COURT FILE NO.: CV-21-00672037-0000

DATE: 20220623

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

SERGUIO GRILLONE and GRILLONE LAW FIRM

Applicants

• and -

GEORGE BEKIARIS and BEKIARIS LAW FIRM

Respondents

Matthew G. Moloci for the Applicants

George Bekiaris, self-represented

Randy Schliemann for the Bank of Nova Scotia

Eric Sherkin for BridgePoint Financial Services Limited Partnership I

Aaron Rosenberg for Bluecore Capital Inc.

David Fogel for Mandeep Saggi, Neelam, Saggi and Sucha Saggi

HEARD: May 27, 2022

PERELL, J.

REASONS FOR DECISION

A. Introduction

Introduction

1There was an agreement, referred to as a Referral Agreement, between two law firms.

2The Applicants, Sergio Grillone and Grillone Law Firm (collectively “Grillone”) was one of the law firms, and the Respondents George Bekiaris and Bekiaris Law Firm (collectively “Bekiaris”) was the other law firm.

3In this application, Grillone claims payment of $119,495.63 from Bekiaris under the Referral Agreement. Bekiaris does not oppose the application, but Bekiaris insists that only $82,157.90 is owing under the Referral Agreement.

4Grillone’s application has drawn the attention of some of Grillone’s creditors. The creditors, Bank of Nova Scotia, BridgePoint Financial Services Limited Partnership I, Bluecore Capital Inc., and Mandeep, Neelam and Sucha Saggi (the “Saggis”) do not oppose Bekiaris paying what he owes Grillone, but they do object to it being paid directly to Grillone because its assets have been frozen pursuant to a Mareva injunction granted by Justice Kimmel in proceedings brought by the Saggis.

5More precisely, Grillone makes application for:

a. an order for payment of referral fees, disbursements and applicable taxes due and owing by George Bekiaris and Bekiaris Law Firm to Scarfone Hawkins LLP, in trust;

b. an order for payment out of trust from the proceeds in paragraph "a" above for legal fees, professional fees, disbursements and applicable taxes, as well as retainer payments for legal and professional services rendered or to be rendered on behalf of Sergio Grillone and Grillone Law Firm (Grillone seeks $55,994.80 for payment of legal fees for litigation and business expenses);

c. an order for payment into court of the remainder funds in trust after the payments out of trust in paragraph "b" above; and,

d. such further and other relief as this Honourable Court deems appropriate in the circumstances.

6For the following Reasons, I find as fact that Bekiaris owes Grillone $82,157.90 and that this sum should be paid into court pursuant to Rule 72. I otherwise dismiss Grillone’s application.

B. Facts

Facts

7Since Mr. Grillone’s call to the bar in 1999, Grillone practised exclusively as a plaintiff’s personal injury law firm. In May 2019, Mr. Grillone was practising law with one associate lawyer, Vic Purewal, and nine support staff. The law firm had carriage of approximately 500 plaintiff personal injury files.

8On December 19, 2007, Grillone entered into a credit agreement with the Bank of Nova Scotia. Under the agreement, Grillone granted the Bank a general security interest in exchange for a line of credit. The security interest was registered in accordance with the Personal Property Security Act (“PPSA”).¹ On January 20, 2015, Grillone executed and delivered to the Bank a General Security Agreement. This security was also registered under the PPSA. The Bank’s PPSA registration of its security interest in Grillone’s assets expires on November 23, 2022.

9In 2019, Mr. Grillone took ill, and in light of his illness, Grillone approached Bekiaris and the two law firms entered into a fee referral agreement. Subject to the clients’ agreement, Grillone agreed to transfer seven files to Bekiaris.

10On June 3, 2019, Bekiaris and Grillone entered into the Referral Agreement for client files to be transferred to Bekiaris. There was a similar Referral Agreement between Grillone and Mr. Purewal.

11In August 2019, creditors of Grillone contacted Bekiaris and sought to garnish funds payable under the referral agreement in payment of Grillone’s indebtedness. Bekiaris advised Grillone’s creditors that he would hold the referral fee payments in trust and would only release them on consent or by court Order.

12In August 2019, the Bank of Nova Scotia learned that Grillone was winding down the law practice. Grillone defaulted on its obligations to the Bank, and in August 2019, the Bank delivered a Notice of Intention to Enforce Security pursuant to section 244(1) of the Bankruptcy and Insolvency Act² and a notice under section 63(5) of the PPSA.

13In September 2019, on consent of the Law Society of Ontario, Mr. Grillone voluntarily withdrew and undertook not to practise law. This continues to be his current status. By the end of September 2019, Grillone’s staff found alternate employment, and Mr. Grillone was left with all of the administration and management matters, including the transfer of the client files directly to clients or to new lawyers retained to act on their behalf. Mr. Grillone set about to recover his firm’s accounts receivables.

14On September 11, 2019, Grillone’s credit line was converted to a non-accrual loan and draws on the credit line terminated.

15In January 2020, on consent, the Law Society of Ontario was appointed trustee for legal files and clients. The trusteeship did not extend to the business/financial side of the practice, which remained under administration and management of Mr. Grillone alone. Since his withdrawal from his practice of law, Mr. Grillone has, as a self-represented litigant, been engaged in numerous actions in which he is a plaintiff and others in which he is a defendant and sometimes a plaintiff by counterclaim. There has been ongoing litigation involving the winding up of Grillone’s law practice.

16On March 18, 2020, the Bank of Nova Scotia, through its lawyers, sent a demand letter to Grillone for payment of its indebtedness.

17On May 27, 2020, the Bank sued Grillone for possession of the assets secured by the Bank’s security interests under the General Security Agreement (Court File No. CV-20-00001957-0000).

18On July 8, 2020, Grillone’s guarantor paid down the indebtedness by $190,352.77. As of February 2, 2022, the Bank of Nova Scotia is owed $334,567.77.

19In August 2020, Mr. Grillone settled a lawsuit with Marco DeLuca and Rhondaroo Holdings Ltd. (Court File No. CV-20-638052-00CL). Under the settlement, Rhondaroo paid Mr. Grillone’s company (2390215 Ontario Inc.), $420,000.

20Given the claims against Grillone by its creditors, Justice Koehnen ordered that the $420,000.00 be paid into court to the credit of the Bank of Nova Scotia’s action against Grillone. Justice Koehnen further ordered that any motion to pay the $420,000.00 or any portion thereof out of court shall be served by email on counsel to the listed creditors.

21On October 20, 2020, Justice Kimmel granted a Mareva injunction (Court File No. CV-19-00627474-0000) in an action brought by the Saggis against Grillone. Justice Kimmel ordered that Grillone be restrained from directly or indirectly dealing with any assets. Paragraph 6 of Justice Kimmel’s Mareva states:

THIS COURT ORDERS that the plaintiffs are directed to disclose to such other creditors of the Grillone defendants who may ask them any and all of the documentation and information that is provided by the Grillone defendants pursuant to the preceding paragraphs of this order. To the extent that secured creditors claim priority and security over any assets identified, this endorsement and order are not intended to in any way change or interfere with the rights of the secured creditors.

22In a May 10, 2021 email message, Bekiaris advised Grillone that $119,495.63 was currently held in trust pursuant to the Referral Agreement. Bekiaris says that the calculation was incorrect and overstated the amount being held in trust.

23As of August 31, 2021, there was $424,916.67 held in court in the Bank of Nova Scotia action.

24In November 2021, Grillone brought the application now before the court in which Bekiaris is the respondent. Grillone supported the application with Mr. Grillone’s affidavits dated November 18, 2021, January 18, 2022, and February 18, 2022.

25The application now before the court was served on secured and unsecured creditors of Grillone; namely: (a) the Bank of Nova Scotia; (b) BridgePoint Financial Services Limited Partnership I; (c) Marco DeLuca and Rhondaroo Holdings Ltd.; (d) Bluecore Capital Inc.; (e) Mandeep Saggi, Neelam Saggi and Sucha Saggi (the “Saggis”); (f) Settlement Lenders Inc., and (g) Luigi Mauro, Rose Mauro, Highmark Consulting Limited and KVM Investments Limited.

26In a January 25, 2022 email message, Bekiaris advised Grillone that the numbers originally provided in the May 10, 2021 email were incorrect and provided the revised calculation.

27On February 10, 2022, the Bank of Nova Scotia responded to the application with an affidavit from Zamena Baksh. Ms. Baksh is a Senior Litigation Officer with the Bank of Nova Scotia, Special Accounts Centre.

28On February 28, 2022, Mr. Bekiaris and Mr. Stephen Pauwels (of BridgePoint Financial) were cross-examined. Mr. Bekiaris was examined on his affidavit dated February 7, 2022 and Mr. Pauwels was examined on his affidavit dated February 1, 2022.

29On February 28, 2022, Nick Robson was cross-examined on his affidavit dated February 7, 2022. Mr. Robson is a director of Bluecore Capital Inc.

30On March 21, 2022 and April 28, 2022, Mr. Grillone was cross-examined.

31On April 5, 2022, Justice Sanfilippo made the following endorsement:

This Application was initially scheduled to be heard on April 13, 2022, for a full day. That day was vacated because the Application was not ready to be heard. […] The parties jointly requested that a new hearing date be scheduled for this Application, and that a revised timetable be implemented for the preparation of this Application for adjudication. The parties conferred on a new timetable and spoke to it, on consent. I direct that this Application be rescheduled from April 13, 2022 to May 27, 2022, for a full day hearing. […]

32In the litigation between the Bank of Nova Scotia and Grillone, the Bank has brought a summary judgment motion that is returnable in August 2022.

C. Discussion and Analysis

Discussion and Analysis

33Practically speaking, the application before the court is some sort of combined summary judgment motion, garnishment motion, interpleader proceeding, and request to vary a Mareva injunction.

34Bekiaris admits that it owes Grillone $82,157.90, but because Grillone has both secured and unsecured creditors who have, in effect, sought to garnish Bekiaris’ indebtedness to Grillone, Bekiaris wishes to be discharged of its indebtedness and to interplead the money into court.

35Bekiaris is doing precisely what the circumstances require. However, relying on an email message where Bekiaris acknowledged an indebtedness of $119,495.63, Grillone argues that Bekiaris should pay $119,495.63 to his lawyers Scarfone Hawkins LLP, in trust. Grillone then asks that his lawyers be permitted to deduct $55,994.80 from $119,495.63 for payment of legal fees for litigation and business expenses with the balance then to be paid into court.

36Grillone’s argument about the amount of the payment from Bekiaris and Grillone’s request for payment of legal fees and business expenses are mistaken and misdirected.

37It is trite to say that as a matter of contract law, Bekiaris should pay no more and no less than what it is obliged to pay under the so-called Referral Agreement. I am satisfied that Bekiaris has correctly calculated that sum at $82,157.90 and that his email message was just a mistake.

38There is no basis for a factual estoppel, and Bekiaris should be ordered to pay the correct amount of its indebtedness into court pursuant to the rules that provide for the payment into and out of court (Rule 72).

39The matter of whether Grillone can use the Bekiaris payment for legal fees and business fees is in essence a request to vary Justice Kimmel’s Order in a proceeding that is not before me. It is also, in effect, a request for a payment out of moneys that are being claimed by Grillone’s secured and unsecured creditors, which are more matters that are not before me.

40I, therefore, dismiss Grillone’s request for the payment out of moneys on the grounds that the matter of a variation of the Mareva injunction is not properly before me and it is premature to make any payments out on the various actions involving Grillone until the claims and the priority of them have been established.

41Order accordingly.

D. Conclusion

Conclusion

42For the above reasons, I order that Bekiaris pay $82,157.90 into court pursuant to Rule 72 and that the balance of Grillone’s application be dismissed.

43If the parties cannot agree about the matter of costs, they may make brief submissions in writing beginning with the submissions of Bekiaris, the Bank of Nova Scotia, BridgePoint Financial Services Limited Partnership I, Bluecore Capital Inc., and the Saggis within 10 days from the release of these Reasons for Decision followed by Grillone’s submissions within a further 10 days.

Perell, J.

Footnotes

1. 1R.S.O. 1990, c. P.10.
2. 2R.S.C., 1985, c. B-3.