2011 QCCA 1031, 2011 QCCA 1031

Unofficial English Translation Consortium Promecan inc. (Syndic de) 2011 QCCA 1031 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF QUEBEC No. : 200-09-005739-062 (615-11-000793-044) DATE: May 25, 2011 PRESIDING : THE HONOURABLE GUY GAGNON, J.A. RAYMOND CHABOT INC., in its capacity as trustee for the estate of the debtor APPELLANT – Respondent trustee v. L’AGENCE DU REVENU DU QUÉBEC RESPONDENT – Applicant and NATIONAL BANK OF CANADA, AGNICO-EAGLE MINES LTD. IMPLEADED PARTIES – Impleaded parties and CONSORTIUM PROMECAN INC.

IMPLEADED PARTY – Debtor JUDGMENT [ 1 ] Before me is an application for review of a decision rendered contradictorily by the clerk of the Court of Appeal concerning a request for the assessment of the appellant’s bill of costs. For the reasons that follow, I consider that the application for review must be allowed in part.

The context [ 2 ] On December 18, 2007, during a single hearing, [1] the Court decided the outcome of three judgments rendered by the Superior Court. [2] The question raised at that time was whether the amounts to be collected as goods and services taxes (GST) and Quebec sales taxes (QST) from the accounts receivable of a supplier in bankruptcy belonged exclusively to the respondent, the Agence du revenu du Québec . [ 3 ] The three Superior Court judgments accepted the position submitted by the respondent.

In a unanimous decision, our Court agreed with the appellant’s argument instead and allowed the appeal with costs. [ 4 ] I note in passing that the appellate courts of Saskatchewan and Alberta heard an issue analogous or similar to the one before this Court, and that those courts of appeal came to different conclusions. [3] [ 5 ] On October 3, 2009, in a unanimous decision, the Supreme Court of Canada confirmed the judgment of the Quebec Court of Appeal. [ 6 ] Once the Supreme Court judgment was rendered, counsel for the appellant served their bill of costs for the appeal before our Court on the respondent.

They claimed as taxable costs the amount of $82,970.08, of which $81,057.77 represented legal costs. The bill was ultimately taxed in the amount of $9,205.85, of which $7,500.00 was attributed to the appellant as legal costs. [ 7 ] The appellant does not challenge the amount granted for disbursements. It argues, however, that the taxing officer incorrectly applied the tests developed by Dalphond J.A. in Plachcinski (Syndic de) , [4] specifically with respect to the assessment of the legal costs, which it now asserts are $71,134.50.

Analysis [ 8 ] The rules on insolvency apply to this case . [5] For a better understanding of my reasons, it is appropriate to reproduce the relevant provisions of the Bankruptcy Act as well as sections 86 and 87 of the tariff adopted under the Act:

The Act: 197.

(1) Subject to this Act and to the General Rules, the costs of and incidental to any proceedings in court under this Act are in thediscretion of the court.

(2) The court in awarding costs may direct that the costs shall be taxed and paid as between party and party or as between solicitor andclient, or the court may fix a sum to be paid in lieu of taxation or of taxed costs, but in the absence of any express direction costs shallfollow the event and shall be taxed as between party and party. …

(5) Legal costs shall be paid according to the tariff provided by the General Rules or according to the item in the tariff most nearlyanalogous or comparable to the services rendered, or, where no provision may be found therein applicable to the particular servicesrendered or disbursements made, according to the tariff in effect in other civil matters.[6] The Tariff: 86.

If fees or allowances are in the discretion of the taxing officer or may be reduced or increased in his discretion, he shall haveregard to all the circumstances including the importance of the matter, the time occupied, the general conduct and success of theproceedings, the competence exhibited and the preparation of any written argument required. 87.

The taxing officer may, in their discretion, allow fair and reasonable fees and allowances for necessary and proper servicesrendered by barristers or solicitors or, in the Province of Quebec, advocates for which no fees or allowances are provided by the tariff.[7] [9] The parties agree as follows:

a) The law applicable to the assessment of the bill of costs is the law in force before the amendments to the BIA that came into forceon September 18, 2009.

b) Because the Court did not determine the costs more specifically, the costs must be taxed as “between party and party”, not as“between solicitor and client” (197(2) BIA).

c) The taxing officer must use his or her discretion to determine legal costs that represent fair and reasonable indemnity (197(5) BIAand 87 of

Schedule 1 of the Bankruptcy and Insolvency General Rules).

d) The taxing officer must take into consideration the tests developed in Plachcinski (Syndic de), 2005 QCCA 1176 , J.E.2006-91 (C.A.), namely the nature and value of the dispute, the general conduct of the proceedings, the competence exhibited bycounsel, the number of hours devoted to the file by counsel, counsel’s number of years of practice and the reasonable value of similarservices rendered in the same district. [10] Our decision of December 18, 2007, as is often the case, does not determine the amount of the costs to be awarded to thesuccessful party.

In such circumstances, it is up to taxing officers to exercise their legal discretion and establish the legally taxable costsaccording to parameters set by law and case law.

Analysis [11] The parties recognize that the applicable principles in this case are those established by Dalphond J.A. in Plachcinski (Syndicde).[8] In my view, the following passages of this judgment properly define the question with which I am seized: [11] On this view of the matter, a court of appeal, upon disposing of an appeal, ought therefore to exercise its discretion under section197(1) of the Act by fixing, pursuant to section 197(2), “a sum to be paid in lieu of taxation or of taxed costs” — unless it directs,pursuant to the same sub-section and for exceptional reasons, that “the costs be taxed and paid…as between solicitor and client”.However, when a court of appeal grants costs without any special direction as to the legal services rendered, the taxing officer, relying onitem 87 of the Tariff as a rule of general application read in conjunction with section 197(5) of the Act, must allow, in his/her discretion,fair and reasonable fees for such services.

According to Houlden & Morawetz, The 2005 Annotated Bankruptcy and Insolvency Act,p. 833, it is the practice followed in most cases where there is no applicable provision in the Tariff. … [13] In order to properly accomplish their task when a court of appeal grants costs without any special direction as to the legalservices rendered, taxing officers are reminded that these services shall be taxed as between party and party (partial indemnity) asprovided by section 197(2) of the Act and shall take into account all the relevant circumstances, including the number of hours devotedto the file, the number of years at the Bar, the reasonable commercial value of similar services provided in the district, the generalconduct of the proceedings, the competence exhibited, the nature of the dispute and its value. [12] The appellant agrees that the legal costs are to be taxed as between parties despite the conclusions of its application, whichclearly establish the quantum of its fees as between solicitor and client. [13] Starting from the principle that legal costs established as between parties represent a partial indemnity of the real value of theservices rendered[9] and that my intervention must go beyond the mere difference of opinion concerning the way in which the taxingofficer exercised his/her discretion,[10] I believe, however, that the decision under review does not sufficiently take into account theweight that should be assigned to the complexity of the matter and the scope of the effort provided by counsel for the appellant.

i) Importance of the dispute and its complexity [ 14 ] Even though the monetary amount of the appeal was not really significant ($13,572.95), the issue of whether or not to apply the principles argued by the respondent was undoubtedly so. The following passage of the respondent’s application for leave to appeal from the judgment of the Court of Appeal to the Supreme Court, eloquently illustrates this point of view: [ translation ] 66. This matter raises the issue of the interaction of the BIA with tax laws, both federal (GST) and provincial (QST).

It raises serious questions that have a national impact because the collection of sales taxes is involved . The Court of Appeal interferes directly with the tax collection process by declaring that in bankruptcy matters the creditor collects such taxes for its own benefit or the trustee collects them for the body of creditors and that the departments of revenue will take

part in their distribution as ordinary creditors. 69. From the practical standpoint, a decision from this Court is extremely desirable because this problem arises in almost all of the country’s commercial bankruptcy cases and the amount it issue is therefore considerable.

Precisely because this is a significant problem, the Canadian Association of Insolvency & Restructuring Professionals intervened before the Court of Appeal of Quebec stating that “the issues were central to the administration of commercial bankruptcies in Canada ”. [11] [Emphasis added.] [ 15 ] Not only was the issue important but I believe it was also highly complex. Three judgments of the Superior Court, three judgments by three provincial appellate courts, not all in agreement, and a judgment of the Supreme Court of Canada show that the matter was controversial and demanding from a legal standpoint.

A reading of the judgment of the Supreme Court, as well as that of this Court, supports these observations. I should add that, when a bankruptcy matter is juxtaposed with a taxation matter, only rarely will there be a simple solution. ii) The general conduct of the proceedings and the competence exhibited by counsel [ 16 ] Although the general conduct of the proceedings on appeal reveals nothing in particular, I agree with the appellant that the complexity of the file, short of requiring a high level of expertise, required a certain level of expertise from those involved.

I would point out that the appellant persuaded the Court of Appeal to agree with its position, whereas the batting average for the same arguments in the Superior Court were zero for three. iii) Professional effort [ 17 ] It is with respect to this test in particular that I believe the taxing officer committed an overriding error by not considering at fair value the number of hours spent by counsel for the appellant on the preparation and hearing of the case on appeal, evidence that, moreover, was not contradicted by the respondent. [ 18 ] An analysis of the useful points to determine the overall effort made by counsel involves an assessment of the two main components of this factor, namely the number of hours spent to perform the mandate as well as counsel’s hourly rates.

a) Number of hours devoted to the file [ 19 ] A demonstration of the professional efforts dedicated to a given matter is usually, but not exclusively, based on evidence of the hours worked by counsel to perform the mandate given by the client. [12] [ 20 ] In this case, the appellant filed with the taxing officer the detailed list of the hours worked by its counsel for preparation and hearing of the case on appeal. The respondent countered that this effort was quite simply disproportionate given the nature of the matter.

It proposed no evidence that could serve as a counterweight to that of the appellant, however. [ 21 ] According to his code of ethics, an advocate owes his clients a duty of integrity and diligence. [13] An advocate must also avoid needless professional acts [14] and his fees will be considered fair and reasonable if they reflect the following factors:

a) experience;

b) the time devoted to the matter;

c) the difficulty of the question involved;

d) the importance of the matter;

e) the responsibility assumed;

f) the performance of unusual professional services or professional services requiring exceptional competence or celerity;

g) the results obtained;

h) the judicial and extrajudicial fees fixed in the tariffs. [15] [ 22 ] I believe that the provisions of the Code of ethics governing relations between an advocate and his client, especially those concerning determination and payment of professional fees, create a simple presumption that, if it is not rebutted by evidence to the

contrary, is sufficient to establish the fairness of the effort made by the advocate in defending the interests of his client. [ 23 ] I say “if it is not rebutted” because it was possible for the respondent, beyond merely arguing that in this case there was exaggeration, to indicate where the appellant’s evidence was deficient and to specify what it deemed a reasonable effort in the circumstances of this case.

Without betraying the rules respecting solicitor-client privilege, the respondent’s counsel could have drawn on their own experience in appellate cases to support the argument that the effort claimed by counsel for the appellant was disproportionate. [ 24 ] Absent contradictory evidence tending to show the exaggerated nature of the number of hours devoted by an advocate to a given matter and the list of the hours billed showing prima facie anomalies supporting its unreasonable nature, I am of the opinion that, except in these circumstances, considering the rules of ethics governing his conduct in such a matter, it is difficult to call into question an advocate’s statement concerning the relevance of the time he devoted to a given matter.

b) The hourly rate [ 25 ] Mtre Mason Poplaw, who, at the time of the appeal, had 20 years of practice, devoted 66 hours at an hourly rate of $550 to this matter, according to the statement of billable hours. The greatest effort came, however, from Mtre Miguel Bourbonnais, who had four years of experience at the time of the hearing on appeal. The statement of hours shows that he spent 147 hours on the preparation and hearing of the matter at a rate ranging from $230 to $280 an hour.

The statement also shows that Mtre Philippe Bélanger spent about 45 minutes (18 years of practice, hourly rate $565), while Mtre Jocelyn Perreault was involved in the preparation of the appeal, spending five hours at an hourly rate of $150. [ 26 ] In Plachcinski (Syndic de) , [16] Dalphond J.A. determined an hourly rate of $150 for an advocate with 45 years of practice. This matter, however, goes back six years.

Moreover, it is different from the case at bar in that the amount at issue on appeal was slightly less than $60,000 and the appeal raised no truly technical questions. [ 27 ] For its part, Ontario case law has on several occasions awarded to the successful party legal fees amounting to 50% to 60% of the fees established as between solicitor and client. [17] While reiterating that indemnity as between the parties is only partial, so as to be considered fair and reasonable, it should tend toward parameters that more realistically reflect the complexity of a given matter and the scope of the professional effort that it requires.

Conclusion [ 28 ] The respondent has not shown how the evidence of the effort made by counsel for the appellant indicated exaggeration, taking into account the intrinsic difficulty of the matter, just as it did not demonstrate that the statement of billable hours contained incongruities likely to discredit such evidence. Accordingly, there is no justification for removing any number of hours from the statement. [ 29 ] As for the matter of the hourly rate, I believe that a rate of $200 an hour would be reasonable for the professional services of Mtre Mason Poplaw and Mtre Philippe Bélanger.

For the professional services of Mtre Miguel Bourbonnais, I establish the rate at $100 an hour. For those of Mtre Jocelyn Perreault, who had no professional experience in 2007, I believe an hourly rate of $50 is appropriate. [ 30 ] The appellant’s legal costs to be taxed as between the parties correspond to the following amounts: 65.5 x $200 = $13,100 (Mtre Mason Poplaw) 0.7 x $200 = $140 (Mtre Philippe Bélanger) 147 x $100 = $14,700 (Mtre Miguel Bourbonnais) 4.9 x $50 = $245 (Mtre Jocelyn Perreault) Total $28,185 [ 31 ] In

summary, I find that, generally speaking, a fair and reasonable partial indemnity of $28,185 for the appellant’s legal costs appears to be appropriate in the circumstances of this file. FOR THESE REASONS, THE UNDERSIGNED: [ 32 ] ALLOWS in part the application for review of the taxing officer’s decision. [ 33 ] DECLARES that the legal costs shall be taxed in the amount of $28,185. [ 34 ] The whole without other costs. GUY GAGNON, J.A. Mtre Marc-André Russell MCCARTHY, TÉTRAULT For the appellant Mtre Pierre-Olivier Julien LARIVIÈRE, MEUNIER For the respondent

Date of hearing: April 15, 2011