Jagtoo & Jagtoo Professional Corporation v. Chahal, 2017 ONSC 1138

CITATION: Jagtoo & Jagtoo Professional Corporation v. Chahal, 2017 ONSC 1138 COURT FILE NO.: CV-16-556363 DATE: 2017-02-22

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jagtoo & Jagtoo Professional Corporation AND: Jagdeep Singh Chahal

BEFORE: The Honourable Madam Justice Jasmine T. Akbarali

COUNSEL: James Jagtoo, for the Applicant Chad D. Rawn, for the Respondent

HEARD: February 14, 2017

ENDORSEMENT

Overview

[1] The plaintiff, Jagtoo and Jagtoo Professional Corporation, acted for the defendant, Jagdeep Singh Chahal, in connection with a family law matter involving Mr. Chahal’s former wife[^1]. At some point, Mr. Chahal discharged the firm and retained his current counsel, Chad Rawn.

[2] The firm asserted a solicitor’s lien over Mr. Chahal’s matrimonial file. The firm says it is owed over $30,000 in unpaid accounts. Mr. Chahal is assessing those accounts.

[3] The parties entered into discussions with a view to reaching an agreement under which the matrimonial file could be released to Mr. Rawn and the firm could be assured of some security for its unpaid accounts pending a negotiated resolution or the results of the assessment. Negotiations ensued and offers to settle were delivered.

[4] On this motion, the firm seeks an order prescribing terms that it set out in an offer to settle on October 4, 2016 and directions as may be appropriate. It also takes the position that the offer was not accepted. Mr. Chahal’s position is that he accepted this offer, and he agrees I should enforce its terms. However, as I explain below, the parties disagree as to what the offer requires Mr. Chahal to do, and when. Thus, the firm argues that even if the offer was accepted, Mr. Chahal has acted in breach of it. Mr. Chahal argues it is the firm that breached its obligations under the offer by refusing to release his file.

[5] The firm delivered a supplementary notice of motion in which it seeks a declaration that it is entitled to a solicitor’s lien, and an order requiring Mr. Chahal to pay the full amount of the outstanding account without prejudice to his right to an assessment. In the event the assessment results in a lesser amount owing, the firm states it will repay that amount. On payment in full, the firm states it will release the matrimonial file to Mr. Rawn. Mr. Chahal disputes this relief. He says the accepted offer to settle extinguished the solicitor’s lien and the firm is not entitled to early payment of the amount which is in dispute.

[6] The firm also seeks an order requiring that the order for assessment be served on the firm. It is unclear to me whether the order has or has not been served on the firm at this time.

The Offer

[7] The offer in question provides that “from Chahal’s share of proceeds of sale of the matrimonial home” he will instruct his real estate solicitor to hold the principal sum owing on the account in a special interest-bearing account of the real estate solicitor until the dispute between Mr. Chahal and the firm is resolved or the issue is determined at an assessment. In the alternative, the offer allows Mr. Chahal to elect to pay into court, from his share of proceeds of the sale, the principal amount outstanding on the account until the dispute is resolved or the issue is determined at an assessment.

[8] The offer goes on to provide that if it is accepted, the real estate solicitor shall “confirm in writing whether Chahal elects to proceed [by holding the funds in a segregated interest-bearing account of the real estate solicitor]”, and confirm that the real estate solicitor in fact has the funds segregated in a special interest-bearing account.

[9] The offer also provides that if Mr. Chahal elects to proceed by way of payment into court, the firm will consent to such a motion on without costs basis.

[10] In what is obviously an error, the offer provides that if it is accepted by September 30, 2016 (four days before the date of the offer) the firm will proceed to release Mr. Chahal’s file forthwith.

[11] This offer was a new iteration of an offer that the firm had delivered earlier. This new version incorporated comments from Mr. Rawn. In particular, Mr. Rawn sought to make clear that the funds over which security would be granted would come from Mr. Chahal’s share of proceeds of the sale of the matrimonial home. This was in recognition of the fact that Mr. Chahal’s former wife also claims the proceeds of the matrimonial home – something the firm knew because it had acted on the matrimonial litigation.

[12] At the time of the offer, the sale was contemplated to close in mid-November 2016. However, the financial issues between Mr. Chahal and his former wife had not been resolved. There was no certainty that funds would be distributed to Mr. Chahal on closing. I am advised that the funds from the sale of the matrimonial home remain in trust with the real estate lawyer who closed the deal (who Mr. Chahal says is his former wife’s lawyer) and that the funds are currently held for the benefit of both Mr. Chahal and his former wife. [^2]

Was the offer accepted?

[13] On October 5, 2016, Mr. Rawn emailed James Jagtoo, a partner at the firm, and accepted the terms of the offer. However, in the same email, he expressed his view that the option in the offer to settle – to either have the funds segregated in the solicitor’s trust account or to pay the funds into court – did not have to be exercised at that time because there were no trust funds available until the sale of the house closed. Less than 90 minutes later, Mr. Jagtoo responded to say that he disagreed the matter had been resolved “and the basis for that will be discussed in due course”.

[14] I note that having come to, at the very least, substantial agreement, the question of the timing of the election should have been a minor one. If there were a bona fide concern about it, I would have expected Mr. Jagtoo to attempt to clarify the concern, not shut down communication on the basis of something to be “discussed in due course”.

[15] However, notwithstanding the position that Mr. Jagtoo took in his email, there is evidence in the record to support the conclusion that the firm in fact considered the offer to have been accepted. On November 21, 2016, Frances Jagtoo, a partner at the firm, wrote to Mr. Chahal’s real estate solicitor (a different lawyer than the one who holds the proceeds of sale) and provided him with a copy of the offer to settle and acceptance. She asked the real estate lawyer to forthwith provide the confirmations required by the offer.

[16] Moreover, in an affidavit sworn December 15, 2016, Frances Jagtoo deposed that “the fact of offer and acceptance is conceded by the Defendant”. Mr. Jagtoo tried to distance the firm from that admission by stating that Frances Jagtoo did not have carriage of the file. I do not accept this explanation. Mr. Jagtoo participated in drafting the affidavit and commissioned it. The admission is consistent with the letter Ms. Jagtoo wrote to the real estate lawyer in November.

[17] I therefore find that the offer was accepted.[^3]

[18] The next question is what the offer required, and whether its terms were breached. In particular, does the offer require Mr. Chahal to immediately elect to either direct his real estate lawyer to segregate funds to be used as security or to pay the money into court?

[19] I find the offer does not require Mr. Chahal to act immediately. Rather, it requires him to take action to deal with his share of proceeds of sale of the matrimonial home. One possible action, if he so elects, is to pay the funds into court. Obviously the funds could not have been paid into court on October 5, 2016 because the property was not due to close until mid-November and everyone understood the security would be provided by the funds Mr. Chahal would receive from the closing. Therefore, he was not in breach of the agreement in early October. Nor is he in breach of the terms of the agreement by failing to make an election until such time as his share of the proceeds are identified, because until that occurs, the payment into court, which the offer anticipates as an option, cannot be effected.

[20] It follows that by failing to deliver up the matrimonial file, the firm is in breach of the terms of the offer.

[21] I also note that in his affidavit, Mr. Chahal deposes that he has “consented to Mr. Rawn being named an irrevocable trustee for any and all trust funds that are paid out or disbursed in [his] name by [the real estate solicitor]”. It is not clear whether this “consent” has been conveyed to the real estate solicitor. If so, Mr. Chahal has breached the terms of the offer, which contemplate the real estate solicitor holding the funds in trust in a segregated account or a payment into court. It does not contemplate Mr. Rawn holding these funds in trust. For reasons that I explain below, this is not an acceptable arrangement.

Conclusion and Directions

[22] Accordingly, I find that the offer of October 4, 2016 was accepted and is binding. I thus allow the firm’s motion for an order prescribing terms and conditions consistent with the offer. (This is also the relief sought by Mr. Chahal.) Given the history of this motion, and the fact that the proceeds of sale are now in the possession of the real estate solicitor, Myles Waxman, an order for directions as sought by the firm is appropriate.

[23] Mr. Chahal refers to Mr. Waxman as his former wife’s solicitor. The record does not make clear what role his real estate solicitor (who is also his father) had on the transaction. However, I conclude that it is appropriate for Mr. Waxman to hold the funds in trust since they are currently in his account, and since it appears to be Mr. Waxman who acted on the closing. This direction is subject to any concern Mr. Waxman has with occupying that role. Therefore, while I refer to Mr. Waxman in the directions below, if Mr. Waxman is unwilling to hold the funds, the parties may jointly agree on another solicitor to fill Mr. Waxman’s role, and Mr. Waxman shall release the funds to that solicitor on being advised by the parties in writing of his or her identity.

[24] I find that an order should go:

a. directing the firm to release the matrimonial file to Mr. Chahal on payment of the firm’s reasonable photocopying expenses;

b. directing Mr. Chahal to irrevocably direct Mr. Waxman to hold in an interest-bearing trust account segregated funds in the amount of $30,753.29 from Mr. Chahal’s share of proceeds of the matrimonial home (or less, if the amount of Mr. Chahal’s share is less than $30,753.29) when Mr. Chahal’s share of the proceeds is determined. These funds shall remain in Mr. Waxman’s trust account until such time as:

i. the parties to this action resolve their dispute and jointly notify Mr. Waxman in writing as to the manner in which the funds should be disbursed,

ii. the assessment process is concluded and Mr. Waxman is either directed to pay out any funds the Assessment Officer finds to be owing to the firm and return the balance, if any, to Mr. Chahal, or Mr. Chahal demonstrates that he has discharged his obligation to the firm, in which case the entirety of the funds may be released to him,

iii. the money is paid into court pursuant to the terms of the offer to settle, or

iv. further order of this court.

[25] I dismiss the plaintiff’s motion for a declaration that the firm is entitled to a solicitor’s lien. The solicitor’s lien was extinguished by reason of the accepted offer.

[26] I also dismiss the plaintiff’s motion for an order requiring payment of the firm’s accounts at this time. The assessment process should run its course. The firm is protected by virtue of the security it has negotiated. There is no basis to grant this extraordinary relief.

[27] If the Order for Assessment has not yet been served on the firm, Mr. Chahal shall do so forthwith.

Costs

[28] The remaining issue is the parties’ claims for costs. The firm seeks costs on a full indemnity scale in an amount over $27,000, pointing to allegations made by Mr. Chahal that the firm acted in bad faith. Indeed, before me, Mr. Rawn accused the firm of “reverse churning”, alleging it had over-lawyered this file in a manner designed to increase its claim for costs against Mr. Chahal. Mr. Rawn argues this reverse-churning and bad faith of the firm entitles Mr. Chahal to an award of elevated costs. Mr. Chahal seeks $10,000.00 in costs.

[29] At the outset of the hearing of this motion, I raised my concerns about proportionality with counsel. The motion materials before me were voluminous. The actual costs expended on this motion are out of all proportion to the amount at stake in the proceeding – a matter easily demonstrated by the amount of full indemnity costs the firm is seeking.

[30] In their submissions, counsel referred openly to the personal animosity that has coloured their interactions with each other. Each levelled serious accusations at the other. This animosity turned what should have been a simple matter into a lengthy, acrimonious and expensive proceeding.

[31] The firm unreasonably resiled from the offer to settle almost immediately after it was accepted and persisted in this motion. It drove up costs by causing unnecessary attendances and taking positions it should not have taken, like seeking advance payment of its accounts pending assessment.

[32] However, Mr. Chahal aggravated matters by filing materials late, necessitating an adjournment, and by seeking to make Mr. Rawn the trustee of the funds, a suggestion that is wholly unsatisfactory given the relationship between Mr. Rawn and the firm. Mr. Rawn also aggravated the situation through the manner in which he managed the file. For example, he “proposed” a date by which he would deliver a responding affidavit, and then failed to do so on that day because, he stated, he did not “agree” to deliver it, but only “proposed”, and “no one responded” to the proposal.

[33] Because of this behaviour of counsel I am exercising my discretion under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C48 to decline to award any costs. I do so as a mark of the court’s disapproval of the manner in which this litigation was conducted.

Madam Justice J. T. Akbarali

Date: February 22, 2017.

[^1]: It is not clear to me whether Mr. Chahal and his wife are now divorced. In any event, it is irrelevant for these purposes. I will refer to her as his former wife.

[^2]: I asked at the motion whether the practical understanding of all parties was that the only funds available to provide security for the firm’s accounts were the funds from the real estate transaction. Both parties indicated that was the case. As a result, and given that the firm appeared to seek that I make an order that could affect the jointly-held funds, I asked whether anyone had placed Mr. Chahal’s former wife on notice of this motion. I was advised that she had not received a copy of the motion materials. Mr. Rawn agreed notice should have been provided. Mr. Jagtoo acknowledged that, depending on my order, it might be necessary to place Mr. Chahal’s former wife on notice, but it might not be. As a result, I asked the parties to contact Mr. Chahal’s former wife counsel to ascertain if she has a position. After a short recess, counsel confirmed that Mr. Chahal’s former wife’s counsel indicated that the order that I make may or may not affect the interests of Mr. Chahal’s former wife, but understandably, she did not wish to incur the costs of participating in this motion.

[^3]: No one raised the mistaken date in the offer in argument. It was obviously an error and the offer was accepted within a reasonable time from when it was made. I thus conclude there is no issue with the mistaken date.