Court File and Parties
COURT FILE NO.: CV-17-00578306 MOTION HEARD: 20201001 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Frank Raso and Thelma Raso, Plaintiffs AND: Jillian Bayne, Defendant
BEFORE: Master B. McAfee
COUNSEL: Alan Price, Counsel, for the Plaintiffs Francine Papadopoulos, Counsel, for the Defendant Evan Tingley, Counsel, for the Non-Party, the Creditor, Pezzack Financial Services Inc.
HEARD: October 1, 2020
REASONS FOR DECISION
[1]
Introduction
The plaintiffs Frank Raso (Frank) and Thelma Raso (Thelma) (collectively the plaintiffs) move pursuant to Rule 60.08(16) of the Rules of Civil Procedure for an order exempting the settlement funds in the within action from garnishment by a non-party creditor Pezzack Financial Services Inc. (Pezzack).
2The plaintiffs originally sought to bring this motion before a Judge. A triage Judge determined that this motion was within a Master’s jurisdiction and directed the request to schedule a short opposed motion to a Master. Pursuant to the triage directions of Administrative Master Graham dated August 20, 2020, this motion was assigned to me. On September 10, 2020, a telephone case conference was convened before me. The parties agreed that there was no issue of the jurisdiction of a Master to hear this motion. This motion was subsequently scheduled to be heard on October 1, 2020, before me.
[3]
Background
On or about November 15, 2015, Pezzack commenced action no. CV-15-540270 against Frank and Thelma arising from a mortgage default (the mortgage action). On or about September 14, 2016, Pezzack obtained a consent judgment in the mortgage action against Frank in the amount of $3,244,344.28. The amount of approximately $2,127,866.79 remains unpaid.
4On or about July 5, 2017, Frank and Thelma commenced the within action against Jillian Bayne (Bayne). The within action is a personal injury action arising from a motor vehicle accident that occurred on or about January 31, 2016.
5On or about December 14, 2017, a notice of garnishment was issued in the within action naming Pezzack as creditor, Frank as debtor, and Bayne as garnishee.
6On or about December 17, 2019, the within action settled on the basis of a payment by Bayne in the all-inclusive amount of $145,000.00, for general damages, medical treatment expenses, pre-judgment interest, legal costs, and disbursements. No amount of the settlement was allocated to income loss or to Thelma’s Family Law Act claim.
[7]
Positions of the Parties
The plaintiff’s position is that the court should exercise its discretion to exempt the full amount of the settlement in the within action from garnishment because the settlement is damages for pain and suffering.
8Pezzack’s position is that the court should not exempt any amount of the settlement from garnishment because Frank has not come to court with clean hands. In the alternative, it is Pezzack’s position that no more than the amount of $81,687.12, being damages for pain and suffering, should be exempt from garnishment.
9Bayne takes no position on the motion.
10For the following reasons, I am satisfied that the full amount of the settlement in the within action ought to be exempt from garnishment by Pezzack.
[11]
Analysis
Frank bears the onus of demonstrating that the settlement ought to be exempt from garnishment (House v. Baird, 2019 ONSC 1712 (Ont. S.C.J.), para. 62).
12In 20 Toronto Street Holdings Ltd. v. Coffee, Tea or Me Bakeries Inc. (2001), 2001 CanLII 28048 (ON SC), 53 O.R. (3d) 360 (Ont. S.C.J.) Justice Nordheimer states at para. 5:
I start from the basic proposition that garnishment is an equitable remedy and, as suggested by the use of the word “may” in subrule 60.18(16) above, the court may therefore make whatever order it deems just in the particular circumstances of any given case. As stated in the Halsbury’s Laws of England, 4th ed., vol. 17 at para. 539:
The court’s power to make a garnishee order, whether it is an order nisi or an order absolute, is discretionary. A garnishee order is basically an equitable remedy, and it may be refused where the attachment of the debt would work inequitably or unfairly or cause prejudice or injustice to some person or persons other than the judgment creditor.
13As cited in Sobeys v. UFCW, Local 175, 2013 ONSC 1207 (Ont. S.C.J.) at para.45, Justice Riddell in Richards v. Collins (1912), 1912 CanLII 1305 (ON SC), 27 O.L.R. 390, states at p. 398:
It is a well-recognised principle of equity that “he who seeks equity must do equity.” In many instances this contains a pun on the word “equity” and means nothing more than that, “he who seeks the assistance of a Court of Equity must in the matter in which he so asks assistance do what is just as a term of receiving such assistance.” “Equity” means “Chancery” in one instance and “right” or “fair dealing” in the other.
[14]
The Clean Hands Doctrine
Pezzack argues that Frank has not come to court with clean hands because Frank delayed the progress of the mortgage action and repeatedly tried to evade execution of Pezzack’s judgment.
15In the mortgage action there was a four-month delay between the initial return date and the final return date of Pezzack’s motion for summary judgment. The summary judgment motion was adjourned four times at Frank’s request. Ultimately, Frank consented to judgment the day prior to the final return date. According to the endorsements of the Judges who granted the adjournments, the adjournments were granted for medical reasons and to allow Frank an opportunity to retain a lawyer. The delay has been adequately explained by Frank.
16Pezzack argues that Raso tried to evade the collection of the judgment in the mortgage action by falsely claiming that Thelma owned chattels, concealing the existence of a counterclaim in another action, and alleging a sham trust.
17With respect to the alleged false statement concerning Thelma’s ownership of $150,000.00 of chattels, the representation in this regard is contained in an agreement of purchase and sale signed by the plaintiffs and the purchasers dated September 18, 2016. Although Pezzack relies on subsequent power of sale proceedings and Thelma’s subsequent statement of affairs, the record before me does not satisfy me that at the time the agreement of purchase and sale was signed, it contained a false statement concerning Thelma’s ownership of certain chattels. In addition, the agreement of purchase and sale did not close.
18Pezzack alleges that Frank concealed the fact that he was a plaintiff by counterclaim in an action involving Colacci (the Colacci action). On the February 2017 examination in aid of execution of Frank in the mortgage action, Frank was asked about his involvement in other litigation. On the examination, Frank testified: “I have a Colacci lawsuit on the go…He’s suing me for damages of his house, I believe. I don’t know. Mr. Moldaver will answer those questions.” There was an undertaking to produce the pleadings and advise of the status of the Colacci action. Frank states that there is a law suit, states that he does not know and an undertaking is given to produce the pleadings in the Colacci action and advise of the status of the Colacci action. In my view Frank was not attempting to conceal the existence of a counterclaim.
19Frank and Colacci ultimately settled the Colacci action based on a payment to Frank in the amount of $790,000.00. Frank then brought a motion to have the settlement funds payable to 1598356 Ontario Inc. (159 Ontario) arguing that Frank held the settlement funds in trust for 159 Ontario. Pezzack argued that Pezzack was entitled to payment of the settlement funds. Justice Koehnen was not satisfied of the existence of a trust and dismissed Frank’s motion and ordered the settlement funds to be paid into court pending the disposition of any appeals. Frank’s appeal to the Court of Appeal was dismissed. Leave to appeal to the Supreme Court of Canada was denied. Frank’s unsuccessful motion/appeal/leave to appeal and a finding that Frank’s conduct was not consistent with a trust and amounts to a sham does not in my view rise to the level of a lack of clean hands. The settlement funds in the Colacci action were paid to Pezzack with interest shortly after leave was denied.
[20]
Exemption of Personal Injury Damages
In House Justice Braid states at para. 63:
There is no settled approach to how the categories of damages should be allocated to out of court settlements. Where settlements are not broken into constituent components, the court may allocate the settlement into the heads of damages as best it can.
21In the within action, plaintiffs’ counsel billed legal fees of $47,467.82, leaving $97,532.18 comprising of “general damages, medical treatment expenses, [and] pre-judgment interest.” I agree with Pezzack’s allocation of the non-interest, non-costs portion of the settlement being $81,687.12. The amount of $81,687.12, plus $15,845.06 being 5 % interest for 1,416 days equals $97,532.18. On the motion, Frank took no issue with Pezzack’s allocation of the settlement. On the motion both parties referred to damages for pain and suffering and no submissions were made by either party concerning any allocation of those damages for medical treatment expenses.
22In Mullin v. R-M & E Pharmacy, 2005 CanLII 1073 (ON SC), [2005] O.J. No. 196 (Ont. S.C.J.) the court determined that general damages for pain and suffering were exempt in the circumstances of that case. Associate Chief Justice Cunningham states at para. 9:
I liken this situation to that of bankruptcy. It is the law of Ontario that damages awarded for pain and suffering are exempt from a bankrupt’s trustee. As Goodman J.A. stated in Re Holley (1986), 1986 CanLII 2586 (ON CA), 54 O.R. (2d) 225, [1986] O.J. No. 165 (C.A.), at p. 240 O.R.:
It is clear that where damages for which the bankrupt asserts a claim are personal in nature, whether it be for physical suffering resulting from physical injuries sustained as a result of the negligence of another person or mental suffering from a libel or slander perpetrated upon him, such course of action does not become the property of his trustee in bankruptcy because it is not the policy of the law to convert into money for the creditors the mental or physical anguish of the debtor.
23In House, Justice Baird states at para. 70:
(a) Garnishment is an equitable remedy. As such, the court has the jurisdiction to exempt personal injury damages from pain and suffering from garnishment under Rule 60.08(16). The parties agree that damages for pain and suffering are not subject to garnishment: see Mullin v. R-M & E Pharmacy (2005), 2005 CanLII 1073 (ON SC), 74 O.R. (3d) 378 (S.C.).
(b) Damages that are personal in nature (such as damages for pain and suffering, future care and housekeeping) are not ordinarily subject to seizure by creditors: see Conforti (Re), 2015 ONCA 268.
24Relying on Mullin and House, I am satisfied that the amount of $81,687.12, being damages for pain and suffering, are exempt from garnishment. I am also satisfied that the amount allocated to pre-judgment interest on the damages ($15,845.06) and legal fees and disbursements incurred in obtaining the damages ($47,467.82), ought to be exempt. Pre-judgment interest, legal fees and disbursements were incurred with respect to the settlement for damages for pain and suffering.
25I am satisfied that in the circumstances of this case it is just to exercise my discretion to exempt the full amount of the settlement in the within action from garnishment.
[26]
Costs
If successful, the plaintiffs sought costs in the all-inclusive sum of $10,000.00. If successful, Pezzack sought costs in the all-inclusive sum of $9,000.00. The plaintiffs were successful on the motion and are entitled to costs of the motion in the all-inclusive sum of $10,000.00, a fair and reasonable amount that Pezzack could expect to pay for costs in all the circumstances.
[27]
Order
Order to go as follows:
The settlement in the within action, being the amount of $145,000.00, shall be exempt from garnishment by Pezzack.
Costs of this motion are fixed in the all-inclusive sum of $10,000.00 payable by Pezzack to the plaintiffs within 30 days.
Master B. McAfee
Date: November 2, 2020