Lawyer ordered to pay back almost $500,000

A lawyer facing criminal charges related to his bankruptcy has been ordered to repay almost $500,000 in overcharged legal fees to several members of a Fort Erie, Ont. family.

But Calin Lawrynowicz’s former clients, the Marino family, could struggle to collect on the judgment after Ontario Superior Court Justice Paul Perell ruled they could not rely on an assessment officer’s findings of fraud to ensure the debt survives any discharge from bankruptcy ultimately granted to Lawrynowicz.

An assessment officer originally ruled last year, following an eight-year assessment process, that Lawrynowicz should pay the Marinos $662,000 after concluding that the legal services performed by the lawyer’s firm were literally worthless, valuing them at nil.

Perell had ordered the assessment back in 2007, but he declined to confirm it when Lawrynowicz appealed. Instead, Perell substituted his own assessment, setting the refund at $475,000 after finding that the law firm deserved at least some payment for its work.

Gregory Sidlofsky, who represented 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 findings against the law firm,” and the revised refund “remains exceptional,” wrote Sidlofsky, a litigation partner with Toronto firm Wagner Sidlofsky LLP.

“The process for my clients has been a nightmare. Personally, I am very disappointed that the process has taken such an unbelievably long time,” he added.

Lawrynowicz could not be reached for comment before going to press, and his lawyer, William Roland, declined an opportunity to comment.

Though it may sound on its face like a straightforward lawyer-client dispute, Perell points out early in his judgment in Calin A. Lawrynowicz Barristers & 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 identifying a “hidden agenda” in the latest appeal.

“The 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 Lawrynowicz’s interest to have a ruling 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, misappropriation or defalcation while acting in a fiduciary capacity,’” Perell explained in his March 24 decision.

“Conversely, it is in the interest of the Marinos, seeking to collect their refund, to keep alive the circumstances that the bankrupt Mr. Lawrynowicz has a liability arising out of a fraud while acting in a fiduciary capacity.”

Crucially, as far as the hidden agenda of Lawrynowicz’s bankruptcy was concerned, Perell found that while the assessment officer was within her rights to label the law firm’s accounts as “not only unfair and unreasonable, but so grossly excessive as being tantamount to fraud,” her findings 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 whether the refund to the Marinos was a “liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity,” Perell wrote.

“That type of finding is a matter 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 unlikely that the former clients will ever see their money.

“This 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 judgment should survive discharge in Lawrynowicz’s bankruptcy proceedings.

“Neither the assessment officer’s decision nor Justice Perell’s decision would have been determinative,” 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 technical 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 several offences under the Bankruptcy and Insolvency Act, including fraudulent disposal of property and failure to comply with the duties of a bankrupt.

According to the RCMP release, Lawrynowicz declared bankruptcy after becoming enmeshed in a series of lawsuits related to his legal and financial consultation businesses. At the time, he reported $175,000 in assets and more than $4 million in liabilities, according to the RCMP.

Lawrynowicz has been suspended from the practice of law since May 2014, when a Law Society of Upper Canada adjudicator handed him a one-month suspension for failing to co-operate with an investigation into his practice. The order by the LSUC’s hearing division provides for the suspension to continue indefinitely until Lawrynowicz hands over records related to six different complainants.

According to Perell’s judgment, Lawrynowicz’s involvement with the Marinos dated back to April 2002, when Joseph Marino hired the firm to challenge the forfeiture of a business property he owned in Fort Erie, Ont. The law firm’s involvement was a stipulation of an $850,000 loan to the Marinos by another Lawrynowicz client, L-Jalco Holdings. The principal of L-Jalco, John Lawrynowicz, was also the lawyer’s father, according to Perell’s decision.

The law firm received almost $600,000 for matters related to the Marinos from L-Jalco, in the form of advances on the mortgage loan, Perell’s judgment says. In 2004, L-Jalco started foreclosure proceedings on several Marino 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 dropping all their claims except for a request for an assessment of their legal fees, and L-Jalco taking possession of the Marino properties.

When Perell decided back in 2007 that the special circumstances 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 described by Perell as “obnoxious.”

Those arguments “frustrated the assessment officer, prolonged 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 assessment officer too much because the law firm seemed to throw everything at derailing the assessment,” Watson says.