King Road Paving and Landscaping Inc. v. Plati, 2017 ONSC 7675
CITATION: King Road Paving and Landscaping Inc. v. Plati, 2017 ONSC 7675
COURT FILE NOS.: CV-14-118198, CV-12-112441 and CV-12-112028
DATE: 2017-12-21
ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-14-118198
BETWEEN:
King Road Paving and Landscaping Inc., Louis Alaimo and King Road Paving Ltd.
Plaintiffs
– and –
Agostino Plati, Giuseppina Plati and Scotia Mortgage Corporation
Defendants
Amanda Pilieci, for the Plaintiffs
Domenic Saverino, for the Defendants, Agostino Plati and Giuseppina Plati
COURT FILE NO.: CV-12-112441
AND BETWEEN:
Great Northern Insulation Services Ltd.
Plaintiff
– and –
King Road Paving and Landscaping Inc. also known as King Road Paving & Landscaping Inc., Louis Alaimo, Agostino Plati, Giuseppina Plati and Scotia Mortgage Corporation
Defendants
AND BETWEEN:
King Road Paving Ltd. and King Road Paving and Landscaping Inc.
Plaintiffs
– and –
Agostino Plati and Giuseppina Plati
Defendants
Michael Odumodu via Teleconference, for the Plaintiff
Amanda Pilieci, for the Defendants, King Road Paving and Landscaping Inc. also known as King Road Paving & Landscaping Inc. and Louis Alaimo
Domenic Saverino, for the Defendants, Agostino Plati and Giuseppina Plati
COURT FILE NO.: CV-12-112028
Amanda Pilieci, for the Plaintiffs, King Road Paving Ltd. and King Road Paving and Landscaping Inc.
Domenic Saverino, for the Defendants, Agostino Plati and Giuseppina Plati
HEARD: December 14, 2017
REASONS FOR DECISION
CHARNEY J.:
Introduction
[1] This is an urgent motion brought by Sutherland Law, counsel for King Road Paving, for an order granting leave to bring this motion pursuant to s. 67(2) of the Construction Lien Act, R.S.O. 1990, c. C.30 (CLA) and for an order granting Sutherland Law a charge for fees (a “charging order”) incurred by Sutherland Law on behalf of the Plaintiffs, King Road Paving (King Road) and Louis Alaimo (Alaimo), in the within actions pursuant to s. 34 of the Solicitors Act, R.S.O. 1990, c.S.15.
[2] The Charging Order is unopposed by King Road and Alaimo, but is opposed by Great Northern Insulation Services (Great Northern), the plaintiff in an action that was heard together with King Road’s action.
[3] The granting of the Charging Order is not, however, the primary issue on this motion. The real issue is a dispute between Sutherland Law and Great Northern as to their priority with respect the money owed by the defendants, Agostino Plati and Giuseppina Plati (the Platis) to King Road/Alaimo. Sutherland Law takes the position that the charging order will have priority over the amount owed by King Road/Alaimo to Great Northern, and, therefore, seeks an order to that effect. Great Northern takes the position that it has priority over any money paid by the Platis to King Road, and has served a Notice of Garnishment on the Platis.
Facts: Background
[4] On February 13, 2017 I released my reasons in the case of King Road Paving and Landscaping Inc. v Plati, 2017 ONSC 557. This case was a construction lien matter consolidating three actions. The plaintiffs Great Northern and Webdensco are subcontractors with registered liens against the property. The plaintiff/defendant King Road was the general contractor and did not register a lien. Webdensco assigned its lien to King Road pursuant to s. 73 of the CLA. The the Platis are the owners of the property where the construction work was completed.
[5] The two subcontractors (Great Northern and Webdensco) brought claims against the Platis under the CLA. The contractor, King Road and its principal, Alaimo, brought their claim against the Platis as a breach of contract case. Great Northern, in turn, brought a contract claim against King Road and Alaimo.
[6] In the result I made the following order:
a) Judgment is granted in favour of the plaintiffs King Road and Louis Alaimo against the defendants Agostino Plati and Giuseppina Plati in the amount of $78,824 plus prejudgment interest…[this order related to the contract claim].
b) Judgment is granted in favour of the plaintiff Great Northern Insulation Services Ltd. against the defendants King Road and Louis Alaimo in the amount of $105,803 [this was also in relation to a contract claim].
c) This Court declares that Great Northern Insulation Services Ltd. is entitled to a lien under the Construction Lien Act, upon the interest of the owners Agostino Plati and Giuseppina Plati, in the property known as PT Lot 26 … for the amount of $51,415.00.
d) This Court declares that Webdensco is entitled to a lien under the Construction Lien Act, upon the interest of the owners Agostino Plati and Giuseppina Plati, in the property known as PT Lot 26 … for the amount of $54,387.99.
e) This Court orders that the personal liability of the owners Agostino Plati and Giuseppina Plati to the lien holders in respect of the holdbacks the owners were required to retain is $97,287, and writs of execution may be issued forthwith for the amounts set out … above.
[7] The $97,287 holdback was comprised of the basic 10% holdback ($18,462) plus the notice holdback being the amount that was owed to King Road at the time the Platis received notice of the lien claims ($78,824).
[8] On October 23, 2017 I issued a further ruling (2017 ONSC 6319) on a motion brought by the Platis under rule 59.06(c) of the Rules of Civil Procedure. In this decision I clarified the February 13, 2017 order, holding that the $78,824 owed by the Platis to King Road for breach of contract and the $78,824 notice holdback to be paid by the Platis to the subcontractors pursuant to the lien is the same money, and it only has to be paid once. Accordingly, if the Platis pay the holdback to the subcontractors, the sum paid is credited to the amount owing in the King Road judgment. Since the notice holdback was equal to the amount owing under the contract with King Road, the balance owing to King Road would be nil (subject to ancillary orders for interest on the judgment and costs).
[9] Similarly, the payment of $47,670.63 by the Platis to Great Northern (ie. Great Northern’s pro rata share of the total holdback) is set off against Great Northern’s judgment against King Road and Alaimo.
[10] Pursuant to the February 13, 2017 Order, the Platis must divide the holdback amount ($97,287) on a pro rata basis between Great Northern ($47,670.63) and Webdensco ($49,616.37), with Webdensco’s share going to King Road as a result of the assignment under s. 73 of the CLA.
[11] Following the release of the October 23, 2017 Order, the Platis took steps to obtain financing to satisfy the judgment and vacate the liens and writs of execution.
[12] On November 29, 2017, King Road/Alaimo executed an Authorization and Direction directing that any and all funds owed to Alaimo and King Road in respect of the Judgments be paid to Sutherland Law.
[13] On November 30, 2017, Sutherland Law sent an email to counsel for the Platis advising of the amount to be paid to King Road by the Platis pursuant to the judgment.
[14] Sutherland Law takes the position that the Platis owe a total of $99,588.29 to King Road/Alaimo, comprised of the judgment (Webdensco’s pro rata share of the holdback), costs and interest. This amount remains unpaid.
[15] Counsel for Great Northern takes the position that once credit is given to King Road for the holdback amount to be paid by the Platis to Great Northern, King Road still owes Great Northern a total of $118,133, comprised of the judgment, costs and interest. This amount remains unpaid.
Facts: This Motion
[16] On December 1, 2017 Great Northern issued a Notice of Garnishment against the Defendant, Agostino Plati, pursuant to rule 60.08 of the Rules of Civil Procedure. This notice requires Plati (the Garnishee), to pay to the sheriff the amount he owes to King Road (the Debtor), up to $120,750.71 (the total amount owed by King Road to Great Northern under the Judgment). The intent is that the money received by the sheriff will be paid to Great Northern (the Creditor), since King Road is a judgment debtor to Great Northern.
[17] Sutherland Law does not want the Platis to pay the judgment owed to King Road/Alaimo to the sheriff. Sutherland Law has not been paid by King Road/Alaimo for legal fees and services rendered in the three actions. If the money owed by Plati to King Road/Alaimo is garnished and disbursed to Great Northern, Sutherland Law states that King Road will not have the funds to pay their legal fees. Sutherland Law has brought this motion for a Charging Order over all amounts owed to King Road and Alaimo with respect to the February 13, 2017 Judgment. More importantly, Sutherland Law takes the position that the Charging Order will give them priority over any amounts owed by King Road/Alaimo to Great Northern.
[18] Counsel for Great Northern opposes the Charging Order, and asserts that Great Northern has a priority over any money paid to King Road and Alaimo with respect to the February 13, 2017 Judgment, because such payments are trust funds under the CLA. If the Charging Order is granted, Great Northern takes the position that its Notice of Garnishment retains priority over the Charging Order. Great Northern takes the position that any amount paid by the Platis to King Road or Sutherland Law will be in contravention of the Notice of Garnishment and the Platis will be exposed to liability for payment.
[19] Plati does not care to whom he pays the money, provided that once paid he can have the lien and writs of execution on his property removed. He cannot, however, obtain the financing to pay the judgments unless the lender has undertakings from Great Northern and King Road that their respective liens and writs of execution registered on title will be vacated once the money is paid. If Plati pays the money to the sheriff pursuant to the Notice of Garnishment, King Road will not undertake to vacate the lien; if Plati pays the money to King Road, Great Northern will not undertake to vacate the lien.
Issues
[20] There are, therefore, three issues raised by this motion:
i. Should leave be granted under s.67(2) of the CLA?
ii. Should a Charging Order in favour of Sutherland Law issue?
iii. If the Charging Order does issue, does the Charging Order give Sutherland Law priority over Great Northern?
Leave to Bring This Motion
[21] Subsection 67(2) of the CLA provides:
Interlocutory steps, other than those provided for in this Act, shall not be taken without the consent of the court obtained upon proof that the steps are necessary or would expedite the resolution of the issues in dispute.
[22] Section 67(2) appears to contemplate interlocutory steps that precede, and may therefore delay, the trial. The objective, as stated in s. 67(1), is to ensure that the procedure in construction lien actions “be as far as possible of a summary character”. This policy concern has no application to motions, like the present, taken after the decision has been rendered.
[23] In Aird & Berlis Llp v. Levy, 2005 7885 (ON CA), 75 O.R. (3d) 44 (C.A.), at para. 3, the Ontario Court of Appeal held that a charging order made under s. 34 of the Solicitor’s Act is a final order, not an interlocutory order:
The motion judge had to make determinations of fact and law regarding the satisfaction of the conditions in s. 34 before a charging order could be made. Those determinations are limited to the question of the solicitor's entitlement to a charging order and are not revisited in the disposition of the principal proceeding. Therefore, as between the solicitor and the client, the motion finally determines the solicitor's right to the charging order.
[24] Accordingly, it is my view that s.67(2) of the CLA, which applies only to interlocutory steps, does not apply to a motion for a charging order under s.34 of the Solicitor’s Act.
[25] In addition, as indicated above, the real issue in this case is the priority between Sutherland Law and Great Northern. Rule 60.08(16) gives the creditor, debtor and garnishee a right to bring a motion for a garnishment hearing to “determine the rights and liabilities of the garnishee, the debtor…and any assignee or encumbrancer”.
[26] The parties on this motion proceeded on the assumption that s. 67(2) applies to this motion. In my opinion it does not.
[27] If I am not correct on this point, I conclude that leave should be granted under s. 67(2).
[28] The test for leave is whether the motion is (i) necessary or (ii) would expedite resolution of the issues in dispute. Since this action has already been decided on its merits, the present motion will certainly not delay the trial of the action, and the only way for the parties to resolve this dispute is by way of motion. The motion is therefore “necessary”.
Should the Charging Order Issue
[29] Section 34(1) of the Solicitor’s Act provides:
34 (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.
[30] Sutherland Law takes the position that, as counsel for King Road/Alaimo in this action, it was instrumental in quantifying both the basic and the notice holdback amount owed by the Platis. This holdback amount was ordered to be shared pro rata by the two lien claimants, Webdensco and Great Northern. In other words, without the legal work performed by Sutherland Law on behalf of King Road/Alaimo, the Platis would have no personal liability to the lien holders and no contractual liability to King Road. Accordingly, Sutherland Law is entitled to a charging order, up to the amount of its reasonable fees and disbursements, over the totality of the funds awarded in these proceedings.
[31] In Taylor v. Taylor, 2002 44981 (ON CA); 60 O.R. (3d) 138, at para. 28, the Ontario Court of Appeal held that s. 34(1) of the Solicitor’s Act:
[C]odifies the inherent jurisdiction in equity to declare a lien on the proceeds of a judgment where there appears to be good reason to believe that the solicitor would otherwise be deprived of his or her costs… The order is discretionary, and can be made against "the fruits of litigation" where real or personal property has been recovered or preserved through a lawyer's litigation efforts...(citations omitted)
[32] The Court of Appeal also noted (at para. 29) that courts have exercised their discretion to grant a charging order “liberally in favour of charging orders, which are said to benefit both the lawyer and the client, since they encourage lawyers to represent clients who are unable to pay as their cases progress”.
[33] At para. 34 the Court of Appeal affirms that charging orders are discretionary, and will only be granted “if there is evidence that the lawyer was instrumental in securing the judgment and will likely not be paid without the order. Further, courts are required to balance the circumstances and equities of each case and client.”
[34] The three conditions to moving for a charging order are set out in Aird & Berlis LLP v. Levy (2005), 2005 7885 (ON CA),:
The solicitor was at some time employed to prosecute or defend a proceeding;
Property was recovered or preserved in that proceeding; and
The solicitor was instrumental in the recovery or preservation of that property.
[35] In Bilek v Salter (Estate), [2009] O.J. No. 4454, D. M. Brown J. states at para. 11:
“In order to obtain a charging order on property, a solicitor must demonstrate that:
(i) the fund, or property, is in existence at the time the order is granted: Langston v. Landen, [2008] O.J. No. 4936 (S.C.J.), paras. 28 and 29;
ii) the property was “recovered or preserved” through the instrumentality of the solicitor: Kushnir v. Lowry, [2003] O.J. No. 4093 (C.A.) para 2; Higott and Higott (1989), 38 C.P.C. (2nd) 42 (Ont. Gen. Div.); Blue Resources Ltd. v. Sheriff (1996), 47 C.P.C. (3d) 200 (Ont. Gen. Div.); and
(iii) there must be some evidence that the client cannot or will not pay the lawyer’s fees: Kushnir v. Lowry, supra, para. 2; Budinsky v. The Breakers East Inc. (1993), 15 O.R. (3d) 198 (Gen. Div.); Blue Resources Ltd. v. Sheriff, [1996] O.J. No. 1175 (Gen. Div.).”
[36] In my view all of these elements are satisfied. There is no question that Sutherland Law was retained to litigate the action, and that its efforts were instrumental in the recovery of funds on behalf of its own clients. Indeed, by virtue of the partial success of King Road’s contract claim against the Platis (on which the calculation of the CLA holdback was based), Sutherland Law’s efforts were instrumental in the recovery of holdback funds on behalf of Great Northern.
[37] Great Northern takes the position that if the amount owed by King Road to Great Northern is deducted from the amount owed by the Platis to King Road, King Road was a net loser in the action and, therefore, there are no funds or “fruits of the action” recovered or preserved through the action. Indeed, some of the legal fees were used to unsuccessfully defend King Road from Great Northern’s contract action. The equities should not permit Sutherland Law to obtain a charging order for the unsuccessful defence of that claim.
[38] I reject this argument. The fact that King Road is in a net loss situation as a result of the consolidation of three actions does not negate the fact that King Road was successful in both its contract claim and its assigned CLA claim against the Platis, and these successes resulted in a debt owing by the Platis to King Road. Webdensco’s pro rata share of the holdback (which was assigned to King Road) is a fund or property recovered or preserved through the instrumentality of Sutherland Law. Similarly, a costs award is a fund in which a solicitor can claim a charging order (see: Guergis v Hamilton, 2016 ONSC 4428).
[39] The affidavit of Rob Y. Moubarak, filed on behalf of Sutherland Law, attests that Sutherland Law has not been paid by King Road/Alaimo for legal fees and services rendered in the three actions, and that without the Charging Order, Sutherland Law will not be paid its fees for legal services rendered. An affidavit from a law clerk at Sutherland Law confirms that Sutherland Law has not been paid by King Road/Alaimo for legal services, and that the sum of $93,618.90 is due and owing on the account.[^1] There is, therefore, some evidence that without the charging order King Road and Alaimo will not be able to pay their lawyer’s fees, and this is sufficient to satisfy this part of the test. See: Peter Cozzi v Jeffrey Wright, 2016 ONSC 2596, at paras. 45 – 50.
[40] Great Northern, which did not have the benefit of Sutherland Law’s law clerk’s affidavit when it filed its reply factum, also takes the position that there is no evidence of the amount of the charging order, ie. the amount of its fees that Sutherland Law claims remains unpaid. As indicated in footnote 1 of these reasons, Sutherland Law corrected this oversight with an affidavit served on December 20, 2017 after receiving Great Northern’s factum.
[41] In any event, in Frank Loreto v. Bernie Romano et al., 2015 ONSC 898 at para. 23, the Court held that the filing of fee accounts is not a precondition to obtaining a charging order:
No fee accounts were sent by [the lawyer] to the clients for work done. This is, however, not necessarily a precondition to obtaining such a charging order.
[42] Accordingly, I find that Sutherland Law is entitled to a charging order with respect to fees incurred by Sutherland Law on behalf of the Plaintiffs, King Road and Alaimo, in the within actions pursuant to s. 34 of the Solicitors Act, R.S.O. 1990, c.S.15.
Does the Charging Order give Sutherland Law priority over Great Northern?
[43] This final issue is the real issue in this case.
Position of Sutherland Law
[44] Sutherland Law takes the position that the charging order gives it priority over other judgment debts.
[45] Sutherland Law relies primarily on this court’s decision in Dalcor Inc. v Unimac Group Ltd., et al, 2016 ONSC 299, where the Court held, at para. 17, that a charging order under s. 34(1) of the Solicitor’s Act gives the solicitor “a proprietary interest of a secured creditor over the property recovered”, and, at para. 34, that a charging order has priority over a perfected security interest under the Personal Property Security Act, R.S.O. 1990, c. P.10, (PPSA).
[46] In Dalcor the Court emphasized the policy reasons for giving a solicitor’s charging order priority over other creditors. The Court stated (at paras. 43 – 49, (footnotes omitted)):
A solicitors’ charging order is a declaratory relief either granted or not by a court under statute, common law or the law of equity. There is no practicable registration possible. It is an inchoate right that, as Perell J. stated in Thomas Gold Pettinghill LLP, “that immediately arises by operation of law the moment the property has been recovered or preserved by the lawyer’s instrumentality”. It can only be claimed on the “fruits” of the litigation proceeding in which recovery was made and is a pre-existing right that is “confirmed by order of the court”.
Accordingly, given the nature of solicitors’ charging orders, the “first in time” rule does not practicably apply. There is no registration that is possible that would predate the time the solicitor’s charging order arose, as opposed to a later date in which the order is confirmed by the court.
Furthermore, the purpose of solicitors’ charging orders, in equity, mandates that the “first in time” rule does not apply. Solicitors’ charging orders are a unique right granted to solicitors by statute, common law and law of equity to protect solicitors’ services and to encourage and facilitate legal representation of persons who cannot necessarily afford to pay for legal services as these services are incurred. As stated previously, there are strong public policy reasons for the protection of solicitors’ interests through a charging order. In addition, as Newbury J.A. stated in Cliffs Over Maple Bay Investments Ltd. (Re):
… The courts have historically recognized that “all persons of business when dealing with a fund obtained by litigation must be assumed to be aware that the fund is considered as subject to the deduction of the costs to be paid to the solicitor who has conducted the litigation which is successful”: Dallow v. Garrold, supra, at 546, per Baron Pollock. …
The equities of a charging order, generally speaking, are in favour of the solicitor who is granted such an order. In my opinion, a secured creditor who is aware of the services provided by a solicitor who “instrumentally” recovered or preserved property for which the secured creditor wishes to attach cannot collect on that property without providing reasonable compensation to the solicitor who recovered or preserved that property. A secured creditor… is aware that services were provided and that any property that is recovered or preserved instrumentally through the services of a solicitor are subject to the costs incurred by that solicitor.
Therefore, I find that practicality and equity dictates that the “first in time” rule and the provisions of the PPSA do not apply to solicitors’ charging orders.
[47] In Guergis v Hamilton, 2016 ONSC 4428, the plaintiff’s solicitors sought a declaration that they had a valid solicitor’s lien and sought a charging order under s. 34(1) of the Solicitor’s Act over funds ($47,886) held in trust by the defendant’s solicitors that the court ordered the defendant to pay to the plaintiff. The charging order was opposed by the Conservative Party of Canada (CPC), which had previously served a garnishment notice against the funds. CPC had a costs order in their favour against the plaintiff in the sum of $41,555.13, arising from their successful motion to have the action dismissed as against CPC in August 2012, which order was affirmed by the Court of Appeal in June of 2013.
[48] On its face, then, the Guergis case was similar to the case at hand: the solicitor’s claim for a charging order was opposed by another party to the same litigation which had previously served a garnishment order with respect to the same funds. The Court described the opposing positions as follows:
The position of CPC is that the equities of this situation weigh in favour of declining to award the plaintiff’s solicitors the requested charging order. The position of the [plaintiff’s] solicitors… is that the cost awards which constitute the fund currently held by counsel for [the defendants] would not have come into existence but for the efforts of [the plaintiff’s solicitors], and that significant legal costs were incurred by them, well in excess of the costs awarded. [The plaintiff’s solicitors] therefore asserts an entitlement to a solicitor’s lien on the fund.
[49] The Court accepted the plaintiff’s solicitor’s argument and granted the charging order. The Court held (at para. 4) “the solicitor’s lien takes priority over garnishment from other creditors such as the CPC” and (at para. 9) made the following order:
The court will exercise its discretion to declare that the applicants … have a valid solicitor’s lien over the fund in the sum of $47,866 currently held by the solicitors for [the defendants], in priority to all other creditors and will grant a charging order under s. 34(1) of the Solicitors Act over the said fund and an order directing the said solicitors to pay the fund to the plaintiff’s solicitors.
Position of Great Northern
[50] Great Northern takes the position that the money claimed in its Notice of Garnishment are trust funds pursuant to s. 7, 8 and 9 of the CLA, and that the charging order does not apply to trust funds. As such, the charging order cannot give Sutherland Law priority over Great Northern.
[51] Great Northern does not state which of these three provisions apply in this case, but the most likely would appear to be s.8, which establishes a trust for the benefit of the subcontractor. It provides:
8 (1) All amounts,
(a) owing to a contractor or subcontractor, whether or not due or payable; or
(b) received by a contractor or subcontractor,
on account of the contract or subcontract price of an improvement constitute a trust fund for the benefit of the subcontractors and other persons who have supplied services or materials to the improvement who are owed amounts by the contractor or subcontractor.
Obligations as trustee
(2) The contractor or subcontractor is the trustee of the trust fund created by subsection (1) and the contractor or subcontractor shall not appropriate or convert any part of the fund to the contractor’s or subcontractor’s own use or to any use inconsistent with the trust until all subcontractors and other persons who supply services or materials to the improvement are paid all amounts related to the improvement owed to them by the contractor or subcontractor.
[52] In Budinsky v. The Breakers East Inc., 1993 5442 (ON SC), one of the issues considered by the court was if the property recovered or preserved in litigation is subject to a trust in favour of the lien claimants under the CLA, is a charging order in favour the defendant’s solicitor subject to the rights of the beneficiaries of that trust? The Court held:
In a situation where funds held by a solicitor's client are subject to a trust in favour of third parties, such as contractors under the CLA, the charging order would not be applicable to such funds: See George & Asmussen Ltd. v. MCM Projects Inc. (1992), 1992 7619 (ON SC), 9 O.R. (3d) 382 (Gen. Div.); Striemer v. Nagel (1911), 17 W.L.R. 189 (Man. K.B.); Canadian Imperial Bank of Commerce v. Gray (1987), 1987 4210 (ON SC), 59 O.R. (2d) 414, 16 C.P.C. (2d) 181 (S.C.); and Hubbard v. Everyman's Saving & Mortgage Ltd. (1985), 1985 1317 (AB QB), 59 C.B.R. (N.S.) 251, 62 A.R. 81 (Q.B.).
Accordingly, I hold that the general principle should apply that, to the extent that funds held by the respondent are subject to a trust established pursuant to s. 9 of the CLA, the charging order granted to [the solicitor] will not apply to such funds.
[53] See also 61861 Ontario Ltd. v. 1085043 Ontario Inc., 1999 14845 (ON SC) at para. 26: “If these are indeed trust moneys then the charging order would not have any priority over the lien claimants”.
[54] Great Northern argues that its position in this regard is consistent with the scheme of the CLA. The purpose of the CLA is to protect subcontractors and suppliers and ensure payment. It imposes trust obligations on all parties “up the construction pyramid” to prevent the dissipation of funds. It is inconsistent with the scheme of the CLA to limit the trust provisions such that enforcement is only possible after a contractor’s solicitor’s fees are paid.
[55] Great Northern takes the position that the entire amount owed by the Platis to King Road is trust money under the CLA.
Analysis
[56] Given that s. 34(1) is the codification of the court’s inherent jurisdiction to declare a solicitor’s lien (Taylor at para. 28) it does not matter for the purposes of this proceeding whether Sutherland Law has a valid solicitor’s lien at common law or a charging order under s. 34(1); either way the lien or charging order takes priority over garnishment from other creditors unless some other statutory provision gives a garnishment priority.
[57] The general principle in Budinsky is that to the extent that funds held by the respondent are subject to a trust established pursuant to the CLA, the charging order granted to the solicitor will not apply to such funds. The question, then, is to what extent the money owed by the Platis to King Road qualifies as money “owing to a contractor or subcontractor… on account of the contract or subcontract price of an improvement” and therefore qualifies as trust money pursuant to s.8 of the CLA?
[58] The money owed by the Platis to King Road is comprised of the following amounts:
Webdensco’s assigned pro rata share of the holdback: $49,616.37
Costs ordered by the Court: $44,500[^2]
Pre-Judgment Interest: $3,809.68
Post-Judgment Interest: $1,311.56
Interest on Costs Award: $350.68
Total: $99,588.29
[59] In my view, these funds are not subject to a trust established under the CLA.
[60] The sum of $49,616.37 constitutes Webdensco’s pro rata share of its lien claim and cannot be deemed trust monies for the benefit of Great Northern pursuant to sections 7, 8, or 9 of the CLA. They are expressly trust funds for the benefit of Webdensco.
[61] The sum of $44,500 was awarded to King Road as a result of the trial of the action, and is not on account of the contract or subcontract price of an improvement as required by s. 8 of the CLA.
[62] Accordingly, I conclude that s. 8 of the CLA is not applicable to the amounts upon which Sutherland Law claims a charging order.
[63] While I accept the general principle in Budinsky as valid law, I conclude that the funds that are subject to the Sutherland Law charging order are not trust funds for the benefit of Great Northern under the CLA.
[64] Since Great Northern has failed to establish that the funds at issue are CLA trust funds, the principle stated in Dalcor and Guergis applies, and the solicitor’s lien or charging order takes priority over garnishment from other creditors.
Conclusion
[65] This Court Orders that Sutherland Law is entitled to and is granted a charge for fees, costs, charges, disbursements and interest incurred by Sutherland Law on behalf of the Plaintiffs, King Road Paving and Landscaping Inc., Louis Alaimo, and King Road Paving Ltd., in the within actions pursuant to s. 34 of the Solicitor’s Act on monies recovered by the Plaintiff, King Road Paving Ltd., King Road Paving and Landscaping Inc., and Louis Alaimo, up to $93,618.90, from the Defendants, Agostino and Giuseppina Plati in the within action;
[66] This Court Orders that Sutherland Law’s Charging Order holds priority over any amount owed to, Great Northern Insulation Services Ltd. as pursuant to the Orders dated February 13, 2017, April 27, 2017, and October 23, 2017; and the Notice of Garnishment issued against Agostino Plati on December 1, 2017.
[67] Sutherland Law is presumptively entitled to costs against Great Northern for this motion. If the parties cannot agree on costs, Sutherland Law may file costs submissions within 30 days of the release of this decision, and Great Northern may reply within an additional 10 days. Costs submissions are limited to 3 pages plus the costs outline.
Justice R.E. Charney
Released: December 21, 2017
CITATION: King Road Paving and Landscaping Inc. v. Plati, 2017 ONSC 7675
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
King Road Paving and Landscaping Inc., Louis Alaimo and King Road Paving Ltd.
Plaintiffs
– and –
Agostino Plati, Giuseppina Plati and Scotia Mortgage Corporation
Defendants
AND BETWEEN:
Great Northern Insulation Services Ltd.
Plaintiff
– and –
King Road Paving and Landscaping Inc. also known as King Road Paving & Landscaping Inc., Louis Alaimo, Agostino Plati, Giuseppina Plati and Scotia Mortgage Corporation
Defendants
AND BETWEEN:
King Road Paving Ltd. and King Road Paving and Landscaping Inc.
Plaintiffs
– and –
Agostino Plati and Giuseppina Plati
Defendants
REASONS FOR DECISION
Justice R.E. Charney
Released: December 21, 2017
[^1]: The law clerk’s affidavit was not provided with Sutherland Law’s original motion record on December 14, 2017, but was served on December 20, 2017, in response to the factum filed by Great Northern on December 18, 2017.
[^2]: These costs are comprised of: King Road’s costs: $25,000 plus Webdensco’s costs: $25,000, minus the Platis’ set-off costs of $5,500.