



COURT OF APPEAL FOR ONTARIO

CITATION: Abuzour v. Heydary, 2015 ONCA 565

DATE: 20150730

DOCKET: C59984

Laskin, Pardu and Brown JJ.A.

BETWEEN

Hasan Abuzour and Samira Abuzour

Respondents on Appeal

(Applicants)

and

Javad Heydary and Heydary Hamilton Professional
    Corporation

Respondents

Brian N. Radnoff and Louise F. Moher, for the appellants

Arnold Zweig, for the respondents

Heard: June 25, 2015

On appeal from the order of Justice Michael A. Penny of
    the Superior Court of Justice, dated January 29, 2015.

Pardu J.A.:

[1]

This appeal deals with the continuing devastation caused by a lawyer,
    Javad Heydary, who appears to have disappeared with his clients money. Heydary
    Hamilton Professional Corporation, Heydarys firm, owes the Abuzours, the
    respondents, more than $3.6 million. Heydary and Heydary Hamiltons LawPro liability
    insurance policy limits are only $1 million. The appellants are lawyers
    formerly employed by Heydary Hamilton. Although the appellants had no control
    over the trust account and played no part in the disappearance of the funds,
    the respondents have threatened to sue the appellants. The appellants want to
    resort to the liability insurance policy for their defence costs. If the policy
    limits are paid out in partial satisfaction of the respondents claims, the
    appellants will be left without coverage to defend themselves. They appeal from
    the motion judges refusal to set aside or vary an order enforcing the
    garnishment issued by the respondents against LawPro, which exhausts the policys
    limits.

[2]

The procedural history here is unusual. A dispute arose between Heydary
    and the Abuzours about whether the Abuzours were entitled to money deposited to
    Heydarys trust account in settlement of an oppression action with a third
    party. The respondents did not obtain a judgment against Heydary Hamilton or
    Javad Heydary for negligence, fraud, error or omission in the provision of
    professional services, matters which are covered by the insurance policy.
    Rather, the Abuzours brought motions in the oppression proceeding which
    resulted in two orders dated November 14 and December 17, 2013, ordering
    payment of $3.6 million from the Heydary Hamilton trust account to the
    Abuzours. Heydary and Heydary Hamilton did not comply with the orders. In
    reasons released on December 4, 2013, Heydary and Heydary Hamilton were found
    in contempt of court for their failure to comply with orders for release of $2.1
    million to the Abuzours.

[3]

On March 6, 2014, counsel for the Abuzours sent a demand letter to the
    appellants, writing that counsel had instructions to commence legal
    proceedings against each of you unless a resolution is reached on behalf of our
    clients in the next short while.

[4]

Counsel for the Abuzours concluded the demand letter by warning that he
    was instructed to proceed with legal action without further notice if the
    parties could not negotiate a resolution.

[5]

The Abuzours served a notice of garnishment upon LawPro and brought a
    motion returnable October 9, 2014 to enforce the garnishment. LawPro
    unsuccessfully opposed the motion. The appellants were not served with notice
    of the motion. The motion judge granted the garnishment order on the following
    grounds:

(a)

LAWPRO's obligations to indemnify Heydary and Heydary Hamilton under the
    Heydary policy constitute a debt subject to garnishment by the Abuzours under rule
    60.08 (at para. 29);

(b)

LAWPRO has a duty to investigate and to defend other claims against other
    lawyers associated with Heydary Hamilton, but, despite the Abuzours threats,
    no such claims yet exist (at para. 32);

(c)

The Heydary policy does not require LAWPRO to consider the cost of claims
    which have not been made and to weigh those potential obligations against its obligation
    to pay claims finally determined (at para. 35); and

(d)

The first past the post principle applies to the Abuzours judgment.
    The Abuzours should not have to share the proceeds of the Heydary policy with
    parties who have yet to call on the policy and may not call on the policy (at para.
    36).

[6]

The appellants then brought a motion to set aside or vary the
    garnishment order of October 9, 2014.

[7]

As outlined by the motion judge, they advanced four arguments in support
    of their position that the garnishment order should not issue:

(1)

[The orders of November 14 and December 17, 2014] are not covered by the
    Policy because they do not involve damages arising out of a claim where the
    liability of the insured is the result of an error, omission or negligent or
    fraudulent act in the performance of or the failure to perform professional
    services for others;

(2)

[T]he March 6, 2014 demand letter was a claim under the Policy. The
    notice of garnishment was delivered well after the applicants claim. The
    moving parties therefore say that, under the first past the post principle,
    their rights as insureds under the Policy come before any rights of the
    applicants arising by way of notice of garnishment;

(3)

[G]arnishment is an equitable remedy. In the circumstances of this case the
    equities favour the moving parties; and

(4)

[I]n the alternative, if the Order is not set aside, it should be varied
    to provide that, in exchange for payment of the proceeds of the Policy to the
    applicants, the applicants must provide a release of all claims against the
    moving parties.

[8]

The motion judge rejected each of these arguments.

[9]

For the purposes of this appeal, it is not necessary to decide whether
    the motion judge was correct to reject the first two arguments.

[10]

All
    parties agree that a decision on whether to enforce a garnishment is
    discretionary: see
20 Toronto Street Holdings Ltd. v. Coffee, Tea or Me
    Bakeries Inc.
(2001), 53 O.R. (3d) 360 (S.C.), at para. 5;
Noble China
    Inc. v. Lei
, [1999] O.J. No. 5030 (S.C.), at para. 24;
Wayfarer
    Holidays Ltd. v. Hoteles Barcelo
(1993), 12 O.R. (3d) 208 (Gen. Div.), at
    p. 212.

[11]

The
    motion judge rejected the argument that the equities favoured the appellants.
    He held that payment out of the Abuzours claim should not be delayed because
    of the speculative possibility that an action might be commenced against the
    appellants. He recognized that the Abuzours claims against the appellants might
    be weak, noting that [i]f the moving parties are right, then the Abuzours
    would be foolish indeed to spend the limited recovery they may [gain] from
    LawPros Policy in fruitless litigation. But [the merits of that litigation]
    must be for another day. The motion judge also concluded that there was no
    legal basis to attach a condition to the order enforcing garnishment requiring
    the Abuzours to execute a release in favour of the appellants.

[12]

As
    observed by the motion judge, application of the first past the post
    principle will allow a successful plaintiff to enforce a judgment against the
    defendants insurer where the policy covers the acts underlying the judgment,
    even where other potential claims may be adversely affected by a reduction of
    insurance proceeds available to satisfy the claims.

[13]

This
    situation is unusual in that the initial orders for payment out of the Heydary
    Hamilton trust accounts were not based on negligence, omissions, errors or
    fraud covered by the policy. It is the failure to comply with these orders
    which arguably gives rise to an insured loss.

[14]

Most
    significantly for the purposes of this appeal, the respondents at oral argument
    were unable to articulate any basis upon which the respondents might advance a
    claim against the appellants relating to the money which has vanished. I am
    left with the impression that the respondents refusal to execute a release in
    favour of the appellants is a tactical one, designed to extract funds from
    innocent parties who do not have the means to defend themselves. The losses
    suffered by the respondents must be devastating, but there is no basis shown to
    visit Heydarys misconduct on the appellants.

[15]

As
    enforcement of a garnishment is a discretionary decision, in my view, contrary
    to the decision of the motion judge, the appellants should provide a release as
    a condition of the payment to them of the garnished insurance policy limits. In
    the unusual circumstances of this case, where the respondents cannot articulate
    any substance to a claim against the appellants, a release condition narrowly
    tailored to the apparent theft of the trust funds is appropriate.

[16]

Accordingly,
    the appeal is allowed to the extent of varying the order of the motion judge by
    adding the following term to the order:

By the payment of any insurance proceeds relating to LawPro insurance
    policies held by Javad Heydary or Heydary Hamilton Professional Corporation to Hasan
    Abuzour or Samira Abuzour, Hasan Abuzour and Samira Abuzour hereby release any
    claims that they may have against Jeff Landmann, Darren Smith and Yan Wang
    relating to the application in Court File No. CV-12-9960-00CL, including any
    claims relating to or in any way connected with monies held at any time in
    trust for Hasan Abuzour or Samira Abuzour.

[17]

Costs
    are awarded in favour of the successful appellants in the agreed sum of
    $10,000, inclusive of disbursements and taxes.

[18]

In
    this event, the respondents do not pursue their cross-appeal, and this appeal
    is dismissed with costs to the appellants fixed at $1,500 all inclusive.

Released: (JL) July 30, 2015

G. Pardu J.A.

I agree John Laskin J.A.

I agree David Brown J.A.


