damages. The defendants argued plaintiff counsel was a necessary and crucial witness as he would need to testify to the recommendations and opinions in respect of the tort settlement and the effect of the settlements of the other claims on the tort claim.
11By reasons reported at 2018 ONSC 5330, Justice McArthur dismissed the defendants’ motion on the basis that it was premature to determine the issue when weighed against the plaintiff’s right to counsel of its choice.
12The defendants appealed the decision to the Divisional Court.
13Approximately six weeks before the Divisional Court hearing, by letter dated October 15, 2020 and marked “Without Prejudice”, plaintiff counsel wrote to defendants’ counsel with a settlement proposal wherein he also made comments about damages claimed against the defendants. I will address the content of that communication later in these reasons.
14The Divisional Court heard the defendants’ appeal on November 27, 2020. Plaintiff counsel retained counsel to act on the appeal. The Divisional Court dismissed the defendants’ appeal. In reasons released on March 20, 2021 and reported at 2021 ONSC 1757, at paragraph 10 the Divisional Court noted:
This action is in its early stages. Pleadings have been exchanged but are still not complete. On the hearing of the appeal, counsel for the plaintiff advised that the claim would be amended to limit the claim to damages flowing from the settlement of the claim against the long-term disability insurer only. Counsel for the defendants did not object to this information. [Emphasis added]
15At paragraphs 15 and 16 of the Judgment, the Divisional Court reviewed the legal background of the dispute, and the Insurance Act provisions that deduct certain collateral benefits from a damages award in tort. The appellate court commented:
As the plaintiff has limited his claim to the issue of long-term disability benefits, only clause 2 of section 267.8(1) is applicable … In this case, issues arise as to whether the defendant lawyers recommended that Mr. Lepan settle his claim for long-term disability benefits for less than what was “available” and whether the lump sum payment of $40,000 for all claims was deductible by the tortfeasor as a payment received for income loss or loss or [sic] earning capacity.
However, the plaintiff’s claim against his former lawyers is not limited to negligence in the settling of the long-term disability claim. The plaintiff also alleges that the claim was settled without his knowledge and that he was subsequently pressured into agreeing to accept the settlement without being informed of his full legal rights: see paragraphs 12 to 17 of the Amended Statement of Claim. [Emphasis added]
16Paragraphs 12 to 17 of the Amended Statement of Claim, as referenced in the appeal court’s reasons, refer to the alleged circumstances of the settlement of the long-term disability claim. Against this background, the Divisional Court continued its analysis and concluded the judge’s dismissal of the defendants’ motion to remove plaintiff counsel for conflict of interest considered the relevant legal principles and did not demonstrate a misapprehension of evidence.
17Following disposition of the appeal, a further Amended Amended Statement of Claim was issued in December 2021, unopposed by the defendants. In this amended pleading, the plaintiff estate further particularized its allegations of the defendants’ bad faith, negligence and wrongdoing in the settlement of the deceased’s long-term disability claim and withdrew the allegation that the settlement of the long-term disability claim had a negative impact on his eventual settlement of his tort claim.
18The parties proceeded to examinations for discovery in December 2021. The defendants refused to answer questions regarding the tort and accident benefits claims based on the ostensible undertaking made by the plaintiff in correspondence and to the court. The defendants took the position that the plaintiff had limited its claim for damages to only the management and settlement of the long-term disability claim.
19By Amended Amended Statement of Defence dated January 7, 2022, the defendants plead that plaintiff’s counsel advised the Divisional Court that the statement of claim would be amended to limit the plaintiff’s claims to damages flowing from the settlement of the claim against the long-term disability insurer only and that the plaintiff has failed to comply with its undertaking to the court. Further, the defendants plead the plaintiff is estopped from claiming any damages other than the damages flowing from the settlement of the long-term disability claim.
20The plaintiff submits the correspondence from October 2020 is inadmissible and protected by privilege. In the alternative, the plaintiff submits that the statements in the letter and the subsequent statements to the Divisional Court were in the nature of “advice” and that the plaintiff only waived claims for pecuniary damages and economic loss in respect of the settlement of the tort and accident benefits claims. This would eliminate any prospect of plaintiff counsel being in a conflict of interest, as asserted by the defendants in the earlier motion and appeal. The plaintiff estate contends its pleading still maintains non-pecuniary claims arising from the manner in which the plaintiff was allegedly treated by the defendants in the settlements of the long-term disability and accident benefits claims and in the tort settlement recommended by the defendants.
Issues
21This motion requires the court to determine the following questions:
- Is plaintiff counsel’s letter of October 15, 2020 protected by settlement privilege?
- Did plaintiff counsel give an undertaking to limit the plaintiff’s claim to only damages arising from settlement of the long-term disability claim?
- Can the plaintiff claim non-pecuniary general damages arising from the settlement of his accident benefits claim and the management and attempted settlement of his tort claim?
22As a preliminary matter, the plaintiff argued that the motion ought to be dismissed as a collateral attack on the order permitting the Amended Amended Statement of Claim, which the defendants did not oppose and did not seek to appeal.
23Review of the amended pleading does not support this position. It is true the amendments do not contain an express limitation of the action to only the circumstances of the management and settlement of the long-term disability claim. However, the amendments all particularize the alleged misconduct or negligence of the defendants in the settlement of the long-term disability claim and specify the pecuniary loss arising from that settlement. The amendment also strikes out the allegation that the settlement of the long-term disability and accident benefit claims had a negative impact on the settlement of his tort claim. Accordingly, the amended pleading does not raise a bar to this motion. The defendants are not seeking to re-litigate an issue that has already been determined.
24The defendants’ written submissions also argued that plaintiff counsel’s ostensible representation should be enforced either as a partial settlement or an admission. However, on the hearing of the motion, counsel confirmed the defendants would not advance these arguments. This was a reasonable concession. In my view, the communications cannot be characterized as a partial settlement. There is no indication of either an offer or acceptance and consideration is absent. Similarly, in the court’s view, the statements in issue do not clearly constitute an “admission”, in the sense of being an acknowledgement of the truth or accuracy of a set of facts or as being an unambiguous concession to the opposing party.
25The more suited approach is to ask whether these statements amounted to an undertaking by plaintiff counsel to limit the plaintiff’s claim.
1. Is plaintiff counsel’s letter of October 15, 2020 protected by privilege?
26Counsel’s letter of October 15, 2020 is marked “Without Prejudice”. The defendants included this letter in their motion materials, largely redacted but for a brief excerpt upon which the defendants sought to rely in this motion.
27There is no dispute that the redacted portions of that letter included a settlement proposal by the plaintiff. The plaintiff contends the entirety of the letter is therefore protected by settlement privilege and ought to be disregarded: Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 4th ed., (Markham: LexisNexis, 2014) at para. 14.333 (“Sopinka”). The plaintiff has provided a largely unredacted version of the letter in its responding materials for the court’s review. Mr. Arvai’s law clerk deposes on information and belief from counsel that Mr. Arvai’s entire purpose of the letter was to attempt to open settlement discussions, and therefore, the court must disregard the single paragraph relied upon by the defendants.
28The defendants submit that the statement in the letter that it seeks to rely upon in this motion is clearly not linked to any communications made for the purpose of compromise or settlement of the dispute. The defendants redacted those portions of the letter that were clearly made for the purposes of a settlement offer. Simply appending the terms “Without Prejudice” is not conclusive in making the document privileged; it is the content that determines whether the writer was expressing views on the litigation and overtures for settlement or compromise: [Abrams v. Grant, 1978 CarswellOnt 387 (Ont. H.C.J.)](Abrams v. Grant, 1978 CarswellOnt 387 (Ont. H.C.J.)).
29In reviewing the version of the letter supplied by the plaintiff, the court acknowledges that but for the brief passage in issue, the overall tone and purpose of the communication was directed toward seeking a compromise or settlement. The court also recognizes the approach has been to hold that where it is found that settlement privilege arises, it attaches to cover and protect all communications expressed to be “Without Prejudice”: Sopinka, at para. 14.333.
30However, it is evident from an objective assessment of the letter that the isolated paragraph in issue conveyed counsel’s comments about the future of the action that were only relevant if the matter did not resolve. The balance of the letter comments on the litigation for the purpose of presenting the plaintiff’s settlement proposal or compromise. That part of the communication was clearly expressed for a settlement purpose and is protected by privilege.
31In my view, the portion of the letter commenting on the future of the plaintiff estate’s claim if the matter did not resolve, should not attract settlement privilege. It was not made for the purpose of settling the dispute. Given that I have determined its purpose was to advise the defendants of the future nature of the action, it seems incongruous to find that plaintiff counsel either expressly or implicitly intended that this aspect of the communication was to be excluded from evidence.
32In any event – as these reasons will next examine – six weeks later appellate counsel for the plaintiff made the very same representation on behalf of the plaintiff to a third party, the Divisional Court.
33This court finds that to the extent settlement privilege extended to the statement within the “Without Prejudice” letter, the plaintiff implicitly and voluntarily waived that privilege when the same representation was repeated by plaintiff appellate counsel in open court without objection by the defendants. In other words, this act amounted to a waiver of any settlement privilege that may have otherwise attached to the statements. Fairness and consistency require that the settlement privilege that may have attached to this statement was therefore waived: Browne (Litigation Guardian of) v. Lavery (2002), 58 O.R. (3d) 49 (Ont. S.C.J.), at para. 20.
34Plaintiff counsel’s letter of October 15, 2020, communicated the following information to the defendants relating to the nature of the plaintiff’s claims going forward if the matter did not settle:
I have had an opportunity to review this matter in detail. My client will not be pursuing any claims arising from the settlement of the accident benefit proceeding or from the handling of the tort proceeding. My client’s claim is limited to damages flowing from the settlement of the long-term disability claims. Should this matter proceed further, I will bring a motion to amend the Statement of Claim accordingly. [Emphasis added.]
35In this letter, plaintiff counsel expressly advised defendants counsel that the plaintiff estate would not be pursuing any claims arising from the settlement of the accident benefits claim or from the handling of the tort claim and that the estate’s claim is limited to damages flowing from the settlement of the long-term disability claim.
2. Did plaintiff counsel give an undertaking to limit the plaintiff’s claim to only damages arising from settlement of the long-term disability claim?
36The plaintiff submits that appellate counsel simply provided “advice” to the court when the Divisional Court was told: “… the claim would be amended to limit the claim to damages flowing from the settlement of the claim against the long-term disability insurer only.”
37This cannot be correct.
38The plaintiff’s representation to the Divisional Court cannot be characterized as a benign or extraneous comment to the central issue on appeal of the conflict motion. Plaintiff counsel’s “advice” to the court took on prominence in the appellate court’s reasons. The representation was highlighted by the court early in its analysis, repeated in its consideration of the nature of the plaintiff’s action and implicitly informed part of the panel’s conclusion to dismiss the defendants’ appeal.
39Plaintiff counsel’s representation to the Divisional Court was clearly couched as a promise or pledge. I find that the representation, as expressed, was a solicitor’s undertaking to the court, that was intended to be acted upon. An undertaking is a promise given by a solicitor through a written statement, verbal communication or inferred from their acts, or any combination thereof, in reliance on which promise the recipient of the undertaking acts in a way in which they would not have done but for the promise: Hudson v. Foster, 2010 ONSC 3417, at paras. 19-21.
40The Rules of Professional Conduct promulgated by the Law Society of Ontario also require that a lawyer fulfill their undertaking: Rules of Professional Conduct, Rule 7.2-11. The court will enforce a lawyer’s undertaking as part of the court’s inherent jurisdiction to control its process: Hudson, at para. 23. Subject to the determination of the last issue on this motion, this court will accordingly enforce the plaintiff’s undertaking as to the scope of its damages claim in this action.
41In the alternative, the court finds the plaintiff is estopped from asserting these non-pecuniary claims that it alleges arose from the defendants’ conduct on the accident benefit and tort claims. The plaintiff’s statements are subject to the doctrine of estoppel by representation: see Ryan v. Moore, 2005 SCC 38, at para. 164.
42As demonstrated in the Divisional Court’s reasons, the plaintiff made a positive representation to the court and the defendants that it would limit its claim, which the court highlighted in its analysis. The Divisional Court relied on this representation in part to dismiss the defendants’ appeal of the motion to remove plaintiff counsel. The defendants were also privy to and acted on this representation. Apart from the controversial statement in the Without Prejudice letter, the defendants did not object to the plaintiff’s statements at the appeal hearing, as noted in the court’s reasons. The defendants also evidently relied on that advice in the conduct of the litigation given that they did not seek further appeal of the conflict motion decision and embarked upon examinations for discovery where the refusals that subsequently arose in December 2021.
3. Can the plaintiff claim non-pecuniary general damages arising from the settlement of his accident benefits claim and the management and attempted settlement of his tort claim?
43If the plaintiff’s representations are enforceable, the plaintiff submits the limitation of its damages was narrower than that argued by the defendants. The court notes the plaintiff did not seek alternative relief by way of leave to withdraw an undertaking or to amend its claim. Those issues were therefore not considered on this motion.
44The plaintiff contends the estate only waived its claims for pecuniary losses arising from the settlement of the deceased’s long-term disability and accident benefits claims and management of his tort claim.
45The plaintiff submits the estate still has non-pecuniary general damage claims arising from the defendants’ improper treatment of him in the settlement of the disability claims as well as the same “pressure tactics” they unsuccessfully used upon him to recommend the modest tort settlement. To that end, the plaintiff submits the Divisional Court did not accurately record appellate counsel’s representation as to the limitation of the plaintiff estate’s claims.
46There is no compelling evidence to support such assertions. The plaintiff did not make such a distinction between pecuniary and non-pecuniary damages when the estate waived these claims in open court. The plaintiff’s representation in court is exactly the same as the representation made several weeks earlier in the letter to defendants’ counsel.
47Any claims for damages in connection with the management of the accident benefits and tort claims were waived in broad and unequivocal language in both communications. The letter advised: “… My client will not be pursuing any claims arising from the settlement of the accident benefit proceeding or from the handling of the tort proceeding.” The Divisional Court reported the plaintiff having advised: “… that the claim would be amended to limit the claim to damages flowing from the settlement of the claim against the long-term disability insurer only …”.
48Fairness and consistency require that the plaintiff be held to its position on its damages claim as represented to the court.
49Even assuming the appellate court misapprehended counsel’s representation – for which the plaintiff neither sought appeal nor amendment of the Divisional Court’s reasons on the basis of inadvertent error – the subsequent amended amended pleadings do not support the plaintiff estate’s position that there are non-pecuniary damages claims that survive these representations in respect of the accident benefits and tort claims.
50Review of the now twice-amended claim highlights the focus is on alleged losses arising from settlement of the long-term disability claim. At paragraph 29, there are allegations of a breach of the duty of good faith that would form the basis of a punitive damages claim. Read generously, the court accepts there is arguably a claim for non-pecuniary damages at paragraph 30 of the pleading, where the estate pleads the defendants knew or ought to have known that their conduct was stressful to the plaintiff, particularly in light of his conditions of chronic pain, anxiety and depression, such that the wrongful conduct materially contributed to the severity and duration of his physical and psychological illnesses. However, this is not distinctly related to the management of the tort and accident benefit claims.
51Considering the totality of the evidence on this record, the court finds that any claim for non-pecuniary damages arising from the defendants’ conduct on and management of the accident benefits and tort claims were waived.
Disposition
52The defendants’ motion is granted. The court finds that the plaintiff estate waived its claims for all losses arising from the settlement or management of its accident benefits claim and tort claim.
53The parties are encouraged to resolve costs. If the parties are unable to do so, the defendants shall submit their written cost submissions of no more than three-pages (excluding any offers to settle and costs outlines/bills of costs) by April 3, 2023 and the plaintiff its written cost submissions of the same length by April 17, 2023. There will be no reply submissions without leave.
Justice K. Tranquilli Date: March 16, 2023