Lawyer's contribution need not be substantial, integral in charging order: Ontario Court of Appeal

In a case where a client challenged a charging order granted in her ex-lawyer’s favour, the Ontario Court of Appeal found it immaterial that the litigation was settled without the lawyer’s involvement given that the proceedings would be resolved without her participation after the solicitor-client relationship had broken down.

In Foulidis v. Foulidis, 2022 ONCA 362, the appellant and her husband moved into a property bought by a company owned by the husband’s brother. Later, the brother transferred the property’s title to the appellant, who borrowed $450,000 from him via a demand loan for the property’s development.

After the marriage broke down, the appellant’s husband moved out. The appellant retained Jodi Feldman as a lawyer relating to the family law issues. The retainer ended before the issues were settled and Feldman brought a civil action against the appellant to claim outstanding legal fees of $664,323.38.

The appellant managed to settle her litigation with her brother-in-law relating to the demand loan, as well as her family law dispute with her husband. The appellant filed a counterclaim against Feldman in the civil action. She sought damages of $2,000,000 for negligence, breach of contract, and breach of fiduciary duties.

Feldman then did the following:

• Added the appellant’s brother-in-law to the civil action
• Amended the claim to allege that a charge on the property, which the appellant placed in her brother-in-law’s favour, was void under Ontario’s Fraudulent Conveyances Act;
• Registered a certificate of pending litigation against the property
• Moved for a charging order in the Family Court pursuant to s. 34(1) of Ontario’s Solicitors Act against the property.

The motion judge, granting Feldman’s motion, found that she satisfied the three criteria in Weenen v. Biadi, 2018 ONCA 288. The Weenen test required her to establish the following:

• The fund or property was existing at the time of the order’s granting (the existence of the property component)
• The property was recovered or preserved through the instrumentality of the lawyer (the preservation of the property component)
• The client could not or would not pay the lawyer’s fees, as shown by the evidence (the risk of non-payment component).

The Ontario Court of Appeal agreed with the motion judge’s findings and dismissed the appeal. First, Feldman satisfied the existence of the property component of the Weenen test. The appellate court rejected the appellant’s argument that the charging order was invalid because the Family Court made it while her continued interest in the property was uncertain.

According to the appeal court, a solicitor’s charge was intrinsically declaratory and was judicial confirmation that the solicitor had the proprietary interest of a secured creditor. The appeal court noted that, if it accepted the appellant’s submission, an indebted client could prevent the making of a meritorious solicitor’s charging order by transferring the property. This would be against the intent and spirit of s. 34(2) of the Solicitors Act.

Second, Feldman complied with the property component, the appeal court said. Even if the motion judge did not describe Feldman’s contribution as “substantial and integral” in the charging order, she, as a judge, was presumably aware of the law and was not required to use that phrase.

Third, the risk of non-payment component of the Weenen test was also met, given that the appellant was obviously refusing to pay, the appeal court held.

The motion judge did not fail to consider the competing equities when imposing the charging order, the appeal court further said. She addressed the husband’s property interest and found a triable issue on whether the title was acquired via a fraudulent transfer.

Lastly, the appeal court dismissed the respondent’s cross-appeal. While the motion judge failed to explain why she did not grant costs to Feldman despite her success in obtaining a charging order, she gave sufficient reasons for her costs order, the court said.