Court File and Parties

COURT FILE NO.: CV-15-1888-00A1 DATE: 2021 02 22

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Sonia Preiano and Gianluca Preiano, Plaintiffs AND Giuseppe Cirillo, the Estate of Giuseppe Cirillo and Antonia Cirillo, Defendants

BEFORE: The Honourable Justice LeMay

COUNSEL: James Smith, for John M. Gray, former solicitor of the Defendants Grace Cirillo, Self-Represented

ENDORSEMENT

[1] This is a contentious dispute that involves a number of different parties and motions. The underlying action relates back to the aborted sale by the Defendants to the Plaintiffs of a property on Cawthra Road in Mississauga.

[2] Ms. Grace Cirillo is the representative of the Estate of Giuseppe Cirillo and is the litigation guardian of Antonia Cirillo. In other words, she is the personal representative of all of the Defendants. She has been self-represented since she terminated the services of the Defendants’ former counsel in June of 2019. I will refer to her as Ms. Cirillo throughout these reasons.

[3] Mr. John Gray was the Defendants’ former solicitor until his role as solicitor was ended by Ms. Cirillo in June of 2019. In the motion before me, the Defendants are seeking to set aside the November 4th, 2020 decision of Miller J. granting Mr. Gray a charging order over costs that the Plaintiffs are obligated to pay to the Defendants. The Plaintiffs took no part in the motion before me.

[4] For the reasons that follow, the Defendants’ motion is dismissed.

Background

[5] Some brief background is necessary to explain how this motion came to be before me.

[6] The Plaintiffs originally brought a summary judgment motion against the Defendants in the underlying litigation. They abandoned that motion in June of 2019. Shortly after the Plaintiffs abandoned that motion, the Defendants terminated the services of Mr. Gray as counsel.

[7] In January of 2020, Ms. Cirillo brought a motion seeking costs for the Plaintiffs’ abandoned summary judgment motion. This motion was heard by Barnes J. on January 31st, 2020. On February 21st, 2020, Barnes J. ordered Mr. Gray to file a costs outline, which was done. On August 4th, 2020, Barnes J. ordered the Plaintiffs to pay costs in the sum of $17,270.18.

[8] On September 24th, 2020, Miller J. heard a motion brought by Mr. Gray seeking a charging Order against the costs that Barnes J. had ordered. Miller J.’s decision was released on November 4th, 2020 (see 2020 ONSC 6781) and sets out a detailed history of how the charging order came to be claimed by Mr. Gray. Having read the motion material filed on this motion as well as previous materials that the parties have referenced me to, I adopt the history set out by Miller J. in her reasons and have considered it in reaching my conclusions on this motion.

[9] Miller J. decided that Mr. Gray was entitled to a charging order over the costs that Barnes J. had ordered. Ms. Cirillo has brought a motion before me to have the Order and decision of Miller J. set aside on the basis of fraud on the part of Mr. Gray and a claim that facts were discovered after the motion was decided.

[10] In addition, the Plaintiffs have not paid Mr. Gray the costs that Barnes J. ordered. This is in spite of the fact that, prior to the motion before Miller J., counsel for the Plaintiffs only advised Mr. Gray that the Plaintiffs were not able to pay the costs to Mr. Gray until the Court had disposed of the charging motion. Mr. Gray assumed that this statement meant that the monies would be forthcoming once the charging motion was decided.

[11] Since the costs ordered by Barnes J. have not been paid by the Plaintiffs, a further motion has been brought by Mr. Gray to seek these costs from the Plaintiffs. That motion is scheduled for March 2nd, 2021.

The Cirillo’s Claim

[12] It is clear that there is a significant dispute between Ms. Cirillo and Mr. Gray about the legal services that Mr. Gray provided. Ms. Cirillo has sought to have Mr. Gray’s accounts assessed. This assessment was originally scheduled last year, but has not taken place because of the ongoing pandemic.

[13] On this motion, Ms. Cirillo argues that the decision of Miller J. should be set aside based on fraud. Ms. Cirillo advances the following three specific allegations of fraud against Mr. Gray:

a) Mr. Gray wrote off the accounts that he had not been able to collect from the Cirillos and his accounting system showed a $0 balance. This fact was not disclosed to Miller J.

b) The funds were not actually being held by the Plaintiffs’ counsel.

c) Mr. Gray has, in Ms. Cirillo’s view, failed to comply with various Law Society of Ontario by-laws regarding financial records.

[14] I reject all of these claims. None of these claims are established on the record before me. In any event, none of these claims would be grounds to set aside the Order of Miller J. even if they were proven.

The Writing Off of the Cirillos’ Accounts

[15] The fact that Mr. Gray has written off the Cirillos’ accounts is an accounting exercise designed to avoid immediately triggering a tax liability for money that Mr. Gray may never receive. This write-off does not change the fact that Mr. Gray is still seeking to collect some of the money from the Plaintiffs and he is still defending the costs assessment.

[16] Indeed, as I have mentioned above, a motion has been brought by Mr. Gray, and is returnable on March 2nd, 2021. The purpose of that motion is to enforce the charging order and the underlying costs order against the Plaintiffs. This is a clear indication that Mr. Gray has not abandoned the accounts.

[17] The accounts have been written off because, at this point, they may be very difficult (if not impossible) to collect. The Plaintiffs have so far refused to pay any of the costs that Mr. Gray is entitled to collect from them. Similarly, Ms. Cirillo and the other Defendants have refused to pay any of Mr. Gray’s costs.

[18] In the course of submissions before me, Ms. Cirillo argued that there was no evidence that the Defendants would not pay Mr. Gray’s costs. I reject that assertion for two reasons:

a) The Defendants have made it clear, by both their words and their conduct that they do not intend to pay Mr. Gray anything if they can avoid doing so. The reasons for that conclusion were set out in Miller J’s reasons and I adopt her reasoning.

b) In her argument before me, Ms. Cirillo made serious allegations of fraud against Mr. Gray, as well as suggesting that his conduct was unreasonable. These submissions are inconsistent with Ms. Cirillo’s submission that there was “no evidence” that the Defendants would not pay Mr. Gray’s costs.

[19] It is, therefore, not unreasonable for Mr. Gray to avoid paying income tax and HST on monies he may never receive. Absent some evidence that writing the account off at this point would be fraudulent, I decline to find that writing off the account was improper, much less fraudulent.

[20] Finally, even if Mr. Gray has engaged in fraud under the Income Tax Act (which, as I have said, I do not see on the record before me) this is not a fact that would have prevented him from obtaining a charging order. The dispute over the charging order is a dispute between the Defendants and Mr. Gray. Any dispute over Mr. Gray’s taxes is a matter between him and the Canada Revenue Agency.

[21] To that end, I also note that Ms. Cirillo has alleged that she is familiar with accounting and knows that Mr. Gray’s conduct is Income Tax Act fraud. There are three responses to this submission:

a) Ms. Cirillo is not qualified as an expert before this Court in either accounting or in tax law.

b) I repeat my conclusion that there is nothing in the records before me that supports an allegation that Mr. Gray has engaged in fraud.

c) The fact that Mr. Gray wrote the accounts off does not preclude him from trying to collect on them and then paying the relevant taxes on them once he does collect.

[22] I should repeat, for clarity, that there is nothing in the records before me to suggest that Mr. Gray has engaged in any improper or fraudulent conduct with respect to either the writing off of the accounts or his alleged failure to advise Miller J. of the fact that he had written off the accounts.

The Funds Were Not Being Held by Plaintiff’s Counsel

[23] This issue raises the question of whether the funds were in existence at the time that Miller J.’s order was made. This is one of the three parts of the test for granting a charging order. At paragraph 32 of her reasons, Miller J. found that the funds were in existence and preserved as they were being held by Plaintiffs’ counsel.

[24] Since the monies have not been paid by Plaintiffs’ counsel, Ms. Cirillo argues that they were not preserved by Plaintiffs’ counsel and, therefore, a charging order should not have been granted. She also argues that this alleged non-preservation was a fact that was not known to Miller J. and that Mr. Gray did not disclose it.

[25] I reject Ms. Cirillo’s arguments on this issue for three reasons:

a) It is not clear on the records as to whether the funds exist but have simply not been paid because of ongoing disputes or whether the funds do not exist at all.

b) If there was a misrepresentation to Miller J., it was not Mr. Gray’s responsibility as he was reasonably relying on information that he had received from Plaintiffs’ counsel.

c) Mr. Gray is taking steps personally to ensure that the Plaintiffs do pay the monies covered under the charging order.

[26] Ms. Cirillo’s argument on this point raises a larger issue. In argument, Ms. Cirillo confirmed that the Defendants are alleging that Mr. Gray, even when he was purportedly acting for them, was actually assisting the Plaintiffs who were engaged in a fraud against the Cirillos. This is a very serious accusation and underpins much of what Ms. Cirillo argued before me on this motion. There is no evidence to support any of these claims in the record before me and I reject them.

[27] However, I hasten to add that nothing in my reasons should be taken as binding the assessment officer to make the same findings. The assessment process will allow for a full and complete presentation of the dispute between the Cirillos and Mr. Gray.

Compliance With Law Society By-Laws

[28] Ms. Cirillo alleges that Mr. Gray’s records do not comply with various Law Society by-laws. I do not need to resolve this issue. Mr. Gray’s compliance (or non-compliance) with Law Society requirements is not a matter that would generally affect whether he was entitled to a charging order. It might affect the outcome of the costs assessment, and any issues in this regard are best left to the assessor or to the Law Society.

Conclusion

[29] Finally, I would note that, it was open to Ms. Cirillo to appeal the Order of Miller J. No appeal was taken. The decision of Miller J. was a discretionary decision and there is no basis for it to be set aside on the record before me.

[30] For the foregoing reasons, the motion to set aside Miller J.’s order is dismissed.

Other Issues

[31] Ms. Cirillo has raised a number of other issues about Mr. Gray’s alleged conduct. Those issues include:

a) The Defendants allege that they did not receive invoices or trust statements from Mr. Gray.

b) Evidence relating to Mr. Gray’s banking records was not provided.

c) Proper retainers were not provided.

[32] The Defendants may be correct with respect to all of these issues. The Defendants may also be completely wrong about all of these issues. It is not my responsibility to determine these questions as they do not relate to any part of the test for granting a charging order. These issues will be determined by the costs assessment when it ultimately takes place.

[33] In addition, the Defendants seem to state that there is no order that has been taken out directing the payment of the costs to Mr. Gray and that the Defendants did not approve a draft order as to form and content. However, I understand that the Orders relating to Miller J.’s decisions have been taken out. Either way, I do not see how any dispute in this regard relates to the motion before me.

The Real Estate File

[34] Ms. Cirillo seeks the entirety of the real estate file in Mr. Gray’s possession. Mr. Gray has confirmed that, although he is able to assert a lien on the file, he will produce the file once the Plaintiffs have paid the costs that are covered by the charging order. I am of the view that this is an entirely reasonable position for Mr. Gray to take, at least at this stage in the proceeding.

[35] Ms. Cirillo has made very serious allegations of fraud against Mr. Gray. None of these allegations have been substantiated in any way on the record before me. As a result, it is necessary to provide explicit instructions on how this file is to be delivered to Ms. Cirillo when the time comes. It is clear that Ms. Cirillo cannot attend at Mr. Gray’s office and that the two of them should not have any in-person contact outside of a formal courtroom setting.

[36] Ms. Cirillo has argued that she should not be required to pay for a courier to receive this file. I disagree. At this point, it is Ms. Cirillo’s allegations of fraud that prevent her attendance at Mr. Gray’s office and, indeed prevent any contact that is not in writing with Mr. Gray.

[37] As a result, Ms. Cirillo is to pay the costs of a courier to collect the file when it is ready for pick-up. The courier company must be an independent third-party courier, and cannot be a friend or relative of Ms. Cirillo’s. She is to identify the courier company in advance to Mr. Gray to ensure that there are no misunderstandings. All communications between Mr. Gray and Ms. Cirillo are to be in writing.

Conclusion and Costs

[38] For the foregoing reasons, the Defendants’ motion to set aside the decision of Miller J. is dismissed.

[39] The real estate file is to be collected by an independent third-party courier at the expense of the Defendants and only once the charging orders are satisfied.

[40] Further, I am of the view that the costs assessment issues between the Defendants and Mr. Gray should not consume any further Court time. As a result, the issues in the costs claim between Mr. Gray and the Defendants are all to be addressed through the costs assessment. Other than enforcement motions against the Plaintiffs, no further motions may be brought in Superior Court relating to the costs dispute between Mr. Gray and the Defendants without leave of a judge of the Superior Court.

[41] Finally, there is the issue of the costs of this motion. The parties are encouraged to agree on the costs. Failing agreement, Mr. Gray is to serve and file his costs submissions within fourteen (14) calendar days of today’s date. Those submissions are to be no more than two (2) single-spaced pages, exclusive of bills of cost, case law and offers to settle.

[42] Ms. Cirillo is to file her responding costs submissions within fourteen (14) days of receiving Mr. Gray’s costs submissions. Those submissions are also to be no more than two (2) single-spaced pages, exclusive of bills of cost, case law and offers to settle.

[43] The parties are to file these submissions with the Court office and provide my judicial assistant with a copy of same. In order for the parties to have properly filed their submissions, they must do both. Other than providing my judicial assistant with their costs submissions, the parties are not permitted to communicate with her.

[44] There are to be no reply submissions without my leave. There are also to be no extensions to the deadlines I have set out above, even on consent, without my leave. In the event that costs submissions are not delivered in accordance with the timetable I have set out above, there shall be no costs.

LeMAY J. DATE: February 22, 2021