The plaintiff, Mr. Nguyen, through his Litigation Guardian, commenced an action in 2007 against the defendant for injuries sustained in a motor vehicle accident. Mr. Nguyen obtained an After-the-Event (“ATE”) policy in the amount of $100,000 from DAS Legal through his lawyer, Peter Cozzi. Mr. Nguyen lost on the threshold issue at trial and was ordered to pay costs of $161,790. DAS Legal paid the insurance proceeds (“Proceeds”) to Mr. Cozzi in trust for Mr. Nguyen. Mr. Nguyen then executed a direction authorizing Mr. Cozzi to apply the Proceeds to his disbursements in the amount of $68,636.73, and the balance to pay the costs order.
Mr. Cozzi brought this application for a declaration that the Proceeds are the sole property of Mr. Nguyen and that they were properly paid to Mr. Nguyen, who had the legal right to assign the Proceeds to Mr. Cozzi. Aviva Insurance Company of Canada (“Aviva”), who defended the civil action, brought a cross-application for a declaration that Aviva was entitled to the Proceeds or, in the alternative, that it was entitled to a pro rata share of the Proceeds.
Nishikawa J. provided extensive reasons for dismissing both applications. Nishikawa J. concluded that based on the terms of the ATE policy, Mr. Nguyen alone was entitled to the Proceeds as the beneficiary under the policy and that he had the right to decide how to apply the Proceeds. There was no legal basis upon which Aviva can assert a claim to the Proceeds. However, this did not mean that Mr. Cozzi was entitled to any of the Proceeds given the following:
- In October 2006, Mr. Nguyen was deemed incapable of managing his property by Low J. and Ms. Phan, his spouse, was subsequently appointed as his Guardian of Property and Personal Care;
- Ms. Phan was appointed as Mr. Nguyen’s Litigation Guardian in the civil action in 2007;
- Approximately 9 years later, and 1 year before the trial, Mr. Cozzi and Mr. Nguyen entered into a written contingency fee retainer agreement (“CFA”) in relation to the civil action in the absence of Ms. Phan – the CFA assigned the Proceeds to Mr. Cozzi as security for disbursements incurred in the civil action;
- At trial, Mr. Cozzi submitted a list of “assessable disbursements” for a total of $30,149.40;
- After the trial, on August 9, 2017, Mr. Nguyen signed a direction in the absence of Ms. Phan authorizing Mr. Cozzi to pay $68,636.73 of the Proceeds towards his disbursements and HST;
- In September 2017, Mr. Nguyen and Ms. Phan were provided with independent legal advice separately, and both signed an authorization confirming the CFA and Addendum.
- Many of the Disbursements Account pre-dated the CFA and a significant portion was related to the accident benefits portion.
Nishikawa J. noted that the CFA had not been approved by the court and based on the evidence, declined to approve the CFA. Nishikawa emphasized that both the CFA and Direction were signed in the absence of the Litigation Guardian. Although there appeared to be a relationship breakdown, it was not open to Mr. Cozzi to disregard the Litigation Guardian/Guardian of Property if no alternative arrangements had been put into place. The after-the-fact approval of the CFA and Direction only ratified what had already taken place and was therefore ineffective. Since the CFA and Directive were both unenforceable, Nishikawa J. concluded that they cannot be the basis upon which Mr. Cozzi’s disbursements were paid.
Nishikawa J. ordered that the Proceeds be held by Mr. Cozzi in trust pending further attendances to deal with the guardianship issue and the resulting distribution of the Proceeds.