ONTARIO SUPERIOR COURT OF JUSTICE

NEWMARKET COURT FILE NO.: FC-10-034588-00
DATE: 20120606

BETWEEN

Kristina Martino

Applicant

— and —

Enio Zeppieri and Zeppieri & Associates

Respondents

COUNSEL:
Mr. Donald Zaldin and Mr. Ronald V. Zaldin for the applicant
Mr. Dheeraj Sindhwani for the respondents

HEARD: December 13, 2011

H.K. O’Connell J.

REASONS

OVERVIEW

[ 1 ] This case reveals a litigation history rooted in high conflict. That conflict became particularly enhanced when Mrs. Martino was faced with a rapid dissipation, by her husband, of his assets in the spring of 2011. [1] The actions of the husband led to the wife bringing an application seeking a non-dissipation order. That order was granted on consent on June 16, 2011.

[ 2 ] It is the remittance of legal fees with the foreknowledge of the notice of the application in support of the non-dissipation application and events subsequent to the granting of the order, that are the crux of this motion.

The Motion

[ 3 ] This matter was originally set as a two day motion and the trial of an issue in relation to costs, to be heard on December 13 and 14 th 2011, by order of Corkery J. dated October 25, 2011. October 25, 2011 was to have been the date for the matter to proceed, however Mr. Martino had just retained new counsel and as a result the matter was adjourned.

[ 4 ] The matter was settled with respect to all issues save and except costs. The issue of costs in favour of the wife was settled a few days prior to the trial date of December 13, 2011.

[ 5 ] Minutes of Settlement were filed, now incorporated into a court order addressing: custody / access; spousal support; section 7 apportionment; and costs in favour of the wife totalling $75,000.00, which costs are noted to be payable and enforceable as support. Mr. Martino consented to judgment in favour of his wife to recoup her costs, as agreed to.

[ 6 ] On December 13, 2011, I heard the motion for which Justice Gilmore granted leave to proceed. Her Honour’s ruling was rendered on August 23, 2011. The wife seeks an accounting from Mr. Zeppieri’s firm for fees received; payment into court of $27,500.00 for funds said to have been knowingly dissipated by Mr. Martino via payment of funds to Zeppieri and Associates; and recovery of the balance of costs as ordered on the motion heard before Gilmore J.

Position of Mrs. Martino

[ 7 ] Mr. Zaldin argued that having been served with a motion to restrain Mr. Martino from dissipating assets, that former counsel Mr. Zeppieri proceeded to receive retainer funds from his client in contravention of the knowledge of the pending application. This was exacerbated with the further receipt of funds after the order of Graham J. was made on June 16, 2011.

[ 8 ] Those funds were advanced as follows to Mr Zeppieri’s firm:

May 31, 2011: $7,500.00 received from Mr. Martino;

June 06, 2011: $7,500.00 received from Mr. Martino;

September 28, 2011: $12,500.00 received from Mr. Martino.

[ 9 ] The total funds paid to Zeppieri and Associates on and post May 31, 2011 are $27,500.00. In addition $12,500.00 of those funds were paid out on September 28, 2011, some 49 days after Mr. Zeppieri’s firm ceased to be counsel for Mr. Martino. The $12,500.00 was also paid out in the face of the court order of Graham J.

[ 10 ] Mr. Zaldin argued that Mr. Zeppieri’s firm improperly took payment for legal fees. Mr. Zaldin also notes that Mr. Zeppieri’s firm, and Mr. Zeppieri in particular, ceased to be Mr. Martino’s lawyer as at August 10, 2011. On that date Mr. Martino filed a notice of change of representation. [2]

[ 11 ] Thereafter, until late October 2011, Mr. Martino acted for himself, eventually retaining another counsel not associated with the Zeppieri firm, days prior to the second scheduled trial date of October 25, 2011, and the first date scheduled for the motion as approved to proceed by Justice Gilmore.

[ 12 ] This trial date of October 25, 2011, which was also adjourned on terms, was as noted the second date that Mrs. Martino had attempted to have the trial proceed, and the first day for the motion to proceed pursuant to the leave granted by Gilmore J.

[ 13 ] In addition, Mr. Martino consented to default judgment in favour of Mr. Zeppieri’s firm a mere 6 days after service of a statement of claim upon him. The claim itself was served on October 07, 2011, two months after Mr. Zeppieri’s firm ceased to be counsel of record.

[ 14 ] All of this activity occurred in the wake of a non-dissipation order and a clear purpose, says Mr. Zaldin, of Mr. Martino to defeat his wife’s claim for costs. It is argued that this course of conduct in the context of Mr. Zeppieri’s firm, and its receipt of retainer funds, constitutes an abuse of process.

[ 15 ] Mr. Zaldin goes further and suggests that the quantum of fees charged to Mr. Martino were well in excess of what would be considered an appropriate amount of retainer funds. All of this was done to put monies out of the reach of Mrs. Martino.

[ 16 ] Counsel referenced the decisions in Buttarazzi v. Buttarazzi 2009 ON SC 80136, 84 R.F.L. (6 th ) 240 (S.C.J.); Cunningham v. Moran 2011 ONCA 476; and Canam Enterprises Inc. v. Coles 2000 CarswellOnt 4739 (ONCA) (rev’d on other grounds 2002 SCC 63, [2002] 3 S.C.R. 307).

[ 17 ] Of the $140,000.00 paid out to Mr. Martino by Mrs. Martino for her share of the matrimonial home, this amount had been depleted to $101,214.00 as per Mr. Martino’s financial statement dated March 01, 2011; and between that date and May 26, 2011, the funds had been further reduced to $63,074.00. In addition between May 26 and June 16, 2011, a further $38,574.00 had been depleted.

[ 18 ] Mr. Zaldin referenced Justice Gilmore’s endorsement dated August 23, 2011. Gilmore J. provides a recitation of the history of the Martino’s litigation. No one suggests that it is anything but entirely accurate. That endorsement also sets out at paragraph 15, the concerns of the Court, that precipitated the granting of leave to bring this motion.

[ 19 ] In granting leave, Gilmore J. noted the concern of Mrs. Martino, that her husband would continue to deplete his assets and be left with no resources to pay costs. As Gilmore J. noted, this would make his “wife’s motion for costs, futile.” As a consequence Gilmore J. allowed leave for Mrs. Martino to bring her motion. In doing so Gilmore J. noted the relief was “a necessary step where there is a risk of further dissipation.”

[ 20 ] Mr. Zaldin submits that further depletion did occur, given the payment of a further $12,500 by Mr. Martino in September 2011, and the consent to judgment that Mr. Martino participated in, in October 2011 in favour of Zeppieri and Associates.

[ 21 ] In particular, Gilmore J. noted the very speedy depletion of Mr. Martino’s assets post the wife’s payout of her husband’s interest in the matrimonial home. In particular $76,000.00 was depleted leading up to the trial date in the spring sittings of May 2011, which trial date became limited to the issue of costs given settlement of the substantive issues on June 16, 2011. That happened to be the same day that Mr. Zaldin moved for the non-dissipation order. The June 16, 2011 trial date was adjourned at the request of Mr. Zeppieri as a consequence of an injury he sustained.

[ 22 ] Mr. Zaldin also made reference to the Rules of Professional Conduct of the Law Society. Mr. Zaldin says that Mr. Zeppieri is in wanton non-compliance with various rules.

[ 23 ] Mr. Zaldin also pointed to the concerns of Corkery J., in His Honour’s endorsement dated October 25, 2011, when the matter was adjourned yet again at the request of Mr. Martino’s newly retained counsel.

[ 24 ] At that juncture Corkery J. was quite concerned about the parade of dissipation leaving aside for the moment what impact, if any, that should visit upon Mr. Zeppieri’s firm. Corkery J. noted that for his purposes what was most troubling was Mr. Martino’s consent to judgment in favour of Zeppieri and Associates. [3] That consent was provided 6 days previous on October 19, 2011.

[ 25 ] Based on the concerns of counsel and Justice Corkery’s own concerns, Corkery J. wanted and got an assurance from Mr. Martino’s new counsel that further dissipation would not affect Mrs. Martino’s ability to get some satisfaction on her costs claim.

[ 26 ] In that regard, new counsel for Mr. Martino agreed to act as trustee for funds in Mr. Martino’s possession. Justice Corkery noted, in crafting his concern with respect to the prejudice being visited upon the wife, that: “It is hard for me not to draw an inference of some mischief here….”

[ 27 ] Finally, Mr. Zaldin argued for an accounting by Mr. Zeppieri’s firm to justify the costs occasioned by Mr. Martino in the wake of the dissipation by Mr. Martino, post service of the motion for the freezing order, and post order of Graham J. of June 16, 2011.

[ 28 ] He also seeks the remainder of the costs, as ordered by Gilmore J., to be paid by Mr. Zeppieri’s firm.

Position of Mr. Sindhwani, for Zeppieri and Associates

[ 29 ] Like Mr. Zaldin, Mr. Sindhwani relied upon a factum, case law and submissions. The affidavit of Enio Zeppieri was also referenced.

[ 30 ] He argued that there is no abuse of process in play. This litigation was simply hard driven and litigious. It was submitted by Mr. Sindhwani, that counsel was entitled to his fees. Payment of those fees by Mr. Martino and settlement of the law suit brought by Zeppieri and Associates against Mr. Martino, are therefore not violations of the non dissipation order.

[ 31 ] The Visa payments made by Mr. Martino were a charge and not a dissipation. Mr. Sindhwani referenced Mr. Zeppieri’s affidavit filed on the motion, wherein it is noted that the assets as frozen by Graham J. were not accessed for the Visa charges.

[ 32 ] The court was taken to case law in relation to preservation orders and the extent of same. In addition, it is noted that the decision in Buttarazzi was a case involving the need to protect issues of equalization, and not costs.

[ 33 ] Given that the non-dissipation order of Graham J. did not address legal fees, and given the retainer, there was simply no bar for Zeppieri and Associates to take payment as they did.

[ 34 ] Mr. Sindhwani’s factum overviews his entire position. I have carefully considered it, inclusive of the case law that he cites.

Decision

[ 35 ] I do not propose to consider any purported violations of the Rules of Professional Conduct in my decision, as I need not do so for the basis of my decision.

[ 36 ] I do find, however, in the context of the history of this particular case, that the payment of legal fees by Mr. Martino to Zeppieri and Associates, occasioned an abuse of the court’s process.

[ 37 ] Mr. Martino, within a short time frame, extinguished a significant asset base. He did so after he received the proceeds of his share of the matrimonial home, and accelerated his dissipation of assets, both before and after the court order was made. The amount of monies that were exhausted prior to the imposition of the consent non-dissipation order are very significant.

[ 38 ] During that time frame Zeppieri and Associates were counsel of record. Indeed, they had that role since inception of the family law proceedings and for the vast majority of the litigation history between this couple. The record reveals that Mr. Martino was the party that was being particularly litigious and obstinate. The costs orders underscore this. The ability of Mr. Martino to satisfy the totality of the costs orders was put into serious doubt given his dissipation of assets.

[ 39 ] Against that backdrop and in the face of being on notice of the pending motion and the certainty of the order of Graham J., and in the face of the order of Gilmore J. granting leave to Mrs. Martino to bring her further motion, Mr. Martino continued to pay out funds to Zeppieri and Associates. All of these events were known to Zeppieri and Associates. Indeed up and until just prior to the time that Gilmore J. provided leave to Mrs. Martino to bring her claims, Mr. Zeppieri’s firm was still counsel of record.

[ 40 ] I find that the acceptance of Visa payments post service of the non-dissipation motion, and the subsequent activity, including the resistance to the leave application before Gilmore J, bespeaks a non-recognition of Zeppieri and Associates of the need to avoid being seen as a proxy for a recalcitrant client.

[ 41 ] In short, this is not a case about retainer being appropriately satisfied. It is rather, I find, a case of ‘retainer’ trumping the purpose and intent of a court order.

[ 42 ] In this regard, I find the words of Goudge J.A, at paragraph 55 of Canam, instructive:

“The doctrine of abuse of process engages the inherent power of the court to prevent the misuse of its procedure, in a way that would be manifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute. It is a flexible doctrine unencumbered by the specific requirements of concept such as issue estoppel.” (emphasis added)

[ 43 ] To be clear I find that the use of a Visa charge does not take this form of payment outside of the non-dissipation order. Charges require payment. Payment requires access to funds. There is nothing in this record to substantiate where payment came from save and except the irresistible conclusion that it came from assets under the control of Mr. Martino. Those assets were not to be dissipated.

[ 44 ] In addition even were I to accept Mr. Sindhwani’s argument that the non-dissipation order did not capture the payment of legal fees, I would nonetheless have found that at the very least the spirit of the non-dissipation order, made on consent, and the leave to bring this further motion as granted by Gilmore J., is enough to ground a finding of an abuse of process being perpetrated by Mr. Martino with the willing acquiescence of Zeppieri and Associates.

[ 45 ] I note that the inability of Mrs. Martino to get to trial was also none of her making. She pressed hard for her day in court. And yet that was delayed due to a medical issue of Mr. Zeppieri. [4] Then came the totally unnecessary resistance to the leave application as so found by Gilmore J. Then followed the discharge of Mr. Zeppieri’s firm as counsel of record effective August 10, 2011. All of these events delayed Mrs. Martino’s day in court.

[ 46 ] And yet, in early October in a record breaking turnaround from service of statement of claim, to consent to default judgment, some $86,000.00 was agreed owing on judgment to Zeppieri and Associates, a sum that exceeds the amount claimed in the statement of claim.

[ 47 ] The whole aura of this case defines, I find, an abuse of process meant to end run Mrs. Martino’s ability to recover her costs. Family law is litigious enough without novel ways being crafted to “outfox” both the force and the spirit of a non-dissipation order.

[ 48 ] I am therefore satisfied given the history of this litigation, that Mr. Zeppieri and the firm of Zeppieri and Associates pay into court the amount of $27,500.00 which represents the known funds received from Mr. Martino post notice of the pending non-dissipation motion and post order of Justice Graham. These funds will be credited toward the outstanding costs order against Mr. Martino, in favour of Mrs. Martino. [5]

[ 49 ] I likewise agree that the outstanding portion of the costs order of Gilmore J., being the sum of $2,360.00 be paid by Zeppieri and Associates. I find that given the nature of the motion, the fact that Justice Gilmore noted that the motion should not have been resisted, and given the offer to settle, and the actions of Zeppieri and Associates, that the firm should pay these costs. I do not however order that Mr. Zeppieri pay those costs personally as that was not contemplated in the order of Gilmore J.

[ 50 ] In relation to the claim for an accounting by Zeppieri and Associates with respect to legal fees, Mr. Zaldin seeks an accounting of the legal fees paid to Zeppieri and Associates for the period on or after May 31, 2011. I find no reason not to order this limited accounting.

[ 51 ] If costs of this motion cannot be settled, costs submissions of Mr. Zaldin not to exceed 3 pages exclusive of bill of costs to be filed to my attention at Oshawa by June 25, 2012. Reply submissions to be submitted by July 10, 2012, on the same basis as to length.

The Honourable Mr. Justice Hugh K. O’Connell

DATE RELEASED: June 06, 2012

[^1]: Reference to the Chart provided by Mr. Zaldin is particularly telling in this regard. See Tab 3 of the “Wife’s Booklet of Relevant Documents Respecting Wife’s Motion(s) v. Zeppieri /Zeppieri Firm on (Tue) December 13, 2011”.

[^2]: The Form 4, Change in Representation, as signed by Mr. Martino, appears to have been faxed from the offices of Zeppieri and Associates. It is dated August 10, 2011.

[^3]: This lawsuit brought by Zeppieri and Associates and the consent default judgment obtained, was accomplished without any notice to Mrs. Martino. The statement of claim is dated October 07, 2011, was served on Mr. Martino on October 13, 2011, consented to the proposed judgment on October 19, 2011; and met with the signature of Madam Justice CJ Brown, at Toronto, rendering judgment on November 14, 2011.

[^4]: Mr. Zaldin argues that the medical issue was a ruse to delay the trial, however I am satisfied and the evidence suggests that there was indeed an injury. However the delay of the trial and future events nonetheless precipitated continued dissipation.

[^5]: I am aware that the costs are secured by a support deduction order however that is no reason not to make these funds payable into court, especially given the acrimonious relationship that this litigation defines.