Court File and Parties

COURT FILE NO.: CV-22-89331 DATE: 2023/04/20 SUPERIOR COURT OF JUSTICE – ONTARIO

In the matter of the Solicitor’s Act

RE: Bruce Marks, Marks Law, Applicant AND: 1324789 Ontario Inc., 1073650 Ontario Inc., 2290998 Ontario Inc., Gary Beach and Martha Lorraine Beach, Respondents

BEFORE: Regional Senior Justice Calum MacLeod

COUNSEL: Bruce Marks, Applicant Solicitor Gary Beach, for the Respondent Clients

HEARD: April 19, 2023

CASE CONFERENCE ORDER AND DIRECTION

[1] This is a case conference that was convened in this proceeding at the request of the Solicitor. Mr. Marks proposed to appeal from the decision of the Assessment Officer in which she postponed an Assessment because of a stay under the Bankruptcy and Insolvency Act.

[2] As I will explain, it is unclear that there is currently a stay in force due to an appeal which Mr. Beach has pending before the Court of Appeal, but if the appeal should fail for any reason, the stay would go back into force automatically. In either case, it is open to this court to determine whether or not the Assessment should be allowed to continue despite the bankruptcy order and the appeal.

[3] Both parties agree that the Assessment should be completed to determine whether or not the accounts rendered by the solicitor to the clients were justified. But each party has certain concerns which I am able to address.

Background

[4] Mr. Marks brought an application for assessment of his accounts. Apparently, the clients were also in the process of launching an assessment. As I explained to Mr. Beach, it really does not matter who takes out the order under the Solicitor’s Act because the onus is always on the solicitor to prove the value of the work done.

[5] There is no dispute that Mr. Marks was retained. He represented the clients in various court actions (the “joint venture litigation”) until he moved to get off the record in those actions in April of 2022. The order for assessment was obtained in May of 2022. The issue of the value of the work and whether or not the fees charged were reasonable are squarely within the jurisdiction of the Assessment Officer.

[6] There were two issues that arose before the Assessment Officer. One of these involved an attempt by Mr. Stikuts (who is opposing counsel in at least some of the joint venture litigation) to attend the Assessment. Mr. Beach objected and, on the basis that Mr. Marks might have to give evidence which disclosed privileged communications with the clients, the Assessment Officer ruled that Mr. Stikuts could not be present. Mr. Marks agrees with and supports this ruling.

[7] The second issue had to do with unilateral communication from Mr. Beach to the Assessment Officer in which allegations are made against Mr. Marks. Mr. Marks was aware of the communication but not the content. Mr. Beach did not comply with an order by the Assessment Officer to produce the correspondence to Mr. Marks although Mr. Marks has a copy now. Mr. Marks is concerned that the Assessment Officer may not be able to disabuse herself of the contents of the letter. I would not make that presumption. That is an issue to be raised with the Assessment Officer.

[8] The issue that brings the parties here today was the result of a separate proceeding brought by Heliotrope Investment Corporation for a bankruptcy order against Gary and Martha Beach (Court file no. 33-1657775 & 165776). Heliotrope is one of the opposing parties in the Joint Venture Litigation and is a creditor of the Beaches for inter alia several outstanding costs awards. On November 18, 2022, my colleague, Justice Ryan Bell adjudged the Beach defendants (but not the corporate defendants) as bankrupt and made a bankruptcy order (see 2022 ONSC 6474).

[9] The result of a bankruptcy order is an automatic stay of all legal proceedings involving the bankrupts pursuant to s. 69.3 of the BIA. That section provides that with certain exceptions “no creditor has any remedy against the debtor or the debtor’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy.” A court may lift the stay. Ryan Bell J. declined to do so but that does not prevent individual creditors seeking to lift the stay in particular circumstances.

[10] On January 30, 2023, the bankrupts brought a motion in the Court of Appeal (Court file no COA-23-OM-0113) seeking an extension of time to file a Notice of Appeal. This was required because they had filed a Notice of Appeal but had failed to first file the Notice with the Bankruptcy Court as was required by the Bankruptcy Rules. The extension of time was granted, and the Appellants were directed to properly file the Notice of Appeal by February 3, 2023.

[11] Launching an appeal has the effect of staying the bankruptcy order pursuant to s. 195 of the BIA. The Respondent in the Appeal asked that the Court of Appeal lift that stay but Justice Copeland (the motion judge) declined to do so. Copeland J. held that a motion to lift the stay could be brought once the Notice of Appeal was properly filed and if the Respondent in the appeal wished to pursue that then they should bring a motion on notice to which the Appellants could properly respond.

[12] This creates something akin to a double negative. The order of Ryan Bell J. generates an automatic stay under the BIA. On the filing of a notice of appeal the order resulting in the stay is itself stayed (a stay of the stay) but of course should the appeal be dismissed or fail to be perfected (or if the Notice of Appeal was not filed within the time provided) there would be no stay of the stay in effect.

[13] On February 22, 2023 the parties appeared before the Assessment Officer. There was confusion as to whether the stay was in effect or whether it operated to stay the assessment proceeding in respect of the corporate defendants. The assessment did not proceed. The Assessment Officer directed that the Beaches were to provide all documents concerning the bankruptcy to the Assessment Officer and Mr. Marks. The endorsement also records that the Beaches advised they were expecting a “bankruptcy hearing” in October or November 2023 and they were directed to forward documents confirming this.

[14] Mr. Marks then launched this appeal of the order of the Assessment Officer which he interpreted as the Assessment Officer ordering that the Assessment be stayed. I do not read the endorsement that way but in any event, there is no reason to proceed by way of an appeal. All that is required is judicial direction to the Assessment Officer and if necessary, lifting of the stay pursuant to s. 69.3 to permit the completion of the Assessment.

[15] As noted by the Assessment Officer and as reaffirmed before me today, the Beaches did not intend to delay or impede the completion of the assessment. Mr. Marks wishes the assessment to continue. While he originally sought an order for a new assessment by a different Assessment Officer or referral of the matter to an Associate Judge pursuant to Rule 54 and 55 of the Rules of Civil Procedure, he advised he would be content with clear directions to the Assessment Officer that no weight was to be given to any allegations or submissions that had been made by Mr. Beach by way of letter (or email). Again, I would not presume that such direction is required but I am prepared to give that direction as a term of my order.

[16] It is unclear to me on the material before me whether the “stay of the stay” is in effect or not since I do not have proof that the Notice of Appeal was filed. In addition, even if the Appeal was launched, it may fail for a number of reasons which would reinstate the stay. It is well within my discretion to direct that the Assessment continue whether the stay is in effect or not and it would also be within my discretion to impose a stay on enforcement pending the outcome of the appeal if it appears just. I can exercise that discretion because there is currently no motion to impose or lift a stay before the Court of Appeal so we will not be at cross purposes.

[17] Where a litigant declares bankruptcy or is put into bankruptcy involuntarily and a trial or other hearing process is already underway, it is not uncommon for this court, in the exercise of its bankruptcy jurisdiction, to lift the stay so that the hearing may be completed and the quantification of a clam against the bankrupt can be finalized. This gives the judgment creditor no priority in the bankruptcy, it simply permits it to file its claim with the Trustee as a judgment creditor. Moreover, where there are parties to the proceeding that are in bankruptcy (or may be) and there are parties that are not, it is useful to determine which parties are liable for the debt and whether the liability is joint and several.

Order and Direction

[18] Based on the above, the court orders and directs as follows:

a. Whether or not there is a stay of proceedings against the Beach respondents pursuant to s. 69.3 of the BIA, the Assessment Officer is authorized and directed to continue the assessment of the Marks accounts.

b. If the stay is in effect or comes back into effect during the pendency of the assessment hearing then in the exercise of my discretion under the BIA, the stay is lifted to the extent that it is necessary to complete the assessment.

c. If a stay remains in effect or comes back into effect at the time the Assessment Officer makes her report and the report is to be confirmed, either of the parties may seek further direction from this court either in this file or in the bankruptcy file.

d. The following directions are issued with respect to the conduct of the Assessment:

i. The Assessment Officer shall have the power and duty to exclude any observers from the assessment hearing during any portion of the hearing in which evidence touches on matters of privilege that could adversely affect the rights of the clients in their other litigation.

ii. The Assessment Officer shall base her findings on evidence or admissions properly adduced and admitted before her and shall disregard any submissions made by way of letter, e-mail or other unsworn ex parte communication.

e. The appeal and cross appeal are otherwise dismissed.

f. The costs of this attendance may be considered by the Assessment Officer in awarding costs of the Assessment.

g. A copy of this order will be placed in each of the bankruptcy files and is to be provided to counsel for the creditor (Mr. Ostroff) as well as to the trustee in bankruptcy.

h. This order is a case management order within the meaning of Rule 50.13 and is effective without further formality.

Justice C. MacLeod

Date: April 20, 2023