COURT OF APPEAL FOR ONTARIO
CITATION: Karrys v. Karrys, 2015 ONCA 17
DATE: 20150119
DOCKET: C59155
Doherty, Juriansz and Huscroft JJ.A.
BETWEEN
Peter J. Karrys
Applicant
and
Steven J. Karrys, Karrys Holdco Inc.
and Karrys Bros., Limited
Respondents
BETWEEN
Karrys Bros., Limited
Plaintiff
and
Gregorio Ruffa
Defendant
AND BETWEEN
Gregorio Ruffa
Plaintiff by Counterclaim
and
Karrys Bros., Limited, Steven J. Karrys
and Peter J. Karrys
Defendants by Counterclaim
AND BETWEEN
Karrys Bros., Limited
Plaintiff
and
Andy Kephalas, Charles Havill,
Charles Havill Chartered Accountant and Charles Havill LLP
Third Parties
AND BETWEEN
Peter J. Karrys
Applicant
and
Steven J. Karrys, Karrys Bros., Limited, Karrys Holdco Inc.,
Karbro Transport Inc. and Karrys Software Ltd.
Respondents
Robert G. Schipper, for the appellant Torkin Manes LLP
Peter J. Karrys, acting in person
David C. Moore, for the respondent, Karrys Bros., Limited
Heard: January 12, 2015
On appeal from the order of Justice David M. Brown of the Superior Court of Justice, dated July 3, 2014.
ENDORSEMENT
[1] This appeal involves charges orders granted under s. 34(1) of the Solicitors Act, R.S.O. 1990, c. S.15. The section provides:
Where a solicitor has been employed to prosecute or defend a proceeding in the Superior Court of Justice, 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] The appellant, a firm of solicitors, appeals from the order of the motion judge declaring certain payments to be made to the respondent pursuant to a settlement agreement were not subject to three charging orders in the solicitors’ favour. The three charging orders were granted to the solicitors because of work they had done, beginning in 2004, representing the respondent in three proceedings in connection with a complex and hostile shareholder dispute with his cousin. The three proceedings and the larger dispute remained unresolved when the respondent terminated the solicitors’ retainer in October 2007.
[3] In January 2009, the solicitors obtained the charging orders on consent. The charging orders gave the solicitors a first charge on any proceeds of settlement or any proceeds after judgment payable to the respondent “in respect of” the matters on which the solicitors had represented him. Each of the charging orders specified a court file number corresponding to the proceedings on which the solicitors had represented the respondent.
[4] After terminating the solicitors’ retainer, the respondent continued the dispute with his cousin and commenced additional lawsuits. In one subsequent lawsuit he sought to restore the payment of his salary that the corporate respondent, of which his cousin was the majority shareholder, had suspended in June, 2011. He claimed entitlement to the salary under the shareholders agreement. In another subsequent action, the respondent sued third parties who were connected to the company alleging various wrongdoings.
[5] On February 5, 2014, the respondent and his cousin entered into a settlement that resolved “all lawsuits” and “all legal proceedings” between them, as well as matters involving third parties. The settlement agreement contemplated immediate payments and future payments to the respondent. In particular the agreement included the following two terms:
• Starting now: consulting payments to [the respondent] @$300k/yr as of and from January 1/2014 to the conclusion of Plan A or Plan B; [the cousin’s] salary to continue at ~$310K/yr.
• As consideration for the full and complete settlement of all existing and potential claims against third parties, …the company agrees to pay [the respondent] compensation for all alleged damages as follows: [an itemization of amounts to be paid under various scenarios]
[6] The parties disputed whether the charging orders applied to these payments. The motion judge granted the respondent’s motion for a declaration the solicitors were not entitled to these disputed payments.
[7] The motion judge observed a solicitor must demonstrate the property was recovered or preserved through his or her instrumentality to obtain a charging order on property. He stated that the element of instrumentality explicitly found its way into these charging orders because they specified that they applied to proceeds paid to the respondent “in respect to [the three court files]”.
[8] The motion judge, upon a consideration of the agreement and the affidavit evidence, went on to find that although the settlement agreement dealt in part with proceedings on which the solicitors had acted, the disputed payments arose out of the settlement of the subsequent litigation.
[9] He inferred that the consulting fees, which on their face appear to refer to payments for services rendered after January 2014, were best related to compensation for the suspension of the respondent’s salary in 2011. The motion judge remarked that the respondent’s “salary was not suspended until 2011, long after the [solicitors’] retainer had ended.”
[10] The other parts of the disputed payments were classified by the settlement agreement, the motion judge noted, as “consideration for the full and complete settlement of all existing and potential claims against third parties.” He observed that the litigation against the third parties commenced in 2009 and 2012 “again long after the termination of the [solicitors’] retainer.”
[11] The motion judge concluded that the disputed payments were not subject to the charging orders.
[12] On appeal, the solicitors’ counsel submits that the motion judge failed to recognize that charging orders should be given a broad and expansive scope. He submits the motion judge engaged in a limited chronological analysis that focused on the fact that the subsequent proceedings were not launched until after the solicitors’ retainer had ended. This limited focus led him to the erroneous conclusion that there was “no link” between the legal work performed by the solicitors and the ultimate settlement of the litigation. He points out that the solicitors represented the respondent in connection with an earlier reduction of his salary and the respondent’s subsequent action against the third parties relied in part on their earlier investigations.
[13] Counsel submits that on a proper analysis all the settlement proceeds should be found to be inextricably intertwined with the legal work the solicitors performed. The agreement settled all of the ongoing litigation and that the manner in which the parties to the settlement chose to characterize the payments for their purposes should not be taken into account in interpreting the charging orders. The respondent should not be allowed to avoid the effect of the charging orders by earmarking part of the settlement proceeds as relating only to other litigation.
[14] The difficulty with the solicitors’ argument is that they do not, and on the record cannot, submit that the settlement agreement was intentionally structured to avoid the application of the charging orders. The solicitors did not cross-examine the respondent on his affidavit. The record that was before the motion judge provides ample support for his conclusions. He considered the parties involved in the proceedings, the subject matter, the time at which the proceedings were launched and when the subject events took place.
[15] The motion judge did not find, as the solicitors have suggested, that there was no link between their work and the ultimate settlement of the litigation. Rather he found there was no link between the disputed payments and the solicitors’ work. The disputed payments are only a portion of the payments provided by settlement agreement. The respondent acknowledges that the remaining payments are subject to the charging orders.
[16] We have not been persuaded there is any basis for interfering with the motion judge’s conclusion. The appeal is dismissed. The costs of the appeal are left to the judge who disposes of the respondent’s action against the solicitors.
“Doherty J.A.”
“R.G. Juriansz J.A.”
“G.A. Huscroft J.A.”