Docket: T-1478-05
Citation: 2011 FC 1276
Ottawa, Ontario, November 8,
2011
PRESENT: The Honourable Justice Johanne Gauthier
BETWEEN:
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CALOGERAS & MASTER SUPPLIES INC.
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Plaintiff
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and
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CERES HELLENIC SHIPPING ENTERPRISES
LTD. AND THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP "CAP
LAURENT" AND THE SHIP "CAP LAURENT" AND THE OWNERS AND ALL
OTHERS INTERESTED IN THE SHIP "CAP ROMUALD" AND THE SHIP "CAP
ROMUALD" AND THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP "CAP
GEORGES" AND THE SHIP "CAP GEORGES" AND THE OWNERS AND ALL
OTHERS INTERESTED IN THE SHIP "CAP LEON" AND THE SHIP "CAP
LEON" AND ALL OWNERS AND OTHERS INTERESTED IN THE SHIP "CAP
JEAN" AND THE SHIP "CAP JEAN" AND THE OWNERS AND ALL OTHERS
INTERESTED IN THE SHIP "CAP DIAMANT" AND THE SHIP "CAP
DIAMANT" AND THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP "CAP
PIERRE" AND THE SHIP "CAP PIERRE"
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Defendants
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REASONS FOR ORDER AND
ORDER AS TO COSTS
[1]
In
my Reasons for Judgment dated December 22, 2010, I indicated at paragraph 81
that I would deal with the costs (including the attorneys’ fees and other costs
claimed by Calogeras & Master Supplies Inc. [“Calogeras”] pursuant to
paragraph 7(e) of its General Terms and Conditions [“GTC”]) in a
distinct order, to give an opportunity to the parties to make specific
submissions in that respect. I referred, among other things, to a recent
decision of the Court of Appeal of the province of Quebec in Groupe Van
Houtte Inc (AL Van houtte ltée) v Développements industriels et commerciaux de
Montréal Inc, 2010 QCCA 1970, [2010] JQ no 11127 (QL) [Van Houtte]
and to the fact that there necessarily was some duplication of services in the
invoices of the three different law firms who represented the plaintiff since
the institution of this action. Also, I noted that the services claimed by
Calogeras did not all appear to relate to the claim set out in the new
paragraph 12(b) of its Amended Statement of Claim (especially when read in the
context of Exhibit TX-A, listing the only invoices that the plaintiff was able
to establish had not been paid by the defendants, based on the admission by Mr.
Lagonikas). The parties were also asked to deal with the issue of special fees
relating to Calogeras’ last-minute motion to file additional documents and an
Amended Affidavit of Documents, as well as a motion to amend their Statement of
Claim.
[2]
That
said, Calogeras having appealed the decision on the merits, and given that the
determination of the impact of Rule 420 of the Federal Courts Rules, SOR/98-106
[the “Rules”]
depended on the amount ultimately awarded
to them, the Court had decided to wait until after the decision of the Court of
Appeal to finally assess the costs.
[3]
The
defendants have now asked that the Court issue its order before the Court of
Appeal hearing, as there may be a need to present a motion for additional
security for costs.
[4]
As
mentioned, relying on clause 7(e) of the GTC (and before that, a similar clause
in its invoices), Calogeras seeks to recover all the costs it paid on a
solicitor-client basis since the beginning of this action. It has produced
several invoices from three sets of counsel amounting to $200,786.41. It is not
clear if it is also seeking to recover taxable costs in addition to the said
amount for it refers in its written submissions to the fact that it was granted
costs in a motion that amounted, according to the draft bill of costs, to
$5,064.34.
Obviously,
there can only be one set of costs granted to the plaintiff. If it is entitled
to have its costs calculated on a solicitor-client basis, it cannot also
recover, for the same taxable services, costs calculated on the basis of Tariff
B.
[5]
Despite
the fact that the reference to the recent decision in Van Houtte above
was meant to remind the plaintiff of its burden of establishing the
reasonableness of the costs it seeks, little evidence, if any, was produced by
Calogeras to establish this. With respect to the apparent and possible
duplication of services, Calogeras simply annexed an e-mail from Me
Boily stating that about $2,000.00 of fees might be deduced on that basis,
while the current counsel simply adds in his written representations that 23
hours were spent to review the file and to prepare to complete the trial
(essentially final argumentation as no expert evidence was produced).
[6]
The
affidavit of Mr. Moutsios on which Calogeras relies simply lists the invoices
received and indicates that two of these have not been paid. According
to the defendants, this is especially significant with respect to the last
invoice of Me Boily. Mr. Moutsios makes no undertakings on behalf of
Calogeras to pay these invoices given that the plaintiff, which has not been in
business for some years
(and appears to have been kept alive as a corporation for the purposes of this action)
had to be forced by judgment to pay the invoices of the counsel who instituted
the action on its behalf and subsequently withdrew from the file after
Calogeras failed to follow his recommendation to settle matter for the amount
of $156,000.00, offered verbally as early as November 2005, and the
relationship irrevocably deteriorated thereafter.
[7]
In
addition to vigorously contesting the reasonableness of the amounts claimed by
the plaintiff, especially in light of the result obtained and the way the matter
was dealt with throughout the proceedings, the defendants seek to recover their
own costs as of November 15, 2007, the date on which they put in writing an
offer to settle for $150,000.00 which remained open until the beginning of the
trial.
[8]
They
also submit that, in any event, special costs are warranted, among other
things, with respect to the two motions referred to in paragraph 1 above and
with Calogeras’ decision to change solicitors before completion of the trial in
March 2010.
[9]
As
noted in my Reasons for Judgment, it is trite law and not disputed by the
plaintiff that its contractual right to costs on a solicitor-client basis is
always subject to the Court’s control and its discretion to grant less than
they actually paid. However, in exercising this discretion the Court is not
looking at the criteria normally applicable to determine whether
solicitor-client costs are warranted. The issue here is not whether Calogeras
has established that the defendants’ behaviour was reprehensible. Their claim is
based on a contractual provision.
[10]
In
keeping with its duty to carefully examine the costs claimed under clause 7(e)
(or the invoices), the Court has considered all the arguments and case law
presented by both sides. Because of the potential application of Rule 420, the
Court had to evaluate not only the costs claimed as of the end of the trial,
but also those that are payable as of November 15, 2007.
[11]
In
effect, the existence of a contract dealing with the legal cost of a recovery
action does not preclude the application of Rule 420 which is meant to ensure
that parties to any proceedings before this Court seriously consider offers of
settlement made in accordance with paragraphs 420(3)(a) and (b)
of the Rules or suffer the consequences of a failure to properly do so.
[12]
The
need for Rule 420 is even more pressing when one “may” feel or believe that
they have a blank cheque from their debtor with respect to legal costs. This is
even more so in admiralty cases like this one where the plaintiff exercised a right
in rem against the ships to which the services were
supplied, which resulted in the filing of a
bank guarantee
costing the defendants about $1,200.00 USD per month (here Calogeras obtained
the guarantee for an amount of $1.6 million on the basis of the claim described
in its then-paragraph 12 of the Statement of Claim).
[13]
In
my judgment, I granted the plaintiff’s action for an amount of $99,171.16 with
simple interest at 5% beginning March 1, 2010 until the date of payment.
[14]
On
July 5, 2010, Ceres made a payment pursuant to Rule 149 of $74,734.92. This is
the amount recognized as unpaid by Mr. Lagonikas in his affidavit and in
respect of which the defendants waive their right to rely on time limitation.
[15]
It
is not disputed that Ceres’ offer dated November 15, 2007 meets the
requirements of paragraphs 420(3)(a) and (b) of the Rules. Calogeras
simply submits that it was reasonable at the time to refuse the said offer and
that, in any event, it would not have covered the capital, interest and costs.
[16]
As
it was intended to cover the capital, interest and costs payable to the
plaintiff, the Court must determine the costs that would have been payable at
that time.
[17]
The
plaintiff argues that, as of November 15, 2007, it was already entitled to more
than $100,000.00 in attorney fees. As a matter of fact, it appears that only
the first invoice of the first counsel relates to the advancement of Calogeras’
action, given that most of the account, totalling $3,806.81, appears to be
dealing with the renegotiation of the basis of their legal fees and the
preparation of the motion to cease to act. Although the $902.55 in
disbursements in that invoice appears to include at least some disbursements
related to the motion for the reduction of bail, it is
not clear to what they all relate exactly. The same is true of the
disbursements in the last invoice, totalling $530.78 (October 5, 2005). That
said, given the small amounts involved, the Court decided to give some benefit
of the doubt to the plaintiff and deducted $300.00 from these disbursements to
cover the disbursements that were likely incurred for the motion to cease to
act.
[18]
Thus,
Calogeras paid $27,704.00 in legal fees to its first counsel with $1,656.00
($523.00 + $1,133.00) in disbursements, plus GST and QST. It then paid
$45,307.50 in legal fees to its second counsel (first invoice) with $684.73 in
disbursements, plus GST and QST. With respect to the second account, only about
$5,400.00 and $34.32 in disbursements
were incurred prior to November 15, 2007. Thus, Calogeras paid $78,411.50 in
legal fees plus $2,375.05 in disbursements (plus GST and QST) prior to November
15, 2007.
[19]
From
even a quick review of the first account of Me Boily, it is
difficult to understand how this counsel evaluated the duplication of services
from the transfer of the file at $2,000.00. This would be equivalent to ten hours to
bring himself up to speed. However, the Court notes that, at the beginning of
December and early January, Me Boily was also taking care of
Calogeras’ claim against its first counsel with the syndic du Barreau du
Quebec. Also, apart from a first entry for six hours to review the file
that was actually received only on January 18, 2006 ($1,200.00), one wonders
why the March 24, 2006 entry ($1,800.00) for reviewing the examinations for
discovery to deal with objections is not part of acquiring knowledge of what
went on during that said examination where the first counsel was acting and
presumably knew very well why he objected to the questions asked. Those two
entries alone are well above the amount of $2,000.00 estimated by Me
Boily.
[20]
This
can also be compared, for example, to the cost of preparing Calogeras’ draft
bill of costs which, as mentioned earlier, amounted to $5,064.34 and to which
the entries between June 21, 2006 and June 29, 2006 appear to be related. This
simple exercise (which was, in any event, rather useless given that Calogeras
was always seeking the legal costs on a solicitor-client basis) resulted in
more than $1,000.00 in fees. Is it credible then, that only $2,000.00 should be
deducted to take over a file where the quantum was still quite unclear and
which certainly involved issues of maritime liens and Federal Court practices
with regard to the setting of bail in respect of which Me Boily had
little experience, if any, and had to do research.
[21]
Finally,
the Court must obviously consider, as was done in previous case law,
including Van Houtte above, whether the services rendered all relate to
the claim that was ultimately granted. As mentioned, the only invoices that
Calogeras was able to establish as unpaid were not identified until the weekend
prior to the commencement of the trial and they were communicated for the first
time on March 1, 2010. One should not be fooled by the argument that the amount
granted in capital is similar to the one that was included in Calogeras’
expert’s report. The only evidence before the Court dealt with different
services under different invoices (see paragraphs 47 and 51 of my Reasons for
Judgment). It is also clear that obtaining security for the claim ultimately
granted would have been easy and would likely not have required a lengthy
debate to set the amount of the bail.
[22]
Keeping
in mind the above and applying the principles, including proportionality,
summarized in Van Houtte, (see paragraphs 124-125), where the Court of Appeal of Quebec reduced the amount of $54,340.87
granted by the trial judge to $25,000.00 with respect to a judgment for
$93,112.20, the Court is satisfied that the reasonable amount of attorney fees
and disbursements payable to the plaintiff as of November 15, 2007 should be no
more than $35,000.00 for fees and $2,375.05 for disbursements. This amount is,
in my view, quite generous and, in fact, I would have granted no more than
$60,000.00 for all the legal fees
up to judgment (the additional disbursements would have amounted to $2,290.21 and
would not include any expert fees), if Rule 420 had not applied.
[23]
Having
regard to the amount ultimately granted and the costs payable as of the date of
the relevant offer, the Court is satisfied that paragraph 420(2)(a) of
the Rules applies. However, having regard to all the circumstances, the
Court will exercise its discretion to reduce the multiplier from 2 (doubling)
to 1.5 except for the services identified in paragraph 25 below.
[24]
Moreover,
the Court agrees that it would not be appropriate in this case to grant to the
defendants a fee for a second counsel for taxable services before trial or for
the second leg of the trial.
With respect to the first leg of the trial, given the confusion as to the exact
basis of the claim, especially considering the inconsistencies and vagueness of
the evidence in that respect at discovery and the new documentation produced at
the last minute by the plaintiff, the Court is satisfied that a fee for a
second counsel is warranted. It has been assessed at 50% of the units claimable
for the first counsel before the multiplier of 1.5 is applied to calculate the
fee of the first counsel.
[25]
In
addressing the lump sum to be granted, the Court relied mostly on the high end
of Column III (with respect to the items of Tariff B applicable here), except
for the special meeting that took place between the parties, their experts and
Prothonotary Tabib before trial (February 16, 2010) which was assessed on the
basis of 4 units per hour (one counsel) and a multiplier of 2 and
$3,000.00 granted for the preparation of the defendants’ response to Exhibit
TX-A. Finally, the preparation with respect to the second leg of the trial
(items 13a) and b)) should be assessed on the basis of the high end of Column
IV applying a multiplier of 2 for this taxable service, which was the direct
result of Calogeras’ decision to change its counsel shortly before the end of
the trial.
[26]
The
defendants will be entitled to their disbursements, including the cost of
maintaining the bank guarantee after November 15, 2007.
[27]
However,
the amount claimed for their expert is reduced to $15,500.00. This
amount would have been granted as special costs in any event of the cause (this
expression means whether or not Calogeras was successful in claiming
contractual interest and even if Rule 420 did not apply) in the circumstances
of this matter. The cost of printing, photocopies and faxes (other than long
distance charges) will be reduced to $0.25 per page, colour printing to $0.50
per page and binders to $5.00 each. The travel costs for Mr. Lagonikas are
reduced to the same amount claimed for Mr.
Psarros, as no explanation was given for
the difference in cost and Mr. Lagonikas’ airfare appears to be a business
fare.
[28]
To
avoid the costs of taxation, further delay and dispute and using the above
mentioned principles to guide itself, the Court assesses the overall costs
payable to the defendants at a lump sum of $160,689.49 (inclusive of fees
($72,160.00)
and disbursements ($88,529.49)).
[29]
The
Court notes that it is only because of proportionality and the application of
Rule 420 that lower fees were granted to Ceres to account for the loss of time
and efforts relating to the claim in capital (Exhibit TX-A versus paragraphs
12(a) or (b) of the Amended Statement of Claim), the meeting with Prothonotary
Tabib and the motion for filing of additional documents and the preparation of
evidence with respect to Exhibit TX-A. Had the taxable fees not been increased
as a result of the application of Rule 420, the Court would have granted the
defendants special costs at a higher level of compensation for these items.
ORDER
THIS COURT
ORDERS that:
1. The plaintiff
shall be entitled to an amount of $37,375.00 for costs (inclusive of fees and
disbursements);
2. The
defendants shall be entitled to an amount of $160,690.00 for costs (inclusive
of fees and disbursements);
3. If necessary,
the defendants shall be entitled to set off any amount owed to them above the
amount of the security for costs filed by the plaintiff against any amount due
to Calogeras on the basis of this order or the judgment dated December 22,
2010.
“Johanne
Gauthier”
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