Court File and Parties

Court File No.: CV-15-65711 Date: 2024 05 17 Superior Court of Justice - Ontario

Re: Shannon Luknowsky, in her capacity as executrix for the Estate of Lynn Carroll, deceased, Plaintiff And: Aviva Canada Inc. and Pilot Insurance Company, Defendants

Before: Mr. Justice Calum MacLeod

Counsel: Joseph Y. Obagi, for the Plaintiff (Moving Party) Brian Sunohara, for the Defendants (Responding Parties)

Heard: May 17, 2024

Endorsement

[1] As characterized by the moving party, this is a motion within a motion. In other words, it is a refusals motion in relation to cross examination on affidavits sworn in aid of another motion. I will refer to that as the “main motion” to distinguish it from this motion.

[2] By way of context, the action in which the main motion is brought is a bad faith action against the defendant insurers. The defendants bring the main motion for leave to amend the statement of defence and in the event the court should determine that the proposed amendment is withdrawal of an admission, for leave to withdraw the admission.

[3] To be clear, my role on this motion is a narrow one. I am not deciding the merits of the main motion, still less the merits of the action. The only question is whether the questions that were refused are proper questions in relation to the main motion and if so, whether privilege has been waived in relation to a letter from counsel to the witness.

Background

[4] To the extent that context is important, the facts have been summarized in various decisions of this court and of the Court of Appeal. [1] In brief, the late Lynn Carroll was the plaintiff in motor vehicle litigation as a consequence of catastrophic injuries sustained when she, as a pedestrian, was struck by the McEwan vehicle.

[5] The plaintiff sued the McEwans in tort and also claimed against her own insurer, Pilot Insurance Company under the OPF44R (underinsured) endorsement. I will refer to that action as the original action. It was clear that the plaintiff’s damages would exceed the defendants’ policy limits. During the course of the original action, the McEwan defendants declared bankruptcy.

[6] The McEwans were insured by Traders General Insurance Company. The policy limits were $1 million under the tort insurer’s policy and $2 million under the OPCF44R. In other words, there was $2 million in available insurance limits. To the extent that damages exceeded the tort limits, the OPCF44 insurer would be liable up to the plaintiff’s own $2 million limit.

[7] Both Pilot and Traders are fully owned subsidiaries of Aviva although they are separate corporations and separately licenced insurers in Ontario.

[8] Just prior to the trial in the original action, the insurers put forward a joint settlement offer for the all inclusive amount of $2,150,000. According to the allegations in this bad faith action, the insurers refused to disclose which insurer was contributing how much and so it was unclear whether the offer included Trader’s limits. There is more to the allegations but the details are not important to this motion.

[9] The plaintiff ultimately purported to accept the offer but launched this separate bad faith action against Aviva and Pilot. Ultimately, the offer was withdrawn and the original action went to trial. The jury found the plaintiff’s damages to be approximately $3.6 million but net of contributory negligence, the plaintiff recovered judgment for $2,610,774.32 in damages, as well as costs of $375,000. She recovered the $2 million plus costs from the insurers and was left with a shortfall of just over $6 hundred thousand, for which she filed a proof of claim in the bankruptcy.

[10] The plaintiff also took an assignment from the Trustee in bankruptcy of any claim for bad faith which the McEwans had against Travellers. So, there is a companion action against Travellers for bad faith as well as this claim against Aviva and Pilot.

[11] In the Statement of Defence in this action, the defendants pleaded inter alia that the settlement offer involved Pilot contributing its limits. The defendants also pleaded that Travellers was contributing its limits. The defendants now say that this pleading (which has been in place since 2019) is factually incorrect and seek to amend it. While it is the position of the defendant that such amendment does not constitute a withdrawal of an admission, the notice of motion requests leave to withdraw the admission should the court disagree with that position.

[12] In short, there is a motion before the court (the main motion) to amend the pleading and, if necessary to obtain the amendment, to withdraw the admission. This means that on the main motion both the tests for amending a pleading under Rule 26.01 and the test for withdrawal of an admission under Rule 51.05 are engaged.

The Present Motion

[13] The motion to amend the statement of defence (and withdraw an admission if it was an admission) is supported by the affidavit of Patricia Veitch, Senior Analyst for the defendants in the current action.

[14] Ms. Veitch deposes that she “now believes it is inaccurate to say that Pilot contributed its full limits” to the settlement offer. She calculates that the cost component of the original offer would have been at least $350,000 and therefore the contribution by Traders would have been contributing at least $1,350,000 to the settlement.

[15] Ms. Veitch was cross examined on her affidavit. In her cross examination, she was asked the basis for concluding that the costs component of the offer was $350,000. She answered that the source of that information was a letter from her counsel (Q. 62). She confirmed that answer at Q. 71 where she repeated that the breakdown came from counsel and confirmed that answer again at Q. 96.

[16] The moving party seeks production of the letter from counsel containing the breakdown and providing the basis for Ms. Veitch’s current belief that the pleading contains a factual error. Bearing in mind that I am not the motions judge and I am not ultimately determining questions of admissibility, relevance or weight, it is clear that the basis for the belief to which Ms. Veitch deposes is evidence that should be available to the responding party on the main motion.

[17] The letter, or the document, containing the breakdown of the settlement including the calculation of the costs component is to be produced. While the communication itself may be privileged, such privilege does not extend to underlying relevant facts. [2] If the only basis for the breakdown is a privileged document then to the extent that privilege may attach to such document, privilege has been waived by the witnesses reliance on that document as the basis for her affidavit. [3] If the document contains other privileged information, the privileged portion may be redacted.

[18] The second refusal relates to whether or not there has been any communication between Ms. Veitch and the defendants in the companion bad faith action against Traders. That is a reasonable question in light of the interrelationship between the two actions and the argument that the plaintiff may wish to advance about the pleading amendment being an abuse of process. I note that the defendants themselves have a pending motion to have both bad faith actions tried together.

Conclusion and Order

[19] The motion is granted. The letter or document is to be produced and the question is to be answered. If necessary, the witness will return for further follow up questions not to exceed one hour without agreement between the parties or further court order.

Costs

[20] Counsel believe they can resolve the question of costs. If they are not able to do so and wish to make costs submissions, they are to advise my office of that state of affairs within the next 30 days. If I do not hear from counsel within that time, there will be no order as to costs.

Justice C. MacLeod Date: May 17, 2024