Law Times

Law Times • apriL 11, 2016 Page 3 www.lawtimesnews.com Unlikely former clients will see the money Lawyer ordered to pay back almost $500,000 BY MICHAEL MCKIERNAN For Law Times A lawyer facing criminal charges related to his bankruptcy has been ordered to repay al- most $500,000 in overcharged legal fees to several members of a Fort Erie, Ont. family. But Calin Lawrynowicz's for- mer clients, the Marino family, could struggle to collect on the judgment aer Ontario Superior Court Justice Paul Perell ruled they could not rely on an assess- ment officer's findings of fraud to ensure the debt survives any discharge from bankruptcy ulti- mately granted to Lawrynowicz. An assessment officer origi- nally ruled last year, following an eight-year assessment process, that Lawrynowicz should pay the Marinos $662,000 aer con- cluding that the legal services performed by the lawyer's firm were literally worthless, valuing them at nil. Perell had ordered the as- sessment back in 2007, but he declined to confirm it when Lawrynowicz appealed. Instead, Perell substituted his own as- sessment, setting the refund at $475,000 aer finding that the law firm deserved at least some payment for its work. Gregory Sidlofsky, who rep- resented the Marino family, said in a statement that his clients were still "very happy" with the decision. Despite the reduction, the court "reiterated the key find- ings against the law firm," and the revised refund "remains exceptional," wrote Sidlofsky, a litigation partner with Toronto firm Wagner Sidlofsky LLP. "e process for my clients has been a nightmare. Personally, I am very disappointed that the process has taken such an unbe- lievably long time," he added. Lawrynowicz could not be reached for comment before go- ing to press, and his lawyer, Wil- liam Roland, declined an oppor- tunity to comment. ough it may sound on its face like a straightforward law- yer-client dispute, Perell points out early in his judgment in Calin A. Lawrynowicz Bar- risters & Solicitors v. Marino Estate that the case is far from normal, lamenting an "execrable matter" that has dragged on for more than a decade, and iden- tifying a "hidden agenda" in the latest appeal. "e hidden agenda, which was not mentioned by either party during the argument, but which agenda did not escape me, is that it is in Calin Law- rynowicz's interest to have a rul- ing that the Assessment Officer does not have the jurisdiction to make a finding of fraud because s.178(1)(d) of the Bankruptcy and Insolvency Act provides that 'an order of discharge does not release the bankrupt from any debt or liability arising out of fraud, embezzlement, misap- propriation or defalcation while acting in a fiduciary capacity,'" Perell explained in his March 24 decision. "Conversely, it is in the inter- est of the Marinos, seeking to collect their refund, to keep alive the circumstances that the bank- rupt Mr. Lawrynowicz has a lia- bility arising out of a fraud while acting in a fiduciary capacity." Crucially, as far as the hidden agenda of Lawrynowicz's bank- ruptcy was concerned, Perell found that while the assessment officer was within her rights to la- bel the law firm's accounts as "not only unfair and unreasonable, but so grossly excessive as being tantamount to fraud," her find- ings related only to the narrow issues before her: how much the client paid in fees and the correct value of those fees. Her decision did not decide the issue of wheth- er the refund to the Marinos was a "liability arising out of fraud, embezzlement, misappropria- tion or defalcation while acting in a fiduciary capacity," Perell wrote. "at type of finding is a mat- ter for a court to determine," he added. Joel Watson, a partner in the litigation department of Toronto firm Shibley Righton LLP, says Perell's conclusion makes it un- likely that the former clients will ever see their money. "is is one of those paper judgments that you can't take to the bank," he says. "Even though it looks like the Marinos won, in reality they didn't, because as Perell points out, their agenda was to maintain the finding of fraud so that the refund would survive the lawyer's bankruptcy." Despite that, Sidlofsky said his clients will continue to push for a declaration that the judg- ment should survive discharge in Lawrynowicz's bankruptcy proceedings. "Neither the assessment offi- cer's decision nor Justice Perell's decision would have been de- terminative," Sidlofsky wrote in his e-mailed statement. "I do not believe the decision will impact on the issues to be decided in the bankruptcy proceeding." For Lawrynowicz, the tech- nical victory may also prove insignificant, since he has other problems associated with his bankruptcy. In December, the RCMP's Integrated Bankruptcy Enforcement Unit announced that it had charged him with fraud over $5,000, as well as sev- eral offences under the Bank- ruptcy and Insolvency Act, in- cluding fraudulent disposal of property and failure to comply with the duties of a bankrupt. According to the RCMP re- lease, Lawrynowicz declared bankruptcy aer becoming en- meshed in a series of lawsuits related to his legal and financial consultation businesses. At the time, he reported $175,000 in as- sets and more than $4 million in liabilities, according to the RCMP. Lawrynowicz has been sus- pended from the practice of law since May 2014, when a Law So- ciety of Upper Canada adjudica- tor handed him a one-month suspension for failing to co-oper- ate with an investigation into his practice. e order by the LSUC's hearing division provides for the suspension to continue indefi- nitely until Lawrynowicz hands over records related to six differ- ent complainants. According to Perell's judg- ment, Lawrynowicz's involve- ment with the Marinos dated back to April 2002, when Joseph Marino hired the firm to chal- lenge the forfeiture of a business property he owned in Fort Erie, Ont. e law firm's involvement was a stipulation of an $850,000 loan to the Marinos by another Lawrynowicz client, L-Jalco Holdings. e principal of L-Jal- co, John Lawrynowicz, was also the lawyer's father, according to Perell's decision. e law firm received almost $600,000 for matters related to the Marinos from L-Jalco, in the form of advances on the mort- gage loan, Perell's judgment says. In 2004, L-Jalco started foreclo- sure proceedings on several Ma- rino properties held as security for the loan, which prompted the Marinos to sue both L-Jalco and the law firm, looking for a declaration that the mortgage was void. By mid-2006, the litigation between the parties had cooled down, with the Marinos drop- ping all their claims except for a request for an assessment of their legal fees, and L-Jalco taking pos- session of the Marino properties. When Perell decided back in 2007 that the special circum- stances of the case warranted an assessment, the law firm claimed some of the money advanced by L-Jalco was actually a loan to the law firm rather than payment for the Marino's accounts, and it also argued that the Marinos were never its clients, a position de- scribed by Perell as "obnoxious." ose arguments "frustrated the assessment officer, pro- longed the assessment hearing," and probably led her to make the error of reducing the firm's fee to zero, Perell wrote. "It's hard to criticize the as- sessment officer too much be- cause the law firm seemed to throw everything at derailing the assessment," Watson says. LT NEWS Platinum Sponsor Silver Sponsor Bronze Sponsor Hosted in Partnership With Date: Sept. 8, 2016 Location: Arcadian Court, Toronto 6 p.m. Cocktail Reception 7 p.m. Gala Dinner and Awards Presentation Emcee: Gail J. Cohen, Editor in Chief, Canadian Lawyer/Law Times Dress: Business Attire Innovation. It's in our DN The Canadian Lawyer InHouse Innovatio Awards celebrate in-house counsel, both individuals and teams, who have found ways to show leadership by becoming more efficient, innovative and creative in meeting the needs of their organizations within the Canadian legal market. innovatio-awards.com Bronze Sponsor Presented by Untitled-3 1 2016-04-06 3:08 PM The process for my clients has been a nightmare. Personally, I am very disappointed that the process has taken such an unbelievably long time. Gregory Sidlofsky Promote your law firm by ordering reprints of articles from the voice of the profession — Law Times! 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