Wagner Sidlofsky LLP v. Gironda, 2015 ONSC 6791
COURT FILE NO.: 14-506194
Heard: October 14, 2015
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Wagner Sidlofsky LLP v. Gironda
BEFORE: Master Joan Haberman
COUNSEL: Sidlofsky, G. for the moving party
Graham, C.M.B. for the responding party
REASONS
Master Haberman:
[1] The plaintiff law firm (hereinafter referred to as WS) seeks to add Frank and Salvatore Gironda to an action already commenced against their brother, John. Frank opposes the motion. Salvatore and the Public Guardian and Trustee take no position.
[2] WS brings this motion in the context of this action for payment of their fees and the following factual context:
o WS represented the three Gironda brothers (“the brothers”) in an action against their late brother, Vito (the main action);
o The main action involved the brothers’ efforts to protect the assets of their mother, Caterina, from their now late brother, Vito;
o However, the brothers’ account with WS fell into arrears. Accordingly, on January 26, 2012, WS proposed that John Gironda assume responsibility for paying arrears as follows: Wagner of WS was prepared to waive 2/5 of his own hourly fee if John agreed to make monthly payments of $2,500 towards the outstanding balance until it was paid off. WS also proposed that if there was an outstanding balance at the time of Caterina’s death, any remaining unpaid fees would be paid directly to WS from the estate to satisfy the account in full;
o In his affidavit, Wagner claims that all three brothers agreed to all aspects of this arrangement but that is not supported by the documents. WS’s letter of January 26, 2012 is described as proposal, which, according to Charles Wagner, John had already accepted when he wrote the letter to all three brothers. Frank does not indicate that he agreed to these terms;
o Instead, Frank refers in his evidence to an agreement he entered into with John regarding payment of various expenses pertaining to and on behalf of their mother, as well as authority for decision-making about her. Salvatore, though named in the agreement, does not appear to have signed it. This agreement makes no mention of what WS now claims regarding payment of legal fees from Caterina’s estate and Franks asserts that he was assured by WS at the time he singed this agreement that the firm would not look to him or his mother for payment;
o Franks also states that this agreement was actually drafted by WS. The following appears in the preamble: And whereas John Gironda is taking responsibility for any further legal fees incurred as of January 1, 2012 in the prosecution of the Guardianship Application.
o The main action was resolved by trial in June 2013 in the brothers’ favour;
o In June 2014, John advised he would no longer pay legal fees. As a result, this action was commenced later that month, naming John, only, as defendant.
[3] In view of the timing, it is clear that WS started this action directly as a result of John’s declaration that he would no longer pay their fees. Despite the agreement that WS relies on regarding how they would collect their fees, they initially sued John, only. They now want both Frank and Salvatore added to the action. They say the sole purpose for this amendment is to ensure that, upon Caterina’s future demise, all three bothers will be bound by a court order allowing WS to collect their fees from the estate before it is distributed.
[4] In his affidavit, Wagner states:
The Gironda brothers are beneficiaries of Caterina’s estate and therefore their interests are affected by the proceedings.
[5] Wagner points out that as Caterina no longer has testamentary capacity, she cannot change her last will, so they will remain her beneficiaries. From this he concludes that the situation is static, as the beneficiaries are known and the testator lacks capacity to now alter her will.
[6] The first problem with WS’s analysis is that it ignores one critical fact that must be considered in the mix. While it is accurate to say that the brothers are, today, the beneficiaries under the will, the will is very clear that the estate it to be divided per stirpes.
[7] As a result, if any of the brothers predeceases his mother, his share of the estate would be distributed to his heirs. Though Caterina is no longer competent to change her will, the end result is not yet clear - the pool of her beneficiaries is not static and cannot be determined absolutely until her death. I made a similar observation several years ago when dealing with a motion in the context of the main action in the face of the same allegation by WS.
[8] Wagner is clear in his evidence that he seeks no relief directly against the brothers, claiming instead that their presence is necessary to enable the court to adjudicate effectively with respect to payment of WS’s fees before distribution of Caterina’s estate.
[9] I was taken to no law by WS that illustrates what becomes of a per stirpes claim if one of the brothers predeceases his mother. If the brothers’ heirs stand to inherit, would they be automatically bound by this alleged agreement, though it does not expressly state that it extends to the brother’s heirs’, or would each actual beneficiary also have to be named in this litigation for it to extend to them? In other words, at this time, all three brothers and all their heirs are contingent beneficiaries, only. Who actually becomes a beneficiary will only crystalize when Caterina dies.
[10] It therefore seems to me to be somewhat artificial to say the three beneficiaries are necessary parties, when the identity if the actual beneficiaries is an uncertainty at this time. This was not discussed by WS.
[11] The second problem with WS’ analysis involves the fact that Vito, now deceased, was named as sole executor of Caterina’s will, without provision for what would occur if he predeceased her, as has occurred. I was not advised by either party how that would play out but it seems to me that the person that WS would want to ensure is bound is the executor of the will, rather than potential beneficiaries. Again, this was not discussed by WS.
[12] This takes us to main thrust behind the motion: WS’s claim that the brothers are necessary parties to the action, which they say is their sole purpose for joining them now.
[13] When the action was started, payment was sought from John, only, in the form of “damages”, along with specific performance of an agreement between the plaintiff and the defendant for payment of legal fees out of the proceeds of sale of Caterina’s home, against which WS filed a CPL. WS now seeks to change “defendant” to “defendants”, yet has produced no copy of a written agreement.
[14] The proposed claim seeks a declaration that the legal fees in the amount of $283,161.35 are payable out of the estate of Caterina Gironda in the event that they remain unpaid at the date of her demise. If the court ultimately finds that there was an agreement such as WS asserts, this finding would obviously impact on how much each beneficiary of Caterina’s estate receives upon distribution of her estate.
[15] Frank and Salvatore are then described on the basis that WS acted as their lawyers in an estate litigation lawsuit. The nature of this claim is defined vis a vis John, only: This claim concerns John’s refusal or neglect to pay legal fees which are due and owing to the plaintiff.
[16] The claim goes on to note that John now refuses to pay. The alleged agreement is then described and leads to the stated basis for adding Frank and Salvatore:
Frank and Salvatore have an interest in the outcome of the within proceeding because if John does not pay the legal fees outstanding prior to Caterina’s demise, Frank’s and Salvatore’s residuary interest in her estate will be impacted given the terms of the agreement set out above.
[17] The action was started with John standing alone as defendant. Nothing has changed since that time, yet the court was given no explanation for why Frank and Salvatore were not considered to be necessary parties when the action began but have become so now.
[18] The court was also provided with no law that suggests future beneficiaries of a will are necessary parties to a lawsuit involving a claim against the estate, to be executed at some future time against an inheritance they expect to come into. It is possible that there is no law in the area as there is an entirely different process available to deal with this situation.
[19] To the extent that WS’ actions, resulting in a judgment in favour of the brothers in 2013, was instrumental in preserving Caterina’s estate, they have a basis to claim a charge against the assets under the will. Section 34 of the Solicitors Act RSO 1990, Chapter. S.15 reads as follows:
Charge on property for costs
- (1) 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. R.S.O. 1990, c. S.15, s. 34 (1); 2006, c. 19, Sched. C, s. 1 (1).
Conveyance to defeat is void
(2) A conveyance made to defeat or which may operate to defeat a charge under subsection (1) is, unless made to a person who purchased the property for value in good faith and without notice of the charge, void as against the charge. R.S.O. 1990, c. S.15, s. 34 (2).
Assessment and recovery
(3) The court may order that the solicitor’s bill for services be assessed in accordance with this Act and that payment shall be made out of the charged property. R.S.O. 1990, c. S.15, s. 34 (3).
[20] In this case, WS has already obtained a CPL against Caterina’s home, though she was never their client. This action therefore appears to be ‘part two” of an attempt to get monies out of her estate, the estate they were retained to protect.
[21] At the conclusion of the main action, WS failed to ask to have the costs of that litigation borne by the estate. All of this manoeuvering at this time therefore appears to be an ill-conceived and expensive attempt to address that omission on their part
[22] It is not clear why WS has chosen this protracted and costly route instead of s. 34 above. In Reply, their position was that a lawsuit was a better avenue for them to pursue this relief as there remained a lot in issue, such as whether there was such an agreement as they assert and its interpretation. Again, they failed to address why these issues could not be dealt with in the context of a s. 34 proceeding.
[23] WS was also not helpful when asked if an order adding parties to a claim on what is effectively a conditional and contingent basis was even available. The pre-condition is that Caterina has to pass away before any of the relief sought becomes exigible. Whether or not monies must come out of the estate depends on whether or not John fails to pay the arrears in full before Caterina’s death. Again, there was no case law presented on these points.
THE LAW, ANALYSIS and CONCLUSION
[24] WS has focused on Rule 26.01 in their submissions in terms of amending the pleading. They maintain that this is a mandatory provision and they are correct. Amendments sought must be granted unless to do so would create prejudice that cannot be compensated for by costs or an adjournment, or, if what is proposed would give rise to a claim that is untenable at law.
[25] WS also relies on the law of Joinder, this time looking to Rule 5.04(2) which allows the court to join a party at any time. Unlike Rule 26.01, the language used here is “may be ordered” as opposed to “shall grant leave”, so the court retains some degree of discretion when asked to add parties.
[26] This raises the issue of whether the proposed claim against Frank and Salvatore, as currently drafted, raises a tenable issue. While I am required to treat what WS plans to plead as “true” for the purposes of a motion to amend, all that leads to here is that the alleged agreement they rely on need not be proven for the purpose of the motion. Assuming the agreement exists and binds all parties as alleged, must Frank and Salvatore be joined in order to be bound by judgment? In other words, are they necessary parties, as WS alleges?
[27] WS has provided no case law or analysis as to what the court should look to in assessing whether such an assertion is accurate.
[28] There is the added problem with the proposed pleading, as it does not read as Wagner suggests. While the first item of the proposed claim seeks damages of $293,161.35 from John, the second item seeks a declaration that legal fees in (that amount) are owning to WS.
[29] This raises two issues. First, the claim for declaratory relief is not pleaded in the alternative to the claim for damages from John. This suggests that, even if John settles the action and pays these damages, it would still be open for WS to continue with the remainder of the claim, including declaratory relief for their legal fees.
[30] Further, the declaratory relief sought could impact against all three brothers, which runs contrary to what Wagner states in his affidavit, when he claims Frank and Salvatore are being joined only to bind them with respect to WS’s claim against the proceeds from the estate
[31] I am not comfortable that this pleading does only what WS says it intends and under Rule 5.04, I have discretion to refuse to grant the relief sought. In this case, I choose to do so.
[32] It seems to me that WS is trying to do too much in one action. Their primary target is John, with whom they may be able to establish some agreement through course of conduct and their invoices that he did pay. John’s agreement with Frank backs up their position in that regard.
[33] Their secondary attack, for declaratory relief flowing from this alleged agreement with the three brothers, is only necessary if John fails to live up to what they say is his end of the bargain, and if they fail against him on the first prong of relief.
[34] As matters stand, none of this is clear from the current proposal on the table. It is also not clear that this is the best, least expensive and most expeditious route to where WS wants to go. Though they act for themselves in this matter, Frank has retained counsel so he faces legal fees. As a result, the court should review what is proposed in the context of costs and time as well as proportionality. In view of the amount at stake and the alternatives available, I do not agree that adding Frank and Salvatore is appropriate.
[35] Finally, the complete failure to address the submission of “necessary parties” with any law is troubling. In fact, several issues, as set out above, were completely ignored in WS’s submissions and my attempts to explore these areas were met with little or no assistance.
[36] For all of these reasons, this motion (item b) is dismissed, item (a) having been withdrawn at the commencement of the hearing.
[37] If the parties are unable to agree as to costs, I can be spoken to within thirty days.
(original signed)___
Master Joan M. Haberman
Released: November 4, 2015