CITATION: The Estate of Ivo Lepan v. Lofranco Chagpar Barristers et al, 2026 ONSC 4855
COURT FILE NO.: CV-14-4591
DATE: 2026-08-24
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: The Estate of Ivo Lepan, by way of his Estate Trustee, Mirjana Lepan, Plaintiff
AND:
Lofranco Chagpar Barristers, Lofranco Corriero LLC, Rocco Carmen Lofranco, Francis Joseph Burns and Michael Dewayne Pryce, Defendants
BEFORE: Justice P.J. Moore
COUNSEL: K. Arvai, Counsel for the Plaintiff
A. Rachlin, Counsel for the Defendants
HEARD: June 10, 2026 (virtual)
endorsement
Overview
[1] The moving defendants, Lofranco Chagpar Barristers, Rocco Lofranco and Francis Burns ("the LCB Defendants"), bring a motion seeking:
a. a determination that long-term disability ("LTD") benefits received by the late Ivo Lepan, including the lump sum settlement of his claim against Manulife, were deductible from damages recoverable in the underlying motor vehicle tort action;
b. an order removing Karl Arvai and Karl Arvai Professional Corporation as counsel of record for the plaintiff;
c. alternatively, a declaration that Mr. Arvai is a compellable witness at trial and that the summons served upon him should stand; and
d. disclosure of the terms of the plaintiff's settlement with defendant Michael Pryce.
[2] The plaintiff opposes the motion and brings a cross-motion to set aside the summons served upon Mr. Arvai.
[3] For the reasons that follow, I conclude that:
a. the Manulife LTD settlement would have constituted a deductible collateral benefit in the underlying tort action;
b. the motion to remove Mr. Arvai as counsel should nevertheless be dismissed;
c. the summons served on Mr. Arvai should be set aside without prejudice to any determination by the trial judge concerning his evidence at trial; and
d. no further disclosure respecting the settlement with Mr. Pryce is required.
Background
[4] Mr. Lepan was injured in a motor vehicle accident on June 11, 2008. He retained the LCB Defendants to pursue claims arising from the accident, including accident benefits, tort and LTD claims.
[5] At the time of the accident, Mr. Lepan was employed by Krause Carpet Mills as an operator. He had access to long term disability (“LTD”) benefits through The Manufacturers Life Insurance Company (“Manulife”). The policy paid maximum gross monthly benefits of $1500 to an insured who became “totally disabled” before age 65 due to a disease or accident injury. The amount of the LTD benefit was tied to the insured’s gross earnings.
[6] The defendants commenced litigation against Manulife after LTD benefits were denied. The LTD action settled in 2009 for a lump sum payment of $40,000. The plaintiff alleges that although the settlement was intended to resolve only benefits payable during the initial "own occupation" period, the defendants procured and delivered a full and final release extinguishing all future entitlement under the policy.
[7] On April 11, 2011, the Plaintiff’s statutory accident benefits (“SABS”) claim settled.
[8] In 2012, Mr. Lepan changed counsel and retained Mr. Arvai.
[9] In July 2013, the underlying tort action settled for $480,500 all-inclusive, less than the full policy limits of the at-fault motorist.
[10] The present solicitor's negligence action commenced in December of 2014. The statement of claim was amended twice. As currently pleaded, the plaintiff no longer advances a claim that the tort settlement itself was improvident. The remaining economic loss claim relates to the alleged loss of future LTD benefits resulting from the Manulife release.
[11] Mr. Lepan passed away on July 4, 2017, from causes unrelated to the accident. The action continued, and his wife, Mirjana Lepan, was appointed estate trustee.
[12] On August 20, 2025, partial settlement of this action was reached between the plaintiff and Michael Pryce, a paralegal employed by the LCB Defendants.
[13] The matter was scheduled for trial but adjourned for various reasons. It is now scheduled for December 14, 2026.
Issues
[14] The motion raises four issues:
a. Was the Manulife LTD settlement deductible in the underlying tort action?
b. Should Mr. Arvai be removed as counsel?
c. Should the summons to Mr. Arvai be set aside?
d. Is further disclosure of the Pryce settlement required?
Issue 1: Deductibility of the LTD Settlement
[15] Under the common law, plaintiffs in motor vehicle accidents were not entitled to double recovery, subject to two exceptions: (1) charitable gifts; and (2) the “private insurance exception” which held that benefits derived from private policies of insurance were not deductible as double recovery under a tort award.[1]
[16] On November 1, 1996, section 267.8 of the Insurance Act[2] was enacted to address the common law private insurance exception in the context of motor vehicle accidents. The legislative intention was to prevent double recovery while ensuring fair compensation.
[17] The Court of Appeal has repeatedly emphasized that an injured plaintiff is entitled to full compensation, but not over-compensation.[3]
[18] The relevant portion of section 276.8 that deals with income loss reads as follows:
267.8 (1) In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the damages to which a plaintiff is entitled for income loss and loss of earning capacity shall be reduced by the following amounts:
All payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for statutory accident benefits in respect of the income loss and loss of earning capacity.
All payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for income loss or loss of earning capacity under the laws of any jurisdiction or under an income continuation benefit plan.
All payments in respect of the incident that the plaintiff has received before the trial of the action under a sick leave plan arising by reason of the plaintiff’s occupation or employment.
[19] Section 5.2 of O. Reg. 461/96 under the Insurance Act provides statutory guidance in interpreting the collateral deductions referred to in section 267.8:
5.2 (1) For the purposes of paragraph 2 of subsection 267.8 (1), paragraph 2 of subsection 267.8 (9) and subclause 267.8 (12) (a) (ii) of the Act, payments in respect of an incident for income loss or loss of earning capacity under an income continuation benefit plan shall be deemed to include the following payments if the incident occurs on or after October 1, 2003 and before September 1, 2010:
Payments of disability pension benefits under the Canada Pension Plan.
Periodic payments of insurance, if the insurance is offered by the insurer,
i. only to persons who are employed at the time the contract of insurance is entered into, and
ii. only on the basis that the maximum benefit payable is limited to an amount calculated by reference to the insured person’s income from employment.
[20] Earlier decisions, including Cromwell v. Liberty Mutual Insurance Co.[4], Vanderkop v. The Personal Insurance Company of Canada[5] and Anand v. Belander[6] applied a strict matching approach when considering deductions for collateral benefits.
[21] However, in 2018 in Cadieux v. Cloutier[7], a five-member panel of the Court of Appeal endorsed what has become known as the "silo approach", rejecting overly technical matching exercises and emphasizing the broader statutory objective of preventing double recovery commenting:
The “apples to apples” strict matching approach unnecessarily complicates tort actions by focusing on immaterial distinctions or labels for heads of damages…[8]
[22] In Cadieux, the Court created three silos – income loss, health care expenses and “other pecuniary loss”[9] and concluded that SABS paid prior to the settlement should be deducted from the jury award for corresponding past and future damages “within the relevant silos”.[10] Further, it decided that collateral benefit deductions should be made on a gross basis and not net of legal fees.[11]
[23] More recently, in A.B. v. Waite[12] and Diebold v. Economical Mutual Insurance Company[13], LTD settlements have been treated, in substance, as income replacement benefits and therefore deductible within the income loss silo.
[24] In Diebold, Gibson J. wrote:
I agree with the defendant’s submission that the decision in Vanderkop is no longer applicable and was not applicable at the time of the subject accident, because the section it considered had been amended. Additionally, the decision is in relation to the accident benefits insurer and not the tort insurer and predates the Court of Appeal’s decision in Cadieux.[14]
[25] Cadieux did not amend the legislation. Rather, it authoritatively interpreted the statutory deduction regime. Absent clear authority to the contrary, I am bound to apply that interpretation.
[26] The plaintiff argues that the silo approach to deductibility begins on December 4, 2018, when Cadieux was released, and the earlier approach applies to this settlement in 2013. Two cases are cited in support of this proposition – Rivait v. Monforton[15] and Knapp v. O’Neill[16].
[27] I have reviewed both cases. In my view, neither supports the proposition suggested. In Rivait, the paragraphs cited in the plaintiff’s factum summarize an opinion from a plaintiff expert, which opinion is not expressed by the court. Knapp simply says that the court cannot rely upon facts not known at the time of the settlement but says nothing about the applicable law.
[28] This is not a case where there was a substantive change in the legislation. Instead, the Court of Appeal corrected the interpretation of the law as it was. Cadieux must therefore be applied retroactively because failure to do so would be an error; the law is the law.
[29] In McCurdy et al. v. Maille[17] Nicholson J. determined that long term disability benefits offered by Manulife were deductible as payment for lost income under an income continuation plan pursuant to section 267.8 because: (1) the quantum of benefits received depended upon the plaintiff being employed at the time the disability arose; the benefits were monthly and therefore “periodic payments”; and (3) the maximum benefit payable was limited to an amount calculated with reference to the plaintiff’s income from employment.
[30] Here, like McCurdy, the Manulife policy was plainly an income continuation plan. Benefits were available only to employed persons, were monthly “periodic payments”, and were tied to employment income.
[31] The plaintiff argues that the 2009 LTD settlement cannot be deducted because the release encompassed claims beyond disability benefits and did not allocate amounts among separate heads of recovery. That submission reflects the reasoning of the earlier matching cases.
[32] The reasoning in Diebold is, in my view, more persuasive in light of Cadieux because LTD is, in economic reality, a claim for income replacement.[18] The fact that settlement documentation contains releases extending to ancillary claims does not change the essential character of the payment.
[33] I am therefore satisfied that the settlement proceeds paid by Manulife fall within the income-loss silo contemplated by s. 267.8.
[34] I reject the plaintiff’s submission that such payments were not made "in respect of the incident". The LTD claim arose because of Mr. Lepan’s alleged disability flowing from the motor vehicle accident. Although entitlement depended upon proof of disability, the settlement was plainly connected to the same income loss that formed part of the tort claim.
[35] Likewise, I reject the plaintiff’s submission that Diebold and A.B. Waite are wrongly decided based upon Co-operators General Insurance v. Branden[19].
[36] Co-operators involved a different issue -- the interpretation of s. 7(1) of the SABS, which provides a specific calculation method for the income replacement benefit, including a precise definition of the collateral deductions, which more closely matches the pre-2018 law outlined in cases such as Vanderkop and Cromwell.
[37] In Co-operators the Divisional Court differentiated first-party SABS cases from claims under section 267.8, stating:
This is not a dispute that is between insurers as under s. 267.8 where the defendant’s insurer is able to deduct payments that have been made by the plaintiff’s insurer pursuant to SABS. Rather, this is a dispute between a plaintiff and her own insurer.[20]
[38] Finally, I reject the plaintiff’s submission that the Manulife policy at issue affords coverage to members of the United Food and Commercial Workers and their dependents, which does not meet the requirement of s. 5.2(1) of O.Reg. 461/96 in effect at the material time that the periodic payments be limited to persons who are “employed”. According to the policy wording, the class of persons “who may be insured” consists of:
Members in good standing of United Food and Commercial Workers and their dependents, provided the Members meet the eligibility requirements and provided that initial contributions have been made on their behalf by a contributing employer.
[39] The plaintiff’s submission fails to consider that the Manulife policy provided not only LTD coverage but also life insurance for dependents. While dependents were provided life insurance coverage, the policy also states that “only members who work 18 hours or more per week are eligible to receive long term disability benefits”. In other words, it covered employed persons such as Mr. Lepan.
[40] Accordingly, I conclude that the Manulife LTD settlement would have constituted a deductible collateral benefit in the underlying tort action.
Issue 2: Removal of Mr. Arvai as Counsel
[41] The LCB Defendants argue that because the plaintiff is presumptively entitled to 100% of his income loss from the tortfeasor, damages against them are limited to any shortfall on the LTD settlement. In other words, if Mr. Lepan did not receive all his tort loss, any loss flowed from his decision to compromise his tort claim.
[42] They further argue that Mr. Arvai should be removed because he is the only person who can testify regarding the reasons the tort settlement was reached. Mr. Lepan can’t testify, and Mrs. Lepan will say that although she was at various meetings with Mr. Arvai, she can’t speak to any decisions her husband made.
[43] I am not persuaded.
[44] The court possesses inherent jurisdiction to remove counsel where required to protect the integrity of the administration of justice. However, the right of a litigant to counsel of choice is fundamental and removal orders are granted sparingly.
[45] In Best v. Cox[21] the Court of Appeal held that the highest degree of restraint should be exercised before interfering with a party’s choice of counsel; there should be a possibility of “real mischief” should a removal order be refused.[22]
[46] The test is whether a fair-minded and reasonably informed member of the public would conclude that counsel's removal is necessary for the proper administration of justice. This determination is objective, fact-specific and based on an examination of all factors in the case. Courts generally adopt a flexible approach.[23]
[47] I place significant weight on the procedural history. Similar removal motions have already been litigated through the Superior Court[24], Divisional Court[25] and the Court of Appeal[26].
[48] The plaintiff no longer advances a claim that the tort settlement was itself a source of loss. The Court of Appeal observed that, following amendments to the claim, it was not “plain and obvious” that Mr. Arvai would become a witness, and that there was no obvious reason he should be disqualified from continuing to act.
[49] I am not persuaded that anything of substance has changed since 2024 when the Court of Appeal’s comments were made, or that Mrs. Lepan has insufficient knowledge of her husband’s reasons for agreeing to the settlement. While the defendants' deductibility argument has merit, that does not automatically transform Mr. Arvai into a necessary witness.
[50] The motion ultimately asks me to conclude, before trial, that the plaintiff cannot establish damages without Mr. Arvai's testimony. That issue goes directly to the merits of the negligence claim. However, whether compensable damages remain after accounting for deductibility, and whether any alleged shortfall resulted from litigation choices made during the tort action, are matters more appropriately addressed by the trial judge on a complete evidentiary record.
[51] In these circumstances, I am not satisfied that the stringent test for removal has been met. The motion to remove Mr. Arvai is dismissed.
Issue 3: The Summons Served on Mr. Arvai
[52] The defendants seek to compel Mr. Arvai's attendance as a witness.
[53] Courts have repeatedly cautioned that calling opposing counsel as a witness is exceptional and should occur only where necessity has clearly been established.
[54] In R. v. 1504413 Ontario Ltd. the Court of Appeal denounced the practice of summonsing counsel for the opposite party to testify against his client stating:
Whether as a matter of custom or policy, issuing a summons to counsel for the opposite party to testify against his or her client is virtually unheard of and it should not be done absent the most exceptional circumstances. [27]
[55] At this stage, necessity has not been established, much less exceptional circumstances.
[56] The precise issues to be tried remain matters for the trial judge. It is impossible to determine in the abstract what evidence may become necessary after the full evidentiary record unfolds.
[57] I therefore conclude that the summons was issued prematurely and is set aside without prejudice to any future determination by the trial judge regarding the admissibility or necessity of evidence from Mr. Arvai.
Issue 4: Disclosure of the Pryce Settlement
[58] During oral argument, counsel for the moving defendants appropriately acknowledged the difficulty presented by Rule 49.14 of the Rules of Civil Procedure[28] which outlines the procedure to be followed on a partial settlement between the plaintiff and a defendant. This rule requires the plaintiff to disclose the terms of the agreement, other than the monetary value of the settlement, to every other defendant who is not a party to the agreement.
[59] The evidence before me establishes that a Form 49E was served and filed and that the plaintiff disclosed the terms required by Rule 49.14. The monetary value of the settlement is specifically exempt from mandatory disclosure.
[60] I am not satisfied that any further disclosure is required at this juncture.
Disposition
[61] The motion is granted in part such that I declare that the Manulife LTD settlement constitutes a deductible collateral benefit for the purposes of the plaintiff's claim arising from the underlying tort action. In all other respects, the defendants' motion is dismissed.
[62] The plaintiff's cross-motion to set aside the summons served on Mr. Arvai is granted, without prejudice to any ruling that may be made by the trial judge.
[63] I see success as divided. If the parties cannot agree, they may deliver written submissions not exceeding three pages exclusive of bills of costs within 20 days of the release of these reasons to the Court. There shall be no reply without leave.
Justice Patricia J. Moore
Date: August 24, 2026
1Meloche v. McKenzie, 2005 CanLII 9467 (ONSC).
3Nemchin v. Green, 2021 ONCA 238, at para. 22.
42008 (CanLII) 3409 (ONSC).
52008 (CanLII) 22926 (ONSC).
72018 ONCA 903, leave to appeal refused at [2019] S.C.C.A. No. 63.
152005 CanLII 40374 (ONSC).
18A.B. v. Waite, at para. 14 and Diebold, at para. 44.
20Cooperators, at para. 20.
23Karas v. Ontario, 2011 ONSC 5181, at para. 26; Ontario Realty Corp. v. P. Gabriele & Sons Ltd., 2006 CarswellOnt 6983, at para. 20; and P & J Contracting Inc. v. James Singer, 2017 ONSC 3783, at para. 36.
252021 ONSC 1757 (Div. Ct.)
262024 ONCA 110, at para. 23.
272008 ONCA 253, at para. 16.
28Rules of Civil Procedure, R.R.O. 1990, Reg. 194.