COURT FILE NO.: FS-15-00404561-0000

DATE: 20210909

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Lynne Catherine Foulidis, Applicant

AND:

George Foulidis (Self-Rep), and Jodi L. Feldman, Respondents

Email for Jodi L. Feldman: jfeldman@jfeldmanlaw.com

BEFORE: Shore, J.

COUNSEL: Caplan Gary M, for the Applicant Email: gcaplan@mer.law

Harold Niman and Sean Zeitz, for the Respondent Jodi L. Feldman Emails: niman@nimancounsel.ca and szeitz@lzwlaw.com

HEARD: July 29, 2021

ENDORSEMENT

[1] This is a motion brought by the Applicant’s former lawyer for a charging order to be registered on a property known as 17 Airley Crescent, Toronto, Ontario (“the Property”), on any proceeds or funds with respect to the Applicant’s entitlement to an equalization payment and on any funds preserved by court order.

[2] In July 2015, the Applicant, Ms. Foulidis, retained Jodi L. Feldman Professional Corporation (“JF” or “Ms. Feldman”) to represent her on all issues arising from the breakdown of her marriage to the Respondent, Mr. G. Foulidis. Ms. Feldman represented the Applicant for approximately 3.5 years. During that time, JF rendered seven invoices to the Applicant. The last invoice rendered to Ms. Foulidis in February 2018 showed a balance owing of $664,323.38 to JF, from a total legal bill of approximately $730,000. JF and the Applicant parted ways in February 2018. There is no dispute that the retainer ended at that time.

[3] Upon ending the retainer, JF commenced a civil action by way of a Statement of Claim against the Applicant, seeking legal fees in the sum of $664,323 (“the civil action”). The Applicant filed a Statement of Defence and Counterclaim in that action, making a $2 million claim against JF for negligence in the matrimonial file. In November 2018, JF amended her Statement of Claim to include a claim for a charging order on the same property as set out in this motion. In December 2018, a Certificate of Pending Litigation (CPL) was registered against the home in the civil action. Very little has happened in those proceedings since that time.

[4] There were other proceedings commenced between JF and the Applicant. In April 2018, the Applicant requested an assessment of the legal fees. In April 2019, JF commenced a claim in Small Claims Court to recover an alleged personal loan in the sum of $9,300 that Ms. Feldman alleges she personally made to the Applicant.

[5] JF has now brought this motion for a charging order in the family proceedings and not in the civil action.

[6] In the meantime, in June 2018 shortly after Ms. Feldman started the civil action, Mr. Foulidis and the Applicant resolved their matrimonial dispute in family court by entering into Minutes of Settlement. One of the terms of the Minutes included a transfer of the Property into Mr. Foulidis’s name, subject to the CPL registered on title by JF. Title to the Property is now held by Mr. Foulidis.

[7] Prior to transferring the home to Mr. Foulidis, the Applicant signed documents for a second mortgage to be registered on title, in the sum of $525,000, in favour of Danny Foulidis (“Danny”). Danny is the Applicant’s former brother-in-law. Danny has been added as a party to the civil action. More details regarding the terms surrounding this mortgage are set out below.

[8] The questions before this court are as follows:

1. Should this motion have been brought in the civil action as opposed to the family proceedings?

2. Should a charging order/solicitor’s lien be placed on the Property, title to which is now registered in Mr. Foulidis’ name?

[9] For the reasons set out below, I find that the motion can and should be determined by this court and that a charging order should be placed on the Property. All future proceedings related to the charging order or legal fees owing shall be brought within the civil action.

1) Should this motion have been brought under the civil proceedings?

[10] Before determining whether a charging order should be placed on the property, I must determine if this motion should have been brought under the civil action and not within the family proceedings.

[11] The judges sitting in both Family Court and Civil Court are judges of the Superior Court of Justice. Both have jurisdiction to hear this motion. A charging order is a stand-alone action in that a litigant lawyer does not need a separate action to bring a motion for a charging order. A charging order can be brought under the proceeding in which the work was done. Technically, it was not wrong of JF to bring her motion in this court. The work Ms. Feldman did for the Applicant was in family court.

[12] However, JF commenced an action by way of a statement of claim in civil court. In that claim JF amended her pleadings specifically to be able to obtain a charging order against the Property. At first glance, it appears that this motion should have been brought under the civil action, to avoid multiplicity of proceedings and to have all of the issues related to the same matter be decided by the same court. Should the motion be sent back to be heard under the civil action?

[13] The primary objective of the Family Law Rules, O. Reg. 114/99, rr. 2(2) to 2(4), provides as follows:

PRIMARY OBJECTIVE

2(2) The primary objective of these rules is to enable the court to deal with cases justly.

DEALING WITH CASES JUSTLY

(3) Dealing with a case justly includes,

(a) ensuring that the procedure is fair to all parties;

(b) saving expense and time;

(c) dealing with the case in ways that are appropriate to its importance and complexity; and

(d) giving appropriate court resources to the case while taking account of the need to give resources to other cases.

DUTY TO PROMOTE PRIMARY OBJECTIVE

(4) The court is required to apply these rules to promote the primary objective, and parties and their lawyers are required to help the court to promote the primary objective.

[14] There are similar provisions in the Rules of Civil Procedure, R.R.O. 1990, Reg. 194:

1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits..

[15] At first instance, the motion should have been brought under the civil action because all of the relief would be available in one court and the relief being requested on this motion was specifically requested in the pleadings in the civil action. However, family court also has jurisdiction to hear the matter. Further, the motion has now been brought and argued in its entirety before this court. It would be a waste of time, money and court resources to send this matter back to the civil court to be reargued. Considering both the primary objective in the Family Law Rules and in the Rules of Civil Procedure, I am prepared to determine the motion and not send it back to be reargued in the civil proceedings. However, all future litigation related to the CPL, the charging order, the legal fees owing and the counter claim for negligence shall proceed in civil court.

2) Should a charging order be placed on the Property, title to which is now registered in Mr. Foulidis’s name?

[16] Solicitors’ charging orders are a unique right to solicitors. There are two kinds of charging orders. There is the statutory order, which is preserved by s. 34 of the Solicitors Act, R.S.O. 1990, c. S.15, and there is a charging lien which is a “manifestation of the inherent jurisdiction of common law courts and courts of equity”: see Thomas Gold Pettinghill LLP v. Ani-Wall Concrete Forming Inc., 2012 ONSC 2182, 349 D.L.R. (4th) 431, at para. 99.

[17] Section 34(1) of the Solicitors Act provides as follows:

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.

[18] A charging order is a statutorily based proprietary right of a lawyer to claim property owned by a client or former client when the lawyer’s acts were instrumental in recovering the property. A charging order is similar to a charging/solicitor’s lien, which is a manifestation of the common law court’s and the court of equity’s inherent jurisdiction: see Weenen v. Biadi, 2018 ONCA 288, 141 O.R. (3d) 276, at para. 10, and Ani-Wall Concrete, at para. 84. Charging orders exist alongside, and in addition to, a court’s inherent jurisdiction to grant a solicitor’s lien: Weenen, at para. 16.

[19] The two orders are both subject to the same three-part test: see Weenen, at para. 17. However, a lien is usually made against funds and is acquired the moment property has been recovered or preserved by the proceedings. A charging order can be made on real estate: see Morton (Re), 2014 ONSC 5438, 50 R.F.L. (7th) 357, at paras. 50-51.

[20] The rationale behind granting a solicitor a lien or a charging order on the fruits of an action is to recognize that it is unfair for a party to enjoy the results of a solicitor’s work without paying the solicitor’s account incurred in achieving the result. Further, it fosters and creates an environment that protects solicitors who act for persons who are unable to pay for legal services upfront. In effect, it is an access to justice issue as well as an equity issue: see Taylor v. Taylor (2002), 2002 CanLII 44981 (ON CA), 60 O.R. (3d) 138 (C.A.), at para. 29.

[21] As the Court of Appeal explained in Weenen, at para. 15., to obtain a charging order or charging lien, a lawyer must demonstrate that:

1. the fund, or property, is in existence at the time the order is granted;

2. the property was recovered or preserved through the instrumentality of the lawyer; and

3. there must be some evidence that the client cannot or will not pay the lawyer’s fees.

[22] The onus is on the lawyer to demonstrate that a charging order or lien should be granted.

i) Does the Property currently exist?

[23] By the time this motion was heard, title to the Property was already registered in Mr. Foulidis’s name. In light of the facts of this case, I do not find that fatal to JF’s position. It is important to set out the chronology of events to understand my analysis and findings on this issue.

[24] In December 2000, the Property was purchased by a numbered company, which in turn was owned by Danny Foulidis, Mr. Foulidis’s brother. The parties, being Mr. and Mrs. Foulidis, moved into the Property in September 2002 while the Property was still owned by the numbered company.

[25] On May 18, 2006, Ms. Foulidis signed an Acknowledgement and Direction wherein she directed a real estate lawyer to register a transfer of title of the Property into her name and acknowledged and agreed that Danny loaned her $450,000 for the development of the house, and that this loan was without interest and was payable on demand, with liability for the repayment arising on demand. On May 23, 2006, the property was transferred into Ms. Foulidis’s name. Mr. and Mrs. Foulidis thereafter continued to live together in the Property until the breakdown of their marriage.

[26] The parties separated in July 2015. JF was retained shortly thereafter. JF commenced a divorce proceeding for Ms. Foulidis on July 21, 2015 and continued to represent her for the next 3.5 years.

[27] In October 2016, Danny issued a demand to be paid on the loan. On November 15, 2016, Danny started a lawsuit against Ms. Foulidis to recover the money owing to him. Danny also claimed an equitable interest in the Property. JF assisted Ms. Foulidis in retaining civil counsel and thereafter Ms. Foulidis filed a defence. In her Statement of Defence, Ms, Foulidis alleged that she signed the Acknowledgement and Direction under duress by Mr. Foulidis, who insisted the document be signed for legal reasons and assured her the loan would never be called. Ms. Foulidis added Mr. Foulidis as a third party to the civil proceedings, alleging the loan was really between Danny and Mr. Foulidis.

[28] Thereafter, the retainer between Ms. Foulidis and JF was terminated in February 2018, and the civil lawsuit was commenced by JF on February 15, 2018.

[29] The trial between Danny and Ms. Foulidis was scheduled to be heard on April 12, 2018, for three hours. In March 2018, on the day before the deadline for cross-examinations, Ms. Foulidis settled the lawsuit with Danny by way of Minutes of Settlement which provided for a mortgage to be placed on the Property in the amount of approximately $525,000. Danny would pay the outstanding property taxes and $40,000 to Ms. Foulidis. The Minutes also permitted Ms. Foulidis to repay the $450,000 loan without interest, with the full amount of the mortgage and 4% interest to become due on the fifth anniversary. Both parties were represented by lawyers at the time.

[30] On April 23, 2018, Ms. Foulidis served JF with a Notice of Preliminary Appointment for a solicitor client assessment of JF’s accounts. This application was stayed pending the outcome of the civil action.

[31] On June 14, 2018, the parties, being Mr. and Ms. Foulidis, settled the family law proceedings by signing Minutes of Settlement. The Minutes of Settlement included (but are not limited to) the following terms:

• The Property would be transferred to Mr. Foulidis, subject to the current encumbrances, which included a mortgage to RBC securing a line of credit frozen at about $500,000, and Danny’s mortgage of $525,000. (JF submits the property had a gross value between $1,275,000 and $1,350,000 at this time);

• Ms. Foulidis would have exclusive possession of the Property until March 2025, rent free;

• Mr. Foulidis would pay all the expenses on the Property and would not sell the Property until March 2025. It cost approximately $20,000 a year to maintain the Property; and

• Mr. Foulidis will pay Ms. Foulidis an increasing amount of spousal support for the next twenty years, having an approximate value of $1,115,000.

[32] JF brought a successful motion in September 2018 to amend her Statement of Claim to add Danny as a defendant and seek a declaratory order that the mortgage was void as being contrary to the provisions of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29.

[33] In December 2018 JF brought another successful motion to register a Certificate of Pending Litigation against title to the Property.

[34] In February 2021, JF served these motion materials (for a charging order) on both Mr. and Ms. Foulidis.

[35] In March 2021, the Property was transferred to Mr. Foulidis, allegedly under the terms of the Minutes of Settlement. The Property was transferred subject to the Certificate of Pending Litigation that JF had registered on title.

[36] JF submits that under s. 34(2) of the Solicitors Act, “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”. In other words, JF takes the position that the transfer of the Property to Mr. Foulidis was a fraudulent conveyance and her interest in the property therefore exists.

[37] As of the beginning of March 2018, both Mr. and Ms. Foulidis were aware of JF’s intent to recover her fees. They signed their own agreement in April 2018 to transfer the home to Mr. Foulidis. JF did not make a claim for a charging order until later that year, but the parties were aware the civil action was commenced, with JF seeking to recover over $600,000 in legal fees. Ms. Foulidis’s primary asset was the Property. In February 2021, both Mr. and Ms. Foulidis became aware of JF’s motion to obtain a charging order against the property and in March 2021 the Property was transferred under the June 2018 agreement.

[38] Without commenting on the strength of the argument, on the evidence before me, I am satisfied that there is a triable issue with respect to the fraudulent nature of the conveyance to Mr. Foulidis and the validity of the loan between Danny and Ms. Foulidis. JF has met her onus in this regard. Ultimately, this issue will need to be determined in the civil action, but if successful, the conveyance of the Property will be found to be void. I am not prepared to quantify the equity available in the Property to satisfy the charging order or the quantum of the charging order based on the evidence before me. These issues will need to be determined in the civil action.

[39] For the purpose of this motion, I find that Mr. Foulidis was not a bona fide third party without notice of the claims, but whether JF can prove a fraudulent conveyance is something that will need to be determined in the civil proceedings. If ultimately there is a finding that there was no fraudulent conveyance, and the property did not exist when the claim for this charging order was made, then my order can be set aside in the civil action.

[40] As set out at in Ani-Wall Concrete, at para. 92:

A subtle point that is worth noting is that the charging lien or charging order binds the client from the time of its creation but notice of the charging lien is required to bind a successor lawyer who otherwise could disburse the funds to a bona fide third party without notice of the charging order or charging lien. Charging orders or charging liens are not enforceable against bona fide purchasers for value without notice of the lawyers' claim for payment of his costs and expenses for the litigation.

[41] JF submits that in any event, her charging order has priority as an inchoate interest that predates the court’s declaration and therefore the property was transferred subject to that interest. Given my finding above, I do not need to opine on whether a charging order (as opposed to a lien) is an inchoate interest that pre-dates the court’s declaration.

ii) Was the Property recovered or preserved through the instrumentality of the lawyer?

[42] There is a dispute between the parties as to whether JF was instrumental in recovering or securing the Property for Ms. Foulidis. A solicitor’s lien/charging order must be related to assets recovered or preserved by the solicitor. The solicitor’s lien may occur at the time the property is preserved or recovered, but it may also attach to amounts which may flow to the client in the future: Medici v. Roy (2004), 5 C.P.C. (6th) 94 (Ont. S.C.), at para. 15. Did the solicitor’s work result in their client retaining or obtaining the asset?

[43] JF submits that she was successful in preserving and obtaining orders to preserve the Property including: preventing RBC from moving forward on the sale of the Property; an order that required Mr. Foulidis to pay all expenses and services on the Property, including the mortgage/line of credit, utilities, realty taxes and insurance; an order for exclusive possession; and an order that Mr. Foulidis could not encumber the Property, thus maintaining the equity in same. JF did obtain orders that preserved the Property.

[44] In the case of Re Booth, [1985] O.J. No. 1286 (Ont. Bktcy.), Osborne J. limited the extent of the solicitor’s lien over matrimonial home proceeds. He did so after finding that little of the litigation was related to the preservation of this asset. At para. 17, Osborne J. states:

Although the $16,000.00 fund, being the bankrupt's declared interest in the matrimonial home, was the result of the family law litigation, it is manifestly clear that the family law litigation was overwhelmingly dominated by the custody issue…Very little of it can reasonably be attributed to any time spent on the division of family assets issue under the provisions of s. 4 of the Family Law Reform Act. It would not be equitable, as I view all the circumstances in this matter, to enforce the [solicitor’s] lien rights by issuing either a declaration or a charging order which would have the effect of elevating the solicitors to the status of a secured creditor with respect to the $16,000.00 fund in issue.

[45] In Morton, the solicitor was asserting an interest in the wife’s one-half interest in the proceeds of sale of the matrimonial home. One-half of the home already belonged to their former client, Mr. Morton, and therefore it was not preserved by the lawyers. Kershman J. stated that “[t]o determine the extent to which it is equitable to obtain a solicitors lien/charging order, each case must be evaluated on the facts. This is particularly so in the family law context, where litigation can be complicated and often deal with a number of issues”: see para. 57.

[46] Although the Property was already in Ms. Foulidis’s name, I find JF was instrumental to some extent in preserving the equity in the asset. The quantification of this charging order will need to be determined in the civil action.

iii) Is there evidence that the client will not pay the fees?

[47] In light of the Counterclaim, and the evidence before me, there is no dispute that the client is refusing to or will not pay the fees.

[48] Finally, as set out above, it is not appropriate for me to make a finding on the quantification of the charging order. The quantification of the charging order, the merits of the negligence action, the propriety of the quantum of fees charged and a finding on the claim of fraudulent conveyance will all be decided in the civil action.

[49] Although there is an obligation on the Court, as set out in the Family Law Rules, to determine costs at each stage of the litigation, I find that the costs of this motion shall be reserved and determined in the civil action, in the ultimate determination of the outstanding issues set out above.

Shore, J.

Date: September 9, 2021