COURT OF APPEAL FOR ONTARIO

CITATION: Bosnali v. Michaud, 2020 ONCA 7

DATE: 20200107

DOCKET: C66969

Brown, Huscroft and Roberts JJ.A.

BETWEEN

Caner Bosnali

Plaintiff (Respondent)

and

Robert Michaud and Central Graphics and Container Group Ltd.

Defendants (Respondents)

F. J. Burns and Allan Cocunato, for the appellant, Lofranco Corriero, plaintiff’s former counsel

Nestor E. Kostyniuk, for the respondents, Robert Michaud and Central Graphics and Container Group Ltd.

Caner Bosnali, acting in person

Heard: December 16, 2019

On appeal from the order of Justice Cynthia Petersen of the Superior Court of Justice dated April 23, 2019, with reasons reported at 2019 ONSC 2809.

BROWN J.A.:

OVERVIEW

[1] The appellant solicitors, Lofranco Corriero Personal Injury Lawyers, were counsel to the respondent, Caner Bosnali, in a seven-week jury trial of Mr. Bosnali’s motor vehicle accident claim against the respondents, Robert Michaud and Central Graphics and Container Group Ltd. (the “Michaud Respondents”). The appellant solicitors appeal from the motion judge’s dismissal of their request for a declaration that, pursuant to s. 34(1) of the Solicitors Act, R.S.O. 1990, c. S.15 (the “Act”), they had a first charge on the monies awarded to Mr. Bosnali at trial in priority to any right of set-off claimed by the Michaud Respondents. Section 34(1) of the Act authorizes the court to issue a declaration, in respect of a proceeding in the Superior Court of Justice, that a solicitor is 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] For the reasons set out below, I would dismiss the appeal.

BACKGROUND FACTS

[3] On February 17, 2017 the jury returned a verdict awarding Mr. Bosnali general damages, as well as damages for housekeeping and past and future medical expenses. The trial judge then heard submissions on the application of the statutory deductible under the Insurance Act, R.S.O. 1990, c. I.8, and costs, including the costs consequences of Mr. Bosnali’s refusal to accept offers to settle made by the Michaud Respondents under r. 49 of the Rules of Civil Procedure that were more favourable than his result at trial. On June 26, 2017, the trial judge issued her decision on those issues and directed that a judgment issue in accordance with her reasons. Given the amount of her award of costs in favour of the Michaud Respondents, the net judgment would require a payment from Mr. Bosnali (plaintiff) to the Michaud Respondents (defendants): 2017 ONSC 3943.

[4] The parties could not settle the terms of the formal judgment. In the result, the terms of the trial judge’s decision were finally embodied in a formal final judgment dated October 5, 2017 (the “Judgment”). Paragraphs 1 through 4 of the Judgment ordered the Michaud Respondents to pay Mr. Bosnali certain sums for damages and some costs. Paragraphs 5 and 6 ordered Mr. Bosnali to pay the Michaud Respondents certain amounts which, when aggregated, exceeded the amounts payable by the Michaud Respondents to Mr. Bosnali. In her reasons explaining the Judgment, the trial judge specifically noted that her calculations yielded “a net outcome to the effect that the plaintiff pay the defendants the sum of $11,675.59”: 2017 ONSC 5958, at para. 20. As a result, the Judgment concluded with the following language: “In summary, IT IS ORDERED AND ADJUDGED that the plaintiff pay the defendants the sum of $11,675.59, within 30 days from the date of this order.”

[5] Mr. Bosnali filed a notice of appeal from the trial Judgment but abandoned his appeal.

[6] The appellant solicitors initiated their motion for a charging order in June 2017. On the initial return of the motion on June 30, 2017, Shaw J. adjourned the motion on terms, one of which was ordering “an interim declaration that Lofranco Corriero has a charging order on the funds and costs recovered in this action on behalf of the Plaintiff, Mr. Bosnali.” A subsequent endorsement of Shaw J. made it clear that she had not decided the appellant solicitors’ motion on its merits at the June attendance: at para. 29. The motion was not finally heard until April 23, 2019.

REASONS OF MOTION JUDGE

[7] The motion judge dismissed the motion, stating at paras. 34 and 42:

If property or a fund is brought into existence through litigation, it must be as a result of a final court order, not merely as a result of a jury verdict.

I do not doubt that Mr. Bosnali’s partial success at trial was achieved at least in part through the instrumentality of Lofranco Corriero’s representation. I am not suggesting that he did not benefit whatsoever from the efforts of his lawyers, but he did not achieve a net benefit from their work. His solicitors’ efforts did not result in the recovery of any property/money. Rather, Mr. Bosnali was ultimately ordered to pay the Defendants the sum of $11,675.59 in costs.

ISSUE ON APPEAL

[8] The appellant solicitors submit that the motion judge erred in holding that there was no property recovered on which a charge could be imposed. They contend that a charge should be imposed on those portions of the Judgment that ordered payment of money to their client, the plaintiff Mr. Bosnali (paras. 1 to 4). To ascertain whether the Judgment created any property recovered through the instrumentality of the solicitor, the appellant solicitors contend that no effect should be given to the portions of the Judgment requiring Mr. Bosnali to pay money to the Michaud Respondents. In effect, a line should be drawn under para. 4 of the Judgment and the motion judge should have ignored what followed in the balance of the Judgment.

ANALYSIS

The bankruptcy of Mr. Bosnali, the client

[9] Before dealing with the appellant solicitors’ submission on its merits, mention need be made of the procedure the appellant solicitors chose by which to advance their claim for a charging order. Their motion was brought in June 2017 in the motor vehicle accident action between their client and the Michaud Respondents. However, on October 1, 2018, before the hearing of the motion, Mr. Bosnali made an assignment in bankruptcy pursuant to s. 49(1) of the Bankruptcy and Insolvency Act, R.S.C., 1985, C. B-3.

[10] Mr. Bosnali’s Statement of Affairs listed his debts to the appellant solicitors and the Michaud Respondents as liabilities but did not include as an asset any amount ordered payable to him by paras. 1 to 4 of the Judgment. The Notice of Bankruptcy and of Impending Automatic Discharge stated that an automatic discharge would issue on July 3, 2019 if no notice of opposition was filed.

[11] Notwithstanding this assignment, the appellant solicitors did not convert their motion into one brought within the bankruptcy proceeding. From her reasons, it appears that the motion judge was not asked to consider the effect of the assignment into bankruptcy on the ability of the appellant solicitors to advance a claim outside of the bankruptcy proceeding in respect of their unpaid accounts, including the request for a charging order, either under s. 34(1) of the Act or the common law: BIA, s. 71; Re Tots and Teens Sault Ste. Marie Ltd. (1975), 1975 CanLII 535 (ON SC), 11 O.R. (2d) 103 (S.C. (Bank & Ins Div)); Municipal Savings & Loan Corp. v. Evoy (1992), 15 C.B.R. (3d) 289 (Ont. C.J. (Gen. Div.)).

[12] In response to an inquiry from this court, counsel provided materials that show: (i) the appellant solicitors did not file a proof of claim with Mr. Bosnali’s trustee in bankruptcy; and (ii) on July 3, 2019 Mr. Bosnali was granted an automatic discharge. Pursuant to BIA s. 178(2), the discharge order released Mr. Bosnali from all claims provable in bankruptcy.

[13] Given that: (i) the Judgment that forms the basis for the appellant solicitors’ claim for a charging order on recovered property was made prior to the assignment in bankruptcy; (ii) no charging order was made prior to the assignment in bankruptcy that treated the solicitors’ claim as that of a secured creditor: Re Tots and Teens, at p. 108; (iii) the solicitors filed no proof of claim in the bankruptcy proceeding; and (iv) Mr. Bosnali is now a discharged bankrupt, it is difficult to see how the solicitors’ claim for a charging order could survive the administration of Mr. Bosnali’s bankruptcy estate and Ms. Bosnali’s discharge from bankruptcy. However, it is not necessary to definitively determine that point as we see no error in the motion judge’s conclusion that there was no property recovered through the instrumentality of the solicitors against which a charging order could be made.

The denial of the charging order

[14] In a standard motor vehicle accident action, a jury verdict determines some, but not all, of the issues between the parties. Following the jury’s verdict, the trial judge must determine the issues of any statutory adjustments and costs. Once that is done, the disposition made of the issues between the parties can be embodied in a judgment. If a judgment creates an obligation on one party to pay an amount to the other – whether in respect of damages, interest, or costs – the judgment creates a debt obligation which, obviously, constitutes “property recovered” within the meaning of s. 34(1) of the Act.

[15] As a general principle, if a judgment on its face creates mutual debt obligations from each party to the other, the debt obligations are set-off or netted against each other to determine which party can enforce the net amount against the other, absent language to the contrary in the judgment: see, generally, Martin v. McColl (1957), 1957 CanLII 360 (ON CA), 10 D.L.R. (2d) 284 (Ont. C.A.), at p. 287.

[16] In the present case, the trial judge incorporated into the express language of her Judgment the results of the process of netting out the itemized obligations of each party to the other. The Judgment ordered the plaintiff, Mr. Bosnali, to pay the defendants, the Michaud Respondents, the sum of $11,675.59. The Judgment thereby created an enforceable debt obligation owed by Mr. Bosnali to the Michaud Respondents.

[17] By its terms, the Judgment did not create any debt obligation enforceable by Mr. Bosnali against the Michaud Respondents. Mr. Bosnali could not “recover” any money under the Judgment by standard enforcement mechanisms without first satisfying the countervailing Judgment-based claims by the Michaud Respondents, who were entitled to assert legal set-off as the debts were mutual as between the parties. It follows that Mr. Bosnali did not recover any property by reason of the Judgment. As a result of the Judgment, Mr. Bosnali became the judgment debtor of the Michaud Respondents.

[18] This distinguishes the present case from the situation in Guergis v. Hamilton, 2016 ONSC 4428, a case relied upon by the appellant solicitors: at para. 8. As well, the present case does not involve a situation where the solicitor seeks a charging order against a fund recovered or preserved through the instrumentality of his work that is held in court or a trust account: Bell v. Wright (1895), 1895 CanLII 20 (SCC), 24 S.C.R. 656, at p. 659. Instead, the determination of who “recovered” what from whom had to await the trial judge’s decision on all monetary items in dispute between the parties to the action, including the issues of the statutory adjustments and costs. Only then could one ascertain who emerged from the proceeding as the judgment creditor and the judgment debtor – i.e., who “recovered property” in the proceeding.

[19] The appellant solicitors’ argument that they could obtain a charging order on the payment obligations of the Michaud Respondents to Mr. Bosnali recorded in paras. 1 to 4 of the Judgment “in priority” to the Michaud Respondents’ entitlements against Mr. Bosnali created by paras. 5 and 6 of the Judgment rests upon on a rule of practice that was repealed 35 years ago. Rule 673 of the Rules of Practice, R.R.O. 1980, Reg. 540, stated: “A set-off of damages or costs between parties shall not be allowed to the prejudice of the solicitor’s lien for costs in the particular action in which the set-off is sought, but interlocutory costs in the same action awarded to the adverse party may be set off notwithstanding any lien.” Rule 673 was not carried forward into the new 1985 Rules of Civil Procedure. As a result, whether a client recovered property through the instrumentality of his lawyer for the purposes of s. 34(1) of the Act is subject to the general principle that mutual debt obligations created by a judgment are set-off against each other to ascertain which party can enforce the net amount against the other.

[20] In the circumstances of the present case, the appellant solicitors could stand in no better position than Mr. Bosnali vis-à-vis the Michaud Respondents, and their right to a charging order or lien was subject to the right of set-off in the same action: Durall Construction Ltd. v. H.J. O'Connell Ltd. (1977), 1977 CanLII 1055 (ON SC), 16 O.R. (2d) 713 (H.C.), at p. 715; Diamond v. Western Realty Co. (1925), 1924 CanLII 2 (SCC), 28 O.W.N. 120 (C.A.), at p. 120; Poulin v. Pettitt (1992), 10 C.P.C. (3d) 29 (Ont. C.J. (Gen. Div.)), at para. 21.

[21] It follows that the appellant solicitors did not satisfy the conditions for obtaining a charging order under s. 34(1) of the Act because their client did not recover any property through the instrumentality of their work. Consequently, the motion judge quite properly dismissed the motion.

DISPOSITION

[22] For the reasons set out above, I would dismiss the appeal.

[23] In accordance with the parties’ agreement, the Michaud Respondents are entitled to their costs of the appeal in the amount of $5,000, inclusive of disbursements and applicable taxes, and payable by the appellant solicitors, Lofranco Corriero.

Released: “DB” JAN 07 2020

“David Brown J.A.”

“I agree. Grant Huscroft J.A.”

“I agree. L.B. Roberts J.A.”