Wineman v. MacPhee
James H. Wineman, on behalf of himself and all other
subscribers to the Auto Club Insurance Association and the
Auto Club Insurance Association, Plaintiffs
Neil J. MacPhee and Michael V. Marston, Defendants
 O.J. No. 1187
22 C.C.L.I. 104
2 A.C.W.S. (3d) 190
Action No. 6907/82
Supreme Court of Ontario - High Court of Justice
Windsor Assize - Windsor, Ontario
September 29, 1986
Insurance -- Subrogation -- Action against lawyers -- Ontario lawyer paying proceeds of judgment to Michigan attorney of traffic victim in Ontario accident, having been notified of subrogated claim by Michigan insurer of victim -- Insurer's action for accounting and payment of its claim against Ontario lawyer and Michigan attorney discontinued.
This was an action by an insurer against two lawyers for an accounting and payment of a subrogated claim. The plaintiff, a Michigan insurer, sought to recover the amount of a judgment obtained by a Michigan resident insured by it, from an Ontario lawyer who had paid the amount of the judgment, less withholding tax and fees, to the insured's Michigan attorney, who held it in trust.
HELD: The action was discontinued against both defendants. The claim was really for payment rather than an accounting since the plaintiffs knew what had happened to the funds. The Ontario lawyer did what was reasonable in all the circumstances, he did nothing wrong, did not misappropriate funds, and was not in breach of trust. The plaintiff could proceed with their Michigan actions to establish their entitlement to part of the judgment. Thus the action against the Michigan attorney should also be discontinued.
R. Barnes, Esq., Q.C. and G. DeMarco, Esq., for the Plaintiffs.
R.G. Colautti, Esq., and L. Balen, Esq., for the Defendant, MacPhee.
M. Greenaway, Esq., for the Defendant, Marston.
CARRUTHERS J.:-- On the 31st of August, 1977, three motor vehicles were involved in a collision on Ouellette Avenue in the City of Windsor, Province of Ontario. At that time one vehicle was owned and operated by a resident of the City of Detroit in the State of Michigan. In that vehicle was a passenger by the name of Abby Uller, the wife of Meyer Uller. Both of them, at the time of the collision, and at all relevant times thereafter, were residents of the State of Michigan. The owners and operators of the other two motor vehicles involved in the collision who I shall refer to respectively as Tyrrell and McNeilly, were residents of the Province of Ontario.
Upon their return to Detroit following the collision, Meyer Uller and his wife Abby Uller retained the services of a firm of attorneys, Marston and Marston, and in particular the defendant Michael Marston, who I shall hereinafter refer to as "Marston". That firm, and Marston, at all relevant times,were attorneys practising in the State of Michigan. Marston was asked to take the appropriate steps on behalf of Meyer Uller and Abby Uller by reason of the personal injuries which she suffered in the collision aforesaid. The retainer was a contingency fee arrangement providing for payment of one-third of any recovery up to $250,000 with nothing to be paid in the event of no recovery, and disbursements were to be paid in any event.
The plaintiff, James H. Wineman, is a representative of the Subscribers to the Auto Club Insurance Association. I shall hereinafter refer to the plaintiffs as "AAA", the name by which they were referred to at trial as opposed to the name used in the statement of claim being "The Exchange". At all relevant times AAA carried on its insurance business in and about the State of Michigan. On the 5th of March, 1977 it issued a policy of automobile insurance to Meyer Uller to be in force until the 5th of September, 1977. That policy was endorsed with a State of Michigan statutory form under the laws of the State of Michigan as set forth in the Michigan compiled law and notated section 500.3116. That compulsory endorsement provided for the payment of no-fault benefits of a very substantial nature. By reason of the injuries suffered by her in the collision aforesaid, both Abby Uller and her husband Meyer Uller were entitled to claim on account of these no-fault benefits.
Following his being retained, Marston, on behalf of both the Ullers, was in touch with AAA about the payment of the no-fault benefits. Some of these benefits were paid by AAA as early as December 1977, by cheque sent to either Meyer Uller or Abby Uller or both, through the defendant Marston. Thereafter some dispute arose as to the extent of the liability of AAA to pay further benefits. As a result Marston launched proceedings on behalf of Meyer and Abby Uller against AAA in the Michigan courts. Specifically, the complaint was filed in the Circuit Court of the County of Wayne in the month of July, 1978. AAA defended these proceedings which, in 1981, were settled through the involvement of a mediation board. As a result, a further amount was paid to Mr. and Mrs. Uller on account of no-fault benefits.
The defendant Marston as well as dealing with AAA on behalf of Mr. and Mrs. Uller, also referred them to the defendant MacPhee, who I shall hereinafter refer to as "MacPhee". At all relevant times he has resided and practised law in the City of Windsor in the Province of Ontario. On the 8th of June, 1979, after being directly retained by both Meyer Uller and Abby Uller, MacPhee caused an action to be commenced in this court on behalf of both of them against Tyrrell and McNeilly. The action was to recover damages on account of the personal injuries suffered by Abby Uller in the collision aforesaid and, as well, the losses and out-of-pocket expenses which followed as a result. Specifically MacPhee had included a claim for special damages consisting of the medical expenses incurred by the Ullers and which he subsequently learned had been paid to them by AAA. Marston, by reason of MacPhee's contact with him, advised AAA's Michigan counsel, a Mr. Tuffley, hereinafter referred to as "Tuffley", of the difficulties encountered by MacPhee in advancing this aspect of their claim. Apparently counsel for Tyrrell and McNeilly were denying any responsibility for payment of the amount claimed for all these medical expenses and, as well, denying the right to have them included as a claim in the action. As a result AAA directly retained the services of Alex Szalkai, who I shall hereinafter refer to as "Szalkai", a lawyer practising in the City of Windsor. He was in touch with MacPhee, and the two worked together in the preparation for the trial of the action. Both appeared at the time of the trial which took place before O'Leary J. on the 5th of June, 1981.
At the conclusion of the trial, O'Leary J. gave his judgment and oral reasons. That judgment required Tyrrell and McNeilly to pay to Meyer Uller and the estate of his wife Abby, she having died in the meantime, the sum of $175,115.47 Canadian, or $147,184.55 U.S. During the course of that trial counsel for Tyrrell and McNeilly consented to the amount of medical expenses having been paid on account of Abby Uller by AAA at $60,000 U.S. When converted to Canadian dollars this amount along with pre-judgment interest totalled $90,537.88. Szalkai, at the request of the insurers of Tyrrell and McNeilly, obtained a form of release in that total amount directly from AAA and delivered it to them. Notwithstanding that it contained a direction to pay the amount directly to AAA's order, the insurers of Tyrrell and McNeilly paid the total amount due under O'Leary J's judgment, along with assessed party and party costs, to MacPhee. MacPhee, therefore, was in receipt of the total amount awarded under the judgment, $175,115.47 Canadian, and a further sum on account of costs, $14,032.15 Canadian. MacPhee had provided counsel for Tyrrell and McNeilly with the formal judgment of O'Leary J. as issued and endorsed and a satisfaction peace and form of release was duly executed on behalf of Meyer Uller and the estate of his wife Abby. As well, following negotiations to which Szalkai was privy, MacPhee received a further sum on account of post-judgment interest.
At the time of the judgment of O'Leary J. it appears that another dispute was underway between Marston and Tuffley. This one concerned the interest of AAA in the amounts recovered under the judgment of O'Leary J. As I understand the situation to have then existed, Marston, on behalf of Meyer Uller and the estate of his wife, and on behalf of himself, wanted to deny AAA the portion of prejudgment interest and post-judgment interest attributable to its interest in the total recovery and, as well, to retain by way of fees the difference between that which MacPhee had charged and the total amount due under the contingency fee arrangement. I gather that Tuffley was also disputing the right of Marston to charge anything on account of the contingency fee arrangement towards the interests of AAA. Some negotiations took place with respect to an amount to be paid in full satisfaction of AAA's interest. Marston made an offer and Tuffley declined to accept it. Tuffley wanted all of the money that had been recovered on behalf of AAA under the judgment of O'Leary J, both principal and interest.
I think it is appropriate for me, at this time, to quote in full from some letters which passed between MacPhee and others involved in this matter. The first is found in tab 47 of the document book. MacPhee was writing to Szalkai on the 16th of October, 1981:
"It is indeed unfortunate that a problem has arisen regarding the amount to which AAA is entitled from the judgment in the above action, but must make it clear that their Michigan attorney's have had in excess of four months to clarify this matter with the plaintiff's Michigan attorneys.
As we informed you by telephone, and have done so throughout your involvement in this proceeding, it is our opinion that the right of AAA to subrogation, and the extent or amount of said right is a matter of Michigan contract law, and governed by the policies insured by AAA to the plaintiffs. Any dispute in this regard should therefore, be made by the Michigan courts, and we believe that our client is prepared to pay into court into Michigan the portion of the funds involved in the dispute."
I will eliminate one paragraph. The last paragraph reads:
"We cannot understand why some reasonable arrangements cannot be made by the Michigan attorneys, and must inform you that we will resist any effort to delay payment of the funds."
Tab 58 is a further letter which MacPhee wrote to Szalkai on the 2nd of December, 1981. It reads in part as follows:
"Several days ago, the writer received a call from Mr. Barnes, who advised that he had been retained by Triple A regarding their interest in the judgment and indicated that he felt that we had acted improperly in this matter.
There has been no misunderstanding between your firm and ours as to what our position has been regarding Triple A, that as an insurer carrying on business in Michigan with an insured resident in Michigan and an insurance contract located in Michigan, its rights must be determined in accordance with the laws of the State of Michigan."
"When you requested us to negotiate with Mr. Marston as to what would be chargeable against any share to which Triple A might be entitled, we informed you that we did not intent to be involved in that area. Accordingly, we have paid the funds to Marston and Marston on condition that the gross amount for benefits paid by Triple A and interest be held by that firm in trust until the matter can be resolved by settlement or by the courts of Michigan. We understand that this has been confirmed with Mr. Tuffley of Triple A and that negotiations have commenced.
In short, we have protected the interest of Triple A throughout, and without being retained by it and we submit that no action of ours has been prejudicial in any way to Triple A's interests."
There is no dispute that the full amount of MacPhee's bill assessed at $36,899.49 on account of solicitor and client costs was properly deducted from the monies he had been holding. As well, there is no dispute that he sent to Marston's firm, in accordance with his letter above, the sum of $150,180.41 Canadian. MacPhee had with-held the sum of $9,637.95 on account of non-resident tax and continues to hold that sum today in his trust account. I note here that of that amount being held for non-resident tax, $3,295.33 is attributed to the interest of AAA in the judgment of O'Leary J. Accordingly, as of about the 2nd of December, 1981, perhaps except for the amount with-held for non-resident tax, MacPhee had put himself out of the picture. At least that was the case until the 29th of December, 1981, when Mr. Barnes who, as I have indicated above by reference to MacPhee's letter, had been retained by AAA wrote to him. That letter reads as follows, tab 60:
"As you are aware we have been retained by the Auto Club Insurance Association (formerly Detroit Automobile Inter-Insurance Exchange) in respect to the above matter.
I have reviewed your letter of December 2, 1981 and the McTague law firm's file in this proceeding.
I fail to understand the position you take in your letter of December 2, 1981. Funds that were clearly impressed with a trust in favour of my client were paid into your firm's trust account and apparently paid to an attorney in Michigan without the written authority of my client or Robert Glen Copland the administrator of the estate of Abby Uller. If that is the case, quite aside from any rules of the Law Society, it appears that you have misappropriated trust funds the only claim to which you could assert a personal interest would be your proper solicitor and client account in respect of your conduct of that portion of the law suit pertaining to the funds recovered for the Auto Club that were not performed by your associate counsel, Mr. Alex Szalkai.
My respectful suggestion is that you deliver your proper account to the Auto Club in care of myself and that you pay the balance of the monies into court under interpleader proceedings upon notification to any person who claims a legitimate interest in the funds. I am unable to accede to the position you take that Mr. Marston a Michigan attorney would have any status in the matter whatsoever. He is prohibited by the law of Ontario from taking any action in this Province that would further the collection of the monies from the defendants and his contingency fee arrangement would in my view not be recognized by the courts of this Province as constituting a completely illegal contract against public policy irrespective of what the proper law governing the illegal contract might or might not be.
My instructions are to commence whatever proceedings appear appropriate within a week of today's date in the absence of an assurance from you that you are proceeding to turn over to my client the trust funds that rightfully belong to it subject to your solicitor's lien."
There are a couple of short paragraphs and the letter ends. MacPhee replied in part:
"In reply to your letters of February 18th last and December 29, 1981 it appears that there is an obvious difference of opinion as to our firm's position inrelation to the moneys paid to it under the judgment in the above action. The judgment was in favour of Myer Uller and the Estate of the late Abbey Uller, his wife. The portion of the judgment payable to the Estate was limited to general damages and pre-judgment interest thereon, no part thereof being for special damages in which your client is interested.
We must repeat that our only duty and obligation was to our client, Meyer Uller and the Estate of his late wife and that we were retained by no other person or persons in connection with this action. Mr. Uller is elderly and chose to seek the guidance of his Michigan attorney from whom we received instructions soon after the accident. The arrangement between Mr. Uller and his Michigan attorney are of no interest or concern to us and is a matter strickly between them."
He goes on to say:
"You seem to feel that we have taken the position that Mr. Marston a Michigan attorney has some status in the matter. This is not our position and the payment to the firm of Marston and Marston was in accordance with our client's instructions, the arrangement being that the funds be retained in an interest bearing trust account until the contractual matters in issue between Mr. Uller and the Auto Club be resolved in Michigan."
The action which I have just tried commenced on the 4th of July, 1982. The endorsement on the writ of summons reads as follows:
"The plaintiff's claims are against the defendant for an accounting of trust funds payment of the amounts due, damages for professional negligence as against the defendant Neil J. MacPhee in the discharge of his engagement as solicitor, pre-judgment interest and costs."
In the statement of claim the portion that is relevant to the nature of the claims made therein specifically against MacPhee are as follows:
Paragraph 11: The defendant did not appeal from the judgment of the Honourable Mr. Justice O'Leary and their insurer ultimately paid in full the judgment including the sum of $90,537.88 to the defendant Neil J. MacPhee or his firm and obtained a satisfaction peace from Meyer Uller and Robert Glen Copland in exchange therefore.
Paragraph 12: The said sum of $90,537.88 was received by the defendant MacPhee as trustee and was placed by him in his firm's trust account.
Paragraph 13: The defendant MacPhee has refused to account to the Exchange for the trust monies so received by him on behalf of the Exchange. He has retained some of the monies and some of them he has paid without lawful authority to the defendant Marston who carries on a law practice in the City of Detroit, Michigan. The defendant Marston has likewise refused to pay an account to the Exchange for such of the monies as were received by him.
Paragraph 14: The Exchange pleads that the defendant MacPhee has deliberately, or in the alternative, negligently misappropriated the sum of $90,537.88 held in trust by him for the Exchange."
As I have noted above, that amount of $90,537.88 represents AAA's interest in the judgment of O'Leary J, both on account of principal and pre-judgment interest awarded thereunder. It is to be noted that the Robert Glen Copland referred to at all times as an associate of MacPhee designated as the representative of the Estate of Abby Uller for the purposes of that litigation. There is no dispute that at the time of the commencement of this action the amount of money claimed by AAA less that with-held for non-resident tax was on deposit in a trust account created by Marston and Marston in a bank in the City of Detroit and has so remained there to this point. As is noted above the amount held for non-resident tax as from time of his receipt of all monies has been held in MacPhee's trust account in Windsor.
I think it is significant to note that since the commencement of this action two others have been started in the State of Michigan and remain outstanding. This is, two actions relative to the issues and involving the parties who are concerned or interested in this action. In one of them Marston or his firm seeks a declaration of the rights of the parties, they being in that action; Marston and Marston and AAA, to the funds being held in trust by Marston and Marston in the State of Michigan. As well, that action seeks an injunction to have this action in the Province of Ontario stayed. The second action has been brought by Meyer Uller and the relief which he seeks in his action has as its object a declaration of the rights of himself, the estate of his wife, Marston and Marston and AAA to the monies being held in trust by Marston and Marston.
The trial of this action proceeded in part on the basis of an agreed statement of facts, filed, and an extensive exhibit book used in conjunction therewith. Tuffley testified on behalf of the plaintiff, particularly with respect to aspects of Michigan law thought to be relevant to the disposition of the issues raised in this action. As well, an accountant from Windsor, Ladouceur, testified with respect to the obligations to with-hold non-resident tax with respect to amounts recovered in personal injury actions in Canada. No evidence was called on behalf of either MacPhee or Marston. At the end of the plaintiff's case counsel for each defendant brought a motion for non-suit. Most of the time before me was taken up by argument; and in this respect I have a further concern. Following the conclusion of the attendances of counsel before me, I received a written supplementary submission from Mr. Barnes. I have not been told that a copy of it was served upon other counsel and I have not received anything further from them by way of a reply or response. The further submissions appear to raise matters not raised before before me. I will deal with them later and I need not hear further from counsel of the defendants before doing so.
In the prayer for relief the plaintiff simply requests of both defendants an accounting and payment of the said sum of $90,537.88. To my mind what the plaintiff really wants is payment and not an accounting. In my view of all of that which I have been asked to consider the plaintiff has always known where the money in which it has an interest has been located. Notwithstanding the form of direction executed by AAA which required the sum specifically referred therein to be paid to it, it was not and to its knowledge and apparently with its consent or approval that amount, the balance required to satisfy all that which was provided for in the judgment of O'Leary J, was paid to MacPhee. Its counsel in Windsor was then told that MacPhee intended to send the portion of the money in which AAA had an interest, as well as all the rest, to Marston to be held in trust by his firm. At least that seems to me to be the only conclusion that one can reach when you read MacPhee's letter of the 2nd of December, 1981. The agreed statement of facts says that MacPhee sent the entire amount of the judgment less deductions for fees and non-resident tax. The letter is not as clear as that, but that is the basis on which the parties have proceeded in this action.
While I cannot myself find where MacPhee advised of the extent of his fee and with-holding tax, the agreed statement of facts also provides that:
"On November 12, 1981, MacPhee remitted $150,180.41 Canadian to Marston and Marston, with-holding $36,899.49 for fees and $9,637.95 for non-resident tax on pre-judgment interest."
The documents and correspondence I have been given in the exhibit brief do not make it clear when MacPhee first advised AAA or its counsel on either side of the Detroit River what he had deducted before sending the money to Marston and Marston. Barnes, in his first letter to MacPhee of the 29th of December, 1981, recognized MacPhee's right to deduct his fee from the funds "received from the Auto Club". There is no dispute that the Auto Club and AAA are one and the same. At the time of his examination on the 23rd of August, '84, MacPhee had advised AAA's counsel of what was deducted for non-resident tax. If I appear to be either confused in this area or dwelling too long on a matter not in dispute, there is a reason. Throughout the trial, Mr. Barnes asserted on more than one occasion that it was not until the trial that he knew MacPhee was still holding an amount of non-resident tax in trust. Apart from the agreed statement of facts to the contrary, it seems to me that he learned about this fact, and specifically the amount of non-resident tax involved, over two years ago, in August of 1984. He knew then at least that the interest of AAA in the amount of non-resident tax being with-held was $3,295.33. I note here that there is no dispute raised with respect to the propriety of the amount of MacPhee's account. And, in fact, the parties have also agreed as to how it is to be apportioned between the interest of the Ullers and AAA. It is to be on a two-third, one-third basis.
In the final analysis I can only conclude that at the time this action was commenced AAA knew where all the funds paid under the judgment of O'Leary J. had gone and were being held. It is to be noted that the sum of $3,295.33 relates to a post-judgment interest on the amounts representing AAA's interest in the judgment of O'Leary J. If there was lack of knowledge on the part of AAA as to the whereabouts of this amount I do not think the amount warrants the commencement of an action in this court for an accounting. I should add here as well that there appears to be no doubt that Marston and Marston are continuing to hold all they received from MacPhee in an interest-bearing trust account. There is some indication contained in correspondence that it will pay that or some portion of the monies out to Uller if demanded. There is no indication that that has happened with the exception of some small amounts of interest relating to the portion of the monies held which are clearly only the interest of Uller or the Estate of his wife. There is no indication that there are not sufficient funds on hand in the trust account administered to by Marston and Marston to satisfy the interests of AAA, and that is whether according to AAA's position or according to that of Marston and Marston and Uller. That Marston indicates otherwise, as he did in the letter with respect to payment out of all of the funds, I think was said to simply add another burr under the saddle of Tuffley. AAA in this action does not really want to ascertain where the money is what it really wants is payment.
As I have noted above, it claims the total of $90,537.88 when clearly on its own case it is not entitled to that amount. It has to allow for the deduction of that portion of MacPhee's account which it has agreed is attributable to AAA's interest. And, as well, it has to accept the fact that some amount of the non-resident tax being with-held is properly attributed to the interest of AAA as well. That appears to be $3,295.33. I am just not sure from all that I have read and heard what AAA really wants by way of payment. There is no question that it wants or, at least this was the position until the end of trial, that it wants either Marston or MacPhee to pay what it is that they seek. I say that appeared to be the position at the end of trial because with the further submissions received from Mr. Barnes it looks to me as though he suggests that Marston, at least, should be put in the pos- ition of having to pay twice, or at least some amount twice.
I have trouble trying to understand what it is to which AAA feels entitled. During the course of the trial I really did not think AAA was paying much attention to Marston because as I have noted above, the claim for payment seems directed primarily, if not solely, at MacPhee. The statement of claim really does not mention Marston except, almost, in a passing manner. It is focused on MacPhee. Much of the trial, the greatest portion of which was argument, was directed to the position of MacPhee and the reason why this court should require him to make a payment to AAA. I am therefore somewhat surprised to read Mr. Barnes' supplementary written argument that he thinks that Marston should be required to pay either the total amount or some other amount, twice. As is indicated in that further argument, the amount looked to from Marston is "for some or all of the funds" whether he has to pay them on either side of the border. Again what that fund consists of was not clearly mentioned and is not mentioned at all in those further submissions. Surely it is unreasonable to expect Marston to pay anything twice. I will return to this position later as I want to now deal with the position of MacPhee.
On the 13th of January, 1983, Trainor J. dismissed an application brought by the defendants to stay this action. Two grounds for the application were advanced: one, the statement of claim disclosed no cause of action; two, that Ontario was not the forum conveniens. In his reasons Trainor J. says at page 2:
"I am not satisfied that the statement of claim fails to disclose any cause of action. Had I concluded that there was no cause of action against MacPhee I probably would have stayed the action on the basis that the proper forum was Michigan, although it was pointed out that Marston need only take the tunnel bus from Detroit to Windsor, his office being about a mile away from the Windsor Court House, in order to defend his cause.
The trust issues pleaded in the statement of claim may be a novel one but that is not a reason to dismiss the action at this stage. One of the difficult problems for me, is, that after a lengthy and able argument I cannot say with certainty what the facts are. For example, have the funds been paid in whole or in part or at all to Marston? Does Marston continue to retain these funds? Has MacPhee deducted a fee for his services and if so, does that effect his status? Who was MacPhee's principal, the injured plaintiffs or Marston?"
Stopping there, I have some difficulty understanding why these questions should have remained unanswered. I recognize that Trainor J, for one aspect of the motion, at least, could only look at the statement of claim, but surely the answers were all in existence at the time. And they are as I have indicated above. Trainor J. goes on:
"MacPhee was aware of the insurer's interest. If he was in a position of conflict should he have interpleaded? Was he a constructive trustee or trustee de son tort? Did he pay over the money knowing his principal had no right to so instruct him.?"
He then concluded that he was not satisfied that the forum conveniens is Michigan. He does recognize there are legal questions involving both Ontario and Michigan law to be decided.
The question of whether MacPhee was a trustee in receiving the funds from the counsel for the insurers of Tyrrell and McNeilly occupied much of the time in argument. Clearly it was intended that a resolution of this decision in favour of AAA would, in the opinion of its counsel, assist in having MacPhee being made liable to repay money or to pay money to it. Again the amount is not clear. There can be no doubt that MacPhee received trust money. There is no issue about that. The total amounts received from the counsel for the insurers of Tyrrell and McNeilly were received for a number of interests: Meyer Uller, the Estate of Abby Uller and AAA and, as well, his own costs, to say nothing of the interest of Marston and Marston by reason of its contingency arrangement in Michigan.
The request made of MacPhee by Szalkai recognized that there was a dispute outstanding in Michigan relative to the determination of the extent of the various interests in the total fund. He asked MacPhee to interplead in Ontario. As I have noted above, MacPhee wrote indicating why he was not going to do that. the first reason was that he was instructed by the people he considered to be his clients to send all of the monies to Michigan. And he did that. Furthermore, he felt that in any event before any payments could be made out of the total funds there had to be a resolution of the extent of the respective interests therein, and in his opinion that resolution had to be made according to Michigan law.
There can be no dispute that AAA recognized that there were competing interests to the total amount of money. Both Szalkai and Barnes suggested MacPhee interplead. What then is the breach of trust on the part of MacPhee? What constitutes the misappropriation alleged? It can only be the refusal of MacPhee to interplead here in Ontario and his transfer of the funds to Michigan in accordance with his clients' instructions. I cannot conclude that there was any wrongful act on the part of MacPhee though, in reflection, it may have been better had he kept the monies in his own trust account. But for practical purposes, in my opinion, that would not have advanced the position of any of the parties any further than we are today. There still remains the necessity of determining who has what interest in those funds, and that determination has to be made in accordance with the application of Michigan law.
I cannot conclude that MacPhee did anything wrong. I cannot conclude that he misappropriated funds or that he was in breach of any trust. The funds remain intact today. There is no issue or dispute about that. This is not a case of an individual doing something with funds which ends up denying the rightful beneficiary of their receipt. I heard something of Michigan law and I have read the documents of the plaintiff's which consist in part of the plaintiff's insurance coverage and something of the applicable statute relative thereto. What is the right of AAA to recover the monies included in an action commenced in the name of its insured to whom it has paid no-fault benefits? If you look at the correspondence at the beginning, there is no doubt that AAA's counsel at that time talked about it having a lien on the funds. According to Tuffley it is clear that AAA has a right to be reimbursed the amount of its expenditures from the funds generated through the action commenced in the name of its insured and in which its interest is included.
I do not think for the purposes of this law suit it makes any difference whether you call MacPhee a trustee, a fiduciary or an agent, he has kept the funds intact. And by the law of the State of Michigan AAA has the right to proceed against its insured and the holder of those funds to obtain its interest. That is recognized in the documents that were given to me and, as well, in the testimony of Tuffley. It has, as I have noted above, been recognized from the outset that no payments could properly be made out of the total funds with the exception of those which MacPhee deducted, until the rights of Meyer Uller, the Estate of his wife, AAA and Marston's participation in those funds is determined. I have mentioned that Meyer Uller and the Estate of his wife claim an interest in the funds and that is not too surprising in as much as the action was commenced on their behalf to recover amounts on their behalf over and above the interest of AAA.
But it is quite clear from all that I have been told that the major issue involving Uller is with respect to the ability of AAA to recover the amounts paid on account of pre-judgment interest and post-judgment interest attributed to their interest in the judgment of O'Leary J. I gather that it is Uller's position that all that AAA is entitled to is to be reimbursed for each dollar it spent on account of no-fault benefits. That is $60,000 U.S. That is the major issue. And even if this court was inclined to want to determine that dispute in Ontario, through the application of Michigan law, surely it could not do so in the absence of Meyer Uller and the Estate of his wife Abby. They are not parties to these proceedings.
And it appears it was not until almost the end of argument that Mr. Barnes conceded that they were necessary to the determination, the proper determination of that major issue. He suggested that I consider adding them as parties to this action at this time. If there need be only one reason then why this action is not able to resolve the variety of disputes, it surely has to be the fact that Meyer Uller and the Estate of his wife are not parties or represented in the action. And that is to say nothing of the fact that if they were, this court would then be put in the position of trying a dispute between Michigan residents relative to funds all of which exist in Michigan, with the very small exception of some $3,200, and in accordance with Michigan law. The only reason for this case being in this court is because of the inclusion of MacPhee as a party and the very serious allegations that have been made against him.
I think what MacPhee did was most reasonable under all of the circumstances. And as I have indicated above, I cannot be critical of him at all. In fact what struck me was that he appeared to be an island of calm and reason in a sea tormented and lashed by a storm generated by all the other lawyers that were involved in this case. The tone of confrontation set by Tuffley and Marston unfortunately was carried on by Barnes and the rest. In this respect I think it most unfortunate that during the course of the examinations of MacPhee very tough positions were taken as to the ability of him to answer questions concerning the whereabouts of the money in issue. I realize that counsel suggest that they were bound to protect the confidence which MacPhee had with the Ullers, and that there was some form of solicitor privileged communication because the questions touched on MacPhee's trust account with them. Surely when the action only relates to a portion of the trust account in which all of the parties recognized the plaintiff AAA has some interest, no privilege can attach to information needed to be put forth by MacPhee to explain what he did with it. I think the attitude raised on the discoveries of both Marston and MacPhee just fanned the flames of dispute,already burning. Most unfortunate. In the final analysis I cannot find that MacPhee is responsible except to clear up the matter of non-resident tax. And I am going to direct him to advise the director of the Windsor Tax Office of the amount of monies he is holding, and their source, and to require that director within ten days determine the extent, if any, of the monies to be paid on account of non-resident tax. The monies not required to be paid shall be sent by MacPhee to the Circuit Court for the County of Wayne to be held in trust on behalf of Meyer Uller, the Estate of Abby Uller, Marston and Marston and the plaintiff. I understand that it is necessary to specifically direct that the monies held in trust are to bear a rate of interest other than the normal amount that they would otherwise attain without specific instructions. I do not care which of the two actions the monies are credited to. They can be credited to both, if that is possible. Upon the filing of an affidavit by Neil MacPhee confirming that he has disposed of the interest of the Minister of National Revenue and has sent the balance as I have directed, the action may be discontinued against him.
And in case I saw any eyebrows raise at the chance of cross-examining Mr. MacPhee again, there will be none without leave of the court. I do not think that any is necessary, but unfortunately, having read the record in this case I think it is necessary for me to say so.
Now the Minister of National Revenue is not to dally. If he does not make a determination within ten days it will be up to the Minister of National Revenue to take whatever action it deems necessary to with-hold any monies from being sent by MacPhee to the trust account of the Court of Michigan.
So far as Marston is concerned, again I do not know what amount I could ask him to pay, even if I felt that I should order him to pay something, because those issues remain outstanding. I do not agree with Mr. Barnes that the pleadings raise all these issues and that therefore I am required to determine them. The pleadings as I read them, and it is in their amended form to which I refer, simply raise the problems that make it impossible from the defendants' view to pay the amounts claimed by AAA. I have no doubt that if the parties get on with the Michigan actions all of their problems will be solved satisfactorily. Mr. Greenaway tells me that the Court in Michigan stands ready, willing and able to proceed with this matter expeditiously and I have no reason to doubt that is the case.
The action against Marston will be discontinued as well.
Costs to both defendants on party and party basis.
Andreena M. Doey C.S.R.
Official Reporter S.C.O.