Wilson (Re), 2018 BCSC 982

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Wilson (Re), 2018 BCSC 982 Date: 20180615 Docket: 53765 Registry: Vernon In the Matter of the Bankruptcy of Barry James Wilson of the Village of Keremeos in the Province of British Columbia Before: Master McDiarmid [as Registrar] Reasons for Decision Representative of the Trustee, D. Thode & Associates Inc: D.J. Thode Place and Date of Hearing: Vernon, B.C. June 12, 2018 Place and Date of Judgment: Vernon, B.C.

June 15, 2018 [ 1 ] On May 30, 2018, I reviewed the Final Statement of Receipts and Disbursements on this matter, submitted in the usual way as a desk order. The Trustee is claiming $12,654.00 in fees for its remuneration. The affidavit provided to me deposed to details of the work done and time expended.

It deposed that the Trustee’s charge rates range from $400.00 per hour to $460.00 per hour, with administrative staff rates ranging from $125.00 to $180.00 per hour. [ 2 ] I had previously commented to other trustees that trustees’ charge rates in excess of $400.00 per hour seemed to me excessive for trustees practicing outside major centres. I required a representative of the Trustee to attend to speak to the Trustee’s charge rates. [ 3 ] Douglas Thode, a licensed insolvency trustee, attended before me.

He provided evidence and submissions to justify the rate he charged and the fees sought to be taxed. [ 4 ] The documentary evidence has been marked as exhibit 1 in these proceedings. It is a binder which contains 21 tabs, including the affidavit which was initially provided to me in support of Trustee’s remuneration sworn by Mr. Thode April 12, 2018. That affidavit exhibited a detailed time entry report. It also set out the

summary of the bankruptcy. At the date of bankruptcy, the bankrupt was 75 years old and married. His only dependant was his spouse. He was retired at the date of bankruptcy. The bankrupt’s financial difficulties arose as a result of health problems and a business failure.

He was discharged on June 19, 2017. [ 5 ] The affidavit confirms that the total receipts of the estate were $80,545.33 and distribution to all unsecured creditors after Trustee’s fees, disbursements and taxes was $66,242.73. [ 6 ] The affidavit confirmed that the Trustee was required to expend time on the statutory duties imposed under the Bankruptcy and Insolvency Act , R.S.C., 1985, c.

B-3 [ BIA ], and performed no extraordinary activities. [ 7 ] This latter point is important; I have seen affidavits from other trustees which purport to claim extraordinary activities which are in fact normal services rendered as to the trustees’ statutory obligations. [ 8 ] Mr. Thode has a bachelor in economics degree from McMaster University. He has been practicing in the area of insolvency in Ontario and British Columbia for almost 28 years. He became a licensed insolvency trustee in British Columbia in 2002. He has experience in dealing with both business and personal insolvencies.

He submitted that once becoming a licensed insolvency trustee, he estimates that approximately 90% of his work involves personal bankruptcies such as this one. [ 9 ] Exhibit 1 provides evidence of fees charged by insolvency trustees in major centres. At tab 14 of exhibit 1 is an email exchange between Mr. Thode and Cecil Cheveldave. Mr. Thode requested Mr. Cheveldave provide standard billing rates for Mr. Cheveldave as a licensed insolvency trustee with the national firm of KPMG. Mr. Cheveldave is based in Kamloops, British Columbia.

The email “string” sets out “rack rates” (as opposed to discounted rates) in Vancouver for trustee fees as follows: Partner - $760 Sr. Mgr. - $675 Manager - $490 Sr. Consultant - $350 Clerical/Technical - $235 [ 10 ] For the interior, the email sets out that the “rack rates” for the British Columbia interior are: Partner - $675

Sr. Mgr. - $520Manager - $420Sr. Consultant - $305Clerical/Technical - $195 [11] I have been advised in other taxations of accounts that these “rack rates” tend to be set by the Trustee’s head office. D. Thode &Associates Inc. is a regional insolvency trustee and thus sets its own rates. [12] Most trustees’ fees which come to me for taxation in this judicial district charge based on an hourly rate of less than $400.00 perhour. [13] Exhibit 1 included a comparison of cost of living statistics, comparing Kelowna and downtown Vancouver.

Its extract from theWelcome B.C.- Cost of Living Calculator shows that the personal cost of living in Kelowna was approximately 88% of the cost of livingin downtown Vancouver. [14] Exhibit 1 also included a comparison of commercial office rental rates, using what Mr. Thode explained was a “regis” websearch. Mr.

Thode explained that the “regis” numbers were used because the base plus triple net lease rates were difficult to comparegiven that some expenses, such as snow clearing and electrical costs for air conditioning, were substantially greater in Kelowna than inthe lower mainland of Vancouver. [15] This was important, Mr. Thode submitted, because rental overhead is a significant factor in businesses determining their charge-out rates. [16] I agree with his submission. There are obviously other factors. [17] Mr.

Thode referenced an article, included in exhibit 1, from the June 2016 edition of Canadian Lawyer magazine setting outdetails of legal fees charged. [18] There is a significant difference between fees charged by trustees in bankruptcy and fees charged by lawyers.

Generallyspeaking, in my experience, lawyers’ fees include secretarial overhead as part of the hourly rate of the lawyer, whereas trustees’ feescharge the hourly rates of all persons working on the file, including secretarial help. [19] The legal principles applicable to this taxation have been set out in a decision of Registrar Blok, as he then was, in Wright (Re),2005 BCSC 1618, where at paras. 51-52 he writes: [51] In Re Hess (1977), 23 C.B.R. (N.S.) 215 (Ont.

S.C.), an oft-cited case, Henry J. set out various principles relating to the taxationof the fees of bankruptcy trustees, and he stated that the objects of the taxation are as follows (at p. 218): (

a) To allow the trustee a fair compensation for his services; (

b) To prevent unjustifiable payments for fees to the detriment of the estate and the creditors; (

c) To encourage, rather than to discourage, efficient, conscientious administration of the bankrupt estate for the benefit of thecreditors and, so far as the public is concerned, in the interests of the proper carrying-out of the principles and objectives of theBankruptcy Act. In this respect it should be borne in mind that the labourer is worthy of his hire.

The creditors and the public are entitledto the best services from professional trustees and must expect to pay for them. [52] While fair and full remuneration ought to be awarded to trustees to encourage the efficient and conscientious administration ofestates, equally it is clear that a trustee who improperly administers an estate must bear the risk of having that maladministrationcondemned through a reduction in fees.

The clearest cases for reduced fees are those in which the trustee's misdeeds have resulted inprejudice (perhaps even direct financial loss) to creditors or to the bankrupt, but the authorities make it clear that reductions in fees arenot limited to those cases. Trustees' fees have been reduced due to excessive delay even where a creditor representing 95% of theunsecured claims approved the fees (Re Los, [2000] B.C.J.

No. 1229, 2000 BCSC 951), and where the failure to keep proper records,inordinate and unexplained delay in the estate and the failure of the trustee to respond to communications from the inspector and theOSB were all cited as factors (Re Haramboure, supra).

These cases lead me to the conclusion that it is proper to consider reducing feeswhere the maladministration does not result in identifiable prejudice to the estate but where the integrity of the bankruptcy system isundermined. [20] In the current edition of The 2017-2018 Annotated Bankruptcy and Insolvency Act, commonly referred to as “Houlden andMorawetz”, the authors deal with remuneration of trustees generally in s. C§102. At pp. 113-114, the authors write: The following principles must be considered on taxation: (

a) trustees are entitled to fair compensation for their services; (

b) unjustifiablepayments for trustee fees to the detriment of the bankrupt estate and its creditors must be prevented; and (

c) efficient, conscientiousadministration of the bankrupt estate for the benefit of creditors and, so far as the public is concerned, in the interests of the propercarrying-out of the objectives of the BIA, ought to be encouraged. … In calculating the fee for time spent, the rate charged by the trustee should be reasonable and in line with charges by other trustees in thejurisdiction in similar estates. Rates for purely routine matters will be less than those for complex protracted negotiations. Routine workshould be delegated to employees with reduced hourly rates.

Trustees who prefer not to delegate routine work should reduce their hourlyrate to that of employees who would normally perform such routine tasks: Re Gibney (2003), 2003 SKQB 338 , 2003CarswellSask 546, 45 C.B.R. (4th) 256 (Sask. Q.B.). In the absence of compelling reasons to the contrary, the trustee should be permitted to charge its fees for the time spent in theadministration of the estate at a reasonable rate of remuneration; and for obtaining a positive result in getting in or saving assets for

distribution to creditors. A trustee is expected to exercise judgment, restraint and common sense in making claims for fees; it cannot expect the court to accept overly generous charges that exhaust the estate and leave little for creditors.

The court must therefore exercise some judgment as to the overall costs and gains to the estate of the trustee’s administration and may decide that, as a matter of judgment, a fee otherwise justifiable should be reduced, but this discretion must be exercised judicially and with care, especially if the fee is approved by the creditors or the inspectors: Re Hess (1976), 23 C.B.R. (N.S.) 215 (Ont.

H.S.) . [ 21 ] After reviewing the affidavit, the time spent and the fees, I am satisfied that in this case the bankrupt estate has been administered efficiently and conscientiously. [ 22 ] Notice was given to the creditors pursuant to s. 39 of the BIA on January 25, 2018. No objection to the fees and disbursements claimed has been made by any creditor. [ 23 ] After hearing the submissions of Mr. Thode and reviewing the materials, I am satisfied that his charge-out rate as claimed of $460.00 per hour, while higher than most of the charge-out rates I routinely tax and allow, is reasonable given Mr.

Thode’s qualifications, experience and, importantly, efficient and conscientious dealing with this file. [ 24 ] Accordingly, I tax the Trustee’s fees as claimed at $12,741.50, and tax the total disbursements inclusive of GST and PST at $14,394.48. I have provided the Vernon Registry with a Form 12 confirming taxation of this sum. “Master R.W. McDiarmid” MASTER McDIARMID