



COURT OF APPEAL FOR ONTARIO

CITATION: First v. Fillion, 2020 ONCA 451

DATE: 20200710

DOCKET: C66953

Rouleau, Hoy and Hourigan JJ.A.

BETWEEN

William First

Creditor (Respondent)

and

Andre Fillion

Debtor (Respondent)

and

McNally
    Gervan LLP

Garnishee (Respondent)

Ron Aisenberg, for the appellant
    Seahold Investments Inc.

No submissions on behalf of the
    respondent William First

No submissions on behalf of the
    respondent Andre Fillion

No submissions on behalf of the
    respondent McNally Gervan LLP

Heard: In writing

On appeal from the order of Justice Julianne
    A. Parfett of the Superior Court of Justice, dated April 25, 2019.

REASONS FOR DECISION

[1]

This appeal arises out of a dispute between the
    appellant, Seahold Investments Inc., and the respondent, William First, as to
    who is entitled to settlement funds held in trust by McNally Gervan LLP for its
    client, Andre Fillion.

[2]

The appellant appeals the motion judges order,
    dated April 25, 2019, that McNally Gervan pay all monies held in trust for Mr.
    Fillion to Mr. First.

[3]

This appeal was case managed. The case
    management judge directed that Mr. First file his factum by May 11, 2020 if he
    intended to respond to the appeal, and that, if he did not do so by that date,
    the appeal would proceed before a panel in the absence of responding materials.
    Mr. First did not file a factum, and this appeal has accordingly proceeded in
    writing without the benefit of submissions from Mr. First. Counsel for McNally
    Gervan advised the case management judge that McNally Gervan would not be
    participating in the appeal.

Background

[4]

In 2009, Mr. Fillion sustained injuries in a
    slip and fall accident. He commenced an action against the owner and occupier
    of the premises where the accident occurred. Mr. First  Mr. Fillions then
    common law partner  was also a plaintiff in the action. He claimed damages in
    the amount of $25,000 for loss of care, guidance and companionship pursuant
    to s. 45 of the
Family Law Act
, R.S.O., 1990, c. F.3, and special
    damages in an unspecified amount for out-of-pocket expenses and loss of income.
    Mr. Fillion retained McNally Gervan to act for him and Mr. First.

[5]

The relationship between Mr. Fillion and Mr.
    First broke down and, on April 28, 2013, they entered into an agreement (the
    Agreement) to settle all financial matters arising from the termination of
    their relationship.

[6]

Paragraph 4(b) of the Agreement arose out of the
    accident and required Mr. Fillion to pay Mr. First One-Hundred and Twenty
    thousand dollars for extraordinary care provided to Andre Fillion and income
    forfeited as a result of providing that care. Paragraph 5 of the Agreement
    provided that, Should Andre Fillion make any successful insurance claims or
    obtain any settlement funds from any parties found liable for the personal
    injury which brought about the need for extraordinary care and complications to
    the spousal relationship, any amount claimed therein for the re-imbursement of
    William First will be deducted from the monies referred to in 4(b). Paragraph 6
    provided that monies payable under the Agreement became due and payable,
    without interest, on the later of September 1, 2015 or the day on which all
    claims made by Andre Fillion for compensation for losses sustained by his
    personal injury are resolved or settled.

[7]

There was no evidence before the motion judge of
    when or if McNally Gervan received notice of the Agreement. The affidavit of
    Mr. First indicates that McNally Gervan was made aware of Mr. Fillions debt to
    Mr. First in October of 2017, but there is no indication that McNally Gervan
    was made aware of the language of the Agreement or any possible equitable
    assignment to Mr. First.

[8]

The appellant is a litigation financer and
    provided funds to Mr. Fillion to permit him to pursue the litigation. Between
    May of 2013 and June of 2014, Mr. Fillion signed the first of several
    promissory notes in favour of the appellant and Irrevocable Directions to Frank
    McNally of McNally Gervan. The Irrevocable Directions required Mr. McNally to
    pay any and all sums owing to the appellant immediately upon receipt by
    him/her or his/her law firm of all or any portion of the Settlement Funds and
    to make the aforesaid payment in priority to any other payment out of the
    Settlement Funds, saving and excepting any payment to my solicitor or his/her
    law firm.

[9]

The promissory notes and Irrevocable Directions
    were faxed to McNally Gervan within days of being signed by Mr. Fillion.
    McNally Gervan was also sent monthly statements setting out the amount
    outstanding.

[10]

In August 2017, the action settled for $150,000,
    all inclusive. On August 23, 2017, Mr. Fillion and Mr. First signed an
    Authorization & Direction to McNally Gervan, instructing it to settle for
    $150,000, all inclusive, and acknowledging that their net amount would be $90,000
    to $95,000 after disbursements, legal fees and HST, and that from that amount,
    $12,000 would be allocated to Mr. First and the balance to Mr. Fillion. Mr.
    Fillion also acknowledged that he had loans with the appellant that he was
    responsible to pay.

[11]

On September 7, 2017, Mr. First commenced an
    action against Mr. Fillion, to enforce the payment obligation in the Agreement.
    On the consent of Mr. Fillion, he obtained judgment against Mr. Fillion in the
    amount of $185,000. Mr. First then issued and served McNally Gervan with a
    Notice of Garnishment.

[12]

In response, McNally Gervan brought a motion
    under rules 60.08(16) and 43 of the
Rules of Civil Procedure
, R.R.O
    1990, Reg. 194, seeking a garnishment hearing or interpleader order to
    determine its liabilities with respect to Mr. First, the appellant, Mr.
    Fillion, and another litigation financer, Settlement Lenders Inc., in relation
    to the settlement funds balance of $78,000 it held in trust. The appellant was
    a respondent to McNally Gervans motion, as both an interested person to the
    garnishment, and as a claimant to the interpleader. It also brought its own
    motion seeking payment of the settlement funds.

[13]

Neither Mr. Fillion nor Settlement Lenders Inc.
    filed materials or attended the motions.

The motion judges reasons

[14]

In brief oral reasons, the motion judge
    commented that the Agreement could certainly have been drafted more clearly
    but that the agreement does indicate that the monies owed were to come from
    any settlement of the action.  She concluded:

It is apparent that Mr. Fillion and Mr. First
    believed that any settlement would be large enough that everyone would be paid.
    Unfortunately, that did not turn out to be the case. As the agreement with Mr.
    First was executed first, it stands first in line for the funds. Consequently
    McNally Gerv[an] are ordered to pay all the monies they hold in trust to Mr.
    First.

[15]

The motion judge ordered that there be no costs
    awarded for the motions.

Analysis

[16]

The motion judge did not make an express finding
    that the Agreement and the Irrevocable Directions constituted equitable
    assignments of the settlement funds. However, it is implicit from the manner in
    which she resolved the priority issue that she considered both to be equitable
    assignments.

[17]

The appellant argues that the motion judge
    failed to consider binding authority from this court as to what is required to
    make an equitable assignment and that her interpretation of the Agreement and
    the Irrevocable Directions is accordingly not owed deference. It submits that,
    considering the applicable jurisprudence, only the Irrevocable Directions are
    equitable assignments, and, therefore, the appellant has priority. In the
    alternative, relying on
Bank of Montreal v. Union Gas Co. of Canada Ltd.
(1969), 7 D.L.R. (3d) 25 (C.A.), citing
Dearle v. Hall
(1828), 38 E.R.
    475, it submits that the motion judge erred by determining priority by the
    order of execution of the Agreement and the Irrevocable Directions, rather than
    by considering the order of notice given to McNally Gervan.

[18]

We agree with the appellant that the motion
    judge erred by failing to consider what is required to make an equitable
    assignment and that, having regard to what is required, only the Irrevocable
    Directions are equitable assignments. The appellant, as an equitable assignee
    based on the Irrevocable Directions, has priority over Mr. First, as a judgment
    creditor. Accordingly, it is not necessary to consider whether, as the
    appellant argues, when the funds at issue have not been paid over, priority of
    equitable assignments is determined by the order of notice given to the person
    holding the funds, rather than by the order of the assignments.

[19]

This court has described the law of equitable
    assignment as follows, in
Thibodeau v. Thibodeau
,
2011 ONCA
    110, 104 O.R. (3d) 161, at para. 57, citing the House of Lords in
Swiss
    Bank Corp. v. Lloyds Bank Ltd.
,
[1981] 2 All E.R. 449 (H.L.), at p.
    453, quoting
Rodick v. Gandell

(1852), 42 E.R. 749, at p. 754:

an agreement between a debtor and a creditor
    that the debt owing shall be paid out of a specific fund coming to the debtor,
    or an order given by the debtor to his creditor upon a person owing money or
    holding funds belonging to the giver of the order, directing such person to pay
    such funds to the creditor, will create a valid equitable charge upon such
    fund, in other words, will operate as an equitable assignment of the debts or
    fund to which the order refers.

[20]

Equity does not require a particular form to
    effect a valid assignment. But whatever form is used must
clearly
show an intention that the assignee is to have
    the benefit of the debt or chose in action assigned:
Nadeau v. Caparelli
,
    2016 ONCA 730, 132 O.R. (3d) 729, at para. 19. [Emphasis added.]

[21]

The motion judge did not consider the
    requirement that the Agreement must
clearly
show
    an intention that Mr. First was to have the benefit of the settlement funds. Indeed,
    she found that the Agreement could certainly have been drafted more clearly.
    We agree with the motion judge that the Agreement does not clearly show an
    intention that Mr. First was to have the benefit of the settlement funds.
    Rather, it provides that the monies payable under the Agreement became due and
    payable on the later of September 15, 2015 or the day on which all claims made
    by Andre Fillion for compensation for losses sustained by his personal injury
    are resolved or settled. If the action settled before September 15, 2015, Mr.
    Fillion had the benefit of the settlement funds. The Agreement did not direct
    him to pay the monies he owed Mr. First out of the settlement funds.

[22]

In contrast, the Irrevocable Directions required
    Mr. McNally to pay any and all sums owing to the appellant immediately upon
    receipt by him/her or his/her law firm of all or any portion of the Settlement
    Funds and to make the aforesaid payment in priority to any other payment out of
    the Settlement Funds, saving and excepting any payment to my solicitor or
    his/her law firm. This language clearly shows an intention that the appellant
    was to have the benefit of the settlement funds.

[23]

Moreover, a direction by an assignor to a person
    holding funds of the assignor to pay the funds over to a third party has been
    recognized as an instance of a good equitable assignment:
Bitz,
    Szemenyei, Ferguson & MacKenzie v. Cami Automotive Inc.
,
1997
    CarswellOnt 2309 (Gen. Div.), at para. 21. This is also true of a direction to
    pay a portion of a specified fund:
Bitz
,
at paras. 17, 19.

[24]

We note that the motion judge did not rely on
    the garnishment process as a basis for according priority to Mr. First, and we
    agree with her that the garnishment process does not assist Mr. First. Rule
    60.08(1) of the
Rules of Civil Procedure

provides:

A creditor under an order for the payment or
    recovery of money may enforce it by garnishment of
debts payable to the debtor by other persons
. [Emphasis added.]

[25]

Mr. First could use the garnishment process
    against McNally Gervan only if it were an other person with a debt payable
    to Mr. Fillion. The settlement funds are monies owed to Mr. Fillion by the
    defendant in the action which Mr. Fillion directed be paid first to McNally
    Gervan in trust and then to the appellant in accordance with the Irrevocable
    Directions. Once those amounts are paid, there will be no balance remaining and
    no amount that could be argued is a garnishable debt:
Richter LLP v. Big Truck TV Productions Inc.
, 2015 ONCA 567, 127 O.R. (3d) 314.

Disposition

[26]

The appeal is allowed, the order of the motion
    judge is set aside, and McNally Gervan is ordered to pay all the monies it holds
    in trust for Mr. Fillion to the appellant. There shall be no costs of the
    motions below and no costs of this appeal.

Paul
    Rouleau J.A.

Alexandra Hoy J.A.

C.W. Hourigan J.A.


