SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-12-463112

DATE: 20150708

RE: Building Solutions International Inc. and Bowmore Investments Limited, Plaintiffs

AND:

William Benazzi, WB Capital Management Inc. and WB Mortgage Investment Corporation, Defendants

AND:

Derek Francesco Sorrenti and Sorrenti Law Professional Corporation, Garnishees

BEFORE: Carole J. Brown

COUNSEL: Douglas Christie, for the Plaintiffs

Jordan Sobel, for the Defendants

Tim Gleason and Rebecca Liu for the Garnishees, Derek Sorrenti and Sorrenti Law Professional Corporation

HEARD: June 19, 2015

ENDORSEMENT

[1] The plaintiffs bring this motion, pursuant to rr. 60.08 and 60.18(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“the Rules”), for an order directing the garnishees, Derek Sorrenti and Sorrenti Law Professional Corporation, to produce for inspection all books, records (including computerized accounting records), bank records (including all monthly general and trust bank account statements), and concerning all funds received from the lawyers on behalf of their clients, WB Capital Management Inc., or received from or held on behalf of either of the creditors, Bowmore Investments Limited and Building Solutions International Inc.

[2] Pursuant to a motion for summary judgment, Myers J. granted judgment against the defendants, William Benazzi and WB Capital Management Inc., and dismissed the action as against the third defendant, WB Mortgage Investment Corporation. The plaintiffs allege that no payments have been made in the amount of $1,109,349.24 to Bowmore and in the amount of $159,711.46 to Building Solutions.

[3] Justice Myers also ordered, inter alia, an accounting, a tracing, and a reference, if necessary, to take accounts and conduct hearings with respect to the tracing of investment money.

[4] Notices of Garnishment were issued on October 31, 2014, at the request of the plaintiffs and directed to Derek Sorrenti and Sorrenti Law Professional Corporation, seeking to garnish monies held by Mr. Sorrenti and to garnish certain mortgages which the garnishees hold in trust for the mortgage investment corporation.

[5] The evidence indicates that Mr. Sorrenti requested additional time to investigate and prepare a proper response to the Notices of Garnishment in correspondence of November 12, 2014, which extension was refused. On November 13, 2014, Mr. Sorrenti served Garnishee Statements, based on information available to him at that time. On May 12, 2015, Mr. Sorrenti delivered a bank draft in the amount of $1,474.58 to the Sheriff of the Regional Municipality of York, which is in evidence before this Court. He maintained that this represents all of the monies held by him and his law firm in trust for WB Mortgage Investment Corporation, and that he has no other monies or any form of debt payable to WB Mortgage Investment Corporation in his possession or control.

Issues

[6] The issues to be determined on this motion are:

a. Whether the mortgages held in trust by Mr. Sorrenti are “debts” pursuant to r. 60.08(1), such that they can be subject to garnishment; and

b. Whether the documents and information sought by the plaintiffs are subject to solicitor-client privilege.

Analysis

Whether mortgages held in trust are “debts”

[7] Rule 60.08(1) provides as follows: “A creditor under an order for the payment or recovery of money may enforce it by garnishment of debts payable to the debtor by other persons.” The Rules do not define “debt” or “debts payable,” and so it has been left to the courts to define the term’s meaning. The Supreme Court of Canada has defined a debt as “a sum payable in respect of a liquidated money demand, recoverable by action”: Diewold v. Diewold, 1940 52 (SCC), [1941] S.C.R. 35, [1940] S.C.J. No. 48. Interest in land, such as a mortgage, is not a liquidated money demand and is therefore not subject to garnishment: Hansen v. Danstar Mines Ltd., [1978] M.J. No. 12 (C.A.) at paras. 61-65, citing McFadden v. James Kerr (Robert Kerr Garnishee) (1897-99), 1899 147 (MB QB), 12 Man. R. 487. In Hansen, at para. 63, the Court wrote the following concerning McFadden and the case before it:

In [McFadden], the garnishee held land in trust for the judgment debtor which might at a future date be converted into a money obligation. The interest of the judgment debtor in that land could not be attached by garnishment. In the case before us, the garnishee holds bonds in trust for the judgment debtor. They may at a future date be converted into a money obligation. If that happens; there will be a monetary obligation by the trustee in favour of the judgment debtor. But until that happens, there is no money obligation and the judgment debtor’s interest in the bond is not subject to garnishment.

[8] I read Hansen as meaning that interests in properties such as bonds and mortgages, held in trust by another, are non-monetary obligations which cannot be subject to garnishment until they are converted into money obligations at a future date. Until that time, there is no existing debt, claim or demand payable in money. In Parker v. Parker, 2013 ONSC 7135, [2013] O.J. No. 5319, the Court held that money intended to discharge a mortgage on the judgment debtor’s home, held in trust by the judgment debtor’s lawyer, was not subject to garnishment. The judgment debtor’s lawyer was permitted to tender the funds and obtain a discharge of the mortgage on behalf of his client.

[9] The mortgage held by Mr. Sorrenti and his law firm in trust is not a liquidated money demand and, therefore, not a debt until it is converted into money obligations. I do not agree with the plaintiffs’ submission that Turchiaro v. Liorti, [2004] O.J. No. 6289 (S.C.), aff’d [2006] O.J. No. 1113 (C.A.), 2006 8872, stands for the proposition that a mortgage is a garnishable debt. Indeed, the court in that case held that the money that the garnishee owed to the judgment debtor pursuant to the mortgage agreement was a garnishable debt. There was no finding as regards a mortgage interest in land held in trust by the garnishee. Further, unlike the garnishee in that case, Mr. Sorrenti is not a mortgagor in relation to the judgment debtor and has given no covenant to pay a debt to the defendants. Rather, he holds mortgage interests in land in trust for the judgment debtor. Those mortgage interests do not constitute debts pursuant to r. 60.08. I would add that Mr. Sorrenti does not dispute the fact that any payments received from the mortgagors and to the benefit of the judgment debtor are debts subject to garnishment.

Whether documents sought are privileged

[10] Rules 60.18(1) and 60.18(6) provide as follows:

60.18(1) In subrules (2) to (6),

“creditor” includes a person entitled to obtain or enforce a writ of possession, delivery or sequestration; “debtor” includes a person against whom a writ of possession, delivery or sequestration may be or has been issued.

Examination of Person other than Debtor

(6) Where any difficulty arises concerning the enforcement of an order, the court may,

(a) make an order for the examination of any person who the court is satisfied may have knowledge of the matters set out in subrule (2); and (b) make such order for the examination of any other person as is just.

[11] Pursuant to this provision, the plaintiffs seek the production of the garnishees’ books and records, including computerized accounting records; their banking records, including all monthly general and trust bank account statements, all mortgages, charges, investments and monies concerning all funds received from or held on behalf of their client, WB Capital Management Inc. or received from or held on behalf of either of the creditors, Bowmore Investments Limited and Building Solutions International Inc. Further, they seek an order requiring the garnishees to make full disclosure of any disbursement, renewal or payout of any such funds, mortgages, charges, investments or other monies held by them or held by them on behalf of the parties listed herein.

[12] While the plaintiffs state that they only seek information which is in the public record, their motion records seeks a much broader disclosure. It is the position of counsel for Mr. Sorrenti that such documentary disclosure would breach solicitor-client privilege.

[13] Maintenance of the confidentiality of the relationship between the client and solicitor is a substantial public interest and a fundamental civil and legal right in the Canadian judicial system: Pritchard v. Ontario (Human Rights Commission), 2004 SCC 31 at paras. 17, 31, [2004] 1 S.C.R. 809; R. v. McClure, 2001 SCC 14 at paras. 2, 35, [2001] 1 S.C.R. 445; Geffen v. Goodman Estate, 1991 69 (SCC), [1991] 2 S.C.R. 353 at para. 56, [1991] S.C.J. No. 53. The privilege is nearly absolute and “will only yield in certain clearly defined circumstances, and does not involve a balancing of interests on a case-by-case basis”: R. v. McClure, supra at para. 35.

[14] While the classes of exceptions to solicitor-client privilege are not closed, courts have only permitted exceptions in very few situations, such as where there is an imminent risk of serious bodily harm or death to an identifiable person or group, where an accused’s right to make a full answer and defence is in jeopardy, or where the communication itself is criminal: Smith v. Jones, 1999 674 (SCC), [1999] 1 S.C.R. 455 at paras. 52-59, [1999] S.C.J. No. 15.

[15] Mr. Sorrenti represented both WB Capital Management Inc., as mortgagee, and individuals, as mortgagors, in the mortgage loan transactions. Communications by the borrowers to Mr. Sorrenti in the course of negotiating a transaction such as a mortgage can be privileged if they are not purely business advice: Currie v. Symcor Inc., 2008 37901 (ON SCDC), [2008] O.J. No. 2987 (S.C.) at para. 46, 244 O.A.C. 3. The borrowers have not waived privilege and, pursuant to the evidence, were not given notice of this motion. I am of the view that the broad disclosure sought would breach solicitor-client privilege. The moving party seeks disclosure of all of the law firm’s books, records, bank records, financial documentation, mortgages, charges, investments and monies concerning all funds received for the defendants. There is no evidence which would warrant this broad disclosure of confidential documentation.

[16] Mr. Sorrenti further submits that the plaintiffs have not first exhausted the other remedies available to them, including a writ of sequestration or appointment of a receiver, prior to seeking the Court’s discretion to grant the remedies sought pursuant to r. 60.18(6). In this regard, the plaintiffs submit that these other remedies would be costly and that they seek the most direct remedy. While the plaintiffs assert that disclosure is required as they are unable otherwise to seize assets pursuant to the Execution Act, R.S.O. 1990, c. E.24, there is no supporting evidence for this submission. There is no evidence to indicate any steps taken under the Execution Act, nor is there any evidence that the plaintiffs have appointed a receiver or directed the Sheriff to seize any property belonging to WB Mortgage Investment Corporation. I find no basis, nor any special circumstance, to justify making an exception to solicitor-client privilege in this case. There is nothing before me that would justify or warrant the broad disclosure of confidential documentation and information sought by the plaintiffs.

Conclusion

[17] For the reasons above, I dismiss the plaintiffs’ motion. The mortgages held in trust by the garnishee are not “debts payable” to which a notice of garnishment may attach pursuant to r. 60.08. Furthermore, the documents and information sought by the plaintiffs are covered by solicitor-client privilege, the affected parties have not waived privilege, and the plaintiffs have not provided any compelling argument as to why the privilege does not apply.

Costs

[18] The parties each provided their bills of costs. I award the respondents their costs in the amount of $5,835.16, payable forthwith by the moving parties. I find this amount to be reasonable and proportionate, given the moving party’s request for cost of $7,158.90 (partial indemnity) and $10,531.90 (substantial indemnity).

Carole J. Brown J.

Date: July 8, 2015