2015 QCCA 625, 2015 QCCA 625

Dunkin' Brands Canada Ltd. c. Bertico inc. 2015 QCCA 625 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-023156-128 (500-17-015511-036) (500-17-019989-048) (500-17-028727-058) DATE: April 15, 2015 CORAM: THE HONOURABLE NICHOLAS KASIRER, J.A. CLAUDE C. GAGNON, J.A. MARTIN VAUCLAIR, J.A. DUNKIN' BRANDS CANADA LTD. (formerly Allied Domecq Retailing International (Canada) Ltd.) APPELLANT – defendant v.

BERTICO INC. 3024032 CANADA INC. 3155412 CANADA INC. 3176941 CANADA INC. 3481191 CANADA INC. 2857-8664 QUEBEC INC. 3089-8001 QUEBEC INC. 9067-0308 QUEBEC INC. JACQUES DOYON ET MONIC HUARD LES ENTREPRISES DOYON ET HUARD INC. LES ENTREPRISES CHARLOISE INC. LES ENTREPRISES LUCIEN STEPHENS INC. 3089-8639 QUEBEC INC. LES ENTREPRISES PIERRE MACLURE LIMITEE LES PATISSERIES AL.MA.SO. INC. 9116-5399 QUEBEC INC. 3089-3309 QUEBEC INC. 3092-5077 QUEBEC INC. 9009-6694 QUEBEC INC. 9064-0947 QUEBEC INC. 2622-6282 QUEBEC INC. 2968-7654 QUEBEC INC.

CLAUDE ST-PIERRE et LYNDA VIEL SYLVAIN CHARBONNEAU NOEMIA DE LIMA et JOAO DE LIMA RENE JOLY et CHARLOTTE LEVESQUE MARIETTE LONG RAYMOND MASSI PIERRE MACLURE JEAN RIOUX MARIO CORBEIL JOHN A. COSTIN BERNARD STERN JACQUES POMERLEAU RESPONDENTS – plaintiffs JUDGMENT [ 1 ] Dunkin’ Brands Canada Ltd. appeals from a judgment of the Superior Court, District of Montreal (the Honourable Mr. Justice Daniel H. Tingley), rendered on October 31, 2012, which granted in part a motion for the award of a special fee pursuant to the Tariff of

Judicial Fees for Advocates [1] in the amount of $240,000 to counsel for the respondents. [2] In a separate judgment on the merits rendered on June 21, 2012, the same judge condemned the appellant to pay $16,407,143 to 20 franchisees who operated 32 Dunkin’ Donuts restaurants in Quebec in damages for breach of contract. [3] This latter judgment was also appealed. [ 2 ] The Court has rendered, simultaneously with the present judgment, its judgment in appeal on the merits. That appeal has been allowed in

part in order to reduce the aggregate damages awarded to the franchisees by some $5.3M, with costs against the appellant franchisor. *** [ 3 ] Soon after rendering his judgment on the merits, the trial judge was seized of a motion filed by respondents’ counsel asking for a special fee of $360,000 because the case was an “important” one within the meaning of that term in

section 15 of the Tariff. [ 4 ]

Section 15 provides that “the Court may, upon request or of its own initiative, grant a special fee, in addition to all other fees, in an important case / la Cour peut, sur demande ou d'office, accorder un honoraire spécial, en plus de tous autres honoraires, dans une cause importante ”. [ 5 ] The judge was of the view that the case was indeed “important” according to the criteria identified in the jurisprudence decided under

section 15.

After considering, in particular, the factors identified in Aztec [4] as to what constitutes an important case, the judge wrote: [12] A case that took eight (8) years to get to trial, lasted 71 days, involved 20 Franchisees operating 32 Dunkin Donuts shops throughout Quebec and 36 witnesses, of whom four (4) were experts, comprised 478 Exhibits, included written arguments extending to more than 350 pages and where the Reamended Action runs to 83 pages and each of the separate Defences responded to each and every allegation of the action, would seem to satisfy most of the 23 objective factors and criteria for determining whether a case is important or not. [Footnote omitted.] [ 6 ] The judge also mentioned that the 20 plaintiffs came from different parts of the province involving multiple sites of investigation, that the exhibits were often particularly voluminous, and that the hearing had to be reopened in order to obtain additional expert evidence on damages (para. [8]). [ 7 ] He awarded a special fee in the amount of $240,000, noting that this corresponded to $12,000 for each of the 20 plaintiffs at trial. [ 8 ] Dunkin’ Brands inscribed the judgment in appeal. *** [ 9 ] Both parties have correctly recognized that the decision by the judge granting the special fee is inherently discretionary.

The fee should not be revised on appeal unless it reflects an improper exercise of the judge’s discretionary authority. [ 10 ] The burden on the appellant is a heavy one: to recall the language of one leading case, it requires “[…] une démonstration formelle d'illégalité, d'application erronée des principes ou d'abus grave de la discrétion”. [5] [ 11 ] With that standard in mind, the appellant’s four arguments suggesting that the judge erred in granting the special fee shall be considered in turn.

I Did the judge err in awarding a special fee for the purpose of punishing allegedly reprehensible conduct of the appellant? [ 12 ] The appellant submits that the judge abused his discretionary power by granting the special fee as a punishment for the appellant’s perceived improper conduct at trial and its reprehensible treatment of the franchisees. [ 13 ] At trial, the judge found the appellant’s defence that the respondent franchisees were bad operators and thus responsible for their own plight to be without merit.

Now the appellant says the judge subsequently used the special fee to punish them for having presented an improper defence at trial. It cites the following from the judgment a quo as a sign of the judge’s intention to use the special fee as a punishment: [17] […] Such a fee has certainly been earned in this case and its award will not put a chill on other litigants. It may, however, operate in some small measure to discourage defendants from advancing patently unsustainable defences. The Court has already criticized Dunkin’ Brands for attempting to lump “A” and “B” Franchisees into the “C” group of Franchisees.

As found, Plaintiffs were the best Franchisees of the bunch in the Québec réseau [footnote to paras 61 and 62 of the judgment on the merits in which this defence was rejected]. [Emphasis added.] [ 14 ] In addition, it says certain comments made in his reasons for judgment on the merits, in particular paragraph [122], suggest that the judge imposed the special fee as a substitute for punitive damages. The latter remedy, the judge held, was not available at trial. [ 15 ] At law, the special fee is not a punishment for either improper proceedings or as an alternative to punitive damages, says the

appellant, but is only justified by the importance of the case.

On this view, the fee granted reflects an indefensible use by the judge of his discretionary power and should be struck on appeal. [ 16 ] Was the fee granted as a punishment for either the appellant’s conduct at trial or as a substitute for punitive damages? [ 17 ] The appellant is right to say that if a special fee were granted for the purpose of punishing the appellant, it would be improper exercise by the judge of his discretionary power. [6] [ 18 ] That said, the appellant has failed to show that the judge used the special fee as a punishment either for its litigation strategy or as a substitute for punitive damages. [ 19 ] A reading of the judgment a quo as a whole makes plain that this was not what the judge did here.

Instead, he imposed the special fee because the case was an important one, as the law requires. [ 20 ] In paragraph [8] of his reasons, the judge sets forth, using arguments advanced by counsel for the franchisees, how a majority of the factors of the Aztec decision apply to the case at bar. He concludes, in paragraph [12], by noting that it “would seem to satisfy most of the 23 objective factors and criteria for determining whether a case is important or not”.

None of the pertinent factors bears on punishment. [ 21 ] The fact that the appellant proposed “patently unsustainable defences”, referred to by the judge in paragraph [17], is not irrelevant to the “important” character of the case under

section 15 of the Tariff. A weak defence can have the effect of dragging out a dispute before the courts, and the Aztec case identified the protracted length of a trial as one factor among others that can, in some circumstances, justify a special fee. That would obtain here given the 71-day trial in the case on the merits. It is true that

article 54.1 C.C.P. provides that frivolous conduct by a litigant in argument can be an abuse of procedure, but the judge specifically declined to make such a finding in the judgment on the merits.

The special fee was not granted for that reason. [ 22 ] As for the judge’s allusion to the possible deterrent value of the award of a special fee in paragraph [17] of the judgment a quo ,, the better view is that he was only referring to a possible consequence of his decision, but not its justification in law as an “important case”. [ 23 ] The appellant has also failed to show that the special fee was awarded as an alternative to punitive damages on the merits. [ 24 ] The appellant is wrong to say that in paragraphs [120] to [122] of the judgment on the merits, the judge invited the franchisees to apply to the Superior Court for an award of special fees as a substitute for punitive damages, after expressly linking costs to punishment at paragraph [120]. [ 25 ] The judge’s reference to ordinary costs being the “penalty for losing” was only meant to explain that arguing strenuously in a losing effort does not justify punitive damages.

As to whether a special fee would be available “in a case such as this one” (para. [122]), the judge merely directed the parties to the possibility of filing such a claim. Where appropriate, a special fee would be awarded, as he wrote, “in accordance with

Article 15 of the Tariff”. [ 26 ] In sum, the special fee was not a punishment nor has the appellant demonstrated that the judge intended it to be one. II Did the Trial Judge err in concluding that the case was "important" enough to justify the granting of a special fee? [ 27 ] The appellant argues that the judge misapplied the factors relevant to deciding whether a case is an “important” one under

section 15 of the Tariff. He is said to have given disproportionate weight to some of the factors set forth in Aztec , in particular the consideration as to the number of franchisees that came forward as plaintiffs and the presence of experts on both sides, while failing to consider the overall importance and complexity of the case. [ 28 ] The appellant says that it was the respondents’ decision to regroup the plaintiffs in a single action and that there was nothing “important” about the case by reason of the involvement of experts.

The judge is thus said to have erred by concluding that a greater number of factors listed in Aztec were satisfied than he should have. [ 29 ] The appellant is mistaken. [ 30 ] It is certainly true that the judge averted to the complexity associated with the number of plaintiffs and to the presence of experts in justifying the special award. Not only has that not been shown to be a mistake in this case, but he made clear that these were merely among the many factors that justified the characterization of the case as an “important” one (para. [15]).

The appellant has failed to show that the plaintiffs’ choice to file a common cause of action or the presence of experts were given disproportionate significance in a manner that would render the exercise of the judge’s discretionary power improper. III Did the judge err in law by using a novel method to calculate the amount of the special fee? [ 31 ] After deciding that the case was an important one that justified granting a special fee, the judge explained the amount of the award as follows: [16] Plaintiffs’ Counsel asks for $12,000 for each of 30 establishments; $360,000 in the aggregate.

This represents 2% of the amount of the award, excluding interest. [17] In all the circumstances of this matter and recognizing that there will be a 1% fee calculated on the amount of the award, the

Court is disposed to exercise its discretion by awarding a special fee to Counsel for Plaintiffs of $240,000 ($12,000 X 20 Plaintiffs). Such a fee has certainly been earned in this case […]. [Footnote omitted.] [ 32 ] The appellant says that the judge arrived at the figure of $240,000 using a new and erroneous method for calculating the special fee by multiplying a number chosen at random by the number of plaintiffs represented by counsel. By using a mathematical formula based on a random number the judge is said to have erred in law.

He also erred by calculating the amount of the special fee as a percentage of the amount of damages claimed at trial. [ 33 ] The judge made no reviewable error here. [ 34 ] The appellant is right to note that, as observed by our colleague Duval Hesler J. (then a judge of the Superior Court) in Godin v.

Tribunal administratif du Québec , “[i]l serait périlleux de tenter de formuler une solution mathématique quelconque pour les fins de l'exercice d'un pouvoir de nature discrétionnaire comme l'est celui d'attribuer un honoraire spécial”. [7] [ 35 ] Read in context, however, the reference to the number of franchisees here was not part of a mathematical method of calculation but simply a reminder by the judge, after he had identified the amount of the special fee, that 20 franchisees with distinct financial circumstances were involved. [8] Instead of multiplying a figure by the number of franchisees to arrive at the special fee, the judge considered the impact of all the relevant factors before reducing the amount claimed from $360,000 to $240,000.

This exercise is a reflection, in the judge’s discretionary estimation, of the overall importance of the case in accordance with

section 15 of the Tariff. [ 36 ] Moreover, the appellant has not shown that the amount arrived at by the judge was calculated as a percentage of the quantum claimed. He did refer to the original request for a special fee as representing 2% of the franchisees’ overall claim (para. [16]), but nothing suggests that the final figure was calculated as a percentage. [ 37 ] The appellant has thus failed to show an improper exercise of the judge’s power in this regard.

IV Alternatively, was the amount awarded as special fee unreasonable? [ 38 ] As a subsidiary argument, the appellant argues that $240,000 is an unreasonably high special fee in the circumstances.

It gives a number of examples chosen from the jurisprudence in which significantly lower amounts were awarded. [9] [ 39 ] The respondents counter by giving examples – more recent in some cases, they say – that would suggest that the amount fixed by the judge was in keeping with what courts have awarded in comparable circumstances. [10] [ 40 ] The appellant has failed to show that the amount of $240,000 – reduced from $360,000 as initially requested – was unreasonable for an “important” case such as the one at bar.

The judge himself presided over the trial and was well-positioned to measure how the importance of the case should be reflected in the amount of the special fee. The examples cited by the appellant of lower amounts, in themselves, do not show that the higher amount here was unreasonable. [ 41 ] The respondents are right to say that, as noted in Aztec , [11] one can expect a wide range of awards under

section 15 and, to some extent, each case is peculiar to its own facts. In so saying, we do not wish to say that the quantum chosen by a judge for a special fee is insulated from review. But whether or not it is the amount judges sitting in appeal would have set themselves is not the material question; here, the appellant has failed to show that the amount fixed was unreasonable given the importance of the case according to the criteria rightly identified by the judge. [ 42 ] As a final note, the special fee need not necessarily be revised because the quantum of damages on the merits has been reduced on appeal.

This Court has recognized elsewhere that this does not, on its own, justify reducing the special fee. [12] The amount of damages in issue is indeed a factor identified in Aztec but it is only one factor among others and the case was no less important, given all the relevant considerations, because the quantum of the damages for lost profits and for lost investments was reduced on appeal. Those issues were fiercely fought before the trial judge.

He was no less justified in seeing the quantum of damages as a sign of the importance of the case simply because the amounts awarded have been reduced on appeal. [ 43 ] Lastly, it is sometimes said that the amount of a special fee should be debated after final judgment on appeal, not while an appeal is pending. In this case, as the judge observed at paragraph [7] of the judgment a quo , he was set to retire within 30 days of rendering judgment.

In light of that fact, wrote the judge, “[c]ounsel for the Defendant [ i.e. the appellant here] had the grace not to raise the possibly premature nature of the Plaintiffs’ application, perhaps implicitly acknowledging that the trial judge is, after all, the one best placed to hear it”. These circumstances were indeed exceptional and, with this in mind, we observe that nothing relating to the “possibly premature nature” of the application has a bearing on the outcome of this appeal. [ 44 ] FOR THE FOREGOING REASONS , the Court: [ 45 ] DISMISSES the appeal, with costs. NICHOLAS KASIRER, J.A. CLAUDE C. GAGNON, J.A.

MARTIN VAUCLAIR, J.A.

Mtre Margaret Weltrowska Mtre Stéphane Teasdale Mtre Luc Giroux Mtre Catherine Dagenais Dentons Canada LLP For the appellant Mtre Frédéric Gilbert Fasken Martineau DuMoulin LLP Mtre Guy de Blois Langlois Kronström Desjardins LLP For the respondents Dates of hearing: February 12 and 13, 2014