Dalcor Inc. v. Unimac Group Ltd. et al. Yong Tai Construction Limited v. Unimac Group Ltd. et al.

[Indexed as: Dalcor Inc. v. Unimac Group Ltd.]

Ontario Reports

Ontario Superior Court of Justice,

Sutherland J.

February 8, 2017

136 O.R. (3d) 587 | 2017 ONSC 945

Case Summary

Barristers and solicitors — Fees — Charging orders — Perfected Personal Property Security Act ("PPSA") security not having priority over solicitor's charging order — Common law "first in time" rule not applying to give priority over solicitor's charging order — Fact that client had executed indemnity agreement in favour of holder of PPSA security not precluding solicitors from obtaining charging order — Personal Property Security Act, R.S.O. 1990, c. P.10. [page586]

Personal property security — Priorities — Perfected Personal Property Security Act security not having priority over solicitor's charging order — Personal Property Security Act, R.S.O. 1990, c. P.10.

T Co. was the defendant U Ltd.'s surety and had registered a security under the Personal Property Security Act ("PPSA") over all of the defendant's inventory, equipment and other assets in 2010. T Co. brought a motion for a declaration that its PPSA security had priority over any charging order that might be obtained by the defendant's former solicitors.

Held, the motion should be dismissed.

The PPSA does not include solicitors' charging orders. A perfected security under the PPSA does not have priority over a solicitor's charging order. If that conclusion was wrong as a matter of statutory interpretation, then solicitors' charging orders are excluded from the operation of the PPSA based on equitable considerations.

The common law "first in time" rule does not apply to solicitors' charging orders.

The fact that the defendant had executed an indemnity agreement in favour of T Co. did not preclude the solicitors from obtaining a charging order.

Budinsky v. The Breakers East Inc. (1993), 15 O.R. (3d) 198, [1993] O.J. No. 1984, 106 D.L.R. (4th) 370, 12 C.L.R. (2d) 243, 18 C.P.C. (3d) 166, 7 P.P.S.A.C. (2d) 166, 1993 5442, 42 A.C.W.S. (3d) 400 (Gen. Div.); Bulut v. Brampton (City) (2000), 48 O.R. (3d) 108, [2000] O.J. No. 1062, 185 D.L.R. (4th) 278, 131 O.A.C. 52, 16 C.B.R. (4th) 41, 15 P.P.S.A.C. (2d) 213, 95 A.C.W.S. (3d) 1018, 2000 5709 (C.A.), consd

Other cases referred to

1889072 Ontario Ltd. v. Globealive Wireless Management Corp., [2016] O.J. No. 2827, 2016 ONSC 3578, 37 C.B.R. (6th) 39, 266 A.C.W.S. (3d) 986 (S.C.J., Commercial List); Canada Mortgage & Housing Corp. v. Apostolou (1995), 22 O.R. (3d) 190, [1995] O.J. No. 518, 9 P.P.S.A.C. (2d) 89, 53 A.C.W.S. (3d) 777, 1995 7152 (Gen. Div.); Champion Feed Services Ltd. v. Hospers, [2014] A.J. No. 914, 2014 ABQB 490, 18 C.B.R. (6th) 237, 3 P.P.S.A.C. (4th) 59, 244 A.C.W.S. (3d) 208; Cliffs Over Maple Bay Investments Ltd. (Re), [2011] B.C.J. No. 1550, 2011 BCCA 346, 18 P.P.S.A.C. (3d) 166, 21 B.C.L.R. (5th) 297, 309 B.C.A.C. 145, 83 C.B.R. (5th) 322, 207 A.C.W.S. (3d) 356; Dalcor Inc. v. Unimac Group Ltd., [2016] O.J. No. 3961, 2016 ONSC 4662 (S.C.J.); Fairbanx Corp. v. Royal Bank of Canada, [2010] O.J. No. 2226, 2010 ONCA 385, 68 C.B.R. (5th) 102, 319 D.L.R. (4th) 618, 262 O.A.C. 251, 16 P.P.S.A.C. (3d) 96, 189 A.C.W.S. (3d) 849; Guergis v. Hamilton, [2016] O.J. No. 3629, 2016 ONSC 4428 (S.C.J.); Hamilton (City) v. Equitable Trust Co. (2013), 114 O.R. (3d) 602, [2013] O.J. No. 1036, 2013 ONCA 143, 303 O.A.C. 147, 8 M.P.L.R. (5th) 1, 30 R.P.R. (5th) 1, 361 D.L.R. (4th) 114, 225 A.C.W.S. (3d) 1132; Lambert (Re) (1994), 20 O.R. (3d) 108, [1994] O.J. No. 2151, 119 D.L.R. (4th) 93, 74 O.A.C. 321, 28 C.B.R. (3d) 1, 7 P.P.S.A.C. (2d) 240, 1994 10576, 50 A.C.W.S. (3d) 900 (C.A.) [Leave to appeal to S.C.C. refused [1994] S.C.C.A. No. 555, 33 C.B.R. (3d) 291]; Morse Shannon LLP v. Fancy Barristers P.C., [2016] O.J. No. 3500, 2016 ONSC 3950, 93 C.P.C. (7th) 407, 268 A.C.W.S. (3d) 219 (S.C.J.); Saulnier v. Royal Bank of Canada, [2008] 3 S.C.R. 166, [2008] S.C.J. No. 60, 2008 SCC 58, 13 P.P.S.A.C. (3d) 117, 271 N.S.R. (2d) 1, 298 D.L.R. (4th) 193, J.E. 2008-2021, EYB 2008-149205, 381 N.R. 1, 48 C.B.R. (5th) 159, 50 B.L.R. (4th) 1, 169 A.C.W.S. (3d) 704; Taylor v. Taylor (2002), 60 O.R. (3d) 138, [2002] O.J. No. 2313, 214 D.L.R. (4th) 676, 160 O.A.C. 176, 21 C.P.C. (5th) 205, 26 R.F.L. (5th) 208, 114 A.C.W.S. (3d) 760, 2002 44981 (C.A.); [page587] Thomas Gold Pettingill LLP v. Ani-Wall Concrete Forming Inc., [2012] O.J. No. 2109, 2012 ONSC 2182, 349 D.L.R. (4th) 431, 25 C.P.C. (7th) 110, 215 A.C.W.S. (3d) 226 (S.C.J.); Tots and Teens Sault Ste. Marie Ltd. (Re) (1975), 11 O.R. (2d) 103, [1975] O.J. No. 2549, 65 D.L.R. (3d) 53, 21 C.B.R. (N.S.) 1, 1975 535 (H.C.J.); Wilson v. Wilson, [1996] O.J. No. 2359, 136 D.L.R. (4th) 410, 7 O.T.C. 392, 41 C.B.R. (3d) 103, 1 C.P.C. (4th) 71, 63 A.C.W.S. (3d) 1183, 1996 8115 (Gen. Div.)

Statutes referred to

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3

Construction Lien Act, R.S.O. 1990, c. C.30, s. 67(1)

Personal Property Security Act, R.S.O. 1990, c. P.10, ss. 4 [as am.], (1) [as am.], (a), 19, 20 [as am.], (1) [as am.], (a)(ii) [as am.], 46(4)

Solicitors Act, R.S.O. 1990, c. S.15, s. 34 [as am.], (1) [as am.]

MOTION for a declaration that the applicant's security had priority over the solicitors' charging order.

No one appearing for plaintiff.

Justin P. Baichoo, for defendant, Unimac Group Ltd. and BPR Litigation Lawyers.

James W. MacLellan, for added party Trisura Guarantee Insurance Company.

SUTHERLAND J.: —

Overview

[1] On October 12, 2016, I heard two motions: (a) one brought by Unimac Group Ltd.'s ("Unimac") former lawyers BPR Litigation Lawyers ("BPR") for a charging order; and (b) the other brought by Trisura Guarantee Insurance Co. ("Trisura") for priority of Trisura's Personal Property Security Act[^1] ("PPSA") registration over any charging order of BPR. On that day, I ordered a timetable and adjourned argument on Trisura's priority motion to December 19, 2016 and BPR's charging order motion to be spoken to.

[2] On July 26, 2016, I released my decision on the motion brought by Trisura to set aside a charging order obtained without notice by BPR.[^2] In my decision, I set out the brief factual matrix of these two proceedings. I also found that the solicitor's charging order be set aside without prejudice to BPR to bring a motion, on notice, requesting a solicitor's charging order. Unimac/BPR and Trisura agreed that the most cost effective way to deal with both motions was for the court to hear argument on the priority first [page588] and, subject to the court's decision on the priority issue, set a date to hear argument on BPR's motion for a solicitor's charging order.

[3] Trisura registered a PPSA security on October 12, 2010, which was amended on February 23, 2016. The amendment was to correct the name of the debtor, Unimac, from Unimac Group Inc. to Unimac Group Ltd. The PPSA security was over all inventory, equipment/material, accounts, motor vehicles and other assets of Unimac Group Ltd., along with seven other companies of the principle, Leon Hui.

[4] As indicated in my decision of July 26, 2016, Unimac and Leon Hui executed an indemnity agreement in favour of Trisura dated December 18, 2009. Paragraph 2 of the indemnity agreement reads as follows:

Each of the Indemnitors shall indemnify the Surety, against any and all losses, charges, expenses, costs, claims, demands and liabilities (hereinafter called "Indemnity Losses") of whatsoever kind or nature (including, but not limited to, the fees and disbursements of adjusters, consultants and counsel and the establishment or increase of a reserve to cover any possible Indemnity Loss) which the Surety may sustain or incur:

(a) by reason of having executed or procured the execution of any Bond(s) (or an allegation that the Surety should have done so); or

(b) by reason of the failure of the Indemnitors to perform or comply with this Agreement or any Bond Facility; or

(c) in enforcing any of the covenants and conditions hereof.

[5] Trisura commenced an action in Toronto to enforce the terms of the indemnity agreement (the "Toronto action"). The Toronto action has been defended and a motion is pending in Toronto to determine if the Toronto action should be referred to Master Wiebe, who is the construction lien master who has carriage of the construction lien action(s) by way of a judgment for reference pursuant to the Construction Lien Act[^3] ("CLA") ("construction lien actions"), in which Unimac is involved as a named party.

Positions of the Parties

[6] Trisura takes the position that based on its perfected PPSA security, it has priority over any charging order that BPR may obtain pursuant to the provisions of the Solicitors Act[^4] (the "Act"), namely, s. 34 or at common law. If the PPSA does not apply, then the "first in time" rule applies, and since Trisura registered its security prior to any charging order of BPR then Trisura has [page589] priority. Trisura further argues that given the terms of the indemnity agreement, all rights to the moneys posted pursuant to s. 44 of the Act, which were later transferred by the owner to Unimac, is the property of Trisura and, as such, BPR's client, Unimac, has no interest in those moneys and BPR is, therefore, unable to obtain a charging order against those moneys.

[7] BPR takes the position that the provisions of the PPSA do not apply given that a solicitor's charging order is an equitable right given to solicitors through the common law and by statute. There is no method for a solicitor to register a charging order. The reality is that the registration of an interest to perfect a security and the "first in time" rule has no application due to the nature of a solicitor's lien and charging order. BPR withdrew its argument of collateral attack.

[8] Both parties agree that leave to bring this motion under s. 67(1) of the CLA is not required.

Issue

[9] The question for this court to answer is, does a perfected security of Trisura pursuant to the PPSA or the "first in time" rule give Trisura priority over any solicitor's charging order that may be granted to BPR?

[10] For the reasons below, I find that Trisura does not have a priority over any solicitor's charging order that may be granted to BPR.

Law and Analysis

PPSA

[11] Trisura relies on ss. 4(1)(a) and 20 of the PPSA. Sections 4(1)(a) and 20(1) read:

Non-application of Act

4(1) Except as otherwise provided under this Act, this Act does not apply,

(a) to a lien given by statute or rule of law, except as provided in subclause 20(1)(a)(i) or section 31[.]

Unperfected security interests

20(1) Except as provided in subsection (3), until perfected, a security interest,

(a) in collateral is subordinate to the interest of,

(i) a person who has a perfected security interest in the same collateral or who has a lien given under any other Act or by a rule of law or who has a priority under any other Act, or [page590]

(ii) a person who causes the collateral to be seized through execution, attachment, garnishment, charging order, equitable execution or other legal process, or

(iii) all persons entitled by the Creditors' Relief Act, 2010 or otherwise to participate in the distribution of the property over which a person described in subclause (ii) has caused seizure of the collateral, or the proceeds of such property;

(b) in collateral is not effective against a person who represents the creditors of the debtor, including an assignee for the benefit of creditors and a trustee in bankruptcy;

(c) in chattel paper, documents of title, instruments or goods is not effective against a transferee thereof who takes under a transaction that does not secure payment or performance of an obligation and who gives value and receives delivery thereof without knowledge of the security interest;

(d) in intangibles other than accounts is not effective against a transferee thereof who takes under a transaction that does not secure payment or performance of an obligation and who gives value without knowledge of the security interest.

(Emphasis added)

[12] Section 19 defines perfection as follows:

Perfection

19. A security interest is perfected when,

(a) it has attached; and

(b) all steps required for perfection under any provision of this Act have been completed,

regardless of the order of occurrence.

[13] On October 12, 2010, Trisura perfected its security interest under the PPSA by registering a financing statement/verification statement based on the terms of the indemnity agreement. The registration was amended on February 23, 2016 to correct the name of Unimac. I agree with the submissions of Trisura that the amendment of the name of Unimac does not vitiate its security interest as against Unimac as secured by the registration of the security interest on October 12, 2010.[^5] I do not find that the change in name from Inc. to Ltd. would mislead materially a reasonable person. Thus, I agree with Trisura that it has a perfected security interest in the collateral of Unimac Group Ltd. as [page591] registered. In any event, Unimac/BPR did not argue that the error of Inc. rather than Ltd. materially misled a reasonable person to vitiate the security interest of Trisura.

Charging orders

[14] There are two kinds of charging orders. There is the statutory order which is preserved by s. 34 of the Act and there is a charging lien that is a "manifestation of the inherent jurisdiction of common law courts and courts of equity".[^6]

[15] Section 34 of the Act reads as follows:

Charge on property for costs

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.

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.

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.

[16] On charging liens, Perell J. in Thomas Gold Pettingill LLP v. Anti-Wall Forming Inc. reviewed Henry J.' s decision in Tots and Teens Sault Ste. Marie (Re)[^7] and stated:

For present purposes, the three points to note from Justice Henry's decision in Re Tots and Teens Sault Ste. Marie about a charging lien made under the court's inherent jurisdiction are: first, the charging lien creates the proprietary interest of a secured creditor; second, subject to being declared, the charging lien is an inchoate interest that pre-dates the court's declaration; and third, the charging lien is intrinsically declaratory in nature.[^8]

[17] Solicitors' charging orders by a statutory order or a declaratory order both provide the holder of the order, the solicitor, with a proprietary interest of a secured creditor over the [page592] property recovered or preserved through the "instrumentality of the solicitor".

[18] There are strong policy reasons for the inchoate right of a solicitor to a solicitor's charging order. It protects solicitors for their fees and disbursements on work that is instrumental to the preservation of one's client's property and, thus, benefits the client as well as the solicitor. Further, it fosters and creates an environment that protects solicitors to act for persons who, upfront, are unable to pay for legal services.[^9] In effect, it is an access to justice issue as well as an equity issue.

[19] In order for a solicitor to have the use of this inchoate right, the solicitor must satisfy the court either through statute or common law that the solicitor qualifies for this right.[^10]

[20] Whether BPR qualifies for the inchoate right of a solicitor's charging order is not for this court to determine on this motion. BPR may or may not be found to have a charging order in favour of its reasonable fees and disbursements against the moneys presently paid into court. For the purposes of this motion, I make no finding on whether BPR does have a solicitor's charging order against the bonds paid into court.

Priority

[21] Trisura contends that BPR's charging order does not have priority over the security interest of Trisura for the following reasons:

(i) the PPSA perfected security has priority;

(ii) the common law "first in time" rule gives Trisura priority;

(iii) the indemnity agreement transfers all interests to Trisura and, thus, the moneys paid into court to the benefit of the construction lien actions are the property of Trisura and Unimac has no interest in the funds which prohibits BPR from making the moneys subject to a charging order.

[22] I will deal with each contention separately. [page593]

PPSA perfected security

[23] Trisura submits that in reading ss. 4 and 20 of the PPSA together, the court must come to the conclusion that charging orders are not excluded from the security interest mandated by the PPSA. The PPSA distinguishes between liens and charging orders. Section 20(1) expressly states that charging orders are subject to the PPSA while liens are not. The PPSA does not define the meaning of "lien" or "charge".

[24] Section 34(1) of the Act deals with charging orders as expressly stated in the legislation. Liens are not expressly mentioned in this section of the legislation.

[25] Accordingly, as Trisura states, in para. 50 of its factum:

If the legislature intended to exclude charging orders from the PPSA's applicability, then it would have included such language in s. 4(1), or at the very least omitted such language from s. 20(1)(a)(ii) of the PPSA. Similarly, if the legislature intended to provide a "lien" under the Solicitors Act then it would have included such language in s. 34(1).[^11]

[26] Consequently, since Trisura has a perfected security, s. 20 of the PPSA would then mandate that its perfected security has priority over a charging order, but not a lien, if a lien existed, in the circumstances of this case.

[27] In support of the contention that a perfected security under the PPSA has priority over the solicitor's charging order, Trisura relies on the decision of 1889072 Ontario Ltd. v. Globealive Wireless Management Corp.[^12]

[28] Globealive is a decision of Newbould J. which found that a perfected security under the PPSA has priority over a garnishment relying on s. 20(1)(a)(ii) of the PPSA. Newbould J. stated, at para. 12:

I accept the purport of section 20(1)(a)(ii) of the PPSA that once perfected, the security of a lender takes priority over a later notice of garnishment.

[29] In coming to this conclusion, Newbould J. relied on the in obiter statement of Lederman J. in Canada Mortgage & Housing Corp. v. Apostolou,[^13] where Lederman J. stated:

The purpose of section 20(1)(a)(ii) of the Personal Property Security Act is to give court-authorized legal processes, such as garnishment, priority over unperfected security interests based upon private agreements between parties. This serves to emphasize the importance of registration as the foundation for the secured party to exercise priority. [page594]

[30] At first blush, this argument of Trisura is compelling. However, I reject the argument because of the purpose and nature of a solicitor's charging order. As stated by Perell J. in Thomas Gold Pettingill LLP, a solicitor's charging order encompasses a statutory order and a charging lien, a declaratory order under the common law and law of equity. The charging lien aspect of a charging order, I find, takes it out of the explicit wording of the PPSA.

[31] I agree with the submission of Trisura that the fundamental principle of statutory interpretation is that the words of the Act are to be read in their entire context and given their ordinary and grammatical meaning harmoniously with the content of the Act.[^14] Thus, in looking at the content of the PPSA, Trisura argues, if the legislator wished to have solicitors' charging orders excluded from the PPSA, it would have explicitly stated such. Trisura takes the position that since charging orders is not in s. 4(1) of the PPSA, the legislature did not explicitly exclude solicitors' charging orders from the application of the PPSA.

[32] However, in my opinion, the opposite is correct. If the legislature intended to interfere with the common law, law of equity or statutory right of a solicitor's charging order, it would have provided explicit language that it intended to do so.[^15] Absent such explicit language, it is presumed that the legislature did not intend to interfere with the common law, law of equity or statutory right to solicitors' charging orders.[^16]

[33] The ordinary wording of the PPSA gives different consequences to liens and charging orders. The wording is contradictory in that liens are excluded under s. 4(1) of the PPSA but charging orders are not. This contradictory wording makes it difficult to ascertain the intention of the legislature that, specifically, solicitors' charging orders, encompassing a lien component and statutory charging order component, are subject to a perfected security under the PPSA. It does not make logical sense to me that the legislature intended that the statutory charging order component of solicitors' charging orders is subject to the provisions of the PPSA but the lien component of a charging order is not. It seems to me that this could lead to an unjust and inequitable result, where one element being the lien component [page595] has a greater priority than that of the other element, the statutory component.

[34] Consequently, to extinguish the inchoate right of solicitors' charging orders requires, in my opinion, explicit wording from the legislature. No such wording exits in the PPSA. It is therefore my conclusion that the PPSA does not include solicitors' charging orders and, as such, a perfected PPSA security does not have priority over a solicitor's charging order.

[35] If I am incorrect in my interpretation, I further find that solicitors' charging orders are excluded from the operation of the PPSA based on equitable considerations, as is discussed below.

First in time and equity

[36] Trisura contends that if a solicitor's charging order is not subject to the PPSA then priority by the common law "first in time" rule applies and the consequence, therefore, is that Trisura's security was first in time and has priority over a solicitor's charging order of BPR.

[37] In support of its submission, Trisura directs this court to the decision of Bulut v. Brampton (City)[^17] and distinguishes the decision of Budinsky v. The Breakers East Inc.[^18]

[38] In Bulut, the Ontario Court of Appeal dealt with the priority claims between secured creditors pursuant to the priority provisions of the PPSA and the Bankruptcy and Insolvency Act.[^19] Accordingly, the Ontario Court of Appeal found that the motion judge was correct in applying common law and equitable principles to reach a fair result. The Court of Appeal upheld the motion judge in that the "first in time" rule would apply in the circumstances of the case but the rule can be exceptionally overridden by statute or by equitable considerations.

[39] In Budinsky, Ground J. found that a solicitor's charging order has priority over other secured interests regardless of the common law "first in time" rule. Trisura submits that Budinsky is bad law and should not be followed, and is distinguishable in any event, because

(a) the court in Budinsky did not consider the provisions of the PPSA; and [page596]

(b) Budinsky was decided before Bulut, which found that where the PPSA does not apply, the common law "first in time" rule applies subject to the limited exceptions identified by the Court of Appeal.

[40] Consequently, Trisura contends that this court cannot follow Budinsky and the "first in time" rule applies and mandates that Trisura, being the first in time, has priority over any solicitor's charging order of BPR.

[41] It is not disputed that Trisura's registration of its PPSA security was before the involvement of BPR in the various construction litigation proceedings involved in by Unimac.

[42] After careful review of Bulut and Budinsky, I do not accept the submissions of Trisura and find that the "first in time" does not apply to solicitors' charging orders. I make this finding again based on the nature and purpose of solicitors' charging orders, and the equitable considerations of solicitors' charging orders.

[43] 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 Pettingill LLP, "that immediately arises by operation of law the moment the property has been recovered or preserved by the lawyer's instrumentality".[^20] 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".[^21]

[44] 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 pre-date the time the solicitor's charging order arose, as opposed to a later date in which the order is confirmed by the court.

[45] 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): [page597]

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.[^22]

[46] 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, such as Trisura, 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.

[47] Notwithstanding the submissions of Trisura, I agree with the following statement of Ground J. in Budinsky:

I am not aware of any authority for the proposition that the general rule that the solicitor's lien has priority over the claims of any creditor ought not to apply where the creditor's security predates the solicitor's work and was known to the solicitor before the solicitor undertook the work. Accordingly, I find that the charging order in favour of D&D has priority over the secure claims of MYC.[^23]

[48] I find this statement of Ground J. applicable on the basis of equitable considerations given the purpose of solicitors' charging orders. The equitable considerations enunciated in Budinsky, in my opinion, falls within the exceptions set out in the Ontario Court of Appeal's decision in Bulut.

[49] 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.

The indemnity agreement

[50] Trisura argues that the indemnity agreement signed by Unimac, Leon Hui and seven of his other companies assigned any interest that Unimac has in the bonds posted into court to Trisura. To accept this argument by Trisura, any and all work that BPR rendered to preserve or protect Unimac's interest in the bonds posted into court is not recoverable from the bonds posted. As a result, Trisura would receive a benefit without [page598] paying for the services rendered to recover and preserve the funds paid into court. It is undisputed that Trisura did not incur legal costs to defend the construction lien actions or prosecute Unimac's construction lien action against the owners.

[51] I do not accept this argument of Trisura for various reasons. First, I do not accept that Trisura can lay in the weeds, do nothing, have the funds posted in court recovered and preserved, and then rely on terms of the indemnity agreement to oust any payment for the preservation and recovery of these funds that may have occurred through the efforts of BPR. Trisura was aware of the multitude of actions that were being defended by Unimac and the lien action prosecuted by Unimac against the owner.

[52] Trisura was aware that the funds posted into court by the owners, trustees of the Mount Albert United Church Congregation of the United Church of Canada, Mount Albert, Ontario, was transferred to Unimac to resolve Unimac's lien action against the owners. Trisura is further deemed to know that the funds posted into court for the benefit of Unimac, recovered and preserved by Unimac, is subject to "the deduction of the costs to be paid to the solicitor who has conducted the litigation which is successful".

[53] This court did acknowledge that para. 15(b) of the indemnity agreement did assign and transfer "as collateral, all right, title and interest of the Indemnitors to every contract, retained percentages, holdbacks, progress payments, deferred payments, earned moneys, compensation for extra work, proceeds' of damage claims".[^24] Further, Unimac's interest in the bonds posted into court has been transferred or assigned to Trisura, if the indemnity agreement is upheld as legally valid and enforceable.[^25] However, this does not translate to the conclusion that the posted bonds are not subject to a deduction for reasonable fees and disbursements rendered by a solicitor to recover and preserve said posted funds. Trisura takes any legally valid assignment subject to the inchoate rights of the solicitor to a charging order, in my opinion. To decide otherwise would be contrary to the purpose of solicitors' charging orders.

[54] Thus, I find if BPR can satisfy this court that it qualifies for a solicitor's charging order and the court assesses the reasonable fees and disbursements incurred by BPR, such assessed amount of the charging order is a deduction of the costs to be paid to BPR who, if the court finds, conducted litigation which is successful in recovering and preserving property of Unimac. [page599]

[55] If BPR cannot satisfy this court to grant the declaratory relief of solicitors' charging order against the bonds posted into court, then BPR does not have the inchoate right of a charging order and the posted funds are not subject to a deduction on the basis of solicitor charging order of BPR.

Disposition

[56] I therefore make the following order:

(a) Trisura's motion for a declaration that its PPSA security has priority over a charging order of BPR is dismissed.

(b) BPR to contact the trial coordinator to schedule a convenient date acceptable to Trisura to hear its motion for a solicitor's charging order in front of me.

(c) If there is any issue that may arise on the scheduling of or the hearing of the charging order motion, either Trisura or BPR may contact my judicial assistant to schedule a conference call to deal with that issue.

(d) If the parties cannot agree on costs, then Unimac/BPR to serve and file its submissions for costs within 21 days from the date of this decision, and Trisura will have 21 days thereafter to serve and file its submissions. There is no right for any reply submissions. The submissions to be no more than three pages, double spaced, exclusive of any cost outline, case law and offers to settle. Submissions are to be filed with the court. If no submissions are received within the time period set out herein, an order will be made that there will be no costs.

Motion dismissed.

Notes

[^1]: R.S.O. 1990, c. P.10. [^2]: Dalcor Inc. v. Unimac Group Ltd., 2016 ONSC 4662 (S.C.J.). [^3]: R.S.O. 1990, c. C.30. [^4]: R.S.O. 1990, c. S.15. [^5]: PPSA, supra, note 1, at s. 46(4); Fairbanx Corp. v. Royal Bank of Canada, 2010 ONCA 385, at para. 18; and Lambert (Re) (1994), 20 O.R. (3d) 108, [1994] O.J. No. 2151, 1994 10576 (C.A.), leave to appeal to S.C.C. refused [1994] S.C.C.A. No. 555, 33 C.B.R. (3d) 291. [^6]: Thomas Gold Pettingill LLP v. Ani-Wall Concrete Forming Inc., 2012 ONSC 2182 (S.C.J.), at para. 99. [^7]: (1975), 11 O.R. (2d) 103, [1975] O.J. No. 2549, 1975 535 (H.C.J.). [^8]: Thomas Gold Pettingill, supra, note 6, at para. 101. [^9]: Taylor v. Taylor (2002), 60 O.R. (3d) 138, [2002] O.J. No. 2313, 2002 44981 (C.A.), at para. 29. [^10]: Thomas Gold Pettingill LLP, supra, note 6; Morse Shannon LLP v. Fancy Barristers P.C., 2016 ONSC 3950 (S.C.J.); Guergis v. Hamilton, 2016 ONSC 4428 (S.C.J.); and Wilson v. Wilson, [1996] O.J. No. 2359, 1996 8115 (Gen. Div.). [^11]: Factum of Trisura dated October 31, 2016. [^12]: [2016] O.J. No. 2827, 2016 ONSC 3578 (S.C.J., Commercial List). [^13]: (1995), 22 O.R. (3d) 190, [1995] O.J. No. 518, 1995 7152 (Gen. Div.). [^14]: Champion Feed Services Ltd. v. Hospers, 2014 ABQB 490, at para. 8; and Saulnier v. Royal Bank of Canada, [2008] 3 S.C.R. 166, [2008] S.C.J. No. 60, 2008 SCC 58, at para. 16. [^15]: Hamilton (City) v. Equitable Trust Co. (2013), 114 O.R. (3d) 602, [2013] O.J. No. 1036, 2013 ONCA 143, at para. 34. [^16]: Ibid. [^17]: (2000), 48 O.R. (3d) 108, [2000] O.J. No. 1062, 2000 5709 (C.A.). [^18]: (1993), 15 O.R. (3d) 198, [1993] O.J. No. 1984, 1993 5442 (Gen. Div.). [^19]: R.S.C. 1985, c. B-3. [^20]: Thomas Gold Pettingill LLP, supra, note 6, at para. 90. [^21]: Ibid. [^22]: [2011] B.C.J. No. 1550, 2011 BCCA 346, at para. 33. [^23]: Budinsky, supra, note 18. [^24]: Dalcor Inc., supra, note 2, at paras. 32-33. [^25]: This is one of the issues to be adjudicated in the Toronto action.