Janes & Noseworthy Limited, in its Capacity as Trustee Acting in re the Proposal of James Francis Duff Applicant And: Jean V. Dawe, Q.C. First Respondent And: Dawe v. Burke law Office, 2018 NLSC 3

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Duff v. Dawe , 2018 NLSC 3 Date : January 8, 2018 Docket : 201701G5374 In re: a consumer proposal of James Francis Duff pursuant to the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 Between: Janes & Noseworthy Limited, in its Capacity as Trustee Acting in re the Proposal of James Francis Duff Applicant And: Jean V. Dawe, Q.C. First Respondent And: Dawe and Burke law Office Second Respondent ______________________________________________________________________________ Before: Justice James P.

Adams ______________________________________________________________________________ Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: November 21, 2017

Summary: The Trustee of a consumer who filed a proposal under the Bankruptcy and Insolvency Act , sought the return of $42,081.93 transferred by the consumer’s lawyer from her trust account to her general account to satisfy an invoice for legal services rendered to the consumer.

The Respondent, Jean V. Dawe, Q.C., represented James F. Duff in a matrimonial dispute in which the division of assets was theprincipal issue. Following presentation of an invoice for her services, she filed a lis pendens based on her claim for a solicitor’s lienagainst properties of Duff. Subsequently, Duff filed a consumer proposal under the Bankruptcy and Insolvency Act, in which Dawe wasnamed as an unsecured creditor. Meanwhile, subsequent to the filing of the proposal, Dawe acted for Duff on the sale of one of theproperties referred to in the lis pendens.

Following the sale, and relying on her solicitor’s lien, Dawe transferred most of the proceeds ofsale from her trust account to her general account in satisfaction of her invoice and retained the rest against unbilled work. The Trusteesought return of the money. Held: The solicitor’s lien is valid and created a secured debt in favour of Dawe from the date the service was provided and should have beenrecognized as such by the Trustee.

While the self-help remedy employed by Dawe is to be discouraged (she should have applied to courtfor a declaration of a charge against the fund), on equitable principles this did not change the legal character of the debt or deprive her ofher right to the lien. The lis pendens was declared invalid as it did not comply with the legal requirements therefore but operated as avalid notice of lien. The Trustee’s application was denied. Appearances: Matthew M. Peyton Appearing on behalf of the Applicant Jean V. Dawe, Q.C. Appearing on behalf of the Respondents Authorities Cited: CASES CONSIDERED: Crosbie v.

Health Care Corp. of St. John’s, (NL CA), [1999] 181 Nfld. & P.E.I.R. 174, 550 A.P.R. 174 (Nfld. (C.A.)); Tots & Teens Sault Ste. Marie Ltd. Re, (ON SC), [1975] 11 O.R. (2d) 103, 65 D.L.R.(3d) 53 (S.C.); Employers’ Liability Assurance Corp. v. Ideal Petroleum

(1959) Ltd., (SCC), [1978] 1 S.C.R. 230; KingInsurance Finance (Wines) Inc. v. 1557359 Ontario Inc., 2012 ONSC 4263; Cox Downie v. Patterson, (NS SC),[1992] 112 N.S.R. (2d) 148; 307 A.P.R. 148 (S.C. (T.D.)); Menzies Lawyers Professional Corp. v. Doyle Salewski, 2014 ONSC 5438;Thomas Gold Pettinghill LLP v. Ani-Wall Concrete Forming Inc., 2012 ONSC 2182; Dwyer v. Duffy & Associates, 2008 NLTD 133;Paro Enterprises Ltd. v. Murphy, 2015 NLCA 33 STATUTES CONSIDERED: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3; Family Law Act, R.S.N.L. 1990, c.

F-2 RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D TEXTS CONSIDERED: LexisNexis Canada Inc., Halsbury’s Laws of Canada, First Edition (Markham: Ontario, 2007) REASONS FOR JUDGMENT Adams, J.: INTRODUCTION [1] This is an application by Janes & Noseworthy Limited as trustee of the Estate of James Francis Duff (hereinafter the“Trustee”) under a consumer proposal made pursuant to the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (hereinafter the “B.I.A.”)for the return of $42,081.93 paid by Jean V.

Dawe, Q.C. and Dawe and Burke Law Office (hereinafter collectively referred to as “Dawe,

Q.C.”) from her trust account to her general account in satisfaction of an invoice for legal services and a declaration that a lis pendens and a solicitor’s lien, pursuant to which the payment was allegedly made, are invalid and of no force or effect. factual background [ 2 ] The facts and background are not largely in dispute between the parties. [ 3 ] James Francis Duff (hereinafter “Mr. Duff”) and Gail Christine Duff (nee Kennedy and hereinafter referred to as “Ms. Kennedy”) were married on or about 3 November 2001. On or about 29 July 2011 Mr. Duff and Ms. Kennedy ceased cohabiting.

On or about 6 December 2013 Ms. Kennedy filed an originating application in this Court (Family Division) seeking a divorce, spousal support and a division of matrimonial assets pursuant to the Family Law Act , R.S.N.L. 1990, c. F-2. [ 4 ] Ms. Kennedy was seeking an equal division of the matrimonial assets in addition to retroactive and prospective spousal support. There were no issues relating to children. Mr. Duff retained the services of Dawe, Q.C. to represent him in 2013. The assets in respect of which Ms.

Kennedy was seeking division included three real properties and the proceeds of a class action distribution in favour of Mr. Duff in the amount of $124,000.00. The three properties in question were: 1) Irishtown Road, Carbonear, Newfoundland and Labrador, purchased by Mr. Duff and Ms. Kennedy as joint tenant in 2003; 2) Captain Frank’s Lane, Carbonear, Newfoundland and Labrador, purchased by Mr. Duff in 2007; and 3) Leary’s Place, Mahers, Newfoundland and Labrador, purchased by Mr. Duff and Ms. Kennedy as joint tenants in 2009. [ 5 ] The family law litigation was complicated as a result of the claims by Ms.

Kennedy to the class action settlement monies and the bankruptcy of Ms. Kennedy. The matter was further complicated by the failure of Ms. Kennedy to take into account debts incurred during the marriage and debts she incurred after separation using credit of Mr. Duff as offsetting payments against her claim. As a consequence of Ms. Kennedy’s debts for which Mr. Duff was held liable, Mr. Duff sought an unequal division of the matrimonial assets. [ 6 ] This necessitated detailed and time consuming assessments of the various credit vehicles of Mr. Duff used by Ms. Kennedy and lengthy negotiations with Ms.

Kennedy’s trustee in bankruptcy (Ms. Kennedy had declared bankruptcy in or about August 2014) as well as numerous court proceedings at Family Division and Bankruptcy Court dealing with Ms. Kennedy’s bankruptcy and the equity available in each of the three properties. During this time, Mr. Duff was suffering from significant cognitive-communication issues arising from a post-traumatic injury which placed a further burden on Dawe, Q.C. respecting her representation of Mr. Duff. Ultimately, Ms. Kennedy’s trustee relinquished any claim by Ms.

Kennedy to the Irish Town Road property for the nominal amount of $1,000.00. [ 7 ] The Captain Frank’s Lane property was sold by power of sale pursuant to a mortgage over the property in May 2016 for the value of the mortgage, leaving no equity. [ 8 ] On or about 9 June 2015, Dawe, Q.C. issued an account for her legal services to date in the amount of $38,915.78. On 11 August 2015, Dawe, Q.C. filed with the Registry of Deeds a lis pendens “on the basis of a solicitor’s lien” against the three properties at Captain Frank’s Lane, Irishtown Road and Leary’s Place.

A partial release of the lis pendens in respect of the Irishtown Road property was issued on 4 March 2016 to facilitate the sale of the property. [ 9 ] Having entered into an agreement of purchase and sale some months earlier, on 24 March 2016, Mr. Duff (having obtained the release of Ms. Kennedy’s interest from her trustee) sold the Irishtown Road property for $100,000.00. After payment of the outstanding mortgage on the property and other deductions, a balance of $42,081.93 remained in Dawe, Q.C.’s trust account.

On or about 19 April 2016 Dawe, Q.C. transferred $38,915.78 representing her 9 June 2015 invoice to her general account and her invoice for legal services on the sale of the Irishtown Road property leaving a balance of $3,166.15 which she retained as “partial payment” against work performed since 9 June 2015. Other than the real estate file on the sale of Irishtown Road, Dawe, Q.C. stated that the other amounts transferred or retained related to Duff’s “main file” which I interpret to mean the family law file. [ 10 ] In the meantime, on 3 February 2016 Mr. Duff filed his consumer proposal pursuant to

section 66.13 of the B.I.A. In Mr. Duff’s Statement of Affairs attached to the proposal, Dawe, Q.C.’s Law Firm is included as an unsecured creditor in the amount of $45,000.00. The proposal automatically invoked a stay on all proceedings in respect of Mr. Duff’s Estate. Dawe, Q.C. was given notice of the proposal. There is no evidence before me that she formally objected to the notice. The consumer proposal has been approved by the creditors of Mr. Duff (with the exception of Dawe, Q.C. by virtue of her action in transferring her fees described above and this Application) and awaits completion by the Trustee.

The lis pendens remains in place in respect of the Leary’s Place property. issues Is the solicitor’s lien valid and effective? Is the lis pendens valid and effective? positions of the parties Trustee [ 11 ] The Trustee submitted that the solicitor’s lien is ineffective as Dawe, Q.C.’s work did not retain or preserve the property as is required for a valid solicitor’s lien. He submitted that in any event the lien, if effective at all, could only have attached to the one half interest of Mr. Duff in the Irishtown Road property.

However, he submitted that even if I determine that the solicitor’s lien applies, I have a discretion which I should exercise in his favour to disallow it because it would be inequitable and prejudicial to the other creditors of Mr. Duff. He further submitted that should I find the lien to be effective, I should declare that it only relates to that portion of Dawe, Q.C,’s work related to the retention or preservation of the property and since it is not possible to make this determination on the evidence

before me, I should refer the matter to the Registrar for an assessment. [12] On the issue of the lis pendens, the Trustee submitted that I should vacate it as it does not comply with the legal requirementsfor a valid lis pendens. Dawe, Q.C. [13] Dawe, Q.C. submitted that the lis pendens should really be treated as simply a Notice of the solicitor’s lien. She submitted thatall the work for which she claims right of payment relates to the preservation of the property for the benefit of Mr. Duff and ultimatelyhis Estate based on the Family Law Act and jurisprudence interpreting it.

She stated the law in Newfoundland and Labrador requires abalancing of the assets and liabilities as between the parties to a family law dispute over matrimonial assets which the Trustee has eithermisunderstood or misapplied. She submitted that the solicitor’s lien attaches to the property or to the proceeds of any sale of property themoment the solicitor’s work is performed and it establishes a secured debt in favour of the solicitor.

She submitted that since thesolicitor’s lien was in place at the time of the consumer proposal, the proposal is subject to the lien and she was therefore entitled to bepaid her fees. The fact that she simply transferred the funds is immaterial as the lien gives her an absolute right to be paid for herservices from the proceeds of sale of Irishtown Road. In light of this, she submitted, the Trustee incorrectly allocated her debt as beingunsecured; but this can’t change its legal characterization and effectiveness. She submitted that there is no prejudice to the othercreditors as Mr.

Duff is obliged under his proposal to pay $1,200.00 per month for a total of $72,000.00 to the Trustee (much of whichhas been paid already) so this would offset the money paid to her. [14] Dawe, Q.C. submitted that the equities favour my upholding her lien. She submitted that if a solicitor’s lien is not effective onthe facts of this case, then the whole concept of a solicitor’s lien is rendered meaningless. DISCUSSION [15] The common law has long recognized the right of a lawyer to a solicitor’s lien to protect her right of payment for servicesrendered. As stated in Crosbie v. Health Care Corp. of St.

John’s, (NL CA), [1999] 181 Nfld. & P.E.I.R. 174; 550A.P.R. 174 (Nfld. (C.A.)) at paragraph 13: 13. … There are two types of liens associated with a solicitor: a retaining lien which gives the solicitor the right, at common law, toretain the property of the client until accounts owing to the lawyer are paid; and a charging lien which enables the lawyer to enforce alien over a fund or property which has been recovered or maintained as a result of litigation, including the settlement of litigation. In thelatter case the property does not have to be in the possession of the lawyer.

Rule 55.23(1) of the Rules of the Supreme Court, 1986codifies the charging lien. It states: 55.23.

(1) The Court may, on the application of a solicitor, declare that the solicitor is entitled to a charge for the solicitor's proper feesand disbursements in a proceeding upon the property recovered or preserved through the solicitor's instrumentality in the proceeding andmay make such order as is just for the payment of the fees and disbursements out of the property. … It is accepted that the charging lien is not a lien at all but a claim to the equitable interference of the court to have property recoveredor preserved through the solicitor's instrumentality (in this case, the settlement fund) held as security for the debt owed to the lawyer.(See James Bibby Ltd. v.

Woods, [1949] 2 K.B. 449 (Eng. K.B.) at 453) Further, the power of the court to protect the position of thelawyer is a discretionary one [16] It is the charging lien which is the subject of this Application. [17] In Tots & Teens Sault Ste. Marie Ltd. Re, (ON SC), [1975] 11 O.R. (2d) 103; 65 D.L.R. (3d) 53 (Ont. (S.C.)),Henry, J. reviewed the common law history of the solicitor’s lien in the context of a bankruptcy. He stated at paragraphs, 19, 21 and 22: 19.

It is to be observed that the order made is declaratory and this presupposes that there is a pre-existing right at common law or inequity, so that the order of the court merely declares and gives effect to that right. The inherent jurisdiction of the court, however, toapply its equitable jurisdiction in favour of the solicitor, remains. 21. The solicitor's so-called lien on the fruits of litigation that he has successfully conducted was described in Dallow v.

Garrold(1884), 14 Q.B.D. 543, by Lindley L.J. in the Court of Appeal, p. 547, as an inchoate right which cannot be defeated by any conveyanceor act and was therefore not affected by an assignment of the fund by the client or by a stop order obtained by the assignee. The commonlaw right was recognized and was enforced through the equitable jurisdiction of the court so that it took effect only when the court, in theexercise of its equitable discretion, declared the fund recovered to be security for the solicitor's claim.

This was translated into statutoryform and extended as I have said by the Solicitors Act of 1860 and in Ontario by what is now R. 696. So far as I can determine however,the same principles were applied by the courts in making charging orders under these statutory provisions.

It is well establishedjudicially that the solicitor has a prima facie right to his lien, as a particular charge upon the fruits of his endeavours, which I refer to as"the fund", and that he ought not to be deprived of this remedy by way of charging order in the absence of exceptional circumstances.The principle was stated by Lord Greene M.R. in the Court of Appeal in Re Blake; Clutterbuck v. Bradford, [1945] Ch. 61 at 68, [1945]1 All E.R. 1, as follows: I do not propose to assert as a matter of principle that the discretion should be exercised against the solicitor only in cases where some

conduct of his own makes it unjust to give him the relief asked for. That, I think, would not be the proper course to take in view of thelanguage of the

section [of the Solicitors Act, 1932 (U.K.), c. 37, s. 69], but I think I am entitled to say that, in a case where no conductof the solicitor was involved, it would require very exceptional circumstances to justify the court in refusing to the solicitor that securityin respect of the fruit of his labours to which he is prima facie entitled. In the present case, hardship though it be to the residuary legatees,I do not find any such circumstances, and, in my opinion, that point also fails. 22.

I emphasize that the decision to grant a charging order, as I believe was also the case in equity before the statute was enacted, isone of discretion in the court, which discretion is exercised judicially on equitable principles, the solicitor prima facie being entitled to itsexercise in his favour. Moreover, the order need not be founded on statute: see Campbell v. Campbell & Lewis, [1941] 1 All E.R. 274. [18] In Tots & Teens the fund against which the lien was claimed did not come into existence until after the bankruptcy wasdeclared.

Despite acknowledging that, once invoked, the B.I.A. suspends the rights of a creditor to pursue her own remedy otherwisethen as provided in the Act, Henry, J. nevertheless held that the court retained the inherent discretion to recognize a solicitor’s lien inappropriate circumstances. He stated at paragraph 28: 28. While fully accepting the principle here declared, I have reached the conclusion that the fund at the time it was created in thehands of the sheriff was impressed with the inchoate right of the solicitor to apply to the Court and have a declaration that it is charged assecurity for his costs.

This was an inherent right to invoke the equitable jurisdiction of the Court to exercise its discretion in his favour byway of declaring that the fund is charged as security for his claim. As I see it, the role of the Court is to declare, not to create, the securityand even though the bankruptcy has occurred, it is in my opinion still open to the proper Court, in the exercise of its discretion, as I havesaid, to decide if the lien shall or shall not be recognized. If the Court makes such a declaration it has the effect, as I see it, of holding thatthe lien attached to the fund at the moment it was created.

If it had been created prior to the bankruptcy, there would be no question thatthe fund would stand charged; the fund having been created after the bankruptcy may, in my opinion, in the same way be made thesubject of a charge by way of security, unless of course the Court comes to the conclusion that it would offend the principles of equity,either by reason of the conduct of the solicitor or unfairness to the creditors, to refuse to exercise the discretion in the solicitor's favour.On the view that I take of the matter, the lien in law attached to the fund as an inchoate right, the crystallization of the lien requiring onlythe pronouncement of the Court to reveal it. [19] The B.I.A. defines a “secured creditor” in

section 2 to mean: … a person holding a mortgage, hypothec, pledge, charge or lien on or against the property of the debtor or any part of that property assecurity for a debt due or accruing due to the person from the debtor … (emphasis added) [20] From this statement of principles, I conclude that if the solicitor’s lien came into existence prior to the bankruptcy then theestate of the bankrupt is impressed with the charge in favour of the solicitor and is subject to it.

Furthermore, even if the fund againstwhich the solicitor’s lien is claimed came into existence after the event of bankruptcy, the court in bankruptcy still has the discretion torecognize the lien unless it would be inequitable to do so either because of solicitor’s conduct or unfairness to the creditors. [21] While a consumer proposal is not an event of bankruptcy it nonetheless comes under the B.I.A. for the purposes ofinterpretation: Employers’ Liability Assurance Corp. v. Ideal Petroleum

(1959) Ltd., (SCC), [1978] 1 S.C.R. 230 at p.6. [22] As stated in King Insurance Finance (Wines) Inc. v. 1557359 Ontario Inc. 2012 ONSC 4263 at paragraph 31: 31. In my view, given the solicitor's lien, Mr. Kulidjian's claim to the costs award has priority to any claim by the creditors of theestate in bankruptcy. Mr. Kulidjian is a "secured creditor" within the meaning of the BIA because of his solicitor's lien and by s. 136(1)his rights as a secured creditor have priority over unsecured creditors. [23] The statement of the law set out in Tots & Teens, supra has found widespread support across Canada.

Representative of thisacceptance is the case of Cox Downie v. Patterson, (NS SC), [1992] 112 N.S.R. (2d) 148; 307 A.P.R. 148 (N.S.S.C.(T.D.), where, following a review of common law principles (including reference to Tots and Teens, supra) and statutory regulation,Saunders, J. concluded at paragraphs 19 to 21: 19. Two principles emerge. In choosing to exercise its discretion the court will balance the equities having regard to all of thecircumstances. Those circumstances will include an assessment of the solicitor's work and the extent to which that work secured orprotected property.

A solicitor's lien will not extend to all of the debtor's property, but only that which was recovered or preservedthrough the solicitor's actions. (Walker v. Saunders, (BC CA), [1985] 1 W.W.R. 743, 55 C.B.R. (N.S.) 84, 58 B.C.L.R.387 (C.A.); Canadian Commercial Bank (Liquidators of) v. Parlee McLaws (1989), (AB KB), 64 Alta. L.R. (2d) 218,42 B.L.R. 41, 72 C.B.R. (N.S.) 39, 95 A.R. 321, (sub nom. Price Waterhouse Ltd. v. Parlee McLaws) 56 D.L.R. (4th) 515 (Q.B.). Thecourt may even break down the solicitor's bill into charges pertaining to the "preserved" property versus other property of the debtor(Lang v.

Soyatt (1988), 68 C.B.R. (N.S.) 201 (Ont. S.C.)). 20. As stated in Jackson, Arlette, MacIver & Skitsko v. Western Crane Service Ltd., 1986 ABCA 69 , 45 Alta. L.R. (2d) 156,[1986] 4 W.W.R. 661, 70 A.R. 147 (C.A.) [at p. 665 W.W.R.]:

The thrust of [Rule 625(1)] is that only the specific property which is salvaged is subject to the solicitor's charge. It is for this reason that it must be specific and identifiable. Furthermore, in order to be property recovered or preserved, there must be some dispute as to its ownership. 21. To summarize, at common law a solicitor is entitled to a solicitor's lien where his services result in the recovery or preservation of property. The common law right is, in each jurisdiction, subject to the rules of the court. In Nova Scotia, Civil Procedure Rule 63.26 provides that the solicitor "may" have such a right.

Therefore the right in this jurisdiction is discretionary, such discretion to be exercised by the court taking into account all of the circumstances. [ 24 ] These principles were also recognized in the more recent decision of Kershman, J. in Menzies Lawyers Professional Corp. v. Doyle Salewski , 2014 ONSC 5438 (another bankruptcy decision) where the learned judge stated at paragraph 51: 51. A solicitor's lien attaches to the asset ipso facto the moment the property has been preserved by the solicitor. Whether the Court decides to declare the right by providing a charging order is a question of equity.

As Lord Goddard states in James Bibby Ltd. v. Woods, [1949] 2 K.B. 449 (Eng.

K.B.) at paras. 453 and 454 : Although we talk of an attorney having a lien upon a judgment, it is in fact only a claim or right to ask for the intervention of the court for his protection, when, having obtained judgement for his client, he finds there is a probability of the client depriving him of his costs...It is the solicitor's [sic] right to go to the court and ask the court to charge the property in his favour; until that is done he has no right in it. [ 25 ] It is also clear from the authorities that the enforcement of a solicitor’s lien is discretionary in the court and that any lien recognized can only apply to property actually preserved or retained by the lawyer for the benefit of his/her client.

In the case at bar, counsel for the Trustee acknowledged that Dawe, Q.C. may have a right to a solicitor’s lien to Mr. Duff’s one half interest in the fund created through the sale of the Irishtown Road property (while emphasizing that it would be inequitable for the court to enforce it) but not to the entire value of the property. [ 26 ] In my respectful view, this position is untenable in the circumstances of this case and demonstrates a misunderstanding of the provisions of the Family Law Act and its

interpretation by the courts. [ 27 ] The practice at Unified Family Court (as the uncontradicted evidence of Dawe, Q.C. indicated) is to take all matrimonial debts of the parties into account when determining the division of matrimonial assets. In this case, Ms. Kennedy was responsible for her share of the matrimonial debts incurred while the couple cohabitated. Additionally, Ms. Kennedy incurred substantial debts in the name of Mr. Duff after separation through the use of his credit cards.

All these debts had to be taken into account before a determination could be made on the right of ownership of the Irishtown Road property. The result was that Ms. Kennedy’s Trustee in Bankruptcy relinquished Ms. Kennedy’s claim to an equal division of the property for a nominal payment. Ms.

Kennedy was also seeking a substantial lump sum payment for retroactive and prospective spousal support and a share of the class action settlement which had to be factored into the calculation, all of which would be taken into account in this balancing exercise. [ 28 ] The Trustee took the position that there was no dispute over Mr. Duff’s one half interest as Ms. Kennedy was only seeking an equal division of the matrimonial property.

I disagree. [ 29 ] While that was the indication in her Originating Application in the Family Court, the reality is that in order to realize her claim for her one half of the real property as well as her other claims, had she been successful, Mr. Duff’s one half interest in the Irishtown Road property would have had to be taken into account and in all probability would have been lost to him. There were no issues relating to children between Ms. Kennedy and Mr. Duff so all the efforts of Dawe, Q.C. went to resisting the financial claims by Ms.

Kennedy. [ 30 ] I am therefore satisfied that the work performed by Dawe, Q.C. was essential in preserving or retaining the full value of Irishtown Road for Mr. Duff both by advancing his claim to an unequal division of the assets as well as resisting the claim by Ms. Kennedy to an equal division. These efforts necessarily involved a full and vigorous assessment of all debts incurred by Ms. Kennedy in Mr. Duff’s name and the resistance to her claim respecting the class action settlement.

All these efforts on Dawe, Q.C.’s part were required to preserve the matrimonial assets, including the Irishtown Road property, for the benefit of Mr. Duff.

Due to the nature of family law proceedings, it would be difficult, if not impossible, to isolate that work which related specifically to the preservation of the Irishtown Road property from the other matrimonial assets as the rights and obligations to all assets and debts had to be determined before a final balancing could take place. [ 31 ] Therefore, I am satisfied that Dawe, Q.C. has a solicitor’s lien in respect of all of the proceeds from the sale of Irishtown Road.

However, that does not determine whether it is equitable to enforce the lien. [ 32 ] While the sale of Irishtown Road did not conclude until after the consumer proposal was filed, on the strength of the common law rules outlined above, the lien attached to Mr. Duff’s property as soon as the service was performed by Dawe, Q.C. That occurred well before the proposal and required only a declaration by the court that it should be enforced.

It is an inchoate right that immediately arose by operation of law the moment the property has been recovered or preserved by the lawyer’s instrumentality: Thomas Gold Pettinghill LLP v. Ani-Wall Concrete Forming Inc. , 2012 ONSC 2182 , paragraph 90 . [ 33 ] As stated at paragraph 52 of Menzies Lawyers Professional Corp. , supra : 52. It is well established that solicitors have a prima facie right to their lien, and that they ought not be deprived of their charging

order remedy unless there are exceptional circumstances. In determining whether it is equitable to declare the charging order, the Court is mindful of two factors: (1) whether the solicitor's work was related to the preservation of the asset; and, if it is related, (2) whether it would offend the principles of equity, either by reason of conduct of the solicitor or unfairness to the creditors to allow the charging order to have effect. [ 34 ] I have already determined that Dawe, Q.C.’s work related to preservation of the asset.

I turn now to determine whether it would be inequitable to declare a charging order in respect of it either because of Dawe, Q.C.’s conduct or unfairness to the other creditors of Mr. Duff. [ 35 ] In respect of the conduct of Dawe, Q.C., I am not aware of any conduct on her part prior to the consumer proposal in respect of which I would deprive her of her solicitor’s lien.

However, her actions following the proposal bring some of her conduct into question. [ 36 ] Rather than apply to the court to have her solicitor’s lien enforced, she employed the self-help remedy of transferring the funds from her trust account to her general account to satisfy her invoices for services rendered representing the work covered by the lien. She did this in the face of the knowledge that the Trustee had determined that her debt fell into the unsecured category giving her no preference to the other creditors.

As well, the other creditors had approved of the proposal. [ 37 ] This type of self-help remedy is to be discouraged. But does it disentitle Dawe, Q.C. from the benefit of the exercise of the court’s equitable jurisdiction to enforce her lien. I think not in all the circumstances of this case. [ 38 ] Dawe, Q.C. concluded that the Trustee had made an error in categorizing her debt as being unsecured. She felt she had an absolute right to be paid for the substantial work she had performed to preserve the asset.

The purpose of the solicitor’s lien is the protection not only of the solicitor’s right of payment for legitimate services rendered but also the protection of the general public in supporting their ability to retain the services of legal counsel in such complicated and difficult matters. If solicitors are easily to be deprived of their security for payment of their fees, they will be less likely to take on such cases without express security arrangements. This will not always be possible in such cases where the title and entitlement to assets are often the very issues in question.

It will not always (perhaps rarely) be possible for a family law litigant to provide such security. If a solicitor is then left uncertain whether her longstanding right to security for payment through a solicitor’s lien is to be lightly thwarted, access to justice may thereby be undermined as solicitors may not be willing to take on the representation of clients who cannot offer security for payment of fees: Halsbury’s Laws of Canada , First Edition, LexisNexis Canada Inc., 2007 at

section HLP 272 (see also Dwyer v. Duffy & Associates , 2008 NLTD 133 , per Hall, J. at paragraphs 8-10 where he quotes with approval this

section from Halsbury’s ). [ 39 ] It was not Dawe, Q.C. who categorized her debt as unsecured. That was done by the Trustee.

If for whatever reason the Trustee mistakenly mischaracterized the debt as unsecured while the law outlined above makes it clear that the lien creates a secured debt, it would be unfair to the solicitor to deprive her of the fruits of her efforts on such a basis, even if the preferred action on her part would have been to file an objection with the Trustee and apply to the court to have a charge declared pursuant to the Rules of Court and the court’s inherent equitable jurisdiction. [ 40 ] In respect of any unfairness to the other creditors, I also reject this as a basis on which to deny Dawe, Q.C. her solicitor’s lien.

While it is true that the creditors approved the proposal with Dawe, Q.C.’s account listed as an unsecured debt along with theirs, and re- categorizing it as a secured debt will undoubtedly to some degree dilute their interest in Mr. Duff’s estate, the action of the Trustee in so listing it does not change the underlying proper legal characterization of Dawe, Q.C.’s debt as being secured. [ 41 ] And, in respect of Dawe, Q.C.’s self-help remedy, the same could be said of a mortgagee enforcing its contractual rights to power of sale under its mortgage.

As a secured creditor she had the right to take steps to protect her interest. As already noted, the appropriate approach for Dawe, Q.C. to have taken was an application to court pursuant to Rule 55.23 to have her right declared before enforcement. Despite this, the fact that she did not follow this preferred approach, barring some other improper conduct on her part, is not sufficient in my view to deprive her of her lien. [ 42 ] I find the creditors are no worse off than if the Dawe, Q.C.’s debt had been properly characterized.

Whether they would have approved the proposal under those circumstances is a matter of conjecture into which I am not prepared to enter. The Trustee, like the rest of the world, had notice of the claim to a solicitor’s lien by virtue of the filing of the lis pendens in the Registry of Deeds. Further, whether the lis pendens itself was properly filed is a different question to which I will turn shortly. But there can be no question that notice of the solicitor’s lien was or ought to have been known by the Trustee and it was incumbent on him to properly investigate the matter.

If he was in any doubt about the validity of the lien, he could have applied to court for a determination. Having come to his own conclusion, if he was mistaken in his assessment of its validity or its applicability, that is not a circumstance which should deprive Dawe, Q.C. of the security she claimed by virtue of it. To deny Dawe, Q.C. the benefit of the solicitor’s lien in all the circumstances would be to put form before substance.

I invoke my inherent jurisdiction at common law and in equity to recognize the validity of the lien in the circumstances of this case. [ 43 ] Counsel for the trustee referred to two cases from our court in which the solicitor’s lien was found not to apply: Crosbie v. Health Care Corp. , supra and Dwyer v. Duffy & Associates , supra . I find that these cases are distinguishable on their facts from the case at bar: in Crosbie v.

Health Care Corp. , the court found that the fund in question never became the property of the lawyer’s client and therefore could not be subject to a lien; in Dwyer , the court found the solicitors had not preserved any property of the client to which a lien could apply. [ 44 ] The Trustee also relied on a statement in the Crosbie v. Health Care Corp. case as another basis on which to deny Dawe, Q.C. her lien.

In that case, Cameron, J.A. stated at paragraph 16: … The Court does have a discretion to protect the interest of a solicitor [to a lien] but to obtain such protection the claimant solicitor must show that the parties (in this case Broderick and the respondent or McDonald as the respondent's agent) colluded or conspired to deprive him of his costs. [ 45 ] In my view, that statement has no application to the case at bar and is confined to the facts of that case. In Crosbie v. Health

Care Corp. , a lawyer negotiated a settlement on behalf of his client (Broderick) with the defendant (Health Care Corporation). The settlement funds were forwarded to the lawyer to be held in trust on certain conditions. The lawyer and his client (the plaintiff) fell out and the client terminated the lawyer’s services prior to the lawyer being paid. She then entered into an agreement on her own with the hospital in the same amount as negotiated by her lawyer. [ 46 ] The court held that a client has the right to represent herself and that is what happened in that case.

The court concluded that while the amount of money negotiated by the client was the same as that negotiated by the lawyer, it did not follow that the money paid related to the earlier settlement. The lawyer received the funds under certain trust conditions which he was unable to fulfill because of the cancellation of his retainer. In the result, the court concluded that the settlement funds in the hands of the lawyer never became the property of the lawyer’s former client.

On this basis, the court concluded that no solicitor’s lien could exist against the funds and the funds had to be returned to the Health Care Corp. That is completely different than the facts of the case at bar. [ 47 ] In conclusion on this issue, I find that Dawe, Q.C. had a solicitor’s lien on the entirety of the value of the Irishtown Road property. While she ought to have applied to court to have her security declared, her failure to do so is not fatal to the recognition of her security.

Neither am I satisfied for the reasons before given that the preference the lien gives her relative to the other creditors is unfair. [ 48 ] I therefore declare that Dawe, Q.C. is and has been since the performance of the service in preservation of the asset of Irishtown Road entitled to a charging order as a secured debt against the proceeds of sale of that property giving her the right to payment for her fees and disbursements in the preservation of the asset in the amount of $33,141.06 and for her fee for services on the realization of the fund through the sale of the property.

The lien continues against the $3,166.15 retained in her trust account for services rendered after June 2015. If no agreement can be reached with the Trustee respecting the disposition of these funds, Dawe, Q.C. has leave to apply to court for directions. [ 49 ] The lien also attached to the Leary’s Place property. If she is unable to come to an agreement with the Trustee, Dawe, Q.C. is entitled to apply to court for directions on the enforcement of the lien against the property for work performed since 9 June 2015, payment for which was not satisfied from the sale of Irishtown Road.

Lis Pendens [ 50 ] I turn now to the second issue – the validity of the lis pendens filed by Dawe, Q.C. on 11 August 2015. The Trustee submitted that it is invalid as it does not comport with the legal requirements for a lis pendens . Dawe, Q.C. submitted that the lis pendens should really be considered as a notice of the solicitor’s lien. She did not vigorously pursue the validity of the lis pendens . [ 51 ] The legal principles in respect of a lis pendens were recently re-stated by our Court of Appeal in Paro Enterprises Ltd. v.

Murphy , 2015 NLCA 33 , where the court stated at paragraph 31 in relevant part: … 1. A lis pendens should not be filed until after litigation has been commenced by means of an originating application or statement of claim; 2. The title-holder of the property as listed in the Registry of Deeds should be named as a party in the litigation; 3. A copy of the originating document commencing the litigation should be included when the lis pendens is registered; 4. The lis pendens should clearly identify the litigation to which it attaches; 5.

If a lis pendens is registered and litigation has not been commenced, application to the court will result in the lis pendens being vacated with an appropriate order for costs; 6.

As discussed above, if a lis pendens is registered before litigation is commenced, but litigation is subsequently commenced before an application is made to vacate the lis pendens, the coincidence of the lis pendens and commencement of litigation operates to make the lis pendens effective as of the date of coincidence. [ 52 ] In this case, Dawe, Q.C. did not commence an action co-incident with the filing of the lis pendens which is fatal to its validity.

The lis pendens also fails on a number of other grounds as well: it is overly broad as it includes property [17 Captain Frank’s Lane] that had previously been sold; it did not name Ms. Kennedy as a joint owner of two of the named properties; and, it was not properly executed. Therefore the lis pendens is hereby vacated. [ 53 ] However, I am satisfied that the purported lis pendens operates as a valid notice of solicitor’s lien. Indeed, it states that Dawe, Q.C. and her law firm “claim an interest [in the Irishtown Road and Leary’s Place properties] on the basis of a solicitor’s lien”.

This put the Trustee on notice that a lien was being claimed against these properties and it was therefore incumbent on the Trustee to investigate the claim and to arrive at a correct conclusion as to its validity.

[ 54 ] In conclusion on this issue, I declare the lis pendens filed 11 August 2015 to be invalid and it is therefore vacated but subject to its validity as a notice of solicitor’s lien.

Summary and conclusion [ 55 ] Dawe, Q.C. has a solicitor’s lien against the entire value of the property of Mr. Duff at Irishtown Road, Carbonear and Leary’s Place, Mahers. The lien constitutes a secured debt under the consumer proposal filed by Mr. Duff on 3 February 2016 and is a charge against the above mentioned properties or the proceeds of sale thereof. The solicitor’s lien arises because of the work of Dawe, Q.C. in preserving or retaining the properties for Mr. Duff.

It is not inequitable to enforce the lien either because of conduct by Dawe, Q.C. or unfairness to the creditors named in the consumer proposal. [ 56 ] Because of the relative divided success in this matter and the failure of Dawe, Q.C. to follow the appropriate procedure to enforce her lien, I order that each party will be responsible for their own costs on this Application. _____________________________ James P. Adams Justice