Toliver v Koepke, 2017 ABQB 686

Court of Queen’s Bench of Alberta Citation: Toliver v Koepke, 2017 ABQB 686 Date: 20171109 Docket: 4803 132898 Registry: Edmonton Between: Rachelle Ann Toliver Plaintiff - and - Murray Elwood Koepke Defendant _______________________________________________________ Reasons for Decision of the Honourable Mr. Justice Eric F. Macklin _______________________________________________________ Introduction [ 1 ] During the course of a protracted divorce action, a total of $125,328 was paid into Court. Of that sum, $12,956.13 remains.

Three individuals have claimed a right to the funds: Murray Koepke, the defendant in the action; Thomas Plupek, a lawyer who acted for Koepke in the action from 2007-2012; and June Koska, a former lawyer who acted as Plupek’s agent in the action. [ 2 ] I have determined that Plupek has a valid charging lien and a valid charging order over a portion of the funds remaining in Court. The rest will go to Koepke.

Background [ 3 ] This application arises out of a long-running family law dispute. Only the facts relevant to the present application are recounted below. [ 4 ] In 2004, Koepke’s wife initiated divorce proceedings against him. Koepke was originally represented by Witten LLP. In 2006, Koepke, represented by Witten, participated in a judicial dispute resolution meeting. After the meeting, the parties continued discussions and eventually reached a settlement. However, Koepke quickly resiled from the agreement, and refused to recognize it. [ 5 ] On May 17, 2006, Witten ceased to act for Koepke.

Koepke continued the litigation unrepresented. [ 6 ] On September 15, 2006, Slatter J (as he then was) issued an order (the “2006 Order”) that, among other things, directed the wife to pay $115,000 into her lawyer’s trust account. The $115,000 represented the estimated amount that Koepke would receive under the settlement agreement. Of this amount, $5,000 was to be paid to Koepke’s lawyer, when he eventually hired one. [ 7 ] On June 1, 2007, Witten obtained judgment against Koepke for $19,999.22 for unpaid legal fees.

Witten registered a writ of enforcement against Koepke on June 29, 2007. [ 8 ] At some point in mid-2007, Koepke hired Plupek to represent him. Plupek did not immediately become the lawyer of record, but did begin legal work for Koepke. Soon after beginning to work for Koepke, Plupek hired Koska to act as his agent and help him with Koepke’s file. [ 9 ] On September 13, 2007, Moreau J (as she then was) issued an order (the “2007 Order”) that, among other things, varied the 2006 Order to provide that $110,000 of the original $115,000 would be held in Court, instead of in the wife’s lawyer’s trust account.

The remaining $5,000 was to be paid to Koepke’s lawyer. [ 10 ] Plupek became Koepke’s lawyer of record on September 26, 2007. [ 11 ] Over the next few years, relations between Plupek and Koska deteriorated significantly. Though the parties disagree about the exact timing of events, at some point in 2010 or 2011, Koska ceased working for Plupek. Plupek subsequently asked her to return some time in 2011 or 2012 to perform limited work on Koepke’s file. [ 12 ] In 2012, a trial was held to determine whether the parties had reached a settlement agreement in 2006.

Read J found that they had reached a settlement agreement, which included the amounts owing for child and spousal support (“the 2012 Decision”). Her decision was upheld on appeal. [ 13 ] In June 2012, Plupek sent Koepke a statement of account for $16,800. Koepke only paid Plupek $500. [ 14 ] On September 10, 2012, Plupek withdrew as counsel. He retained Koepke’s file. [ 15 ] Koska continued to work on Koepke’s matter, but never become the lawyer of record. She appeared as counsel on several appeals in 2013.

During this time, Koska sought to have Plupek release Koepke’s file, but Plupek refused, pending an agreement by Koepke to pay his outstanding legal fees. Koska appears to have ceased working for Koepke by 2014. Koepke continued the litigation unrepresented. [ 16 ] During 2014, Koepke continued to seek the release of his file from Plupek. Plupek continued to refuse to release the file unless Koepke agreed to make arrangements to settle the outstanding account. [ 17 ] Eventually, Plupek applied for directions from the Court on how to proceed regarding Koepke’s file.

On December 2, 2014, I issued an order (the “2014 Order”) directing that (

i) all funds held in Court continue to be held until after the conclusion of trial in order to assess any “attachment or security against the funds” held by Plupek, and (ii) that Plupek release the file contents to Koepke. [ 18 ] A second trial was held in 2016 to determine whether the settlement agreement was unconscionable and what effect, if any, the parties’ non-compliance with ss 37 and 38 of the Matrimonial Property Act , RSA 2000, c M-8 ( MPA ) would have on the agreement. Judgment was delivered in August 2016 (the “2016 Decision”).

Shelley J found that the settlement agreement was enforceable, and the parties’ non-compliance with the MPA was inconsequential. At the end of the trial, Shelley J calculated the amount owing to Koepke based on the 2012 Decision, which was itself an affirmation of the settlement agreement. Based on expert testimony given during the trial, Shelley J found that the initial $115,000 sum was $10,328 less than what the wife actually owed Koepke, given the offset between spousal support and child support payments.

The wife was required to pay the difference into Court. [ 19 ] As a consequence of his behavior during the trial, significant costs were awarded against Koepke. This costs award nearly depleted the funds held in Court. However, after the wife paid the offset into Court, it raised the total held in Court to $12,956.13. The current application [ 20 ] On July 25, 2017, I heard Plupek’s application to have the funds held in Court paid to him. He claimed the funds on the basis that he held a retaining lien, a charging order, or a charging lien against the funds in Court.

Three others also appeared, claiming the funds: Witten, with a claim based on their outstanding judgment; Koska, with a claim based on legal work she had performed for Plupek that she was never paid for; and Koepke, with a claim based on no other party having a valid claim to the funds. [ 21 ] During the application, the parties adjourned in an attempt to reach a settlement agreement. Upon returning, the parties indicated that Koepke had agreed to accept $1,000 of the funds held in Court in exchange for his discontinuing his claim to the fund,

while the remaining three parties would pursue their claims. The parties then adjourned the application to make additional writtensubmissions. [22] Subsequent to the application, Witten informed the other parties and myself that its judgment had not been renewed and that itwas discontinuing its claim to the funds. Given this information, and because a formal order regarding the settlement agreement had notbeen entered, I permitted Koepke to continue his participation in the matter. [23] After further written submissions on the issue of limitation periods, the application continued on September 14, 2017.

Preliminary concerns regarding Koepke’s involvement [24] At the September 14 continuation hearing, Plupek objected to Koepke’s continued involvement in the matter on the basis thatKoepke had agreed, in exchange for $1,000, to discontinue his participation. However, Koepke’s agreement to end his participation mustbe considered in the context of the settlement negotiations between Koepke, Witten, Plupek, and Koska. [25] Koepke was an unrepresented litigant, thrust unexpectedly into discussions with two lawyers and a former lawyer.

At the timeKoepke agreed to discontinue his participation, he wrongly believed that Witten held a valid judgment against him. The other parties tothe application, including Plupek, created this incorrect belief. During the July 25 application, Plupek told the Court: I can advise the Court I have reviewed [the lawyer from Witten’s] attachments to one of his affidavits.

I believe they did comply with the10 year limit by looking at their PPSA attachment that shows that it’s current, and my belief is that it was refiled by a date in 2016. [26] I am satisfied that Koepke’s agreement to settle for $1,000 was, at least in part, based on his understanding that Witten held avalid judgment against him. Even if Plupek’s and Koska’s claims were to fail, Witten’s claim was enough to entirely deplete the fundsremaining in Court. Barring Koepke from participating on the basis of Plupek’s objection, when Plupek himself contributed to Koepke’sincorrect belief, would be unfair.

Koska’s claims [27] Koska claims payment from the funds in Court on equitable grounds. She alleges that Plupek owes her over $59,000 for legalwork she performed as his agent in the Koepke matter, and that he has owed her this money since 2012. She claims that she should, onthe basis of equitable principles, receive the funds. Furthermore, she alleges that both Plupek and Koepke told her that her eventualpayment would come from the funds held in Court.

Given this, she claims that Plupek and Koepke are estopped from raising limitationperiods as a defence that would bar her claim. [28] Koska’s claim in equity does not entitle her to the funds held in Court. Any claim Koska may have for unpaid work done onthis matter is against Plupek, her former employer, not against the funds held in Court. As there is no merit to Koska’s claim, there is noneed to address her estoppel arguments.

Plupek’s claims [29] Plupek submits that he is entitled to the funds held in Court via a retaining lien, a charging lien, or a charging order. [30] These three types of liens have been canvassed in depth in two Alberta cases: Re Cochard, 2005 ABQB 679, 385 AR 1 andMerchant Law Group v McLeod and Co, 2005 ABQB 875, 55 Alta LR (4th) 301. Each type has different requirements that must bemade out. Retaining liens [31] A retaining lien permits a lawyer to refuse to release a client’s file until the client arranges to pay any outstanding legal fees.

Itdoes not give a lawyer a right to bring an action or to get an order (Merchant at para 10). Even where a lawyer holds a valid retaininglien, courts retain the jurisdiction to order the release of the file. Court orders to release files can be dependent on specific conditions orundertakings being made, including that the lawyer with the retaining lien have priority to whatever funds arise from the action (see, forexample, Re Gladstone, 25 DLR (3d) 43, (Ont CA)). [32] Here, Plupek had a valid retaining lien over Koepke’s file, as Plupek held the file and refused to release it.

In the 2014 Order,on Plupek’s application, I ordered the release of the file contents to Koepke. However, Plupek did not seek to impose conditions on therelease of the file that would grant him priority to the funds held in Court. Instead, the order essentially crystallized whatever rights theparties had at the time the order was granted, leaving open for later determination whether he was entitled to these funds.

This effect isclear based on the first paragraph of the order: The issue of attachment or security against the funds previously paid into court to the credit of this action may be addressed on futureapplication following the trial of the action between Murray Koepke and Rachelle Toliver. [33] As such, as per the terms of the order, Plupek continues to have all of the rights inherent in holding a retaining lien over thefile. Retaining liens cannot be actively enforced, so the lien would not entitle him to payment here. [34] Instead, the only routes to payment are through either a charging lien or a charging order.

If Plupek would have been able to

assert either at the time of the 2014 Order, he would still be entitled to claim it now. Plupek meets the requirements for a charging lien and acharging order [35] Charging liens and charging orders are very similar. Charging liens are created under common law, while charging orders,essentially a codification of charging liens, are created under r 10.4 of the Alberta Rules of Court.

Both allow a lawyer to assert a claimover funds not in the lawyer’s possession for unpaid legal work (Merchant at paras 12-15). [36] Charging liens have three requirements: (1) a likelihood that the client will be unable to pay the lawyer’s costs (Merchant at para 20); (2) the lawyer has conducted some legal work for the client (Merchant at para 27); and (3) property must have been recovered or preserved through the lawyer’s efforts (Merchant at para 28). [37] However, even when these three requirements are met, the Court in its equitable discretion can refuse to recognize a charginglien (Merchant at para 49, Re Cochard at para 70). [38] Rule 10.4, which creates charging orders, states in part:

(1) On application by a lawyer, the Court may declare property specified in its order, including property that may be subsequentlyrecovered in an action, to be subject to a charge as security for payment of the lawyer’s charges.

(2) The order referred to in subrule (1) may only be made if (

a) the lawyer establishes to the Court’s satisfaction that the lawyer’s charges will not be or are unlikely to be paid unless the order ismade, and (

b) the property to be the subject of the charge is associated with (

i) the action conducted by the lawyer on the client’s behalf, and (ii) the lawyer’s services result in the recovery or preservation of the client’s property. ...

(5) An order must not be made under this rule if in all the circumstances the Court considers that to make the order would be unfair. [39] Rule 10.4 is the new version of r 625 of the old Rules of Court. No case appears to have yet considered r 10.4. However, r10.4’s requirements reflect the test Alberta courts developed for granting charging orders under r 625 (see Royal Bank of Canada vLaughlin, 2001 ABCA 78 at para 34, 277 AR 201). [40] Plupek has met all of the requirements to be granted either a charging lien or a charging order.

Plupek conducted litigation onbehalf of Koepke, appearing as counsel in the 2012 trial. He recovered or preserved Koepke’s property, as he worked on the file whenthe fund was created. He is unlikely to be paid without a charging lien or a charging order: Koepke had a judgment issued against him byWitten for unpaid legal fees, and Koepke has made no payments to Plupek for his outstanding legal fees since 2012, after making aninitial $500 payment.

Finally, the charge Plupek seeks is for the work he performed in the course of representing Koepke in the divorceaction. [41] However, while Plupek has made out the requirements for both, I am not prepared to recognize that Plupek has a charging lienor a charging order over the entirety of the fund. [42] In deciding whether it is equitable to recognize a charging lien, courts will consider the connection between the lawyer andthe property the lawyer seeks to charge (Cox Downie v Patterson, 112 NSR (2d) 148, (SC (TD)), Re Booth, 56 CBR(NS) 289, 1985 CarswellOnt 194 (Sup Ct)).

A charging lien “must be related to assets preserved by the solicitor” (Re Morton, 2014ONSC 5438 at para 53, 17 CBR (6th) 264, leave to appeal granted on other grounds, 2015 ONCA 553, 337 OAC 1). Here, much of themoney remaining in the fund was not recovered or preserved by Plupek. Accordingly, it would be unfair to grant him a charging lien overthe funds he did not recover or preserve. A review of the history of the fund illustrates what money is attributable to Plupek’s efforts. [43] Plupek represented Koepke when the 2007 Order was obtained that required the wife to pay $110,000 into Court.

This moneycould be seen as having been recovered or preserved by Plupek. However, this $110,000 was almost completely depleted following the2016 trial; after costs were awarded against Koepke, only $2,628.13 of this original amount remained in Court. [44] In the 2016 Decision, Shelley J found that the parties had underestimated the amount of money owing to Plupek under thesettlement agreement by $10,328. This amount came from the evidence of one of the wife’s experts, and his evidence was based on thesettlement terms negotiated by the parties in 2006.

Plupek was not involved at either of these points: Witten represented Koepke duringthe 2006 negotiations, and Koepke was self-represented during the 2016 trial. Plupek cannot be viewed as having recovered or preservedthis additional $10,328.

He thus cannot assert a charging lien over it, and his lien is restricted to what remains of the original fund, being$2,628.13. [45] Similarly, under r 10.4(5), a court must refuse to grant a charging order where “the Court considers that to make the orderwould be unfair.” It would be unfair to grant Plupek a charging order over the entirety of the fund for the reasons discussed above.

Instead, a charging order only entitles him to the same amount as he would receive via the charging lien, being $2,628.13. Limitation periods [ 46 ] Limitation periods do not apply to charging liens ( Merchant at para 50). [ 47 ] While it is questionable whether a limitation period would apply to a charging order, it is unnecessary to consider that issue as Plupek has satisfied the test for both a charging lien and a charging order. Conclusion [ 48 ] Koska has no claim to the funds held in Court.

Her application must fail. [ 49 ] Plupek has a charging lien over the portion of the funds held in Court that he preserved: $2,628.13. [ 50 ] Koepke will receive the remainder of the funds. Costs [ 51 ] No costs are awarded given the mixed success of the parties in the application. Heard on the 25 th day of July, 2017 and the 14 th day of September 2017. Dated at the City of Edmonton, Alberta this 9 th day of November 2017. Eric F. Macklin J.C.Q.B.A. Appearances: Murray E. Koepke self-represented Thomas E. Plupek self-represented June K. Koska self-represented Ryan T. Bencic, Student at law for Witten LLP