Court File and Parties
COURT FILE NO.: FS-18-4130 DATE: 20200302
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Tazeen Haroon Applicant – and – Haroon Anwar Sheikh Respondent – and – Murray N. Maltz Respondent on Motion
Counsel: Shelly Kalra, for the Applicant James R. G. Cook, for the Respondent on Motion
HEARD: February 4, 2020
Shore, J.
[1] This is a motion by the Applicant seeking costs against Murray Maltz, the Respondent’s previous lawyer. On November 19, 2019, Gilmore, J. ordered costs of $6,500 in favour of the Applicant and “Mr. Maltz and Ms. Kalra to appear before me in an agreed upon date with further material as to why costs should not be ordered against Mr. Maltz personally”. Justice Gilmore is no longer sitting in the family law court. This motion came before me as I am familiar with the facts and history of the file, having heard previous motions.
[2] For the reasons set out below, I find that Mr. Maltz shall pay the costs of $6,500 personally, pursuant to rule 24(9) of the Family Law Rules, O. Reg. 114/99.
History
[3] Both parties on this motion agree that a motion for costs to be paid personally by a lawyer should not be determined in isolation but having regard to the entire context of the file. It is important to understand the relevant history in this file to properly determine the motion.
[4] The parties separated in January 2018. The application was issued in July 2018. The matter has been litigated continuously since January 2019.
[5] In August 2018, the Applicant registered designations of matrimonial home against 2230 Lakeshore Blvd. West, Unit 606, Etobicoke, ON (“Lakeshore property”) and 16 Harbour Street, Unit 5302, Toronto, ON (“Harbour property”). The properties were owned by the Respondent.
[6] On January 17, 2019, the Respondent brought a motion to have the entire application dismissed for a lack of jurisdiction by this court. The Respondent was partially successful. On January 30, 2019. I dismissed the Applicant’s claims under the Divorce Act, R.S.C. 1985 c.3 (2nd Supp.) but permitted her claims to proceed on the issues of custody, support, and equalization under Ontario legislation. The Respondent was ordered to pay costs of $24,120.95.
[7] For the purpose of the cost motion, it is important to highlight the last sentence of paragraph 24 of my reasons which states: “given that no divorce has been issued by another jurisdiction, the applicant has the right to bring a support claim before this court, under the provincial legislation” (emphasis added).
[8] The Respondent appealed the decision.
[9] The Respondent began divorce proceedings in Pakistan and allegedly obtained a divorce certificate on January 30, 2019. The certificate was not filed with the court in Ontario until after the release of the January 30th decision. The Applicant took the position that the divorce was fraudulently obtained in Pakistan, and that the certificate was subsequently cancelled.
[10] On March 21, 2019, the Applicant obtained an order for $6,000 of spousal support per month on a temporary basis. No order was made with respect to child support because there were arrangements in place to meet the financial needs of the children. In ordering spousal support, the Court relied on its jurisdiction as set out in my January 30th order. In the reasons, Justice Gilmore stated “[t]here are conflicting decisions from the Pakistani court which have yet to be resolved. If the parties have indeed been divorced as a result of the challenged Pakistani order, the applicant’s entitlement to spousal support may be an issue” (emphasis added). Therefore, the concern about the validity of the Pakistani divorce was known to the parties, their lawyers, and the court by this date.
[11] The Respondent brought a motion in the Court of Appeal to stay the earlier orders pending his appeal. The hearing of the stay motion was scheduled to be heard on April 8th, 2019 but was adjourned to June 2019.
[12] The motion for support came back before Justice Gilmore on May 21, 2019, and an order was made for both child support and spousal support. The Respondent made no effort to comply with the order. Justice Gilmore also awarded the Applicant costs of $20,000 and the Respondent made no effort to comply with that order.
[13] In the Ruling on Motion, Gilmore J., at paragraph 27 specifically stated that “The respondent maintains that he has obtained a valid divorce in Pakistan. The applicant disagrees and submits that the divorce was obtained fraudulently. Both sides have retained counsel and experts to support their positions. The investigations are ongoing”. At paragraph 36(c) it further states: “While jurisdiction remains an issue on appeal, the order of Shore, J. currently stands”. Therefore, the Court made it clear again that there was a dispute as to whether there was a valid divorce obtained in Pakistan.
[14] On May 16, 2019, Mr. Maltz retained an agent, Romeo Finder, to remove the designations of matrimonial home from the Lakeshore property and the Harbour property. No notice was given to the Applicant. Despite the court’s findings set out above, Mr. Maltz provided his own opinion to the Land Titles Office that the Respondent had a valid foreign divorce from Pakistan and therefore the designation was improperly registered. His letter includes the following wording: “It is my opinion that the attached divorce is valid and binding in Ontario Canada and the Divorce Registration Certificate is valid and evidence of the decree absolute of divorce” (emphasis added). These actions ultimately lead to the motion before me, as seen in more detail below. [^1]
[15] On June 4, 2019, the Respondent’s motion to stay the January 19th order was heard in the Court of Appeal. On June 11, 2019, Bennotto J.A. dismissed the motion and ordered costs of $10,000. In the Court of Appeal decision, Bennotto J.A. also references that fact that there is an issue with the validity of the foreign divorce.
[16] The Respondent continued to ignore his support obligation. Several times throughout June 2019, Ms. Kalra, solicitor for the Applicant, writes to Mr. Maltz advising that her client intends to bring a motion to obtain a preservation order if the Respondent does not rectify his breaches of the court orders.
[17] In the meantime, having lifted the designation of matrimonial home, on June 21, 2019 the Respondent sold the Lakeshore property with a closing date of July 8, 2019. Mr. Maltz acted as the real estate lawyer for the Respondent. The Applicant was not advised of the sale or the lifting of the designation of the matrimonial home before the closing of sale.
[18] On July 5, 2019, Ms. Kelra advised Mr. Maltz that her client intends to proceed with the motion for a preservation order on July 18, 2019.
[19] On July 8, 2019, Mr. Maltz acts as the real estate agent on the closing of sale of the Lakeshore property.
[20] On July 8, 2019, Mr. Maltz wired $66,028 out of the country to the Respondent from the proceeds of sale of the Lakeshore property.
[21] On July 9, 2019, Mr. Maltz wrote a letter to Ms. Kalra advising that he is not available on July 18, 2019 for the motion for a preservation order, but he could be available on July 25th. What is also key to the motion before me is that in his letter dated July 9, 2019 (one day before he disburses the remaining proceeds of sale of the Lakeshore property), Mr. Maltz states “There is no urgency in this matter” (emphasis added). As seen from the events below, this is a misrepresentation by Mr. Maltz. Further, as set out below, on July 18th, the date the Applicant wanted her motion heard, Mr. Maltz is a witness to the Respondent assigning his interests in various condominiums.
[22] On July 10, 2019, Mr. Maltz pays himself $60,000 from the proceeds of sale for outstanding fees and transfers the remaining $90,000 out of the country, to the Respondent. All the proceeds of sale were disbursed. [^2]
[23] On July 18, 2019, the date Ms. Kalra suggested for the motion for the preservation order and Mr. Maltz advised he was not available, Mr. Maltz witnessed the Respondent’s signature to reassign the condominiums to third parties.
[24] At this time, the Applicant is still unaware that the designations have been lifted from the properties, that the Lakeshore property was sold, or that the Respondent assigned the condominiums to third parties. Neither the Respondent nor Mr. Maltz disclosed this to the other side. Mr. Maltz’s representation on July 9, 2019 was that there was no urgency in the matter.
[25] On July 25, 2019, the Respondent was ordered to produce disclosure and a preservation order was made against him. That order was continued on August 8, 2019, and the Respondent was ordered to pay costs of $8000.
[26] On September 11, 2019, the Court of Appeal dismissed the Respondent’s appeal as he failed to appear. He was ordered to pay costs of $40,000.
[27] On September 17, 2019, the Respondent signed a notice of change in representation and Mr. Maltz ceased acting for the Respondent.
[28] On September 20, 2019, the Respondent was found to be owing significant arrears of child support and spousal support and to have not paid any of the cost awards. He owed $172,000 to the Applicant by this date. He was in breach of all orders made by both this court and the Court of Appeal.
[29] On and around September 21, 2019, the Applicant discovered that the Respondent had been depleting his assets and that the designations of matrimonial home had been lifted allegedly by Mr. Finder. Mr. Maltz’s involvement was still unknown and it was thought that Mr. Finder acted on the sale of the Lakeshore property because his name was on the documents.
[30] On September 23, 2019, the Applicant obtained an order for certificates of pending litigation to be registered against the remaining Canadian properties, including the condominiums. The Applicant was unaware that the Respondent had also disposed of his interest in the condominiums. Costs of $2,500 were ordered against the Respondent.
[31] On September 25, 2019, Mr. Finder releases his file along with a letter advising that he only acted as agent for Mr. Maltz. He was never retained by the Respondent and did not act for him to remove the matrimonial home designations. All correspondence in Mr. Finder’s file is from Mr. Maltz’s office. Mr. Finder registered the removal of designations as an agent for Mr. Maltz.
[32] On September 26, 2019, an order was made vesting the properties in the Applicant’s name. The Respondent was ordered to pay costs of $8,000. He did not appear at the motion. When trying to register the order, the Applicant discovered that the two condominiums were already assigned to third parties.
[33] On October 10, 2019, the Respondent’s pleadings were struck. He had not participated in the court proceedings since August 8, 2019. He failed to abide by any court orders. He owed significant arrears of child support and spousal support. He had not paid any of the cost awards. He had dissipated his assets. He was ordered to pay costs of $10,000.
[34] By this date the Applicant had discovered that most of the properties subject to the vesting order had previously been transferred by the Respondent to third parties. The Applicant obtained documents showing Mr. Maltz’s involvement with the transfers and the sale of the Lakeshore property.
[35] That same day, the Applicant advised Mr. Maltz’s that she will be bringing a motion for the release of the real estate file. Mr. Maltz advised that he was available on November 19 for the motion.
[36] On November 11, 2019, Mr. Maltz produced the file but failed to disclose the tracing of funds. It was Mr. Maltz’s position that his client specifically instructed him not to release information regarding the disbursement of funds. The Applicant therefore had to attend on the motion on November 19th.
[37] The motion was heard November 19, 2019. Mr. Maltz’s position was that the information with respect to the disbursement of funds was protected by solicitor-client privilege and that he needed a court order to release the information. The order was made as requested by the Applicant and the documents released. Although Mr. Maltz could have taken no position on the motion and simply advise that he needed an order, he swore an affidavit on November 12, 2019, containing several derogatory comments about the Applicant and advocating for his ex-client on the support issues.
[38] Further, Mr. Maltz acknowledges that while the Applicant’s counsel was signing in, he approached the Applicant and told her she would “never see a penny”. He also advised the Applicant and her lawyer to read an article in the Globe and Mail, about a husband fleeing the jurisdiction and the wife receiving nothing. In his affidavit of December 13, 2019, Mr. Maltz’s explanation for his actions was that he did not represent the Respondent at the time but he “was asked to deliver a message from the Respondent”, that the Respondent wanted to settle the matter.
[39] The motion on November 19th was heard by Justice Gilmore. Justice Gilmore, having heard from the Applicant and Mr. Maltz, ordered costs of $6,500 in favour of the Applicant and that “Mr. Maltz and Ms. Kalra to appear before me in an agreed upon date with further material as to why costs should not be ordered against Mr. Maltz personally”.
[40] In her reasons of November 19, 2019, Justice Gilmore at paragraph 18 stated:
This motion was entirely unnecessary. Raising the issue of privilege over the tracing of funds was yet another ploy in the respondent’s unrelenting attempt to make his family suffer and to treat the Ontario Court system with disdain.
Mr. Maltz’s involvement in the sale of the subject property raises questions, the two most concerning ones being why he did not give notice to the applicant of the removal of the designation of matrimonial home (whether it was proper or not) and failing to inform the court of the sale of the subject property on July 25, 2019. Costs are properly sought against him, but the request was only raised at the motion. Mr. Maltz and Ms. Kalra to appear before me on an agreed upon date with further material as to why costs should not be ordered against Mr. Maltz personally.
Law and Analysis
[41] Mr. Maltz submitted that he could not release the information requested without his client’s consent or a court order as it was protected by solicitor-client privilege. Both parties relied on Justice Perell’s decision in Glegg v. Glass, 2019 ONSC 6623, 313 A.C.W.S. (3d) 738. In considering the issue of solicitor-client privilege, Perell J. specifically states that “information about funds held by the lawyer in respect of the client’s transactions in which the identity of the participants has become known is not privileged because the privilege applies only to communications and records pertaining to the client’s transactions directed through the lawyer’s trust account are evidence of actions not communications”: at para. 136. In the decision Perell J. relies on Ontario (Securities Commission) v. Greymac Credit Corp. (1983), 41 O.R. (2d) 328 (Div. Ct.). In that decision, the court was considering whether money given to a trustee in bankruptcy by the debtor or held in trust for the debtor was protected by solicitor-client privilege. The Divisional Court held that solicitor-client privilege does not extend to prohibit a solicitor from answering questions as to the movement of funds into and out of his trust account.
[42] Evidence as to whether a solicitor holds or has paid or received moneys on behalf of a client is evidence of an act or transaction, whereas the privilege applies only to communications: see Greymac, at paras. 23-24. It may be helpful to ask in such a case whether the client himself, if he were the witness, could refuse on the ground of the solicitor-and-client privilege to disclose particulars of a transaction directed by him through his solicitor's trust account. The fact that a client has paid to, received from, or left with his solicitor a sum of money involved in a transaction is not a matter as to which the client himself could claim the privilege, because it is not a communication at all. It is an act. The solicitor-and-client privilege does not enable a client to retain anonymity in transactions in which the identity of the participants has become relevant in properly constituted proceedings: Greymac, at para. 24.
[43] Whether Mr. Maltz should or could have disclosed the information was only one small factor to consider in determining whether he should be personally responsible for costs.
[44] Both parties on this motion agree that an order awarding costs against a lawyer personally should only be ordered in exceptional circumstances and are rare.
[45] Rule 24(9) of the Family Law Rules states:
(9) If a party’s lawyer or agent has run up costs without reasonable cause or has wasted costs, the court may, on motion or on its own initiative, after giving the lawyer or agent an opportunity to be heard,
(c) order the lawyer or agent personally to pay the costs of any party.
[46] The Supreme Court of Canada held that costs are rewarded as compensation for the successful party and not to punish a lawyer: see Young v. Young, [1993] 4 S.C.R. 3 and F.(V.) v. F.(J.), 2016 ONCJ 759, 86 R.F.L. (7th) 452, at paras. 9-11. Courts must be extremely cautious in awarding costs personally against a lawyer, given the duties upon a lawyer to guard confidentiality of instructions and to bring forward with courage even unpopular cases or positions (see Young, at para. 263).
[47] Although the rules are not identical, the test used under Rule 57.07(1) of the Rules of Civil Procedure, applies to rule 24(9) of the Family Law Rules. The two-part test was set out by the Court of Appeal in Galganov v. Russell, 2012 ONCA 410, 350 D.L.R. (4th) 679. Specifically, the court must first determine if the lawyer’s conduct falls within the ambit of the rule in the sense that he or she caused costs to be incurred or wasted unnecessarily or without reasonable cause; and second, as a matter for discretion whether an order for costs personally is warranted in the circumstances of the case: see paras. 18 and 22 and see F.(V.) v. F. (J.).
[48] In Covriga v. Covriga, 2010 ONSC 2900, Justice Horkins found that the lawyer supported and encouraged her client’s unreasonable conduct and ordered the lawyer to pay costs: see paras. 111 and 184. The lawyer’s unreasonable conduct was described as “shocking” (at para. 185). Specifically, Justice Horkins found that the wife did not do what she did alone. The lawyer must bear responsibility for much of the conduct. She “had a duty to take all reasonable steps to ensure that her client complied with court orders and the Family Law Rules. Instead, she pursued Ms. Covriga’s application with a breathtaking disregard for the Family Law Rules, court orders and the Rules of Professional Conduct”: at para. 185. The lawyer’s behaviour was found to have “aggravated and perpetuated the existing problems and numerous new problems arose”: at para. 186. A lawyer may not rely on a client’s instructions as a defence when a lawyer acts in a manner inconsistent with the goals of the justice system: MacMull v. MacMull, 2015 ONSC 5667, 258 A.C.W.S. (3d) 342, at para. 19. I find that much of the description of the lawyer in Justice Horkin’s order aptly describes Mr. Maltz’s behaviour in the case before me.
[49] Amongst other reasons, the Court of Appeal in Galganov stated that the cost rule is intended to apply “when a lawyer pursues a goal which is clearly unattainable or is clearly derelict in his or her duties as an officer of the court” (emphasis added): at para. 18; see also F.(V.) v. F.(J.), at para. 11. In determining whether the rule applies, the court must examine “the entire course of the litigation that went on before the application judge”: Galganov, at para. 20; F.(V.) v. F.(J.), at para. 11. This requires a “holistic examination of the lawyer’s conduct” in order to provide an “accurate tempered assessment”: Galganov, at para. 20; F.(V.) v. F.(J.), at para. 11. As stated by Justice George Czutrin in R. (C.) v. Children’s Aid Society of Hamilton, 2004 CarswellOnt 1414 (S.C.), any person whose conduct “flies in the face” of the primary goals of the Family Law Rules may be subject to cost consequences (at para. 51). In that case, he was referring to costs ordered against the Office of the Children’s Lawyer, but the statement is equally applicable in this case.
[50] There is no bad faith requirement in the Family Law Rules: see Covriga at para. 11. In MacMull, Justice McGee held that “The wording of Rule 24(9) as it refers to ‘fault’ within the heading, requires a finding of negligence, inappropriate conduct, or abuse of process on the part of the lawyer, even if the conduct does not amount to bad faith”: at para. 18.
[51] I find that Mr. Maltz’s actions caused additional costs to be incurred without reasonable cause. His behaviour perpetuated existing problems and created new problems. Further, he assisted his client in avoiding his obligations under court orders. A few examples of his conduct that was courtesy of his obligations as an officer of the court include:
a. Providing a written legal opinion that the parties were divorced and the divorce certificate valid, knowing that the issue was in dispute and a live issue before the Ontario Court. b. Sending an agent to remove the matrimonial home designation, knowing the validity of the divorce was in question. c. Swearing an affidavit that he did not retain Mr. Finder and that the relationship was between Mr. Finder and the Respondent, when Mr. Finder had no communication with anyone but Mr. Maltz (and his office). d. Advising the other side in writing that there was nothing urgent pending with respect to a non-depletion order, knowing the Lakeshore property had been sold (he acted as the real estate lawyer on the closing) and within days of the letter to the other side he disbursed the remaining funds from his trust account to himself and his client. e. Paying himself $60,000 and wiring money to his client out of the country knowing his client is avoiding his support and cost obligations under several court orders. f. Acting for his client on the sale of property, knowing he was assisting in his client avoiding his court-ordered obligations. g. Instead of limiting his affidavit to the issues before the court (specifically whether he needed his client’s instructions to release part of the file), Mr. Maltz used his affidavit as an opportunity to attack and criticize the Applicant and advocate for his (previous) client, despite many of the issues not being before the court. h. He made inappropriate comments to the Applicant when her lawyer was not present (that she would “never see a penny”), alleging he was simply passing on a message from his (former) client.
[52] Mr. Maltz’s tenuous legal opinion on the validity of the foreign divorce, the clandestine manner in which his removed the designation of matrimonial home, acting for the Respondent on the closing of sale of the property, the misleading letter to the other side, and the disbursement of funds are examples of Mr. Maltz’s actions that assisted his client in avoiding his court obligations and demonstrative of shocking behaviour for an officer of the court, leading to increased costs for the Applicant. This was not a case of an isolated lapse in judgement. This was a series of deliberate actions by a lawyer that contributed directly to increased costs for the Applicant. Had Mr. Maltz not provided his opinion on the validity of the foreign divorce and removed the designations of the matrimonial home, this motion and the events leading up to this motion would not have unfolded as they did.
[53] Mr. Maltz relies on a series of cases included in his book of authorities where costs were not ordered personally against counsel. In those cases, the lawyers’ behaviour does not come close to the behaviour of Mr. Maltz in these proceedings and are therefore easily distinguishable. See e.g. Sgrignuoli v. Melara, 2018 ONSC 255, 290 A.C.W.S. (3d) 347, Carleton v. Beaverton Hotel (2009), 96 O.R. (3d) 391 (Div. Ct.) and Walsh v. 1124660 Ontario Limited.
[54] I find Mr. Maltz’s actions unnecessarily increased the Applicant’s costs without reasonable cause. I have considered the warnings of the Supreme Court of Canada and Court or Appeal in awarding costs against counsel sparingly and only in exceptional circumstances. Ultimately, it is a matter of discretion.
[55] The role of the lawyer in our system of justice is an important one. Lawyers must be able to put forward their client’s case, even difficult or unpopular cases without having to look over their shoulders or be concerned about costs being ordered against them personally. There are very serious public policy considerations when determining whether to order costs against a lawyer, including the integrity of the administration of justice. It is for this reason that the discretion is to be exercised with extreme caution.
[56] However, to ignore Mr. Maltz’s conduct in these circumstances would put into question the integrity of the profession and the administration of justice. This is not a case of a lawyer vigorously putting his client’s case before the court. Mr. Maltz crossed a line. As set out in Covriga and F.(V.) v. F.(J.), not granting an order of costs against counsel in the appropriate circumstances “would send a very different message to the profession: that they can engage in unacceptable behaviour without the risk of being penalized with a costs order.”: Covriga, at para. 258; F.(V.) v. F.(J.), at para. 119.
[57] Further, rule 2(4) of the Family Law Rules places a duty on counsel to help the court promote the primary objective of these rules. The primary objective is to enable the court to deal with cases justly (rule 2(2)). Dealing with a case justly includes ensuring that the procedure is fair to all parties (rule 2(3)).
[58] For all the reasons set out above, I find Mr. Maltz’s conduct comes within the scope of rule 24(9) and he should be personally responsible for the costs of the motion.
[59] Order to go as follows:
a. Mr. Maltz shall be personally responsible for paying the costs of $6,500 as ordered by Gilmore J.
[60] The Applicant was successful on her motion and presumptively entitled to her costs of the motion before me. If the parties are unable to agree on costs of the motion before me within 10 days of release of this order, the Applicant shall serve and file cost submissions, limited to two pages, not including her bill of costs and any offers to settle. Within five business days of receipt of the Applicant’s cost submissions the Respondent shall serve and file any responding material, also limited to two pages, not including his bill of costs and any offers to settle. The parties can assume that I am familiar with rule 24 of the Family Law Rules and recent case law.
Justice S. Shore
Released: March 2, 2020
Footnotes
[^1]: On December 13, 2019, Mr. Maltz swore an affidavit in which he alleged that he sent the documents to the law firm of Horowitz, Finder for a second opinion and they opined that the divorce was final and that the firm removed the designation of matrimonial home from the properties. At para. 37, Mr. Maltz specifically stated that “Horowitz, Finder acted for the Respondent and billed the Respondent directly”. As set out below, these statements proved to be untrue.
[^2]: At para. 68 of his December 13, 2019 affidavit, Mr. Maltz stated “At no time did I assist the Respondent in avoiding any obligations that were imposed upon him by the courts of Ontario”. Except that at the time Mr. Maltz both paid himself and transferred the money to the Respondent, the Respondent had not paid any support as per the court orders and all the cost orders were outstanding.