Taylor v. Taylor [Indexed as: Taylor v. Taylor]

60 O.R. (3d) 138

[2002] O.J. No. 2313

Docket No. C36989

Court of Appeal for Ontario,

Abella, Charron and Cronk JJ.A.

June 13, 2002

Family law -- Support -- Spousal support -- Charging order under Solicitors Act should not be made against spousal support payments -- Solicitors Act, R.S.O. 1990, c. S.15, s. 34(1).

Professions -- Barristers and solicitors -- Fees -- Charging orders -- Charging order under Solicitors Act should not be made against spousal support payments -- Solicitors Act, R.S.O. 1990, c. S.15, s. 34(1).

The solicitor represented the client in an acrimonious and protracted divorce proceeding. In the divorce judgment, the client was awarded spousal support, including arrears. The spousal support arrears were sent to the solicitor's office and were deposited into his trust account rather than with the Family Responsibility Office. The client brought a motion requesting that the arrears of spousal support be paid to her, or, in the alternative, to the Family Responsibility Office. The solicitor brought a cross-motion requesting a lien on the moneys held by him in trust and further seeking a charging order on any receivables to be paid pursuant to the divorce judgment. The motions judge ordered that all of the spousal support arrears be paid to the Family Responsibility Office. He also granted the solicitor a charging order on all sums receivable by the client under the divorce judgment, including moneys held by the Family Responsibility Office and any further receivables, until the assessed bill for services was paid. He held that the term "property" in s. 34 of the Solicitors Act should be given the widest possible meaning to include everything, in whatever form, recovered in an action or proceeding for the benefit of a client. The client appealed. [page139]

Held, the appeal should be allowed.

As a matter of both law and public policy, charging orders should not be made against support payments. Although "property" is not defined in the Solicitors Act, its treatment in the Family Law Act, R.S.O. 1990, c. F.3 demonstrates that property is different from, and by implication does not include, support.

If the word "property" in s. 34 of the Solicitors Act does not exclude support, then, given that spousal support is awarded based on demonstrable need, it should be protected from charging orders on the grounds of public policy.

APPEAL from order granting charging order under the Solicitors Act, R.S.O. 1990, c. S.15.

Cases referred to Boston v. Boston, 2001 SCC 43, [2001] 2 S.C.R. 413, 201 D.L.R. (4th) 1, 271 N.R. 248, 17 R.F.L. (5th) 4; Bracklow v. Bracklow, 1999 715 (SCC), [1999] 1 S.C.R. 420, 63 B.C.L.R. (3d) 77, 169 D.L.R. (4th) 577, 236 N.R. 79, [1999] 8 W.W.R. 740, 44 R.F.L. (4th) 1; Cairns v. St. Amour (1913), 1913 1275 (SKDC), 5 W.W.R. 115 (Dist. Ct.); Foley v. Davis (1996), 1996 1145 (ON CA), 49 C.P.C. (3d) 201 (Ont. C.A.); G. (L.) v. B. (G.), 1995 65 (SCC), [1995] 3 S.C.R. 370, 127 D.L.R. (4th) 385, 186 N.R. 201, 15 R.F.L. (4th) 201; Kleinman v. Zaldin & Zaldin, [1999] O.J. No. 2830; Lang Michener Lawrence & Shaw v. Ballard (1992), unreported, Court file number 341/91 (Ont. Div. Ct.); Lang v. Ball, [1988] O.J. No. 1388 (Ont. S.C.); M. v. H., 1999 686 (SCC), [1999] 2 S.C.R. 3, 43 O.R. (3d) 254n, 171 D.L.R. (4th) 577, 238 N.R. 179, 62 C.R.R. (2d) 1, 46 R.F.L. (4th) 32; Marzetti v. Marzetti, 1994 50 (SCC), [1994] 2 S.C.R. 765, 20 Alta. L.R. (3d) 1, 116 D.L.R. (4th) 577, 169 N.R. 161, [1994] 7 W.W.R. 623, 26 C.B.R. (3d) 161, 5 R.F.L. (4th) 1; Moge v. Moge, 1992 25 (SCC), [1992] 3 S.C.R. 813, 81 Man. R. (2d) 161, 99 D.L.R. (4th) 456, 145 N.R. 1, [1993] 1 W.W.R. 481, 43 R.F.L. (3d) 345; Moog and Moog (Re) (1985), 1985 2108 (ON CA), 50 O.R. (2d) 113, 8 O.A.C. 200, 17 D.L.R. (4th) 172, 44 R.F.L. (2d) 301 (C.A.) (sub nom. Moog v. Moog); Siskind, Cromarty, Ivey and Dowler v. Ross, Bennett & Lake, [1994] O.J. No. 1807; Willick v. Willick, 1994 28 (SCC), [1994] 3 S.C.R. 670, 125 Sask. R. 81, 119 D.L.R. (4th) 405, 173 N.R. 321, 81 W.A.C. 81, 6 R.F.L. (4th) 161 Statutes referred to Bankruptcy Act, R.S.C. 1985, c. B-3 Creditors' Relief Act, R.S.O. 1990, c. C.45, s. 4(1)(a) Family Law Act, R.S.O. 1990, c. F.3 Solicitors Act, R.S.O. 1990, c. S.15, s. 34 Wages Act, R.S.O. 1990, c. W.1, s. 7(2), (3) Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 60.08(16) Authorities referred to Lysak and Sossin, eds., Barristers and Solicitors in Practice (Markham: Butterworths, 1998, updated to 2002) Orkin, M., The Law of Costs (Aurora, Ont.: Canada Law Book, 1987) Rogerson, C., "Spousal Support After Moge" (1997) 14 C.F.L.Q. 281

Anthony T. Keller, for appellant. Jarvis Postnikoff, counsel for Gary L. Petker, former solicitor for appellant. Julia Viva, for the Family Responsibility Office. [page140]

The judgment of the court was delivered by

[1] ABELLA J.A.: -- Christine Mary Taylor was the petitioner in a divorce proceeding. She owes her lawyer a substantial amount of money for years of legal services. After judgment was obtained, her lawyer obtained a charging order under s. 34(1) of the Solicitors Act, R.S.O. 1990, c. S.15 against all sums receivable by her in connection with that judgment. The issue in this appeal is whether such an order can be made against spousal support.

Facts

[2] Gary L. Petker represented Ms. Taylor in an acrimonious and protracted divorce proceeding from 1996 to 2001. During that time, he billed a total of $145,404.25 in legal fees. Recognizing that the breakdown of her marriage had left Ms. Taylor in a precarious financial situation, Mr. Petker agreed to continue to act as her lawyer, as long as she made some effort to pay his fees and disbursements as the litigation progressed. He informed Ms. Taylor that all legal fees would eventually have to be paid, regardless of the outcome of the litigation. As of August 21, 2001, when Mr. Petker ceased to act for Ms. Taylor, she still owed him $112,619.21.

[3] In the divorce judgment dated March 7 and June 12, 2001, Whitten J. awarded Ms. Taylor $3,500 per month in spousal support commencing October 9, 1996, plus arrears, minus certain deductions for child support owed by Ms. Taylor to Mr. Taylor. The total amount of arrears for spousal support owing to Ms. Taylor as of the date of the judgment was jointly calculated by the Taylors' lawyers to be $69,241.77.

[4] Ms. Taylor was also awarded an equalization payment of $273,802.79, costs on a solicitor and client scale plus a ten per cent premium, and costs in the amount of $10,348.88 representing the fees of the expert accountant who testified in the divorce proceeding.

[5] In his judgment, Whitten J. expressly commended Mr. Petker for his efforts during the 15-day trial. Except for the orders for spousal support and arrears of spousal support, the trial judgment is currently under appeal.

[6] The spousal support arrears were sent to Mr. Petker's office on June 25, 2001 and were deposited into his trust account rather than with the Family Responsibility Office because of prior failures on the part of that Office to enforce the spousal support order against Mr. Taylor. Mr. Petker undertook to hold the funds in escrow pending delivery of a release from Ms. Taylor for the support arrears to Mr. Taylor's lawyer. [page141]

[7] Mr. Petker called Ms. Taylor on June 26, 2001 to inform her of the cheque's arrival and to arrange a meeting so that she could sign the release and they could discuss what portion of the funds would go towards payment of his legal fees. Ms. Taylor indicated in that conversation that she also wanted to pay the accountant's bill out of the money.

[8] On July 13, 2001, Ms. Taylor sent Mr. Petker a letter stating:

As you suggested, it would be good for us to meet and sign any documents as well as the disbursement to you and Mike Johnson [the expert accountant]. At this time, I do not know the exact amount of the check at your office, but was basing my calculations on $69,000. However, to the best of my knowledge I do know what my indebtedness is. It is my intention to clear up Mike Johnson's bill with interest . . .

Perhaps I have misunderstood what my indebtedness is to you and I apologize. In reading the documentation I understood that Mike Taylor would have to pay all and forward legal fees from 1999. (This being the result of the excessive time spent in relation to Mike Taylor) I will have time on holiday to look at my statements.

Gary, I want to clear up this situation by arriving at an amount that will be satisfactory to us both. And want you to know that I appreciate all your endeavours to bring closure to this case as soon as possible.

[9] On July 18, 2001, Mr. Petker sent a letter to Ms. Taylor confirming that he had paid the accountant and suggesting that $30,000 of the balance of the trust funds be paid to him on account. He transferred $10,000 to his general account, believing that he was entitled to transfer these funds to himself because he had submitted interim accounts to Ms. Taylor and because of signed authority, since misplaced, that he had received from her.

[10] On July 26, 2001, Ms. Taylor met with Mr. Petker. She wanted the balance of the remaining money (after the deduction of the $10,000 already transferred) to be paid to her, based on her understanding that it was Mr. Taylor who was required to pay all her legal fees and disbursements. Since the property judgment he obtained for Ms. Taylor was stayed pending Mr. Taylor's appeal of the equalization payment ordered, Mr. Petker found Ms. Taylor's refusal to pay him after his considerable efforts on her behalf to be sufficiently troubling to suggest that she talk to another lawyer for advice on this issue.

[11] Despite the dispute over fees, Mr. Petker continued to act for Ms. Taylor. During the July 26, 2001 meeting, Ms. Taylor informed Mr. Petker that she had reason to believe Mr. Taylor was selling his home. Mr. Petker asked her to get proof, and then [page142] scheduled a date for settling the divorce judgment. He left for holidays the next day.

[12] When Mr. Petker returned on August 13, 2001, he found a letter from a lawyer, Anthony T. Keller, dated August 2, 2001, in which allegations of breach of trust were made against him by Ms. Taylor. The letter demanded that Mr. Petker pay the funds in his trust account to the Family Responsibility Office, and that he proceed to assess his costs against Mr. Taylor. Mr. Keller also stated that Ms. Taylor wished to continue retaining Mr. Petker as her lawyer.

[13] Mr. Petker replied to the letter, correcting what he believed to be several inaccuracies. In addition, he set out conditions for his continuing to act for Ms. Taylor, including an acknowledgement from her that his fees were due when his accounts were delivered, that $35,000 towards his existing bill be paid, and written confirmation that she had authorized the payment to the accountant. The balance of the money was to be paid to Ms. Taylor.

[14] Mr. Petker attended court on August 14, 2001 to settle the trial and divorce judgments. On August 16, 2001, Mr. Keller advised Mr. Petker that he would be delivering a notice of change of solicitors and would hereafter represent Ms. Taylor. Ms. Taylor did not provide Mr. Petker with the requested acknowledgement and authorization.

[15] In his correspondence with her new lawyer, despite the dispute with his former client, Mr. Petker provided advice to Mr. Keller to advance Ms. Taylor's interests.

[16] Ms. Taylor brought a motion against Mr. Petker on August 23, 2001, requesting that the arrears of spousal support be paid to her or, in the alternative, to the Family Responsibility Office; that Mr. Petker give his file to Mr. Keller; and that he be ordered to prepare and deliver the solicitor/client costs assessment against Mr. Taylor.

[17] Mr. Petker brought a cross-motion requesting a lien on the moneys held by him in trust and further seeking a charging order on any receivables to be paid pursuant to the divorce judgment. Mr. Taylor also brought a cross-motion seeking an order declaring that he had discharged his obligation for arrears of spousal support with his cheque for $69,241.77.

[18] On August 23, 2001, Justice Festeryga ordered that all of the spousal support arrears be paid to the Family Responsibility Office, and that Mr. Petker deliver his file to Mr. Keller. He also granted Mr. Taylor's cross-motion.

[19] On August 30, 2001, Justice Festeryga granted Mr. Petker a charging order on all sums receivable by Ms. Taylor under the [page143] divorce judgment, including moneys held by the Family Responsibility Office and any further receivables, until the assessed bill for services was paid. He held that the term "property" in s. 34 of the Solicitors Act should be given the widest possible meaning to include anything, in whatever form, recovered in an action or proceeding for the benefit of a client.

[20] The Family Responsibility Office has paid the $69,241.77 to Ms. Taylor. On August 29, 2001 she also received $150,000 of the total $273,802.79 equalization payment, pursuant to an order by Simmons J.A in Chambers which partially lifted the stay of the divorce judgment pending appeal.

[21] Ms. Taylor earns $26,000 a year in employment income and is receiving regular spousal support payments as set out in the divorce judgment.

[22] Mr. Petker has not received any further payment from Ms. Taylor, and is still owed the fees of the expert accountant which he paid out of his general account, in addition to the approximately $112,000 still owed to him by Ms. Taylor.

[23] Ms. Taylor refuses to acknowledge her responsibility to pay her legal fees, suggesting in her August 23, 2001 motion, unsuccessfully, that it was Mr. Petker's responsibility to collect those fees from Mr. Taylor. She did not appeal from that conclusion and I therefore consider it inappropriate to accede to her invitation to revisit that issue in this appeal.

Analysis

[24] I fully appreciate the frustration Mr. Petker must feel. He voluntarily delayed, for his client's financial benefit, payment of his fees pending the outcome of a bitter divorce action, only to find her unreasonably withholding any payment to him notwithstanding the benefits she received from what the trial judge considered to be his exemplary representation.

[25] Mr. Petker acted in the best professional interests of Ms. Taylor for five years. He financed acrimonious litigation, protracted primarily due to Mr. Taylor's conduct, receiving a relatively small amount of compensation from his client notwithstanding the special recognition he received from Whitten J. in the award of a premium on solicitor and client costs. Mr. Petker has not received payment from Ms. Taylor for more than a year.

[26] My sympathy is with Mr. Petker, but the law is not. As a matter of both law and public policy, it is my view that charging orders should not be made against support payments.

[27] The authority to make a charging order derives from s. 34 of the Solicitors Act, which states: [page144]

34 (1) Where a solicitor has been employed to prosecute or defend a proceeding in the Ontario Court (General Division), the court may, on motion, declare the solicitor to be entitled to a charge on the property recovered or preserved through the instrumentality of the solicitor for the solicitor's fees, costs, charges and disbursements in the proceeding.

(2) A conveyance made to defeat or which may operate to defeat a charge under subsection (1) is, unless made to a person who purchased the property for value in good faith and without notice of the charge, void as against the charge.

(3) The court may order that the solicitor's bill for services be assessed in accordance with this Act and that payment shall be made out of the charged property.

[28] This section codifies the inherent jurisdiction in equity to declare a lien on the proceeds of a judgment where there appears to be good reason to believe that the solicitor would otherwise be deprived of his or her costs. (Siskind, Cromarty, Ivey and Dowler v. Ross, Bennett & Lake, [1994] O.J. No. 1807). The order is discretionary, and can be made against "the fruits of litigation" where real or personal property has been recovered or preserved through a lawyer's litigation efforts. (See Foley v. Davis (1996), 1996 1145 (ON CA), 49 C.P.C. (3d) 201 (Ont. C.A.) at p. 202; Lysak and Sossin eds., Barristers and Solicitors in Practice (Markham: Butterworths, 1998, updated to 2002) and Orkin, The Law of Costs (Aurora, Ont.: Canada Law Book, 1987, updated to 2000)).

[29] Historically, courts have exercised their discretion liberally in favour of charging orders, which are said to benefit both the lawyer and the client, since they encourage lawyers to represent clients who are unable to pay as their cases progress. As noted by Lysak and Sossin in Barristers and Solicitors in Practice, at para. 13.39, this may particularly affect women:

Women in family cases often fall into this category. Unless lawyers know they can confidently look to funds to be created by orders for the division of family assets, they will understandably be reluctant to commit themselves to anything but simple cases, and men with ready resources could use them to advantage.

[30] I do not, however, accept the submission that the term "property" should be given the widest possible meaning to include spousal support. Although "property" is not defined in the Solicitors Act, its treatment in the Family Law Act, R.S.O. 1990, c. F.3, demonstrates that property is different from and, by implication, does not include support. Support and property are dealt with in entirely different parts of the Family Law Act and support payments are not included in the Act's net family property calculations. As this court observed in Moog v. Moog (1985), 1985 5022 (ON CA), 50 O.R. (2d) 113, 44 R.F.L. (2d) 301 (C.A.), property division and [page145] support payments involve the consideration of different and distinct issues and interests.

[31] There is no reported case in which a charging order has been applied to an award or arrears of spousal support. In Lang v. Ball, [1988] O.J. No. 1388 (Ont. S.C.), a lawyer sought a charging order against moneys owed to his client, a wife in a divorce action. The client had been awarded child support, as well as a specific award for arrears. Judge Vannini declined to place a charging order against the support payments. While the case deals with child support, his conclusions are no less germane to spousal support when he concludes that s. 4(1)(a) of the Creditors' Relief Act, R.S.O. 1990, c. C.45, "clearly indicates the intention of the Legislature to protect maintenance and support orders from garnishment or any other enforcement process" (emphasis added). That section now states:

4(1) A support or maintenance order has priority over other judgment debts regardless of when an enforcement process is issued or served,

(a) if the order is for periodic payments, in the amount of the arrears owing under the order at the time of seizure or attachment; and

(b) if the order is for a lump sum payment, in the amount of the lump sum.

[32] Judge Vannini also cited Cairns v. St. Amour (1913), 1913 1275 (SKDC), 5 W.W.R. 115 (Dist. Ct.), which involved an attempt to garnishee alimony payments, where the court observed at p. 116:

On the best consideration I can give this case it appears to me that the policy of the law is that payments made by virtue of an order of the court for the purpose of the wife's support are not attachable.

[33] If I am wrong in interpreting the word "property" in s. 34 of the Solicitors Act as excluding support, I am nonetheless of the view that the unique perch justifiably occupied by support in our legal system argues in favour of its protection from charging orders on the grounds of public policy. That public policy is reflected in both statutory and case law.

[34] Charging orders are clearly discretionary. There is no right to a charging order, and the court will order one only if there is evidence that the lawyer was instrumental in securing the judgment and will likely not be paid without the order. Further, courts are required to balance the circumstances and equities of each case and client.

[35] By definition, spousal support is awarded based on demonstrable need. This ameliorative purpose has been recognized by the Supreme Court of Canada consistently in recent years. (See [page146] Moge v. Moge, 1992 25 (SCC), [1992] 3 S.C.R. 813, 99 D.L.R. (4th) 456; Willick v. Willick, 1994 28 (SCC), [1994] 3 S.C.R. 670, 119 D.L.R. (4th) 405, G. (L.) v. B. (G.), 1995 65 (SCC), [1995] 3 S.C.R. 370, 127 D.L.R. (4th) 385, Bracklow v. Bracklow, 1999 715 (SCC), [1999] 1 S.C.R. 420, 169 D.L.R. (4th) 577, M. v. H., 1999 686 (SCC), [1999] 2 S.C.R. 3, 171 D.L.R. (4th) 577, and Boston v. Boston, 2001 SCC 43, [2001] 2 S.C.R. 413, 201 D.L.R. (4th) 1).

[36] Professor Carole Rogerson emphasized the reconstructive importance of support and its particular significance for women in "Spousal Support After Moge" (1997) 14 C.F.L.Q. 281 at p. 290:

[T]he primary objective of spousal support is . . . compensating women who, under existing social arrangements, continue to sacrifice employment opportunities because of the assumption of family responsibilities, while their husbands are allowed to pursue their employment opportunities unimpeded (or much less impeded) by family responsibilities.

[37] As noted above, in the Creditors' Relief Act, R.S.O. 1990, c. C.45, s. 4, support and maintenance orders are given priority over other judgment debts. Furthermore, s. 7(2) and (3) of the Wages Act, R.S.O. 1990, c. W.1, allow 50 per cent of wages to be garnished for the enforcement of support or maintenance orders rather than the general allowance of 20 per cent. Sections 7(2) and (3) state:

Exemption from seizure or garnishment

(2) Subject to subsection (3), 80 per cent of a person's wages are exempt from seizure or garnishment.

Idem, support or maintenance

(3) Fifty per cent of a person's wages are exempt from seizure or garnishment in the enforcement of an order for support or maintenance enforceable in Ontario.

[38] In Lang Michener Lawrence & Shaw v. Ballard (1992), Court file number 341/91, unreported, the Ontario Divisional Court held that in bankruptcy proceedings, spousal support payments were not traditional debts, could not be considered a "debt" under rule 60.08(16) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194], and therefore were not subject to garnishment by a creditor in bankruptcy.

[39] In addition, the Supreme Court of Canada has recognized the priority of spousal support orders in bankruptcy proceedings. In Marzetti v. Marzetti, 1994 50 (SCC), [1994] 2 S.C.R. 765, 116 D.L.R. (4th) 577, Iacobucci J. held that a husband's income tax refund could not be assigned to his trustee in bankruptcy when there was an outstanding support order in favour of his wife. Finding that the refund came within the meaning of "wages" in the Bankruptcy Act, R.S.C. 1985, c. B-3, Iacobucci J. held that the Director of Maintenance [page147] Enforcement, who was seeking to enforce an order for child and spousal support against a bankrupt husband, was entitled to priority over the trustee in bankruptcy to whom the husband had purported to assign his post-bankruptcy income tax refund. He noted, at p. 801 S.C.R., that s. 68 of the Act mandated that the family responsibilities and personal situation of the bankrupt be taken into account in interpreting the word "wages", and that:

Moreover, there are related public policy goals to consider. As recently recognized by L'Heureux-Dubé J. in Moge v. Moge, 1992 25 (SCC), [1992] 3 S.C.R. 813, "there is no doubt that divorce and its economic effects" (p. 854) are playing a role in the "feminization of poverty" (p. 853). A statutory interpretation which might help defeat this role is to be preferred over one which does not.

(Emphasis added)

[40] I cannot see how, given this legislative and jurisprudential recognition of the need to insulate support orders, a court can justify exercising its discretion in a way which so dramatically contradicts express public policy.

[41] I do agree, however, that the charging order made by Justice Festeryga can be applied against any equalization payment received or to be received by Ms. Taylor, including any sums received pursuant to the order of Simmons J.A. (see Kleinman v. Zaldin & Zaldin, [1999] O.J. No. 2830).

[42] The appeal should therefore be allowed, and the order of Justice Festeryga dated August 30, 2001 varied to explicitly exclude support, including arrears, from the scope of the charging order.

[43] In the circumstances, I would not order any costs against Mr. Petker.

Appeal allowed.