Court of Appeal for Ontario

DATE: 20210630 DOCKET: M52295 (C68785)

Gillese, Tulloch and Roberts JJ.A.

BETWEEN

Pasquale Scetto, by his Litigation Guardian Benito Scetto Plaintiff (Respondent/Moving Party)

and

Michele Antonio Scetto Defendant (Respondent/Responding Party)

and

Sutherland Law (Appellant/Responding Party)

Counsel: Kelli Preston, for the plaintiff/respondent/moving party Pasquale Scetto by his litigation guardian Benito Scetto Matthew Kersten, for the appellant/responding party Sutherland Law No one appearing for the defendant/respondent/responding party Michele Antonio Scetto

Heard: June 14, 2021 by video conference

On appeal from the orders of Justice Myrna L. Lack of the Superior Court of Justice, dated October 6, 2020.

Gillese J.A.:

I. OVERVIEW

[1] Sutherland Law appeals from two orders in this proceeding, both of which are dated October 6, 2020: the Directions Order and the Charging Order (collectively, the “Orders”).

[2] The plaintiff in this proceeding is Pasquale Scetto by his litigation guardian Benito Scetto (the “Plaintiff”). The Plaintiff moves to quash Sutherland Law’s appeal of the Directions Order on the basis that Sutherland Law has no standing to appeal it. Alternatively, the Plaintiff asks that Sutherland Law’s Supplementary Notice of Appeal dated December 8, 2020, be struck. In terms of Sutherland Law’s appeal of the Charging Order, the Plaintiff’s position is that because there is no fund over which a charging order can be made, the appeal is devoid of merit and must be dismissed.

[3] For the reasons that follow, I would grant the motion to quash the appeal of the Directions Order and dismiss the appeal of the Charging Order.

II. BACKGROUND

[4] In 2000, the Plaintiff bought a piece of vacant property in Uxbridge, Ontario, and began taking the steps necessary to have a house built on it. In 2003, he transferred title to the property to his son Michele Scetto (the “Defendant”). The Defendant gave no consideration for the transfer. A house was ultimately built on the property, which the Defendant occupied.

[5] The Plaintiff started this proceeding, asking the court to declare that the Defendant held the property in trust for him. The Defendant took the position that the Plaintiff had given him the property. Sutherland Law represented the Defendant.

[6] The action was tried in May 2018; reasons for judgment were released on March 20, 2019. The trial judge found that the Plaintiff had not made a gift of the property to the Defendant and declared that the Defendant held title to the property in trust for the Plaintiff. However, she also found that the Defendant was entitled to an equitable set-off for his contributions to the property. She made extensive findings about the validity of the contributions that the Defendant claimed he had made to it. She also specifically held that the Defendant was responsible for paying off the mortgage on the property because she had given him credit for the mortgage when she determined the amount of his contributions to the property. To do otherwise, as she explained in her reasons, would give the Defendant “double recovery”.

[7] The trial judge ordered that the property be listed for sale and, once sold, the real estate commission, legal expenses, and usual sale expenses (the “Specified Expenses”) were to be paid. She directed that, thereafter, the sale proceeds were to be divided between the parties based on their respective contributions. The trial judge held that the Defendant’s share was the amount she found he had contributed to the property plus the percentage of the sale price his contributions made to it. She permitted the Defendant to stay in occupation of the property until it was sold, provided he paid the occupation costs – including municipal taxes, insurance, and utilities – and that he maintained the property in a good state of repair.

[8] The Defendant filed a Notice of Appeal of the judgment on April 18, 2019, but abandoned the appeal on June 18, 2019.

[9] Because the Defendant refused to co-operate with the sale of the property, the Plaintiff was required to return to the court for assistance on more than one occasion. One such occasion was his motion for directions heard on March 6, 2020. This motion resulted in an order that the property be sold in accordance with a specific agreement of purchase and sale. On the same day, Sutherland Law moved for, and obtained, an order removing it as solicitors of record for the Defendant. Sutherland Law’s motion was heard and dealt with before the Plaintiff’s directions motion.

[10] After the sale of the property was completed, the Specified Expenses were paid, leaving the net sale proceeds (the “Net Sale Proceeds”). Because the parties could not agree on how to divide the Net Sale Proceeds, the Plaintiff brought a motion for directions on their proper disposition (the “Directions Motion”). At the same time, Sutherland Law brought a motion for a charging order over the amount it claimed was owing to the Defendant from the Net Sale Proceeds (the “Charging Order Motion”) (collectively, the “Motions”).

[11] Sutherland Law scheduled its Charging Order Motion to be heard on September 16, 2020, in advance of the Directions Motion, which was scheduled to be heard on September 18, 2020.

[12] On September 16, 2020, the trial judge – who sat as the motions judge on the Motions – adjourned the Charging Order Motion to be heard “contemporaneously” with the Directions Motion on September 18, 2020. She explained that the Charging Order Motion could not proceed until the court had determined whether there was a fund in favour of the Defendant over which a charging order could be made. That determination would be made through the Directions Motion.

[13] The Motions were heard on September 18, 2020. Although the Defendant had notice of the Motions, he did not file materials or appear. However, he did give his written consent to Sutherland Law’s claim for a charging order over his share of the sale proceeds.

[14] On September 18, 2020, the motions judge began by reiterating what she had said on September 16, 2020, when the Charging Order Motion was initially returnable: she would first calculate the Defendant’s entitlement, which was the subject-matter of the Directions Motion, and then she would consider the Charging Order Motion.

[15] On the Directions Motion, the motions judge permitted Sutherland Law to make submissions on the matter of priorities because that matter was “intertwined” with the Charging Order Motion. Sutherland Law made two alternate submissions on the priorities of certain deductions, both of which gave the Defendant’s contributions to the property priority over the Plaintiff’s contributions.

[16] On October 6, 2020, the motions judge delivered one endorsement in which she dealt with both Motions. In the endorsement, the motions judge rejected Sutherland Law’s submissions on the priorities it had advocated for in terms of the Defendant’s entitlement to the Net Sale Proceeds. She explained that giving the Defendant’s contributions to the property priority over the Plaintiff’s contributions was fundamentally inconsistent with the trial judgment. The motions judge noted that Sutherland Law had no standing to attack the trial judgment because it no longer represented the Defendant and, in any event, the trial judgment had not been appealed.

[17] On the Directions Motion, the motions judge found that the Defendant’s share of the Net Sale Proceeds was $0. She reasoned as follows. The Defendant was entitled to $84,672.40 before deductions were made for the discharge of the mortgage and occupation costs. The amount required to discharge the mortgage was $88,479.58. Municipal taxes during the Defendant’s period of occupation was $6,396.75. (These he had not paid, despite the court order requiring that he pay them during occupation.) The amounts needed to discharge the mortgage and pay the municipal taxes exceeded the Defendant’s share of the Net Sale Proceeds by $10,203.93. Thus, the Defendant was entitled to $0 of the Net Sale Proceeds.

[18] The motions judge dismissed the Charging Order Motion for the following reasons. Section 34(1) of the Solicitors Act, R.S.O. 1990, c. S.15, permits a solicitor to obtain a charge on property recovered or preserved through the solicitor’s instrumentality in Superior Court proceedings. The test for a charging order under s. 34(1), as set out in Weenen v. Biadi, 2018 ONCA 288, 141 O.R. (3d) 276, at para. 15, requires that: 1) the fund or property must be in existence at the time the charging order is granted; 2) the property must have been “recovered or preserved” through the instrumentality of the solicitor; and, 3) there must be evidence that the client cannot or will not pay the lawyer’s fees. The motions judge found that the Charging Order Motion failed on the first step of the Weenen test because, as determined on the Directions Motion, the Defendant’s share of the Net Sale Proceeds was $0. Accordingly, there was no fund in existence over which a charging order could be made.

[19] On October 30, 2020, Sutherland Law filed and served a Notice of Appeal of the “Order and Reasons for Decision” of the motions judge dated October 6, 2020.

[20] The Plaintiff and Sutherland Law disagreed on whether one or two orders should be taken out in respect of the Motions. The Plaintiff’s view that two orders were necessary prevailed and, on December 2, 2020, the Orders were settled, signed, and entered.

[21] On December 8, 2020, Sutherland Law served an appeal book and compendium which included a Supplementary Notice of Appeal. In the Supplementary Notice of Appeal, Sutherland Law stated it was appealing the “Orders” of the motions judge, rather than the order of the motions judge as it stated in its original Notice of Appeal. The Supplementary Notice of Appeal was not served on the Plaintiff within the time limits prescribed by the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 61.04(1), or at all.

III. ANALYSIS

[22] Sutherland Law’s position on the motion to quash the Directions Order can be summarized as follows. The threshold for quashing an appeal is high, and to be exercised only in the clearest of cases where the appeal is “manifestly devoid of merit”. It relies on this court’s decision in Schmidt v. Toronto Dominion Bank, 24 O.R. (3d) 1 (C.A.), at paras. 6-8, which cautions against bringing motions to quash on the grounds that the appeal is manifestly devoid of merit:

The court may also quash an appeal where it is manifestly devoid of merit … The very nature of this power, however, dictates that it will seldom be exercised. It is very difficult, in most cases, to reach the conclusion that an appeal is devoid of merit without first hearing the entire appeal …

In our view, a motion to quash, which, according to the practice of this court, is usually scheduled to be heard on the same day as several other motions, is not the proper forum in which to engage in a de facto hearing of the full appeal. Furthermore, given the minimal level of merit needed to defeat a motion to quash based on the alleged absence of any merit in the appeal, it is inevitable that many such motions will fail. Where they fail, there must be a second full inquiry into the merits of the appeal at some later point in time before a different panel. The added expense and loss of valuable court time occasioned by this duplication of effort hurts the litigants involved in the particular case, and others whose cases are in the appellate process.

… Respondents should not be encouraged to jump the queue of perfected appeals awaiting hearing by seeking a full hearing of the appeal under the guise of a motion to quash.

[23] Sutherland Law is correct that this court seldom exercises its power to quash on the basis that the appeal is devoid of merit and that such motions should be avoided because they generally lead to needless duplication and expense. However, as this court stated at para. 5 of Schmidt, there is another basis on which a motion to quash may be brought: a motion to quash “may usefully be brought where the moving party contends that the court cannot or should not hear the merits of the appeal”. This court explicitly added in Schmidt that nothing in its reasons was intended to touch upon motions to quash brought on these grounds.

[24] The motion to quash Sutherland Law’s appeal of the Directions Order is not based on an argument that the appeal is devoid of merit. Rather, the Plaintiff submits that Sutherland Law has no standing to bring such an appeal and, for that reason, its appeal of the Directions Order should be quashed. I accept that submission. Because Sutherland Law does not have standing to appeal the Directions Order, this court cannot and should not hear the merits of that appeal. Consequently, that appeal should be quashed.

[25] Sutherland Law advances two arguments in support of its submission that it has standing to appeal the Directions Order. I reject both.

[26] First, it says that it has standing to appeal the Directions Order because the motions judge granted it standing when she heard the Directions Motion. That is not correct. At the outset of the hearing of the Motions on September 18, 2020, Sutherland Law stated that it was its “understanding that we were granted standing and that’s why we’re appearing today”. The Court responded as follows:

... we’ve been through this, it’s not a question of standing … your motion was adjourned to today’s date. We’re going to do the calculations and then we’re going to look at the, the question of your motion, so first of all, as I ruled the other day the calculations have to be decided first, and then the charging order …

[27] As can be seen, the motions judge specifically rejected Sutherland Law’s submission that it had standing on the Directions Motion. She permitted Sutherland Law to make submissions in the Directions Motion only on the matter of the priorities of certain charges and only because that matter was “intertwined” with the Charging Order Motion.

[28] Second, Sutherland Law says that the motions judge permitted it to make submissions on behalf of the Defendant. I see nothing in the transcript to support this. At the hearing of the Motions, it had been months since Sutherland Law was removed, on its own motion, as counsel of record for the Defendant. It had no right or authority to make submissions on the Directions Motion on behalf of the Defendant.

[29] Quite properly, Sutherland Law does not maintain it was a party to the Directions Motion.

[30] Accordingly, Sutherland Law has no standing to appeal the Directions Order. As there is no basis for this court to hear that appeal, I would grant the motion to quash the appeal of the Directions Order.

[31] Because I would quash Sutherland Law’s appeal of the Directions Order, that order stands. The Directions Order provides that the Defendant is entitled to $0 from the Net Sale Proceeds. For the reasons of the motions judge, there was no fund or property in existence when Sutherland Law’s Charging Order Motion was heard. Consequently, its appeal of the Charging Order is manifestly devoid of merit and must fail.

[32] In light of the foregoing, I find it unnecessary to decide whether the Supplementary Notice of Appeal in the appeal book and compendium should be struck.

IV. DISPOSITION

[33] For these reasons, I would grant the motion to quash the appeal of the Directions Order and dismiss the appeal of the Charging Order, with costs to the Plaintiff fixed at $20,000, all inclusive, payable by Sutherland Law.

Released: June 30, 2021 “E.E.G.” “E.E. Gillese J.A.” “I agree. M. Tulloch J.A.” “I agree. L.B. Roberts J.A.”