2021 ONSC 6979

COURT FILE NO.: CV-19-00617495-0000

DATE: 20211021

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: BRIDGEPOINT FINANCIAL SERVICES LIMITED PARTNERSHIP I, Plaintiff

AND:

KEMPATIE GALAMINI (ALSO KNOWN AS KEMPATIE PERSAUD GALAMINI), SERGIO GRILLONE, and GRILLONE BEKIARIS LLP, Defendants

BEFORE: S.F. Dunphy J.

COUNSEL: Eric Sherkin (esherkin@millerthomson.com), for the Plaintiff

Sergio Grillone (sergio@grillonelawfirm.com), for the Responding parties Sergio Grillone and Grillone Bekiaris LLP)

HEARD at Toronto: October 19, 2021

REASONS FOR DECISION

[1] The plaintiff moved for summary judgment on the covenant of a lawyer to abide by an irrevocable direction from his client to pay proceeds of any settlement funds received by the client to repay a loan advanced by the plaintiff to the client. The lawyer received settlement funds in his trust account in 2012 and without regard to the irrevocable direction he had received, acknowledged and covenanted to honour, he paid the money directly to his client instead of to the plaintiff. This case requires me to consider the whether the lawyer is directly liable to the lender for failing to follow his client’s irrevocable direction.

[2] I granted judgment from the bench with reasons to follow. These are those reasons.

[3] I found that the plaintiff is entitled to enforce the covenant given by Mr. Grillone in the same manner as any lawyer’s undertaking. However, Mr. Grillone is not a guarantor of the obligations of his client. Damages arise from failure to pay the funds as per the irrevocable direction of the client on the day he was required to do so being November 13, 2012. Mr. Grillone did not agree to pay interest at any particular rate upon failure to satisfy his covenant and is not a party to the loan between the plaintiff and Mr. Galamini. Accordingly, I found that only the Courts of Justice Act, R.S.O. 1990, c. C.43 prejudgment interest rate is applicable to the damages arising from his failure to honour the undertaking from and after the date the funds ought to have been paid to the plaintiff being November 13, 2012. I also found that none of the issues raised by Mr. Grillone raised a triable issue.

Background facts

[4] In 2010, Mr. Grillone was acting as the lawyer for Ms. Galamini in the course of a personal injury law suit arising from an accident that occurred in 2008. Mr. Grillone practiced law under a sole proprietorship styled as “Grillone law Firm”. Mr. Grillone also was associated with a law firm organized as an LLP (the defendant Grillone Bekiaris LLP) which firm was not associated with this transaction in any way.

[5] While the plaintiff sought summary judgment on this motion against Mr. Grillone personally and the LLP (Ms. Galamini having been noted in default and proceedings to seek default judgment being underway), it is clear that there is no basis in fact to have included the LLP as a party defendant and the claim is accordingly dismissed as against the LLP.

[6] On February 10, 2010, Ms. Galamini applied for a $15,000 loan from the plaintiff Bridgepoint. After an assessment of Ms. Galamini’s pending personal injury claim, Bridgepoint agreed to advance her the sum of $5,500 which sum was advanced to her on February 18, 2010 by wire transfer.

[7] The loan transaction was evidenced by a document entitled “Plaintiff Loan Agreement (Ontario) between the plaintiff and Ms. Galamini signed by her and witnessed by Mr. Grillone dated February 17, 2010. The relevant features of the transaction arising from the document are as follows:

a. The Borrower was the defendant Ms. Galamini and the Lender was the plaintiff Bridgepoint;

b. The Borrower “acknowledges and promises to pay …. the sum of FIVE THOUSAND FIVE HUNDRED DOLLARS ($5,500) of lawful money of Canada”;

c. Interest was to accrue “at the rate of Twenty Six Percent (26.0%) per annum … compounded semi-annually, and shall be calculated daily”;

d. Principal and interest were payable “immediately upon receipt by the Borrower's Lawyers, GRILLONE LAW FIRM, or any of its successors and assigns, of funds payable to the Borrower as a result of the settlement and/or adjudication, in whole or in part, of the Claim following the payment of legal fees, disbursements and applicable taxes directly associated with the Claim”;

e. The Borrower acknowledged that the loan “is advanced on the condition that the Borrower execute an Irrevocable Authorization and Direction addressed to the Borrower's law firm as noted above, retained by the Borrower, to directly pay the Lender from the Settlement Funds the amount owing on the Loan together with interest as agreed herein”;

f. The Borrower granted the Lender a security interest in the Settlement Funds, acknowledging that such security interest shall be registered under the provisions of the Personal Property Security Act; and

g. The Borrower waived “presentation, notice of dishonour, protest and notice of protest of this promissory note”.

[8] Also on February 17, 2010, Ms. Galamini executed an “Irrevocable Authorization and Direction” in favour of the plaintiff, witnessed by Mr. Grillone. That direction instructed Mr. Grillone’s law firm “upon settlement and/or adjudication of my lawsuit, or any portion thereof. arising as a result of a motor vehicle accident which occurred on May 23, 2008, as described in the Ontario Superior Court of Justice Statement of Claim File Number CV-09-4088-00, to pay the above noted Lender from such proceeds, following the payment of legal fees, disbursements. and associated taxes, the amount of FIVE THOUSAND FIVE HUNDRED DOLLARS ($5,500.00) plus interest as agreed upon and as set out in the Promissory Note attached hereto and this shall be your good and sufficient authority for doing so”.

[9] Immediately below his own signature of the document as witness of Mr. Galamini’s signature, Mr. Grillone signed the following acknowledgment:

We, GRILLONE LAW FIRM, acting as counsel for KEMPATIE GALAMINI, acknowledge receipt of this Irrevocable Letter of Authorization and Direction and covenant to abide by our client's direction.

[10] On November 13, 2010, Mr. Grillone’s firm received Settlement Funds from the Claim referenced in the Plaintiff Loan Agreement which it paid its own account for fees and disbursements and remitted to Ms. Galamini an amount of money sufficient to repay the plaintiff’s loan in full. Mr. Grillone neither notified the plaintiff of the receipt of the Settlement Funds nor did he cause his firm to honour the irrevocable direction referenced above.

[11] These facts came to the attention of the plaintiff following a routine check-in regarding the status of the matter in 2017 resulting in the present claim and motion for summary judgment. There is no suggestion that the failure to act on the Irrevocable Letter of Authorization and Direction on the part of Mr. Grillone’s firm was deliberate or the result of anything other than the matter being overlooked when the settlement was finalized.

Issues to be decided

[12] The following issues arise to be determined on this case:

a. Is Mr. Grillone liable to the plaintiff for breach of the covenant to abide by his client’s direction?

b. If so, what is the correct measure of damages?

c. Has Mr. Grillone raised any triable issues regarding the question of his liability?

Analysis and discussion

(i) Is Mr. Grillone liable to the plaintiff for breach of the covenant to abide by his client’s direction?

[13] The Irrevocable Letter of Authorization and Direction and the acknowledgement of it are on the same page of the same document itself either physically attached to or executed in tandem with the Plaintiff Loan Agreement. It is plain and unambiguous. The author of the Letter unequivocally and irrevocably granted the direction and her lawyer – who was her witness on the document – equally unequivocally acknowledged receipt of that unequivocal direction and provided his “covenant” to abide by it. There was consideration for the direction in the form of a loan in the amount of $5,500. Such a direction for consideration creates a property interest sufficient to sustain its irrevocable nature. A security interest was also created over the Settlement Funds by the same Plaintiff Loan Agreement witnessed by the same lawyer, which security interest further secured the irrevocable nature of the direction.

[14] In form and substance, the Letter of Authorization and Direction is no different from a solicitor’s undertaking on the basis of which thousands if not tens of thousands of legal transactions in this jurisdiction are completed every year in areas as diverse as the settlement of a $10,000 wrongful dismissal claim or the completion of a billion dollar merger transaction to say nothing of almost every real estate transaction. A lawyer’s covenant is not lightly given and ought only to be delivered in circumstances where the lawyer or firm is in a position to ensure that it is complied with.

[15] It is true that there are circumstances in which Mr. Grillone might have been unable to comply with the direction. He might, for example, have seen his retainer terminated. The direction did not bind Mr. Grillone to pay the claimed sum from his own pocket. It was no guarantee. It merely obliged him to cause the settlement funds to be so directed. If he ceased to represent the Borrower, than the direction would have no further object. That prospect does not make the direction given void or unenforceable – it merely recognizes the potential for future events to occur which might, were they to occur, have rendered it without object. As a matter of fact, the Plaintiff Loan Agreement specifically provided for the sequence of events that would unfold in the event of an abandonment of the claim or a change of counsel.

[16] There can be no question that Mr. Grillone was bound by the covenant he gave to honour the irrevocable direction of his client. There can be no question that he received the referenced Settlement Funds on November 13, 2012 and failed to honour that covenant in fact. That such failure was the result of oversight or carelessness on his part is of no moment. Mr. Grillone is liable to the plaintiff for breach of his covenant.

(ii) If so, what is the correct measure of damages?

[17] Mr. Grillone received the Settlement Funds on November 13, 2012 and paid his own outstanding accounts the same day from the proceeds, remitting the balance to his client despite the Irrevocable Authorization and Direction acknowledged by him. That sum so remitted was sufficient to retire the debt of his client the Borrower on that day. Mr. Grillone was obliged to see that done on that day but failed to do so. He is therefore personally liable to the plaintiff for the amount not paid on that day. That amount was $5,500 plus interest to that day calculated in accordance with the terms of the Plaintiff Loan Agreement quoted above (26% per annum calculated daily and compounded semi-annually).

[18] What about interest after that date?

[19] I express no view at this point as to the existence of an obligation to pay default interest at the same rate. The terms of the Plaintiff Loan Agreement (a document which, despite its name, is drafted as a promissory note containing all of the features of a promissory note including waiver of presentment or notice of dishonour) contain no specific reference to a default interest rate. The loan evidenced by the document clearly states when the loan was payable (immediately upon receipt of the Settlement Funds) but does not specifically provide what rate shall apply if the direction is not acted upon.

[20] Whether Ms. Gallamini’s obligation to pay interest at the specified rate continued after her lawyer’s failure to honour the direction she gave him is a matter to be decided in the claim as between the plaintiff and Ms. Galamini. It is sufficient for present purposes for me to note that Mr. Grillone is not a party to the contract between Ms. Gallamini and the plaintiff. He is not bound by its terms but was only bound by his own covenant to pay a sum certain on a certain date. No obligation beyond that governs him. In the absence of an agreement on his part to pay interest, the terms of s. 128(1) of the Courts of Justice Act apply and the plaintiff is entitled to have included in the judgment an award of interest at the prejudgment interest rate calculated from the date the cause of action arose which in this case was November 13, 2012. The prejudgment interest rate at that time was 1.3%.

(iii) Has Mr. Grillone raised any triable issues regarding the question of his liability?

[21] Mr. Grillone raised a number of issues which he suggested were sufficient alone or in combination to raise a triable issue. Given the number of years that have passed since the decision of Hryniak v. Mauldin, 2014 SCC 7 it should be unnecessary to recite the principles governing summary judgment motions. The mere suggestion of a possible defence without the factual foundation necessary to raise a triable issue in respect of it will not be sufficient to prevent judgment from being rendered. A triable issue must be evident, not guessed at and the obligation to put one’s best foot forward to demonstrate the existence of a triable issue has not ceased to apply.

[22] I shall address each of the issues raised in turn:

a. Plaintiff has failed to establish that Grillone Law Firm was in receipt of funds payable to Ms. Galamini as a result of the Settlement: the short answer is that this has been established by Mr. Grillone’s trust account ledger and there has been no evidence led to explain or contradict this.

b. The pleading mistakenly described the Irrevocable Authorization and Direction as being directed to Grillone Bekiaris LLP instead of Grillone Law Firm: the document itself makes no reference to the LLP and the minor error in the pleading is neither substantive nor misleading.

c. The Irrevocable Authorization and Direction references an attached promissory note and no such note was attached: The Plaintiff Loan Agreement is a promissory note in fact and there is no ambiguity or confusion as to what the Irrevocable Authorization and Direction referenced in fact.

d. The Plaintiff failed to establish its compliance with the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A: Mr. Grillone has no standing to raise the CPA and there is at all events no suggestion that the Plaintiff Loan Agreement can be described as a “consumer agreement” as defined in that statute.

[23] Mr. Grillone has not provided any evidence that raises a triable issue. The plaintiff has established its entitlement to judgment.

Disposition

[24] Accordingly, I grant judgment as follows:

a. The plaintiff shall have judgment as against Mr. Grillone in the amount of $5,500 plus interest from February 18, 2010 until November 13, 2012, calculated at the rate of 26% per annum compounded semi-annually and calculated daily;

b. The plaintiff shall be entitled to pre-judgment interest on the amount payable by Mr. Grillone calculated as per the preceding paragraph at the pre-judgment interest rate of 1.3% from November 13, 2012 until the date of judgment being October 19, 2021 and post-judgment interest thereafter at the rate of 3%, both as prescribed by s. 128 and s. 129 of the Courts of Justice Act; and

c. The claim as against Grillone Bekiraris LLP is dismissed.

[25] The success on this motion for judgment has been divided. Mr. Grillone was found liable for his failure to abide by the irrevocable direction, but the plaintiff’s claim to contractual interest at the rate of 26% compounding for nine years was disallowed as was its entire claim against the LLP. The total amount of the judgment emerging was well within the range of Small Claims Court and about one quarter of what was claimed. In the circumstances, no order as to costs will be made in favour of or against any of the parties to this motion.

[26] I have requested Mr. Grillone and Mr. Sherkin to settle the form of the judgment between themselves. I granted judgment from the bench with reasons to follow, these being those reasons. In the event there is any difficulty in settling the form of the judgment, the parties may contact my assistant. The calculation of interest being quite straightforward both under the contract until 2012 and thereafter under the Courts of Justice Act, I am confident that will not be necessary.

S.F. Dunphy J.

Date: October 21, 2021