COURT OF APPEAL FOR ONTARIO
RE: K-W FOOD SERVICES DIVISION OF ARGCEN INC. (Creditor/Respondent) – AND – GEORGE COLE (Debtor/ Respondent)– AND – MURPHY & BROWN (Garnishee/ Respondent)
BEFORE: Laskin, Cronk, and Gillese JJ.A.
COUNSEL: Henry Morgan, appellant, in-person Donald H. Crawford, Q.C., for the respondents
HEARD: April 1, 2005
On appeal from the order of Justice Edward R. Browne of the Superior Court of Justice dated May 12, 2004.
E N D O R S E M E N T
1Henry D. Morgan appeals from the order of Browne J., dismissing his motion for directions and leave to add Kevin Fryday and his law firm, Fryday, Murphy & Brown, as defendants in an action for garnishment of a trust account.
2Fryday is a lawyer in London, Ontario, who bought certain files belonging to the law firm Murphy & Brown, after the death of Mr. Murphy.
3Murphy & Brown represented George Cole in an action brought against him by Hans Schmalfeld for fraud, conspiracy to defraud, and inducing breach of contract.
4Morgan alleges that he was originally retained to represent Cole in the action but, due to a conflict of interest that was discovered during Schmalfeld’s examination for discovery, Murphy & Brown were retained instead. Morgan alleges that Murphy agreed that Morgan would have a solicitor’s lien on any money that Cole might receive in the Schmalfeld action. Morgan also claims that he worked on Cole’s behalf to facilitate two real estate transactions worth $17,715.42. He claims that this money was deposited into Cole’s trust account at Murphy & Brown.
5The issues between Schmalfeld and Cole settled and, on April 28, 1993, counsel for Schmalfeld, Mr. Burns, issued a notice of garnishment against Cole for $52,635.64, in the name of K-W Food Services Division of Argcen Inc. as creditor.
6Morgan took the position that his solicitor’s lien gave him priority over any interest of K-W Food Services. He brought a motion on August 24, 1993, to determine the validity of the notice of garnishment, and sought an order declaring that he was entitled to a charge on the funds held in the trust account of Murphy & Brown.
7On September 7, 1993, Jarvis J. ordered a trial of the issue regarding disposal of the funds in the Murphy & Brown trust account, and ordered that the funds should be paid into court pending the trial of the action. He also ordered that searches of executions against Cole be conducted in Middlesex, Waterloo, Huron, and Lambton by the creditor, K-W Food Services. Justice Jarvis ordered that K-W Food Services would be the plaintiff in the action and that the other creditors seeking to assert a claim would become defendants.
8Morgan issued, filed and served the order of Jarvis J. on all parties. However, it appears that Murphy & Brown never paid the money into court.
9On June 8, 1993, Murphy sent Burns a letter in which he informed Burns that there was $19,000 in Cole’s trust account. He also told Burns that there was a solicitor’s lien for about $16,000 on the account and that there were a number of writs in London against Cole that totalled $30,000, excluding interest.
10Murphy died in 1998.
11On February 15, 2000, Burns sent Fryday, who by this time had purchased several files from Murphy & Brown, a letter with reference to the Cole file that said, “It would appear that absolutely nothing has happened in the past six years and I do not anticipate receiving instructions to proceed with the matter.”
12Burns has not searched for executions or delivered a statement of claim.
13On May 22, 2001, Morgan sent Burns a letter in which he stated that he had recently reviewed the Cole file and it appeared that nothing had been done on the file since the order of Jarvis J. on September 7, 1993. Morgan stated that he assumed Burns’ client no longer wished to pursue the claim and requested that Burns advise him as to his client’s intention and as to whether any money had been paid into court.
14Because Morgan was of the view that neither Burns nor his client had any intention of proceeding with the trial of the issue, on October 2, 2003, he brought a motion for directions. The basis for the motion was Burns’ failure to comply with the order of Jarvis J. The motion was adjourned several times and on May 4, 2004, Morgan filed an amended notice of motion to include a request for leave to add Fryday and his law firm as defendants in the action.
15On May 12, 2004, the motion judge dismissed Morgan’s motion. He noted that no real steps had been taken to resolve the matter since the order of Jarvis J. in 1993, a period of over 10 years. He was of the view that although Morgan had been recognized in 1993 for the purpose of the motion before Jarvis J., that did not confer upon him party status or status as a creditor. He held that Morgan had no status to bring the motion and refused to grant him the status of plaintiff in the trial of the issue ordered by Jarvis J.
16Morgan appeals, saying that he has a personal interest in the issue of the disposal of funds in the Murphy & Brown account sufficient to give him status to bring the motion. He argues that his motion ought to be granted and he be named plaintiff because the named plaintiff is unwilling to proceed. He submits that as Jarvis J. recognised him for the purpose of making a motion in 1993, a final determination granting him party status was made, upon which he is now entitled to rely.
17We disagree. The fact that Jarvis J. permitted Morgan to bring a motion in 1993 does not mean that Morgan was granted party status. While the order of Jarvis J. arose as a result of the motion brought by Morgan, the originating proceedings were brought by K-W Food Services by way of the notice of garnishment. Although Morgan claims an interest in the funds over which K-W Food Services served a notice of garnishment, he was not a party to the garnishment proceedings, he was not a creditor in the garnishment proceeding and he had no status in respect of the original notice of garnishment. K-W Food Services did not take any steps to transform the garnishment proceedings into the trial of an issue. It was entitled to decide not to proceed. The consequence of it having taken no steps is that any creditors who might wish to assert a claim did not become defendants in the trial ordered by Jarvis J. As no steps were taken in respect of the order of Jarvis J., the matter remains one of garnishment, in respect of which Morgan cannot claim status. He has no standing to file a statement of claim in the trial of the issue.
18If Morgan wishes to pursue his claim, he will have to initiate his own proceedings. He, legitimately, may claim that his rights in such proceedings are impaired due to the passage of time. However, in the 6½ years between the order of Jarvis J. on September 7, 1993, and Morgan’s letter to Burns on May 22, 2001, it should have been apparent to Morgan that Burns was not going to bring the action. During that period, Morgan had the right to take whatever steps he wished to pursue his solicitor’s lien. The fact that he did not take such steps is not a basis upon which to grant him status when he was not a party to the original proceeding and has not become a party despite the existence of an order which, if acted upon, might have led to him being able to claim status as a defendant.
19Accordingly, we dismiss the appeal without prejudice to Morgan’s right to commence an action concerning his solicitor’s lien claim, should he be so advised. The motion judge made no error in his finding that Morgan had no status to bring the motion, or to be named as plaintiff in the place of K-W Food Services. We award costs to the respondent fixed at $4,000, inclusive of GST and disbursements.
“John Laskin J.A.”
“E. A. Cronk J.A.”
“E. E. Gillese J.A.”