COURT OF APPEAL FOR ONTARIO

CITATION: Lepan Estate v. Lofranco Chagpar Barristers, 2024 ONCA 110

DATE: 20240214

DOCKET: COA-23-CV-0453

Lauwers, van Rensburg and Thorburn JJ.A.

BETWEEN

The Estate of Ivo Lepan, by way of his Estate Trustee, Mirjana Lepan

Plaintiff/Responding Party
(Appellant)

and

Lofranco Chagpar Barristers*, Rocco Carmen Lofranco*,
Francis Joseph Burns* and Michael Dewayne Pryce

Defendants/Moving Parties
(Respondents*)

Karl Arvai, for the appellant

Jame Pedro, for the respondents

Heard: February 1, 2024

On appeal from the order of Justice Kelly C. Tranquilli of the Superior Court of Justice, dated March 16, 2023, with reasons reported at 2023 ONSC 1766.

Lauwers J.A.:

A.           Overview

[1]          The late Ivo Lepan was injured in a 2008 motor vehicle accident. Mr. Lepan brought an action against the respondents, who had represented him in the ensuing motor vehicle litigation. He claimed that they had improperly pressured him into accepting improvident settlements of his claim for statutory accident benefits under the Insurance Act, R.S.O. 1990, c. I.8, and his claim for long-term disability benefits. He also alleged that these improvident settlements adversely affected the settlement of his tort claim, and that the respondents improperly pressured him to accept an improvident settlement of the tort claim. Mr. Arvai eventually settled the tort action for nearly twice the offer obtained by the respondents that Mr. Lepan rejected. Mr. Lepan died in 2017 and his Estate continued the action.

[2]          In 2018, the respondents moved to remove Mr. Arvai as the Estate’s solicitor of record, on the basis that his involvement in the settlement of the tort action rendered him a necessary witness as to the effect of the other allegedly improvident settlements on the tort settlement. The respondents’ motion was dismissed as premature by McArthur J., with reasons reported at 2018 ONSC 5330. The Divisional Court dismissed their appeal, with reasons reported at 2021 ONSC 1757.

[3]          The Estate then moved for leave to further amend the statement of claim to effect appeal counsel’s advice to the Divisional Court, described below. The respondents did not oppose the amendment and made no submissions. Leave to amend was granted on December 16, 2021 and the Amended Amended Statement of Claim was issued on January 4, 2022.

[4]          During examinations for discovery on December 15, 2021, counsel for the Estate began asking questions about the statutory accident benefits claim and the tort claim. Respondents’ counsel objected. On January 7, 2022, the respondents delivered an Amended Amended Statement of Defence and pled that the Estate was estopped from claiming any damages other than those flowing from the settlement of the long-term disability claim.

[5]          The respondents then brought a motion to enforce the Estate’s statement that it would restrict its claim for damages. The motion judge, Tranquilli J., noted at para. 3 of her reasons: “At 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.”

[6]          The motion judge concluded, at para. 51: “Considering 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.”

[7]          The Estate appeals. For the reasons that follow, I would allow the appeal. Put briefly, the Estate at no time gave up its non-pecuniary claims for the improvident settlement of the statutory accident benefits claims or for the respondents’ conduct in relation to the proposed settlement of the tort action.

B.           Analysis

[8]          In our system of justice, there are two basic principles worth recalling. First, a plaintiff with a tenable claim is entitled to proceed with an action in the normal course as pleaded. Second, a party is entitled to counsel of the party’s choice. That choice is not one with which a court should lightly interfere.

[9]          A plaintiff can give up a claim by amending the Statement of Claim. The respondents say that the Estate did just that by amending its Statement of Claim in relation to the statutory accident benefits settlement and the tort settlement. The amendments relevant to this assertion are set out in paras. 23 and 23 (a) of the Amended Amended Statement of Claim. The amendments deleted this sentence from para. 23: “The Plaintiff states that the settlement of the long-term disability and accident benefits claims had a negative impact on the settlement of his tort claims resulting in further loss to the Plaintiff.” The appellants added paragraph 23(a) to the Amended Amended Statement of Claim, which provides:

The Plaintiff states that the loss suffered on the settlement of the accident benefit claims was mitigated on the ultimate settlement of his tort claims through his new counsel. A lump sum settlement of his LTD [long-term disability] entitlement would not have been deductible on the tort settlement. It would have been available to the Plaintiff in addition to his recovery on the tort settlement. The Plaintiff therefore suffered a loss on the LTD settlement in the sum of approximately $130,000.

[10]       The respondents argue that the Amended Amended Statement of Claim must be interpreted in light of the statement in Mr. Arvai’s October 15, 2020 “Without Prejudice Letter” letter to respondents’ counsel, sent before the Divisional Court argume, which stated in part: “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 letter added: “My client’s claim is limited to damages flowing from the settlement of the long-term disability claims.”

[11]       The respondents also rely on the statement of the Estate’s appeal counsel, Paul Morrissey, recorded in the reasons of the Divisional Court, at para. 10: “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.” The court added: “Counsel for the defendants did not object to this information.”

[12]       The Estate asserts that it only gave up its claim for additional pecuniary losses relating to the statutory accident benefits settlement and the tort settlement, not its claim for non-pecuniary damages. It argues, among other things, that the motion judge erred both in finding that the Amended Amended Statement of Claim did not continue the Estate’s non-pecuniary damages claims in relation to the accident benefits and tort claims and in finding that the statements before the Divisional Court and the Without Prejudice letter precluded these claims.

[13]       In light of the plain language of the Amended Amended Statement of Claim, the clarifications of the appellant, and the focus of the motion to remove Mr. Arvai, discussed below in their contexts, I find that the motion judge misapprehended the pleading and the statements of counsel for the Estate, as did counsel for the respondents. I come to this conclusion for five reasons.

[14]       First, and most obviously, it appears to be common ground that the Estate is entitled under the Amended Amended Statement of Claim to pursue both pecuniary and non-pecuniary claims related to the settlement of the long-term disability claim and has done so in all of the iterations of its pleading. The most recent amendments, which maintained these claims, were made without opposition.

[15]       But the Amended Amended Statement of Claim goes, and previous iterations have always gone, beyond claims related to the settlement of the long-term disability claim. I point out that in para. 1 of the pleading the Estate claims general damages, aggravated damages, and punitive and exemplary damages. The pleading claims that the long-term disability settlement was improvident and was forced upon the plaintiff against his will (see paras. 11-17, 17a, 23a, and 28). The Estate’s most recent amendments sharpen and particularize that claim (see paras. 17a, 23a, and 28).

[16]       However, the pleading also maintains a broader claim for non-pecuniary damages. For example, para. 20 of the Amended Amended Statement of Claim states:

The Plaintiff states that both of the above settlements [the settlement of statutory accident benefits and the settlement of the long-term disability claim] were improvident and failed to reflect a proper settlement value of the Plaintiff’s claims and entitlements. Both settlements were entered into by the Plaintiff under significant pressure and coercion from the Defendants, or one or more of them. In both instances, the Plaintiff suffered significant loss as a result of the settlement while the Defendants profited through fees charged for their services. [Emphasis added.]

[17]       Similarly, para. 29 of the Amended Amended Statement of Claim states:

The Plaintiff states the Defendants have acted in a wanton and reckless fashion toward the Plaintiff in their handling of the Plaintiff’s claims, and contrary to the duty of good faith owed by the Defendants to the Plaintiff. The Defendants have failed to treat the Plaintiff fairly and honestly in their dealing throughout the course of their retainer. The Defendants have placed their own interests ahead of those of the Plaintiff. The Defendants have treated the Plaintiff in an oppressive and high-handed fashion in the course of their dealings.

More particulars of the alleged breaches of duty are provided in paras. 24-27.

[18]       In addition, I note that para. 29 of the Amended Amended Statement of Claim refers to “claims.” There are three such claims for which non-pecuniary damages are sought in the pleading. The first is the statutory accident benefits settlement, discussed at paras. 18, 19, and 23(a). The second is the settlement of the tort action, described in paras. 21-23 and 23(a). The third is the long-term disability claim settlement noted in paras. 12-17. Taken together, it is clear that the amendments to the Statement of Claim preserved the Estate’s broader claims for non-pecuniary damages.

[19]       Second, apart from the plain fact that the Amended Amended Statement of Claim was not amended to delete the non-pecuniary claims in relation to the settlement of the statutory accident benefits claim and to the proposed tort settlement, counsel for the Estate points to other exchanges with the respondents before the Statement of Claim was amended that make the Estate’s intentions clear. By letter to the respondents dated July 21, 2021, counsel for the Estate confirmed that the Estate continued to claim damages “in connection with the settlement of the long-term disability claims as well as the general, aggravated, and punitive damages as pled.” The letter further clarified that “the submission to the [Divisional Court] was in connection with those damages which were deductible in tort pursuant to Section 267.8 of the Insurance Act … It did not address the other general claims as they did not involve [Mr. Arvai]. The advice to the court was therefore with respect to the issues relevant to the appeal only.” These statements are unequivocal in maintaining the broader claims for non-pecuniary damages.

[20]       Third, I observe that there was no common understanding between the parties as to what the Estate was giving up in the Amended Amended Statement of Claim and what was being preserved, nor could that have been clear to the Divisional Court. The uncertainty is in part the responsibility of counsel for the Estate, who did not use the terms “pecuniary” and “non-pecuniary” damages that he now uses in explaining the Estate’s position. On the pleading, both have always been claimed. Similarly, the respondents’ counsel can be faulted for not noticing that the Amended Amended Statement of Claim did not delete these claims. The Estate’s alleged failure to amend the Statement of Claim consistently with the withdrawal of non-pecuniary claims should have triggered an inquiry, but it did not.

[21]       Fourth, the court must pay close attention to the context. Respondents’ counsel were anxious to remove Mr. Arvai as solicitor of record for the Estate. They brought the unsuccessful motion and the unsuccessful Divisional Court appeal for this purpose. To add detail, the basis for the motion was the claim in the old version of para. 23 that the improvident settlement of the long-term disability and accident benefits claims had a negative impact on the settlement of the tort claim, resulting in a further loss to the Estate. To prove that claim, the respondents argued that Mr. Arvai, as the one who negotiated the ultimate tort settlement, would have been required to give evidence as to why the Estate got less than it was otherwise entitled to for the tort claim. He should, they argued, therefore be removed as counsel for the Estate.

[22]       This led to the amendments to the pleading to take Mr. Arvai out of the line of fire. As noted, the following sentence was removed from para. 23: “The plaintiff states that the settlement of the long-term disability and accident benefit claims had a negative impact on the settlement of his tort claims resulting in further loss to the plaintiff.” This change removed the requirement that Mr. Arvai would have to be called by the Estate as a witness on the tort settlement. The amendment in para. 23a adds clarity: “The plaintiff states that the loss suffered on the settlement of the accident benefit claim was mitigated on the ultimate settlement of his tort claims through his new counsel.” All that is left related to the accident benefits settlement and the respondents’ conduct in relation to the proposed tort action settlement are the non-pecuniary damage claims.

[23]       By these amendments Mr. Arvai has avoided being a prospective witness by taking the quantum of the tort settlement out of contention. How the Estate proves its entitlement to non-pecuniary damages in relation to the various settlements is not before us, but it is not plain and obvious that Mr. Arvai will be a witness and therefore conflicted out of being counsel.

[24]       The context provided by the motion’s focus on removing Mr. Arvai as the solicitor of record supports the understanding that the statements of the Estate’s counsel were not intended to give up the Estate’s broader non-pecuniary claims. In this context, and supported by the unopposed amendments to the pleading, there is no limitation on the Estate’s ability to claim non-pecuniary damages relating to the accident benefits and tort settlements in addition to the long-term benefits settlement, nor any obvious reason why Mr. Arvai should be disqualified from pursuing them on the Estate’s behalf.

[25]       The fifth reason is that there was no undertaking or representation concerning the non-pecuniary damages to the Divisional Court and no basis for estoppel by representation. As the above discussion makes clear, the Estate did not represent that it waived its non-pecuniary claims. There is also no evidence that the respondents relied on the statements of the Estate’s counsel. While the motion judge noted that the respondents did not appeal the Divisional Court order, this fact is insufficient to show that the respondents changed their legal position in response to the statements. There is no indication that the respondents had intended to appeal, and leave to appeal was unlikely given that the Divisional Court’s order did not preclude the respondents from bringing the same motion later.

[26]       I need not address the other arguments made by the respondents and addressed by the motion judge. However, I would concur with her view that the excerpted segment in the Without Prejudice letter was not protected by privilege. The last sentence of the paragraph in issue makes that plain: “Should this matter proceed further, I will bring a motion to amend the Statement of Claim accordingly.” Counsel was clearly addressing the future progress of the action, not its termination in a settlement. That statement was not privileged.

[27]       It is striking that this litigation has been essentially stalled since 2018. It is time for the parties to attend to the merits of the case with the pleadings as drafted and counsel of the parties’ choice.

C.           Disposition

[28]       I would allow the appeal with costs payable to the appellant in the amount of $22,000, all-inclusive.

Released: February 14, 2024 “P.D.L.”

“P. Lauwers J.A.”

“I agree. K. van Rensburg J.A.”

“I agree. Thorburn J.A.”