Paradigm Quest Inc v Moser, 2014 ABQB 747

Court of Queen ’ s Bench of Alberta Citation: Paradigm Quest Inc v Moser, 2014 ABQB 747 Date: 20141205 Docket: 1403 02502 Registry: Edmonton Between: Paradigm Quest Inc. Plaintiff - and - Shelby A. Moser and Kyle P. Moser Defendants _______________________________________________________ Reasons for Judgment of W. S. Schlosser , Master in Chambers _______________________________________________________ [ 1 ] This is an application for a review of an assessment officer’s decision about costs in a foreclosure action. Rule 9.35(4) provides:

(4) If the plaintiff is not satisfied with the assessment officer’s assessment, whether amended or not the plaintiff may, before the order is entered, re-attend before the master or judge who granted the order for the purpose of settling the costs or for further directions, at which time the plaintiff must provide to the Court any corrections, bill of costs, notes or other materials from the assessment officer.

The Range [ 2 ] The account was assessed by the assessment officer at $4,500.00 (fees). Some small adjustments were made to the disbursements; from a claimed $1,053.04 to $997.05. The Applicant wrote to the assessment officer outlining additional steps taken and asked for another look. The assessment officer did so but declined to readjust the account in the Plaintiff’s favour. [ 3 ] A detailed solicitor and client account was provided. It totals $9,319.45, including disbursements and provides useful background. However, the Plaintiff’s lawyer bills its client in accordance with a tariff (see below).

They sought $5,750.00 in fees in accordance with the tariff, and disbursements of $1,053.04. [ 4 ] The tariff arrangement the lawyers had with the lender is, as follows: Statement of Claim Order Validating Service/Substitutional Service Affidavit of Default Affidavit of Value Application Redemption order – Listing Advertising Property for Sale Supplemental Affidavit of Default Affidavit of Offers (three separate Affidavits required) Attendance for Order Confirming Sale (adjourned per Court Attention for Order Confirming Sale Sale to Third Party Total $700.00 $300.00 $400.00 $300.00 $300.00 $600.00 $400.00 $300.00 $900.00 $500.00 $500.00 $500.00 $5,750.00 The Mortgage and the Order [ 5 ] The mortgage provides: 17C.

Our expenses – you will immediately pay all our expenses of enforcing our rights. . . . our legal fees and disbursements on a full indemnification basis and all other costs related to protecting our interest under the mortgage. (emphasis added). [ 6 ] Paragraph 12 of the Order allowed “solicitor and client costs”, to be assessed. The Nature of the Application [ 7 ] The assessment officer did not provide lengthy reasons and there is no record other than the review officer’s note and counsel’s letter.

So there is no basis to permit a detailed review of the reduction, or the principles invoked by the assessment officer in declining to raise the account. [ 8 ] This is not a Rule 10.26 appeal to a judge of a review officer’s decision. That rule is much more detailed than Rule 9.35(4) and is an appeal on the record. Rule 9.35(4) leaves things wide open. [ 9 ] Rule 9.35(4) is silent about the nature of the process. Masters are not suppose to hear appeals ( Court of Queen’s Bench Act , RSA 2000, c. C-31, section 9(1)(a)(i)).

Accordingly, I am going to treat this as a de novo application and I will substitute my discretion for the opinion of the assessment officer, if necessary. The ATB Case and the Ten Commandments on Costs [ 10 ] In Alberta Treasury Branches v. 14010507 Alberta Ltd. (Katch 22) , 2013 ABQB 748 (“ ATB ”) Wakeling, J. (now J.A.) case sets out ten principles for the assessment of costs. Even though that decision was in the context of a Rule 10.26 appeal, it is my view that these considerations apply as well to a costs determination under Rule 9.35(4).

[ 11 ] Applying these principles, like most discretionary exercises, resists a purely mechanical or ‘cookie cutter’ approach. [ 12 ] The ten principles set out in the ATB case can be summarized as follows:

(1) The court is responsible for settling the costs, if this is requested, or mandated by the Rules or the Order ( ATB para. 18 );

(2) A contract provision does not oust the jurisdiction of the court ( ATB para. 28 ; and now see also: Stubbard v. Hajduk Gibbs LLP , 2014 ABQB 632 , (per Germain J.) and Royal Bank of Canada v Learmonth , 2014 ABQB 695 (per Schulz, M. and the cases cited there).

(3) The court must act in a principled manner in assessing costs ( ATB para.29);

(4) Full indemnification is unlikely and exceptional, except when the contract specifies ‘ full indemnity costs’ . In general terms, the court must enforce a fee agreement ‘unless there is a compelling reason not to do so. The court may choose to hold the party to its bargain (these are the fourth, fifth, sixth and seventh principles found at ATB , paras. 32 -37 ).

(5) Steps that advance the purpose of the action merit indemnity ( ATB para. 39 );

(6) Unnecessary steps won’t be compensated (see, for example, the examples in ATB footnote 19 and para. 40 ). (7) “ The tenth costs principle is that the court has an overriding obligation to ensure that those who are obliged to pay for legal services are treated reasonably, taking into account all the circumstances.

This is an important function in all cases but particularly so when the person who may be liable to pay a lawyers’ charges does not select the lawyer, ” as here. ( ATB para. 44 . emphasis added.) [ 13 ] This tenth principle requires balancing the reasonable expectations of the debtor and, perhaps now, the good faith obligations of the creditor in performing its part of the bargain ( Bhasin v. Hrynew , 2014, SCC 71 ). [ 14 ] The starting point is that we are to recognize and give effect to the Order granting costs.

In most cases, the Order mirrors the lending document in its expression of the scale of costs sought by the Plaintiff. The Order and the lending document are the starting points, whether the review is based on Rule 10.26 or Rule 9.35(4). But the lesson here is that neither the wording of the lending documents nor the terms of the Order make a costs claim immune from review. Here, the lending document is more generous to the lender than the terms of the Order. [ 15 ] As a general rule, a Defendant does not have to pay for ‘unnecessary steps’, as that term has been used in the many decided cases.

Necessary steps are those steps that increase the likelihood of the lender’s security being protected ( ATB para 55 ). The determination begins with an acknowledgement of the steps that are necessary to bring a foreclosure action to its conclusion. [ 16 ] Assessment officers tend to be knowledgeable and experienced in this area. They review many thousands of accounts annually.

I am told that the average range for a standard foreclosure is in the $3,500 to $4,000 range (fees) and that this would typically be adjusted upward for additional applications. [ 17 ] I appreciate that there is some circularity in acknowledging this to be the standard range. There is no outside measure. (The CBA has apparently not taken up Justice Wakelings recommendation to perform a survey (at paragraph 45 of the ATB decision) and if they have, the results are not yet known.) The bulk of lawyers’ accounts may well be geared towards what the assessment officer has allowed.

So the fact that most accounts come in at the $3,500 – 4,000 range does not tell us much. However, if this file is in any way representative, it is doubtful a survey would show a different range. [ 18 ] There being no other measure, the first step is to compare the account to the standard range and adjust it for non-standard elements. It remains open to counsel who exceed the range to justify a departure from it. The main point is that the common elements in a foreclosure outweigh the uncommon ones.

Virtually all of the Orders are template and take only minutes to obtain. [ 19 ] The additional steps noted in the letter to the assessment officer included an Order Validating Service, Supplementary Affidavits of Default, Supplementary Affidavits of Offers and two attendances in chambers with respect to the sale. Two bidders showed up at the first application for an Order for Sale and they were directed to put their best foot forward in sealed bids, which required a return visit to Chambers. A Comparative

Schedule [ 20 ] I reviewed the materials on file and prepared the following table.

Schedule C items are included only for the purposes of comparison. If

Schedule C applied, this file would fall within column 4. The Affidavit of Default showed the amount owing to be $502,415.70. The property sold for $542,222.00. Item

Schedule C (Column 4) Tariff Item Time Record 1 Pleadings (statement of claim) Item 1(1) $2,500.00 $700.00 $214.00 2 Application without notice (validating service) Item 6(2) $100.00 $300.00 $344.00 3 Affidavit of value $300.00 $156.00 4 Application $100.00 (?) $300.00

5 Affidavit of default $400.00 $172.00 6 Supplementary affidavit of default $300.00 $48.00 7 Redemption order( uncontested Application) Item 6(1) 700.00 $600.00 $749.00 8 Advertising for sale $400.00 $176.00 9 Affidavit of offer $300.00 $96.00 10 Supplementary affidavit of offers $300.00 $356.00 11 Further supplementary affidavit of offers $300.00 $32.00 12 Court attendance order for sale (‘contested application’) Item 7(1) $1,250.00 $500.00 $252.00 13 Order for Sale (uncontested application) Item 6(1) $700.00 $500.00 $972.00 14 Sale of Lands under Order $500.00 $550.00 $394.00 TOTAL: $5,850.00 $5,750.00 $3,961.00 [ 21 ] A few notes are in order.

In the first place, the time recorded in the detailed time records often includes other items. Instead of attempting remove the overlap, I simply gave the benefit of the doubt. But it is not a precise measure. I made my best efforts to isolate the time directly related to the claimed tariff items. [ 22 ] The second application (item 4) appears to be in error because there does not appear to be any time corresponding to it. I am assuming that this application does not form part of the ‘redemption order’ tariff item.

The time relating to the Redemption Order was $749.00, of which $196.00 related to preparatory work by the lawyer and the court attendance. [ 23 ] I have treated item No. 12 as a ‘contested application. Two bidders showed up and objected to the Order on the basis that they wanted to submit further bids. [ 24 ] The claimed tariff item of $400.00 for ‘advertising for sale’ is over and above the realtor’s commission which in this case would have amounted to approximately $20,200.00. [ 25 ] The adjourned Order for Sale shows recorded time of 2.4 hours, at $405.00 per hour, for a total of $972.00.

It appears that this application would have been essentially to approve the highest offer after the first application for sale had been adjourned at the request of competing bidders. It is not known how much of the 2.4 hours was spent waiting for the matter to come up in court. [ 26 ] The first application to validate service was essentially perfunctory and made at the request of one of the defendants who wished to be notified by e-mail. It could have been done as a desk application, with no time spent in court. [ 27 ] The subject property is a home in Olds. There was slight equity under this insured mortgage.

It appears that the mortgagors were estranged. One mortgagor was represented and consented to the Redemption Order. The other took no interest in redeeming and both appeared to want this home on the market, sooner rather than later. [ 28 ] Finally, I note that

Schedule C permits $500.00 for ‘sale of lands under order’ which corresponds to the claimed tariff item ($550.00). $350.00 was allowed by Master Smart in AGF Trust Company v. Soos , 2012 ABQB 747 , which corresponds more closely with the actual time spent. Application to this Case [ 29 ] If we apply the ten cost principles, we can draw a number of conclusions. 1. The tariff items are useful and helpful in that they identify steps that are reasonably necessary to protect the mortgagee’s interest and to bring this routine foreclosure action to its conclusion. 2.

Overall time records are instructive but not determinative. It appears that three lawyers and several paralegals were involved in this case. Much of the work was done by paralegals, which is a thoughtful division of labour for tasks that do not require a lawyers time, and which is really the embodiment of the tenth principle; ‘you can’t charge for gold when silver would do’. In this case, the overall time exceeds both the

Schedule C amount, which was included for comparative purposes, and the tariff amount which apparently represents full indemnification. While the detailed time records are useful to assess the tariff items, the client does not pay on that basis. Recorded items appear to disclose duplicated and overlapping effort as well as non-essential steps like conferring with a client or other lawyers about an appeal of the assessment officer’s decision. Therefore, the time billing account that was tendered in support of this application cannot be the end of the story.

Not only is it subject to the ATB principles four through ten, the time exceeds the agreed-upon full indemnification. 3. The tariff agreement shows fees payable by the client of $5,450.00 (after the phantom application is removed). There is no evidence about the disbursements the client is willing to pay, or whether there is any cap on fees and disbursements. The evidence does

not indicate that all or part of the fees and disbursements claimed were either paid by the client or approved by the client with their undertaking to pay. One of the difficulties is that this is an insured mortgage and, in this case, Genworth, will be left to collect any deficiency. There is no evidence about whether there is any limit imposed by the insurer with respect to collectable fees and disbursements. After all, they will be the one holding the judgment at the end of the day. 4. The striking issue appears to be that the value attributed to the tariff items is not fully supported by the time records.

Once we accept that the tariff items are ‘steps that advance the purpose of the action’ for the purposes of the fifth ATB principle, the actual time spent in support of the tariff items of $5,450.00 is only $3,691.00. I do not see why the debtor should be obliged to pay a tariff rate that exceeds billable time. After all, the borrower is not necessarily bound by the agreement with the client, especially when this would represent a bonus to the lawyer for the time spent in performing these necessary and proper steps.

In my view, the disparity would be a ‘compelling reason’ ( ATB principles four – seven) to depart from the claimed tariff items and adjust it down to actual time. [ 30 ] This would make the fee amount allowed by the assessment officer deem slightly generous. In my view, assessments should not be unduly harsh. Some flexibility is required. I appreciate that there is some peripheral work relating to the file that is not captured by the tariff items or the time directly related to them. In the circumstances I am willing to adjust the actual time to the amount allowed by the assessment officer at $4,500.00.

Disbursements [ 31 ] It is my view that taxable disbursements should be allowed at $1,003.04. I would allow the disbursement for the process server at $47.10, as claimed, but disallow the ‘file opening fee’ at $50.00. The Future [ 32 ] This rather lengthy exercise appears to have affirmed the range generally accepted by the assessment officers. In my view, if higher amounts are sought, the first step would be to justify the additional amounts claimed in terms of additional steps over the course of the action.

Justifying a significant departure from the range would require putting the retainer agreement into evidence and an indication that the solicitor/client account was billed and paid, or billed and acknowledged to be in order with an undertaking to pay. This applies to both fees and disbursements. All of which remains subject to the terms of the order, the wording of the lending agreement and an application of the ten ATB principles. [ 33 ] The account is allowed at $4,500.00 plus disbursements at $1, 003.04. Dated at the City of Edmonton, Alberta this 5 th day of December, 2014. W. S. Schlosser M.C.C.Q.B.A.

Appearances: Sandeep Dhir Field LLP for the Plaintiffs