Court File and Parties
Court File No.: CV-21-00671885-0000 Date: 2023-01-13 Ontario Superior Court of Justice
Between: WENDY SOKOLOFF PROFESSIONAL CORPORATION and WENDY H. SOKOLOFF PROFESSIONAL CORPORATION, both c.o.b. as SOKOLOFF LAWYERS, Responding Parties / Plaintiffs
And: SAVANNAH CHORNEY, CHORNEY LEGAL PROFESSIONAL CORPORATION, c.o.b. CHORNEY INJURY LAWYERS, NICOLE CHORNEY, MELISSA MACLEOD AKA MELISSA SIDHU, JHADE-ANN HUE, SUSAN MURRAY, HARBHAJAN GILL aka MALKA GILL, Moving Parties / Defendants
Heard: December 16, 2022
Counsel: Andrew Winton and Xin Lu (Crystal) Li, Lawyers for the Responding Parties/Plaintiffs John J Adair, Lawyers for the Moving Parties/Defendants
Reasons for Decision
G. DOW, J.
[1] The defendant lawyers/law firm seek to vary the terms of the injunction granted to the plaintiff lawyer/law firm by Justice W. Chalmers in Reasons released November 26, 2021 (2021 ONSC 8497) on an urgent basis.
Background
[2] The injunctive relief was the result of the defendants taking over the plaintiffs Brampton office during the 2021 Thanksgiving long weekend and advising the plaintiff, Wendy Sokoloff of same in an email on Monday, October 11 at 7:29 pm. Over 220 clients of the plaintiff transferred their files to the defendants between then and the November 5, 2021 issuance of this action and request for injunctive relief. As described by Justice Chalmers, Savannah Chorney was hired by Wendy Sokoloff in 2014 and opened the Brampton office then or shortly after. It was very successful, generating revenue of $5.5 million by 2020. Justice Chalmers stated that Savannah Chorney was paid $2.17 million in compensation in 2020 (paragraph 10 of his Reasons).
[3] In finding the plaintiffs met the requisite test for injunctive relief, the two key aspects for me to consider within Justice Chalmers' eleven part order was the requirement the defendants repay to the plaintiffs $1.447 million in disbursements incurred on the 220 plus files it took over within the following five months. Further, as transferred files resolved and were billed, the legal fees were to be distributed, 25% to the plaintiffs, 25% to the defendants and 50% paid into a segregated trust account for entitlement to be determined on consent of the parties or by further order of the court.
[4] It is this latter condition the defendants seek to vary. With the passage of its first year of operation, the defendants seek to vary the distribution to 40% of fees payable to the plaintiffs, 40% of fees payable to the defendants and the remaining 20% to be paid into the segregated trust account.
[5] The additional evidence of note relied on by the defendants was its payment of the outstanding disbursements as required. The plaintiffs submit this was merely compliance with the court's order. The number of files that have been transferred has apparently risen to about 269 and the legal fees billed on apparently 70 matters which have resolved is approximately $5.2 million. That is, approximately $1.3 million have been paid to each of the plaintiff and defendant law firms with the balance paid into the segregated trust account. Wendy Sokoloff deposed these files were "cherry picked" and the "largest and most valuable files within the Brampton office" (see paragraph 16 of Wendy Sokoloff’s affidavit sworn December 8, 2022).
[6] Savannah Chorney attached an expense sheet to her affidavit that sets out expenses of just under $1.3 million apparently including $150,000.00 paid each to her and to her spouse, Nicole Chorney, an employed office manager of the defendants. Not surprisingly, Wendy Sokoloff challenged some of the expenses claimed by the Chorney law firm noting the combined salaries of Savannah and Nicole Chorney was "high" (or in excess of a fair market rate) and thus income splitting. This would appear to fly in the face of what Wendy Sokoloff paid to Savannah Chorney in 2020 of $2.17 million (see paragraph 10 of Justice Chalmers' reasons).
[7] It is also alleged that about $250,000.00 for "accounting and legal" includes fees associated with this action.
[8] Unable to agree to a timetable, the parties required Justice Chalmers' further assistance and he ordered, amongst other steps for the litigation, that discovery be completed by September 30, 2022 and mediation be held on or before January 31, 2023. Justice Chalmers prefaced his endorsement that it was "necessary to balance moving the matter forward in an efficient manner" so the parties could have "a meaningful and effective mediation". Justice Chalmers remained seized with respect to "any matters arising out of the timetable".
[9] The action became delayed on the eve of examinations for discovery (which were cancelled) when the plaintiffs learned that the defendants' counsel, Adair Goldblatt Bieber LLP (who became counsel for the defendants in December, 2021 and thus were not the counsel that represented the defendants before Justice Chalmers) had been retained on what is called the "Neville-Lake" matter which Wendy Sokoloff deposed will "likely generate $3 to $4 million in fees" (paragraph 16 of the affidavit of Wendy Sokoloff sworn December 8, 2022). The Adair firm was retained to argue an undertakings and refusals motion (reported at 2022 ONSC 5672). As a result, the plaintiff alleged defence counsel will be a "necessary" witness at the trial and the plaintiffs have brought a motion to have defence counsel removed as solicitors of record. That motion has been scheduled to be heard on March 7, 2023 by Associate Justice McGraw.
[10] Examinations for discovery have yet to be conducted. While the plaintiff maintains its willingness to proceed with the mediation scheduled for January 25, 2023, the defendants dispute there is any value in proceeding.
Analysis
[11] The legal test to vary the terms of an injunction is well summarized in Look Communications Inc. v. Bell Canada Inc., 2009 Carswell Ont. 1784 (leave to appeal denied -). As part of the court exercising its broad discretion to fashion an order pending trial that achieves justice between the parties, the variance sought should not constitute an indirect appeal. There is a very heavy onus on the party seeking the variance.
[12] The relevant factors to considering include:
a) whether there has been inordinate delay in advancing the claim; b) any harm to the party opposing the variance being sought; c) whether the facts presented are substantially different from those upon which the original order was granted; and d) whether the facts presently are so dramatically different that the underpinnings of the original order are no longer valid.
[13] Regarding inordinate delay, the parties have failed to abide by the timetable imposed by Justice Chalmers. Discoveries ought to have been completed three months ago. Undertakings and refusals ought to have been in the process of completion. I agree with the defendants that the mediation scheduled for January 25, 2023 would be ineffective given the current state of the litigation. Thus, the current circumstances are contrary to Justice Chalmers' orders both in granting the injunction and imposing a reasonable litigation timetable.
[14] It is clear examinations for discovery cannot be rescheduled in the face of the plaintiffs' motion to remove counsel representing the defendants pending the determination of that issue. As counsel and I noted in submissions, it is not about whether the plaintiffs' motion has substance or is a delay tactic but that only that it exists. It will not be heard until March 7, 2023 at the earliest, the decision may be reserved for up to three months and could be subject to an appeal. Given Justice Chalmers' statement in imposing the timetable to "balance moving the matter forward in an efficient manner with ensuring that the parties are in the best position to have a meaningful and effective mediation", I conclude there has been inordinate delay. I am reinforced in this conclusion by the lack of any substitute or proposed new timetable.
[15] Regarding harm to the plaintiffs if the sought after variance of the disposition of fees collected is granted, the proposed variance will provide additional revenue directly to the plaintiffs while also continuing to increase the segregated trust fund, albeit at a lower rate. Common sense would suggest that as time passes and lawsuits age, the rate of resolution of the almost 270 matters transferred from the plaintiffs firm to the defendant's firm (of which approximately 200 remain) should increase. However, this would also suggest the revenue (which the defendant firm currently maintains is insufficient to be profitable) should increase. This becomes a neutral factor in the analysis.
[16] Regarding whether the facts presented are substantially different from when the original order was granted, it is clear the defendant law firm now has one year of financial records upon which to rely and the financing of the matters in question (in the form of disbursements) by the plaintiff law firm has ended. I find this is a substantial difference.
[17] Justice Chalmers dealt with the defendant law firms' self-help activity and concluded the unfairness in how the transferred matters were being financed. Further, it was noted that ongoing competition between these firms for personal injury claims in the Brampton area had begun. However, Wendy Sokoloff deposed as of December, 2022 that her claims includes expert evidence about the value of the five years she spent marketing her firm's presence in the Brampton and Mississauga region. This includes establishing contacts within the Peel Region and "wining and dining doctors, clinic owners etc., within the community to develop relationships whereby they would send work to my firm and vice versa" (affidavit of Wendy Sokoloff sworn December 8, 2022 at paragraph 18(b)). Wendy Sokoloff also deposed her ongoing efforts to "rebuild its business" and making slow progress. These changes are substantially different.
[18] Having concluded the present facts are substantially different, is the situation so dramatically different that the underpinnings of the original order are no longer valid? It seems clear the defendants have abided by all eleven of the conditions imposed. No submissions to the contrary were made. The conditions were required because the defendants had not acted in the manner mandated by the Law Society of Ontario. There has been an inordinate delay in moving the matter forward within the timetable imposed by Justice Chalmers.
[19] I was referred to the legal principle of the parties who obtains interlocutory injunctive relief is obliged to pursue their case with reasonable dispatch (Kapur et al. v. Konevic et al., 2021 ONSC 7730 at paragraph 6). While other decisions have noted longer delays, using the timetable framework of Justice Chalmers, logic dictates this matter is not likely to be effectively mediated, at the earliest, before late in 2023.
Conclusion
[20] I am satisfied the variation sought is not an indirect appeal of the original order. I am satisfied the defendants have met the very heavy onus to be considered. Relying on the relevant factors to be considered, the defendants' request to alter the distribution of fees collected on the identified matters to be allocated 40% to the plaintiffs, 40% to the defendants and 20% deposited into in the segregated trust fund already established is granted.
Costs
[21] If successful, the defendant sought partial indemnity costs of $13,392.50 (plus presumably HST of $1,741.03) and disbursements of $1,500.00 for a total of $16,633.53. If successful, the plaintiffs sought partial indemnity costs of $60,769.59 (plus presumably HST on the fees of $59,018.21). The disparity was explained, in part, by the fact counsel for the plaintiffs with carriage of the matter advised the trial scheduling judge of their unavailability of their return date due to another matter. This required alternate senior counsel become familiar with the issue to be determined.
[22] As a result, there was no dispute the quantum sought by the defendants was reasonable and the sum of $16,633.53 inclusive of fees, HST and disbursements is awarded and payable by the plaintiffs forthwith.