



COURT OF APPEAL FOR ONTARIO

CITATION: Karrys v. Karrys, 2015 ONCA 17

DATE: 20150119

DOCKET: C59155

Doherty, Juriansz and Huscroft JJ.A.

BETWEEN

Peter J. Karrys

Applicant

and

Steven
    J. Karrys, Karrys Holdco Inc.

and Karrys Bros., Limited

Respondents

BETWEEN

Karrys Bros., Limited

Plaintiff

and

Gregorio
    Ruffa

Defendant

AND BETWEEN

Gregorio Ruffa

Plaintiff by Counterclaim

and

Karrys Bros., Limited, Steven J. Karrys

and Peter J. Karrys

Defendants by Counterclaim

AND BETWEEN

Karrys Bros., Limited

Plaintiff

and

Andy
    Kephalas, Charles Havill,

Charles Havill Chartered
    Accountant and Charles Havill LLP

Third Parties

AND BETWEEN

Peter J. Karrys

Applicant

and

Steven
    J. Karrys, Karrys Bros., Limited, Karrys Holdco Inc.,

Karbro
    Transport Inc. and Karrys Software Ltd.

Respondents

Robert G. Schipper, for the appellant Torkin Manes LLP

Peter J. Karrys, acting in person

David C. Moore, for the respondent, Karrys Bros., Limited

Heard: January 12, 2015

On appeal from the order of Justice David M. Brown of the
    Superior Court of Justice, dated July 3, 2014.

ENDORSEMENT

[1]

This appeal involves charges orders granted under s. 34(1) of the
Solicitors
    Act
, R.S.O. 1990, c. S.15. The section provides:

Where a solicitor has been employed to prosecute or
    defend a proceeding in the Superior Court of Justice, the court may, on motion,
    declare the solicitor to be entitled to a charge on the property recovered or
    preserved through the instrumentality of the solicitor for the solicitors
    fees, costs, charges and disbursements in the proceeding.

[2]

The appellant, a firm of solicitors, appeals from the order of the
    motion judge declaring certain payments to be made to the respondent pursuant
    to a settlement agreement were not subject to three charging orders in the
    solicitors favour. The three charging orders were granted to the solicitors
    because of work they had done, beginning in 2004, representing the respondent
    in three proceedings in connection with a complex and hostile shareholder
    dispute with his cousin. The three proceedings and the larger dispute remained
    unresolved when the respondent terminated the solicitors retainer in October
    2007.

[3]

In January 2009, the solicitors obtained the charging orders on
    consent. The charging orders gave the solicitors a first charge on any proceeds
    of settlement or any proceeds after judgment payable to the respondent in
    respect of the matters on which the solicitors had represented him. Each of
    the charging orders specified a court file number corresponding to the proceedings
    on which the solicitors had represented the respondent.

[4]

After terminating the solicitors retainer, the respondent continued the
    dispute with his cousin and commenced additional lawsuits. In one subsequent lawsuit
    he sought to restore the payment of his salary that the corporate respondent,
    of which his cousin was the majority shareholder, had suspended in June, 2011.
    He claimed entitlement to the salary under the shareholders agreement. In
    another subsequent action, the respondent sued third parties who were connected
    to the company alleging various wrongdoings.

[5]

On February 5, 2014, the respondent and his cousin entered into a
    settlement that resolved all lawsuits and all legal proceedings between
    them, as well as matters involving third parties. The settlement agreement contemplated
    immediate payments and future payments to the respondent. In particular the
    agreement included the following two terms:

·

Starting now: consulting payments to [the respondent] @$300k/yr
    as of and from January 1/2014 to the conclusion of Plan A or Plan B; [the
    cousins] salary to continue at ~$310K/yr.

·

As consideration for the full and complete settlement of all
    existing and potential claims against third parties, the company agrees to pay
    [the respondent] compensation for all alleged damages as follows: [an
    itemization of amounts to be paid under various scenarios]

[6]

The parties disputed whether the charging orders applied to these
    payments. The motion judge granted the respondents motion for a declaration the
    solicitors were not entitled to these disputed payments.

[7]

The motion judge observed a solicitor must demonstrate the property was
    recovered or preserved through his or her instrumentality to obtain a charging
    order on property. He stated that the element of instrumentality explicitly
    found its way into these charging orders because they specified that they
    applied to proceeds paid to the respondent in respect to [the three court
    files].

[8]

The motion judge, upon a consideration of the agreement and the
    affidavit evidence, went on to find that although the settlement agreement
    dealt in part with proceedings on which the solicitors had acted, the disputed
    payments arose out of the settlement of the subsequent litigation.

[9]

He inferred that the consulting fees, which on their face appear to
    refer to payments for services rendered after January 2014, were best related
    to compensation for the suspension of the respondents salary in 2011. The
    motion judge remarked that the respondents salary was not suspended until
    2011, long after the [solicitors] retainer had ended.

[10]

The
    other parts of the disputed payments were classified by the settlement
    agreement, the motion judge noted, as consideration for the full and complete
    settlement of all existing and potential claims against third parties. He
    observed that the litigation against the third parties commenced in 2009 and
    2012 again long after the termination of the [solicitors] retainer.

[11]

The
    motion judge concluded that the disputed payments were not subject to the
    charging orders.

[12]

On
    appeal, the solicitors counsel submits that the motion judge failed to recognize
    that charging orders should be given a broad and expansive scope. He submits the
    motion judge engaged in a limited chronological analysis that focused on the
    fact that the subsequent proceedings were not launched until after the
    solicitors retainer had ended. This limited focus led him to the erroneous
    conclusion that there was no link between the legal work performed by the
    solicitors and the ultimate settlement of the litigation. He points out that
    the solicitors represented the respondent in connection with an earlier
    reduction of his salary and the respondents subsequent action against the
    third parties relied in part on their earlier investigations.

[13]

Counsel
    submits that on a proper analysis all the settlement proceeds should be found
    to be inextricably intertwined with the legal work the solicitors performed.
    The agreement settled all of the ongoing litigation and that the manner in
    which the parties to the settlement chose to characterize the payments for
    their purposes should not be taken into account in interpreting the charging
    orders. The respondent should not be allowed to avoid the effect of the
    charging orders by earmarking part of the settlement proceeds as relating only to
    other litigation.

[14]

The
    difficulty with the solicitors argument is that they do not, and on the record
    cannot, submit that the settlement agreement was intentionally structured to
    avoid the application of the charging orders. The solicitors did not
    cross-examine the respondent on his affidavit. The record that was before the
    motion judge provides ample support for his conclusions. He considered the
    parties involved in the proceedings, the subject matter, the time at which the
    proceedings were launched and when the subject events took place.

[15]

The
    motion judge did not find, as the solicitors have suggested, that there was no
    link between their work and the ultimate settlement of the litigation. Rather
    he found there was no link between the disputed payments and the solicitors
    work. The disputed payments are only a portion of the payments provided by settlement
    agreement. The respondent acknowledges that the remaining payments are subject
    to the charging orders.

[16]

We
    have not been persuaded there is any basis for interfering with the motion
    judges conclusion. The appeal is dismissed. The costs of the appeal are left
    to the judge who disposes of the respondents action against the solicitors.

Doherty J.A.

R.G. Juriansz J.A.

G.A. Huscroft J.A.


