Limitation period poor defence against legal malpractice claims by unsophisticated parties

Personal-injury lawyers who advise their clients to settle for amounts that are alleged to be improvidently low could face malpractice claims many years after the settlement.

That’s the key takeaway from this week’s decision in Lauesen v. Silverman, in which the Ontario Court of Appeal posed this tricky (and sensitive) question:

“When is it reasonable for a lay person to know that she should sue her lawyer?”

The case stems from a car accident in 2002, in which Melody Lauesen was injured. Lauesen then retained the legal services of Fern Silverman, of Goldman Sloan Nash and Haber LLP, to commence an action. In 2005, Silverman advised her client to accept a settlement of $26,169.36.

Lauesen was unhappy with the low amount but chalked it up to a faulty legal system. In 2008, she requested Silverman’s help in getting statutory benefits for her injuries. In 2009, Silverman requested a $500 retainer, which Lauesen says she couldn’t afford. At that point, the solicitor-client relationship ended.

One year later, Lauesen consulted with another lawyer, Joseph Falconeri, who suggested she get a second medical opinion.

After receiving a fresh opinion that her condition met the statutory definition of “catastrophic impairment,” Lauesen was advised by her new lawyers to launch an action against her former lawyers for breach of contract, negligence and breach of fiduciary duty.

At a preliminary motions hearing, the judge threw out the case, ruling that the limitation period of two years — from the point of the settlement in 2005 — had long expired.

The appeal court, however, disagreed. In a unanimous decision written by Justice Kathryn Feldman, the court found that a lay person like Lauesen could not be expected to know that she had a claim until she understood the extent of her injuries and spoke to another lawyer.

“[A] reasonable person with the appellant’s 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,” writes Feldman.

“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.”

Bryan Rumble, the lawyer at Falconeri Munro Tucci LLP who represented Lauesen before the appeal court, says it comes down to what a lay person could be reasonably expected to know — not what a lawyer might be expected to know.

“You have to look at what a reasonable person would do, but that ‘reasonable person’ has to be in the same situation as the person who is the subject of the claim,” he says. “So I guess if that person was a lawyer it would be a different situation.”

Rumble says, while this case doesn’t really develop the law around discoverability, it does prove that cases such as these — where allegedly improvident settlements lead to malpractice litigation — are viable, which could lead to more of them.

It also demonstrates the court’s general attitude around limitation-period defences for lawyers: “I think we can say that courts do not like to let lawyers use litigation periods to prevent claims against them. That seems to be a general trend.”

Update May 13: Clarification: A previous version of this article contained language that implied legal malpractice by Fern Silverman and Goldman Sloan Nash & Haber LLP. The Ontario Court of Appeal’s ruling deals only with the limitation period of the claim, and any other findings are yet to be determined at trial. The article was not meant to convey any finding of legal malpractice against Ms. Silverman or her firm. Legal Feeds apologizes for any misunderstanding.

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