



COURT OF APPEAL FOR ONTARIO

CITATION: Lauesen v. Silverman, 2016 ONCA 327

DATE: 20160503

DOCKET: C59992

Feldman, Lauwers and Benotto JJ.A.

BETWEEN

Melody Lauesen

Plaintiff (Appellant)

and

Fern Silverman and Goldman Sloan Nash and Haber
    LLP

Defendants (Respondents)

Bryan D. Rumble and Alissa P. Goldberg, for the
    appellant

B. Robin Moodie and Bronwyn M. Martin, for the
    respondents

Heard: October 29, 2015

On appeal from the order of Justice Andra Pollak of the Superior
    Court of Justice, dated April 16, 2015.

Feldman J.A.:

[1]

The appellant did not know she should sue her former lawyer for making
    an improvident settlement of a car accident action until she went to another
    lawyer who advised her to do so, after he obtained an expert opinion about the
    extent of her injuries. The issue in this case is discoverability for
    limitation purposes: when is it reasonable for a lay person to know that she should
    sue her former lawyer?

[2]

The appellant was injured in a car accident on November 16, 2002. Her
    car was stopped at a red light when another driver struck her vehicle violently
    from behind. The appellant consulted the respondent solicitor, Ms. Fern Silverman
    (the respondent), who commenced an action against the other driver for damages
    suffered in the accident. At mediation on November 14, 2005, the appellant relied
    on the advice of the respondent to accept $26,169.36 in full settlement of the
    tort claim.

[3]

The appellant continued to suffer from her injuries and asked the
    respondent to continue to assist her in obtaining statutory accident benefits.
    In 2009, the solicitor-client relationship between the parties ended when the
    respondent asked the appellant for a further monetary retainer to pursue her
    statutory accident benefits claim. In 2010, the appellant consulted another
    lawyer about pursuing that claim. When that lawyer obtained an opinion from a
    psychiatrist in June 2011 that the appellants injuries met the catastrophic
    threshold under the statutory accident benefits regulation, the appellant
    commenced an action against the respondents for breach of contract, negligence,
    and breach of fiduciary duty for advising her to accept an improvidently low settlement
    amount for her tort claim, as well as for failing to explain to her that the
    settlement was full and final. The action against the respondents was commenced
    on August 26, 2011, almost six years after the date of the impugned settlement.

[4]

On a motion for summary judgment, the motion judge framed the issue as
    whether the appellants claim was discoverable prior to August 26, 2009, two
    years before she issued her statement of claim against the respondents. The
    motion judge accepted the respondents argument that the appellant had the
    necessary knowledge to bring her claim against them when she entered into the
    settlement, or at least that she should have had that knowledge more than two
    years before the claim was issued. The motion judge therefore granted summary judgment
    dismissing the action. This is the appeal of that order.

Facts

[5]

The appellant sustained both physical and psychological injuries in a
    car accident in November 2002, where the other driver was at fault. In May 2004,
    she retained the respondent, who commenced an action against the driver of the
    other vehicle in November of that year. Following examinations for discovery in
    October 2005, the appellant attended a mediation in November with the
    respondent, who recommended that she settle the tort claim for the final offer
    of $26,169.36. Although she was unhappy with the amount, the appellant accepted
    the respondents advice and agreed to the settlement. Her evidence before the
    motion judge was that although she felt the amount of the settlement was too low,
    she attributed the unfairness of it to the law and the legal system, and not to
    the respondent.

[6]

The respondent continued to represent the appellant for the purposes of
    obtaining statutory accident benefits. The appellant continued to suffer pain
    and psychological trauma and in May 2008, she wrote to the respondent, asking
    whether anything more could be done with respect to the car accident. In
    February 2009, the respondent advised the appellant that she would require a further
    retainer fee of $500.00 to continue to pursue her statutory accident benefits
    claim. The appellants evidence was that she could not afford the retainer, and
    the solicitor-client relationship was terminated at that time. The respondent never
    indicated to the appellant that she had erred in recommending the settlement,
    nor did the appellant terminate the relationship for that reason. In fact, the
    respondent continues to maintain that she made no error.

[7]

On the recommendation of a law clerk she spoke with, the appellant
    consulted and retained her current counsel, Mr. G. Joseph Falconeri, in April
    2010, to assist her in obtaining her statutory accident benefits. He sent her
    for a medical-legal assessment in November 2010 to a psychiatrist, Dr. Richard Guscott,
    who provided a report in June 2011.

[8]

That report provided his opinion that the appellant had suffered physical
    and psychological damage as a result of the accident that was sufficiently
    severe to meet the definition of catastrophic impairment under the statutory accident
    benefits regulation. Specifically, he found that the appellant showed Class IV
    marked impairments with respect to activities of daily living, social
    functioning, concentration, persistence, and pace, as well as an increased
    likelihood of deterioration or decompensation in a work or work-like setting.

[9]

Upon receipt of Dr. Guscotts report, Mr. Falconeri determined that it
    was appropriate for the appellant to sue the respondent for breach of contract,
    negligence, and breach of fiduciary duty for recommending the improvident
    settlement, and he issued the statement of claim on August 26, 2011.

Summary judgment

[10]

Because the claim was issued more than two years after the impugned settlement,
    the respondents took the position that the action was statute barred under the
Limitations
    Act, 2002
, S.O. 2002, c. 24,

Sched. B, and brought a summary
    judgment motion to determine that issue. The parties agreed that no trial was
    necessary and that the issue could be determined on summary judgment.

[11]

The motion judge outlined the appellants and respondents positions and
    arguments. In granting summary judgment to the respondents, she agreed that the
    appellant had the necessary knowledge at the time of the settlement to bring
    her claim, or else that she ought to have taken steps to discover her claim and
    failed to do so. The motion judge specifically accepted the respondents argument
    that the plaintiffs evidence was deficient because she did not explain how Dr.
    Guscotts report caused her to realize that she had a cause of action against
    the respondents, given that the report did not address either the settlement or
    the standard of care the respondent owed to the appellant.

Issues

[12]

The issue to be resolved on this appeal is whether the motion judge erred
    in her interpretation and application of s. 5(1) of the
Limitations Act,
    2002
by finding that the appellants claim was discovered or discoverable
    prior to August 26, 2009.

Analysis

[13]

The governing statutory framework is ss. 4 and 5 of the
Limitations
    Act,

2002
, which state:

4.
Unless this Act
    provides otherwise, a proceeding shall not be commenced in respect of a claim
    after the second anniversary of the day on which the claim was discovered.

5. (1)
A claim is
    discovered on the earlier of,

(a) the day on which the person with the claim
    first knew,

(i) that the injury, loss or damage had
    occurred,

(ii) that the injury, loss or damage was
    caused by or           contributed to by an act or omission,

(iii) that the act or omission was that
    of the person           against whom the claim is made, and

(iv) that, having regard to the nature
    of the injury, loss or         damage, a proceeding would be an appropriate
    means          to seek to remedy it; and

(b) the day on which a reasonable person with the
    abilities and in the circumstances of the person with the claim first ought to
    have known of the matters referred to in clause (a).

(2)
A person with a
    claim shall be presumed to have known of the matters referred to in clause (1)
    (a) on the day the act or omission on which the claim is based took place,
    unless the contrary is proved.

[14]

In this case, the injury, loss or damage is the impugned settlement of
    the car accident claim that the appellant made with the driver of the other
    car, on the advice of her lawyer, the respondent.

[15]

When a person settles an action, it is most often for an amount that is
    less than the full amount of the claim. It is based on a compromise reached by
    both sides in order to finalize the litigation without incurring the additional
    cost, time and risk of an uncertain result in proceeding to trial. Many factors
    go into the decision to settle an action rather than have a trial. They include
    the perceived strength of the case, the availability of necessary evidence, the
    credibility and reliability of that evidence, and the delay until a trial date,
    to name but some of the factors.

[16]

The fact that a person accepts a settlement that is less than the full
    amount of the claim does not mean the person has suffered an actionable loss.
    The person has made a calculated assessment of all of the relevant factors and
    decided to accept an amount that reflects that assessment and is acceptable on
    that basis.

[17]

That is what occurred in this case. At the time, the appellant was not
    happy with the amount she was receiving. That is quite normal. But she accepted
    it based on her lawyers advice. It would be anomalous indeed if every
    settlement of an action for less than the amount of the claim were viewed as an
    injury, loss or damage based on breach of contract, negligence or breach of fiduciary
    duty by the lawyer acting for the settling party.

[18]

The respondents position continues to be that the settlement was
    appropriate. She maintains there was no injury, loss or damage at all. However,
    as the alleged improvidence of the settlement forms the basis of the
    appellants claim, the issue for limitation purposes is when the appellant knew
    about it and when she ought to have known about it.

[19]

The respondents submitted on the motion that the appellant was aware of
    the following facts before August 26, 2009, which was two years before the
    statement of claim was issued:

·

The appellant had settled her tort claim arising out of the
    accident at the mediation on November 14, 2005;

·

The appellant was unhappy with the settlement amount, and had
    been told by her parents that it was insufficient;

·

The appellant continued to suffer from significant physical and
    psychiatric injuries;

·

The appellant had been diagnosed with chronic pain syndrome, post-traumatic
    stress disorder, fibromyalgia, chronic psychiatric difficulties, anxiety, and
    major depression;

·

The appellant was unable to pay for her needs and treatments; and

·

The appellant required ongoing help and treatment.

[20]

The respondents argued before the motion judge that the appellant was
    unhappy with her 2005 settlement, but did nothing to investigate its propriety
    until 2010. They submitted that ignorance of the law or the legal consequences
    of the facts does not postpone the running of the limitation period. They also
    argued that Dr. Guscotts expert report added nothing new to the appellants
    knowledge of the facts supporting her claim, nor did it comment on the
    settlement or the appropriate standard of care, and it therefore was irrelevant
    to the determination of when the limitation period began to run. In the
    alternative, they argued that the appellant was not duly diligent in seeking to
    acquire the material facts that gave rise to her claim.

[21]

The motion judge did not make a finding whether the appellant had actual
    knowledge of the material facts underlying her claim at the time of the
    settlement, or when a reasonable person with the appellants abilities and in
    her circumstances first ought to have known of them. It was implicit in the finding
    that the appellants action was statute barred that the motion judge accepted
    the respondents argument that the appellant knew or ought to have known she
    had a claim more than two years before the statement of claim was issued on
    August 26, 2011.

[22]

I will address each of the respondents arguments. Accepting that the
    appellant knew the facts set out above at para. 19, those facts were also known
    to the respondent, who continued to act as the appellants lawyer to pursue her
    statutory accident benefits claim until February 2009. Those facts did not
    cause the respondent to consider that the appellant had a claim against her.
    Had she thought otherwise, she was obliged by r. 7.8(1) of the Law Society of
    Upper Canadas
Rules of Professional Conduct
to advise the appellant
    that she had made an error. And in accordance with r. 7.8(2), she would also
    have had to notify her liability insurer, LAWPRO, to ensure the client would be
    indemnified, if required.

[23]

Advising a client of an error or omission will normally give the client
    knowledge of the facts necessary to know that she has a claim, and thereby  commence
    the running of the limitation period under s. 5(1)(a). However, that did not
    occur in this case.

[24]

The appellants uncontradicted evidence was that although she felt the
    settlement was unfair as far back as 2005, she did not know the settlement was
    improvident or that she had a claim against the respondent until she was so
    advised by her new lawyer, based on Dr. Guscotts report. That responds to s.
    5(1)(a) of the Act. It also responds to s. 5(2), as it rebuts the presumption that
    she knew of the matters referred to in s. 5(1)(a) on the day she entered into the
    settlement.

[25]

Under s. 5(1)(b), the question is when a reasonable person with the
    appellants abilities and in her circumstances ought to have first known that
    she had a claim against the respondent for breach of contract, negligence, or
    breach of fiduciary duty for recommending an improvident settlement. In other
    words, when is it reasonable for a lay person to know that she should sue her
    lawyer?

[26]

Until the appellant retained her current counsel, no one advised her
    that the respondent may have made an error in recommending the settlement. A leading
    recent decision on this issue is
Ferrara v. Lorenzetti, Wolfe Barristers
    and Solicitors
,
2012 ONCA
    851, 113 O.R. (3d) 401.
[1]
In that case, a lawyer erred in his calculation of a statement of adjustments for
    the purposes of minutes of settlement, leaving his client liable for a
    deficiency. The lawyer assured his client he had not made an error. When the
    client sued the lawyer within two years of the court finding against the client
    on the deficiency, the lawyer moved for summary judgment on the basis that the
    claim was statute barred because the client should have known about the
    lawyers error once the statement of claim in the deficiency action had been
    issued. The motion judge granted summary judgment, but this court allowed the
    appeal.

[27]

The appellant in that case had been a client of the respondent lawyer for
    20 years. The lawyer repeatedly assured the client he had not made an error and
    was also involved in the defence of the deficiency action. He never advised the
    client in accordance with r. 7.8 (then r. 6.09) of the
Rules of
    Professional Conduct
that he might have made an error. Furthermore, none
    of the senior litigation lawyers the appellant retained to defend the
    deficiency action ever told him he had a claim against his lawyer.

[28]

Those two factors were determinative for Laskin J.A. in concluding, based
    on the modified objective test under s. 5(1)(b), that the claim was not
    discoverable until the court in the deficiency action found that the lawyer had
    made an error in his calculation. Laskin J.A. observed that it lay ill in the
    mouth of the lawyer to say that although he had maintained throughout that he
    made no error, the client should have known that he did.

[29]

Unlike in
Ferrara
,

where the correctness of the statement of adjustments prepared by the
    lawyer was in dispute in the deficiency action, in this case, no issue was ever
    raised about the propriety of the settlement. The respondent never advised or
    suggested to the appellant that she had made an error, and she continued to act
    for the appellant in pursuing her further rights arising out of the car
    accident.

[30]

Moreover, although the appellant in this case did not consult other
    senior litigation lawyers  as was the case in
Ferrara
 neither did
    she receive legal advice from anyone else while the solicitor-client
    relationship with the respondent was ongoing as to any potential problem with
    the settlement.

[31]

For these reasons, although the facts of
Ferrara
are different
    in some respects, the factors relied upon by Laskin J.A. are nevertheless
    applicable. On the record in this case, a reasonable person with the
    appellants abilities and in her circumstances would not have realized that she
    had a claim against the respondents, when no one, including the respondent, indicated
    to her that an error might have been made with respect to the settlement.

[32]

The next argument, accepted by the motion judge, was that the appellant
    did not explain how the opinion of Dr. Guscott caused her to realize that she
    had a claim against the respondent because it did not address the respondents
    alleged negligence or the settlement.

[33]

This conclusion constitutes a misapprehension of the evidence by the
    motion judge. The expert opinion of Dr. Guscott made clear for the first time
    that the extent of the appellants injuries from the accident was legally
    significant in that it met the catastrophic threshold for the purposes of a
    statutory accident benefits claim. The appellants evidence was that on the
    basis of that opinion, Mr. Falconeri concluded that the appellant should not
    have settled her tort claim for such a low amount and that her former lawyer
    was at fault for advising her to do so.

[34]

It was only with that information, and with the legal advice of her new lawyer,
    that the appellant first knew or had the ability to know that she had a claim
    against the respondents.

[35]

The motion judge equated the case to
McSween v. Louis
(2000), 187
    D.L.R. (4th) 446 (Ont. C.A.), a medical malpractice action commenced only after
    the plaintiff patient obtained a medical expert opinion. In that case, this
    court held that the action was statute barred and that the receipt of the
    expert opinion was not a determinative factor.

[36]

The court explained that it was the type of case where a medical opinion
    was not necessary for the plaintiff to know the material facts on which to base
    an action against her doctor. That was because when the medical procedure was performed,
    the plaintiff knew something had gone wrong. In any event, the experts letter
    did not add any new information to what the plaintiff already knew about the
    circumstances of the injury, or offer an opinion as to its cause. The
McSween
case is wholly distinguishable.

[37]

The motion judge also accepted the respondents submission that the appellants
    ignorance of the law or the legal consequences of the facts did not postpone
    the running of the limitation period. However, that proposition does not assist
    the respondents in this case because the appellant did not know the material facts
    that would constitute the elements of a cause of action against the respondents.
    Perell J. explained the concept in
Nicholas v. McCarthy Tétrault
,
2008 CanLII 54974 (Ont. S.C.), at para.
    27, affd 2009 ONCA 692, 254 O.A.C. 197, leave to appeal to S.C.C. refused,
    [2009] S.C.C.A. No. 476:

The circumstance that a potential claimant may not appreciate
    the legal significance of the facts does not postpone the commencement of the
    limitation period
if he or she knows or ought to know the
    existence of the material facts, which is to say the [constituent] elements of
    his or her cause of action.
Error or ignorance of the law or legal
    consequences of the facts does not postpone the running of the limitation
    period:
Coutanche v. Napoleon
    Delicatessen
(2004)
,
2004 CanLII 10091 (ON CA)
,

72 O.R. (3d) 122 (C.A.)
;

Calgar v. Moore
,

[2005] O.J. No.
    4606 (S.C.J.)
;
Milbury v.
    Nova Scotia (Attorney General)
(2007)
,

2007 NSCA 52 (CanLII)
,

283 D.L.R. (4th) 449 (N.S.C.A.)
;
Hill v. South Alberta Land Registration
    District
(1993)
,

1993 ABCA 75 (CanLII)
,
100 D.L.R. (4th) 331
    (Alta. C.A.)
. [Emphasis added.]

[38]

The respondents alternative argument was that the appellant did not
    exercise due diligence in attempting to gain knowledge of the material facts underlying
    her claim. The motion judge did not address this issue because she found that a
    reasonable person in the appellants circumstances would have known the facts necessary
    to bring this claim at the time of the settlement, or at least two years prior
    to the date on which the statement of claim was issued.

[39]

In order to analyze this allegation, it is necessary to examine the
    timeline of events. The settlement was made in November 2005. The respondent
    continued to represent the appellant with respect to her ongoing statutory
    accident benefits claim until February 2009. The respondent never advised the
    appellant of any error in her advice to accept the settlement. In February 2009,
    the solicitor-client relationship ended because the appellant was not able to
    pay a further monetary retainer  not because she was dissatisfied with the
    respondent as a lawyer.

[40]

As she continued to suffer from injuries related to the accident, and
    needed money to cover her expenses, about a year after the termination of the
    solicitor-client relationship, the appellant accepted the advice of a law clerk
    to consult and retain her current lawyer. Until Mr. Falconeri received the
    expert medical-legal opinion, he did not have enough information to decide
    whether to pursue a claim against the respondents. It took almost a year to
    obtain that opinion, but that delay was not the subject of complaint on the
    motion record.

[41]

In my view, it was not unreasonable for the appellant to take just over
    a year before seeking further legal assistance to pursue her statutory accident
    benefits claim, and she exercised due diligence in discovering her claim. This
    is especially so in the circumstances of this case for two reasons: 1) she left
    her first lawyer, the respondent, only because she was unable to afford her
    further assistance, and not because of any concern about the propriety of the
    settlement; and 2) she had no basis to believe that she might have a claim
    against the respondent or that the respondent had made any error or breach of
    duty in advising her to accept the settlement, and therefore there was nothing for
    her to investigate.

Conclusion

[42]

The motion judge erred in her interpretation and application of s. 5(1)
    of the
Limitations Act, 2002
to the circumstances of this case. The
    appellant did not have knowledge that she had a claim against her former
    lawyer, the respondent, until she learned about it from her current counsel,
    based on an expert medical-legal opinion he obtained. The motion judge
    misapprehended the significance of that expert opinion. It was the first
    indication to the appellant and her new lawyer that her injuries from the
    accident were very significant and warranted more compensation than she had
    received from the settlement.

[43]

Furthermore, given that the appellant had no reason to believe there was
    anything to investigate with respect to a potential claim against the
    respondent, she exercised reasonable due diligence in the circumstances of this
    case.

[44]

I would therefore allow the appeal and set aside the order of the motion
    judge that the appellants claim is statute barred, with costs to the appellant
    in the amount of $10,000, inclusive of disbursements and HST. Given that the
    parties agreed that the motion should be decided by summary judgment, I would
    order judgment to go that the claim is not statute barred and may proceed to
    trial on the merits.

Released: KF MAY 3, 2016

K. Feldman J.A.

I agree. P. Lauwers
    J.A.

I agree. M.L.
    Benotto J.A.





[1]
See also
Clarke v. Faust
, 2016 ONCA 223, which was decided after the
    argument in this case.


