NMA v. AS, 2012 ABQB 678

Court of Queen ’ s Bench of Alberta Citation: NMA v. AS, 2012 ABQB 678 Date: 20121031 Docket: 4803 147913 Registry: Edmonton Between: NMA Plaintiff - and - AS Defendant Editorial Notice: On behalf of the Government of Alberta identifying information has been removed from this unofficial electronic version of the judgment. _______________________________________________________ Reasons for Judgment of the Honourable Mr.

Justice Donald Lee _______________________________________________________ Background [ 1 ] The only remaining issue to be determined herein is the legitimacy and status of a caveat filed by the Defendant husband ’ s legal counsel, Brook Mishna. This caveat served to protect Mr. Mishna's legal fees for services rendered to the Defendant during the

period of June 2010 through approximately December 6, 2010. [ 2 ] The evidence in this matter consists of filed Affidavits on the part of counsel for the Plaintiff and counsel for Mr. Mishna, who represented himself. Additionally I allowed submissions and representations made by these parties without calling any party to the stand to provide testimonial evidence in that regard. [ 3 ] Mr.

Mishna ’ s short Affidavit does not contain amy copy of counsel ’ s retainer agreement, Memorandum Charging Lands or legal fees statement of account, nor was any information furnished regarding the interest provisions to be charged. Reference was made by counsel verbally about interest being charged at 24%. [ 4 ] A lengthy Affidavit was filed on behalf of the Plaintiff, which sought to provide context and background to the parties' marriage, and to their financial circumstances at separation and subsequently.

Specific umbrage was taken regarding the conduct of the Defendant husband throughout the proceedings particularly conduct aimed allegedly at subverting the judicial process and at defeating the Plaintiff's matrimonial entitlements [ 5 ] There was an Order of my colleague Moen, J. dated March 6, 2009 obtained early in the proceedings, which precluded either the Plaintiff or the Defendant from disposing of, mortgaging, transferring any property in either Alberta or British Columbia. This Order predated the involvement of Mr. Mishna, however Mr.

Mishna as subsequent counsel for the Defendant, and as an officer of the court in his own right, would have been aware of this Order. [ 6 ] Arrangements aimed at selling the 87 th Street property in dispute were blocked by the Defendant April 14, 2009. At the time of sale title for the 87 th Street property included a caveat registered in favour of Mr. Mishna, which caveat was registered August 9, 2010, without notice to the Plaintiff. [ 7 ] During his representation of the Defendant, Mr.

Mishna helped negotiate a comprehensive settlement between the Plaintiff and the Defendant, which settlement contemplated an equal sharing of any residual monies after the creditor claims had been dealt with. At the time this settlement was completed, neither the Plaintiff nor Plaintiff's counsel were made aware of Mr. Mishna's claim against monies paid into court. [ 8 ] At trial, Mr. Mishna advised me that it was not contemplated that the Plaintiff would share in, or be responsible for any portion of the legal fees owed by the Defendant to Mr. Mishna.

Therefore the only known creditor claims at the time of the settlement, were the CIBC, BMO, and the [S.] extended family members. It was well known that the Plaintiff disputed all the claims of the [S.] family members against title, which claims I have now dismissed. [ 9 ] The Plaintiff maintains that Mr. Mishna's legal fees should not take any priority to her claim under the Matrimonial Property Act for an equitable division of the matrimonial property. It is submitted that the fees of Mr.

Mishna remain an obligation solely against the Defendant and should not prejudice her matrimonial entitlement. [ 10 ] The trial concluded September 6, 2012 subject to written submissions on the legitimacy of Mr. Mishna's caveat, with the Plaintiff being granted Judgment for half the balance of the trust monies plus adjustments against the Defendant's interests, which amount exceeded the balance available to the parties in trust. The Plaintiff is therefore arguably already a Judgment creditor of the Defendant. [ 11 ] Mr.

Mishna advised the Court at trial that he has not pursued his claim against the defendant for unpaid legal fees. Mr. Mishna has also elected to pursue his Claim in Provincial Court which caps his claim at $25,000.00. Therefore Mr. Mishna is not currently a judgment creditor of the Defendant. [ 12 ] The Plaintiff now asks that the Court grant a declaration of constructive trust against the balance of monies held in trust in

Court with the date of such trust to be made retroactive to the date of Moen J.’s Order of March 6, 2009. The Plaintiff’s Argument [13] The Plaintiff asserts that Mr. Mishna's argument relies on him selectively changing from legal counsel to creditor, in order toheighten his priority as a claimant. In order to effect this change however he must utilize knowledge that he could only glean in his roleas counsel for the Defendant. It is submitted he also attempts to attach to trust monies paid into Court, without notice to the Plaintiff, whobecomes indirectly a debtor to Mr.

Mishna without any rights to effectively challenge the legitimacy of the debt that she becomes jointlyresponsible for. Mr. Mishna is not a judgment creditor, he is a claimant only. His caveat provides notice only. He neither has a writsupporting a judgment issued by the Provincial Court, nor has he taken steps to have his account taxed.

The Plaintiff is dependent on Mr.Mishna with respect to establishing the quantum of his account. [14] The 2005 decision of my colleague Veit, J. in 1003166 Alberta Ltd. v 868609 Alberta Ltd. 2005 ABQB 729 argues thatmatrimonial cases add an emotional overlay which requires a principled analysis and balanced overall review, with attention paid toequitable principles.

She favours at para. 31 the position articulated by Professor Paciocco arguing that such cases should be treateddifferently than straight commercial cases: "It is clear that the court should examine the overall circumstances, including the competing equities, the dealings of the parties and theirconduct, and the profits that will be available to the Plaintiffs in determining whether the Plaintiffs are entitled to the relief which theyseek." [15] The Plaintiff in the case at Bar distrusted the actions of her husband throughout the litigation and took pains to protect herinterests, evidenced by the registration of her Certificate of Lis Pendens [“CLP”] in early 2009, and her resort to the Court to obtain afreezing or restraining Order.

These warnings were available to Mr. Mishna when he commenced work as counsel for the defendant inmid-2010. As in 1003166 at para. 23, the Court found that reasonable investigation on the part of the law firm would have informedthem of their potential jeopardy as creditors and that "Indeed, the law firm was uniquely well placed to make its own assessment, from the outset of their dealings with Mr.

Chapman,whether any alleged "negligence" on the part of the plaintiffs would disentitle them to from the relief they sought." [16] Agrios, J. in Pegg, made reference to a 1988 Alberta decision of Bracco, J. in Burroughs v Burroughs(1988) (AB KB), 58 Alta LR (2d) 164 in which a mortgage was given by a son to his mother after the filing of thesons' wife's CLP.

Bracco, J. held that the son had no equitable interest in the land and any security he attempted to give would be entirelyhollow, as it was registered subsequent to the CLP which had not been fully adjudicated. [17] In the present case at bar, unlike in Burroughs, a specific restraining Order that was never appealed or challenged wasalready established that specifically prevented allowing such interests from having effect.

Also the interest advanced here was not infavour of a family member, who could argue they did not know what such an Order meant, instead it was in favour of professionalcounsel who specifically knew or ought to have known that such advancement was not permitted and would not stand challenge. [18] By even allowing the Defendant to sign such a document at a time when he was wearing his counsel hat (and not hiscreditors hat) Mr. Mishna allegedly placed his then client in an active and continuing breach/contempt of an Order of this Court, withoutadvising anyone.

Then counsel advances an argument as a creditor, using the knowledge that he could have only have gleaned frombeing the Defendant’s counsel. This is done even after a formal comprehensive settlement had been negotiated with his input andacquiescence that would render moot the Plaintiffs' interests, in favour of his own. For these reasons the Plaintiff argues that theMemorandum Charging Lands and subsequent registration via caveat, are void ab initio as Mr.

Mishna cannot be seen to come to theCourt with clean hands. [19] Returning again to 1003166, in defending a priority of constructive trust beneficiaries over general unpaid creditors ProfessorPaciocco asserts two grounds of defense and justification. The first being a proprietary interest justification, and the second being theacceptance of risk justification.

[ 20 ] The starting point for a review of the proprietary interest justification is the Supreme Courts decision in Sorochan v Sorochan 2 S.C.R.38, which describes when particular conduct should give rise to a remedial constructive trust. Three elements are necessary to establish a right to claim relief based on unjust enrichment, those being: an enrichment, a corresponding deprivation, and the absence of any juristic reason for the enrichment. [ 21 ] These three elements exist in the case at bar.

It is submitted that the Defendant husband through his conduct throughout proceedings sought to extinguish his wife's ability to recover against their matrimonial property by specifically creating and choosing creditors over her interests and allowing for their elevation over her interests in situations where she was excluded from participating. He did this by encouraging the institutional creditors to register their writs against the 87 th Street property in his sole name.

He did this through his blindness and inaction allowing familial members to register bogus interests against his title, and he did this by entering into an arrangement in contravention of a Court Order and unbeknownst to the Plaintiff aimed at creating a priority claim over his wife's interests in his title. [ 22 ] Here it is submitted that the “ enrichment ” is the ability of the Defendant to manufacture and choose creditors in preference to his wife's legitimate matrimonial interests; and that the deprivation is that the Defendant has rendered himself judgment proof and there are no other eligible assets are available outside the limited monies in trust But for the monies in trust, there is no recovery possible for the Plaintiff.

It is submitted that there is no juristic reason that this manufactured situation be allowed to stand. [ 23 ] Although I did not previously deal with any application by the Plaintiff for a a constructive trust, I did strike the Defendant and the extended familial members claims, and awarded relief to the Plaintiff [ 24 ] While not specifically plead by the Plaintiff in her Statement of Claim, it is clear throughout the proceedings and by her conduct that the Plaintiff asserted her interest in the 87 th Street property, which property was held by the Defendant for the benefit of the Plaintiff.

It is submitted that a declaration of constructive trust (or resulting trust) is the correct remedy. In 1003116 Veit, J. specifically at para.30 noted that the situation where a constructive was necessary to provide justice to the Plaintiff because an award of mere damages would not be adequate. 1003166 also held that the Court was not functus in determining, after the fact, both a time and date on which the constructive trust arose. It was conceded by the parties that where the court recognized a constructive trust, it had the discretion to determine when it arose.

It is asserted in this case that the trust be seen to arise at the moment of the Defendants wrong doing with respect to the discrete issue of the creation of Mr. Mishna' Memorandum Charging Land, which by his account occurred July 30, 2010. [ 25 ] Finally if the Court does not accept that a constructive trust arose, or that the interest seen to be granted to Mr. Mishna was void ab initio, then the Plaintiff asks that the quantum of Mr. Mishna's account be subject to challenge in the form of a taxation. Mr. Mishna ’ s Argument [ 26 ] Mr.

Mishna is a creditor of the Defendant as a result of unpaid legal fees incurred when he acted as counsel for the Defendant between June 30 and December 6, 2010. Mr. Mishna has served a Civil Claim on the Defendant and is taking steps to have the Defendant noted in default. It is expected that Mr. Mishna will have a default judgment shortly. [ 27 ] The Defendant signed a retainer agreement with Mr. Mishna of Venture Law Group on June 30, 2010. A caveat in favour of Brook. S.

Mishna Professional Corporation a partner of Venture Law Group LLP was charged against the Defendant's property on August 9, 2010 to provide security for legal costs that had already been incurred. The retainer agreement sets out that overdue accounts are charged interest at a rate of 24% per annum and a final bill was issued to the Defendant on December 6, 2010. The retainer agreement contains an agreement charging land. Mr. Mishna's argues that he has the capacity to act as both counsel and creditor to the Defendant, and that his role of creditor arose in the course of

standard practice. [28] He argues that the Plaintiff has failed to make out the essential elements for a claim of unjust enrichment against theDefendant. The three elements required to establish unjust enrichment: an enrichment, a corresponding deprivation, and the absence ofany juristic reason for the enrichment. The Plaintiff seeks to meet the first element of this test on the basis that the Defendant has beenenriched by gaining "the ability to manufacture and choose creditors in preference to his wife's legitimate matrimonial interests". TheSupreme Court in Peel (Regional Municipality) v.

Canada; Peel (Regional Municipality) v. Ontario, (SCC), [1992] 3SCR 762 says that an enrichment must be an "incontrovertible benefit". [29] An "incontrovertible benefit" is one that is demonstrably apparent and not subject to debate and conjecture. Where the benefitis not clear and manifest, it would be wrong to make the defendant pay, since he or she might well have preferred to decline the benefit ifgiven the choice.

Any relaxation on the traditional requirement of discharge of legal obligation which may be effected through theconcept of "incontrovertible benefit" is limited to situations where it is clear on the facts on a balance of probabilities that had thePlaintiff not paid, the defendant would have done so. Otherwise it is submitted that the benefit is not incontrovertible. The benefit mustbe more than a secondary collateral benefit. [30] The Defendant has incurred a debt to Mr. Mishna in the case at bar. Even in the broadest possible

interpretation of whatconstitutes an incontrovertible benefit, a debt cannot be construed as a benefit to the debtor. The Defendant has not made any real,monetary gain. No unjust enrichment has taken place in the case at bar because no enrichment has taken place. [31] The Plaintiff cites Burroughs and Pegg as authorities supporting its claim that Mr. Mishna's caveat on the matrimonialproperty should fail because it was registered after the CLP. These cases both concern charges that were incorporeal heriditaments thatare governed by the law of real property. Mr.

Mishna's charge is a debt, governed by the law of personal property. Pegg specificallydistinguishes these two sorts of claims and discharges the claim of the creditor bank because it is found to be governed by the law of realproperty and suggests that this may not have been the outcome had the debt been governed by the law of personal property. [32] It is submitted that Mr.

Mishna is just as entitled to pursue rights related to debt as any creditor, and because there has beenno unjust enrichment in the case at bar, an Order that the monies held in Court be placed in a constructive trust in favour of the Plaintiffis an inappropriate remedy. [33] It is submitted that the Court grant a declaration that the caveat in favour of Mr. Mishna be allowed to stand. Conclusion [34] I gather that Mr.

Mishna does not challenge the Court's ability to declare a constructive trust after the Trial; rather he arguesthat the first element of the test for a constructive trust is not met since the Defendant has not received an "inconvertible benefit" whichhe equates with a "real, monetary gain". It is understood that the Defendant has incurred a debt, and that a debt by its very nature is not abenefit. [35] The law generally on constructive trusts was recently discussed by me in MacGregor v.

Hosack 2012 ABQB 647. [36] I conclude that the "benefit" achieved by the Defendant in the case at bar, was the Defendant's representation by legalcounsel, throughout a period of proceedings where otherwise the Defendant would have been unrepresented. [37] There is no requirement in law for a benefit to be a "real, monetary gain". Benefits can be wide in scope, and include theprovision of services. I conclude that the benefit to the Defendant was threefold:

- continued legal advice and guidance in complex Court proceedings; - a deferred payment system for legal representation as the Defendant did not prepay his legal fees but sought instead to secure payment against a disputed matrimonial asset; and - the Defendants ability to further delay and protract the litigation by having counsel bring numerous applications to Case Management upon an arguably impecunious spouse. [ 38 ] It was these three things that allowed the Defendant to engage in the protracted litigation that has ensued. [ 39 ] I agree that where the benefit is not clear and manifest, it would be wrong to make the Defendant pay, since he or she may well have preferred to decline the benefit if given the choice.

However this is not a situation where representation by counsel was forced upon the Defendant. Quite the opposite, the Defendant sought out and retained counsel to benefit his interests. In the absence of the Defendant choosing to retain counsel, Mr. Mishna, the issues at bar would have dealt with by the Case Management Justice, under extant Orders aimed at selling the 87 th Street property. It was only the arrival of Mr. Mishna as counsel for the Defendant that those arrangements were compromised.

The benefit of this course of action for the Defendant was clear and manifest, and was his alone. [ 40 ] As to the issue of collateral benefit, McLachlin J., speaking for the majority in Peel went on to resolve this issue in favour of the Plaintiff positing that the cases in which claims for unjust enrichment have generally been made out deal with benefits conferred directly and specifically on the Defendant, such as services rendered for the Defendant or money paid to the Defendant. [ 41 ] Thus the requirements of free choice and direct benefit have been satisfied.

In the case at bar the Defendant, through his own action chose to retain legal services from counsel, Mr. Mishna, for his sole benefit, which services formed the basis of the debt which the Plaintiff disputes. The Plaintiff did not choose the Defendants counsel. Counsel for the Defendant was not foisted or forced upon the Defendant. The Plaintiff did not benefit from the services rendered. The Defendant did. There exists an inconvertible benefit to the Defendant, now evidenced by a debt that counsel for Mr. Mishna seeks to recover from the Plaintiff.

This represents enrichment. [ 42 ] Even if I could not grant a Declaration that the Defendant has been unjustly enriched and that the monies now available in trust in Court are held in a constructive trust for and on behalf of the Plaintiff, it is open to the Court to conclude that the Defendant held no equitable interest on the subject land at the time he attempted to grant Mr. Mishna a charge upon it, such that the claim of Mr. Mishna also fails. [ 43 ] However Mr. Mishna's rights against the Defendant continue irrespective of the Plaintiff's matrimonial property action.

To the extent that the Defendant has other assets which are not involved in the matrimonial property action, they are available to Mr. Mishna for his general execution. Heard on the 6 th day of September 2012. Dated at the City of Edmonton, Alberta this 30 th day of October, 2012.

Donald Lee J.C.Q.B.A. Appearances: Lana Robinton Lana Robinton Professional Corporation for the Plaintiff Brook S. Mishna Venture Law Group for the Defendant