2012 QCCQ 64, 2012 QCCQ 64

Sternthal Katznelson Montigny, s.e.n.c.r.l. c. Cornell 2012 QCCQ 64 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division No: 500-22-170510-104 DATE: January 5, 2012 ______________________________________________________________________ BY THE HONOURABLE SUZANNE HANDMAN, J.C.Q. ______________________________________________________________________ STERNTHAL KATZNELSON MONTIGNY S.E.N.C.R.L. Plaintiff v.

CHRISTOPHER CORNELL Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Plaintiff, Sternthal Katznelson Montigny, is claiming $9,727.71 from Defendant, Christopher Cornell, as Defendant’s share for mediation services rendered. Plaintiff is also claiming the amended amount of $1,928.48 as Defendant’s share of the disbursements following a corporate reorganization. Mr. Cornell denies the claim, invoking that he never provided Plaintiff with a personal mandate. ISSUES IN LITIGATION: 1.

Did Plaintiff have a mandate to carry out the services rendered? and if so, 2. Is Cornell Trading Ltd. or Defendant personally liable for Plaintiff’s services? 3. Did Plaintiff act in a partial manner, such that its fees are not payable? 4. Given the wording of the parties' agreement, is Defendant liable to pay for the disbursements? THE EVIDENCE: [ 2 ] Christopher Cornell and his wife April Cornell operated a chain of stores and owned several corporations, including Cornell Trading Ltd. (“CTL”) and related companies.

Both were directors, officers and shareholders of their various companies. [ 3 ] Plaintiff operates a law firm. Kenneth Salomon, a partner, has been practicing corporate and commercial law for 40 years. He joined Plaintiff's firm in 1988. Having performed legal services for Cornell's companies for 25 years as well as for Mr. and Mrs. Cornell personally, Salomon brought this account with him. [ 4 ] In 2008, the Cornells, who had moved their operations to the United States, were involved in bitter divorce proceedings and had reached an impasse. Since Mr.

Salomon considered their companies were in jeopardy, he offered to mediate the Cornell's dispute in an attempt to preserve their companies, protect their interests, assist the Cornells in dividing their assets, and stop the haemorrhaging of funds being incurred by legal fees. [ 5 ] While no written mandate was signed, Mr. Salomon began acting as an intermediary. He corresponded and met with Mr. and Mrs. Cornell as well as with their respective attorneys. Mr. Cornell had counsel both in the U.S. and in Montreal while Mrs. Cornell had engaged only a lawyer in the U.S..

[ 6 ] The couple's patrimony was considerable, consisting of 106 stores, real estate, an operating company and several other companies, including one overseas. The mediation process involved determining what assets were in dispute and the Cornell's preferred distribution. An auction type of process was structured whereby “lots” were evaluated and would be divided between the couple. [ 7 ] During the process, Salomon wrote to Mr. and Mrs. Cornell and asked each one to advise him as to whom his invoice should be addressed, for their portion of his services. Mrs. Cornell directed Mr.

Salomon to transmit her share of the bill to CTL. [ 8 ] Mr. Cornell failed to respond to Mr. Salomon's two requests for information. In the absence of a reply, Mr. Salomon addressed his invoice to Mr. Cornell personally, at Mr. Cornell’s Westmount address. The invoice for Mr. Salomon's services comes to $9,727.71 each, which was billed on an hourly basis, at Mr. Salomon's usual rate. [ 9 ] Mrs. Cornell paid her half of the invoice through CTL. On July 14, 2008, Mr. Cornell advised Mr. Salomon he refused to pay. He had never been billed personally for Mr. Salomon's services.

While he used Salomon's services for his corporate work, he stated that another firm handled his personal affairs. [ 10 ] Mr. Cornell testified that Mr. Salomon inserted himself into the ongoing dispute between himself and his ex-wife. Mr. Cornell had never discussed a mandate for mediation, in contrast to his experience in another mediation forum, and had not discussed Mr. Salomon's fees. He considered Mr. Salomon was acting for the company (CTL) or was representing his ex-wife and maintained he had not confirmed any agreement for the mediation to be carried out on his behalf. [ 11 ] Based on intuition, Mr.

Cornell believed Mr. Salomon had a bias towards his ex-wife. He claimed it was assumed his ex-wife would end up with the operating companies despite the fact that he had 49% of the shares. Mr. Cornell subsequently found e-mails, sent to his ex-wife, at April Cornell Holdings, another of their companies, which he points to as evidence of Mr. Salomon's bias towards Mr. Cornell's ex-wife. The correspondence reads, in part, as follows: “My intention in that regard is to sue him if he does not pay.

I would hope that I will have your support and, if required, your testimony to the effect that it was at all times agreed that the account was to have been divided between the two of you.” [ 12 ] Mr. Salomon denied a bias, affirming that in his practice, he usually dealt with Mr. Cornell. During the mediation, he noted that Mrs. Cornell wanted to continue the companies' operations while Mr. Cornell did not profess an interest in the corporations and wanted to shut them down. [ 13 ] Mr. Cornell testified that the entire bill should have been sent to CTL, as it was a corporate matter.

It was offensive to him to jetton the bill on him, “in light of a sham of a mediation” ; he did not view the mediation as having been constructive. [ 14 ] Ultimately the Cornell's differences were settled by mediation in the U.S.. Mrs. Cornell obtained their business operations while Mr. Cornell obtained their real estate. Mr. Salomon's role at the end was to “clean up” the corporate structure. [ 15 ] A second matter in this litigation involves a corporate reorganization to achieve tax advantages for the parties. Accountants were hired for the tax structuring and Mr.

Salomon was asked to carry out the related legal work. He had quoted a fixed price of $15,000 for his legal fees; each party was to pay half the cost. Both Mr. and Mrs. Cornell paid their half of the bill. [ 16 ] Since the costs of the corporate seals and other related items were payable only following the reorganization, Mr. Salomon billed the Cornells for the cost of the disbursements afterwards. Again, Mr. Cornell refused to pay his half which amounts to $1,928.48. He testified that a memorandum had been signed regarding the cost of the legal work and the amount of $15,000 was all-inclusive.

He also claims he had not authorized any disbursements. ANALYSIS:

a) The mediation fees: [ 17 ] In 2008, Mr. and Mrs. Cornell were involved in acrimonious divorce proceedings. Mr. Salomon asked the Cornells if they would like him to try to find a mechanism for dividing their assets. Although this mandate had not been set out in writing, the couple accepted his offer, as evidenced by the fact that each hired counsel, met with Mr. Salomon and communicated their respective proposals to him. [ 18 ] Mr. Cornell qualified the process as a sham; he claimed Mr. Salomon was acting on behalf of Mr. Cornell's ex-wife.

The Court does not agree. [ 19 ] The nine-page description of services, lists various interventions by Mr. Salomon, which clearly show his attempts to obtain Mr. Cornell's position and divide the assets appropriately.

They include: “E-mail from Chris re copies of documents to be sent to his attorneys, E-mail to Chris' attorneys and Chris re corporate documents… Conference call with Chris Cornell, Bertrand Giroux and Tom Carson re loans… Discussion with Chris et al., Meeting with Chris Cornell at his residence to discuss proposal, E-mail from Chris re his position, E-mail to Chris re response… Telephone interview with Chris re conditions of division, etc..” [ 20 ] During the process, on April 17, 2008, Mr.

Salomon sent an e-mail in which he advises the couple that since a personal matter is concerned, each one is responsible for half the costs. He states: “…the fees, disbursements and taxes of SKM in assisting in this process are to be considered a personal obligation of the parties, with each being responsible for half. This is intended to reflect the spirit of the proposed agreement between the two of you and that you are equally committed to this process. Please confirm your agreement in this regard.”.

[ 21 ] In the absence of a response, Mr. Salomon, in his May 5th e-mail to Mr. Cornell, asks Mr. Cornell to advise as to which of his companies should be billed for Mr. Cornell's half of the shotgun/mediation fees. [ 22 ] Mr. Cornell maintains that Mr. Salomon was acting on behalf of CTL and that he had not given any personal mandate to Mr. Salomon. Mr. Cornell submits he has other attorneys who deal with his personal matters. [ 23 ] He also submits that he never authorized Mr. Salomon to split the invoice. However, Mr. Cornell never responded to either e- mail regarding the fees and continued to use Mr.

Salomon's services. Only after receiving Plaintiff's bill did Mr. Cornell write to Mr. Salomon, in July 2008, to say that he never personally asked him to act as a mediator and did not agree to pay for those services: “1. At all times my personal attorneys (both in Canada and the US) were definitely under the impression that you always represented the Canadian business and not me; 2. I never personally asked you to act as a mediator and did not agree to pay for those services; 3.

The fact that you would implicate yourself in my negotiations with April, presumably for what you thought was the good of the Canadian business, i.e. your client, does not create ay obligations on my part to support the fees you feel you are owed…” [ 24 ] In addition, Mr. Cornell points to Mr. Salomon's correspondence to the couple in which he ends an e-mail by reminding them that: “…my role is that of the attorney of the companies in Canada, and not as an advocate for either of you.

You are both represented by able counsel, and you should be looking to them for any advice and to safeguard your interests”. [ 25 ] Mr. Salomon's choice of words is unfortunate since it does not reflect the reality of his intervention. He testified that his purpose was to attempt to assist the Cornells in dividing their assets and salvage the bleeding of their companies. [ 26 ] The services rendered are described as an “Asset Partition Agreement” . The settlement discussions were in no way limited to the Cornell's corporations.

The assets to be divided include income from their properties, ownership of their personal residences in Vermont and in Montreal, and the division of their various real estate properties in Toronto, the Caymen Islands, and India, etc.. [ 27 ] Given that the Cornells' ultimate goal was to separate everything they owned, in the context of their divorce proceedings, the mandate given to Mr. Salomon was not a corporate matter, despite the fact that the Cornell's companies formed part of the discussions regarding the division of assets. [ 28 ] Mr. Cornell was well aware of Mr.

Salomon's e-mail, stipulating that the obligation of the couple was a personal one. However, he did not respond to say that he disagreed or that he had not provided his consent to a personal mandate. Moreover, he continued to deal with Mr. Salomon, and as such ratified the mandate, as seen by the services provided after Mr. Salomon's email; they include: “a telephone interview with Chris re interest owing on loans, loss benefits, alternative possibility; telephone interview with Chris re update, tax issues, telephone interview with Chris re meeting with accountants, possible solution…”. [ 29 ] Even if Mr.

Cornell were correct in maintaining that the mandate involved the interests of CTL, the evidence reveals that various personal aspects were concerned and that he as well as his ex-wife and CTL had a common interest in the mandate given to Mr. Salomon, such that their obligation would be solidary (article 2156 C.C.Q.). [ 30 ] Mr. Cornell also points to the fact that his ex-wife asked that her portion of the bill be sent to CTL and her half was paid by CTL despite the fact Mr. Cornell was still a shareholder in that company, having a 49% interest. While it may have been improper for Mrs.

Cornell to have her share paid by CTL, the propriety of this act is not before this Court. Moreover, Mr. Cornell could have taken an action in warranty against Mrs. Cornell but he did not do so. [ 31 ] Finally, Mr. Cornell alleges that Mr. Salomon was partial to his ex-wife. In Mr. Cornell’s e-mail of July 2008, contesting his responsibility for the payment of Mr. Salomon's bill, he states: “It quickly became clear that you favoured April's interests and not mine. This impression is shared by my Canadian attorneys.” [ 32 ] Mr. Cornell submitted an e-mail that Mr. Salomon had sent to Mrs.

Cornell, dated July 14, 2008, in which Mr. Salomon writes, with respect to Mr. Cornell's portion of the bill: “…My intention in that regard is to sue him if he does not pay. I would hope that I will have your support and, if required, your testimony to the effect that it was at all times agreed that the account was to have been divided between the two of you.” [ 33 ] Mr. Cornell also points to a memorandum he discovered, sent to CTL from Mr. Salomon, the subject being “Summary of Notes for April” . In this note, written in July 2008, Mr.

Salomon lists recommendations to assure the success of CTL and related operations, one of which reads as follows: “Ensure financial and legal security for April through divorce proceedings.” [ 34 ] Mr. Salomon's mandate ended on April 29, 2008; the last billing entries deal with the signing of agreements. Ultimately, Mrs. Cornell obtained the business operations and Mr. Cornell obtained the couple's real estate. Mr. Salomon continued to act for CTL and, as seen from the foregoing, he was concerned with Mrs. Cornell's interests.

However, these e-mail and the memorandum were sent in July, a couple of months after the end of the settlement discussions. What is pertinent with respect to the allegations of bias is what took place while the mediation process was ongoing. [ 35 ] Mr. Cornell claims Mr. Salomon was biased in favour of Mrs. Cornell. The evidence fails to support his view or indicate any favouritism on the part of Mr. Salomon during the actual mediation process. In Mr.

Salomon's April 17th e-mail, after making a number of recommendations, he indicates that his intent is to find a middle ground, which would neither advantage nor disadvantage either party:

“The proposed solutions to these issues are intended to find a middle ground and to avoid advantaging or disadvantaging either of you in any significant way. In principle, their effect should be neutral (except for CTA/Main Street where April is ceding a credit when she believes none is warranted, and where Chris is receiving a credit that is less than he believes is appropriate). …” [ 36 ] It should also be recalled that both Mr. Cornell and Mrs. Cornell were represented by attorneys and neither was obliged to accept any recommendation made by Mr. Salomon. [ 37 ] Mr.

Cornell never raised the issue of bias during the mediation process; he only did so when he decided that he should not be responsible for the bill that was sent to him personally. Having raised this issue, he has the burden of proving his allegations. In light of the testimonial evidence and documentation, including Mr. Salomon’s proposed solutions, the Court concludes that Mr. Cornell has not met his burden of proof.

b) The bill for disbursements following the corporate reorganization: [ 38 ] There remains the second bill, for disbursements, that was not paid by Mr. Cornell. This matter concerned the reorganization of various companies, following the couple's divorce. Mr. and Mrs. Cornell had agreed to give Mr. Salomon a mandate for his professional services and they had agreed to assume his cost of $15,000 for these services; each one would pay half the bill. [ 39 ] Mr. Cornell testified that the cost was all-inclusive while Mr.

Salomon testified that it covered only his fees for services rendered but not the disbursements. [ 40 ] The Reorganization Agreement, dated April 29, 2009, contains the actual wording regarding fees, in

section 7; it reads as follows: “The parties have received certain assurances regarding professional fees and expenses for completing the transactions set forth (sic) this Agreement. These fees/expenses include a fee to be charged by Nexia Freedman, which is capped at CDN $125,000, and by attorney Ken Solomon (sic), which is capped at CDN $15,000. A

summary of these fees is set forth in the Memorandum. The parties agree to split equally all fees/expenses associated with the transactions set forth in this Agreement, except their individual attorneys' fees which they shall bear individually…” [ 41 ] Mr. Cornell, referring to the rules of

interpretation contained in the Civil code of Quebec , submits the agreement should be interpreted in his favour, such that the mandate is capped at $15,000. In particular, Mr. Cornell refers to

article 1429 and

article 1431 C.C.Q. which state: 1429. Words susceptible of two meanings shall be given the meaning that best conforms to the subject matter of the contract. 1431. In case of doubt, a contract is interpreted in favour of the person who contracted the obligation and against the person who stipulated it.

In all cases it is interpreted in favour of the adhering party or the consumer.'' [ 42 ] However, the agreement does not stipulate that the total amount is fixed at $15,000; rather it indicates that the fee is to be capped at $15,000 but such an amount is to be included in the fees/expenses that are charged: “… the fees/expenses include a fee to be charged by …attorney Ken Solomon (sic), which is capped at CDN $15,000.” (the underlining is ours) [ 43 ] Moreover, we are in the context of a mandate and

article 2136 C.C.Q. stipulates that: 2136. The powers of a mandatary extend not only to what is expressed in the mandate, but also to anything that may be inferred therefrom. The mandatary may carry out all acts which are incidental to such powers and which are necessary for the performance of the mandate.'' [ 44 ] The cost of various disbursements arose after the initial bill was sent. These costs constitute an accessory and are necessary for the performance of the mandate. In virtue of

article 2136 C.C.Q., they are consequently covered by the mandate and in accordance with

article 2150 C.C.Q., the mandatary is entitled to be paid for the expenses incurred in the performance of his mandate. [ 45 ] Given the foregoing, Mr. Cornell has not satisfied the Court by preponderant evidence that the $15,000 fee covers all costs, including disbursements. The Court therefore finds that Mr. Cornell owes the sum of $1,928.48, representing his part of the disbursements. FOR THESE REASONS, THE COURT: GRANTS Plaintiff's action; CONDEMNS Christopher Cornell to pay Sternthal Katznelson Montigny S.E.N.C.R.L. the sum of $9,727.71 plus interest at the legal

rate and the additional indemnity foreseen by

section 1619 of the Civil code of Québec since May 13, 2008 and the sum $1,928.48 plus interest at the legal rate and the additional indemnity foreseen by

section 1619 of the Civil code of Québec since April 12, 2010. THE WHOLE , with costs. __________________________________ SUZANNE HANDMAN, J.C.Q. Me Larry Dikranian Sternthal Katznelson Montigny S.e.n.c.r.l. Attorney for Plaintiff Me Angela Markakis BCF, S.e.n.c.r.l. Attorney for Defendant Date of hearing: October 27, 2011